UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


Washington,
      D.C. 20549





**Form
      10-K**




(Mark
                One)x
            Annual
                Report Pursuant to Section 13 or 15(d) of the Securities Exchange
                Act of
                1934**For
                the fiscal year ended December 31, 2007**oro
            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 000-21615




**PRESSURE
      BIOSCIENCES, INC.**


**(Exact
      Name of Registrant as Specified in its Charter)**





**Massachusetts**
            
            **04-2652826**(State
                or Other Jurisdiction of Incorporation or Organization)
            
            (I.R.S.
                Employer Identification No.)**14
                Norfolk Avenue**
              **South
                Easton, Massachusetts**
            
            **02375**(Address
                of Principal Executive Offices)
            
            (
                Zip Code)**(508)
                230-1828**(Registrant’s
                Telephone Number, Including Area Code)





Securities
                registered pursuant to Section 12(b) of the Act:Title
                of Each Class
            Name
                of Each Exchange on Which Registered**Common
                Stock, par value $.01 per share**
              **Preferred
                Share Purchase Rights**
            **The
                Nasdaq Stock Market, LLC**Securities
                registered pursuant to Section 12(g) of the Act:(Title
                of Class)





Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act. Yes 
      o No  x





Indicate
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 or 15(d) of the Exchange Act.  Yes  o No 
      x





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


Yes 
      x No 
      o




Indicate
      by check mark if disclosure of delinquent filers pursuant to Item 405 of
      Regulation S-K is not contained herein, and will not be contained, to the best
      of registrant’s knowledge, in definitive proxy or information statements
      incorporated by reference in Part III of this Form 10-K or any amendment to
      this
      Form 10-K.





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




Large accelerated filer  o
              Accelerated filer  oNon-accelerated filer  o
                (Do not check if smaller reporting
                  company)
              Smaller reporting company
                 x





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





The
      aggregate market value of the voting and non-voting common stock held by
      non-affiliates of the registrant June 29, 2007 was $8,783,302 based on the
      closing price of the common stock as quoted on the NASDAQ Capital Market on
      that
      date.





As
      of
      March 21, 2008, there were 2,192,175 shares of the registrant’s common stock
      outstanding.





**Documents
      Incorporated by Reference**





N/A.




TABLE
      OF
      CONTENTS




PagePART
                IItem
                1.
            Business
            1Item
                1A.
            Risk
                Factors
            12Item
                1B.
            Unresolved
                Staff Comments
            18Item
                2.
            Properties
            18Item
                3.
            Legal
                Proceedings
            18Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            18PART
                IIItem
                5.
            Market
                for Registrant’s Common Equity, Related Stockholder Matters and Issuer
                Purchases of Equity Securities
            19Item
                6.
            Selected
                Financial Data
            20Item
                7.
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operation
            20Item
                7A.
            Quantitative
                and Qualitative Disclosures About Market Risk
            28Item
                8.
            Financial
                Statements and Supplementary Data
            29Item
                9.
            Changes
                in and Disagreements with Accountants on Accounting and Financial
                Disclosure
            49Item
                9A.
            Controls
                and Procedures
            49Item
                9B.
            Other
                Information
            50PART
                IIIItem
                10.
            Directors,
                Executive Officers and Corporate Governance
            51Item
                11.
            Executive
                Compensation
            55Item
                12.
            Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters
            59Item
                13.
            Certain
                Relationships and Related Transactions, and Directors
                Independence
            60Item
                14.
            Principal
                Accountant Fees and Services
            61PART
                IVItem
                15.
            Exhibits
            62










**Introductory
      Comment**





Throughout
      this Annual Report on Form 10-K, the terms “we,” “us,” “our,” “the Company”
and “our company” refer to Pressure BioSciences, Inc., a Massachusetts
      corporation, and, unless the context indicates otherwise, also includes our
      wholly-owned subsidiaries.





**PART
      I**





**SPECIAL
      NOTE REGARDING FORWARD-LOOKING STATEMENTS**





This
      Annual Report on Form 10-K contains forward-looking statements within the
      meaning of Section 27A of the Securities Act of 1933, as amended (the
“Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as
      amended (the “Exchange Act”).  In some cases, forward-looking statements
      are identified by terms such as “may,” “will,” “should,” “could,” “would,”
“expects,” “plans,” “anticipates,” “believes,” “estimates,” “projects,”
“predicts,” “potential,” and similar expressions intended to identify
      forward-looking statements. Such statements include, without limitation,
      statements regarding:





-
            our
                plans and expectations with respect to our pressure cycling technology
                (PCT) operations;-
            potential
                growth in the market for our PCT products;-
            market
                acceptance and the potential for commercial success of our PCT
                products;-
            our
                belief that PCT provides a superior solution for sample
                preparation;-
            the
                expected development and success of new product
                offerings;-
            the
                potential applications for PCT;-
            the
                expected benefits and results from our research and development efforts;-
            the
                expected benefits and results from our collaboration
                program;-
            our
                belief that we have sufficient liquidity to finance operations into
                early
                2009;-
            our
                expectation of obtaining additional research grants from the government
                in
                the future;-
            the
                amount of cash necessary to operate our business;-
            our
                ability to raise additional capital when needed;-
            general
                economic conditions; and-
            the
                anticipated future financial performance and business operations
                of our
                company.





These
      forward-looking statements are only predictions and involve known and unknown
      risks, uncertainties, and other factors that may cause our actual results,
      levels of activity, performance, or achievements to be materially different
      from
      any future results, levels of activity, performance, or achievements expressed
      or implied by such forward-looking statements. Also, these forward-looking
      statements represent our estimates and assumptions only as of the date of this
      Report.  Except as otherwise required by law, we expressly disclaim any
      obligation or undertaking to release publicly any updates or revisions to any
      forward-looking statement contained in the Report to reflect any change in
      our
      expectations or any change in events, conditions, or circumstances on which
      any
      of our forward-looking statements are based.  Factors that could cause or
      contribute to differences in our future financial results include those
      discussed in the risk factors set forth in Part I, Item 1A of this Report as
      well as those discussed elsewhere in this Report. We qualify all of our
      forward-looking statements by these cautionary statements.







**ITEM
                1.**
              **BUSINESS.**


Throughout
      this document we use the following terms; Barocycler®, PULSE®, and BioSeq®,
      which are registered trademarks of the Company. We also use the terms
      ProteoSolve TM ,
      ProteoSolve LRS TM ,
      the
      Power of PCT, all of which are unregistered trademarks of the Company.





**Overview**


We
        are a
        life sciences company focused on the development and commercialization of
        a
        novel, enabling, platform technology called pressure cycling technology (“PCT”).
        PCT uses cycles of hydrostatic pressure between ambient and ultra-high levels
        (up to 35,000 psi and greater) to control bio-molecular interactions.
 
 Our
        pressure cycling technology uses internally developed instrumentation that
        is
        capable of cycling pressure between ambient and ultra-high levels at controlled
        temperatures to rapidly and repeatedly control the interactions of
        bio-molecules. Our instrument, the Barocycler®, and our internally developed
        consumables product line, which includes PULSE (Pressure Used to Lyse Samples
        for Extraction) Tubes as well as the ProteoSolveLRSTM kit
        for
        the detergent-free extraction of proteins from lipid-rich samples, together
        make
        up the PCT Sample Preparation System (“PCT SPS”).




We
      hold
      13 United States and 6 foreign patents covering multiple applications of PCT
      in
      the life sciences field. Our pressure cycling technology employs a unique
      approach that we believe has the potential for broad use in a number of
      established and emerging life sciences areas, including;




-
              
              sample
                  preparation for genomic, proteomic, and small molecule
                  studies;-
              
              pathogen
                  inactivation;-
              
              protein
                  purification;-
              
              control
                  of chemical (enzymatic) reactions; and-
              
              immunodiagnostics.




In
      2007,
      we continued to engage in activities to support the commercialization of our
      PCT
      product line within genomic and proteomic sample preparation. These activities
      included the following:




·
            *Barocycler
                NEP2320*.
                We introduced for sale the Barocycler NEP2320, a smaller, more compact
                version of our Barocycler NEP3229. The Barocycler NEP2320 was originally
                developed as a demonstration unit for our sales staff. However, we
                determined to offer this instrument as a separate product for sale
                following market feedback for a smaller instrument with similar
                capabilities and features as our larger Barocycler NEP3229.




·
            *Expanded
                our Consumables Product Line*.
                We introduced for sale our ProteoSolveLRSkit to expand our consumables product line. Our ProteoSolveLRSkit offers researchers a unique method for the safe, rapid, efficient
                and
                reproducible extraction of proteins from lipid-rich samples, including
                adipose and brain tissues, organelles, and membrane preparations,
                without
                the use of detergents, which can be harmful to the sample extraction
                process.




·
            *CE
                Mark Approval*.
                Our Barocycler instrumentation received CE Marking, which means that
                our
                Barocycler instruments meet the essential requirements of the relevant
                European health, safety and environmental protection legislation.
                The CE
                Mark is an important step toward our anticipated full-scale launch
                of our
                PCT product line in Europe during
                2008.




·
            *Expanded
                Our Sales Force*.
                We expanded our domestic sales force from one regional sales director
                in
                the beginning of the year to seven at the end of the year. Additionally,
                in February 2008 we re-aligned our senior management team to support
                a
                full commercialization effort by hiring Matthew B. Potter as our
                Vice
                President of Sales and allowing Nathan P. Lawrence Ph.D., formerly
                responsible for marketing and sales, to focus exclusively on marketing
                and
                collaboration support, as our Vice President of Marketing.




-
          1
          -




·
            *Expanded
                Our International Distribution Network*.
                We expanded our international distribution network from one long-term
                distribution partnership at the beginning of the year to three long-term
                partnerships at the end of the year. As of December 31, 2007 our
                distribution relationships covered Japan, France, Belgium, Switzerland
                and
                South Korea.





Since
      we
      began operations as Pressure BioSciences in February 2005, we have installed
      33
      Barocycler instruments, including 20 instruments in 2007, 8 instruments in
      2006,
      and 5 instruments in 2005. Our customers include researchers at academic
      laboratories, government agencies and biotechnology, pharmaceutical and other
      life sciences companies in the United States, and three foreign distribution
      partners.





**Corporate
      Information**





We
      were
      incorporated in the Commonwealth of Massachusetts in August 1978 as Boston
      Biomedica, Inc. In September 2004, we completed the sale of the Boston Biomedica
      core business units and began to focus exclusively on the development and
      commercialization of pressure cycling technology. Following this change in
      business strategy, we changed our legal name from Boston Biomedica, Inc. to
      Pressure BioSciences, Inc., or PBI, and commenced operations as Pressure
      BioSciences in February 2005.





**Available
      Information**





Our
      Internet website address is http://www.pressurebiosciences.com. Through our
      website, we make available, free of charge, our annual report on Form 10-K,
      quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments
      to those reports, as soon as reasonably practicable after we electronically
      file
      such material with, or furnish it to, the Securities and Exchange Commission
      (“SEC”). These SEC reports can be accessed through the investor relations
      section of our website. The information found on our website is not part of
      this
      or any other report we file with or furnish to the SEC.





You
      may
      read and copy any materials we file with the SEC at the SEC’s Public Reference
      Room at 100 F Street, NE, Washington, DC 20549. You may obtain information
      on
      the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
      The SEC also maintains an Internet website that contains reports, proxy and
      information statements, and other information regarding Pressure BioSciences
      and
      other issuers that file electronically with the SEC. The SEC’s Internet website
      address is http://www.sec.gov.





**Sample
      Preparation for Genomic, Proteomic, and Small Molecule
      Studies**





*The
      Market*





Since
      February 2005, we have focused substantially all of our research and development
      and commercialization efforts on sample preparation for genomic, proteomic,
      and
      small molecule studies. This market is comprised of academic and government
      research institutions, biotechnology and pharmaceutical companies, and other
      public and private laboratories that are engaged in studying genomic, proteomic
      and small molecule material within plant and animal cells and tissues.





We
      elected to initially focus our resources in the market of genomic, proteomic,
      and small molecule sample preparation because we believe it is an area
      that:


-
                
                is
                    a rapidly growing market;-
                
                has
                    a large and immediate need for better technology;-
                
                is
                    comprised mostly of research laboratories, which are subject
                    to minimal
                    governmental regulation;-
                
                is
                    the least technically challenging application for the development
                    of our
                    products;-
                
                is
                    compatible with our technical core competency; and-
                
                is
                  the area in which
                  we currently have strong patent
                  protection.





We
      believe that our existing Barocycler instrumentation fills an important and
      growing need in the sample preparation market for the safe, rapid, versatile,
      reproducible, and quality extraction of nucleic acids, proteins, and small
      molecules from a wide variety of plant and animal cells and tissues. We continue
      to invest a significant amount of our engineering resources toward the continued
      improvement of our existing instruments and the development of future
      instrumentation.




-
          2
          -




*Sample
      Extraction Process*





The
      process of preparing samples for genomic, proteomic, and small molecule studies
      includes a crucial step called sample extraction, or sample disruption. This
      is
      the process of extracting nucleic acid (“DNA” and/or “RNA”), proteins, or small
      molecules from the plant or animal cells and tissues that are being studied.
      Sample preparation is widely regarded as a significant impediment to research
      and discovery, and sample extraction is generally regarded as the key part
      of
      sample preparation. Our current commercialization efforts are based upon our
      belief that pressure cycling technology provides a superior solution to sample
      extraction compared to other available technologies or procedures, and can
      thus
      significantly improve sample preparation.





