UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549




FORM
10-Q





(Mark
One)


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




For the
quarterly period ended January 31, 2009




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.


(Exact
Name of Registrant as Specified in Its Charter)




Delaware
                20-0653570(State
      or Other Jurisdiction of
                  Incorporation
      or Organization)
                (IRS  Employer
                  Identification
      No.)





Pharma-Bio
      Serv Building,
                  Industrial
      Zone Lot 14, Barrio Higuillar,
                  Dorado,
      Puerto Rico
                00646
                  (Zip
      Code)(Address
      of Principal Executive Offices)





Registrant’s
Telephone Number, Including Area Code 787-278-2709





Indicate
by check mark whether the registrant: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes ý
No  ̈





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.




Large
      accelerated filer  ̈
                  Accelerated
      filer  ̈Non-accelerated
      filer  ̈
                  Smaller
      reporting companyý





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act). Yes  ̈ No ý





The
number of shares of the registrant’s common stock outstanding as of March 15,
2009 was 20,751,215.







PHARMA-BIO
SERV, INC.


FORM
10-Q


FOR
THE QUARTER ENDED JANUARY 31, 2009




TABLE
OF CONTENTS


PagePART
      I FINANCIAL INFORMATIONItem
      1 – Financial StatementsCondensed
      Consolidated Balance Sheets as of January 31, 2009 and October 31, 2008
      (unaudited)
                                  
                                  
                                  3Condensed
      Consolidated Statements of Income for the three-month periods ended
      January 31, 2009 and 2008 (unaudited)
                                  
                                  
                                  4Condensed
      Consolidated Statements of Cash Flows for the three-month periods ended
      January 31, 2009 and 2008 (unaudited)
                                  
                                  
                                  5Notes
      to Condensed Consolidated Financial Statements (unaudited)
                                  
                                  
                                  6Item
      2 - Management's Discussion and Analysis of Financial Condition and
      Results of Operations
                                  
                                  
                                  13Item
      4 – Controls and Procedures
                                  
                                  
                                  18PART
      II OTHER INFORMATIONItem
      1 – Legal Proceedings
                                  
                                  
                                  19Item
      6 – Exhibits
                                  
                                  
                                  19SIGNATURES
                                  
                                  
                                  20




-2-


PART
I – FINANCIAL INFORMATION




Item 1.
                FINANCIAL
      STATEMENTS








PHARMA-BIO
SERV, INC.


Condensed
Consolidated Balance Sheets


(Unaudited)





January 31,
                        2009
                      
                      
                      October 31,
                        2008ASSETS:Current
      assetsCash
      and cash equivalents
                      
                      $
                      1,564,897
                      
                      
                      $
                      3,087,990Accounts
      receivable
                      
                      
                      2,254,447
                      
                      
                      
                      3,245,153Other
                      
                      
                      236,046
                      
                      
                      
                      194,108Total
      current assets
                      
                      
                      4,055,390
                      
                      
                      
                      6,527,251Property
      and equipment
                      
                      
                      1,510,877
                      
                      
                      
                      1,521,575Other
      assets
                      
                      
                      142,706
                      
                      
                      
                      63,127Total
      assets
                      
                      $
                      5,708,973
                      
                      
                      $
                      8,111,953LIABILITIES AND STOCKHOLDERS’
      EQUITY:Current
      liabilitiesCurrent
      portion-obligations under capital leases
                      
                      $
                      58,239
                      
                      
                      $
                      45,318Accounts
      payable and accrued expenses
                      
                      
                      1,009,902
                      
                      
                      
                      1,189,705Due
      to affiliate
                      
                      
                      500,000
                      
                      
                      
                      2,706,892Income
      taxes payable
                      
                      
                      7,664
                      
                      
                      
                      48,324Total
      current liabilities
                      
                      
                      1,575,805
                      
                      
                      
                      3,990,239Other
      long-term liabilities
                      
                      
                      45,979
                      
                      
                      
                      69,934Total
      liabilities
                      
                      
                      1,621,784
                      
                      
                      
                      4,060,173Stockholders'
      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 20,751,215 shares
                      
                      
                      2,075
                      
                      
                      
                      2,075Additional
      paid-in capital
                      
                      
                      558,113
                      
                      
                      
                      540,337Retained
      earnings
                      
                      
                      3,553,506
                      
                      
                      
                      3,534,060Accumulated
      other comprehensive loss
                      
                      
                      (26,505
                      )
                      
                      
                      (24,692
                      )Total
      stockholders' equity
                      
                      
                      4,087,189
                      
                      
                      
                      4,051,780Total
      liabilities and stockholders' equity
                      
                      $
                      5,708,973
                      
                      
                      $
                      8,111,953




See notes
to condensed consolidated financial statements.


