**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


Washington,
      D.C. 20549





**Amendment
      No. 1**





**FORM
      10-QSB/A**





(Mark
      One)





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




For
      the
      quarterly period ended January 31, 2006





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




For
      the
      transition period from ____________ to ____________





Commission
      File No. 000-50956





PHARMA-BIO
      SERV, INC.


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





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





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


(Address
      of principal executive offices)





787-278-2709


(Issuer's
      telephone number)





Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 12 months (or for such shorter period
      that the registrant was required to file such reports), and (2) has been subject
      to such filing requirements for the past 90 days. xyes  
 ono





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





The
      number of shares outstanding of the registrant's Common Stock as of March 10,
      2006 was 2,301,800.







EXPLANATORY
      NOTE





This
      quarterly report on Form 10-QSB/A ("Form 10-QSB/A") is being filed to amend
      our
      quarterly report on Form 10-QSB for the quarter ended January 31, 2006 (the
      "Original Form 10-QSB") which was filed with the Securities and Exchange
      Commission ("SEC") on March 24, 2006. Pursuant to Rule 12b-15 under the
      Securities Exchange Act of 1934, as amended, the Form 10-QSB/A contains current
      dated certifications from the Principal Executive Officer and the Principal
      Financial Officer.





We
      have
      not updated the information contained herein for events occurring subsequent
      to
      March 24, 2006, the filing date of the original Form 10-QSB.







**PHARMA-BIO
      SERV, INC.**





**FORM
      10-QSB/A**





**FOR
      THE QUARTER ENDED JANUARY 31, 2006**




**TABLE
      OF CONTENTS**





PagePART
              I FINANCIAL INFORMATIONItem
              1 - Financial StatementsBalance
                Sheet as of January 31, 2006 (unaudited)
            
            
            3Statements
                of Income for the three months ended January 31, 2006 and 2005 (unaudited)
            
            
            4Statements
                of Cash Flows for the three months ended January 31, 2006 and 2005(unaudited)
            
            
            5Statement
                of Changes in Stockholders’ Equity (Deficiency) for the three months endedJanuary
                31, 2006 (unaudited)
            
            
            6Notes
                to Financial Statements
            
            
            7Item
                2 - Management's Discussion and Analysis of Financial Condition and
                Resultsof Operation
            
            
            20Item
                3 - Controls and Procedures
            
            
            27PART
                II OTHER INFORMATIONItem
                6 - Exhibits
            
            
            27




2




**PHARMA-BIO
      SERV, INC.**


**Consolidated
      Balance Sheet (Unaudited)**


**At
      January 31, 2006**




Assets:Current
                  AssetsCash
              
              $
              3,084,214Accounts
                  receivable
              
              
              3,449,022Other
              
              
              188,686Total
                  Current Assets
              
              
              6,721,922Property
                  and equipment
              
              
              444,006Other
                  assets
              
              
              260,680Total
                  Assets
              
              $
              7,426,608Liabilities
                  and Stockholders' Deficiency:Current
                  LiabilitiesCurrent
                  portion-obligations under capital leases
              
              $
              36,875Accounts
                  payable and accrued expenses
              
              
              1,053,726Due
                  to affiliate - current
              
              
              2,462,089Income
                  taxes
              
              
              21,873Total
                  Current Liabilities
              
              
              3,574,563Due
                  to affiliate
              
              
              4,976,299Other
                  Long-Term Liabilities
              
              
              170,456Total
                  Liabilities
              
              
              8,721,318Stockholders'
                  Deficiency:Preferred
                  Stock, $0.0001 par value; authorized2,000,000
                  shares; issued and outstanding 1,175,000 sharesof
                  Series A Convertible Preferred Stock
              
              
              118Common
                  Stock,$0.0001 par value; authorized 50,000,000 shares;issued
                  and outstanding 2,301,800 shares
              
              
              230Accumulated
                  deficit
              
              
              (1,295,058
              )Total
                  Stockholders' Deficiency
              
              
              (1,294,710
              )Total
                  Liabilities and Stockholders' Deficiency
              
              $
              7,426,608




The
      accompanying notes are an integral part of these statements.


3





**PHARMA-BIO
      SERV, INC.**


**Statements
      of Income (Unaudited)**


**For
      the Three-Month Periods Ended January 31, 2006 and 2005**


**Three
                  months ended**
                **January
                  31,****Consolidated**
              
              **Plaza-Only****2006**
              
              **2005**REVENUES
              
              $
              3,404,182
              
              $
              4,692,999COST
                  OF REVENUES
              
              
              2,033,339
              
              
              2,657,847GROSS
                  PROFIT
              
              
              1,370,843
              
              
              2,035,152SELLING,
                  GENERAL ANDADMINISTRATIVE
                  EXPENSES
              
              
              425,254
              
              
              448,651DEPRECIATION
                  AND AMORTIZATION
              
              
              30,144
              
              
              19,741INCOME
                  BEFORE INCOME TAX
              
              
              915,445
              
              
              1,566,760INCOME
                  TAX
              
              
              21,873
              
              
              -NET
                  INCOME
              
              $
              893,572
              
              $
              1,566,760BASIC
                  EARNINGS PER COMMON SHARE
              
              $
              0.50
              
              $
              0.90DILUTED
                  EARNINGS PER COMMON SHARE
              
              $
              0.16
              
              $
              0.39WEIGHTED
                  AVERAGE NUMBEROF
                  COMMON SHARESOUTSTANDING
                  - BASIC
              
              
              1,791,985
              
              
              1,750,000WEIGHTED
                  AVERAGE NUMBEROF
                  COMMON SHARESOUTSTANDING
                  - DILUTED
              
              
              5,417,925
              
              
              4,045,752




The
      accompanying notes are an integral part of these statements.


