**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C****. 20549**








**FORM
      10-Q**








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


For
      the
      quarterly period ended March 31, 2006





OR





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


For
      the
      transition period from ______________ to ______________




**Commission
        File Number 1-10352**
 
 
 **COLUMBIA
        LABORATORIES, INC.**
 (Exact
        name of Registrant as specified in its charter)
 
 
 **Delaware**
              **59-2758596**(State
                  or other jurisdiction of
              (I.R.S.
                  Employerincorporation
                  or organization)
              Identification
                  No.)**354
                  Eisenhower Parkway, Plaza 1, 2****nd****Floor****Livingston,
                  New Jersey**
              **07039**(Address
                  of principal executive offices)
              (Zip
                  Code)


**Registrant's
      telephone number, including area code: (973) 994-3999**





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




Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange Act). (Check
      one):





Large
      accelerated filer o  Accelerated
      filer
x  Non-accelerated
      filer
o




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





oYes x
      No





Number
      of
      shares of Common Stock of Columbia Laboratories, Inc. issued and outstanding
      as
      of May 3, 2006: 49,521,823













**PART
      1 - FINANCIAL INFORMATION**





**Item
      1. Financial Statements**




The
      following unaudited, condensed consolidated financial statements of Columbia
      Laboratories, Inc. (“Columbia” or the “Company”) have been prepared in
      accordance with the instructions to Form 10-Q and, therefore, omit or condense
      certain footnotes and other information normally included in financial
      statements prepared in accordance with generally accepted accounting principles.
      In the opinion of management, all adjustments (consisting only of normal
      recurring accruals) necessary for a fair presentation of the financial
      information for the interim periods reported have been made. Results of
      operations for the three months ended March 31, 2006 are not necessarily
      indicative of the results for the year ending December 31, 2006 . It
      is
      suggested that these financial statements be read in conjunction with the
      financial statements and related disclosures for the year ended December 31,
      2005 included in the Company’s Annual Report on Form 10-K filed with the
      Securities and Exchange Commission (the “SEC”).





Page
          2 of 25


COLUMBIA
      LABORATORIES, INC. AND SUBSIDIARIES





CONDENSED
      CONSOLIDATED BALANCE SHEETS






March
                  31,
              
              December
                  31,2006
              
              2005(Unaudited)ASSETSCurrent
                assets-Cash
                  and cash equivalents
              
              $
              35,080,377
              
              $
              7,136,854Accounts
                  receivable, net
              
              
              3,852,125
              
              
              4,020,019Inventories
              
              
              1,892,916
              
              
              1,821,433Prepaid
                  expenses and other current assets
              
              
              939,096
              
              
              625,908Total
                  current assets
              
              
              41,764,514
              
              
              13,604,214Property
                  and equipment, net
              
              
              944,229
              
              
              1,002,580Other
                  assets
              
              
              124,901
              
              
              124,756TOTAL
                  ASSETS
              
              $
              42,833,644
              
              $
              14,731,550LIABILITIES
                  AND STOCKHOLDERS' EQUITY (DEFICIENCY)Current
                  liabilities-Current
                  portion of financing agreements
              
              $
              12,986,145
              
              $
              12,840,161Accounts
                  payable
              
              
              3,332,084
              
              
              1,905,381Accrued
                  expenses
              
              
              1,785,021
              
              
              2,329,475Total
                  current liabilities
              
              
              18,103,250
              
              
              17,075,017Deferred
                  revenue
              
              
              4,302,173
              
              
              4,058,327Long-term
                  portion of financing agreements
              
              
              9,183,093
              
              
              8,747,743TOTAL
                  LIABILITIES
              
              
              31,588,516
              
              
              29,881,087Stockholders'
                  equity (deficiency)-Preferred
                  stock, $.01 par value; 1,000,000 shares authorized:Series
                  B Convertible Preferred Stock, 130 shares issued andoutstanding
                  in 2006 and 2005
              
              
              1
              
              
              1Series
                  C Convertible Preferred Stock, 3,250 shares issuedand
                  outstanding in 2006 and 2005
              
              
              32
              
              
              32Series
                  E Convertible Preferred Stock, 69,000 shares issuedand
                  outstanding in 2006 and 2005
              
              
              690
              
              
              690Common
                  stock, $.01 par value; 100,000,000 authorized;49,336,382
                  and 41,754,784 shares issued and outstanding in2006
                  and 2005, respectively
              
              
              493,364
              
              
              417,548Capital
                  in excess of par value
              
              
              204,398,069
              
              
              175,340,023Accumulated
                  deficit
              
              
              (193,831,296
              )
              
              (191,084,974
              )Accumulated
                  other comprehensive income
              
              
              184,268
              
              
              177,143TOTAL
                  STOCKHOLDERS' EQUITY (DEFICIENCY)
              
              
              11,245,128
              
              
              (15,149,537
              )TOTAL
                  LIABILITIES AND STOCKHOLDERS'EQUITY
                  (DEFICIENCY)
              
              $
              42,833,644
              
              $
              14,731,550


See
      notes
      to condensed consolidated financial statements


Page
          3 of 25


COLUMBIA
      LABORATORIES, INC. AND SUBSIDIARIES





CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS


(Unaudited)





Three
                  Months EndedMarch
                  31,2006
              
              2005NET
                  REVENUES
              
              $
              4,545,377
              
              $
              4,280,577COST
                  OF REVENUES
              
              
              1,878,268
              
              
              1,817,005Gross
                  profit
              
              
              2,667,109
              
              
              2,463,572OPERATING
                  EXPENSES:Selling
                  and distribution
              
              
              1,499,979
              
              
              2,898,603General
                  and administrative
              
              
              1,587,650
              
              
              1,825,758Research
                  and development
              
              
              1,726,617
              
              
              1,292,225Total
                  operating expenses
              
              
              4,814,246
              
              
              6,016,586Loss
                  from operations
              
              
              (2,147,137
              )
              
              (3,553,014
              )OTHER
                  INCOME (EXPENSE):Interest
                  income
              
              
              100,495
              
              
              45,838Interest
                  expense
              
              
              (670,991
              )
              
              (740,613
              )Other,
                  net
              
              
              (28,689
              )
              
              33,082(599,185
              )
              
              (661,693
              )Net
                  loss
              
              $
              (2,746,322
              )
              $
              (4,214,707
              )NET
                  LOSS PER COMMON SHARE:Basic
                  and diluted
              
              $
              (0.06
              )
              $
              (0.10
              )WEIGHTED
                  AVERAGE NUMBER OFCOMMON
                  SHARES OUTSTANDING:Basic
                  and diluted
              
              
              43,344,645
              
              
              41,751,934




See
      notes
      to condensed consolidated financial statements


Page
          4 of 25





COLUMBIA
      LABORATORIES, INC. AND SUBSIDIARIES





CONDENSED
      CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS


(Unaudited)


Three
                  Months EndedMarch
                  31,2006
              
              2005NET
                  LOSS
              
              $
              (2,746,322
              )
              $
              (4,214,707
              )Other
                  comprehensive income (loss):Foreign
                  currency translation, net of tax
              
              
              7,125
              
              
              (24,911
              )Comprehensive
                  loss
              
              $
              (2,739,197
              )
              $
              (4,239,618
              )