-3-





PHARMA-BIO
SERV, INC.


Condensed
Consolidated Statements of Income


(Unaudited)





Three months ended
                          January 31,2009
                        
                        
                        2008REVENUES
                        
                        $
                        2,893,516
                        
                        
                        $
                        3,604,303COST
      OF SERVICES
                        
                        
                        2,031,782
                        
                        
                        
                        2,241,882GROSS
      PROFIT
                        
                        
                        861,734
                        
                        
                        
                        1,362,421SELLING, GENERAL AND ADMINISTRATIVE
      EXPENSES
                        
                        
                        711,916
                        
                        
                        
                        815,910INCOME
      FROM OPERATIONS
                        
                        
                        149,818
                        
                        
                        
                        546,511OTHER
      INCOME (EXPENSES):Interest
      expense
                        
                        
                        (44,616
                        )
                        
                        
                        (88,110
                        )Interest
      income
                        
                        
                        11,095
                        
                        
                        
                        43,415Gain
      on disposition of property and equipment
                        
                        
                        7,950
                        
                        
                        
                        -(25,571
                        )
                        
                        
                        (44,695
                        )INCOME
      BEFORE INCOME TAXES
                        
                        
                        124,247
                        
                        
                        
                        501,816INCOME
      TAXES
                        
                        
                        104,801
                        
                        
                        
                        219,093NET
      INCOME
                        
                        $
                        19,446
                        
                        
                        $
                        282,723BASIC
      EARNINGS PER COMMON SHARE
                        
                        $
                        0.009
                        
                        
                        $
                        0.014DILUTED
      EARNINGS PER COMMON SHARE
                        
                        $
                        0.009
                        
                        
                        $
                        0.013WEIGHTED
      AVERAGE NUMBER OF COMMON SHARES OUTSTANDING – BASIC
                        
                        
                        20,751,215
                        
                        
                        
                        19,615,539WEIGHTED AVERAGE NUMBER OF
      COMMON SHARES
      OUTSTANDING – DILUTED
                        
                        
                        22,554,394
                        
                        
                        
                        22,121,341




See notes
to condensed consolidated financial statements.


-4-





PHARMA-BIO
SERV, INC.


Condensed
Consolidated Statements of Cash Flows


(Unaudited)




Three months ended
                                    January 31,2009
                                  
                                  
                                  2008CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      income
                                  
                                  $
                                  19,446
                                  
                                  
                                  $
                                  282,723Adjustments
      to reconcile net income to net cash provided by operating
      activities:Gain
      on disposition of property and equipment
                                  
                                  
                                  (7,950
                                  )
                                  
                                  
                                  -Stock-based
      compensation
                                  
                                  
                                  17,777
                                  
                                  
                                  
                                  33,313Depreciation
      and amortization
                                  
                                  
                                  92,665
                                  
                                  
                                  
                                  50,427Imputed
      interest expense
                                  
                                  
                                  43,108
                                  
                                  
                                  
                                  86,255Decrease
      in accounts receivable
                                  
                                  
                                  1,033,921
                                  
                                  
                                  
                                  400,228(Increase)
      decrease in other assets
                                  
                                  
                                  (40,333
                                  )
                                  
                                  
                                  54,208(Decrease)
      increase in liabilities
                                  
                                  
                                  (223,486
                                  )
                                  
                                  
                                  107,328NET
      CASH PROVIDED BY OPERATING ACTIVITIES
                                  
                                  
                                  935,148
                                  
                                  
                                  
                                  1,014,482CASH
      FLOWS FROM INVESTING ACTIVITIES:Acquisition
      of property and equipment
                                  
                                  
                                  (58,118
                                  )
                                  
                                  
                                  (444,042
                                  )Payments
      for business assets acquisition
                                  
                                  
                                  (150,394
                                  )
                                  
                                  
                                  -Proceeds
      from sale of property and equipment
                                  
                                  
                                  12,400
                                  
                                  
                                  
                                  -NET
      CASH USED IN INVESTING ACTIVITIES
                                  
                                  
                                  (196,112
                                  )
                                  
