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UNITEDSTATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C.20549

FORM 10-QSB

(MarkOne)

|        |                                                                                 |
|--------|---------------------------------------------------------------------------------|
|   | Quarterly report underSection 13 or 15(d) of the Securities Exchange Act of1934 |

For the quarterly period ended June30,2006

|        |                                                                |
|--------|----------------------------------------------------------------|
|   | Transition reportunder Section 13 or 15(d) of the Exchange Act |

For thetransition period from                             to                            

CommissionFile Number 000-51228

KBL HealthcareAcquisition Corp. II(Exact Name of Small Business Issueras Specified in ItsCharter)

|                                                              |  |  |                                    |
|--------------------------------------------------------------|--|--|------------------------------------|
| Delaware                                                     |  |  | 20-1994619                         |
| (Stateor other Jurisdiction of Incorporation orOrganization) |  |  | (I.R.S. EmployerIdentificationNo.) |
|                                                              |

757 Third Avenue, 21st Floor, NewYork, New York 10017(Address of Principal ExecutiveOffice)

(212) 319-5555 (Issuer’sTelephone Number, Including Area Code)

Check whether the issuer(1) filed all reports required to be filed by Section 13 or 15(d) ofthe Exchange Act during the past 12 months (or for such shorter periodthat the registrant was required to file such reports), and (2) hasbeen subject to such filing requirements for the past 90 days. Yes   No 

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

As ofAugust  14,  2006, 11,200,000 shares of common stock, parvalue $.0001 per share, were issued and outstanding.

TransitionalSmall Business Disclosure Format (check one): Yes     No

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|                                                                              |  |  |      |  |        |  |
|------------------------------------------------------------------------------|--|--|------|--|--------|--|
|                                                                         |  |  | Page |
| PartI: Financial Information:                                                |  |  |      |  |   |  |
| Item 1– Financial Statements(Unaudited):                               |  |  |      |  |   |  |
| Balance Sheet                                                                |  |  |      |  | 3      |  |
| Statements of Operations                                                     |  |  |      |  | 4      |  |
| Statements of Stockholders’Equity                                      |  |  |      |  | 5      |  |
| Statements of CashFlows                                                      |  |  |      |  | 6      |  |
| Notes to FinancialStatements                                                 |  |  |      |  | 7      |  |
| Item 2 –Management’s Discussion and Analysis or Plan ofOperation |  |  |      |  | 10     |  |
| Item 3 – Controlsand Procedures                                        |  |  |      |  | 11     |  |
| Part II. OtherInformation                                                    |  |  |      |  |   |  |
| Item 2 – Unregistered Salesof Equity Securities and Use ofProceeds     |  |  |      |  | 12     |  |
| Item 6 –Exhibits                                                       |  |  |      |  | 12     |  |
| Signatures                                                                   |  |  |      |  | 13     |  |
|                                                                              |

2

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KBL Healthcare AcquisitionCorp. II(a corporation in the development stage)CondensedBalanceSheet

