**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**








**FORM
      10-QSB**





**(MARK
      ONE)**





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





**For
      the quarterly period ended March 31, 2006**








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





**For
      the transition period
      from                                         
to**





**Commission
      file number:** **000-51065**





**MILLSTREAM
                II ACQUISITION CORPORATION**(Exact
                Name of Small Business Issuer as Specified in Its Charter)**Delaware**
            **20-1665695**(State
                or other jurisdiction of incorporation or organization)
            (I.R.S.
                Employer Identification No.)





**435
      Devon Park Drive, Bldg. 400, Wayne, PA 19087**


(Address
      of principal executive offices)





**(610)
      975-4909**


(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. Yes x No o





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





State
      the
      number of shares outstanding of each of the issuer’s classes of common equity,
      as of the latest practicable date: 5,600,000 common shares as of May 12,
      2006





Transitional
      Small Business Disclosure Format. Yes o No x










**PART
      I** **-** **FINANCIAL INFORMATION**





**Item
      1. Financial Statements.**





**MILLSTREAM
      II ACQUISITION CORPORATION**


**(a
      corporation in the development stage)**




**CONDENSED
      BALANCE SHEETS**




**(Unaudited)**
              **March
                31,**
              **2006**
            
            **December
                31,**
              **2005****ASSETS**Current
                assets:Cash
                and cash equivalents
            
            $
            434,658
            
            $
            533,658Investments
                held in trust
            
            
            24,692,740
            
            
            24,443,182Prepaid
                expenses
            
            
            14,125
            
            
            26,125Deferred
                income taxes
            
            
            213,700
            
            
            141,000Total
                assets
            
            $
            25,355,223
            
            $
            25,143,965**LIABILITIES
                AND STOCKHOLDERS’ EQUITY**Current
                liabilities:Accounts
                payable and accrued expenses
            
            $
            192,747
            
            $
            121,388Income
                taxes payable
            
            
            184,800
            
            
            106,800Deferred
                interest
            
            
            191,352
            
            
            141,416Total
                liabilities
            
            
            568,899
            
            
            369,604CommitmentCommon
                stock, subject to possible conversion, 919,540 shares atconversion
                value
            
            
            4,744,826
            
            
            4,744,826Stockholders’
                Equity:Preferred
                stock, $.0001 par value, authorized 1,000,000 shares; noneissued
            
            
            -
            
            
            -Common
                stock, $.0001 par value, authorized 15,000,000 shares; issuedand
                outstanding 5,600,000 shares (which includes 919,540 shares subject
                to
                possible conversion)
            
            
            560
            
            
            560Additional
                paid-in capital
            
            
            19,970,368
            
            
            19,970,368Retained
                earnings accumulated during development stage
            
            
            70,570
            
            
            58,607Total
                stockholders’ equity
            
            
            20,041,498
            
            
            20,029,535Total
                liabilities and stockholders’ equity
            
            $
            25,355,223
            
            $
            25,143,965





See
      accompanying notes to unaudited financial statements.


1


**MILLSTREAM
      II ACQUISITION CORPORATION**


**(a
      corporation in the development stage)**








**CONDENSED
      STATEMENTS OF OPERATIONS (UNAUDITED)**


**Quarter**
                **Ended**
                **March
                  31,**
                **2006**
              
              **Quarter**
                **Ended**
                **March
                  31,**
                **2005**
              
              **September
                  24, 2004 (Inception) to March 31, 2006**General
                  and administrative expenses
              
              $
              184,179
              
              $
              79,825
              
              $
              675,172Operating
                  loss
              
              
              (184,179
              )
              
              (79,825
              )
              
              (675,172
              )Other
                  income:Interest
                  income
              
              
              2,571
              
              
              4,627
              
              
              15,705Interest
                  on trust fund investment
              
              
              199,871
              
              
              107,275
              
              
              765,887Total
                  other income
              
              
              202,442
              
              
              111,902
              
              
              781,592Income
                  before income taxes
              
              
              18,263
              
              
              32,077
              
              
              106,420Income
                  tax provision
              
              
              (6,300
              )
              
              (8,800
              )
              
              (35,850
              )Net
                  income
              
              $
              11,963
              
              $
              23,277
              
              $
              70,570





Weighted
                average shares of commonstock
                outstandingBasic
                and diluted
            
            
            5,600,000
            
            
            5,600,000
            
            
            4,906,557Earnings
                per common shareBasic
                and diluted
            
            $
            .00
            
            $
            .00
            
            $
            .01







See
      accompanying notes to unaudited financial statements.