See
      notes
      to condensed consolidated financial statements


Page
          5 of 25


COLUMBIA
      LABORATORIES, INC. AND SUBSIDIARIES





CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS


(Unaudited)


Three
                  Months Ended March 31,2006
              
              2005CASH
                FLOWS FROM OPERATING ACTIVITIES:Net
                  loss
              
              $
              (2,746,322
              )
              $
              (4,214,707
              )Adjustments
                  to reconcile net loss to netcash
                  used in operating activities-Depreciation
                  and amortization
              
              
              65,674
              
              
              90,006Provision
                  for doubtful accounts
              
              
              721
              
              
              45,000Provision
                  for returns and allowances
              
              
              208,014
              
              
              546,429Writedown
                  of inventories
              
              
              158,275
              
              
              210,000Stock
                  based compensation
              
              
              101,057
              
              
              -Interest
                  expense on financing agreements
              
              
              670,991
              
              
              585,033Loss
                  on disposal of fixed asset
              
              
              2,177
              
              
              -Changes
                  in assets and liabilities-(Increase)
                  decrease in:Accounts
                  receivable
              
              
              167,173
              
              
              1,292,604Inventories
              
              
              (229,758
              )
              
              (275,819
              )Prepaid
                  expenses and other current assets
              
              
              (313,188
              )
              
              296,626Other
                  assets
              
              
              (145
              )
              
              392Increase
                  (decrease) in:Accounts
                  payable
              
              
              1,426,703
              
              
              (190,367
              )Accrued
                  expenses
              
              
              (752,468
              )
              
              (1,865,448
              )Deferred
                  revenue
              
              
              243,846
              
              
              258,067Net
                  cash used in operating activities
              
              
              (997,250
              )
              
              (3,222,184
              )CASH
                FLOWS FROM INVESTING
                ACTIVITIES:Purchase
                  of property and equipment
              
              
              (9,500
              )
              
              (3,343
              )Net
                  cash used in investing activities
              
              
              (9,500
              )
              
              (3,343
              )CASH
                FLOWS FROM FINANCING ACTIVITIES:Proceeds
                  from the sale of common stock, net
              
              
              28,813,385
              
              
              -Payment
                  of note payable
              
              
              -
              
              
              (10,000,000
              )Proceeds
                  from exercise of options
              
              
              260,045
              
              
              -Payments
                  pursuant to financing agreements
              
              
              (89,657
              )
              
              (2,187,526
              )Dividends
                  paid
              
              
              (40,625
              )
              
              (40,625
              )Net
                  cash provided by (used in) financing activities
              
              
              28,943,148
              
              
              (12,228,151
              )(continued)





Page
          6 of 25




COLUMBIA
      LABORATORIES, INC. AND SUBSIDIARIES




CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS


(Unaudited)




(Continued)


Three
                  Months Ended March 31,2006
              
              2005EFFECT
                  OF EXCHANGE RATE CHANGES ON CASH
              
              
              7,125
              
              
              (24,867
              )NET
                  INCREASE (DECREASE) IN CASHAND
                  CASH EQUIVALENTS
              
              
              27,943,523
              
              
              (15,478,545
              )CASH
                  AND CASH EQUIVALENTS,Beginning
                  of period
              
              
              7,136,854
              
              
              19,781,591CASH
                  AND CASH EQUIVALENTS,End
                  of period
              
              $
              35,080,377
              
              $
              4,303,046







See
      notes
      to condensed consolidated financial statements





Page
          7 of 25





COLUMBIA
      LABORATORIES, INC. AND SUBSIDIARIES





NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)





(1)
      SIGNIFICANT ACCOUNTING POLICIES :





The
      accounting policies followed for quarterly financial reporting are the same
      as
      those disclosed in Note (1) of the Notes to Consolidated Financial Statements
      included in the Company's Annual Report on Form 10-K for the fiscal year ended
      December 31, 2005.







On
      January 1, 2006, the Company adopted Statement of Financial Accounting
      Standards No. 123 (revised 2004), “Share-Based Payment,” (“SFAS 123(R)”)
      which requires the measurement and recognition of compensation expense for
      all
      stock-based awards made to employees and directors including employee stock
      options based on estimated fair values. SFAS 123(R) supersedes previous
      accounting under Accounting Principles Board Opinion No. 25, “Accounting
      for Stock Issued to Employees” (“APB 25”) for periods beginning in fiscal year
      2006. In March 2005, the SEC issued Staff Accounting Bulletin No. 107 (“SAB
      107”) providing supplemental implementation guidance for SFAS 123(R). The
      Company has applied the provisions of SAB 107 in its adoption of SFAS 123(R).







SFAS
      123(R) requires companies to estimate the fair value of stock-based awards
      on
      the date of grant using an option pricing model. The value of the portion of
      the
      award that is ultimately expected to vest is recognized as expense over the
      requisite service periods in the Company’s Consolidated Statements of
      Operations. The Company adopted SFAS 123(R) using the modified prospective
      transition method which requires the recognition of expense relative to
      existing, unvested awards from January 1, 2006. The Company’s Condensed
      Consolidated Financial Statements, as of and for the three months ended
      March 31, 2006, reflect the impact of SFAS 123(R). Employee stock-based
      compensation expense for the three months ended March 31, 2006, was
      $100,162, which consisted primarily of stock-based compensation expense related
      to employee stock options recognized under SFAS 123(R).




Prior
      to
      the adoption of SFAS 123(R), the Company accounted for stock-based awards
      to employees and directors using the intrinsic value method in accordance with
      APB 25 as allowed under Statement of Financial Accounting Standards
      No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”). Under the
      intrinsic value method, no stock-based compensation expense for employee stock
      options had been recognized in the Company’s Consolidated Statements of
      Operations, because the exercise price of the Company’s stock options granted to
      employees and directors equaled the fair market value of the underlying stock
      at
      the date of grant. In accordance with the modified prospective transition method
      the Company used in adopting SFAS 123(R), the Company’s results of operations
      prior to fiscal year 2006 have not been restated to reflect, and do not include,
      the possible impact of SFAS 123(R).




Stock-based
      compensation expense recognized during a period is based on the value of the
      portion of stock-based awards that is ultimately expected to vest. Stock-based
      compensation expense recognized in the three months ended March 31, 2006
      included compensation expense for stock-based awards granted prior to, but
      not
      yet vested as of December 31, 2005, based on the fair value on the grant
      date estimated in accordance with the pro forma provisions of SFAS 123, and
      compensation expense for the stock-based awards granted or modified subsequent
      to December 31, 2005, based on the fair value on the grant date estimated
      in accordance with the provisions of SFAS 123(R). In conjunction with the adoption
      of SFAS 123(R), the Company is continuing to use the straight line single-option
      method of attributing the value of stock-based compensation expense.
      Compensation expense for all stock-based awards granted prior to January 1,
      2006 will be recognized using the straight line single-option approach, and
      compensation expense for all stock-based awards granted subsequent to
      December 31, 2005, will also be recognized using the straight line
      single-option method. No stock options were granted during the three months
      ended March 31, 2006. As stock-based compensation expense to be recognized
      in
      the results for periods beginning after December 31, 2005, is based on awards
      ultimately expected to vest, the amounts will be reduced for estimated
      forfeitures. SFAS 123(R) requires forfeitures to be estimated at the time of
      grant and revised, if necessary, in subsequent periods if actual forfeitures
      differ from those estimates. Prior to 2006, the Company accounted for
      forfeitures as they occurred for the purposes of pro forma information under
      SFAS 123, as disclosed in the Notes to Consolidated Financial Statements for
      the
      related periods.