*Collaboration
      Program*





Our
      collaboration program is an important element of our business strategy.
      Initiating a collaboration with a researcher usually involves the installation
      of a Barocycler instrument for an agreed upon period of time, generally three
      to
      six months, and the execution of an agreed upon work plan. Our primary
      objectives for entering into a collaboration agreement include:





-
            the
                development of a new application for PCT in sample preparation;


-
            the
                advancement and validation of our understanding of PCT within an
                area of
                the life sciences in which we have already have products;


-
            the
                demonstration of effectiveness and impact of PCT to specific research
                scientists whom we believe can have a positive impact on market acceptance
                of PCT; and


-
            the
                expectation of peer-reviewed publications and/or presentations at
                scientific meetings by a third party on the merits of PCT.





Since
      we
      initiated our collaboration program in June 2005, we have placed Barocycler
      instruments in approximately twenty sites, resulting in thirty publications
      and
      presentations by third party researchers. We believe that this program has
      provided, and continues to provide us with independent and objective data about
      PCT from well respected laboratories throughout the United States. Below is
      a
      list of selected publications and presentations that have been made by various
      researchers based on their experiences with PCT:




**Investigator**
              
              **Institution**
              
              **Title**
              
              **Venue/Journal**
              
              **Venue
                  Type**
              
              **Date**Nikhil
                  Patel
              
              Bascom
                  Palmer Eye Institute, University of Miami
              
              Strategies
                  to recover proteins from ocular tissues for proteomics
              
              Proteomics
              
              Journal
                  Article
              
              March
                  5, 2008Mourad
                  Ferhat
              
              Universite
                  de Lyon
              
              Application
                  of Pressure Cycling Technology to RNA Extraction from *Legionella
                  Pneumophila* Cells
              
              Meeting
                  of the French Association on Legionella
              
              Poster
              
              October
                  18-19, 2007Patricia
                  Okubara
              
              USDA
                  ARS
              
              Improved
                  extraction of *Rhizoctonia* and *Pythium*DNA from
                  wheat roots and soil samples using pressure cycling
                  technology
              
              Canadian
                  Journal of Plant Pathology
              
              Journal
                  Article
              
              September
                  2007Paul
                  Pevsner
              
              Department
                  of Pharmacology, New York University School of Medicine
              
              Colon
                  Cancer: Protein Biomarkers in Tissue and Body Fluids
              
              BMSS
                  29th Annual Meeting, Heriot- Watt University, Edinburgh
              
              Poster
              
              September
                  9th – 12th, 2007Valerie
                  S. Calvert
              
              George
                  Mason University
              
              A
                  Systems Biology Approach to the Pathogenesis of Obesity-related
                  Nonalcoholic Fatty Liver Disease Using Reverse Phase Protein Microarrays
                  for Multiplexed Cell Signaling Analysis
              
              Hepatology
              
              Journal
                  Article
              
              June
                  27, 2007Louis
                  S. Tisa
              
              University
                  of New Hampshire, Department of Microbiology
              
              Pressure
                  Cycling Technology (PCT) Facilitates Analysis of the Frankia
                  Proteome
              
              U.S.
                  Hupo 2007
              
              Poster
              
              March
                  4-8, 2007Frank
                  A. Witzmann
              
              Indiana
                  University Medical School, Department of Cellular and Integrative
                  Physiology
              
              Applications
                  of Pressure Cycling Technology (PCT) to Tissue Sample Preparation
                  for
                  One-and Two-Dimensional Gel Electrophoresis.
              
              Electrophoresis
              
              Journal
                  Article
              
              February
                  15, 2007Rita
                  Wong
              
              DermTech
                  International
              
              Analysis
                  of RNA Recovery and Gene Expression in the Epidermis Using Non-invasive
                  Tape Stripping
              
              Journal
                  of Dermotological Science
              
              Journal
                  Article
              
              November
                  2006D.
                  Alan Kerr
              
              University
                  of Louisville
              
              Pressure
                  Cycling Technology and Its Application in Steroid Receptor
                  Extraction
              
              Journal
                  of Clinical Ligand Assay
              
              Journal
                  Article
              
              Spring
                  2004





**Company
      Products**





Our
      PCT
      products have been developed to allow researchers to harness *the
      Power of PCT* to
      improve scientific research studies in the life sciences field. All of our
      products are developed with the expectation of meeting the needs of scientific
      personnel while enhancing the safety, speed, and quality that is available
      to
      them with existing sample preparation technology.





-
          3
          -




*Barocycler
      Instrumentation*





Our
      Barocycler product line consists of laboratory instrumentation that subjects
      a
      sample to cycles of pressure from ambient to ultra-high levels and then back
      to
      ambient, all in a precisely controlled manner. Our instruments, the Barocycler
      NEP3229 and Barocycler NEP2320, use cycles of high hydrostatic pressure to
      quickly and efficiently break up the cellular structures of a specimen releasing
      nucleic acids, proteins and small molecules from the specimen in our consumable
      tube, referred to as our PULSE tubes. Our Barocycler instrumentation is designed
      to fit on a laboratory bench top, inside a biological safety cabinet, or on
      the
      shelf of a cold room of a laboratory. Our instruments have an external chiller
      hook-up (to control temperature during the PCT process), automatic fill and
      dispensing valves, and an integrated micro-processor keypad. The microprocessor
      is capable of saving up to 99 specific PCT protocols, so the researcher can
      achieve maximum reproducibility for the extraction of genomic, proteomic, or
      small molecules from various biological samples. Our Barocycler instruments,
      together with our consumable products described below, make up our current
      PCT
      sample preparation system.





Barocycler
      NEP3229 –
      The Barocycler NEP3229 contains two units, an upper, user interface and a lower,
      power source, comprised primarily of a 1.5 horsepower motor and pump assembly.
      Combined, the two components of the NEP3229 weigh approximately 350 pounds.
      The
      Barocycler NEP3229 is capable of processing up to three samples simultaneously
      using our specially designed, single-use PULSE Tubes.





Barocycler
      NEP2320 –
      The Barocycler NEP2320 is a smaller and more compact version of our NEP3229
      unit. It weighs approximately 75 pounds, processes one sample at a time, and
      works on compressed air (pneumatic) and not hydraulics like the larger NEP3229
      unit. Because this instrument is pneumatic, the NEP2320 can be easily attached
      by an air hose to a typical 85 psi air compressor found in most scientific
      laboratories, to many consumer-sold portable compressors, or even to bottled
      gas. This instrument is currently being used by our sales force as a
      demonstration instrument and is being marketed as a second instrument
      alternative to our PCT Sample Preparation System.





*Consumable
      Products*





PULSE
      Tubes (FT500) –
      Our current PULSE Tube, the FT500, is a specially-designed, plastic, single-use,
      processing container with two chambers separated by a small disk with about
      sixty small holes. This small disk is referred to as a Lysis Disk. PULSE Tubes
      transmit the power of PCT from the Barocycler instrument to the sample. In
      sample extraction, the specimen is placed on the Lysis Disk, the PULSE Tube
      is
      placed in the pressure chamber of the Barocycler instrument, pressure chamber
      fluid is added, and pressurization begins. As pressure increases, a small
      moveable piston (the Ram) pushes the specimen from the top (sample) chamber,
      through the Lysis Disk and into the bottom (fluid retention) chamber. When
      pressure is released, the sample (now partially homogenized) is pulled back
      through the Lysis Disk by the receding Ram. The combination of physical passage
      through the Lysis Disk, rapid pressure changes, and other biophysical mechanisms
      related to cycled pressure break up the cellular structures of the specimen
      to
      quickly and efficiently release nucleic acids, proteins, and small
      molecules.





ProteoSolve LRS –
      (ProteoSolve for L ipid R ich S amples)
      is a PCT-dependent method for the safe, rapid, efficient, and reproducible
      extraction of proteins from lipid-rich samples, including adipose and brain
      tissues, organelles, and membrane preparations. Proteomic analysis of these
      types of samples is widely used in the study of diabetes, cancer, ALS, heart
      disease, and a number of other serious human disorders related to obesity.
      We
      believe that this PCT-dependent method of protein extraction from lipid-rich
      samples offers significant advantages over current extraction techniques,
      primarily due to the ability to use certain organic solvents instead of harsh
      detergents in the extraction process. Harsh detergents are known to compromise
      the integrity of many proteins; therefore the use of these detergents requires
      a
      very careful and time consuming removal process. The kit includes 12
      specially-designed PULSE Tubes, certain organic solvents, other reagents, and
      an
      instruction sheet on how to utilize this patent-pending process to enhance
      the
      extraction of proteins from lipid-rich samples.





We
      believe our discovery of this PCT-dependent, detergent-free process, and the
      subsequent development of the ProteoSolve LRS kit, is
      an example of how our significant investment in research and development can
      result in the development of important applications of PCT in a large and
      important area of the life sciences.





-
          4
          -




**Company
      Services**





Government
      Grants –
      We view federal agency grants to be an important part of our business plan.
      These types of grants allow us to bill the federal agency for work that we
      are
      planning to perform as part of the development of our technology, and we expect
      that such work will support our commercialization efforts. Additionally, if
      our
      work in SBIR Phase I grants is successful, then we expect to apply for larger
      NIH SBIR Phase II grants. Such larger grants are typically in excess of $750,000
      and can support significant research projects in areas we would expect to
      support with internal funds should SBIR Phase II grants not be awarded. To
      date
      we have been awarded two National Institutes of Health (“NIH”) Small Business
      Innovation Research (“SBIR”) Phase I Grants. The first grant was awarded in
      September 2006 to fund experiments to demonstrate the feasibility of using
      pressure cycling technology in the development of a new method for the
      extraction of clinically important protein biomarkers, sub-cellular molecular
      complexes, and organelles from cells and tissues. Our second NIH SBIR Phase
      I
      grant was awarded in March 2007, to fund the investigation of the purification
      of nucleic acids using PCT. The amount awarded under each of these grants was
      approximately $150,000.





Extended
      Service Contracts - We
      offer extended service contracts on our laboratory instrumentation to all of
      our
      customers. These service contracts allow a customer who purchases a Barocycler
      instrument to receive on-site scheduled preventative maintenance, on-site repair
      and replacement of all worn or defective component parts, and telephone support,
      all at no incremental cost, for the life of the service contract. We have
      offered one-year and four-year extended service contracts to customers who
      purchase Barocycler instruments.





Fee-for-Service –
      We will occasionally perform PCT services on a fee-for-service basis. We may
      enter into these types of arrangements if we believe that the customer has
      a
      high likelihood of purchasing a PCT Sample Preparation System or if we believe
      that the customer will publish or present results of the work performed in
      scientific journals or in scientific meetings.





**Other
      Applications of Pressure Cycling Technology**





PCT
      is an
      enabling, platform technology based on a bio-physical process that had not
      previously been used to control bio-molecular interactions. During its early
      development, under the legacy business of Boston Biomedica, Inc., our scientists
      were researching and developing applications of pressure cycling technology
      in
      many areas of the life sciences, including genomic, proteomic, and small
      molecule sample preparation. The data generated during these early years,
      combined with the data generated since PBI began significant operations in
      February 2005, form the basis of knowledge that we believe will allow us to
      successfully commercialize PCT both within and outside of the sample preparation
      market.




Our
      research and development efforts have shown that, in addition to genomic,
      proteomic and small molecule sample preparation, PCT is potentially beneficial
      in a number of other areas of the life sciences, including pathogen
      inactivation, protein purification, control of chemical (particularly enzymatic)
      reactions, and immunodiagnostics. Our pursuit of these markets, however, depends
      on a number of factors, including our success in commercializing PCT in the
      area
      of sample preparation, our judgment regarding the investment required to be
      successful in these areas, and the value of these markets to our company. Below
      is a brief explanation of each of these additional potential applications and
      a
      short description of why we believe PCT can be used to improve scientific
      studies in these areas.





*Pathogen
      Inactivation*





Biological
      products manufactured for human use, such as blood, vaccines, and drugs, are
      put
      through rigorous processing protocols in an effort to minimize the potential
      of
      that product to transmit disease. These protocols may include methods to remove
      infectious materials (such as pre-processing testing, filtration, or
      chromatography), or methods to inactivate infectious materials that are not
      captured in the removal steps (such as pasteurization, irradiation, and solvent
      detergent inactivation). Notwithstanding current diligence in both the removal
      and inactivation steps, significant concern remains that some bacteria and
      viruses capable of transmitting infection to recipients may not be removed
      or
      inactivated with current procedures. In addition, some removal and inactivation
      methods may not be useful because of cost, safety, ease-of-use, or other
      practical concerns. To that end, we believe that a new inactivation method
      is
      needed that can safely, rapidly and inexpensively inactivate pathogens in blood,
      vaccines, and drugs without the need for chemical or other potentially toxic
      additives. We believe we have successfully generated proof-of-concept that
      PCT
      can satisfy this need. We believe that compared to current procedures, a process
      that uses PCT has the potential to increase safety and yield, lower cost, and
      decrease the potential side effects of current methods. We have been issued
      US,
      European, and Japanese patents for this PCT-dependent inactivation
      technology.





-
          5
          -




*Protein
      Purification*





Many
      vaccines and drugs are comprised of proteins. These proteins need to be purified
      from complex mixtures as part of the manufacturing process. Current purification
      techniques often result in the loss of a significant amount of the protein,
      therefore, any method that could increase the amount of protein being recovered
      in the purification step, would subsequently lead to a reduction in cost to
      the
      manufacturer. We believe we have successfully generated proof-of-concept that
      PCT can satisfy this need. We believe that compared to current purification
      procedures, a process that uses PCT has the potential to increase protein
      recovery, increase the quality of the product, and lower production costs.
      We
      have been issued US and European patents in this area.