2


**MILLSTREAM
      II ACQUISITION CORPORATION**


**(a
      corporation in the development stage)**








**CONDENSED
      STATEMENTS OF CASH FLOWS (UNAUDITED)**


**Quarter
                  Ended**
                **March
                  31, 2006**
              
              **Quarter
                  Ended**
                **March
                  31, 2005**
              
              **September
                  24, 2004 (Inception) to March 31, 2006****Cash
                  flows from operating activities:**Net
                  income
              
              $
              11,963
              
              $
              23,277
              
              $
              70,570Adjustments
                  to reconcile net income to net cash used in operatingactivities:Interest
                  income on investments held in trust
              
              
              (249,808
              )
              
              (134,076
              )
              
              (957,240
              )Decrease
                  (increase) in prepaid expenses
              
              
              12,000
              
              
              17,955
              
              
              (14,125
              )Increase
                  in deferred income taxes
              
              
              (72,700
              )
              
              -
              
              
              (213,700
              )Increase
                  in accounts payable and accrued expenses
              
              
              71,359
              
              
              31,912
              
              
              192,747Increase
                  in income taxes payable
              
              
              78,000
              
              
              -
              
              
              184,800Increase
                  in deferred interest
              
              
              49,936
              
              
              26,801
              
              
              191,352Net
                  cash used in operating activities
              
              
              (99,250
              )
              
              (34,131
              )
              
              (545,596
              )**Cash
                  flows from investing activities:**Purchase
                  of treasury bills held in trust
              
              
              (24,656,313
              )
              
              -
              
              
              (121,040,380
              )Maturity
                  of treasury bills held in trust
              
              
              24,656,000
              
              
              -
              
              
              97,305,000Decrease
                  (increase) in cash held in trust
              
              
              563
              
              
              250
              
              
              (120
              )Net
                  cash provided by (used in) investing activities
              
              
              250
              
              
              250
              
              
              (23,735,500
              )**Cash
                  flows from financing activities:**Proceeds
                  from sale of shares of common stock to initial stockholders
              
              
              -
              
              
              -
              
              
              25,000Proceeds
                  from note payable, stockholder
              
              
              -
              
              
              -
              
              
              35,000Repayment
                  of note payable, stockholder
              
              
              -
              
              
              -
              
              
              (35,000
              )Proceeds
                  from public issuance of 4,600,000 units
              
              
              -
              
              
              -
              
              
              27,600,000Proceeds
                  from issuance of option
              
              
              -
              
              
              -
              
              
              100Payment
                  of costs of public offering
              
              
              -
              
              
              (32,401
              )
              
              (2,909,346
              )Net
                  cash (used in) provided by financing activities
              
              
              -
              
              
              (32,401
              )
              
              24,715,754Net
                  (decrease) increase in cash and cash equivalents
              
              
              (99,000
              )
              
              (66,282
              )
              
              434,658Cash
                  and cash equivalents at beginning of period
              
              
              533,658
              
              
              941,943
              
              
              -Cash
                  and cash equivalents at end of period
              
              $
              434,658
              
              $
              875,661
              
              $
              434,658







See
      accompanying notes to unaudited financial statements.


3


**MILLSTREAM
      II ACQUISITION CORPORATION**


**(a
      corporation in the development stage)**





**NOTES
      TO UNAUDITED FINANCIAL STATEMENTS**





**1.
      Basis of Presentation**





The **** condensed **** financial
      statements at March 31, 2006 and for the three months ended March 31, 2006
      and
      2005, and for the period from September 24, 2004 (inception) to March 31, 2006
      are unaudited and include the accounts of Millstream II Acquisition Corporation
      (a corporation in the development stage) (“the Company”). The condensed balance
      sheet at December 31, 2005 has been derived from the audited financial
      statements.





In
      the
      opinion of management, all adjustments (consisting of normal accruals) have
      been
      made that are necessary to present fairly the financial position of the Company
      as of March 31, 2006 and 2005 and the results of its operations and its cash
      flows for the three months ended March 31, 2006 and 2005. The Company commenced
      operations effective September 24, 2004. Operating results for the interim
      period presented are not necessarily indicative of the results to be expected
      for a full year.