Page
          8 of 25
 
  COLUMBIA
          LABORATORIES, INC. AND SUBSIDIARIES
 
 NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)


Upon
      adoption of SFAS 123(R), the Company selected the Black-Scholes option pricing
      model as the most appropriate method for determining the estimated fair value
      for stock-based awards. The Black-Scholes model requires the use of highly
      subjective and complex assumptions which determine the fair value of stock-based
      awards, including the option’s expected term and the price volatility of the
      underlying stock.





(2)
      INVENTORIES:





Inventories
      consisted of the following:





March
                  31,
              
              December
                  31,2006
              
              2005Finished
                  goods
              
              $
              967,030
              
              $
              1,165,413Raw
                  materials
              
              
              925,886
              
              
              656,020$
              1,892,916
              
              $
              1,821,433







(3)
      FINANCING AGREEMENTS:





In
      an
      agreement dated July 31, 2002, Quintiles Transnational Corp.’s (“Quintiles”)
      strategic investment group, PharmaBio Development, Inc. (“PharmaBio”) agreed to
      pay the Company $4.5 million in four equal quarterly installments commencing
      third quarter 2002 for the right to receive a 5% royalty on the net sales of
      the
      Company’s women’s healthcare products in the United States for five years
      beginning in the first quarter of 2003. The royalty payments are subject to
      minimum ($8 million) and maximum ($12 million) amounts and because the minimum
      amount exceeds $4.5 million, the Company has recorded the amounts received
      as
      liabilities. The excess of the minimum ($8 million) to be paid by the Company
      over the $4.5 million received by the Company is being recognized as interest
      expense over the five-year term of the agreement, assuming an interest rate
      of
      12.51%. $187,190 and $166,378 were recorded as interest expense for the quarters
      ended March 31, 2006 and March 31, 2005, respectively. The Company has paid
      PharmaBio $3,148,712 under this agreement through March 31, 2006.





Page
          9 of 25
 
  COLUMBIA
            LABORATORIES, INC. AND SUBSIDIARIES
 
 NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)


In
      an
      agreement dated March 5, 2003, PharmaBio agreed to pay the Company $15
      million in five quarterly installments commencing with the signing of the
      agreement. In return, PharmaBio will receive a 9% royalty on net sales of
      Striant in the United States up to agreed annual sales revenues, and a 4.5%
      royalty of net sales above those levels. The royalty term is seven years.
      Royalty payments commenced for the 2003 third quarter and are subject to minimum
      ($30 million) and maximum ($55 million) amounts. Because
      the minimum amount exceeds the $15 million received by the Company, the Company
      has recorded the amounts received as liabilities. The excess of the minimum
      ($30
      million) to be paid by the Company over the $15 million received by the Company
      is being recognized as interest expense over the seven-year term of the
      agreement, assuming an interest rate of 10.67%. $483,801 and $437,156 were
      recorded as interest expense for the quarters ended March 31, 2006 and March
      31,
      2005, respectively.  The
      agreement calls for a true-up payment on November 14, 2006. The true-up payment
      is equal to the difference between royalties paid through and for the third
      quarter of 2006, and $13,000,000. The Company has paid PharmaBio $712,346 under
      this agreement through March 31, 2006.





Long
      term
      l iabilities
      from financing agreements consisted of the following:




March
                  31,
              
              December
                  31,2006
              
              2005July
                  31, 2002 financing agreement
              
              $
              3,365,658
              
              $
              3,242,607March
                  5, 2003 financing agreement
              
              
              18,803,580
              
              
              18,345,29722,169,238
              
              
              21,587,904Less:
                  current portion
              
              
              12,986,145
              
              
              12,840,161$
              9,183,093
              
              $
              8,747,743





Page
          10 of
          25
 
 COLUMBIA
            LABORATORIES, INC. AND SUBSIDIARIES
 
 NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)


(4)
      GEOGRAPHIC INFORMATION:





The
      Company and its subsidiaries are engaged in one line of business, the
      development and sale of pharmaceutical products, medical devices, and cosmetics.
      The following table shows selected unaudited information by geographic
      area:




Net
              
              Profit
                  (loss) from
              
              IdentifiableRevenues
              
              Operations
              
              AssetsAs
                  of and for the three monthsended
                  March 31, 2006-United
                  States
              
              $
              2,051,692
              
              $
              (3,091,349
              )
              $
              34,810,608Europe
              
              
              2,493,685
              
              
              944,212
              
              
              8,023,036$
              4,545,377
              
              $
              (2,147,137
              )
              $
              42,833,644As
                  of and for the three monthsended
                  March 31, 2005-United
                  States
              
              $
              1,729,367
              
              $
              (4,481,617
              )
              $
              4,861,667Europe
              
              
              2,551,210
              
              
              928,603
              
              
              7,272,646$
              4,280,577
              
              $
              (3,553,014
              )
              $
              12,134,313


Page
          11 of
          25


COLUMBIA
            LABORATORIES, INC. AND SUBSIDIARIES
 
 NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)


(5)
      INCOME (LOSS) PER COMMON AND POTENTIAL COMMON SHARE:




The
        calculation of basic and diluted loss per common and common equivalent share
        is
        as follows:


Three
                  Months EndedMarch
                  31,2006
              
              2005Net
                  loss
              
              $
              (2,746,322
              )
              $
              (4,214,707
              )Less:
                  Preferred stock dividends
              
              
              (40,625
              )
              
              (40,625
              )Net
                  loss applicable tocommon
                  stock
              
              $
              (2,786,947
              )
              $
              (4,255,332
              )Basic
                  and diluted:Weighted
                  average number ofcommon
                  shares outstanding
              
              
              43,344,645
              
              
              41,751,934Basic
                  and diluted net loss per common share
              
              $
              (0.06
              )
              $
              (0.10
              )





Basic
      loss per share is computed by dividing the net loss plus preferred dividends
      by
      the weighted-average number of shares of common stock outstanding during the
      period. Diluted earnings per share gives effect to dilutive options, warrants
      and other potential common stock outstanding during the periods. Shares to
      be
      issued upon the exercise of the outstanding options and warrants or the
      conversion of the preferred stock are not included in the computation of diluted
      loss per share as their effect is anti-dilutive. Shares to be issued upon the
      exercise of the outstanding options and warrants or the conversion of the
      preferred stock excluded from the calculation amounted to 12,365,408 and
      7,322,500 at March 31, 2006 and 2005, respectively.








(6)
      LEGAL PROCEEDINGS:





Claims
      and lawsuits have been filed against the Company from time to time. Although
      the results of pending claims are always uncertain, the Company does not believe
      the results of any such actions, individually or in the aggregate, will have
      a
      material adverse effect on the Company’s financial position or results of
      operations. Additionally, the Company believes that it has reserves or insurance
      coverage in respect of these claims, but no assurance can be given as to the
      sufficiency of such reserves or insurance in the event of any unfavorable
      outcome resulting from these actions.