                                  
                                  (444,042
                                  )CASH
      FLOW FROM FINANCING ACTIVITIES:Payments
      on obligations under capital lease
                                  
                                  
                                  (11,034
                                  )
                                  
                                  
                                  (10,205
                                  )Payments
      to affiliate
                                  
                                  
                                  (2,250,000
                                  )
                                  
                                  
                                  -NET
      CASH USED IN FINANCING ACTIVITIES
                                  
                                  
                                  (2,261,034
                                  )
                                  
                                  
                                  (10,205
                                  )EFFECT
      OF EXCHANGE RATE CHANGES ON CASH
                                  
                                  
                                  (1,095
                                  )
                                  
                                  
                                  -NET
      (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
                                  
                                  
                                  (1,523,093
                                  )
                                  
                                  
                                  560,235CASH
      AND CASH EQUIVALENTS - BEGINNING OF PERIOD
                                  
                                  
                                  3,087,990
                                  
                                  
                                  
                                  4,792,366CASH
      AND CASH EQUIVALENTS – END OF PERIOD
                                  
                                  $
                                  1,564,897
                                  
                                  
                                  $
                                  5,352,601SUPPLEMENTAL
      DISCLOSURES OF CASH FLOW
    INFORMATION:Cash
      paid during the period for:Income
      taxes
                                  
                                  $
                                  190,007
                                  
                                  
                                  $
                                  -Interest
                                  
                                  $
                                  1,507
                                  
                                  
                                  $
                                  1,855SUPPLEMENTARY
      SCHEDULES OF NON-CASH INVESTING AND
      FINANCING ACTIVITIES:Accounts
      payable incurred in projects in process
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  84,306Income
      tax withheld by clients to be used as a credit in the Company’s income tax
      return
                                  
                                  $
                                  4,013
                                  
                                  
                                  $
                                  -Property
      and equipment disposed with an accumulated depreciation of
      $27,544
                                  
                                  $
                                  31,995
                                  
                                  
                                  $
                                  -Obligations
      under capital lease incurred for the acquisition of a
    vehicle
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  33,695





See notes
to condensed consolidated financial statements.


-5-





PHARMA-BIO
SERV, INC.


Notes
To Condensed Consolidated Financial Statements


January
31, 2009


(Unaudited)





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, Pharma-Bio Serv US, Inc.
(“Pharma-US”), a Delaware corporation, and Pharma-Bio Serv Validation &
Compliance Limited (“Pharma-IR”), a majority owned Irish corporation.
Pharma-Bio, Pharma-PR, Pharma-US 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.





Pharma-US
is a wholly owned subsidiary, which was organized in Delaware in July 2008. As
of January 31, 2009, this subsidiary was in development stage and has not
incurred significant revenues or expenses.





SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES





The
condensed consolidated balance sheet of the Company as of October 31, 2008 is
derived from audited consolidated financial statements but does not include all
disclosures required by generally accepted accounting principles. The unaudited
interim condensed consolidated financial statements, include all adjustments,
consisting of normal recurring adjustments, which are, in the opinion of
management, necessary for a fair presentation of the financial position and
results of operations and cash flows for the interim periods. The results of
operations for the three months ended January 31, 2009 are not necessarily
indicative of expected results for the full 2009 fiscal year.




The
accompanying financial data as of January 31, 2009, and for the three months
ended January 31, 2009 and 2008 has been prepared by us, without audit, pursuant
to the rules and regulations of the Securities and Exchange Commission (SEC).
Certain information and footnote disclosures normally contained in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. These condensed consolidated financial
statements should be read in conjunction with the financial statements and notes
contained in our audited Consolidated Financial Statements and the notes thereto
for the fiscal year ended October 31, 2008.





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 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.


-6-


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 liquidity or short-term nature.
Management believes, based on current rates, that the fair value of its
obligations under capital leases and amounts due to affiliate approximates the
carrying amount.





Revenue
Recognition




Revenue
is primarily derived from: (1) time and materials contracts (representing
approximately 90% of total revenues), which is recognized by applying the
proportional performance model, whereby revenue is recognized as performance
occurs, and (2) short-term fixed-fee contracts or "not to exceed" contracts
(representing 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 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 initial 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. As of
January 31, 2009 and October 31, 2008 the accumulated depreciation and
amortization amounted to $531,873 and $480,085, respectively.




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.


-7-





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





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 consolidated statements of
income were not significant for the periods presented.