4


**PHARMA-BIO
      SERV, INC.**


**Statements
      of Cash Flows (Unaudited)**


**For
      the Three-Month Periods Ended January 31, 2006 and 2005**


**Three
                  months ended**
                **January
                  31,****Consolidated**
              
              **Plaza-Only****2006**
              
              **2005**CASH
                  FLOWS FROM OPERATING ACTIVITIES:Net
                  income for the period
              
              $
              893,572
              
              $
              1,566,760Loss
                  on disposition of property and equipment
              
              
              3,664
              
              
              -Depreciation
                  and amortization
              
              
              30,144
              
              
              19,741Bad
                  debts expense
              
              
              -
              
              
              -Decrease
                  (increase) in accounts receivable
              
              
              1,481,792
              
              
              (46,352
              )Decrease
                  (increase) in other assets
              
              
              (150,305
              )
              
              (4,163
              )Increase
                  (decrease) in liabilities
              
              
              (149,922
              )
              
              (323,423
              )NET
                  CASH PROVIDED BY OPERATING ACTIVITIES
              
              
              2,108,945
              
              
              1,212,563CASH
                  FLOWS FROM INVESTING ACTIVITIES:Purchase
                  of property and equipment
              
              
              (87,028
              )
              
              (51,720
              )Cash
                  acquired as part of the acquisition of Plaza
              
              
              28,943
              
              
              -NET
                  CASH USED IN INVESTING ACTIVITIES
              
              
              (58,085
              )
              
              (51,720
              )CASH
                  FLOW FROM FINANCING ACTIVITIES:Net
                  proceeds from the sale of preferred stock
              
              
              10,000,000
              
              
              -Payment
                  for purchase of stock in Plaza
              
              
              (9,900,000
              )
              
              -Payment
                  for non-compete covenant
              
              
              (100,000
              )
              
              -Payments
                  on capital lease obligations
              
              
              (8,649
              )
              
              (9,818
              )Distributions
              
              
              (749,554
              )
              
              (728,873
              )NET
                  CASH USED IN FINANCING ACTIVITIES
              
              
              (758,203
              )
              
              (738,691
              )NET
                  INCREASE IN CASH
              
              
              1,292,657
              
              
              422,152CASH
                  - BEGINNING OF PERIOD
              
              
              1,791,557
              
              
              3,036,725CASH
                  - END OF PERIOD
              
              $
              3,084,214
              
              $
              3,458,877PAYMENTS
                  OF:Income
                  tax
              
              $
              -
              
              $
              -Interest
              
              $
              3,412
              
              $
              2,758NONCASH
                  INVESTING AND FINANCING ACTIVITIES:Vehicle
                  acquired under a capital lease
              
              $
              -
              
              $
              33,030Income
                  tax withheld by clients but used as a credit in theincome
                  tax return of a stockholder (noncash distribution)
              
              $
              84,561
              
              $
              161,256Debt
                  incurred in the acquisition of certain assets from avalidation
                  company
              
              $
              200,000
              
              $
              -Debt
                  payable to officer originated in the acquisition ofPlaza,
                  net of $1,025,000 imputed interest
              
              $
              7,225,000
              
              $
              -





The
      accompanying notes are an integral part of these statements.




5


**PHARMA-BIO
      SERV, INC.**


**Statement
      of Changes in Stockholders’ Equity (Deficiency)
      (Unaudited)**


**For
      the Three-Month Periods Ended January 31, 2006**


**Retained****Additional**
              
              **Earnings****Common
                  Stock**
              
              **Preferred
                  Stock**
              
              **Paid-in**
              
              **(Accumulated****Shares**
              
              **Amount**
              
              **Shares**
              
              **Amount**
              
              **Capital**
              
              **Deficit)**
              
              **Total**BALANCE
                  AT OCTOBER 31, 2005 (PLAZA-ONLY) - AUDITED
              
              
              50,000
              
              $
              1,000
              
              
              -
              
              $
              -
              
              $
              -
              
              $
              5,979,569
              
              $
              5,980,569RECLASSIFICATION
                  OF $0.02 COMMON STOCK
              
              
              (50,000
              )
              
              (1,000
              )
              
              -
              
              
              -
              
              
              1,000
              
              
              -
              
              
              -ISSUANCE
                  OF $0.0001 COMMON STOCK IN CONNECTION WITH RECLASSIFICATION OF
                  EQUITY
              
              
              275,900
              
              
              28
              
              
              -
              
              
              -
              
              
              20,947
              
              
              -
              
              
              20,975TWO-FOR-ONE
                  SHARE DISTRIBUTION
              
              
              275,900
              
              
              28
              
              
              -
              
              
              -
              
              
              (28
              )
              
              -
              
              
              -ISSUANCE
                  OF $0.0001 COMMON STOCK
              
              
              1,750,000
              
              
              174
              
              
              -
              
              
              -
              
              
              844,385
              
              
              -
              
              
              844,559ISSUANCE
                  OF $0.0001 PREFERRED STOCK
              
              
              -
              
              
              -
              
              
              1,175,000
              
              
              118
              
              
              10,171,383
              
              
              -
              
              
              10,171,501ISSUANCE
                  OF STOCK WARRANTS TO PURCHASE 2,500,000 SHARES OF COMMON STOCK
                  AT
                  $0.06
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              1,686,000
              
              
              (1,686,000
              )
              
              -ISSUANCE
                  OF STOCK WARRANTS TO PURCHASE 1,600,000 SHARES OF COMMON STOCK
                  AT
                  $0.06
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              800
              
              
              (800
              )
              
              -CAPITAL
                  PAYMENT
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (12,724,487
              )
              
              (5,647,284
              )
              
              (18,371,771
              )NET
                  INCOME
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              893,572
              
              
              893,572DISTRIBUTIONS
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (834,115
              )
              
              (834,115
              )BALANCE
                  AT JANUARY 31, 2006 (CONSOLIDATED) - UNAUDITED
              
              
              2,301,800
              
              $
              230
              
              
              1,175,000
              
              $
              118
              
              $
              -
              
              $
              (1,295,058
              )
              $
              (1,294,710
              )





The
      accompanying notes are an integral part of these statements.




6




**PHARMA-BIO
      SERV, INC.**


**Notes
      to Financial Statements**


**January
      31, 2006 (Unaudited)**




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




**BASIS
        OFPRESENTATION**





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





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





All
      intercompany transactions and balances have been eliminated in
      consolidation.