|                                                                                                                                                                                      |  |  |                              |   |            |                      |  |  |  |   |            |  |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|------------------------------|---|------------|----------------------|--|--|--|---|------------|--|
|                                                                                                                                                                                 |  |  | AsofJune 30, 2006(unaudited) |   |            | As ofDecember31,2005 |
| ASSETS                                                                                                                                                                               |  |  |                              |   |       |                      |  |  |  |   |       |  |
| CurrentAssets                                                                                                                                                                        |  |  |                              |   |       |                      |  |  |  |   |       |  |
| Cash                                                                                                                                                                                 |  |  |                              | $ | 104,672    |                      |  |  |  | $ | 649,223    |  |
| Amountsheld in trust                                                                                                                                                                 |  |  |                              |   |       |                      |  |  |  |   |       |  |
| Cash held intrust                                                                                                                                                                    |  |  |                              |   | —    |                      |  |  |  |   | 286        |  |
| USGovernment Securities – TreasuryBill                                                                                                                                         |  |  |                              |   | —    |                      |  |  |  |   | 49,877,308 |  |
| NewYork Muni CashTrust                                                                                                                                                               |  |  |                              |   | 49,877,596 |                      |  |  |  |   | —    |  |
| AccruedInterest – trustfund                                                                                                                                                    |  |  |                              |   | 1,345,644  |                      |  |  |  |   | 403,509    |  |
| Totalheld intrust                                                                                                                                                                    |  |  |                              |   | 51,223,240 |                      |  |  |  |   | 50,281,103 |  |
| Duefrom management                                                                                                                                                                   |  |  |                              |   | 7,745      |                      |  |  |  |   | —    |  |
| DuefromOfficer                                                                                                                                                                       |  |  |                              |   | 19,070     |                      |  |  |  |   | —    |  |
| Prepaidexpenses                                                                                                                                                                      |  |  |                              |   | 105,833    |                      |  |  |  |   | 42,332     |  |
| TotalCurrentAssets                                                                                                                                                                   |  |  |                              |   | 51,460,560 |                      |  |  |  |   | 50,972,658 |  |
| ComputerEquipment, (net of accumulated depreciation of $878 and $217respectively)                                                                                                    |  |  |                              |   | 5,732      |                      |  |  |  |   | 4,118      |  |
| Deferredacquisitioncosts                                                                                                                                                             |  |  |                              |   | 165,388    |                      |  |  |  |   | —    |  |
| Deferred taxasset                                                                                                                                                                    |  |  |                              |   | 447,000    |                      |  |  |  |   | 229,000    |  |
| Totalassets                                                                                                                                                                          |  |  |                              | $ | 52,078,680 |                      |  |  |  | $ | 51,205,776 |  |
| LIABILITIESAND STOCKHOLDERS'EQUITY                                                                                                                                                   |  |  |                              |   |       |                      |  |  |  |   |       |  |
| Currentliabilities:                                                                                                                                                                  |  |  |                              |   |       |                      |  |  |  |   |       |  |
| Accountspayable and accruedexpenses                                                                                                                                                  |  |  |                              | $ | 285,594    |                      |  |  |  | $ | 41,199     |  |
| DeferredTrustIncome                                                                                                                                                                  |  |  |                              |   | 410,842    |                      |  |  |  |   | 222,509    |  |
| Capitaland Income TaxPayable                                                                                                                                                         |  |  |                              |   | 370,759    |                      |  |  |  |   | 172,193    |  |
| TotalLiabilities                                                                                                                                                                     |  |  |                              |   | 1,067,195  |                      |  |  |  |   | 435,901    |  |
| CommonStock, subject to possible conversion, 1,839,080 shares at conversionvalue                                                                                                     |  |  |                              |   | 9,828,683  |                      |  |  |  |   | 9,828,683  |  |
| CommitmentandContingency                                                                                                                                                             |  |  |                              |   |       |                      |  |  |  |   |       |  |
| Stockholders'equity                                                                                                                                                                  |  |  |                              |   |       |                      |  |  |  |   |       |  |
| Preferredstock, $.0001 par value, Authorized 1,000,000 shares; noneissued                                                                                                            |  |  |                              |   |       |                      |  |  |  |   |       |  |
| Common stock, $.0001par value Authorized 35,000,000 shares Issued and outstanding11,200,000 shares (which include 1,839,080 subject to possibleconversion) and 2,000,000respectively |  |  |                              |   | 1,120      |                      |  |  |  |   | 1,120      |  |
| Additionalpaid-incapital                                                                                                                                                             |  |  |                              |   | 40,632,501 |                      |  |  |  |   | 40,632,501 |  |
| Income/(Deficit)accumulated during the developmentstage                                                                                                                              |  |  |                              |   | 549,181    |                      |  |  |  |   | 307,571    |  |
| Totalstockholders'equity                                                                                                                                                             |  |  |                              |   | 41,182,802 |                      |  |  |  |   | 40,941,192 |  |
| Totalliabilities and stockholders'equity                                                                                                                                             |  |  |                              | $ | 52,078,680 |                      |  |  |  | $ | 51,205,776 |  |
|                                                                                                                                                                                      |

SeeNotes to Unaudited Condensed FinancialStatements

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KBL Healthcare Acquisition Corp. II(acorporation in the development stage)

Condensed Statement ofOperations(unaudited)