Reclassifications





Certain
reclassifications have been made to the January 31, 2008 condensed consolidated
financial statements to conform them to the January 31, 2009 condensed
consolidated financial statements presentation. Such reclassifications do not
have effect on net income as previously reported.


-8-





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.





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. The application of this standard had no 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. 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
application of this standard had no significant effect on the Company's
consolidated financial statements.





5. 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 - INCOME TAXES





On July
2008, Pharma-Bio and Pharma-PR obtained a Grant of Industrial Tax Exemption
(“the Grant”) from the Puerto Rico Industrial Development Company pursuant to
the terms and conditions set forth in Act No. 135 of December 2, 1997, as
amended. The Grant provides relief on various Puerto Rico taxes, including
income tax, mostly for the Company's new microbiological testing facility and
service activities outside of Puerto Rico. The Grant is effective as of
September 1, 2007 and covers a ten year period. Activities covered by the Grant
are subject to a reduced income tax rate of 7%.


-9-


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.





The
Company has not recognized deferred income taxes on 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 tollgate tax.





Pharma-Bio,
Pharma-IR and Pharma-PR have unused operating losses which result in a potential
deferred tax asset. However, an allowance has been provided covering the total
amount of such balance since it is uncertain whether the net operating losses
can be used to offset future taxable income before their expiration dates.
Realization of future tax benefits related to a deferred tax asset is dependent
on many factors, including the company’s ability to generate taxable income.
Accordingly, the income tax benefit will be recognized when realization is
determined to be more probable than not. These net operating losses are
available to offset future taxable income and expire for Pharma-Bio and
Pharma-PR in 2026 and 2015, respectively, while for Pharma-IR are available
indefinitely.





The
statutory income tax rate differs to the effective rate mainly due to the new
tax activities in Ireland and our microbiological testing facility which don’t
have previous taxable income where their current net operating losses could be
carried back and derive a tax benefit. As previously mentioned, it is company
policy to recognize tax benefits of net operating loss carryforwards when
realization is determined to be more probable than not.





The
Company adopted the provisions of FIN 48 which includes a two-step approach to
recognizing, de-recognizing and measuring uncertain tax positions accounted for
in accordance with SFAS 109. As of January 31, 2009, the Company had no
significant uncertain tax positions that would be reduced as a result of a lapse
of the applicable statute of limitations.





The
Company files income tax returns in the U.S. in federal and various states
jurisdictions, Puerto Rico and Ireland. The 2003 through 2008 tax years are open
and may be subject to potential examination in one or more jurisdictions. We are
not currently under federal, state, Puerto Rico or foreign income tax
examination.





NOTE
D - 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 of 6.72%. In January
2009, the Company made an advance payment of $2,250,000 over the final
installment due on January 25, 2009. The Company expects to pay the remaining
balance during fiscal year 2009. As of January 31, 2009 and October 31, 2008 the
outstanding installment balances were:


January
      31,
                        2009
                      
                      
                      October
      31,
                        2008Amount
      due within the year ended October 31, 2009
                      
                      $
                      500,000
                      
                      
                      $
                      2,750,000Less
      imputed interest
                      
                      
                      -
                      
                      
                      
                      (43,108
                      )Present
      value of amount due
                      
                      
                      500,000
                      
                      
                      
                      2,706,892Current
      portion
                      
                      
                      (500,000
                      )
                      
                      
                      (2,706,892
                      )Long-term
      portion
                      
                      $
                      -
                      
                      
                      $
                      -





-10-





NOTE
E – WARRANTS




At
January 31, 2009 and October 31, 2008 the Company had outstanding warrants to
purchase 11,053,216 and 12,188,892 shares, respectively, 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.





On
January 23, 2009, the Board of Directors of the Company authorized a one year
extension on the expiration date of the outstanding warrants issued pursuant to,
and subject to the terms and conditions of, those certain Series C Common Stock
Purchase Warrants of the Company, dated as of January 25, 2006, and which were
set to expire on January 24, 2009. In total, this extension of the expiration
date of the common stock purchase warrants identified above will apply to an
aggregate of 973,225 warrants. These warrants have an exercise price of
$0.7344.





NOTE
F – EARNINGS PER SHARE





The
following data shows the amounts used in the calculations of basic and diluted
earnings per share.