The
      statements and related notes have been prepared pursuant to the rules and
      regulations of the U.S. Securities and Exchange Commission. Accordingly, certain
      information and footnote disclosures normally included in financial statements
      prepared in accordance with generally accepted accounting principles have been
      omitted pursuant to such rules and regulations.





**2.
      Organization and Business Operations**





The
      Company was incorporated in Delaware on September 24, 2004 as a blank check
      company whose objective is to acquire an operating business.





The
      registration statement for the Company’s initial public offering ("the
      Offering") was declared effective on December 17, 2004. The Company consummated
      the Offering, including the over-allotment option, on December 23, 2004 and
      December 30, 2004, respectively, and raised total net proceeds of approximately
      $24,691,000. The Company’s management has broad discretion with respect to the
      specific application of the net proceeds of the Offering, although substantially
      all of the net proceeds of the Offering are intended to be generally applied
      toward consummating a business combination with an operating business ("Business
      Combination"). There is no assurance that the Company will be able to
      successfully effect a Business Combination. An amount of $23,736,000 of the
      net
      proceeds was placed in an interest-bearing trust account ("Trust Account")
      until
      the earlier of (i) the consummation of a Business Combination or (ii)
      liquidation of the Company. Under the agreement governing the Trust Account,
      funds will be invested only in United States government securities (Treasury
      Bills) with a maturity of 180 days or less. This amount has been invested in
      United States Treasury Bills, which have been accounted for as trading
      securities (see Note 3). The remaining net proceeds (not held in the Trust
      Account) may be used to pay for business, legal and accounting due diligence
      on
      prospective acquisitions and continuing general and administrative expenses.





The
      Company, after signing a definitive agreement for the acquisition of a target
      business, will submit such transaction for stockholder approval. In the event
      that stockholders owning 20% or more of the shares sold in the Offering vote
      against the Business Combination and exercise their conversion rights described
      below, the Business Combination will not be consummated. All of the Company’s
      stockholders prior to the Offering, including all of the officers and directors
      of the Company ("Initial Stockholders"), have agreed to vote their 1,000,000
      founding shares of common stock in accordance with the vote of the majority
      of
      all other stockholders of the Company ("Public Stockholders") with respect
      to
      any Business Combination. After consummation of a Business Combination, these
      voting safeguards will no longer be applicable.


4


**MILLSTREAM
      II ACQUISITION CORPORATION**


**(a
      corporation in the development stage)**





**NOTES
      TO UNAUDITED FINANCIAL STATEMENTS - (Continued)**





**2.
      Organization and Business Operations (continued)**




With
      respect to a Business Combination that is approved and consummated, any Public
      Stockholder who voted against the Business Combination may demand that the
      Company convert his shares to cash. The per share conversion price will equal
      the amount in the Trust Account, calculated as of two business days prior to
      the
      consummation of the Business Combination, divided by the number of shares of
      common stock held by Public Stockholders at the consummation of the Offering.
      Accordingly, Public Stockholders holding 19.99% of the aggregate number of
      shares owned by all Public Stockholders may seek conversion of their shares
      in
      the event of a Business Combination. Such Public Stockholders are entitled
      to
      receive their per share interest in the Trust Account computed without regard
      to
      the shares held by Initial Stockholders. Accordingly, a portion of the net
      proceeds from the Offering (19.99% of the amount held in the Trust Account)
      has
      been classified as common stock subject to possible conversion in the
      accompanying balance sheets and 19.99% of the related interest earned has been
      recorded as deferred interest.





The
      Company’s Certificate of Incorporation, as amended, provides for mandatory
      liquidation of the Company in the event that the Company does not consummate
      a
      Business Combination within 18 months from the date of the consummation of
      the
      Offering (June 23, 2006), or 24 months from the consummation of the Offering
      (December 23, 2006) if certain extension criteria have been satisfied. There
      is
      no assurance that the Company will be able to successfully effect a Business
      Combination during this period.  This factor raises substantial doubt about
      the Company's ability to continue as a going concern. The accompanying financial
      statements are prepared assuming the Company will continue as a going concern.
      The financial statements do not include any adjustments that might result from
      the outcome of this uncertainty.  In the
      event of liquidation, it is likely that the per share value of the residual
      assets remaining available for distribution (including Trust Account assets)
      will be less than the initial public offering price per share in the Offering
      due to costs related to the Offering, general and administrative expenses
      incurred prior to the liquidation event and since no value would be attributed
      to the Warrants contained in the Units sold (see Note 5).