|                                        |  |  |                                                 |   |            |                                                 |  |  |                                     |   |           |                                     |  |  |                                                           |   |            |  |  |  |  |   |           |  |  |  |  |   |           |  |
|----------------------------------------|--|--|-------------------------------------------------|---|------------|-------------------------------------------------|--|--|-------------------------------------|---|-----------|-------------------------------------|--|--|-----------------------------------------------------------|---|------------|--|--|--|--|---|-----------|--|--|--|--|---|-----------|--|
|                                   |  |  | Forthe threemonthsApril 1, 2006 toJune 30, 2006 |   |            | Forthe threemonthsApril 1, 2005 toJune 30, 2005 |  |  | Forthe sixmonths endedJune 30, 2006 |   |           | For thesixmonths endedJune 30, 2005 |  |  | For theperiodDecember 09,2004 (inception) to June 30,2006 |
| Income:                                |  |  |                                                 |   |       |                                                 |  |  |                                     |   |      |                                     |  |  |                                                           |   |       |  |  |  |  |   |      |  |  |  |  |   |      |  |
| Interest                               |  |  |                                                 | $ | 354,438    |                                                 |  |  |                                     | $ | 177,825   |                                     |  |  |                                                           | $ | 759,185    |  |  |  |  | $ | 177,825   |  |  |  |  | $ | 1,655,534 |  |
| TotalIncome:                           |  |  |                                                 |   | 354,438    |                                                 |  |  |                                     |   | 177,825   |                                     |  |  |                                                           |   | 759,185    |  |  |  |  |   | 177,825   |  |  |  |  |   | 1,655,534 |  |
| Expenses:                              |  |  |                                                 |   |       |                                                 |  |  |                                     |   |      |                                     |  |  |                                                           |   |       |  |  |  |  |   |      |  |  |  |  |   |      |  |
| ProfessionalFees                       |  |  |                                                 |   | 78,014     |                                                 |  |  |                                     |   | 9,136     |                                     |  |  |                                                           |   | 100,204    |  |  |  |  |   | 12,886    |  |  |  |  |   | 162,935   |  |
| Franchiseand CapitalTaxes              |  |  |                                                 |   | 10,500     |                                                 |  |  |                                     |   | 47,070    |                                     |  |  |                                                           |   | 20,875     |  |  |  |  |   | 47,070    |  |  |  |  |   | 57,036    |  |
| Administrativefees                     |  |  |                                                 |   | 22,500     |                                                 |  |  |                                     |   | 17,500    |                                     |  |  |                                                           |   | 45,000     |  |  |  |  |   | 17,500    |  |  |  |  |   | 107,500   |  |
| DuesandSubscriptions                   |  |  |                                                 |   | 4,524      |                                                 |  |  |                                     |   | 6,563     |                                     |  |  |                                                           |   | 11,372     |  |  |  |  |   | 6,563     |  |  |  |  |   | 43,207    |  |
| Insurance                              |  |  |                                                 |   | 27,500     |                                                 |  |  |                                     |   | 18,333    |                                     |  |  |                                                           |   | 55,000     |  |  |  |  |   | 18,333    |  |  |  |  |   | 128,333   |  |
| Otheroperatingexpenses                 |  |  |                                                 |   | 18,724     |                                                 |  |  |                                     |   | 14,424    |                                     |  |  |                                                           |   | 83,601     |  |  |  |  |   | 14,574    |  |  |  |  |   | 140,373   |  |
| Totalexpenses                          |  |  |                                                 |   | 161,762    |                                                 |  |  |                                     |   | 113,026   |                                     |  |  |                                                           |   | 316,052    |  |  |  |  |   | 116,926   |  |  |  |  |   | 639,384   |  |
| Incomebefore provision for incometaxes |  |  |                                                 |   | 192,676    |                                                 |  |  |                                     |   | 64,799    |                                     |  |  |                                                           |   | 443,133    |  |  |  |  |   | 60,899    |  |  |  |  |   | 1,016,150 |  |
| Provisionfor incometaxes               |  |  |                                                 |   | 87,411     |                                                 |  |  |                                     |   | 21,265    |                                     |  |  |                                                           |   | 201,523    |  |  |  |  |   | 21,265    |  |  |  |  |   | 466,969   |  |
| Netincome                              |  |  |                                                 | $ | 105,265    |                                                 |  |  |                                     | $ | 43,534    |                                     |  |  |                                                           | $ | 241,610    |  |  |  |  | $ | 39,634    |  |  |  |  | $ | 549,181   |  |
| Netincome per share basic anddiluted   |  |  |                                                 | $ | 0.01       |                                                 |  |  |                                     | $ | 0.01      |                                     |  |  |                                                           | $ | 0.02       |  |  |  |  | $ | 0.02      |  |  |  |  | $ | 0.06      |  |
| Weightedaverage sharesoutstanding      |  |  |                                                 |   | 11,200,000 |                                                 |  |  |                                     |   | 8,632,967 |                                     |  |  |                                                           |   | 11,200,000 |  |  |  |  |   | 1,721,854 |  |  |  |  |   | 8,962,390 |  |
|                                        |

SeeNotes to Unaudited Condensed FinancialStatements

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KBL Healthcare Acquisition Corp. II(acorporation in the development stage)