The
      unaudited interim financial statements for the quarters January 31, 2006 and
      2005 presented herein have been prepared in accordance with accounting
      principles generally accepted in the United States for interim financial
      statements and with the instructions to Form 10-QSB and Regulation S-B
      pertaining to interim financial statements and reflect all adjustments,
      consisting of normal recurring adjustments and accruals which, in the opinion
      of
      management, are considered necessary for a fair presentation of the Company’s
      financial position, results of operations and cash flows. Results of operations
      for interim periods are not necessarily indicative of the results that may
      be
      expected for the full year.




**SHAREDISTRIBUTION**





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




**REVERSEACQUISITION**


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




7


**PHARMA-BIO
        SERV, INC.**
 **Notes
        to Financial Statements**
 **January
        31, 2006 (Unaudited)**


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





Pursuant
      to the Plaza Agreement, at the closing, Pharma-Bio issued 600,000 shares of
      common stock and warrants to purchase 2,500,000 shares of common stock with
      an
      exercise price of $.06 per share to San Juan Holdings, Inc., the investment
      banker for Plaza and Ms. Plaza. Pharma-Bio provided certain demand and piggyback
      registration rights to Ms. Plaza and San Juan Holdings covering the shares
      of
      common stock issued to them at the closing and the shares issuable upon exercise
      of the warrants issued to San Juan Holdings.





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





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





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





The
      acquisition of Plaza and the private placement resulted in a change of control
      of Pharma-Bio. As a result of the reverse acquisition accounting treatment,
      Plaza is deemed to be the acquiring company for accounting purposes. The
      transaction was accounted for as a reverse acquisition because former owners
      of
      Plaza, together with the purchasers in the private placement who purchased
      the
      series A preferred stock and warrants in connection with the acquisition of
      Plaza, gained control of Pharma-Bio,. Effective on the acquisition date,
      Pharma-Bio's balance sheet includes the assets and liabilities of Plaza and
      its
      equity accounts have been recapitalized to reflect the equity of Pharma-Bio.
      The
      financial statements of the Company for periods prior to January 25, 2006,
      reflect only the financial position, results of operations and cash flows of
      Plaza.




8


**PHARMA-BIO
        SERV, INC.**
 **Notes
        to Financial Statements**
 **January
        31, 2006 (Unaudited)**


**SUMMARY
        OFSIGNIFICANTACCOUNTINGPOLICIES**





**Use
      of Estimates**





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





**Fair
      Value of Financial Instruments**





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





Management
      believes, based on current rates, that the fair value of its obligations under
      capital leases approximates the carrying amount.





**Revenue
      Recognition**





The
      Company recognizes revenues in the month when services are rendered to
      customers. Revenue is primarily derived from time and materials contracts
      (representing approximately 90% of total revenues), where the clients are
      charged for the time, materials and expenses incurred on a particular project,
      and to a lesser extent, from fixed-fee contracts or from "not to exceed"
      contracts (approximately 10% of total revenues). In the case of fixed-fee
      contracts, which mostly are short-term contracts, revenue is recognized based
      on
      the percentage that the services rendered bears to the estimated services to
      be performed
      over the contract .
      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.





**Accounts
      Receivable**





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





**Income
      Taxes**





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




9


**PHARMA-BIO
        SERV, INC.**
 **Notes
        to Financial Statements**
 **January
        31, 2006 (Unaudited)**


Plaza,
      from its inception until January 25, 2006, was covered under the provisions
      of
      Subchapter N of Subtitle A of the Puerto Rico Internal Revenue Code (the "Puerto
      Rico Code"), which is similar to Subchapter S of the Internal Revenue Code
      in
      that its taxable income is taxed to the stockholders and therefore
      there is no income tax liability for that period. As a result of the completion
      of the reverse acquisition, Plaza and Pharma-Bio are no longer eligible for
      treatment as a Subchapter N corporation. See Note F.





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





**Property
      and equipment**





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





**Intangible
      assets**





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





**Stock-based
      Compensation**





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





**Three
                Months Ended**
              **January
                31,****2006**
            
            **2005**Net
                income
            
            $
            893,572
            
            $
            1,566,760Deduct:
                Stock-based employee compensation as determined under fair value
                method,
                net of tax effect
            
            
            517,725
            
            
            -Pro
                forma net income attributable to common stockholders
            
            $
            375,847
            
            $
            1,566,760Basic
                earnings per share of common stock:As
                reported
            
            $
            0.50
            
            $
            0.90Pro
                forma
            
            $
            0.21
            
            $
            0.90Diluted
                earnings per share of common stock:As
                reported
            
            $
            0.16
            
            $
            0.39Pro
                forma
            
            $
            0.07
            
            $
            0.39Weighted
                average number of common shares outstanding:Basic
            
            
            1,791,985
            
            
            1,750,000Diluted
            
            
            5,417,925
            
            
            4,045,752





10


**PHARMA-BIO
        SERV, INC.**
 **Notes
        to Financial Statements**
 **January
        31, 2006 (Unaudited)**


**Income
      Per Share of Common Stock**





Basic
      income per common share is calculated by dividing net income by the weighted
      average number of shares of common stock outstanding. Diluted income per share
      includes the dilution of common stock equivalents. Pursuant to reverse
      acquisition accounting treatment, the weighted average number of shares
      outstanding in the computation of basic income per share was derived by
      weighting (i) for the period prior to the reverse acquisition transaction,
      the
      1,150,000 shares received by the former stockholder of Plaza and the shares
      600,000 shares received by San Juan Holdings, Inc., and (ii) for the period
      after the transaction, the number of shares outstanding represented the
      outstanding shares of Pharma-Bio. Diluted income per share includes the dilution
      of common equivalents. Accordingly, in computing diluted earnings per share,
      the
      shares of common stock issuable upon conversion of the series A preferred stock
      and exercise of the warrants issued in January 2006 private placement (see
      Note
      C) were deemed outstanding from the date of issuance to the end of the reporting
      period, and the shares of common stock issuable upon exercise of the warrants
      issued to the investment banker for Plaza as a result of the reverse acquisition
      were deemed to be outstanding through all periods prior to the reverse
      acquisition.