Three
      months ended
                            January
    31,2009
                          
                          
                          2008Net
      income available to common equity holders - used to compute basic and
      diluted earnings per share
                          
                          $
                          19,446
                          
                          
                          $
                          280,723Weighted
      average number of common shares - used to compute basic earnings per share
                          
                          
                          20,751,215
                          
                          
                          
                          19,615,539Effect
      of warrants to purchase common stock
                          
                          
                          1,803,179
                          
                          
                          
                          2,500,936Effect
      of options to purchase common stock
                          
                          
                          -
                          
                          
                          
                          4,866Weighted
      average number of shares - used to compute diluted earnings per
      share
                          
                          
                          22,554,394
                          
                          
                          
                          22,121,341





Warrants
for the purchase of 8,972,625 and 9,687,956 shares of common stock for the three
month periods ended in January 31, 2009 and 2008, respectively, were not
included in computing diluted earnings per share because their effects were
antidilutive. In addition, options for the purchase of 1,426,944 and 1,481,906
shares of common stock for the years ended in January 31, 2009 and 2008,
respectively, were not included in computing diluted earnings per share because
their effects were also antidilutive.





NOTE
G - CONCENTRATION OF RISKS




Cash
and cash equivalents





The
Company maintains cash deposits in an 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 insured until April 30, 2009 under the United States
Treasury Temporary Guarantee Program. No losses have been experienced or are
expected on these accounts.





Accounts
receivable and revenues





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


-11-





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





The
Company provided a substantial portion of its services to four customers, who
accounted for 10% or more of its revenues in either of the three month periods
ended January 31, 2009 or 2008. During the three months ended January 31, 2009
revenues from these customers were 29%, 23%, 12% and 7%, or a total of 71%, as
compared to the same period last year for 27%, 25%, 5% and 13%, or a total of
70%, respectively. At January 31, 2009 amounts due from these customers
represented 61% of total accounts receivable balance.


-12-





ITEM 2.
            MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS.




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 of this Quarterly Report on Form 10-Q. 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-K for the year ended October 31, 2008. 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 and the “Risk Factors” section in our Annual Report on Form
10-K for the year ended October 31, 2008.





Overview





We are a
compliance services consulting firm with headquarters in Puerto Rico, servicing
the Puerto Rico, United States and Europe markets. The compliance consulting
service sector in those markets consists of local compliance and validation
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 related 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 125 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.





We
expanded the markets we serve from Puerto Rico to the United States and Ireland.
We have offices in the United States and Ireland markets since fiscal years 2006
and 2008, respectively. The recently established Ireland operation, with an
Ireland based management team reporting to our headquarters, has established a
network of potential key customers and contacts that serve as the base for our
sales target and opportunities.





We have
plans to further penetrate the markets we currently serve. We will be marketing
our services with an active presence in industry trade shows, professional
conventions, industry publications and company provided seminars to the
industry.  Our senior management is also actively involved in the
marketing process, especially in marketing to major accounts. Our senior
management and staff also concentrate on developing new business opportunities
and focus on the larger customer accounts (by number of professionals or dollar
volume) and responding to prospective customers’ requests for
proposals.





While our
core business is FDA and International agencies regulatory compliance related
services we feel that our clients are in need of other services that we can
provide and allow us to present the company as a global solution provider with a
portfolio of integrated services that will bring value added solutions to our
customers.  Accordingly, in fiscal year 2009 we have expanded our
portfolio of services to include a microbiological testing laboratory, an
information technology consulting practice and an organically developed training
center that will provide seminars/trainings to the industry.





Our new
microbiological laboratory (“Lab”) located in Puerto Rico, with an investment of
$1.3 million, incorporates the latest technology and test methodologies meeting
pharmacopoeia industry standards and regulations. The Lab offers microbiological
testing and related services to our core industries already serviced as well as
the cosmetic and food industries.





During
2008, we identified the industry need, and the opportunity to provide, technical
seminars/trainings that will incorporate the latest regulatory trends and
standards as well as other related areas. A network of leading industry
professional experts in their field, which includes resources of our own, were
identified and teamed to provide these seminars/trainings to the industry. Our
goal is to provide these services and market our company in the markets we
currently serve as well as others.


-13-





In
December 2008, we acquired the operations and assets of Integratek Corp.
(“Integratek”), an information technology services and consulting firm based in
Puerto Rico. Integratek provides a variety of information technology services
such as web pages and portals development, digital art design, intranets,
extranets, software development including database integration, Windows and web
applications development, software technical training and learning management
systems, technology project management, and compliance consulting services,
among others.  Integratek is a Microsoft Certified Partner and a
reseller for technology products from leading vendors in the market. Although
this acquired operation is currently small, our goal is to broaden the portfolio
of services that we can provide to our customer base and also target other
potential customers in other industries.