(7)
      STOCK-BASED COMPENSATION:







On
      January 1, 2006, the Company adopted SFAS 123(R) using the modified
      prospective transition method. SFAS 123(R) requires the measurement and
      recognition of compensation expense for all stock-based awards made to the
      Company’s employees and directors including employee stock options and other
      stock-based awards based on estimated fair values.






Page
          12 of
          25
 
  COLUMBIA
            LABORATORIES, INC. AND SUBSIDIARIES
 
 NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)


The
      following table summarizes the impact of the adoption of SFAS 123(R) on
      stock-based compensation costs for employees on the Company’s Condensed
      Consolidated Statements of Operations for the three months ended March 31,
      2006 and 2005:





Three
                  Months EndedMarch
                  31,2006
              
              2005Employee
                  stock-based compensation in:Cost
                  of revenue
              
              $
              16,082
              
              $
              -Selling
                  and distribution
              
              
              15,832
              
              
              -General
                  and administrative
              
              
              43,885
              
              
              -Research
                  and development
              
              
              24,363
              
              
              -Total
                  employee stock-based compensation in operating expenses
              
              
              84,080
              
              
              -Total
                  employee stock-based compensation
              
              
              100,162
              
              
              -Total
                  other stock-based compensation(1)
              
              
              895
              
              
              -Total
                  stock-based compensation
              
              $
              101,057
              
              $
              -





(1)
            Other
                stock-based compensation represents charges primarily related to
                non-employee stock options.





The
      table
      below reflects net loss and net loss per share for the three months ended
      March 31, 2006, compared with the pro forma information for the three
      months ended March 31, 2005 reflecting the impact of stock-based compensation
      as
      if accounted for under SFAS 123(R):


Three
                  Months EndedMarch
                  31,2006
              
              2005(pro
                  forma)Net
                  loss, before stock-based compensation for employees,prior
                  period
              
              $
              (2,746,322
              )
              $
              (4,214,707
              )Less:
                  Stock-based employee compensation included in thedetermination
                  of net loss as reported
              
              
              100,162Add:
                  Stock-based compensation expense for employeesdetermined
                  under fair based method
              
              
              (100,162
              )
              
              (671,503
              )Net
                  loss, after effect of stock-based compensation for
                  employees
              
              $
              (2,746,322
              )
              $
              (4,886,210
              )Net
                  loss per share:Basic
                  and diluted - as reported in prior year
              
              $
              (0.06
              )
              $
              (0.10
              )Basic
                  and diluted - after effect of stock-based compensationfor
                  employees
              
              $
              (0.06
              )
              $
              (0.12
              )


*
      Includes the effect of $100,162 in stock- based
      compensation.


Page
          13 of
          25


COLUMBIA
          LABORATORIES, INC. AND SUBSIDIARIES
 
 NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)




As
      of
      March 31, 2006, total unamortized stock-based compensation cost related to
      non-vested stock options was $1,375,286 which is expected to be recognized
      over
      the remaining vesting period of the outstanding options, up to the next 48
      months. The Company selected the Black-Scholes option pricing model as the
      most
      appropriate model for determining the estimated fair value for stock-based
      awards. The use of the Black-Scholes model requires the use of extensive actual
      employee exercise behavior data and the use of a number of complex assumptions
      including expected volatility, risk-free interest rate, and expected dividends.
      The weighted-average estimated value of employee stock options granted was
      $2.05
      per share during the three months ended March 31, 2005. No stock options
      were granted during the three months ended March 31, 2006. The assumptions
      used
      to value options granted during the three months ended March 31, 2005 are as
      follows:


Risk
                  free interest rate
              
              
              4.27
              %Expected
                  term
              
              
              7.46
                  yearsDividend
                  yield
              
              
              0.0Expected
                  volatility
              
              
              82.12
              %





The
      Company estimated the volatility of the Company’s stock based on historical
      volatility. in accordance with guidance in SFAS 123(R) and SAB 107. The
      risk-free interest rate assumption is based upon observed interest rates
      appropriate for the term of the employee stock options. The dividend yield
      assumption is based on our history and expectation of dividend
      payouts.





Page
          14 of
          25
 
 COLUMBIA
            LABORATORIES, INC. AND SUBSIDIARIES
 
 NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)




A
      summary
      of the status of the Company’s stock option plans as of March 31, 2006 and of
      changes in options outstanding under the plans during the three months ended
      March 31, 2006 is as follows:




Weighted
              
              WeightedAverage
              
              AveragePrice
              
              Remaining
              
              AggregateNumber
                  of
              
              Per
              
              Contractual
              
              IntrinsicShares
              
              Share
              
              Term
                  (in years)
              
              ValueOutstanding
                  at December 31, 2005
              
              
              5,953,725
              
              $
              7.80Options
                  granted
              
              
              -
              
              $
              -Options
                  exercised
              
              
              (83,378
              )
              $
              3.12Options
                  forfeited
              
              
              (468,225
              )
              $
              5.41Outstanding
                  at March 31, 2006
              
              
              5,402,122
              
              $
              8.07
              
              
              4.33
              
              $
              3,366,720Options
                  exercisable at March 31, 2006
              
              
              4,475,810
              
              $
              9.04
              
              
              3.67
              
              $
              1,750,494


A
      summary
      of the status of the Company’s nonvested shares as of March 31, 2006 and the
      changes during the three months ending March 31, 2006 is presented
      below:


WeightedaverageNumber
                  of
              
              exercise
                  priceshares
              
              per
                  shareNonvested
                  shares at December 31, 2005
              
              
              1,307,787
              
              $
              3.49Options
                  granted
              
              
              -
              
              $
              -Options
                  vested
              
              
              (153,975
              )
              $
              3.65Options
                  forfeited
              
              
              (227,500
              )
              $
              3.49Nonvested
                  shares at March 31, 2006
              
              
              926,312
              
              $
              3.43




Generally,
      stock options granted under the Company’s 1996 Long-term Performance Plan (“1996
      Plan”) prior to January 1, 2006 have a contractual term of ten years from
      the date of grant, and stock options granted under the 1996 Plan on or
      after January 1, 2006 are expected to have a contractual term of seven
      years from the date of grant. Options generally vest ratably over a four-year
      period. The Company’s general policy is to issue new shares upon the exercise of
      stock options.




The
      expected term of employee stock options represents the weighted-average period
      that employees are expected to hold the options before exercise. The Company
      derived the expected term assumption based on the Company’s historical
      settlement experience, while giving consideration to options that have life
      cycles less than the contractual terms and vesting schedules in accordance
      with
      guidance in SFAS 123(R) and SAB 107. Prior to the adoption of SFAS
      123(R), the Company used historical settlement experience to derive the expected
      term for the purposes of pro forma information under SFAS 123, as disclosed
      in
      the Notes to the Company’s Consolidated Financial Statements for the related
      periods.




Page
          15 of
          25
 
 COLUMBIA
              LABORATORIES, INC. AND SUBSIDIARIES
 
 NOTES
              TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)


(8)
      RECENT ACCOUNTING PRONOUNCEMENTS:





The
      Company does not believe that any other recently issued, but not yet effective,
      accounting standards would have a material effect on the Company’s consolidated
      financial position, results of operations or cash flows.