*Control
      of Chemical (Particularly Enzymatic) Reactions*





Chemical
      reactions encompass many important interactions in nature. Methods used to
      control chemical reactions could have a positive effect on the quality, speed,
      and overall result of the reaction. The control and detection of chemical
      reactions is particularly useful in the biotechnology field for synthesizing
      and
      characterizing such molecules as nucleic acids and polypeptides. We believe
      that
      PCT offers distinct advantages in controlling chemical reactions over current
      methods, since PCT can provide precise, automated control over the timing and
      synchronization of chemical reactions, particularly enzymatic reactions. We
      have
      been issued US and European patents in this area.





*Immunodiagnostics*





Many
      tests used in the clinical laboratory today are based on the formation of a
      complex between two proteins, such as an antigen and an antibody. Such
“immunodiagnostic” methods are used for the detection of infectious agents (such
      as HIV, hepatitis viruses, and West Nile virus), as well as for endocrine,
      drug
      testing, and cancer diagnostics. We have generated proof-of-concept that PCT
      may
      be used to control bio-molecular interactions between proteins, such as antigens
      and antibodies. We believe this capability may provide a greater degree of
      sensitivity and quantitative accuracy in immunodiagnostic testing than that
      offered by methods that are available today. We have been issued US and European
      patents in this area.





**Customers**





Our
      customers include researchers at academic laboratories, government agencies,
      biotechnology, pharmaceutical, and other life science companies in the United
      States. Our customers also include three foreign distribution partners that
      we
      have entered into agreements with over the past 12 months. During 2007, we
      sold
      limited quantities of PCT products to all of these customer groups. Our goal
      in
      2008 is to continue our market penetration in these target groups, and to
      increase our commercial operations to serve researchers at these types of
      institutions on a global basis. We also feel that there is a significant
      opportunity to sell additional Barocycler instrumentation to additional
      laboratories at current customer institutions.





If
      we are
      successful in commercializing PCT in applications beyond our current focus
      area
      of genomic, proteomic, and small molecule sample preparation, our potential
      customer base could expand to include hospitals, reference laboratories, blood
      banks and transfusion centers, plasma collection centers, pharmaceutical
      manufacturing plants, and other sites involved in each specific
      application.





**Competition**





We
      compete with companies that have existing technologies for the extraction of
      nucleic acids, proteins, and small molecules from “hard-to-lyse” cells and
      tissues, including methods such as mortar and pestle grinding, sonication,
      rotor-stator homogenization, French Press, bead beating, freezer milling,
      enzymatic digestion, and chemical dissolution.  We believe that there are a
      number of significant issues related to the use of these methods, including:
      complexity, sample containment, cross-contamination, shearing of bio-molecules
      of interest, limited applicability to different sample types, ease-of-use,
      reproducibility, and cost.  We believe that the PCT Sample Preparation
      System offers a number of significant advantages over these methods, including
      labor reduction, temperature control, precision, reproducibility, versatility,
      efficiency, simplicity, and safety.  To compete, we must be able to clearly
      and conclusively demonstrate to potential customers that our products provide
      these improved performance capabilities.





-
          6
          -




We
      believe that our PCT Sample Preparation System is a novel and enabling system
      for genomic, proteomic and small molecule sample preparation.  As such,
      many users of current manual techniques will need to be willing to challenge
      their existing methods of sample preparation and invest time to evaluate a
      method that could change their overall workflow in the sample preparation
      process, prior to adopting our technology.  We are also aware that the cost
      of the PCT Sample Preparation System may be greater than the cost of many of
      the
      other techniques currently employed.  Consequently, we are focusing our
      sales efforts on those product attributes that we believe will be most important
      and appealing to potential customers, namely versatility, reproducibility,
      quality, and safety.





*PCT
      Compared to Existing Technologies*





There
      are
      several incumbent technologies that offer scientists varying degrees of success
      in sample preparation. For several years, PBI scientists have been performing
      comparative studies with hundreds of samples to better understand how pressure
      cycling technology compares with these competitive technologies. Depending
      on
      the area of research and the type of material a scientist may be working with,
      there is a different level of importance placed on each attribute. Below is
      an
      illustration of how pressure cycling technology, in our opinion, compares to
      several existing technologies across the key attributes that we have assessed
      (with a “-“denoting a negative attribute, and a “+” denoting a positive
      attribute).




Incumbent TechnologiesKey
                    Attributes
                
                Sonication
                
                BeadBeating
                
                Tissue
                  Homogenizer
                
                Mortar
                  Pestle
                
                French
                  Press
                
                **PCT**Safety
                Closed System
                
                
                **-**
                
                
                **+**
                
                
                **-**
                
                
                **-**
                
                
                **-**
                
                
                **+**Storage, Transport
                
                
                **-**
                
                
                **+**
                
                
                **-**
                
                
                **-**
                
                
                **-**
                
                
                **+**Versatility
                
                
                **-**
                
                
                **-**
                
                
                **-**
                
                
                **-**
                
                
                **-**
                
                
                **+**Reproducibility
                
                
                **-**
                
                
                **-**
                
                
                **-**
                
                
                **-**
                
                
                **-**
                
                
                **+**Efficiency
                
                
                **-**
                
                
                **-/+**
                
                
                **-**
                
                
                **-**
                
                
                **-**
                
                
                **+**Shearing
                    Molecules
                
                
                Yes
                
                
                Yes
                
                
                Yes
                
                
                Min
                
                
                Yes
                
                
                **Min**





**Relationship
      with Source Scientific, LLC**





In
      June 2004, we transferred certain assets and liabilities of our PBI Source
      Scientific, Inc. subsidiary to a newly formed limited liability company
      known as Source Scientific, LLC. At the time of the transfer, we owned 100%
      of
      the ownership interests of Source Scientific, LLC. We subsequently sold 70%
      of
      our ownership interests of Source Scientific, LLC to Mr. Richard Henson and
      Mr. Bruce A. Sargeant pursuant to a purchase agreement (the “Source
      Scientific Agreement”). As a result of the sale of 70% of our ownership
      interests, Mr. Henson and Mr. Sargeant each owned 35% and we owned the
      remaining 30% of Source Scientific, LLC. Under the Source Scientific Agreement,
      we received notes receivable in the aggregate amount of $900,000 (the “Notes”)
      payable at the end of three years bearing 8% interest. The Source Scientific
      Agreement offered Mr. Henson and Mr. Sargeant the option (“the
      Option”) to purchase our 30% ownership interest in Source Scientific, LLC until
      May 31, 2007, at an escalating premium (10-50%) over our initial ownership
      value, provided that they first paid off the Notes in their
      entirety.





On
      May
      29, 2007, we executed a consent agreement with Mr. Henson and Mr. Sargeant,
      Source Scientific LLC, and BIT Analytical Instruments, Inc. (“the Consent
      Agreement”) pursuant to which the Notes were repaid in full in the aggregate
      amount of $1,201,534 in principal and interest, and Mr. Henson and Mr. Sargeant
      exercised their Option through BIT Analytical Instruments, Inc. to purchase
      our
      remaining 30% ownership interest in Source Scientific, LLC for an aggregate
      price of $578,573. As a result of these transactions, we no longer retain any
      direct or indirect ownership interest in Source Scientific, LLC.





-
          7
          -




The
      execution of these transactions, and receipt of the funds, triggered our
      recognition of a gain on the sale of assets related to discontinued operations
      of $1,534,476, net of income taxes of $218,060, during the three months ended
      June 30, 2007.





**Manufacturing
      and Supply**





Source
      Scientific, LLC, currently provides all of the manufacturing and assembly
      services for our instrumentation products. We plan to continue to utilize Source
      Scientific, LLC as our primary assembler and contract manufacturer of our
      current, and future, Barocycler instruments. During 2007, however, we initiated
      several engineering initiatives to position us for greater independence from
      any
      one supplier, and we are in the process of developing a network of manufacturers
      and sub-contractors to reduce our reliance on any single supplier. Until we
      develop a broader network of manufacturers and subcontractors, obtaining
      alternative sources of supply or manufacturing services could involve
      significant delays and other costs and challenges, and may not be available
      to
      us on reasonable terms, if at all. The failure of a supplier or contract
      manufacturer to provide sufficient quantities, acceptable quality and timely
      products at an acceptable price, or an interruption of supplies from such a
      supplier could harm our business and prospects.





**Research
      and Development**





Our
      research and development activities are split into two functional areas,
      applications and engineering.





*Applications
      Research and Development*





Our
      highly educated, experienced, and trained staff has years of experience in
      molecular and cellular biology, virology, and proteomics. This team focuses
      on
      the development of PCT-dependent genomic, proteomic, and small molecule sample
      preparation methods that we believe will result in an immediate commercial
      return-on-investment. To help ensure the success of this objective, Dr. Alex
      Lazarev our Vice President of Research & Development and his team meet
      regularly with our sales, marketing, and engineering departments to discuss
      market needs and trends. Our applications research and development staff is
      responsible for the technical review of all scientific collaborations, for
      the
      support of our marketing and sales departments through the generation of
      internal data in a number of areas of market interest, and in the development
      of
      commercially-viable PCT-dependent products. The discovery and subsequent
      development of ProteoSolve LRS is
      an
      example of how our investment in applications research and development has
      expanded the potential commercialization of PCT.





*Engineering
      Research and Development*





Our
      engineering research and development team is focused on the design and
      development of new and improved instrumentation and consumable products to
      support the commercialization of PCT. Our engineering department is led by
      Dr.
      Edmund Ting, our Senior Vice President of Engineering, and is supported by
      a
      full-time senior engineer and third parties. Over the past year, the majority
      of
      this department’s efforts have been directed towards the development of
      additional features and benefits for the NEP3229, on the development of the
      NEP2320, and on the design of additional consumables for the PCT Sample
      Preparation System. Dr. Ting and his team have also begun the design of a
      Barocycler that can achieve pressures of approximately 87,000 psi, (useful
      for
      both sample preparation and inactivation), a Barocycler with minimal features
      and benefits that we believe will fill the need for a very basic, low cost,
      “mass market” type instrument, as well as a Barocycler that is small, portable,
      and robust enough to take out into the field. Future instrumentation could
      also
      include larger, more sophisticated, high-throughput, fully-automated instruments
      that could process several thousand samples per day.





In
      addition to instrumentation, we believe there is significant market demand
      for
      PCT-dependent consumable products that are designed to process samples smaller,
      and larger, than the samples that can be processed by our current PULSE Tubes.
      Additionally, we are investing research and development resources toward the
      development of application specific PULSE Tubes with the intention of offering
      added convenience for our customer base, as well as expanding the application
      of
      PCT into other areas of life sciences.





Our
      research and development expenses were approximately $2.0 million and $1.4
      million for the years ended December 31, 2007 and 2006, respectively.





-
          8
          -




**Sales
      and Marketing**





Our
      sales
      and marketing efforts are centered on using the independent data developed
      and
      disseminated by our collaboration partners to help drive the installed base
      of
      PCT Sample Preparation Systems. The development of scientific data by our
      partners and our internal researchers provides our sales and marketing staff
      with additional tools that are essential in selling a new technology such as
      PCT.





*Sales*





Direct
      US Sales Force





Our
      domestic sales force is led by our newly hired Vice President of Sales, Matthew
      B. Potter. Mr. Potter is responsible for directing the efforts of our seven
      full-time sales directors, each of whom is responsible for covering a specific
      region of the United States. We hired and trained six of these regional sales
      directors during 2007, primarily in the final four months of the year. We
      believe that hiring seasoned sales professionals, with at least 10 - 15 years
      of
      industry experience, will allow us to more effectively penetrate the market
      with
      a small, focused sales force. Throughout 2008, we plan to monitor this strategy
      and may increase the number of sales professionals if our resources permit
      and
      we believe that doing so will accelerate our commercialization
      efforts.





Foreign
      Distributor Network





We
      have a
      distribution agreement with Veritas Corporation (“Veritas”) of Tokyo, Japan
      pursuant to which we granted Veritas exclusive distribution rights to all of
      our
      products in Japan. The term of this agreement expired on December 31, 2007,
      however we are currently operating under the terms of the agreement as we
      negotiate a three year extension.





In
      December 2007, we signed a distribution agreement with Disruptive Technologies
      (“DT”) of Villecresnes, France pursuant to which we granted DT exclusive
      distribution rights to all of our products in France, Belgium, and Switzerland.
      The agreement is effective from January 1, 2008 through December 31, 2010.





In
      September 2007, we signed a distribution agreement with CM Corporation (“CM”),
      of Seoul, South Korea pursuant to which we granted CM exclusive distribution
      rights to all of our products in South Korea. The agreement is effective from
      September 1, 2007 through August 31, 2010.





*Marketing*





Our
      marketing team includes our Vice President of Marketing and a marketing
      associate. Our marketing department oversees and directs marketing activities
      such as trade show attendance and sponsorship, on-line advertising, website
      maintenance and improvement, search engine optimization, creation and
      dissemination of a PCT newsletter, market research initiatives, and the
      arrangement of on-location seminars, lectures, and demonstrations of PCT
      capabilities. Our
      marketing team is also responsible for the overall coordination of our
      collaboration programs, from initial set-up, research plan design, and training,
      service, and data analysis. Some of these responsibilities are shared with
      other
      PBI departments (such as R&D), but marketing drives the collaborative
      process.