In line
with the strategy to penetrate the United States market, we applied and on July
1, 2008 received certification as a "minority-controlled company" as defined by
the National Minority Supplier Development Council and Growth Initiative
("NMSDC"). The certification will allow us to participate in corporate diversity
programs available from various potential customers in the United States and
Puerto Rico. The certification is subject to renewal on July 1,
2009.





On July
2008, Pharma-Bio and Pharma-PR obtained a Grant of Industrial Tax Exemption
(“the Grant”) from the Puerto Rico Industrial Development Company pursuant to
the terms and conditions set forth in Act No. 135 of December 2, 1997, as
amended. The Grant provides relief on various Puerto Rico taxes, including
income tax, mostly for our new Lab and service activities outside of Puerto
Rico. The Grant is effective as of September 1, 2007 and covers a ten year
period. Activities covered by the Grant are subject to a reduced income tax rate
of 7%.





Although
we believe we have instituted the right strategies to be profitable and seek
growth, we cannot control the fact that the industry and the local and global
economies are undergoing a recession and that has affected our operation and
business growth.





The
global economy recession and the industry worldwide consolidation continue to
affect our fiscal year 2009 revenues and our growth plans.  For the
three months period ended in January 31, 2009 our total net revenues decreased
by approximately $0.7 million or 19.7%, when compared to the same period last
year. In order to maintain volume in the markets we serve and ensure we are
price competitive, we have adjusted our pricing and gross margin structure
accordingly. In addition, we implemented cost containment measures and are
refocusing the overall operations strategy to reduce its overhead costs. These
factors have lead our net income for the three months period ended January 31,
2009 to be approximately $19,000, a decline of $264,000 or a reduction in profit
margin of 7.1 percentage points when compared to the same period last
year.





The
following table sets forth information as to our revenue for the three months
ended January 31, 2009 and 2008, by geographic regions (dollars in
thousands).





Three months ended January 31,Revenues by Region
                        
                        2009
                        
                        
                        2008Puerto
      Rico
                        
                        $
                        2,143
                        
                        
                        
                        74.1
                        %
                        
                        $
                        2,724
                        
                        
                        
                        75.6
                        %United
      States
                        
                        
                        601
                        
                        
                        
                        20.8
                        %
                        
                        
                        880
                        
                        
                        
                        24.4
                        %Ireland
                        
                        
                        149
                        
                        
                        
                        5.1
                        %
                        
                        
                        -
                        
                        
                        
                        -$
                        2,893
                        
                        
                        
                        100.0
                        %
                        
                        $
                        3,604
                        
                        
                        
                        100.0
                        %





We
believe our fiscal year 2009 profitability and liquidity is going to be highly
dependent of the effect the global economy and worldwide industry consolidations
will have over our operations, and our ability to seek service opportunities and
adapt to the current industry trends.


-14-





Results
of Operations





The
following table sets forth our statements of operations for the three-month
periods ended January 31, 2009 and 2008, (dollars in thousands) and as a
percentage of revenue:




Three months endedJanuary 31,2009
                  
                  
                  2008Revenues
                  
                  $
                  2,894
                  
                  
                  
                  100.0
                  %
                  
                  $
                  3,604
                  
                  
                  
                  100.0
                  %Cost
      of services
                  
                  
                  2,032
                  
                  
                  
                  70.2
                  %
                  
                  
                  2,242
                  
                  
                  
                  62.2
                  %Gross
      profit
                  
                  
                  862
                  
                  
                  
                  29.8
                  %
                  
                  
                  1,362
                  
                  
                  
                  37.8
                  %Selling,
      general and administrative costs
                  
                  
                  712
                  
                  
                  
                  24.6
                  %
                  
                  
                  816
                  
                  
                  
                  227
                  %Interest
      expense
                  
                  
                  45
                  
                  
                  
                  1.6
                  %
                  
                  
                  88
                  
                  
                  
                  2.4
                  %Interest
      income
                  
                  
                  11
                  
                  
                  
                  -0.4
                  %
                  
                  
                  44
                  
                  
                  
                  -1.2
                  %Gain
      on disposition of property
                  
                  
                  8
                  
                  
                  