(9)
      SALE OF COMMON STOCK:




On
      March
      10, 2006, the Company entered into a Securities Purchase Agreement with certain
      investors for the private placement of 7,428,220 shares of the Company’s common
      stock, par value $.01 per share (the “Shares”), at a price of $4.04 per share
      and warrants to purchase 1,857,041 shares of common stock (the “Warrants”). The
      gross proceeds from the sale of the Shares were approximately $30 million.
      The
      Warrants are exercisable for common stock of the Company at $5.39 per share
      beginning on September 9, 2006, and expiring on March 11, 2011. The exercise
      price and number of shares issuable upon exercise of the Warrants are subject
      to
      adjustment in the event of stock split, stock dividend, recapitalization,
      reclassification, combination or exchange of shares, reorganization,
      liquidation, dissolution, consolidation, or merger. Pursuant to the Securities
      Purchase Agreement, the Company filed, within 30 days, a registration statement
      with the SEC to register for resale the Shares and the shares of common stock
      issuable upon the exercise of the Warrants, which registration statement was
      declared effective on April 14, 2006.







(10)
      SUBSEQUENT EVENT - EARLY PAYMENT OF STRIANT TRUE-UP PAYMENT




On
      April
      14, 2006, the Company entered into a letter agreement (the “Letter Agreement”)
      with PharmaBio pursuant to which the Company agreed to pay approximately $12
      million of a true-up payment seven months early. (See Note 3 to Condensed
      Consolidated Financial Statements)





On
      March
      5, 2003, the
      Company and PharmaBio
      entered into an agreement (the “Striant Agreement”) under which PharmaBio paid
      $15 million to the Company over a 15-month period that commenced with the
      signing of the agreement. In return, PharmaBio receives a 9% royalty on net
      sales of Striant ® (testosterone buccal system) in the United States up to agreed annual sales
      levels, and a 4.5% royalty of net sales above those levels. The royalty term
      is
      seven years. Royalty payments commenced in the 2003 third quarter and are
      subject to aggregate minimum ($30 million) and maximum ($55 million)
      amounts ,
      and
      include a true-up payment, payable not later than November 14, 2006, of the
      difference between royalties paid to that date and $13 million . Through
      March 31, 2006, the Company paid $712,346 in royalties to PharmaBio under the
      Striant Agreement. The Company expects the amount of the true-up payment to
      be
      approximately $12 million.





Under
      the
      Letter Agreement, the Company agreed to pay PharmaBio on April 14, 2006
      $11,585,235 (the “Early Payment”), which was the present value of a November 14,
      2006 $12 million true-up payment using a six percent (6%) annual discount
      factor. Although the Company will pay and record approximately $415,000 less
      in
      interest expense during 2006 due to this early payment, for accounting purposes,
      the payment will result in a non cash loss of approximately $278,000 during
      the
      second quarter of 2006. In consideration of such payment, PharmaBio agreed
      that
      PharmaBio will be deemed (solely for purposes of the Striant Agreement) to
      have
      received on account of that payment $12 million for purposes of the true-up
      payment. In the event that, as of the payment date for the true-up payment,
      the
      aggregate amount of royalties paid under the Striant Agreement, including the
      Early Payment, exceed $13 million, the Company will be entitled to have such
      excess reimbursed.





Page
          16 of
          25







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





**Overview**




The
      following Management’s Discussion and Analysis of Financial Condition and
      Results of Operations (“MD&A”) is intended to help the reader understand the
      Company’s financial condition and results of operations. MD&A is provided as
      a supplement to, and should be read in conjunction with, our financial
      statements and the accompanying notes thereto.




We
      are in the
      business of developing, manufacturing and selling pharmaceutical products that
      treat various medical conditions. Most of our products and developmental product
      candidates address women’s healthcare issues. We have also developed Striant, a
      buccal system for the treatment of hypogonadism in men, and a desmopressin
      buccal product for the treatment of nocturnal enuresis in children.




All
      of
      our products and product candidates utilize our patented, proprietary
      Bioadhesive Delivery System (“BDS”), which consists principally of a polymer
      (polycarbophil) and an active ingredient. The BDS is based upon the principle
      of
      bioadhesion, a process by which the polymer adheres to epithelial surfaces
      or
      mucosa. The polymer remains attached to epithelial surfaces or mucosa and is
      discharged upon normal cell turnover, a physiological process that, depending
      upon the area of the body, occurs every 12 to 72 hours, or longer. This extended
      period of attachment permits the BDS to be utilized in products when extended
      duration of effectiveness is desirable or required.




Over
      the
      last few years we have laid a foundation for the Company’s long-term growth by
      establishing marketing partnerships and forging alliances with strategic
      partners to create a base business of products that these partners market and
      that provide us with good margins and growth potential. In addition, in
      September 2002, we developed our own commercial organization to commercialize
      our women’s healthcare products in the United States. We more than doubled the
      size of that sales organization in the summer of 2003 upon FDA approval of
      Striant. Subsequently, in both January 2004 and February 2005, we restructured
      our sales and marketing organizations and downsized them to reduce costs. We
      have advanced several clinical research initiatives designed to realize
      additional potential from currently marketed Prochieve products by developing
      new indications, while simultaneously advancing the development of new product candidates. Our focus
      in
      fiscal 2006 is to build on this foundation and execute well in key areas.







**Results
      of Operations - Three Months Ended March 31, 2006 versus Three Months Ended
      March 31, 2005**





Net
      revenues increased 6% in the three months ended March 31, 2006 to $4.5 million
      as compared to $4.3 million in the three months ended March 31, 2005. We receive
      revenues both from selling our products to licensees, which we refer to as
      our
“Partnered Products”, and selling our products that we promote through our own
      sales force to wholesalers and other distributors, which we refer to as our
      “Promoted Products.”




Partnered
      Products are:


·
            Crinone®
                sold to Ares Trading S.A. (“Serono”) on a worldwide
                basis;


·
            Striant®
                sold to our ex-U.S. marketing partners;


·
            Replens®
                Vaginal Moisturizer sold to Lil’ Drug Store Products, Inc. (“Lil’ Drug
                Store”) ex-U.S.;


·
            RepHresh®
                Vaginal Gel and Advantage-S® Bioadhesive Contraceptive Gel sold to Lil’
                Drug Store on a worldwide basis;
                and,


·
            Royalty
                and licensing revenues.





Page
          17 of
          25


Promoted
      Products are:


·
            Prochieve®
                8%, Prochieve 4% and Striant in the
                U.S.;


·
            Crinone®
                prescriptions in the U.S. from our OB/GYN audience, for which Serono
                pays
                us a 40% supplemental royalty; and


·
            Replens®
                Vaginal Moisturizer, RepHresh® Vaginal Gel, and Advantage-S® Bioadhesive
                Contraceptive Gel, which Lil’ Drug Store pays us promotion fees to present
                to OB/GYNs.





Revenues
      from promoted products increased 29% to $1.8 million in the three months ended
      March 31, 2006 as compared to $1.4 million in the three months ended March
      31,
      2005, primarily as a result of an increase in sales of the Prochieve line of
      products.