Condensed Statement ofStockholders’ Equity

For the period fromDecember  9,  2004 (inception) to June  30,2006

|                                                                                                                                            |  |  |             |  |            |                          |  |  |                                                      |   |         |       |  |  |  |   |            |   |  |  |  |   |         |   |  |  |  |   |            |   |
|--------------------------------------------------------------------------------------------------------------------------------------------|--|--|-------------|--|------------|--------------------------|--|--|------------------------------------------------------|---|---------|-------|--|--|--|---|------------|---|--|--|--|---|---------|---|--|--|--|---|------------|---|
|                                                                                                                                       |  |  | CommonStock |  |            | Additionalpaid-inCapital |  |  | (Deficit)/Incomeaccumulatedduringthedevelopmentstage |   |         | Total |
|                                                                                                                                       |  |  | Shares      |  |            | Amount                   |
| Saleof 2,000,000 shares of common stock to initial stockholders asof December  9,  2004 at $.02857 pershare                                |  |  |             |  | 2,000,000  |                          |  |  |                                                      | $ | 200     |       |  |  |  | $ | 24,800     |   |  |  |  | $ | — |   |  |  |  | $ | 25,000     |   |
| Netloss for theperiod                                                                                                                      |  |  |             |  | —    |                          |  |  |                                                      |   | — |       |  |  |  |   | —    |   |  |  |  |   | (939    | ) |  |  |  |   | (939       | ) |
| Balance,December  31,2004                                                                                                                  |  |  |             |  | 2,000,000  |                          |  |  |                                                      | $ | 200     |       |  |  |  |   | 24,800     |   |  |  |  |   | (939    | ) |  |  |  |   | 24,061     |   |
| Saleof 9,200,000 units, net of underwriters’ discount and offeringexpenses (includes 1,839,080 shares subject to possibleconversion) |  |  |             |  | 9,200,000  |                          |  |  |                                                      | $ | 920     |       |  |  |  |   | 50,436,284 |   |  |  |  |   | — |   |  |  |  |   | 50,437,204 |   |
| Proceedssubject to possible conversion of 1,839,080shares                                                                                  |  |  |             |  | —    |                          |  |  |                                                      |   | — |       |  |  |  |   | (9,828,683 | ) |  |  |  |   | — |   |  |  |  |   | (9,828,683 | ) |
| Proceedsfrom issuance ofoptions                                                                                                            |  |  |             |  | —    |                          |  |  |                                                      |   | — |       |  |  |  |   | 100        |   |  |  |  |   | — |   |  |  |  |   | 100        |   |
| Netincome for theperiod                                                                                                                    |  |  |             |  | —    |                          |  |  |                                                      |   | — |       |  |  |  |   | —    |   |  |  |  |   | 308,510 |   |  |  |  |   | 308,510    |   |
| Balanceat December  31,2005                                                                                                                |  |  |             |  | 11,200,000 |                          |  |  |                                                      | $ | 1,120   |       |  |  |  | $ | 40,632,501 |   |  |  |  | $ | 307,571 |   |  |  |  | $ | 40,941,192 |   |
| Unaudited:                                                                                                                                 |  |  |             |  |       |                          |  |  |                                                      |   |    |       |  |  |  |   |       |   |  |  |  |   |    |   |  |  |  |   |       |   |
| NetIncome for theperiod                                                                                                                    |  |  |             |  | —    |                          |  |  |                                                      |   | — |       |  |  |  |   | —    |   |  |  |  |   | 241,610 |   |  |  |  |   | 241,610    |   |
| Balanceat June  30,2006                                                                                                                    |  |  |             |  | 11,200,000 |                          |  |  |                                                      | $ | 1,120   |       |  |  |  | $ | 40,632,501 |   |  |  |  | $ | 549,181 |   |  |  |  | $ | 41,182,802 |   |
|                                                                                                                                            |

SeeNotes to Unaudited Condensed FinancialStatements.

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KBL Healthcare Acquisition Corp. II(acorporation in the development stage)Statement of CashFlows(unaudited)