                  -0.3
                  %
                  
                  
                  -
                  
                  
                  
                  0.0
                  %Income
      before income taxes
                  
                  
                  124
                  
                  
                  
                  4.3
                  %
                  
                  
                  502
                  
                  
                  
                  13.9
                  %Income
      tax expense
                  
                  
                  105
                  
                  
                  
                  3.6
                  %
                  
                  
                  219
                  
                  
                  
                  6.1
                  %Net
      income
                  
                  
                  19
                  
                  
                  
                  0.7
                  %
                  
                  
                  283
                  
                  
                  
                  7.8
                  %




Revenues. Revenues
for the three months ended January 31, 2009 were $2.9 million, a decrease of
approximately $0.7 million or 19.7%, when compared to the same period last year.
The reduction is mainly attributable to the decrease of approximately $0.5
million and $0.3 million in the Puerto Rico and the United States market service
revenue, respectively, partially offset by $0.1 million generated by the Ireland
operation.





Decreases
in the service revenue are mostly due to the global economy recession and the
closing of, or decrease in, operations of some pharmaceutical plants, triggered
by operations consolidation.





Cost of Services; gross
margin. For the three months ended January 31, 2009, our gross margin
decreased by 8.0 percentage points when compared to the same period last year.
The net gross margin reduction is mainly attributable to our strategy to
maintain volume in the market we serve by keeping its pricing competitiveness,
and expenses incurred by our new Lab for rent and equipment depreciation in the
aggregate amount of approximately $65,000.





Selling, General and
Administrative Expenses. Selling, general and administrative expenses for
the three months ended in January 31, 2009 were approximately $712,000, a
reduction of $104,000 as compared to the same period last year. The net decrease
in expenses is mainly attributable to the expense containment measures
implemented from last fiscal year and continued in the current fiscal year,
geared to offset the service revenue decline and the variance in some expenses
incurred by our Lab last year while under the development stage for the
aggregate amount of approximately $24,000.





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 through fiscal year 2009.




Income Taxes Expense.
The decrease on income taxes expense is attributable to the decrease of income
before income tax. The statutory income tax rate differs to the effective rate
mainly due to the new tax activities in Ireland and our Lab which do not have
previous taxable income where their current net operating losses could be
carried back and derive a tax benefit. It is company policy to recognize tax
benefits of net operating losses when realized. Realization of future tax
benefits is dependent on many factors, including the tax activity ability to
generate taxable income. Accordingly the income tax benefit will be recognized
on a yearly basis when realized.




-15-




Net
Income.Our net income for
the three months ended January 31, 2009 was approximately $19,000, a decline of
$264,000 or a reduction in profit margin of 7.1 percentage points when compared
to the same period last year. For the three months ended in January
31, 2009, earnings per common share basic and diluted were $0.009, they declined
by $0.005 and $0.004, respectively, when compared to the same period last
year.





Our net
income was affected by the decrease in gross margin, partially offset by cost
containment measures in selling, general and administrative expenses, favorable
variances in interest expense, and the reduction of income tax expense due to
the decline in taxable income.





Liquidity
and Capital Resources





Liquidity
is a measure of our ability to meet potential cash requirements, including
planned capital expenditures. For the three months ended January 31, 2009, we
have generated cash flow from operations of approximately $0.9 million and
working capital of approximately $2.5 million, notwithstanding within that
period we have made a partial payment of $2.25 million related to the final
$2.75 million installment due in January 2009 pursuant the 2006 Pharma-PR
acquisition agreement. If our profitability and liquidity improves, during
fiscal year 2009 we expect to pay from working capital the remaining balance of
$500,000.





To the
extent that we pursue possible opportunities and 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 net cash flow from
operations.





Our
primary cash needs consist of the 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 with improved levels of operations 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 balance of the final
installment due in connection with the acquisition of Pharma-PR and our
obligations to pay the installment payments due in connection with the
acquisition of Integratek, for the next twelve months.





While
uncertainties relating to the current local and global economic condition,
competition, the industries and geographical regions served by us and other
regulatory matters exist within the consulting services industry, management is
implementing marketing and cost containment strategies to seek and improve our
current liquidity and profitability trend.





Off-Balance
Sheet Arrangements




We were
not involved in any significant off-balance sheet arrangement during the three
months ended January 31, 2009.





Critical
Accounting Policies and Estimates





There
were no material changes during the three months ended January 31, 2009 to the
critical accounting policies reported in our Annual Report on Form 10-K for the
fiscal year ended October 31, 2008.