Revenues
      from partnered products decreased 5% to $2.7 million in the three months ended
      March 31, 2006 as compared to $2.9 million in the three months ended March
      31,
      2005, primarily as a result of the reduction in orders of RepHresh by one of
      our
      marketing partners.





Gross
      profit as a percentage of revenues was 59% in the three months ended March
      31,
      2006 and 58% in the three months ended March 31, 2005. The
      1%
      increase in gross profit percentage from 2005 to 2006 was the result of the
      change in product mix. Cost of goods sold for Prochieve includes a 30% royalty
      on net sales paid to Serono.





Selling
      and distribution expenses decreased 48% to $1.5 million in the three months
      ended March 31, 2006, as compared to $2.9 million in the
      three months ended March 31, 2005. Selling and distribution expenses include
      payroll, employee benefits, equity compensation and other personnel-related
      costs associated with sales and marketing personnel, and advertising,
      promotions, tradeshows, seminars, and other marketing-related programs. The
      Company restructured its sales force in February 2005, reducing the number
      of
      salespeople, which is reflected in the 2006 reduction in expense. Included
      in
      the 2006 expenses were sales force costs of approximately $919,000, product
      marketing expenses of approximately $184,000 and salary costs of approximately
      $103,000. Expenses in 2005 included approximately $1.7 million in sales force
      costs, approximately $483,000 in product marketing expenses and approximately
      $272,000 in salary costs.




General
      and administrative expenses include
      payroll, employee benefits, equity compensation and other personnel-related
      costs associated with the finance, legal, regulatory affairs, information
      technology, facilities, certain human resources and other administrative
      personnel, as well as legal costs and other administrative fees. General and
      administrative expenses decreased 13% to $1.6 million in the three months ended March 31, 2006 as
      compared to $1.8 million in the three months ended March 31, 2005. The reduction
      in 2006 expenses is primarily the result in a decrease in salary expense
      ($400,000), offset by increases in insurance premiums ($79,000) and legal fees
      ($89,000).





Research
      and development expenses  include
      payroll, employee benefits, equity compensation and other personnel-related
      costs associated with product development, as well as the cost of conducting
      and
      administering clinical studies and the cost of regulatory filings for our
      products. Research and development expenses increased 34% to $1.7 million in
      the
      three months ended March 31, 2006 as compared to $1.3 million in the three
      months ended March 31, 2005. The increase is primarily related to the higher
      costs associated with the Company’s ongoing Phase III trial for Prochieve® 8% in
      preventing preterm delivery in pregnant women who are at high risk.





As
      a
      result, the net loss for the three months ended March 31, 200 6
      was
      $2.7 million or $(.06) per common share as compared to the net loss for the
      three months ended March 31, 2005 of $4.2 million or $(.10) per common
      share.





Page
          18 of
          25





**Liquidity
      and Capital Resources**





Cash
      and
      cash equivalents increased from $7,136,854 at December 31, 2005 to $35,080,377
      at March 31, 2006. During the quarter ended March 31, 2006, we received net
      proceeds of $28,813,385 from the sale of the 7,428,220 shares of common stock
      described in Note 9 of the Company’s Condensed Consolidated Financial Statements
      and $260,045 from the exercise of employee stock options. During the quarter
      ended March 31, 2006 we used $997,250 for operations, paid off $89,657 on our
      PharmaBio financing agreements, used $9,500 on property and equipment additions
      and paid a $40,625 dividend to holders of our Series C preferred stock. The
      effect of exchange rate changes increased cash by $7,125.





Cash
      and
      cash equivalents decreased from $19,781,591 at December 31, 2004 to $4,303,046
      at March 31, 2005. During the quarter ended March 31, 2005 the Company used
      $3,222,184 for operations, paid off its $10,000,000 convertible subordinated
      note, paid $2,187,526, which included a $1,891,944 true-up payment, to
      PharmaBio, spent $3,343 on property and equipment and paid a $40,625 dividend
      to
      holders of its Series C preferred stock. The effect of exchange rate changes
      decreased cash by $24,867.





On
      April
      14, 2006, the Company entered into the Letter Agreement with PharmaBio pursuant
      to which the Company agreed to pay approximately $12 million of a true-up
      payment under the Striant Agreement seven months early. (See Note 3 to the
      Company’s Condensed Consolidated Financial Statements).  On
      March
      5, 2003, the
      Company and PharmaBio
      entered into the Striant Agreement under which PharmaBio paid $15 million to
      the
      Company over a 15-month period that commenced with the signing of the Striant
      Agreement. In return, PharmaBio receives a 9% royalty on net sales of Striant ® (testosterone buccal system) in the United States up to agreed annual sales
      levels, and a 4.5% royalty of net sales above those levels. The royalty term
      is
      seven years. Royalty payments commenced in the 2003 third quarter and are
      subject to aggregate minimum ($30 million) and maximum ($55 million)
      amounts ,
      and
      include a true-up payment, payable not later than November 14, 2006, of the
      difference between royalties paid to that date and $13 million . Through
      March 31, 2006, the Company paid $712,346 in royalties to PharmaBio under the
      Striant Agreement. The Company expects the amount of the true-up payment to
      be
      approximately $12 million.  Under
      the
      Letter Agreement, the Company agreed to pay PharmaBio an Early Payment of
      $11,585,235, which was the present value of a November 14, 2006 $12 million
      true-up payment using a six percent (6%) annual discount factor. In
      consideration of such payment, PharmaBio agreed that PharmaBio will be deemed
      (solely for purposes of the Striant Agreement) to have received on account
      of
      that payment $12 million for purposes of the true-up payment. In the event
      that,
      as of the payment date for the true-up payment, the aggregate amount of
      royalties paid under the Striant Agreement, including the Early Payment, exceed
      $13 million, the Company will be entitled to have such excess
      reimbursed.





T he
      Company has an effective registration statement that we filed with the SEC
      using
      a shelf registration process. Under the shelf registration process, we may
      offer
      from time to time shares of our common stock up to an aggregate amount of
      $75,000,000. To date, the Company has sold approximately $56,400,000 in common
      stock under the registration statement. We cannot be certain that additional
      funding will be available on acceptable terms, or at all. To the extent that
      we
      raise additional funds by issuing equity securities, our stockholders may
      experience significant dilution. Any debt financing, if available, may involve
      restrictive covenants that impact our ability to conduct our business. If we
      are
      unable to raise additional capital when required or on acceptable terms, we
      may
      have to significantly delay, scale back or discontinue the marketing of one
      or
      more of our products and the development and/or commercialization
      of one or more of our product candidates.





In
      connection with the 1989 purchase of the assets of Bio-Mimetics, Inc., which
      assets consisted of the patents underlying the Company’s BDS, other patent
      applications and related technology, the Company pays Bio-Mimetics, Inc. a
      royalty equal to two percent of the net sales of products based on the BDS,
      up
      to an aggregate of $7.5 million or until the last of the relevant patents
      expire. The Company is required to prepay 25% of the remaining maximum royalty
      obligation, in cash or stock at the option of the Company, within 30 days of
      March 2 of any year in which the closing price on that date of the Company’s
      common stock on any national securities exchange is $20 or more. Through March
      31, 2006, the Company has paid approximately $3.4 million in royalty
      payments.