|                                                                             |  |  |                                     |   |          |                                     |  |  |                                                          |   |             |   |  |  |  |   |             |   |
|-----------------------------------------------------------------------------|--|--|-------------------------------------|---|----------|-------------------------------------|--|--|----------------------------------------------------------|---|-------------|---|--|--|--|---|-------------|---|
|                                                                        |  |  | Forthe sixmonths endedJune 30, 2006 |   |          | For thesixmonths endedJune 30, 2005 |  |  | For theperiodDecember 09, 2004(inception) toJune 30,2006 |
| Cash flow from operatingactivities                                          |  |  |                                     |   |     |                                     |  |  |                                                          |   |        |   |  |  |  |   |        |   |
| Netincome                                                                   |  |  |                                     | $ | 241,610  |                                     |  |  |                                                          | $ | 39,634      |   |  |  |  | $ | 549,181     |   |
| Adjustmentsto reconcile net income to net cash used in operatingactivities: |  |  |                                     |   |     |                                     |  |  |                                                          |   |        |   |  |  |  |   |        |   |
| Depreciation                                                                |  |  |                                     |   | 661      |                                     |  |  |                                                          |   | —     |   |  |  |  |   | 878         |   |
| Deferredtaxbenefit                                                          |  |  |                                     |   | (218,000 | )                                   |  |  |                                                          |   | —     |   |  |  |  |   | (447,000    | ) |
| Changesin operatingassets/liabilities:                                      |  |  |                                     |   |     |                                     |  |  |                                                          |   |        |   |  |  |  |   |        |   |
| Accruedinterest income on trustaccount                                      |  |  |                                     |   | (942,135 | )                                   |  |  |                                                          |   | (222,252    | ) |  |  |  |   | (2,055,238  | ) |
| Decrease/(increase)in prepaidexpenses                                       |  |  |                                     |   | (63,501  | )                                   |  |  |                                                          |   | (107,454    | ) |  |  |  |   | (105,833    | ) |
| (Increase)in due frommanagement                                             |  |  |                                     |   | (7,745   | )                                   |  |  |                                                          |   |        |   |  |  |  |   | (7,745      | ) |
| (Increase)in due fromofficer                                                |  |  |                                     |   | (19,070  | )                                   |  |  |                                                          |   | —     |   |  |  |  |   | (19,070     | ) |
| Increasein accruedexpenses                                                  |  |  |                                     |   | 104,007  |                                     |  |  |                                                          |   | 14,200      |   |  |  |  |   | 145,206     |   |
| Increasein deferred trustincome                                             |  |  |                                     |   | 188,333  |                                     |  |  |                                                          |   | 44,428      |   |  |  |  |   | 410,842     |   |
| Increase(decrease) in capital and income taxpayable                         |  |  |                                     |   | 198,566  |                                     |  |  |                                                          |   | 68,196      |   |  |  |  |   | 370,759     |   |
| Netcash flows used in operatingactivities                                   |  |  |                                     |   | (517,274 | )                                   |  |  |                                                          |   | (163,248    | ) |  |  |  |   | (1,158,020  | ) |
| Cashflows from InvestingActivities                                          |  |  |                                     |   |     |                                     |  |  |                                                          |   |        |   |  |  |  |   |        |   |
| Purchasesofequipment                                                        |  |  |                                     |   | (2,275   | )                                   |  |  |                                                          |   | —     |   |  |  |  |   | (6,610      | ) |
| Paymentof deferred acquisitioncosts                                         |  |  |                                     |   | (25,000  | )                                   |  |  |                                                          |   | —     |   |  |  |  |   | (25,000     | ) |
| Increasein cash held intrust                                                |  |  |                                     |   | (2       | )                                   |  |  |                                                          |   | —     |   |  |  |  |   | (288        | ) |
| Purchaseof treasurybills                                                    |  |  |                                     |   | —  |                                     |  |  |                                                          |   | (49,168,001 | ) |  |  |  |   | (99,044,714 | ) |
| Maturityof treasurybills                                                    |  |  |                                     |   | —  |                                     |  |  |                                                          |   | —     |   |  |  |  |   | 49,877,000  |   |
| Netcash flows used in investingactivities                                   |  |  |                                     |   | (27,277  | )                                   |  |  |                                                          |   | (49,168,001 | ) |  |  |  |   | (49,199,612 | ) |
| Cashflows from financingactivities                                          |  |  |                                     |   |     |                                     |  |  |                                                          |   |        |   |  |  |  |   |        |   |
| Grossproceeds from publicoffering                                           |  |  |                                     |   | —  |                                     |  |  |                                                          |   | 55,200,000  |   |  |  |  |   | 55,200,000  |   |
| Proceedsfrom issuance ofoption                                              |  |  |                                     |   | —  |                                     |  |  |                                                          |   | 100         |   |  |  |  |   | 100         |   |
| Proceedsfrom notes payable,stockholders                                     |  |  |                                     |   | —  |                                     |  |  |                                                          |   | 100,000     |   |  |  |  |   | 100,000     |   |
| Paymentof notes payable,stockholders                                        |  |  |                                     |   | —  |                                     |  |  |                                                          |   | (100,000    | ) |  |  |  |   | (100,000    | ) |
| Proceedsfrom sale of shares of commonstock                                  |  |  |                                     |   | —  |                                     |  |  |                                                          |   | —     |   |  |  |  |   | 25,000      |   |
| Paymentof offeringcosts                                                     |  |  |                                     |   | —  |                                     |  |  |                                                          |   | (4,738,171  | ) |  |  |  |   | (4,762,796  | ) |
| Netcash provided by financingactivities                                     |  |  |                                     |   | —  |                                     |  |  |                                                          |   | 50,461,929  |   |  |  |  |   | 50,462,304  |   |
| Netincrease incash                                                          |  |  |                                     |   | (544,551 | )                                   |  |  |                                                          |   | 1,130,680   |   |  |  |  |   | 104,672     |   |
| Cashat beginning of theperiod                                               |  |  |                                     |   | 649,223  |                                     |  |  |                                                          |   | —     |   |  |  |  |   | —     |   |
| Cashat the end of theperiod                                                 |  |  |                                     | $ | 104,672  |                                     |  |  |                                                          | $ | 1,130,680   |   |  |  |  | $ | 104,672     |   |
| Supplementalschedule of non-cash investingactivity:                         |  |  |                                     |   |     |                                     |  |  |                                                          |   |        |   |  |  |  |   |        |   |
| Accrual ofdeferred acquisitioncosts                                         |  |  |                                     |   | 140,388  |                                     |  |  |                                                          |   | —     |   |  |  |  |   | 140,388     |   |
|                                                                             |

SeeNotes to Unaudited Condensed FinancialStatements.

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KBLHealthcare Acquisition Corporation(a corporation in thedevelopment stage)Notes to Unaudited FinancialStatements

1.    Basis ofPresentation

The financial statements at June  30,2006 and for the periods ended June  30,  2006 areunaudited. In the opinion of management, all adjustments (consisting ofnormal accruals) have been made that are necessary to present fairlythe financial position of KBL Healthcare Acquisition Corp. II (the‘‘Company’’) as of June  30,2006 and the results of its operations and cash flows for the periodsended June  30,  2006 and 2005. Operating results for theinterim period presented are not necessarily indicative of the resultsto be expected for a full year.

The statements and related noteshave been prepared pursuant to the rules and regulations of the U.S.Securities and Exchange Commission. Accordingly, certain informationand footnote disclosures normally included in financial statementsprepared in accordance with generally accepted accounting principleshave been omitted pursuant to such rules and regulations. Thesefinancial statements should be read in conjunction with the financialstatements that were included in the Company’s Annual Report onForm 10-KSB for the period ended December  31,  2005. TheDecember  31,  2005 balance sheet has been derived from theaudited financial statements.

2.    Organization and BusinessOperations

The Company was incorporated on December9,  2004 as a blank check company whose objective is to acquirean operating business in the healthcare industry.