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





**NOTE
      B - RECENT ACCOUNTING PRONOUNCEMENTS**





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




11


**PHARMA-BIO
        SERV, INC.**
 **Notes
        to Financial Statements**
 **January
        31, 2006 (Unaudited)**


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





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





This
      Statement is effective as of the beginning of the first interim or annual
      reporting period that begins after December 15, 2005. One of the effects of
      the
      application of FASB123R is to treat the value (as properly determined) of the
      options as compensation to the grantees, thus increasing the Company's selling,
      general and administrative expenses.





4.
      In May
      2005, the FASB issued Statement No. 154 "Accounting for Changes and Errors
      Corrections.' This Statement replaces APB Opinion No. 20 "Accounting Changes"
      and FASB Statement No. 3 "Reporting Accounting Changes in Interim Financial
      Statements," and changes the requirements for the accounting for and reporting
      of a change in accounting principle.





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




12


**PHARMA-BIO
        SERV, INC.**
 **Notes
        to Financial Statements**
 **January
        31, 2006 (Unaudited)**


**NOTE
      C - CAPITAL TRANSACTIONS**





On
      January 25, 2006, contemporaneously with the consummation of the acquisition,
      Pharma-Bio sold, in a private placement, 47 units, each unit consisting of
      25,000 shares of series A preferred stock, warrants to purchase 85,100 shares
      of
      common stock at $1.10 per share and warrants to purchase 85,100 shares of common
      stock at $1.65 per share. In the private placement, Pharma-Bio issued an
      aggregate of 1,175,000 shares of series A preferred stock (which are convertible
      into an aggregate of 15,998,800 shares of common stock), warrants to purchase
      3,999,700 shares of common stock at $1.10 per share, and warrants to purchase
      3,999,700 shares of common stock at $1.65 per share, to 42 accredited investors.
      The Company paid brokerage commissions of 10% of the gross purchase price and
      an
      aggregate non-accountable expense allowance of 3% of the gross purchase price
      with respect to the units sold. In certain cases, the broker waived the
      commission and non-accountable expense allowance, and the investor paid the
      purchase price less the commission and non-accountable expense allowance. The
      purchase price for the 47 units sold was $11,750,000. Broker-dealers waived
      commission and non-accountable expense allowance with respect to $628,750,
      the
      Company paid commissions and non-accountable expense allowances totaling
      $898,750, and the Company issued warrants to purchase an aggregate of 1,439,892
      shares of common stock. The warrants have an exercise price of $.7344 per share
      and a term of three years.





Each
      share of series A preferred stock automatically converts into 13.616 shares
      of
      common stock, or an aggregate of 15,998,800 shares of common stock, upon the
      filing of a certificate of amendment to Pharma-Bio’s certificate of
      incorporation which increases the authorized capital stock to 10,000,000 shares
      of preferred stock and 50,000,000 shares of common stock. The board of directors
      has approved such an amendment, subject to stockholder approval.





The
      holders of the series A preferred stock have no dividend rights, except that,
      if
      a dividend is declared with respect to the common stock, the holders of the
      Series A preferred stock shall be entitled to dividends on the preferred stock
      on an "as if converted" basis.





The
      warrants issued in the private placement expire five years from the closing
      date
      and are callable by Pharma-Bio if the closing price of the common stock is
      at
      least twice the exercise price of the warrants for twenty (20) consecutive
      trading days.





The
      holders of the series A preferred stock and the warrants issued in the private
      placement have demand and piggyback registration rights.




13


**PHARMA-BIO
        SERV, INC.**
 **Notes
        to Financial Statements**
 **January
        31, 2006 (Unaudited)**


**NOTE
      D - PROPERTY & EQUIPMENT**





The
      balance of property and equipment as of January 31, 2006 consists
      of:





**Useful
                life**
              **(years)**
            
            **Amount**Vehicles
            
            
            5
            
            $
            221,434Leasehold
                improvements
            
            
            5
            
            
            64,895Computers
            
            
            3
            
            
            117,156Equipment
            
            
            3-5
            
            
            121,450Furniture
                and fixtures
            
            
            10
            
            
            67,907Total
            
            
            
            
            
            592,842Less:
                Accumulated depreciation and amortization
            
            
            
            
            
            (148,836
            )Property
                and equipment, net
            
            
            
            
            $
            444,006





**NOTE
      E - OTHER ASSETS**





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





Intangible
                assets:Covenant
                not to compete
            
            $
            100,000Customer-related
                intangibles
            
            
            150,000Other
                assets
            
            
            10,680$
            260,680




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





Customer-related
      intangible assets consist mainly of a customer list which Plaza acquired along
      with certain other assets from a business which performs in the United States
      consulting services similar to those performed by the Company in Puerto Rico.
      The total assets were acquired for $300,000, of which $150,000 were allocated
      to
      the customer-related intangible assets. Of the total purchase price, $100,000
      was paid in January 2006, $100,000 will be paid in March 2006 and the remaining
      $100,000 will be paid in June 2006.  The
      value
      of the customer list is being amortized on the straight-line method over its
      estimated useful life of three years.





All
      of
      the intangibles assets were originated in January 2006, therefore, the Company
      will amortize them commencing in February 2006.




14


**PHARMA-BIO
        SERV, INC.**
 **Notes
        to Financial Statements**
 **January
        31, 2006 (Unaudited)**


**NOTE
      F - INCOME TAXES**





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





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





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




**Three
                months ended**
              **January
                31,****2006**
            
            **2005**Theoretical
                income tax expense
              by
                application of statutory rates to
              the
                book pre-tax
            
            $
            379,910
            
            $
            611,036Effect
                of income subject to
              taxation
                under Subchapter N
              (taxable
                income taxed to stockholders)
            
            
            (358,037
            )
            
            (611,036
            )Income
                tax expense
            
            $
            21,873
            
            $
            -0-





Because
      Plaza was treated as an N Corporation under the Puerto Rico Internal Revenue
      Code through January 24, 2006, its income was taxed to its stockholder through
      said date, and Plaza did not pay income tax. If income tax were paid at the
      statutory rate, the Company’s net income would have been $535,535, or $0.30 per
      share (basic) and $0.10 per share (diluted), for the quarter ended January
      31,
      2006; and $955,724, or $0.55 per share (basic) and $0.24 per share (diluted),
      for the quarter ended January 31, 2005.