Page
          19 of
          25


As
      of March
      31,
      2006, the Company has outstanding exercisable options and warrants that, if
      exercised, would result in approximately $45.0 million of additional capital
      and
      would cause the number of shares outstanding to increase. However, there can
      be
      no assurance that any such options or warrants will be exercised.





Significant
      expenditures anticipated by the Company in the near future are concentrated
      on
      research and development related to new products. In addition, the Company
      anticipates it will spend approximately $100,000 on property and equipment
      in
      2006.





As
      of
      March 31, 2006, the Company had available net operating loss carryforwards
      of
      approximately $132 million to offset its future U.S. taxable income. There
      can
      be no assurance that the Company will have sufficient income to utilize the
      net
      operating loss carryforwards or that the net operating loss carryforwards will
      be available at that time.





In
      accordance with Statement of Financial Accounting Standards No. 109, as of
      March
      31, 2006 and December 31, 2005, other assets in the accompanying consolidated
      balance sheets include deferred tax assets of approximately $48 and $45 million,
      respectively (comprised primarily of a net operating loss carryforward), for
      which a full valuation allowance has been recorded since the realizability
      of
      the deferred tax assets are not determinable.




**Contractual
      Obligations, Commercial Commitments and Off-Balance Sheet
      Arrangements**




The
      Company’s contractual obligations, commercial commitments and off-balance sheet
      arrangements disclosures in its Annual Report on Form 10-K for the year ended
      December 31, 2005 have not materially changed since that report was
      filed.








**Recent
      Accounting Pronouncements**





The
      Company does not believe that any other recently issued, but not yet effective,
      accounting standards would have a material effect on the Company’s consolidated
      financial position, results of operations or cash flows.





**Critical
      Accounting Policies and Estimates**





The **** Company
      has identified the policies below as critical to its business operations and
      the
      understanding of its **** results
      of operations. For a detailed discussion on the application of these and other
      accounting policies, see Note 1 of the consolidated financial statements
      included in Item 15 of the Annual Report on Form 10-K for the year ended
      December 31, 2005, beginning on page F-11. Note that the preparation of this
      Quarterly Report on Form 10-Q requires the Company to make estimates and
      assumptions that affect the reported amount of assets and liabilities,
      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. There can be no assurance that actual results will not differ
      from those estimates.





Page
          20 of
          25


*Revenue
      Recognition.*  The
      Company’s revenue recognition is significant because revenue is a key component
      of our results of operations. In addition, revenue recognition determines the
      timing of certain expenses, such as commissions and royalties. Revenue results
      are difficult to predict, and any shortfall in revenue or delay in recognizing
      revenue could cause operating results to vary significantly from quarter to
      quarter. Revenues
      from the sale of products are recorded at the time goods are shipped to
      customers. Provisions for returns, rebates and other allowances are estimated
      based on a percentage of sales, using such factors as historical trends,
      distributor inventory levels and product prescription data, and are recorded
      in
      the same period the related sales are recognized. Royalties
      and additional monies owed to the Company based on the strategic alliance
      partners’ sales are recorded as revenue as those sales are made by the strategic
      alliance partners. License fees are recognized in net sales over the term of
      the
      license.





*Accounting
      for PharmaBio Agreements* .
      In July
      2002 and March 2003, the Company entered into agreements with PharmaBio under
      which the Company received upfront money paid in quarterly installments in
      exchange for royalty payments on certain of the Company’s products to be paid to
      PharmaBio for a fixed period of time. The
      royalty payments are subject to minimum and maximum amounts. Because the minimum
      amounts are in excess of the amount to be received by the Company, the Company
      has recorded the money received as liabilities. The excess of the minimum to
      be
      paid by the Company over the amount received by the Company is being recorded
      as
      interest expense over the terms of the agreements.




*Stock-Based
      Compensation - Employee Stock-Based Awards.* On
      January 1, 2006, the Company adopted SFAS 123(R) which requires the
      measurement and recognition of compensation expense for all stock-based awards
      made to employees and directors including employee stock options based on
      estimated fair values. SFAS 123(R) supersedes previous accounting under APB
      25 for periods beginning in fiscal year 2006. In March 2005, the SEC issued
      SAB
      107 providing supplemental implementation guidance for SFAS 123(R). We have
      applied the provisions of SAB 107 in our adoption of SFAS 123(R).




SFAS
      123(R) requires companies to estimate the fair value of stock-based awards
      on
      the date of grant using an option pricing model. The value of the portion of
      the
      award that is ultimately expected to vest is recognized as expense over the
      requisite service periods in the Company’s Consolidated Statements of
      Operations. The Company adopted SFAS 123(R) using the modified prospective
      transition method which requires the application of the accounting standard
      starting from January 1, 2006. The Condensed Consolidated Financial
      Statements, as of and for the three months ended March 31, 2006, reflect
      the impact of SFAS 123(R). Stock-based compensation expense for the three months
      ended March 31, 2006, was $100,162, which consisted primarily of
      stock-based compensation expense related to employee stock options recognized
      under SFAS 123(R).




Prior
      to
      the adoption of SFAS 123(R), the Company accounted for stock-based awards
      to employees and directors using the intrinsic value method in accordance with
      APB 25 as allowed under Statement of Financial Accounting Standards
      No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”). Under the
      intrinsic value method, no stock-based compensation expense for employee stock
      options had been recognized in the Company’s Consolidated Statements of
      Operations, because the exercise price of our stock options granted to employees
      and directors equaled the fair market value of the underlying stock at the
      date
      of grant. In accordance with the modified prospective transition method the
      Company used in adopting SFAS 123(R), the results of operations prior to fiscal
      year 2006 have not been restated to reflect, and do not include, the possible
      impact of SFAS 123(R).




Page
          21 of
          25


Stock-based
      compensation expense recognized during a period is based on the value of the
      portion of stock-based awards that is ultimately expected to vest. Stock-based
      compensation expense recognized in the three months ended March 31, 2006
      included compensation expense for stock-based awards granted prior to, but
      not
      yet vested as of December 31, 2005, based on the fair value on the grant
      date estimated in accordance with the pro forma provisions of SFAS 123, and
      compensation expense for the stock-based awards granted subsequent to
      December 31, 2005, based on the fair value on the grant date estimated in
      accordance with the provisions of SFAS 123(R). In conjunction with the adoption
      of SFAS 123(R), the Company is continuing to use the straight line single-option
      method of attributing the value of stock-based compensation expense.
      Compensation expense for all stock-based awards granted prior to January 1,
      2006 will continue to be recognized using the straight line single-option
      approach, while compensation expense for all stock-based awards granted
      subsequent to December 31, 2005, will also be recognized using the straight
      line single-option method. No stock options were granted during the three months
      ended March 31, 2006. As stock-based compensation expense to be recognized
      in
      the results for periods beginning after December 31, 2005, is based on awards
      ultimately expected to vest, the amounts will be reduced for estimated
      forfeitures. SFAS 123(R) requires forfeitures to be estimated at the time of
      grant and revised, if necessary, in subsequent periods if actual forfeitures
      differ from those estimates. Prior to 2006, the Company accounted for
      forfeitures as they occurred for the purposes of pro forma information under
      SFAS 123, as disclosed in the Notes to Consolidated Financial Statements for
      the
      related periods.