Theregistration statement for the Company’s initial public offering(‘‘Offering’’) was declared effectiveApril  21,  2005. The Company consummated the Offering onApril  27,  2005 (see Note 7). The Company’smanagement has broad discretion with respect to the specificapplication of the net proceeds of this Offering, althoughsubstantially all of the net proceeds of this Offering are intended tobe generally applied toward consummating a business combination with anoperating business in the healthcare industry (‘‘BusinessCombination’’). Upon the closing of the Offering, and theunderwriters’ over-allotment option, an aggregate of$49,168,000, was deposited in an interest-bearing trust account(‘‘Trust Fund’’) until the earlier of (i)the consummation of a Business Combination or (ii) liquidation of theCompany. Under the agreement governing the Trust Account, funds willonly be invested in United States ‘‘governmentsecurities’’ within the meaning of Section 2(a)(16) ofthe Investment Company Act of 1940 with a maturity of 180 days or less,or in money market funds meeting certain conditions under Rule 2a-7promulgated under the Investment Company Act of 1940. At June30,  2006, the value of the Trust Account amounted toapproximately $51,223,240. The remaining net proceeds (not held in theTrust Fund) may be used to pay for business, legal and accounting duediligence on prospective acquisitions and continuing general andadministrative expenses.

The Company, after signing a definitiveagreement for the acquisition of a target business, will submit suchtransaction for stockholder approval. In the event that stockholdersowning 20% or more of the shares sold in the Offering voteagainst the Business Combination and exercise their conversion rightsdescribed below, the Business Combination will not be consummated. Allof the Company’s stockholders prior to the Offering, includingall of the officers and directors of the Company(‘‘Initial Stockholders’’), have agreed tovote their 2,000,000 founding shares of common stock in accordance withthe vote of the majority in interest of all other stockholders of theCompany (‘‘Public Stockholders’’) withrespect to any Business Combination. After consummation of a BusinessCombination, these voting safeguards will no longer beapplicable.

With respect to a Business Combination which isapproved and consummated, any Public Stockholder who voted against theBusiness Combination may demand that the Company convert his or hershares. The per share conversion price will equal the amount in theTrust Fund as of two days prior to the consummation of the proposedBusiness Combination divided by the number of shares of 

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KBLHealthcare Acquisition Corporation(a corporation in thedevelopment stage)Notes to Unaudited FinancialStatements

common stock held by Public Stockholders atthe consummation of the Offering. Accordingly, Public Stockholdersholding 19.99% of the aggregate number of shares owned by allPublic Stockholders may seek conversion of their shares in the event ofa Business Combination. Such Public Stockholders are entitled toreceive their per-share interest in the Trust Fund computed withoutregard to the shares held by Initial Stockholders. Accordingly, aportion of the net proceeds from the Offering (19.99% of theamount originally held in the Trust Fund) has been classified as commonstock subject to possible conversion in the accompanying June30,  2006 balance sheet and 19.99% of the related interestearned on the Treasury Bill has been recorded as deferredinterest.

The Company’s Amended and Restated Certificateof Incorporation provides for mandatory liquidation of the Company inthe event that the Company does not consummate a Business Combinationwithin 18 months from the date of the consummation of the Offering, or24 months from the consummation of the Offering if certain extensioncriteria have been satisfied. There is no assurance that the Companywill be able to successfully effect a Business Combination during thisperiod. This factor raises substantial doubt about the Company'sability to continue as a going concern. The accompanying financialstatements are prepared assuming the Company will continue as a goingconcern. The financial statements do not include any adjustments thatmight result from the outcome of this uncertainty. In the event ofliquidation, it is likely that the per share value of the residualassets remaining available for distribution (including Trust Fundassets) will be less than the initial public offering price per sharein the Offering (assuming no value is attributed to the Warrantscontained in the Units sold in the Offering discussed inNote 7).

3.    Initial Public Offering

OnApril  27,  2005, the Company sold 8,000,000 units(‘‘Units’’) in the Offering. OnApril  29,  2005, the Company sold an additional 1,200,000Units pursuant to the underwriters’ over-allotment option. EachUnit consists of one share of the Company’s common stock, $.0001par value, and two Redeemable Common Stock Purchase Warrants(‘‘Warrants’’). Each Warrant will entitlethe holder to purchase from the Company one share of common stock at anexercise price of $5.00 commencing the later of the completion of aBusiness Combination with a target business or one year from theeffective date of the Offering and expiring five years from the date ofthe prospectus. The Warrants will be redeemable, upon prior writtenconsent of EarlyBirdCapital, Inc., at a price of $.01 per Warrant upon30 days' notice after the Warrants become exercisable, only inthe event that the last sale price of the common stock is at least$8.50 per share for any 20 trading days within a 30 trading day periodending on the third day prior to the date on which notice of redemptionis given.

In connection with this Offering, the Company issuedan option, for $100, to the representative of the underwriters topurchase 400,000 Units at an exercise price of $7.50 per Unit. TheCompany estimatesthat the fair value of the Option isapproximately $876,000 ($2.19 per Unit) using a Black-Scholesoption-pricing model. The fair value of the option granted toEarlyBirdCapital was estimated as of the date of grant using thefollowing assumptions: (1) expected volatility of 43.45%, (2)risk-free interest rate of 3.97% and (3) expected life of 5years. The Option may be exercised for cash or on a‘‘cashless’’ basis, at the holder'soption, such that the holder may use the appreciated value of theOption (the difference between the exercise prices of the Option andthe underlying Warrants and the market price of the Units andunderlying securities) to exercise the option without the payment ofany cash. In addition, the Warrants underlying such Units areexercisable at $6.25 per share.