**Intellectual
      Property**





We
      believe that protection of our patents and other intellectual property is
      essential to our business.  Our practice is to file patent applications to
      protect technology, inventions, and improvements to inventions that are
      important to our business development.  We also rely on trade secrets,
      know-how, and technological innovations to develop and maintain our potential
      competitive position.  To date, we have been granted thirteen United States
      patents, three European patents, one Australian patent, one Japanese patent,
      and
      one Canadian patent.  Our issued patents expire between 2015 and 2027. Our
      failure to obtain adequate patent protection may adversely affect our ability
      to
      enter into, or affect the terms of, any arrangement for the marketing or sale
      of
      any of our PCT products. It may also allow our competitors to duplicate our
      products without our permission and without compensation.





-
          9
          -




*License
      Agreements Relating to Pressure Cycling Technology*





In
      1996,
      we acquired our initial equity interest in BioSeq, Inc., which at the time
      was
      developing our original pressure cycling technology.  BioSeq, Inc. acquired
      its pressure cycling technology from BioMolecular Assays, Inc. under a
      technology transfer and patent assignment agreement.  In 1998, we purchased
      all of the remaining outstanding capital stock of BioSeq, Inc., and at such
      time, the technology transfer and patent assignment agreement was amended to
      require us to pay BioMolecular Assays, Inc. a 5% royalty on our sales of
      products or services that incorporate or utilize the original pressure cycling
      technology that BioSeq, Inc. acquired from BioMolecular Assays, Inc.  We
      are also required to pay BioMolecular Assays, Inc. 5% of the proceeds from
      any
      sale, transfer or license of all or any portion of the original pressure cycling
      technology.  These payment obligations terminate in 2016.  During the
      fiscal years ended December 31, 2007 and 2006, we paid BioMolecular Assays,
      Inc.
      $19,596 and $9,809 in royalties.





In
      connection with our acquisition of BioSeq, Inc., we licensed certain limited
      rights to the original pressure cycling technology back to BioMolecular Assays,
      Inc.   This license is non-exclusive and limits the use of the
      original pressure cycling technology by BioMolecular Assays, Inc. solely for
      molecular applications in scientific research and development and in scientific
      plant research and development.  BioMolecular Assays, Inc. is required to
      pay us a royalty equal to 20% of any license or other fees and royalties, but
      not including research support and similar payments, it receives in connection
      with any sale, assignment, license or other transfer of any rights granted
      to
      BioMolecular Assays, Inc. under the license. BioMolecular Assays, Inc. must
      pay
      us these royalties until the expiration of the patents held by BioSeq, Inc.
      in
      1998, which we anticipate will be 2016.  We have not received any royalty
      payments from BioMolecular Assays, Inc. under this license.





**Regulation**





Many
      of
      our activities are subject to regulation by governmental authorities within
      the
      United States and similar bodies outside of the United States. The regulatory
      authorities may govern the collection, testing, manufacturing, safety, efficacy,
      labeling, storage, record keeping, transportation, approval, advertising, and
      promotion of our products, as well as the training of our employees.





All
      of
      our commercialization efforts to date are focused in the area of genomic,
      proteomic, and small molecule sample preparation. We do not believe that our
      current Barocycler products used in sample preparation are considered “medical
      devices” under the United States Food, Drug and Cosmetic Act (the “Act”) and we
      do not believe that we are subject to the law’s general control provisions that
      include requirements for registration, listing of devices, quality regulations,
      labeling, and prohibitions against misbranding and adulteration. Nor do we
      believe that we are subject to regulatory inspection and scrutiny. If, however,
      we are successful in commercializing PCT in applications beyond our current
      focus area of genomic, proteomic, and small molecule sample preparation, such
      as
      protein purification, pathogen inactivation and immunodiagnostics, our products
      may be considered “medical devices” under the Act, at which point we would be
      subject to the law’s general control provisions and regulation by the U.S. Food
      and Drug Administration (the “FDA”) that include requirements for registration
      listing of devices, quality regulations, labeling, and prohibitions against
      misbranding and adulteration. The process of obtaining approval to market these
      devices in the other potential applications of PCT would be costly and time
      consuming and could prohibit us from pursuing such markets.





We
      may
      also become subject to the European Pressure Equipment Directive, which requires
      certain pressure equipment meet certain quality and safety standards. We do
      not
      believe that we are currently subject to this directive because our Barocycler
      instruments are below the threshold documented in the text of the directive.
      If
      our interpretation were to be challenged, we could incur significant costs
      defending the challenge, and we could face production and selling delays, all
      of
      which could harm our business.





Our
      Barocycler instrumentation received CE Marking, which means that our Barocycler
      instruments meet the essential requirements of the relevant European health,
      safety and environmental protection legislation. The CE Mark is an important
      step toward our anticipated full-scale launch of our PCT product line in Europe
      during 2008. In order to maintain our CE Marking, a requirement to sell
      equipment in many countries of the European Union, we are obligated to uphold
      certain safety and quality standards.




**Employees**





As
      of
      March 24, 2008 we had 27 full-time employees.


-
            10
            -


Our
      27
      employees include 11 employees in the sales and marketing and technical support
      functions, four in general and administrative, 10 in applications research
      and
      development, and two in engineering research and development.


-
          11
          -




**ITEM
                1A.**
              ****RISK
                  FACTORS****


This
      report contains forward-looking statements that involve risks and uncertainties,
      such as statements of our objectives, expectations and intentions. The
      cautionary statements made in this report should be read as applicable to all
      forward-looking statements wherever they appear in this report. Our actual
      results could differ materially from those discussed herein. Factors that could
      cause or contribute to such differences include those discussed below, as well
      as those discussed elsewhere in this report.





***We
      will require additional capital to further develop our pressure cycling
      technology products and services and cannot ensure that additional capital
      will
      be available on acceptable terms or at all.***




We
      have
      experienced negative cash flows from operations from our pressure cycling
      technology business since its inception. As of December 31, 2007, we had
      available cash of approximately $5.4 million. Based on our current
      projections, we believe our current cash resources are sufficient to fund our
      normal operations into early 2009.




We
      will
      need additional capital sooner than we currently expect if we experience
      unforeseen costs or expenses, unanticipated liabilities or delays in
      implementing our business plan, developing our products and achieving commercial
      sales. We also believe that we will need substantial capital to accelerate
      the
      growth and development of our pressure cycling technology products and services
      in the sample preparation area, as well as for applications in other areas
      of
      life sciences. Our capital requirements will depend on many factors, including
      but not limited to:




·
            the
                problems, delays, expenses, and complications frequently encountered
                by
                early-stage companies;


·
            market
                acceptance of our pressure cycling technology products and services
                for
                sample preparation;


·
            the
                success of our sales and marketing programs;
                and


·
            changes
                in economic, regulatory or competitive conditions in the markets
                we intend
                to serve.





To
      satisfy our potential capital requirements to cover the cost of the development
      and commercialization of our pressure cycling technology products and services
      relating to sample preparation and other life science applications, we expect
      to
      raise additional funds in the public or private capital markets. Additional
      financing may not be available to us on a timely basis, if at all, or on terms
      acceptable to us. If adequate funds are not available or if we fail to obtain
      acceptable additional financing, we may be required to:




·
            obtain
                financing with terms that may have the effect of diluting or adversely
                affecting the holdings or the rights of the holders of our common
                stock;


·
            obtain
                funds through arrangements with future collaboration partners or
                others
                that may require us to relinquish rights to some or all of our
                technologies or products; or


·
            otherwise
                reduce planned expenditures and forego other business opportunities,
                which
                could harm our business.





***We
      have a history of operating losses, anticipate future losses and may never
      be
      profitable.***




We
      have
      experienced significant operating losses in the area of pressure cycling
      technology in each period since we began investing resources in pressure cycling
      technology in 1998. These losses have resulted principally from research and
      development, sales and marketing, and general and administrative expenses
      associated with the development of our pressure cycling technology business.
      We
      expect to continue to incur operating losses until sales of our pressure cycling
      technology products increase substantially. We cannot be certain when, if ever,
      we will become profitable. Even if we were to become profitable, we might not
      be
      able to sustain such profitability on a quarterly or annual basis.





***Our
      financial results depend on revenues from our pressure cycling technology
      products and services, which has a limited operating
      history.***




We
      currently rely on revenues from our pressure cycling technology products and
      services in the sample preparation area. We only recently commercialized our
      pressure cycling technology products and services for sample preparation. Our
      limited sales and operating history may not be adequate to enable you to fully
      assess our ability to achieve market acceptance of our product offering. If
      we
      are unable to increase sales of our pressure cycling technology products and
      services, our business will fail.





-
          12
          -




***Our
      business may be harmed if we encounter problems, delays, expenses, and
      complications that affect early-stage companies.***




We
      are an
      early-stage company and our pressure cycling technology business has a limited
      operating history. Early-stage companies may encounter problems, delays,
      expenses and complications, many of which may be beyond our control or may
      harm
      our business or prospects. These include:




·
            unanticipated
                problems and costs relating to the development, testing, production,
                marketing, and sale of our products;


·
            delays
                and costs associated with our ability to attract and retain key personnel;


·
            availability
                of adequate financing; and


·
            competition.





We
      cannot
      guarantee that we will successfully complete the transition from an early-stage
      company to the commercialization of our pressure cycling technology products
      and
      services.





***We
      may be unable to obtain market acceptance of our pressure cycling technology
      products and services.***




Many
      of
      our initial sales of our pressure cycling technology products and services
      have
      been to our collaborators, following their use of our products in studies
      undertaken in sample preparation for genomics, proteomics and small molecules
      studies. Our technology requires scientists and researchers to adopt a method
      of
      sample extraction that is different than existing techniques. Our PCT sample
      preparation system is also more costly than existing techniques. Our ability
      to
      obtain market acceptance will depend, in part, on our ability to demonstrate
      to
      our potential customers that the benefits and advantages of our technology
      outweigh the increased cost of our technology compared to existing methods
      of
      sample extraction. If we are unable to demonstrate the benefits and advantages
      of our products and technology as compared to existing technologies, then we
      may
      not gain market acceptance and our business will fail.





***The
      sales cycle of our pressure cycling technology products is lengthy. We have
      incurred and may continue to incur significant expenses and we may not generate
      any significant revenue related to those products.***




Many
      of
      our current and potential customers have required between three and six months,
      or more to test and evaluate our pressure cycling technology products. This
      increases the possibility that a customer may decide to cancel its order or
      otherwise change its plans, which could reduce or eliminate our sales to that
      potential customer. As a result of this lengthy sales cycle, we have incurred
      and may continue to incur significant research and development, selling and
      marketing, and general and administrative expense related to customers from
      whom
      we have not yet generated any revenue from our products, and from whom we may
      never generate the anticipated revenue if a customer cancels or changes its
      plans.





***Our
      business could be harmed if our products contain undetected errors or
      defects.***




We
      are
      continuously developing new, and improving our existing, pressure cycling
      technology products in sample preparation and we expect to do so in other areas
      of life sciences depending upon the availability of our resources. Newly
      introduced products can contain undetected errors or defects. In addition,
      these
      products may not meet their performance specifications under all conditions
      or
      for all applications. If, despite internal testing and testing by our
      collaborators, any of our products contain errors or defects or fail to meet
      customer specifications, then we may be required to enhance or improve those
      products or technologies. We may not be able to do so on a timely basis, if
      at
      all, and may only be able to do so at considerable expense. In addition, any
      significant reliability problems could result in adverse customer reaction,
      negative publicity or legal claims and could harm our business and prospects.





***Our
      success may depend on our ability to manage growth
      effectively.***




We
      expect
      our operations to grow at a rapid pace as we further commercialize our pressure
      cycling technology in sample preparation and other areas of life sciences.
      Our
      failure to manage growth effectively could harm our business and prospects.
      Given our limited resources and personnel, growth of the business could place
      significant strain on our management, information technology systems, sources
      of
      manufacturing capacity and other resources. To properly manage our growth,
      we
      may need to hire additional employees and identify new sources of manufacturing
      capabilities. Failure to effectively manage our growth could make it difficult
      to manufacture our products and fill orders, as well as lead to declines in
      product quality or increased costs, any of which would adversely impact our
      business and results of operations.





-
          13
          -




***Our
      success is substantially dependent on the continued service of our senior
      management.***




Our
      success is substantially dependent on the continued service of our senior
      management. We do not have long-term employment agreements with our key
      employees. The loss of the services of any of these individuals could make
      it
      more difficult to successfully operate our business and achieve our business
      goals. In addition, our failure to retain existing engineering, research and
      development and sales personnel could harm our product development capabilities
      and customer and employee relationships, delay the growth of sales of our
      products and could result in the loss of key information, expertise or
      know-how.




***We
      may not be able to hire or retain the number of qualified personnel,
      particularly engineering personnel, required for our business, which would
      harm
      the development and sales of our products and limit our ability to grow.***




Competition
      in our industry for senior management, technical, sales, marketing, finance
      and
      other key personnel is intense. If we are unable to retain our existing
      personnel, or attract and train additional qualified personnel, our growth
      may
      be limited. Our success also depends in particular on our ability to identify,
      hire, train and retain qualified engineering personnel with experience in design
      and development of laboratory equipment.




***Our
      reliance on a single third party for all of our manufacturing, and certain
      of
      our engineering, and other related services could harm our
      business.***




We
      currently rely on Source Scientific, LLC, a third party contract manufacturer,
      to manufacture our products, provide engineering expertise, and manage the
      majority of our sub-contractor supplier relationships. Because of our dependence
      on one manufacturer, our success will depend, in part, on the ability of Source
      Scientific to manufacture our products cost effectively, in sufficient
      quantities to meet our customer demand, if and when such demand occurs, and
      meeting our quality requirements. If Source Scientific experiences manufacturing
      problems or delays, or if Source Scientific decides not to continue to provide
      us with these services, our business may be harmed. While we believe other
      contract manufacturers are available to address our manufacturing and
      engineering needs, if we find it necessary to replace Source Scientific, there
      will be a disruption in our business and we would incur additional costs and
      delays that would harm our business.