New
Accounting Pronouncements





There
were no new accounting pronouncements, issued since our filing of the Annual
Report on Form 10-K for the fiscal year ended October 31, 2008, which could have
a significant effect on our condensed consolidated financial
statements.


-16-




Forward-Looking
Statements




Our
business, financial condition, results of operations, cash flows and prospects,
and the prevailing market price and performance of our common stock, may be
adversely affected by a number of factors, including the matters discussed
below. Certain statements and information set forth in this Quarterly Report on
Form 10-Q, as well as other written or oral statements made from time to time by
us or by our authorized executive officers on our behalf, constitute
“forward-looking statements” within the meaning of the Federal Private
Securities Litigation Reform Act of 1995. These statements include all
statements other than those made solely with respect to historical fact and
identified by words such as “believes”, “anticipates”, “expects”, “intends” and
similar expressions, but such words are not the exclusive means of identifying
such statements.  We intend for our forward-looking statements to be
covered by the safe harbor provisions for forward-looking statements contained
in the Private Securities Litigation Reform Act of 1995, and we set forth this
statement and these risk factors in order to comply with such safe harbor
provisions. You should note that our forward-looking statements speak only as of
the date of this Quarterly Report on Form 10-Q or when made and we undertake no
duty or obligation to update or revise our forward-looking statements, whether
as a result of new information, future events or otherwise. Although we believe
that the expectations, plans, intentions and projections reflected in our
forward-looking statements are reasonable, such statements are subject to known
and unknown risks, uncertainties and other factors that may cause our actual
results, performance or achievements to be materially different from any future
results, performance or achievements expressed or implied by the forward-looking
statements. The risks, uncertainties and other factors that our stockholders and
prospective investors should consider include, but are not limited to, the
following:




·
            Because our business is
      concentrated in the pharmaceutical industry in Puerto Rico, any changes in
      that industry could impair our ability to generate revenue and realize a
      profit.


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


·
            Since our business is dependent
      upon the development and enhancement of patented pharmaceutical products
      or processes by our clients, the failure of our clients to obtain and
      maintain patents could impair our ability to operate
      profitably.


·
            We may be unable to pass on
      increased labor costs to our
clients.


·
            Our cash requirements include
      payments due from our reverse merger
  transaction.


·
            Consolidation
      in the pharmaceutical industry may have a harmful effect on our
      business.


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


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


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


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


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


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


·
            We may be held liable for the
      actions of our employees or contractors when on
      assignment.


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


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


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


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


-17-





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


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


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


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


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


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




ITEM
4. CONTROLS AND PROCEDURES.





Evaluation
of Disclosure Controls and Procedures





We
carried out an evaluation, under the supervision and with the participation of
our management, including our Chief Executive Officer and Chief Financial
Officer, of the effectiveness of our disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the
period covered by this Quarterly Report. Based upon that evaluation, our Chief
Executive Officer and Chief Financial Officer concluded that our disclosure
controls and procedures were effective as of the end of the period covered by
this Quarterly Report.




Changes
in Internal Control Over Financial Reporting




Based on
an evaluation, under the supervision and with the participation of our
management, including our Chief Executive Officer and Chief Financial Officer,
there has been no change in our internal control over financial reporting during
our last fiscal quarter identified in connection with that evaluation that has
materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.


-18-





PART
II– OTHER INFORMATION





ITEM
1.  LEGAL PROCEEDINGS.





From time
to time, we may be a party to legal proceedings incidental to our
business.  We do not believe that there are any proceedings threatened
or pending against us, which, if determined adversely to us, would have a
material effect on our financial position or results of operations and cash
flows.




ITEM
6.  EXHIBITS





(a)
Exhibits:




4.1
              Form
      of First Amendment to Series C Common Stock Purchase Warrant (incorporated
      by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K
      filed on January 29, 2009).
 
 10.1
              Amendment
      dated December 17, 2008 to Employment Agreement dated November 5, 2007,
      between Pedro Lasanta and the Company (incorporated by reference to
      Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on December
      23, 2008).
 
 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.


-19-




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
      PlazaChief
      Executive Officer(Principal
      Executive Officer)/s/
      Pedro J. LasantaPedro
      J. LasantaChief
      Financial Officer(Principal
      Financial Officer and Principal Accounting
                    Officer)Dated:
      March 17, 2009


-20-