4.    Deferred OfferingCosts

Deferred offering costs consisted principally of legal andunderwriting fees incurred through the balance sheet date that arerelated to the Offering and were charged to capital upon the receipt ofthe capital raised.

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KBLHealthcare Acquisition Corporation(a corporation in thedevelopment stage)Notes to Unaudited FinancialStatements

5.    Commitment

The Companypresently occupies office space provided by an affiliate of an InitialStockholder. Such affiliate has agreed that, until the acquisition of atarget business by the Company, it will make such office space, as wellas certain office and secretarial services, available to the Company,as may be required by the Company from time to time. The Company hasagreed to pay such affiliate $7,500 per month for such servicescommencing on the effective date of the Proposed Offering. ThroughJune  30,  2006, the Company has expensed $107, 500relating to this agreement.

6.    CommonStock

Effective January  26,  2005 and March24,  2005, the Company's Board of Directors authorized astock dividend of 0.428571 shares of common stock and 0.6 shares ofcommon stock, respectively, for each outstanding share of common stock.On February  8,  2005, the Company's Certificate ofIncorporation was amended to increase the authorized shares of commonstock from 15,000,000 to 30,000,000 shares of common stock.Additionally, on March  24,  2005, the Company'sCertificate of Incorporation was amended to increase the authorizedshares of common stock to 35,000,000 shares of common stock. Allreferences in the accompanying financial statements to the number ofshares of stock have been retroactively restated to reflect thesetransactions.

As of June  30,  2006, 19,600,000shares of common stock were reserved for issuance upon exercise ofredeemable warrants and underwriter’s unit purchaseoption.

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ITEM 2 –MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OFOPERATION

The following discussion should be read in conjunctionwith the Company’s Consolidated Financial Statements andfootnotes thereto contained in this report.

Forward LookingStatements

The statements discussed in this Report includeforward looking statements that involve risks and uncertaintiesdetailed from time to time in the Company’s reports filed withthe Securities and Exchange Commission.

We were formed onDecember  9,  2004, to serve as a vehicle to effect amerger, capital stock exchange, asset acquisition or other similarbusiness combination with an operating business in the healthcareindustry. We intend to utilize cash derived from the proceeds of ourrecently completed public offering, our capital stock, debt or acombination of cash, capital stock and debt, in effecting a businesscombination.

For the three months ended June  30,2006, we had a net income of $105,265, attributable to interest incomeon the trust fund net of organization and formation expenses.

Forthe three months ended June  30,  2005, we had a net incomeof $43,534 attributable to organization and formationexpenses.

For the six months ended June  30,  2006,we had a net income of $241,610, attributable to interest income on thetrust fund net of organization and formation expenses.

For thesix months ended June  30,  2005, we had a net loss of$39,634 attributable to organization and formation expenses.

Forthe period from December  9,  2004 (inception) throughJune  30,  2006, we had a net income of $549,181,attributable to interest income on the trust fund net of organizationand formation expenses.

We consummated our initial publicoffering on April  27,  2005. On April  29, weconsummated the closing of an additional 1,200,000 units that weresubject to the underwriters’ over-allotment option. Grossproceeds from our initial public offering were $55,200,000. We paid atotal of $4,272,000 in underwriting discounts and commissions, andapproximately $491,000 was or will be paid for costs and expensesrelated to the offering. After deducting the underwriting discounts andcommissions and the offering expenses, the total net proceeds to usfrom the offering were approximately $50,437,000, of which $49,168,000was deposited into the trust account (or $5.344 per share sold in theoffering). The remaining proceeds are available to be used by us toprovide for business, legal and accounting due diligence on prospectiveacquisitions and continuing general and administrative expenses. Wewill use substantially all of the net proceeds of this offering toacquire a target business, including identifying and evaluatingprospective acquisition candidates, selecting the target business, andstructuring, negotiating and consummating the business combination. Tothe extent that our capital stock is used in whole or in part asconsideration to effect a business combination, the proceeds held inthe trust fund as well as any other net proceeds not expended will beused to finance the operations of the target business. We believe wewill have sufficient available funds outside of the trust fund tooperate through April  27,  2007, assuming that a businesscombination is not consummated during that time. From April27,  2005 through April  27,  2007, we anticipateapproximately $280,000 of expenses for legal, accounting and otherexpenses attendant to the due diligence investigations, structuring andnegotiating of a business combination, $180,000 for the administrativefee payable to KBL Healthcare Management Inc. ($7,500 per month for twoyears), $150,000 for expenses for the due diligence and investigationof a target business, $40,000 of expenses in legal and accounting feesrelating to our SEC reporting obligations and $619,000 for generalworking capital that will be used for miscellaneous expenses andreserves, including approximately $80,000 for director and officerliability insurance premiums. We do not believe we will need to raiseadditional funds following this offering in order to meet theexpenditures required for operating our business. However, we may needto raise additional funds through a private offering of debt or equitysecurities if such funds are required to consummate a businesscombination that is presented to us. We would only consummate such afinancing simultaneously with the consummation of a businesscombination.