***Our
      failure to manage current or future alliances or joint ventures effectively
      may
      harm our business.***




We
      have
      entered into business relationships with distribution partners, and we may
      enter
      into alliances, joint ventures or other business relationships to further
      develop our pressure cycling technology product line. We may not be able
      to:




·
            identify
                appropriate candidates for alliances, joint ventures or other business
                relationships;


·
            assure
                that any candidate for an alliance, joint venture or business relationship
                will provide us with the support
                anticipated;


·
            successfully
                negotiate an alliance, joint venture or business relationship on
                terms
                that are advantageous to us; or


·
            successfully
                manage any alliance or joint
                venture.





Furthermore,
      any alliance, joint venture or other business relationship may divert management
      time and resources. Entering into a disadvantageous alliance, joint venture
      or
      business relationship, failing to manage an alliance, joint venture or business
      relationship effectively, or failing to comply with any obligations in
      connection therewith, could harm our business and prospects.





***We
      may not be successful in growing our international
      sales.***




We
      cannot
      guarantee that we will successfully develop our international sales channels
      to
      enable us to generate significant revenue from international sales. To date,
      we
      have entered into three international distribution agreements, one of which
      covers Belgium, France, and Switzerland, another covering Japan, and the third
      which covers South Korea. We have generated limited sales to date from
      international sales and cannot guarantee that we will be able to increase our
      sales. As we expand, our international operations may be subject to numerous
      risks and challenges, including:




·
            multiple,
                conflicting and changing governmental laws and regulations, including
                those that regulate high pressure equipment;


·
            reduced
                protection for intellectual property rights in some countries;


·
            protectionist
                laws and business practices that favor local companies;






-
          14
          -




·
            political
                and economic changes and
                disruptions;


·
            export/import
                controls;


·
            tariff
                regulations; and


·
            currency
                fluctuations.





***Our
      operating results are subject to quarterly variation.***




Our
      operating results may fluctuate significantly from period to period depending
      on
      a variety of factors, including the following:




·
            our
                ability to increase our sales of our pressure cycling technology
                products
                for sample preparation on a consistent quarterly or annual basis;


·
            the
                product mix of the Barocycler instruments we install in a given period,
                and whether the installations are completed pursuant to sales, rental
                or
                lease arrangements, and the average selling prices that we are able
                to
                command for our products;


·
            our
                ability to manage our costs and
                expenses;


·
            our
                ability to continue our research and development activities without
                unexpected costs and expenses; and


·
            our
                ability to comply with state and federal regulations without incurring
                unexpected costs and expenses.





***Our
      instrumentation operates at high pressures and may therefore become subject
      to
      certain regulation in the European Community. Regulation of high pressure
      equipment may limit or hinder our development and sale of future
      instrumentation.***




Our
      Barocycler instruments operate at high pressures. If our Barocycler instruments
      exceed certain pressure levels, our products may become subject to the European
      Pressure Equipment Directive, which requires certain pressure equipment meet
      certain quality and safety standards. We do not believe that we are subject
      to
      this directive because our Barocycler instruments are currently below the
      threshold documented in the text of the directive. If our interpretation were
      to
      be challenged, we could incur significant costs defending the challenge, and
      we
      could face production and selling delays, all of which could harm our
      business.




***We
      expect that we will be subject to regulation in the United States, such as
      the
      FDA, and overseas as we begin to invest more resources in the development and
      commercialization of PCT in applications outside of sample preparation.***




Our
      current pressure cycling technology products in the area of sample preparation
      are not regulated by the U.S. Food and Drug Administration, or the FDA.
      Applications in which we intend to develop and commercialize pressure cycling
      technology, such as protein purification, pathogen inactivation and
      immunodiagnostics, are expected to require regulatory approvals or clearances
      from regulatory agencies, such as the FDA, prior to commercialization. We expect
      that obtaining these approvals or clearances will require a significant
      investment of time and capital resources and there can be no assurance that
      such
      investments will receive approvals or clearances that would allow us to
      commercialize the technology for these applications.




***If
      we are unable to protect our patents and other proprietary technology relating
      to our pressure cycling technology products, our business will be
      harmed.***




Our
      ability to further develop and successfully commercialize our products will
      depend, in part, on our ability to enforce our patents, preserve our trade
      secrets, and operate without infringing the proprietary rights of third parties.
      We currently have thirteen United States patents issued and several pending
      patent applications for our pressure cycling technology. Several of these have
      been followed up with foreign applications, for which three patents have been
      issued in Europe and one patent has been issued in Australia, one in Japan,
      and
      one in Canada. We expect to file additional foreign applications in the future
      relating to our pressure cycling technology, and we will file additional United
      States applications as we develop new patentable intellectual property. 
The patents which have been issued expire between 2015 and 2027.




There
      can
      be no assurance that:




·
            any
                patent applications filed by us will result in issued
                patents;


·
            patent
                protection will be secured for any particular
                technology;






-
          15
          -




·
            any
                patents that have been or may be issued to us will be valid or
                enforceable;


·
            any
                patents will provide meaningful protection to
                us;


·
            others
                will not be able to design around our patents;
                or


·
            our
                patents will provide a competitive advantage or have commercial
                value.





The
      failure to obtain adequate patent protection would have a material adverse
      effect on us and may adversely affect our ability to enter into, or affect
      the
      terms of, any arrangement for the marketing or sale of any product.




***Our
      patents may be challenged by others.***




We
      could
      incur substantial costs in patent proceedings, including interference
      proceedings before the United States Patent and Trademark Office, and comparable
      proceedings before similar agencies in other countries, in connection with
      any
      claims that may arise in the future. These proceedings could result in adverse
      decisions about the patentability of our inventions and products, as well as
      about the enforceability, validity, or scope of protection afforded by the
      patents.





***If
      we are unable to maintain the confidentiality of our trade secrets and
      proprietary knowledge, others may develop technology and products that could
      prevent the successful commercialization of our
      products.***




We
      also
      rely on trade secrets and other unpatented proprietary information in our
      product development activities. To the extent we rely on trade secrets and
      unpatented know-how to maintain our competitive technological position, there
      can be no assurance that others may not independently develop the same or
      similar technologies. We seek to protect our trade secrets and proprietary
      knowledge, in part, through confidentiality agreements with our employees,
      consultants, advisors and contractors. Nevertheless, these agreements may not
      effectively prevent disclosure of our confidential information and may not
      provide us with an adequate remedy in the event of unauthorized disclosure
      of
      such information. If our employees, consultants, advisors, or contractors
      develop inventions or processes independently that may be applicable to our
      products, disputes may arise about ownership of proprietary rights to those
      inventions and processes. Such inventions and processes will not necessarily
      become our property, but may remain the property of those persons or their
      employers. Protracted and costly litigation could be necessary to enforce and
      determine the scope of our proprietary rights. Failure to obtain or maintain
      trade secret protection, for any reason, could harm our business.





***If
      we infringe on the intellectual property rights of others, our business will
      be
      harmed.***




It
      is
      possible that the manufacture, use or sale of our pressure cycling technology
      products or services may infringe patent or other intellectual property rights
      of others. We may be unable to avoid infringement of the patent or other
      intellectual property rights of others and may be required to seek a license,
      defend an infringement action, or challenge the validity of the patents or
      other
      intellectual property rights in court. We may be unable to secure a license
      on
      terms and conditions acceptable to us, if at all. Also, we may not prevail
      in
      any patent or other intellectual property rights litigation. Patent or other
      intellectual property rights litigation is costly and time-consuming, and there
      can be no assurance that we will have sufficient resources to bring any possible
      litigation related to such infringement to a successful conclusion. If we do
      not
      obtain a license under such patents or other intellectual property rights,
      or if
      we are found liable for infringement, or if we are unsuccessful in having such
      patents declared invalid, we may be liable for significant monetary damages,
      may
      encounter significant delays in successfully commercializing and developing
      our
      pressure cycling technology products, or may be precluded from participating
      in
      the manufacture, use, or sale of our pressure cycling technology products or
      services requiring such licenses.





***We
      may be unable to adequately respond to rapid changes in technology and the
      development of new industry standards.***




The
      introduction of products and services embodying new technology and the emergence
      of new industry standards may render our existing pressure cycling technology
      products and related services obsolete and unmarketable if we are unable to
      adapt to change. We may be unable to allocate the funds necessary to improve
      our
      current products or introduce new products to address our customers’ needs and
      respond to technological change. In the event that other companies develop
      more
      technologically advanced products, our competitive position relative to such
      companies would be harmed.





-
          16
          -




***We
      may not be able to compete successfully with others that are developing or
      have
      developed competitive technologies and products.***




A
      number
      of companies have developed, or are expected to develop, products that compete
      or will compete with our products. We compete with companies that have existing
      technologies for the extraction of nucleic acids, proteins and small molecules
      from cells and tissues, including methods such as mortar and pestle, sonication,
      rotor-stator homogenization, French press, bead beating, freezer milling,
      enzymatic digestion, and chemical dissolution. We are aware that there are
      additional companies pursuing new technologies with similar goals to the
      products developed or being developed by us. Some of the companies with which
      we
      now compete, or may compete in the future, have or may have more extensive
      research, marketing, and manufacturing capabilities, more experience in genomics
      and proteomics sample preparation, protein purification, pathogen inactivation,
      immunodiagnostics, and DNA sequencing and significantly greater technical,
      personnel and financial resources than we do, and may be better positioned
      to
      continue to improve their technology to compete in an evolving industry. To
      compete, we must be able to demonstrate to potential customers that our products
      provide improved performance and capabilities. Our failure to compete
      successfully could harm our business and prospects.





***In
      connection with our sale of substantially all of the assets of Boston Biomedica
      to SeraCare Life Sciences in September 2004, we continue to be exposed to
      possible indemnification claims in amounts up to the purchase price for the
      assets, which could prevent us from pursuing our remaining business operations
      in the event an indemnification claim is brought against
      us.***




In
      2004
      we sold substantially all of the assets of Boston Biomedica, our predecessor
      business, to SeraCare Life Sciences. Following the sale, we retained assets
      and
      liabilities relating to our pressure cycling technology business. In connection
      with the sale of assets, we agreed to provide indemnification for breaches
      of
      representations and warranties contained in the asset purchase agreement. Our
      indemnification obligations with respect to most matters have expired, though
      our obligations relating to breaches of certain representations and warranties,
      such as environmental and tax matters, continue to survive. Our indemnification
      obligations are limited by an overall cap equal to the $29 million purchase
      price. If we are required to pay any claims for indemnification from SeraCare
      Life Sciences, we will have less cash available to fund our operations, our
      business will be harmed and it may be difficult to continue our business at
      all.





***Provisions
      in our articles of organization and bylaws and our poison pill may discourage
      or
      frustrate shareholders’ attempts to remove or replace our current
      management.***




Our
      articles of organization and bylaws contain provisions that may make it more
      difficult or discourage changes in our management that our stockholders may
      consider to be favorable. These provisions include:




·
            a
                classified board of directors;


·
            advance
                notice for stockholder nominations to the board of
                directors;


·
            limitations
                on the ability of stockholders to remove directors;
                and


·
            a
                provision that allows a majority of the directors to fill vacancies
                on the
                board of directors.





Our
      shareholders rights agreement, or “poison pill”, may also have the effect of
      discouraging or preventing a change in control.





These
      provisions could prevent or frustrate attempts to make changes in our management
      that our stockholders consider to be beneficial and could limit the price that
      our stockholders might receive in the future for shares of our common
      stock.





***The
      costs of compliance with the reporting obligations of the Exchange Act, and
      with
      the requirements of the Sarbanes-Oxley Act of 2002, may place a strain on our
      limited resources and our management’s attention may be diverted from other
      business concerns.***




As
      a
      result of the regulatory requirements applicable to public companies, we incur
      legal, accounting, and other expenses that are significant in relation to the
      size of our company.  In addition, the Sarbanes-Oxley Act of 2002, as well
      as rules subsequently implemented by the SEC and Nasdaq, have required changes
      in corporate governance and financial disclosure practices of public companies,
      some of which are currently applicable to us and others will or may become
      applicable to us in the future.  These rules and regulations will increase
      our legal and financial compliance costs and may make some activities more
      time-consuming.  These requirements may place a strain on our systems and
      on our management and financial resources.


-
          17
          -




**ITEM
                    1B.**
                  **UNRESOLVED
                      STAFF
                      COMMENTS.**




Not
      Applicable.




**ITEM
                2.**
              ****PROPERTIES.****


Our
      corporate offices are currently located at 14 Norfolk Avenue, South Easton,
      Massachusetts 02375.  In November 2007, we signed an 18 month lease
      agreement commencing in February 2008 pursuant to which we lease approximately
      5,500 square feet of office space, with an option for an additional 18 months.
      We pay approximately $6,500 per month for the use of these facilities.





On
      June
      1, 2006, we entered into a lease agreement with Scheer Partners and the Maryland
      Economic Development Corporation, pursuant to which we lease laboratory and
      office space in Rockville, MD. In August 2007, we extended the lease agreement
      through May 31, 2009. We pay approximately $3,300 per month for the use of
      these
      facilities.