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





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





**January
                31,**
            
            **Amount**2007
            
            $
            2,750,0002008
            
            
            2,750,0002009
            
            
            2,750,000Total
                payments
            
            
            8,250,000Less:
                imputed interest
            
            
            (1,025,000
            )Present
                value of total payments
            
            
            7,225,000Less:
                current portion
            
            
            (2,248,701
            )Long-term
                portion
            
            $
            4,976,299




15


**PHARMA-BIO
        SERV, INC.**
 **Notes
        to Financial Statements**
 **January
        31, 2006 (Unaudited)**


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





Current
                portion of deferred purchase price
            
            $
            2,248,701Payment
                for excess net tangible book value, as finally determined
            
            
            88,161Reimbursement
                of income taxes
            
            
            125,227Due
                to affiliate - current portion
            
            $
            2,462,089





San
      Juan
      Holdings represented Plaza and Elizabeth Plaza in connection with the reverse
      acquisition. For such services, Pharma-Bio issued 600,000 shares of common
      stock
      and warrants to purchase 2,500,000 shares of common stock, with an exercise
      price of $.06 per share, to San Juan Holdings. In Pharma-Bio's private placement
      of series A preferred stock and warrants, San Juan Holdings purchased three
      units. The purchase price for the three units was $750,000. The broker, which
      is
      an affiliate of San Juan Holdings, waived the commission and non-accountable
      expense allowance with respect to such sales, and as a result, San Juan Holdings
      purchased the three units for a net payment of $652,500. The Company also paid
      an affiliate of San Juan Holdings a broker's commission and non-accountable
      expense allowance of $195,000 for sales made to other purchasers in the private
      placement, and Pharma-Bio issued to the affiliate three-year warrants to
      purchase an aggregate of 275,724 shares of common stock at an exercise price
      of
      $.7344 per share.





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





**NOTE
      H - COMMITMENTS**




**CONTRACTS**





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




16


**PHARMA-BIO
        SERV, INC.**
 **Notes
        to Financial Statements**
 **January
        31, 2006 (Unaudited)**


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





On
      January 26, 2006, the Company entered into a one-year consulting agreement
      with
      Dov Perlysky, pursuant to which the Company agreed to pay Mr. Perlysky a 5%
      commission on business generated by Mr. Perlysky's efforts. This agreement
      replaced his prior employment agreement.





**Lease
      commitments**





**Capitalized
      lease obligations** -As of
      January 31, 2006, the Company owned vehicles acquired under non-cancelable
      capital leases with a cost of $221,434 (accumulated depreciation of $33,646).
      Depreciation expense for these assets amounted to $11,589 and $9,643 in the
      three-month periods ended January 31, 2006 and 2005, respectively. The following
      is a schedule, by year, of future minimum lease payments under the capitalized
      leases together with the present value of the net minimum lease payments at
      January 31, 2006:





2007
            
            $
            48,3602008
            
            
            48,3602009
            
            
            48,3602010
            
            
            66,9472011
            
            
            24,704Total
                minimum lease payments
            
            
            236,731Less:
                Amount of imputed interest
            
            
            (29,400
            )Present
                value of minimum lease payments
            
            
            207,331Current
                portion of obligation under capital leases
            
            
            (36,875
            )Long-term
                portion
            
            $
            170,456




17


**PHARMA-BIO
        SERV, INC.**
 **Notes
        to Financial Statements**
 **January
        31, 2006 (Unaudited)**


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


**Monthly****Description**
              
              **Rent**
              
              **Commitment
                  Term**Main
                  resources facilities
              
              $3,200
              
              Ending
                  in October 2007Human
                  resources facilities
              
              $1,850
              
              Ending
                  in June 2006Land
              
              $1,000
              
              Ending
                  in June 2006Housing
                  for employees
              
              $1,800
              
              Ending
                  in January 2006Hilltown
                  office space
              
              $2,750
              
              Ending
                  in July 2006




Rent
      expense during the three-month periods ended January 31, 2006 and 2005 amounted
      to $26,300 and $33,345, respectively.





**NOTE
      I - STOCK OPTIONS**





In
      October 2005, the Company's board of directors adopted the 2005 Long-Term
      Incentive Plan, covering 2,500,000 shares of common stock. The 2005 plan
      provides for the grant of incentive and non-qualified options, stock grants,
      stock appreciation rights and other equity-based incentives to employees,
      including officers, and consultants. The 2005 plan is to be administered by
      a
      committee of independent directors. In the absence of a committee, the plan
      is
      administered by the board of directors. Independent directors are not eligible
      of discretionary options. However, each newly elected independent director
      receives at the time of his or her election, a five-year option to purchase
      25,000 shares of common stock at the market price on the date of his or her
      election. In addition, the plan provides for the annual grant of an option
      to
      purchase 5,000 shares of common stock on the first trading day of January of
      each year, commencing January 2007. The options to directors have a term of
      five
      years and become exercisable cumulatively as to 50% of the shares subject to
      the
      option six months from the date of grant and as to the remaining 50% 18 months
      from the date of grant. Pursuant to this provision, on January 25, 2006, options
      to purchase 25,000 shares at $.7344 per share, being the fair market value
      on
      the date of grant, were automatically granted to each of the three independent
      directors. Options intended to be incentive stock options must be granted at
      an
      exercise price per share which is not less than the fair market value of the
      common stock on the date of grant and may have a term which is not longer than
      ten years. If the option holder holds 10% of our common stock, the exercise
      price must be at least 110% of the fair market value on the date of grant and
      the term of the option cannot exceed five years.