**3.
      Investments Held in Trust**





Investments
      held in trust at March 31, 2006 consist of a zero coupon United States Treasury
      Bill with a face value of $24,940,000 purchased at a discount of 98.8625% due
      June 23, 2006 and carried on the Company’s financial statements at $24,692,740,
      which includes interest of $36,282 and trust cash of $144.





Investments
      held in trust at December 31, 2005 consist of a zero coupon United States
      Treasury Bill with a face value of $24,656,000 purchased at a discount of
      99.0268% due March 23, 2006 and carried on the Company’s financial statements at
      $24,443,182, which includes interest of $26,426 and trust cash of
      $703.










5





**MILLSTREAM
      II ACQUISITION CORPORATION**


**(a
      corporation in the development stage)**





**NOTES
      TO UNAUDITED FINANCIAL STATEMENTS - (Continued)**





**4.
      Earnings per Share**





The
      following table sets forth the computation of basic and diluted earnings per
      share:





**Quarter
                Ended March 31, 2006**
            
            **Quarter
                Ended March 31, 2005**
            
            **September
                24, 2004 (Inception) to March 31, 2006**Numerator:
                Net income
            
            $
            11,963
            
            $
            23,277
            
            $
            70,570Denominator:
                Average common shares
              outstanding
            
            
            5,600,000
            
            
            5,600,000
            
            
            4,906,557Basic
                and diluted earnings per share
            
            $
            .00
            
            $
            .00
            
            $
            .01





No
      computation for diluted earnings per share was prepared for the Redeemable
      Common Stock Purchase Warrants (see Note 5) to purchase an aggregate of
      9,200,000 shares of common stock at $5.00 per share and the underwriters’ option
      (see Note 5) to purchase 300,000 Units at an exercise price of $9.90 per Unit
      (with underlying warrants at $6.25 per share), respectively, that were
      outstanding at March 31, 2006 and 2005 because the shares underlying the
      conversion of the warrants are contingently issuable and the exercise price
      of
      the underwriters’ option is in excess of the related market value of the
      Units.





**5.
      Stockholders’ Equity**





**The
      Offering**


The
      Company sold 4,600,000 units ("Units") in the Offering, which included all
      of
      the 600,000 Units subject to the underwriters’ over-allotment option. Each Unit
      consists of one share of the Company’s common stock, $.0001 par value, and two
      Redeemable Common Stock Purchase Warrants ("Warrants"). Each Warrant entitles
      the holder to purchase from the Company one share of common stock at an exercise
      price of $5.00 commencing the later of the completion of a Business Combination
      with a target business or December 17, 2005 and expiring December 16, 2008.
      The
      Warrants will be redeemable at a price of $.01 per Warrant upon 30 days notice
      after the Warrants become exercisable, only in the event that the last sale
      price of the common stock is at least $8.50 per share for any 20 trading days
      within a 30 trading day period ending on the third day prior to the date on
      which notice of redemption is given. In connection with this Offering, the
      Company issued an option, for $100, to the representative of the underwriters
      to
      purchase 300,000 Units at an exercise price of $9.90 per Unit (see Common Stock
      Commitments below).





The
      Company accounted for the fair value of the option, inclusive of the receipt
      of
      the $100 cash payment, as an expense of the Offering resulting in a charge
      directly to stockholders’ equity. The Company estimated that the fair value of
      this option was approximately $621,000 ($2.07 per Unit) using a Black-Scholes
      option-pricing model. The fair value of the option granted to the underwriter
      was estimated as of the date of grant using the following assumptions: (1)
      expected volatility of 51.45%, (2) risk-free interest rate of 3.59% and (3)
      expected life


6








**MILLSTREAM
      II ACQUISITION CORPORATION**


**(a
      corporation in the development stage)**





**NOTES
      TO UNAUDITED FINANCIAL STATEMENTS - (Continued)**





**5.
      Stockholders’ Equity (continued)**





**The
      Offering (continued)**


of
      5
      years. The option may be exercised for cash or on a ‘‘cashless’’ basis, at the
      holder’s option, such that the holder may use the appreciated value of the
      option (the difference between the exercise prices of the option and the
      underlying Warrants and the market price of the Units and underlying securities)
      to exercise the option without the payment of any cash. The warrants underlying
      such Units are exercisable at $6.25 per share, but otherwise have the same
      terms
      and conditions as the Warrants. Separate trading of the Common Stock and
      Warrants underlying the Company’s Units commenced in January 2005.