On
      March
      1, 2006, we entered into a sub-lease agreement with Proteome Systems, pursuant
      to which we lease approximately 650 square feet of laboratory space plus 100
      square feet of office space from Proteome Systems in Woburn, Massachusetts.
      The
      lease period extends through December 31, 2008 and we pay approximately $3,200
      per month for the use of these facilities.




**ITEM
                3.**
              **LEGAL
                  PROCEEDINGS.**


We
      are
      not currently involved in any legal proceedings.






**ITEM
                4.**
              **SUBMISSION
                  OF MATTERS TO A VOTE OF SECURITY
                  HOLDERS.**


None.




-
          18
          -


**PART
      II**


**ITEM
                    5.**
                  **MARKET
                      FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER
                      PURCHASES OF EQUITY
                      SECURITIES.**




Our
      common stock is traded on the NASDAQ Capital Market under the trading symbol
      “PBIO”.





The
      following table sets forth, for the periods indicated, the high and low sales
      price per share of common stock, as reported by the NASDAQ Capital Market from
      January 1, 2006 through December 31, 2007.





**Common Stock Price****Fiscal Year Ended December 31, 2006**
              
              **High**
              
              **Low**First
                  Quarter
              
              $
              4.80
              
              $
              3.67Second
                  Quarter
              
              
              4.10
              
              
              3.04Third
                  Quarter
              
              
              3.48
              
              
              2.88Fourth
                  Quarter
              
              
              5.80
              
              
              3.01




**Fiscal Year Ended December 31, 2007**
              
              **High**
              
              **Low**First
                  Quarter
              
              $
              4.35
              
              $
              3.50Second
                  Quarter
              
              
              5.70
              
              
              4.00Third
                  Quarter
              
              
              5.00
              
              
              3.67Fourth
                  Quarter
              
              
              7.78
              
              
              3.98




As
      of
      March 19, 2008, there were 20,000,000 shares of common stock authorized of
      which
      2,192,175 shares were issued and outstanding, and held by 94 stockholders of
      record.




We
      have
      never declared or paid any cash dividends on our common stock and do not plan
      to
      pay any cash dividends in the foreseeable future.  We intend to retain any
      future earnings to finance our growth.





**Recent
      Sales of Unregistered Securities**





On
      November 21, 2007, we completed a private placement, pursuant to which we sold
      an aggregate of 126,750 shares of common stock for a purchase price of $5.00
      per
      share, resulting in gross proceeds to us of approximately $633,750 (the “Private
      Placement”). The shares were issued and sold to a total of 8 accredited
      investors pursuant to a Securities Purchase Agreement entered into as of
      November 21, 2007 (the “Securities Purchase Agreement”).





The
      shares were issued in the Private Placement without registration under the
      Securities Act, in reliance upon the exemption from registration set forth
      in
      Rule 506 of Regulation D (“Regulation D”) promulgated under the Securities Act.
      We based our reliance, in part, upon representations made by each purchaser
      of
      shares, including, but not limited to, representations as to the purchaser’s
      status as an “accredited investor” (as defined in Rule 501(a) under Regulation
      D) and the purchaser’s investment intent. The shares were not offered or sold by
      any form of general solicitation or general advertising; as such terms are
      used
      in Rule 502 under Regulation D. The shares cannot be offered or sold
      in
      the United States absent an effective registration statement or an exemption
      from the registration requirements under applicable federal and state securities
      laws.





In
      connection with the Private Placement, we filed a Registration Statement on
      Form
      S-3 (the “Registration Statement”) covering the resale of the shares purchased
      in the Private Placement. The Registration Statement was declared effective
      on
      January 22, 2008.





**Repurchases
      by Pressure BioSciences**





We
      did
      not repurchase any of our equity securities during the fourth quarter of 2007.





**Equity
      Compensation Plan Information**





The
      information required by this Item 5 with respect to securities authorized for
      issuance under equity compensation plans is set forth in Part III, Item 12
      of
      this Form 10-K.




-
          19
          -




**ITEM
                6.**
              ****SELECTED
                  FINANCIAL
                  DATA.****




Not
      Applicable.





**ITEM
                7.**
            ****MANAGEMENT’S
                DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                OPERATION.****




**OVERVIEW**




We
        are a
        life sciences company focused on the development and commercialization of
        a
        novel, enabling, platform technology called pressure cycling technology (“PCT”).
        PCT uses cycles of hydrostatic pressure between ambient and ultra-high levels
        (up to 35,000 psi and greater) to control bio-molecular interactions.
 
 Our
        pressure cycling technology uses internally developed instrumentation that
        is
        capable of cycling pressure between ambient and ultra-high levels at controlled
        temperatures to rapidly and repeatedly control the interactions of
        bio-molecules. Our instrument, the Barocycler®, and our internally developed
        consumables product line, which includes PULSE (Pressure Used to Lyse Samples
        for Extraction) Tubes as well as the ProteoSolveLRSTM kit
        for
        the detergent-free extraction of proteins from lipid-rich samples, together
        make
        up the PCT Sample Preparation System (“PCT SPS”).





Our
      pressure cycling technology employs a unique approach that we believe has the
      potential for broad applications in a number of established and emerging life
      sciences areas, including;





-
            sample
                preparation for genomic, proteomic, and small molecule
                studies;


-
            pathogen
                inactivation;


-
            protein
                purification;


-
            control
                of chemical (enzymatic) reactions; and


-
            immunodiagnostics.




Since
      we
      began operations as Pressure BioSciences in February 2005, we have focused
      substantially all of our research and development and commercialization efforts
      on sample preparation for genomic, proteomic, and small molecule
      studies.





Our
      business strategy is to commercialize pressure cycling technology in the area
      of
      sample preparation for genomic, proteomic, and small molecule studies (“sample
      preparation”). We also plan to pursue the further development and
      commercialization of PCT in other life sciences applications, which could
      include working with various strategic partners that have greater scientific,
      and regulatory, expertise in the respective applications than we
      do.





To
      support our current strategy, our primary focus in 2007 was the execution of
      our
      commercialization plan for PCT in sample preparation. We increased our spending
      in important areas of our business during 2007, including increased expenses
      associated with additional staff in the areas of sales and research and
      development, to support our sales expansion and increased research and
      development activities.





If
      we are
      successful commercializing our technology in the sample preparation market,
      we
      believe that our financial results will be positively affected by a combination
      of the revenue from the sale, lease, and rental of the Barocycler instruments,
      and by the recurring revenue streams that we hope to realize from the sale
      of
      the single-use PULSE Tubes, PCT-dependent kits (such as ProteoSolve LRS ),
      and  extended
      service contracts on our instrumentation. We believe the recurring revenue
      streams that could be generated from our instruments in the field is a very
      important component of our future financial success. Therefore, we believe
      that
      in the short-term it is more important for us to focus on increasing the number
      of installed Barocyclers in the field than it is for us to record revenue in
      the
      current period. To this end, we have offered our prospective customers the
      opportunity to lease or rent the Barocycler instruments. While these
      arrangements do not provide us with the immediate revenue of a sale, they do
      serve to expand the utilization of PCT and they provide a stream of revenue
      from
      the monthly rental income and the sale of consumable products. We define sales,
      leases, and rentals of Barocycler instruments as revenue-generating
      installations.





-
          20
          -




We
      also
      derive revenues from Small Business Innovation Research (“SBIR”) grants awarded
      to us by the National Institutes of Health. In September 2006, and in March
      2007, we received SBIR Phase I grants in the aggregate amount of $300,000.
      These
      grants have funded experiments to demonstrate the feasibility of using pressure
      cycling technology in various applications in the life sciences. If our work
      in
      SBIR Phase I grants is successful, then we expect to have the opportunity to
      apply for larger NIH SBIR Phase II grants. Additionally, if our work with the
      SBIR grants is successful, the publication of application notes in specific
      areas of research should further support our commercialization
      efforts.





**RESULTS
      OF OPERATIONS**





**Years
      Ended December 31, 2007 as compared to 2006**





*Revenue*





We
      had
      total revenue of $645,870 in the year ended December 31, 2007 as compared to
      $210,289 in the prior year.





Revenue
      from the sale of PCT products and services was $399,787 in 2007 as compared
      to
      $210,289 in 2006. This increase in revenue in 2007 was driven primarily by
      the
      installation of a total of 20 Barocycler instruments during 2007 as compared
      to
      eight in the prior year. Although the number of instruments that we installed
      more than doubled in 2007 as compared to 2006, the increase in revenue was
      not
      as significant. During 2006, all of the instruments installed were the higher
      priced NEP3229 model while during 2007 many of the instruments installed were
      the lower priced NEP2320 model. Additionally, in 2007 many of our installations
      were completed pursuant to lease or rental agreements rather than outright
      sales. When we install instrumentation under lease or rental agreements, we
      record the revenue over the life of the agreement, generally 12 months or 36
      months.





We
      expect
      the number of units installed will continue to increase in future periods as
      we
      continue to commercialize our technology. We also expect that some portion
      of
      future installations will be for the smaller, lower priced, Barocycler NEP2320
      model and some will be placed under lease or short-term rental agreements.
      Therefore, the average revenue per installation may fluctuate from period to
      period as we continue to drive our installed base and commercialize PCT.





During
      2007, we recorded $246,083 of grant revenue. This revenue was earned in
      connection with our research and development efforts performed, under the two
      SBIR Phase I grants that we were awarded during 2006 and 2007. During 2006,
      we
      did not record any grant revenue.





*Cost
      of PCT Products and Services*





The
      cost
      of PCT products and services was $209,050 for the year ended December 31, 2007
      compared to $165,233 for the comparable period in 2006. This decrease in overall
      cost of goods sold as a percentage of revenue is due to a number of factors.
      The
      first factor was the third quarter 2007 sale of four prototype Barocycler
      NEP2320 instruments. These units were prototypes and therefore the costs
      associated with development and assembly of these instruments were recorded
      as
      research and development expense, as such costs were incurred. The second factor
      that contributed to an increase in overall gross margin in 2007 relative to
      2006
      was a shift in the product mix to include an increasing number of consumables
      and the sale of several production Barocycler NEP2320 units, which have a higher
      gross margin than the NEP3229.





We
      believe that our cost of PCT Products and Services will continue to improve
      as a
      percentage of revenue as we continue to install more instrumentation, and sell
      more consumable products, such as PULSE Tubes and ProteoSolve LRS kits.
      However, we expect our gross margin may fluctuate from period to period as
      we
      continue to sell, lease, or rent a varying mix of Barocycler instrumentation
      and
      consumable products.





-
          21
          -




*Research
      and Development*





Research
      and development expenditures increased to $2,022,730 during 2007 from $1,429,711
      in 2006. This increase was primarily due to a significant increase in headcount
      from an average of three research and development employees during 2006 to
      an
      average of 10 in 2007. Consistent with our plans to increase our research and
      development capabilities, the growth in our staff has allowed us to perform
      more
      experiments and provide a higher level of support to our collaboration partners,
      and to our newly hired sales team. We believe these efforts are important to
      the
      continued development and commercialization of PCT. Also contributing to the
      increase in research and development expense was the approximate $400,000 that
      we incurred in the development of the Barocycler NEP2320. In addition to
      developing a new product and a demonstration instrument for our sales force,
      this expenditure has resulted in the development of the core technology required
      to create future pneumatic (air driven) PCT instrumentation. We believe that
      pneumatic pressure technology will allow us to more easily and rapidly develop
      the smaller, portable, less expensive instruments that we believe represents
      an
      additional significant market opportunity.





Research
      and development expense included $141,115 and $181,609 of non-cash, stock-based
      compensation expense related to Statement of Financial Accounting Standards
      (“SFAS”) 123R “ *Share-Based
      Payment”* (“SFAS
      123R”) in 2007 and 2006, respectively.





We
      plan
      to reduce the level of hiring in 2008, relative to 2007. Therefore, we expect
      our spending in this area to increase less significantly than it has in the
      prior year. We believe that with our existing staff, we can continue to pursue
      research and development programs, and continue to invest in our intellectual
      property portfolio, in the sample preparation area.





*Selling
      and Marketing*





Selling
      and marketing expenses increased to $1,386,519 in 2007 from $528,265 for the
      year ended December 31, 2006. In March 2007 we announced our plans to begin
      active commercialization of PCT. As part of this plan, we outlined our intent
      to
      build a targeted US-based sales force. During 2007, we completed the hiring
      of
      six additional regional directors (bringing the total to seven) and continued
      to
      increase our spending in marketing, and sales support. Additionally, we shifted
      our technical services department into the sales and marketing function to
      reflect a shift in departmental responsibilities.





Selling
      and marketing expense included $70,770 and $44,086 of non-cash, stock-based
      compensation expense related to SFAS 123R in 2007 and 2006,
      respectively.




We
      expect
      that selling and marketing expense will continue to increase throughout 2008
      in
      support of our commercialization efforts. We also plan to continue the expansion
      of our marketing programs and the further development of our foreign
      distribution network.





*General
      and Administrative*





General
      and administrative costs totaled $2,174,739 in the year ended December 31,
      2007,
      as compared to $2,145,196 in 2006. Our general and administrative costs remained
      relatively flat despite an increase in spending in the areas of investor
      relations, Sarbanes-Oxley compliance, and legal costs associated with our
      intellectual property. These increases were almost entirely offset by a decrease
      in non-cash, stock-based compensation expense related to SFAS 123R. In 2007,
      our
      SFAS 123R general and administrative expense was $150,479; in 2006, our general
      and administrative SFAS 123R expense was $424,628. The decrease in general
      and
      administrative SFAS 123R expense was due to the fact that the outside members
      of
      our Board of Directors did not receive any stock options in 2007. The expense
      related to the stock option grants to outside members of our Board of Directors
      during 2006 was $313,071.