Pursuant
      to the Plaza Agreement, all outstanding options issued by Plaza were terminated,
      and the Company granted incentive stock options to purchase an aggregate of
      1,400,000 shares of common stock at an exercise price of $0.7344 per share
      to
      the holders of such terminated Plaza options pursuant to the Company's 2005
      Long-Term Incentive Plan. Of the total options to purchase 1,400,000 shares
      of
      common stock, options to purchase 776,186 shares of common stock were granted
      to
      18 employees whose options to purchase Plaza common stock were cancelled. The
      options to purchase the remaining 623,814 shares of common stock were granted
      to
      both the 18 former holders of Plaza options and 23 additional Plaza
      employees.





All
      of
      the foregoing option grants are subject to stockholder approval of the 2005
      Long
      Term Incentive Plan.




18


**PHARMA-BIO
        SERV, INC.**
 **Notes
        to Financial Statements**
 **January
        31, 2006 (Unaudited)**


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





**NOTE
      J - CONCENTRATION OF RISKS**





The
      Company's cash balances are maintained in a bank checking account. Management
      deems all its accounts receivable to be fully collectible, and, as such, does
      not maintain any allowances for uncollectible receivables.





The
      Company's revenues are concentrated in the pharmaceutical industry in the island
      of Puerto Rico, and a small number of customers have accounted for a significant
      percentage of its revenue. For the quarter ended January 31, 2006, three
      customers accounted for approximately 68.1% of revenue. Two of these customers
      accounted for approximately 63.4% of revenue in the quarter ended January 31,
      2005. The same customers had an outstanding balance at January 31, 2006 and
      2005
      representing 63.4% and 74.8% of the total receivables, respectively. The Company
      assesses the financial strength of its customers and, as a consequence, believes
      that its trade accounts receivable credit risk exposure is limited. However,
      the
      loss or significant decline in business from any of its major customers could
      have a material effect upon its revenue and income.





**NOTE
      K - RETIREMENT PLAN**





The
      Company has a qualified profit sharing in accordance with the provision of
      Section l165(a)(3)(A) of the Puerto Rico Code, for employees who meet certain
      age and service period requirements. The Company makes contributions to this
      plan as required by the provisions of the plan document. Contributions for
      the
      three months ended January 31, 2006 and 2005 were $10,265 and $6,336,
      respectively.





**NOTE
      L - SUBSEQUENT EVENTS**





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





On
      February 27, 2006, Lawrence filed a certificate of ownership and merger merging
      its wholly-owned subsidiary, Pharma-Bio Serv, Inc., into Lawrence. As a result
      of the filing of this certificate, Lawrence corporate name was changed to
      Pharma-Bio Serv, Inc. Pharma-Bio never had any operations, assets and
      liabilities. The merger was effected solely to change Lawrence's
      name.




19




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





The
      following discussion of the Company's results of operations and financial
      condition should be read in conjunction with the financial statements of the
      Company and the related notes. The following discussion includes forward-looking
      statements. For a discussion of important factors that could cause actual
      results to differ from results discussed in the forward-looking statements,
      see
      "Forward Looking Statements."





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





**Overview**





The
      Company is a validation and compliance consulting service firm in Puerto Rico.
      The validation and compliance consulting service market in Puerto Rico consists
      of local validation and compliance consulting firms, United States dedicated
      validation and compliance consulting firms and large publicly traded and private
      domestic and foreign engineering and consulting firms. The Company provides
      a
      broad range of compliance and validation consulting services. The Company
      markets its services to pharmaceutical, chemical, biotechnology and medical
      devices and allied products companies in Puerto Rico, the United States and
      Europe through their Puerto Rico operations. The Company's staff includes more
      than 140 experienced engineering and life science professionals, and includes
      former FDA investigators, former quality assurance managers or directors, and
      experienced and well-trained professionals with masters and doctorates in health
      sciences and engineering.





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


underestimates
      its costs on any contract, it would sustain a loss on the contract.





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





The
      Company's business has been dependent upon a small number of clients; a very
      small number of clients accounts for a disproportionately large percentage
      of
      the Company's revenues. For the three-month period ended January 31, 2006,
      three
      customers accounted for approximately 68.1% of revenues. For the three-month
      period ended January 31, 2005, two of these three customers accounted for
      approximately 63.5% of revenues. The loss of or significant reduction in the
      scope of work performed for any major customer could impair the Company's
      ability to operate profitably. In particular, the Company had a contract with
      its largest customer which expired on December 31, 2005. Although this contract
      was extended through March 2006, the level of business has significantly
      declined from the prior year.




20





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





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





On
      January 25, 2006, Pharma-Bio acquired Plaza in a transaction which is accounted
      for as a reverse acquisition, with Plaza being deemed the accounting acquirer.
      Pursuant to the acquisition agreement, the Company paid Elizabeth Plaza, the
      sole stockholder of Plaza, $10,000,000 plus 1,150,000 shares of Pharma-Bio's
      common stock. In addition, Ms. Plaza will receive three payments, each in the
      amount of $2,750,000, payable on January 25, 2007, 2008 and 2009. The first
      payment, net of imputed interest, is a current liability at January 31, 2006,
      and, together with the costs incurred by Pharma-Bio in connection with the
      acquisition of Plaza, is a significant factor in the reduction in the Company's
      working capital at January 31, 2006, as discussed under "Liquidity and Capital
      Resources."





As
      a
      condition to closing, Plaza was required to have a net tangible book value
      of
      not less than $5,500,000, of which at least $2,000,000 was in cash, as of
      November 30, 2005, with the excess to be paid to Ms. Plaza, the selling
      stockholder. As a result, we owed Ms. Plaza an additional $88,161 pursuant
      to
      this provision.