**Common
      Stock**


The
      Company’s initial stockholders purchased 347,500 common shares for $24,947 and
      527,500 common shares for $53 on September 29, 2004. On December 7, 2004, the
      Board of Directors authorized a stock dividend of 0.1428571 shares of common
      stock for each share of common stock outstanding, bringing the initial
      outstanding shares to 1,000,000. All references in the accompanying financial
      statements to the number of shares of stock outstanding for the initial
      stockholders have been retroactively restated to reflect this
      transaction.





**Preferred
      Stock**


The
      Company is authorized to issue 1,000,000 shares of preferred stock, par value
      $.0001 per share, with such designations, voting and other rights and
      preferences as may be determined from time to time by the Board of Directors.
      As
      of March 31, 2006, no shares of preferred stock have been issued.





**Common
      Stock Commitments**


The
      Company has 10,100,000 shares of common stock commitments in the form of
      Warrants and the underwriters’ option, which are currently not exercisable. Only
      9,400,000 common shares are available for issuance under the current amount
      of
      authorized shares. The Company intends to increase its number of authorized
      shares in connection with a business combination and prior to the date in which
      the Warrants and the underwriters’ option become exercisable. The Company’s
      underwriters have committed that the Company will not be obligated to issue
      240,000 of the Units described in The Offering above if the Company is unable
      to
      increase its number of authorized shares. These 240,000 Units represent 720,000
      shares of common stock commitments.





**6.**  **Commitment**





The
      Company presently occupies office space provided by an affiliate of an Initial
      Stockholder, who is also an officer. Such affiliate has agreed that, until
      the
      acquisition of a target business by the Company, it will make such office space,
      as well as certain office and secretarial services, available to the Company,
      as
      may be required by the Company from time to time. The Company has agreed to
      pay
      the affiliate $7,500 per month for such services commencing December 17, 2004.





7


**Item
      2. Plan of Operation.**





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





*This
      Quarterly Report on Form 10-QSB includes forward-looking statements within
      the
      meaning of Section 27A of the Securities Act of 1933, as amended, and Section
      21E of the Securities Exchange Act of 1934, as amended. We have based these
      forward-looking statements on our current expectations and projections about
      future events. These forward-looking statements are subject to known and unknown
      risks, uncertainties and assumptions about us that may cause our actual results,
      levels of activity, performance or achievements to be materially different
      from
      any future results, levels of activity, performance or achievements expressed
      or
      implied by such forward-looking statements. In some cases, you can identify
      forward-looking statements by terminology such as “may,” “should,” “could,”
“would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or
      the negative of such terms or other similar expressions. Factors that might
      cause or contribute to such a discrepancy include, but are not limited to,
      those
      described in our other Securities and Exchange Commission filings, including
      our
      report on Form 10-KSB as filed on March 30, 2006. The following discussion
      should be read in conjunction with our Financial Statements and related Notes
      thereto included elsewhere in this report.*





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





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





Net
      income of $11,963 reported for the quarter ended March 31, 2006 consists
      primarily of $14,250 expense for director and officer liability insurance,
      $22,500 expense for a monthly administrative services agreement, $20,000 for
      franchise and state capital stock taxes, $118,979 for legal and accounting,
      $6,300 for federal income taxes and $8,450 for other expenses. Interest on
      the
      trust fund investment was $199,871, excluding $49,936 of deferred interest,
      and
      interest earned on the money market account was $2,571.





Net
      income of $23,277 reported for the quarter ended March 31, 2005 consists
      primarily of $14,250 expense for director and officer liability insurance,
      $22,500 expense for a monthly administrative services agreement, $17,215 for
      franchise and state capital stock taxes, $14,147 for legal and accounting,
      $8,800 for federal income taxes and $11,713 for other expenses. Interest on
      the
      trust fund investment was $107,275, excluding $26,801 of deferred interest,
      and
      interest earned on the money market account was $4,627.





Net
      income of $70,570 reported for the period from September 24, 2004 (inception)
      to
      March 31, 2006 consists primarily of $73,625 expense for director and officer
      liability insurance, $116,250 expense for a monthly administrative services
      agreement, $106,139 for franchise and state capital stock taxes, $203,424 for
      legal and accounting, $35,850 for federal and state income taxes, $114,220
      for
      failed acquisition costs and $61,514 for other expenses. Interest on the trust
      fund investment was $765,887, excluding $191,352 of deferred interest, and
      interest earned on the money market account was $15,705.