Upon
      adoption of SFAS 123(R), the Company selected the Black-Scholes option pricing
      model as the most appropriate method for determining the estimated fair value
      for stock-based awards. The Black-Scholes model requires the use of highly
      subjective and complex assumptions which determine the fair value of stock-based
      awards, including the option’s expected term and the price volatility of the
      underlying stock.




Generally,
      stock options granted under the 1996 Plan prior to January 1, 2006 have a
      contractual term of ten years from the date of grant, and stock options granted
      under the 1996 Plan on or after January 1, 2006 are expected to have a
      contractual term of seven years from the date of grant.







**Forward-Looking
      Information**





The
      Company and its representatives from time to time make written or verbal
      forward-looking statements, including statements contained in this and other
      filings with the SEC and in the Company’s reports to stockholders, which are
      made pursuant to the safe harbor provisions of the Private Securities Litigation
      Reform Act of 1995. Such statements include, without limitation, the Company’s
      expectations regarding clinical research programs, sales, earnings or other
      future financial performance and liquidity, product introductions, entry into
      new geographic regions and general views about future operations or operating
      results. Some
      of
      these statements can be identified by the use of forward-looking terminology
      such as "prospects," "outlook," "believes," "estimates," "intends," "may,"
      "will," "should," "anticipates," "expects" or "plans," or the negative or other
      variation of these or similar words, or by discussion of trends and conditions,
      strategy or risks and uncertainties.





Although
      the Company believes that its expectations are based on reasonable assumptions
      within the bounds of its knowledge of its business and operations, there can
      be
      no assurance that actual results will not differ materially from its
      expectations. Factors
      that might cause future results to differ include, but are not limited to,
      the
      following: the successful marketing of Prochieve ® 8%,
      Prochieve ® 4% and
      Striant ® in the
      U.S.; whether Prochieve is dispensed to patients of physicians on Serono’s
      target list of fertility specialists at a rate of less than 10% the amount
      of
      Crinone dispensed to those patients, the timing and size of orders for
      out-licensed products from our marketing partners; the timely and successful
      development of products; the timely and successful completion of clinical
      studies, including the Phase III study of Prochieve 8% in preventing preterm
      birth and the lidocaine vaginal gel study; success in obtaining acceptance
      and
      approval of new products and indications for current products by the FDA and
      international regulatory agencies, including acceptance and approval of an
      indication for preventing preterm delivery for Prochieve 8% from the FDA; the
      impact of competitive products and pricing; competitive economic and regulatory
      factors in the pharmaceutical and health care industry; general economic
      conditions; and other risks and uncertainties that may be detailed, from time
      to
      time, in the Company’s reports filed with the SEC . All
      subsequent written and oral forward-looking statements attributable to the
      Company or persons acting on behalf of the Company are expressly qualified
      in
      their entirety by the Cautionary Statements in this Quarterly Report. Readers
      are advised to consult any further disclosures the Company may make on related
      subjects in subsequent Form 10-Q, 8-K, and 10-K reports to the SEC.




Page
          22 of
          25




**Item
      3. Quantitative and Qualitative Disclosures About Market
      Risk**





The
      Company does not believe that it has material exposure to market rate risk.
      The
      Company may, however, require additional financing to fund future obligations
      and no assurance can be given that the terms of future sources of financing
      will
      not expose the Company to material market risk.








**Item
      4. Controls And Procedures**





**Evaluation
      of Disclosure Controls and Procedures**







We
      maintain “disclosure controls and procedures,” as such term is defined in Rule
      13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange
      Act”), that are designed to ensure that information required to be disclosed by
      us in reports that we file or submit under the Exchange Act is recorded,
      processed, summarized, and reported within the time periods specified in SEC
      rules and forms, and that such information is accumulated and communicated
      to
      our management, including our Chief Executive Officer and Chief Financial
      Officer, as appropriate, to allow timely decisions regarding required
      disclosure. In designing and evaluating our disclosure controls and procedures,
      management recognized that disclosure controls and procedures, no matter how
      well conceived and operated, can provide only reasonable, not absolute,
      assurance that the objectives of the disclosure controls and procedures are
      met.
      Additionally, in designing disclosure controls and procedures, our management
      necessarily was required to apply its judgment in evaluating the cost-benefit
      relationship of possible disclosure controls and procedures. The design of
      any
      disclosure controls and procedures also is based in part upon certain
      assumptions about the likelihood of future events, and there can be no assurance
      that any design will succeed in achieving its stated goals under all potential
      future conditions.




Based
      on
      their evaluation as of the end of the period covered by this Quarterly Report
      on
      Form 10-Q, our Chief Executive Officer and Chief Financial Officer have
      concluded that our disclosure controls and procedures were effective.





**Changes
      in Internal Control over Financial Reporting**







There
      was
      no change in our internal control over financial reporting that occurred during
      the period covered by this Quarterly Report on Form 10-Q that has materially
      affected, or is reasonably likely to materially affect, our internal control
      over financial reporting.





Page
          23 of
          25





**PART
      II - OTHER INFORMATION**











**Item
      1.**  **Legal
      Proceedings**





Claims
      and lawsuits have been filed against the Company from time to time. Although
      the results of pending claims are always uncertain, the Company does not believe
      the results of any such actions, individually or in the aggregate, will have
      a
      material adverse effect on our financial position or results of operation.
      Additionally, the Company believes that it has reserves or insurance coverage
      in
      respect of these claims, but no assurance can be given as to the sufficiency
      of
      such reserves or insurance in the event of for any unfavorable outcome resulting
      from these actions.





**Item 1A.
      Risk Factors**





There
      have been no material changes to the factors disclosed in Item 1A. Risk Factors
      in our Annual Report on Form 10-K for the year ended December 31,
      2005.





**Item
      2.**  **Unregistered
      Sales of Equity Securities and Use of Proceeds**





None.





**Item
      3.**  **Defaults
      upon Senior Securities**





None.





**Item
      4.**  **Submission
      of Matters to a Vote of Security Holders**





None.





**Item
      5.**  **Other
      Information**





None.





**Item
      6.**  **Exhibits**





(a)
            Exhibits


10.59
            Securities
                Purchase Agreement, dated March 10, 2006, by and between Columbia
                Laboratories, Inc. and the Purchasers listed on Exhibit A
                thereto.1/


31.1
            Rule
                13a-14(a)/15d-14(a) Certification of Chief Executive Officer of the
                Company.2/


31.2
            Rule
                13a-14(a)/15d-14(a) Certification of Chief Financial Officer of the
                Company.2/


32.1
              Certification
                  Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
                  906 of
                  the Sarbanes-Oxley Act of 2002.2/
 32.2
                Certification
                    Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
                    906 of
                    the Sarbanes-Oxley Act of 2002.2/  1/
                Incorporated by reference to the
                  Company’s
                  Current Report on Form 8-K, dated March 16,
                  2006.  2/
                Filed herewith.


Page
          24 of
          25


**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.





**COLUMBIA
              LABORATORIES, INC.**By:
            /s/ DAVID
              L.
              WEINBERGDAVID
              L. WEINBERG, Vice President-Finance
                and Chief Financial OfficerDATE: May
              9, 2006




Page
        25 of
        25