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





Prior
      to
      January 25, 2006, we operated as an N Corporation under the Puerto Rico Internal
      Revenue Code. An N corporation is similar to an S corporation under the United
      States Internal Revenue Code in that the corporation itself is not subject
      to
      tax and all taxable income is taxed to Ms. Plaza, as the sole stockholder.
      Upon
      the completion of the reverse acquisition on January 25, 2006, we became subject
      to Puerto Rico income tax, which provides for corporate income tax at our tax
      bracket at rates ranging from 39% to 41.5%. The table under “Results of
      Operations” shows the pro forma results of operations as if we had been subject
      to Puerto Rico income tax during the three-months periods ended January 31,
      2006
      and 2005.




21





**Critical
      Accounting Policies and Estimates**





The
      discussion and analysis of the Company's financial condition and results of
      operations are based upon the Company's financial statements, which have been
      prepared in accordance with generally accepted accounting principles ("GAAP")
      in
      the United States. We believe the following are the critical accounting policies
      that impact the financial statements.





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




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





Revenue
      Recognition - The Company recognizes revenues when services are rendered to
      customers for time and materials contracts. In the case of fixed-fee contracts
      or “not to exceed” contracts, which are generally short-term contracts, revenue
      is recognized based on the percentage that the services rendered bears to the
      estimated services to be performed over the contract.





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





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





Income
      Taxes - Plaza elected from its inception until January 25, 2006, when Pharma-Bio
      acquired Plaza, to be covered under the provisions of Subchapter N of Subtitle
      A
      of the Puerto Rico Internal Revenue Code (the "Puerto Rico Code"), which is
      similar to Subchapter S of the United States Internal Revenue Code in that
      the
      Company pays no income taxes since the taxable income is taxed to the Company's
      stockholders. Under the provisions of the Puerto Rico Code, Plaza paid the
      Puerto Rico Secretary of Treasury, on behalf of its stockholder, an amount
      equal
      to 33% of its taxable income. These payments, and any income tax withheld,
      are
      included in the amount of distributions to stockholder in the Company's
      financial statements.





Commencing
      with the acquisition of Plaza on January 25, 2006, the Company will be tax
      based
      on its taxable income under the applicable provisions of the Puerto Rico Code
      and the United States Internal Revenue Code. The financial statements for the
      three months ended January 31, 2006 and 2005 reflect an income tax expense
      based
      on the applicable provisions of the Puerto Rico Code, since the income was
      earned in Puerto Rico, and, pursuant to the Puerto Rico Code, the Company did
      not pay income tax for periods prior to January 25, 2006.





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




22





The
      Company's revenues are concentrated in the pharmaceutical industry in the island
      of Puerto Rico. Approximately $2.3 million, or 68.1%, of the revenues in the
      January 31, 2006 quarter were generated by three customers. Two of these
      customers accounted for revenue of approximately $3.0 million, or 63.5%, of
      revenue for the January 31, 2005 quarter. The three customers had an outstanding
      balance at January 31, 2006 representing 63.2% of the total receivables. The
      Company assesses the financial strength of its customers and, as a consequence,
      believes that its trade accounts receivable credit risk exposure is
      limited.





Retirement
      Plan - Plaza adopted a qualified profit sharing plan in January 2002 (amended
      on
      November 30, 2003) in accordance with the provision of the Puerto Rico Code,
      for
      employees who meet certain age and service period requirements. The Company
      makes contributions to this plan as required by the provisions of the plan
      document, amounting to $7,537 for the January 31, 2006 quarter and $5,016 for
      the January 31, 2005 quarter.





Stock
      Option Plan - During the year ended October 31, 2004, Plaza granted stock
      options with an exercise price equal to the book value of the common stock
      as of
      October 31, 2003, which Plaza deemed to be the fair value of its common stock..
      The options expired ten years from the date of grant and generally vested over
      a
      three-year period. In connection with the acquisition of Plaza, these options
      were cancelled and Pharma-Bio granted the option holders options to purchase
      an
      aggregate of 776,186 shares of common stock and issued options to purchase
      an
      additional 623,814 shares of common stock to employees of Plaza, including
      those
      whose options were cancelled. In addition, options to purchase 75,000 shares
      of
      common stock were granted to our independent directors pursuant to a provision
      of the plan that provided for the automatic grant of an option to purchase
      25,000 shares upon the initial election of an independent director. All of
      the
      Company’s outstanding options have an exercise price of $.7344, a term of five
      years and are exercisable in installments.





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





**New
      Accounting Pronouncements**





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





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




23





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





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




24





**Results
      of Operations**





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




Three
                months ended January 31,2006
            
            2005Revenue
            
            $
            3,404
            
            
            100.0
            %
            $
            4,693
            
            
            100.0
            %Cost
                of revenue
            
            
            2,033
            
            
            59.7
            %
            
            2,658
            
            
            56.6
            %Gross
                profit
            
            
            1,371
            
            
            40.3
            %
            
            2,035
            
            
            43.4
            %Selling,
                general and administrative expenses
            
            
            425
            
            
            12.5
            %
            
            449
            
            
            9.6
            %Depreciation
                and amortization
            
            
            30
            
            
            0.9
            %
            
            19
            
            
            0.4
            %Income
                before income taxes
            
            
            916
            
            
            26.9
            %
            
            1,567
            
            
            33.4
            %Income
                tax expense1
            
            
            22
            
            
            0.6
            %
            
            —
            
            
            —Net
                income1
            
            $
            894
            
            
            26.3
            %
            $
            1,567
            
            
            33.4
            %





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





Three
                months ended January 31,2006
            
            2005Income
                before income taxes
            
            $
            916
            
            
            26.9
            %
            $
            1,567
            
            
            33.4
            %Pro
                forma income tax expense
            
            
            380
            
            
            11.2
            %
            
            611
            
            
            13.0
            %Pro
                forma net income
            
            $
            536
            
            
            15.7
            %
            $
            956
            
            
            20.4
            %





Quarter
      Ended January 31, 2006 Compared to Quarter Ended January 31, 2005





Revenues .
      Revenues for the first quarter 2006 were $3.4 million, a decrease of
      approximately $1.3 million, or 27.4%, compared to first quarter 2005 revenues.
      This decline reflected a decline in revenue of approximately $1.3 million in
      the
      quarter ended January 31, 2006 from the comparable quarter of the prior year
      from the two companies which were our two largest customers in both the quarter
      ended January 31, 2005, following completion of contracts with these customers.