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Commencing on April  21,  2005and ending upon the acquisition of a target business, we beganincurring a fee from KBL Healthcare Management, Inc., an affiliate ofZachary Berk, O.D., our chairman of the board and president, MarleneKrauss, M.D., our chief executive officer and secretary, and MichaelKaswan, our chief operating officer, of $7,500 per month for providingus with office space and certain general and administrative services.In addition, in January and March  2005, Marlene Krauss advancedan aggregate of $100,000 to us for payment on our behalf of offeringexpenses.These loans were repaid following our initial public offeringfrom the proceeds of the offering.

ITEM 3.    CONTROLS ANDPROCEDURES.

Disclosure controls and procedures are controls andother procedures that are designed to ensure that information requiredto be disclosed in company reports filed or submitted under theSecurities Exchange Act of 1934 (the ‘‘ExchangeAct’’) is recorded, processed, summarized and reported,within the time periods specified in the Securities and ExchangeCommission’s rules and forms. Disclosure controls and proceduresinclude, without limitation, controls and procedures designed to ensurethat information required to be disclosed in company reports filed orsubmitted under the Exchange Act is accumulated and communicated tomanagement, including our chief executive officer and treasurer, asappropriate to allow timely decisions regarding requireddisclosure.

As required by Rules 13a-15 and 15d-15 underthe Exchange Act, our chief executive officer and chief operatingofficer carried out an evaluation of the effectiveness of the designand operation of our disclosure controls and procedures as ofJune  30,  2006. Based upon their evaluation, theyconcluded that our disclosure controls and procedures wereeffective.

Our internal control over financial reporting is aprocess designed by, or under the supervision of, our chief executiveofficer and chief operating officer and effected by our board ofdirectors, management and other personnel, to provide reasonableassurance regarding the reliability of our financial reporting and thepreparation of our financial statements for external purposes inaccordance with generally accepted accounting principles. Internalcontrol over financial reporting includes policies and procedures thatpertain to the maintenance of records that in reasonable detailaccurately and fairly reflect the transactions and dispositions of ourassets; provide reasonable assurance that transactions are recorded asnecessary to permit preparation of our financial statements inaccordance with generally accepted accounting principles, and that ourreceipts and expenditures are being made only in accordance with theauthorization of our board of directors and management; and providereasonable assurance regarding prevention or timely detection ofunauthorized acquisition, use or disposition of our assets that couldhave a material effect on our financial statements.

During themost recently completed fiscal quarter, there has been no significantchange in our internal control over financial reporting that hasmaterially affected, or is reasonably likely to materially affect, ourinternal control over financial reporting.

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PART II.

OTHERINFORMATION

ITEM 2:    UNREGISTERED SALES OF EQUITYSECURITIES AND USE OF PROCEEDS

On April  27,  2005,we consummated our initial public offering of 8,000,000 Units, witheach unit consisting of one share of our common stock and two warrants,each to purchase one share of our common stock at an exercise price of$5.00 per share. On April  29,  2005, we closed on anadditional 1,200,000 units that were subject to theunderwriters’ over-allotment option. The units were sold at anoffering price of $6.00 per unit, generating total gross proceeds of$55,200,000. EarlyBirdCapital, Inc. acted as lead underwriter. Thesecurities sold in the offering were registered under the SecuritiesAct of 1933 on a registration statement on Form S-1 (No. 333-121610).The Securities and Exchange Commission declared the registrationstatement effective on April  21,  2005.

We paid atotal of $4,272,000 in underwriting discounts and commissions, andapproximately $491,000 has been paid for costs and expenses related tothe offering.

After deducting the underwriting discounts andcommissions and the offering expenses, the total net proceeds to usfrom the offering were approximately $50,437,000, of which $49,168,000was deposited into a trust fund (or $5.344 per share sold in theoffering) and the remaining proceeds are available to be used toprovide for business, legal and accounting due diligence on prospectivebusiness combinations and continuing general and administrativeexpenses.

For a description of the use of the proceeds generatedin our initial public offering, see Part I, Item 2 of this Form10-QSB.

ITEM6:    EXHIBITS

(a)    Exhibits:

 31.1– Section 302 Certification byCEO

 31.2 – Section 302Certification by COO

 32.1 –Section 906 Certification by CEO

 32.2– Section 906 Certification by COO

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SIGNATURES

In accordance with therequirements of the Exchange Act, the registrant caused this report tobe signed on its behalf by the undersigned, thereunto dulyauthorized.

|  | KBL HEALTHCAREACQUISITIONCORP. II |
|--|-----------------------------------|

Dated: August  14,2006

|  | /s/ Marlene Krauss, M.D.MarleneKrauss, M.D.Chief ExecutiveOfficer |
|--|-------------------------------------------------------------------|

|  | /s/ MichaelKaswanMichael KaswanChief OperatingOfficer |
|--|-------------------------------------------------------|

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