We
      expect
      general and administrative spending in 2008 to be approximately the same as
      it
      was in 2007. We will continue to incur costs in support of our investor
      relations programs, Sarbanes-Oxley compliance, and other costs associated with
      being a publicly-traded company, and some continued investment in the
      development of our infrastructure.




-
          22
          -


*Operating
      Loss from Continuing Operations*





The
      operating loss from continuing operations was $5,147,168 in 2007, as compared
      to
      $4,058,116 in the year ended December 31, 2006. The $1,089,052 increase relates
      primarily to an increase in spending in the research and development and selling
      and marketing areas of our business, in support of our development and
      commercialization of PCT.





Included
      in our operating loss was $367,110 and $660,278 of non-cash, stock-based
      compensation expense related to SFAS 123R in 2007 and 2006, respectively.





We
      expect
      our operating loss in 2008 to be higher than the operating loss incurred in
      2007, due primarily to expected increased spending in our sales and marketing
      activities and, to a lesser extent, our research and development activities.
      We
      do, however, expect that the gross profit from increasing revenues will mitigate
      the impact of our increased spending on our overall operating loss.





*Realized
      gain of sale on securities held for sale*





During
      2007, we recorded a gain on sale of securities of $2,028,720 in connection
      with
      the sale of our remaining 513,934 shares of Panacos Pharmaceuticals common
      stock. In 2006, we realized a gain of $517,938 in connection with the sale
      of
      57,900 shares of Panacos Pharmaceuticals common stock. As of December 31, 2007,
      we no longer held any shares of Panacos Pharmaceuticals common stock.





*Interest
      Income*





Interest
      income totaled $286,600 for the year ended December 31, 2007, as compared to
      interest income of $381,713 in 2006.  The prior year period included
      approximately $100,000 of interest income from our chief executive officer
      in
      connection with his loan payable to us. This Note was paid in full in December
      2006.





*Income
      Tax Benefit from Continuing Operations*





For
      the
      year ended December 31, 2007 we recorded a benefit for income taxes from
      continuing operations of $520,214. Despite our history of operating losses,
      we
      recorded this benefit due to our expected ability under federal income tax
      law
      to carry back current operating losses to offset taxable income that was
      recorded in 2005. During 2006, we recorded a benefit for income taxes from
      continuing operations of $745,354.





We
      do not
      expect to record any income tax benefit for the foreseeable future due to the
      fact that we are no longer able to carry back current losses against taxable
      income from prior periods and because we expect our operating losses to continue
      for several years. If we are successful commercializing PCT and if we are able
      to generate operating income, then we may be able to utilize the net operating
      loss carry-forwards that we generate.





*Gain
      on Sale of Net Assets Related to Discontinued Operations*





During
      2007, we realized a gain on the sale of Source Scientific, LLC of $1,155,973.
      This gain is comprised of the $378,503 charge that we recorded in the first
      quarter of 2007 under the provisions of Staff Accounting Bulletin (“SAB”) Topic
      5E, *“Accounting
      for Divestiture of a Subsidiary or Other Business Operation* (“SAB
      Topic 5E”) and the gain of $1,534,476, net of income taxes of $218,060, that we
      recorded during the second quarter of 2007, the period in which we completed
      the
      sale.





We
      recorded this gain in connection with the receipt on May 29, 2007 of $1,780,071
      from Mr. Richard W. Henson and Mr. Bruce A. Sargeant, the principals of Source
      Scientific, LLC, as full payment for their purchase of our remaining interest
      in
      that business. During 2006, we accounted for our investment in Source
      Scientific, LLC under the provisions of SAB Topic 5E. In accordance with SAB
      Topic 5E, we were to record the losses of Source Scientific, LLC, to the extent
      they exceeded cumulative income for the year. During 2006, Source Scientific,
      LLC, was never in a cumulative loss position therefore we did not record any
      loss in connection with our interest in Source Scientific, LLC.





*Net
      Loss*





Our
      net
      loss in 2007 was $1,155,661 as compared to a net loss of $2,413,111 in 2006.
      This decrease in net loss was due to an increase in operating expenses of the
      business that was more than offset by the gain in the sale of marketable
      securities and the gain in the sale of assets related to discontinued
      operations. Without these non-recurring items, our net loss in 2007 would have
      exceeded that recorded in 2006.




-
          23
          -




We
      expect
      that our net loss in 2008 will be significantly higher than it was in 2007.
      Our
      expectation of an increase in net loss is based upon plans to increase operating
      costs relative to 2007 in our selling and marketing and, to a lesser extent,
      our
      research and development activities. Additionally, our net loss in 2008 will
      not
      be mitigated by the gain on sale of marketable securities and the gain on sale
      of assets related to discontinued operations, as was the case in 2007. Finally,
      during 2008 we do not expect to record a benefit for income taxes as we did
      in
      2007.




**LIQUIDITY
      AND FINANCIAL CONDITION**





As
      of
      December 31, 2007, our working capital position was $5,933,822, the primary
      components of which were cash and cash equivalents, income tax receivable,
      prepaid expenses and deposits on open purchase orders for the production of
      Barocycler instruments, partially offset by accounts payable, accrued employee
      compensation, other accrued expenses, and accrued income taxes. As of December
      31, 2006, our working capital position was $5,770,086, the primary components
      of
      which were cash and cash equivalents, income tax receivable, prepaid expenses
      and other current assets, partially offset by accounts payable, accrued employee
      compensation, other accrued expenses, and accrued income taxes. The prior year
      working capital balance excluded the $2,060,875 of investment in marketable
      securities, and the related deferred tax liability of $669,520, that we had
      classified as current.





This
      increase in working capital of $163,736 is due primarily to the receipt of
      cash
      proceeds from the sale of our remaining shares in Panacos Pharmaceuticals common
      stock, our receipt of proceeds from the sale of our ownership interest in Source
      Scientific, LLC and the sale of 126,750 shares of our common stock in November
      2007, partially offset by our utilization of working capital to fund our
      operations.





We
      expect
      our working capital position to decline as we fund our operations from our
      cash
      and cash equivalents. We believe that we have sufficient liquidity to fund
      our
      operations at their current level, and with planned increases in selected areas
      of our business, into early 2009. The extent to which we increase our
      operational costs is dependent upon our judgment of the investment required
      to
      successfully commercialize PCT and our ability to secure additional funding
      through equity or debt financings.





Net
      cash
      used in continuing operations during 2007 was $3,896,422 as compared to net
      cash
      used in continuing operations of $2,102,976 during 2006. The cash used in
      operations in 2007 included our net loss, an increase in deposits on open
      purchase orders, inventory and accounts receivable, partially offset by a
      decrease in income tax receivable and an increase in accrued employee
      compensation. We expect net cash used in continuing operations to increase
      in
      2008 as we increase our selling and marketing and research and development
      activities.




Net
      cash
      provided by investing activities during 2007 was $1,852,482 as compared to
      $452,854 in the prior year. The cash generated in 2007 was entirely from the
      sale of 513,934 shares of Panacos Pharmaceuticals common stock, partially offset
      by purchases of fixed assets. The cash generated in the same period in 2006
      was
      entirely from the sale of 57,900 shares of Panacos Pharmaceuticals common stock,
      also partially offset by purchases of fixed assets. We expect that our
      investment in fixed assets will increase in 2008 as we continue to increase
      our
      staff and operating facilities.





Net
      cash
      generated from financing activities during 2007 was $571,133 and relates to
      the
      sale of 126,750 shares of our common stock to 8 non-affiliated investors
      pursuant to a private placement that we completed in November 2007. Net cash
      used in financing activities in 2006 included $323,158 to purchase 110,889
      shares of our common stock from unaffiliated shareholders for an average price
      of $2.91 per share, partially offset by proceeds generated by the exercise
      of
      options to purchase 2,000 shares of our common stock by a Director. The stock
      purchase from the unaffiliated shareholders was made pursuant to the
      authorization of our Board of Directors in September 2006.





Net
      cash
      provided by discontinued operations during 2007 of $1,562,011 was due to the
      completion of the divestiture of Source Scientific, LLC. During the same period
      in 2006, we received cash from discontinued operations of $886,390. This amount
      was due entirely to the receipt of the final escrow payment in connection with
      the 2004 sale of the Boston Biomedica core businesses to SeraCare Life Sciences,
      Inc.




-
          24
          -




**CRITICAL
      ACCOUNTING POLICIES**





*Use
      of Estimates*





To
      prepare our consolidated financial statements in conformity with accounting
      principles generally accepted in the United States of America, we are required
      to make significant estimates and assumptions that affect the reported amounts
      of assets and liabilities and disclosure of contingent assets and liabilities
      at
      the date of the financial statements and the reported amounts of revenues and
      expenses during the reporting period. In addition, significant estimates were
      made in projecting future cash flows to quantify impairment of assets, deferred
      tax assets, the costs associated with fulfilling our warranty obligations for
      the instruments that we sell, and the estimates employed in our calculation
      of
      fair value of stock options awarded. We base our estimates on historical
      experience and on various other assumptions that we believe to be reasonable
      under the circumstances, the results of which form the basis for making
      judgments about the carrying values of assets and liabilities that are not
      readily apparent from other sources. Actual results could differ from the
      estimates and assumptions used.





*Revenue
      Recognition*





We
      recognize revenue in accordance with the Securities and Exchange Commission’s
      (“SEC”) Staff Accounting Bulletin (“SAB”) No. 104, *Revenue
      Recognition* ("SAB
      104"). Revenue is recognized when realized or earned when all the following
      criteria have been met: persuasive evidence of an arrangement exists; delivery
      has occurred and risk of loss has passed to the customer; the seller’s price to
      the buyer is fixed or determinable; and collectibility is reasonably
      assured.




Our
      current instruments, the Barocycler NEP3229 and NEP2320, require a basic level
      of instrumentation expertise to set-up for initial operation. To support a
      favorable first experience for our customers, we send a representative to the
      customer site to install every Barocycler that we sell through our domestic
      sales force. The installation process includes uncrating and setting up the
      instrument and conducting an introductory user training course. Product revenue
      related to current Barocycler instrumentation is recognized upon the
      installation of our instrumentation at the customer location. Product revenue
      related to sales of PCT products to our foreign distributors is recognized
      upon
      shipment through a common carrier. We provide for the expected costs of warranty
      upon the recognition of revenue for the sales of our instrumentation. Our sales
      arrangements do not provide a right of return to our customers. Product revenue
      related to our consumable products such as PULSE Tubes and
      ProteoSolve LRS kits is
      recorded upon shipment through a common carrier.  Shipping costs are
      included in the costs of sales. Any shipping costs billed to customers are
      recognized as revenue.





In
      accordance with the Financial Accounting Standards Board (“FASB”) Statement of
      Financial Accounting Standards (“SFAS”) No. 13, *“Accounting
      for Leases”* ,
      we
      account for our lease agreements under the operating method. We record revenue
      over the life of the lease term and we record depreciation expense on a
      straight-line basis over the thirty-six month estimated useful life of the
      Barocycler instrument. The depreciation expense associated with assets under
      lease agreement is included in the “Cost of PCT products and services” line item
      in our Consolidated Statements of Operations. We pay all maintenance costs
      associated with the instrument during the term of the leases.





Revenue
      from government grants is recorded when expenses are incurred under the grant
      in
      accordance with the terms of the grant award.





Our
      transactions sometimes involve multiple elements (i.e., products and services).
      Revenue under multiple element arrangements is recognized in accordance with
      Emerging Issues Task Force (“EITF”) Issue No. 00-21, *“Accounting
      for Revenue Arrangements with Multiple Deliverables”* .
      Under
      this method, if an element is determined to be a separate unit of accounting,
      the revenue for the element is based on fair value and determined by vendor
      specific objective evidence (“VSOE”), and recognized at the time of delivery. If
      an arrangement includes undelivered elements that are not essential to the
      functionality of the delivered elements, we defer the fair value of the
      undelivered elements with the residual revenue allocated to the delivered
      elements. Fair value is determined based upon the price charged when the element
      is sold separately. If there is not sufficient evidence of the fair value of
      the
      undelivered elements, no revenue is allocated to the delivered elements and
      the
      total consideration received is deferred until delivery of those elements for
      which objective and reliable evidence of the fair value is not available. We
      provide certain customers with extended service contracts and, to the extent
      VSOE is established, these service revenues are recognized ratably over the
      life
      of the contract which is generally one to four years.




-
          25
          -




*Intangible
      Assets*





We
      have
      classified as intangible assets, costs associated with the fair value of certain
      assets of businesses acquired.  Intangible assets relate to the remaining
      value of acquired patents associated with PCT. The cost of these acquired
      patents is amortized on a straight-line basis over sixteen years.  We
      annually review our intangible assets for impairment.  When impairment is
      indicated, any excess of carrying value over fair value is recorded as a
      loss.  An impairment analysis of intangible assets as of December 31, 2007
      concluded they were not impaired.





*Long-Lived
      Assets and Deferred Costs*





In
      accordance with SFAS No. 144, *“Accounting
      for the Impairment or Disposal of Long-Lived Assets”* ,
      if
      indicators of impairment exist, we assess the recoverability of the affected
      long-lived assets by determining whether the carrying value of such assets
      can
      be recovered through the undiscounted future operating cash flows related to
      the
      long-lived assets. If impairment is indicated, we measure the amount of such
      impairment by comparing the carrying value of the asset to the fair value of
      the
      asset and record the impairment as a reduction in the carrying value of the
      related asset and a charge to operating results. While our current and
      historical operating losses and cash flow are indicators of impairment, we
      performed an impairment analysis at December 31, 2007 and determined that our
      long-lived assets were not impaired.