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





8


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





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





*Off-balance
      sheet arrangements*





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





**Item
      3. Controls and Procedures.**





Disclosure
      controls and procedures are controls and other procedures that are designed
      to
      ensure that information required to be disclosed in company reports filed or
      submitted under the Securities Exchange Act of 1934 (the “Exchange Act”) is
      recorded, processed, summarized and reported, within the time periods specified
      in the Securities and Exchange Commission’s rules and forms. Disclosure controls
      and procedures include, without limitation, controls and procedures designed
      to
      ensure that information required to be disclosed in company reports filed or
      submitted under the Exchange Act is accumulated and communicated to management,
      including our chief executive officer, as appropriate to allow timely decisions
      regarding required disclosure.





As
      required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive
      Officer (principal executive, financial and accounting officer) carried out
      an
      evaluation of the effectiveness of the design and operation of our disclosure
      controls and procedures as of March 31, 2006. Based upon his evaluation, he
      concluded that our disclosure controls and procedures were
      effective.





9


Our
      internal control over financial reporting is a process designed by, or under
      the
      supervision of, our chief executive officer and effected by our board of
      directors, management and other personnel, to provide reasonable assurance
      regarding the reliability of our financial reporting and the preparation of
      our
      financial statements for external purposes in accordance with generally accepted
      accounting principles (United States). Internal control over financial reporting
      includes policies and procedures that pertain to the maintenance of records
      that
      in reasonable detail accurately and fairly reflect the transactions and
      dispositions of our assets; provide reasonable assurance that transactions
      are
      recorded as necessary to permit preparation of our financial statements in
      accordance with generally accepted accounting principles (United States), and
      that our receipts and expenditures are being made only in accordance with the
      authorization of our board of directors and management; and provide reasonable
      assurance regarding prevention or timely detection of unauthorized acquisition,
      use or disposition of our assets that could have a material effect on our
      financial statements.





During
      the most recently completed fiscal quarter, there has been no change in our
      internal control over financial reporting that has materially affected, or
      is
      reasonably likely to materially affect, our internal control over financial
      reporting.








**PART
      II** **-** **OTHER INFORMATION**




**Item
        2. Unregistered Sales of Equity Securities and Use of
        Proceeds.**
 
 On
        December 23, 2004, we consummated the Offering of 4,000,000 Units, with each
        Unit consisting of one share of our common stock and two warrants, each to
        purchase one share of our common stock at an exercise price of $5.00 per
        share.
        On December 30, 2004, we closed on an additional 600,000 Units that were
        subject
        to the underwriters’ over-allotment option. The Units were sold at an offering
        price of $6.00 per unit, generating total gross proceeds of $27,600,000.
        EarlyBirdCapital, Inc. acted as lead underwriter. The securities sold in
        the
        Offering were registered under the Securities Act of 1933 on a registration
        statement on Form S-1 (No. 333-119937). The Securities and Exchange Commission
        declared the registration statement effective on December 17, 2004.
 
 We
        paid a
        total of $2,909,000 in underwriting discounts and commissions and offering
        expenses. After deducting the underwriting discounts and commissions and
        the
        offering expenses, the total net proceeds to us from the Offering were
        approximately $24,691,000, of which $23,736,000 was deposited into the trust
        account (or $5.16 per share sold in the Offering) and the remaining proceeds
        are
        available to be used to provide for business, legal and accounting due diligence
        on prospective business combinations and continuing general and administrative
        expenses.
 
 For
        a
        description of the use of the proceeds generated in the Offering, see Part
        I,
        Item 2 of this Form 10-QSB.


**Item
      6. Exhibits.**


Exhibit
                  No.
              Description31
              Certification
                  of Chairman, Chief Executive Officer and
                  President pursuant to Section 302 of the Sarbanes-Oxley Act of
                  2002.32
              Certification
                  of Chairman, Chief Executive Officer and
                  President pursuant to Section 906 of the Sarbanes-Oxley Act of
                  2002.


10


**SIGNATURES**





In
      accordance with the requirements of the Exchange Act, the registrant caused
      this
      report to be signed on its behalf by the undersigned, thereunto duly
      authorized.










MILLSTREAM
                II ACQUISITION CORPORATIONBy:
            /s/
                Arthur SpectorArthur
                SpectorChairman
                of the Board, President and Chief Executive Officer
              (Principal
                executive, financial and accounting
                officer)





Date:
      May
      12, 2006









11