Cost
      of Revenues; Gross Margin .
      The
      Company's gross margin decreased from 43.4% to 40.3% during the first quarter
      of
      2006 as compared to the first quarter of 2005. The reduction of gross margin
      was
      attributable to increased labor costs, which is the only component of our cost
      of revenues. Although we try to pass on the increased costs, we are not always
      able to do so in a timely manner, and there are often delays between the time
      we
      incur increased labor costs and the time we are able to increase our charges
      to
      customers.





Selling,
      General and Administrative Expenses .
      Selling, general and administrative expenses of the first quarter 2006 were
      in
      line with the selling, general and administrative expenses of the comparable
      quarter of the prior year.





Income
      Tax Expense .
      The
      increase in the income tax expense results from a change in the Company’s tax
      status. The
      Company became a regular corporation taxpayer effective January 25, 2006. Prior
      to that date, the Company did not pay taxes pursuant to the provisions of
      Subchapter N of Subtitle A of the Puerto Rico Internal Revenue Code (the "Puerto
      Rico Code"), which is similar to Subchapter S of the United States Internal
      Revenue Code in that its taxable income is taxed to the
      stockholders.




25





Net
      Income .
      As a
      result of the Company's decline in revenues, combined with a lower gross margin
      resulting from the increase in labor costs and the change its tax status, the
      Company's net income for the January 31, 2006 quarter decreased to approximately
      $894,000, or $.50 per share (basic) and $.16 per share (diluted), a decline
      of
      approximately $673,000, or 43.0%, from the net income of approximately
      $1,567,000, or $.90 per share (basic) and $0.39 per share (diluted), for the
      January 31, 2005 quarter.





**Liquidity
      and Capital Resources**





Liquidity
      is a measure of our ability to meet potential cash requirements, including
      planned capital expenditures. At January 31, 2006, the Company had working
      capital of approximately $3.2 million, a decrease of $2.6 million from the
      working capital at October 31, 2005 of $5.8 million. Although the Company
      generated approximately $2.0 million from operations in the quarter ended
      January 31, 2006, this increase was offset by the current obligation of $2.5
      million payable to Elizabeth Plaza in connection with the acquisition of Plaza.
      The Company also has long term obligations to Ms. Plaza for the payments of
      $2.75 million due in January 2008 and 2009. The Company raised gross proceeds
      of
      $11.75 million from the sale of series A preferred stock and warrants, and
      used
      $10 million to pay Elizabeth Plaza the cash portion of the purchase price of
      the
      Plaza stock and most of the balance to pay offering expenses and closing
      expenses.





For
      the
      three months ended January 31, 2006 and 2005, the Company made cash
      distributions of approximately $834,000 and $285,000, respectively, to or on
      behalf of Elizabeth Plaza. These amounts include cash distributions ($750,000
      and $123,000 for the three-month periods ended January 31, 2006 and 2005,
      respectively) and income tax withheld by clients which was treated as a payment
      of taxes on behalf of Ms. Plaza and used as a credit by Ms. Plaza on her income
      taxes ($85,000 and $161,000 for the three-month periods ended January 31, 2006
      and 2005, respectively).





The
      Company's primary cash needs consist of payment of compensation to its
      professional employees, overhead expenses and payment to the Puerto Rico
      Secretary of the Treasury for income taxes. The Company has a line of credit
      of
      $250,000 secured by the personal guarantee of the Company's chief executive
      officer who, at the time the credit line was established, was Plaza's sole
      stockholder. This line of credit bears interest at 2.00% over the prime rate
      and
      was unused at January 31, 2006.





Management
      believes that based on current levels of operations and anticipated growth,
      cash
      flows from operations, high quality customer receivables will be sufficient
      to
      fund anticipated expenses and satisfy other possible long-term contractual
      commitments for the next twelve months.





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





**Forward
      Looking Statements**





This
      Report on Form 10-QSB contains certain forward-looking statements that are
      based
      on current expectations. In light of the important factors that can materially
      affect results, including those set forth in this paragraph and below, the
      inclusion of forward-looking information herein should not be regarded as a
      representation by the Company or any other person that the objectives or plans
      of the Company will be achieved. The Company may be unable to expand its
      customer base and to replace customers upon the completion of contracts, and
      may
      encounter competitive, technological, financial and business challenges making
      it more difficult than expected to continue to develop and market its services;
      the market may not accept the Company's existing and future services; the
      Company may be unable to retain existing key management personnel; and there
      may
      be other material adverse changes in the Company's operations or business.
      Assumptions relating to budgeting, marketing, and other management decisions
      are
      subjective in many respects and thus susceptible to interpretations and periodic
      revisions based on actual experience and business developments, the impact
      of
      which may cause the Company to alter its marketing, or other budgets, which
      may
      in turn affect the Company's financial position and results of operations.
      The
      reader is therefore cautioned not to place undue reliance on forward-looking
      statements contained herein, which speak solely as of the date of this Form
      10-QSB, and the forward looking statements are qualified in their entirety
      by
      reference to the material contained in "Risk Factors" and "Management's
      Discussion and Analysis of Financial Condition and Results of Operations"
      contained in the Company's Form 8-K which was filed on January
      31, 2006 and the "Management's Discussion and Analysis of Financial Condition
      and Results of Operations" contained in this Form 10-QSB/A. The Company assumes
      no  responsibility to update any forward-looking statements as a result of
      new information, future events, or otherwise.




26





**Item
      3. Controls and Procedures**





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





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





**PART
      II. OTHER INFORMATION**





**Item
      6. Exhibits**





(a)
      Exhibits:





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





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





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




27




**SIGNATURES**





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




**PHARMA-BIO
                SERV, INC**./s/
              Elizabeth PlazaElizabeth
                Plaza
              Chief
                Executive Officer/s/
                Manuel O. MoreraManuel
                O. Morera
              Chief
                Financial OfficerDated: November 29,
              2006