**RECENT
      ACCOUNTING STANDARDS**





In
      September 2006, FASB issued SFAS 157, “Fair Value Measurements”. SFAS No. 157
      establishes a formal framework for measuring fair value under GAAP and expands
      on disclosure of fair value measurements. Although SFAS No. 157 applies to
      and
      amends the provisions of existing FASB and AICPA pronouncements, it does not,
      of
      itself, require any new fair value measurements, nor does it establish valuation
      standards. SFAS No. 157 applies to all other accounting pronouncements requiring
      or permitting fair value measurements, except for; SFAS No. 123R, share based
      payment and related pronouncements, the practicability exceptions to fair value
      determinations allowed by various other authoritative pronouncements, and AICPA
      Statements of Position 97-2 and 98-9 that deal with software revenue
      recognition. This statement is effective for financial statements issued for
      fiscal years beginning after November 15, 2007, and interim periods within
      those
      fiscal years.





In
      December 2007, the FASB issued SFAS 141 (revised 2007), “Business *Combinations”* (“SFAS
      141(R)”) and SFAS No. 160, *“Non-controlling
      Interests in Consolidated Financial Statements – an amendment of ARB
      No. 51”* (“SFAS
      160”).





SFAS
      141(R) significantly changes the accounting for business combinations. Under
      SFAS 141(R), an acquiring entity will be required to recognize all the assets
      acquired and liabilities assumed in a transaction at the acquisition-date at
      fair value with limited exceptions. SFAS 141(R) further changes the accounting
      treatment for certain specific items, including:




-
            Acquisition
                costs will be generally expensed as incurred;




-
            Noncontrolling
                interests (formerly known as “minority interests” – seeSFAS
                160 discussion below) will be valued at fair value at the acquisition
                date;




-
            Acquired
                contingent liabilities will be recorded at fair value at the acquisition
                date and subsequently measured at either the higher of such amount
                or the
                amount determined under existing guidance for non-acquired contingencies;




-
            In-process
                research and development will be recorded at fair value as an
                indefinite-lived intangible asset at the acquisition date;




-
            Restructuring
                costs associated with a business combination will be generally expensed
                subsequent to the acquisition date; and




-
            Changes
                in deferred tax asset valuation allowances and income tax uncertainties
                after the acquisition date generally will affect income tax expense.




-
            SFAS
                141(R) includes a substantial number of new disclosure requirements.
                FAS
                141(R) applies prospectively to business combinations for which the
                acquisition date is on or after January 1, 2009.




-
          26
          -




SFAS
      160
      establishes new accounting and reporting standards for the non-controlling
      interest in a subsidiary and for the deconsolidation of a subsidiary.
      Specifically, this statement requires the recognition of non-controlling
      interests (minority interests) as equity in the consolidated financial
      statements and separate from the parent’s equity. The amount of net income
      attributable to non-controlling interests will be included in consolidated
      net
      income on the face of the income statement. SFAS 160 clarifies that changes
      in a
      parent’s ownership interest in a subsidiary that does not result in
      deconsolidation are treated as equity transactions if the parent retains its
      controlling financial interest. In addition, this statement requires that a
      parent recognize a gain or loss in net income when a subsidiary is
      deconsolidated. Such gain or loss will be measured using the fair value of
      the
      non-controlling equity investment on the deconsolidation date. SFAS 160 also
      includes expanded disclosure requirements regarding the interests of the parent
      and its non-controlling interest.





SFAS
      160
      is effective for fiscal years, and interim periods within such year, beginning
      January 1, 2009. Early adoption of both SFAS 141(R) and SFAS 160 is
      prohibited. We do not expect that either SFAS 141(R) or SFAS 160 will have
      a
      material affect on our consolidated results of operations and financial
      condition.




-
          27
          -




**ITEM
              7A.**
            QUANTITATIVE
                AND QUALITATIVE DISCLOSURES ABOUT MARKET
                RISK.




Not
      Applicable




-
          28
          -




**ITEM
              8.**
            **FINANCIAL
                STATEMENTS AND SUPPLEMENTARY
                DATA.**




**PRESSURE
      BIOSCIENCES, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      BALANCE SHEETS**


**DECEMBER
      31, 2007 and 2006**


**2007**
              
              **2006**ASSETSCURRENT
                  ASSETSCash
                  and cash equivalents
              
              $
              5,424,486
              
              $
              5,335,282Accounts
                  receivable
              
              
              118,471
              
              
              37,495Inventories
              
              
              172,548
              
              
              19,658Deposits
              
              
              553,483
              
              
              175,300Prepaid
                  income taxes
              
              
              56,863
              
              
              38,687Income
                  tax receivable
              
              
              249,541
              
              
              710,013Prepaid
                  expenses and other current assets
              
              
              94,783
              
              
              71,476Investments
                  in marketable securities
              
              
              -
              
              
              2,060,875Total
                  current assets
              
              
              6,670,175
              
              
              8,448,786PROPERTY
                  AND EQUIPMENT, NET
              
              
              257,797
              
              
              207,696OTHER
                  ASSETSIntangible
                  assets, net
              
              
              328,290
              
              
              376,922Assets
                  of discontinued operation
              
              
              -
              
              
              1,420,996Total
                  other assets
              
              
              328,290
              
              
              1,797,918TOTAL
                  ASSETS
              
              $
              7,256,262
              
              $
              10,454,400LIABILITIES
                  AND STOCKHOLDERS' EQUITYCURRENT
                  LIABILITIESAccounts
                  payable
              
              $
              152,729
              
              $
              174,289Accrued
                  employee compensation
              
              
              377,190
              
              
              242,497Accrued
                  professional fees and other expenses
              
              
              186,840
              
              
              150,978Income
                  taxes payable
              
              
              4,519
              
              
              45,962Deferred
                  taxes
              
              
              -
              
              
              669,520Deferred
                  revenue
              
              
              15,075
              
              
              4,099Total
                  current liabilities
              
              
              736,353
              
              
              1,287,345LONG
                  TERM LIABILITIESDeferred
                  revenue
              
              
              6,767
              
              
              9,126Liabilities
                  of discontinued operation
              
              
              -
              
              
              1,042,493Total
                  long term liabilities
              
              
              6,767
              
              
              1,051,619TOTAL
                  LIABILITIES
              
              
              743,120
              
              
              2,338,964COMMITMENTS
                  AND CONTINGENCIES (Note 9)STOCKHOLDERS'
                  EQUITYPreferred
                  stock; 1,000,000 shares authorized; 0 outstanding
              
              
              -
              
              
              -Common
                  stock, $.01 par value; 20,000,000 shares authorized; 2,192,175
                  and
                  2,065,425 shares issued and outstanding
              
              
              21,922
              
              
              20,654Additional
                  paid-in capital
              
              
              6,284,616
              
              
              5,347,641Accumulated
                  other comprehensive income
              
              
              -
              
              
              1,384,876Retained
                  earnings
              
              
              206,604
              
              
              1,362,265Total
                  stockholders' equity
              
              
              6,513,142
              
              
              8,115,436TOTAL
                  LIABILITIES AND STOCKHOLDERS' EQUITY
              
              $
              7,256,262
              
              $
              10,454,400




The
      accompanying notes are an integral part of these consolidated financial
      statements




-
          29
          -




**PRESSURE
      BIOSCIENCES, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


**FOR
      THE YEARS ENDED DECEMBER 31, 2007 AND 2006**





**For the Year Ended****December 31,****2007**
            
            **2006**REVENUE:PCT
                Products, services, other
            
            $
            399,787
            
            $
            210,289Grant
                revenue
            
            
            246,083
            
            
            -Total
                revenue
            
            
            645,870
            
            
            210,289COSTS
                AND EXPENSES:Cost
                of PCT products and services
            
            
            209,050
            
            
            165,233Research
                and development
            
            
            2,022,730
            
            
            1,429,711Selling
                and marketing
            
            
            1,386,519
            
            
            528,265General
                and administrative
            
            
            2,174,739
            
            
            2,145,196Total
                operating costs and expenses
            
            
            5,793,038
            
            
            4,268,405Operating
                loss from continuing operations
            
            
            (5,147,168
            )
            
            (4,058,116
            )OTHER
                INCOME:Realized
                gain on securities available for sale
            
            
            2,028,720
            
            
            517,938Interest
                income
            
            
            286,600
            
            
            381,713Total
                other income
            
            
            2,315,320
            
            
            899,651Loss
                from continuing operations before income taxes
            
            
            (2,831,848
            )
            
            (3,158,465
            )Income
                tax benefit from continuing operations
            
            
            520,214
            
            
            745,354Loss
                from continuing operations
            
            
            (2,311,634
            )
            
            (2,413,111
            )DISCONTINUED
                OPERATIONS:Gain
                on sale of net assets related to discontinued operations (net of
                income
                tax of $218,060)
            
            
            1,155,973
            
            
            -Net
                loss
            
            $
            (1,155,661
            )
            $
            (2,413,111
            )Loss
                per share from continuing operations - basic and diluted
            
            $
            (1.11
            )
            $
            (1.01
            )Income
                per share from discontinued operations - basic and diluted
            
            
            0.55
            
            
            -Net
                loss per share - basic and diluted
            
            $
            (0.56
            )
            $
            (1.01
            )Weighted
                average number of shares used to calculate income (loss) per share
                - basic
                and diluted
            
            
            2,078,657
            
            
            2,396,077




The
      accompanying notes are an integral part of these consolidated financial
      statements




-
          30
          -




**PRESSURE
      BIOSCIENCES, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF COMPREHENSIVE LOSS**


**FOR
      THE YEARS ENDED DECEMBER 31, 2007 AND 2006**


**For
                  the Year Ended****December
                  31,****2007**
              
              **2006**Other
                  Comprehensive LossNet
                  loss
              
              $
              (1,155,661
              )
              $
              (2,413,111
              )Holding
                  gain
              
              
              (27,479
              )
              
              (1,383,417
              )Reclassification
                  of unrealized gain to realized gain on securities during the
                  period
              
              
              (2,028,720
              )
              
              (517,938
              )Unrealized
                  loss on marketable securities
              
              
              (2,056,199
              )
              
              (1,901,355
              )Income
                  tax benefit related to items of other comprehensive loss
              
              
              671,323
              
              
              748,268Total
                  other comprehensive loss, net of taxes
              
              
              (1,384,876
              )
              
              (1,153,087
              )Comprehensive
                  loss
              
              $
              (2,540,537
              )
              $
              (3,566,198
              )




The
      accompanying notes are an integral part of these consolidated financial
      statements




-
          31
          -




**PRESSURE
      BIOSCIENCES, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY**


**FOR
      THE YEARS ENDED DECEMBER 31, 2007 AND 2006**





AccumulatedCommon Stock
            
            Additional
            
            Other
            
            Loan Receivable
            
            
            
            Total$.01 Par
            
            Paid-In
            
            Comprehensive
            
            from Officer/
            
            Retained
            
            Stockholders'Shares
            
            Value
            
            Capital
            
            Income
            
            Director
            
            Earnings
            
            EquityBALANCE,
                December 31, 2005
            
            
            2,424,189
            
            $
            24,242
            
            $
            6,027,020
            
            $
            2,537,963
            
            $
            (1,000,000
            )
            $
            3,775,376
            
            $
            11,364,601Stock
                options and other warrants exercised
            
            
            2,000
            
            
            20
            
            
            5,380
            
            
            
            
            
            
            
            
            
            
            
            5,400Interest
                accrued on loan receivable from CEO/Director
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (25,487
            )
            
            
            
            
            (25,487
            )Exchange
                of shares for payoff of loan receivable from CEO/Director
            
            
            (249,875
            )
            
            (2,499
            )
            
            (1,022,988
            )
            
            
            
            
            1,025,487
            
            
            
            
            
            -Repurchase
                shares via stock buy-back program
            
            
            (110,889
            )
            
            (1,109
            )
            
            (322,049
            )
            
            
            
            
            
            
            
            
            
            
            (323,158
            )Stock-based
                compensation
            
            
            
            
            
            
            
            
            660,278
            
            
            
            
            
            
            
            
            
            
            
            660,278Net
                loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (2,413,111
            )
            
            (2,413,111
            )Unrealized
                loss on investments (net of tax)
            
            
            
            
            
            
            
            
            
            
            
            (1,153,087
            )
            
            
            
            
            
            
            
            (1,153,087
            )BALANCE,
                December 31, 2006
            
            
            2,065,425
            
            $
            20,654
            
            $
            5,347,641
            
            $
            1,384,876
            
            $
            -
            
            $
            1,362,265
            
            $
            8,115,436Issuance
                costs relating to private placement
            
            
            
            
            
            
            
            
            (62,617
            )
            
            
            
            
            
            
            
            
            
            
            (62,617
            )Stock
                issued in private placement
            
            
            126,750
            
            
            1,268
            
            
            632,482
            
            
            
            
            
            
            
            
            
            
            
            633,750Stock-based
                compensation
            
            
            
            
            
            
            
            
            367,110
            
            
            
            
            
            
            
            
            
            
            
            367,110Net
                loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (1,155,661
            )
            
            (1,155,661
            )Unrealized
                loss on investments (net of tax)
            
            
            
            
            
            
            
            
            
            
            
            (1,384,876
            )
            
            
            
            
            
            
            
            (1,384,876
            )BALANCE,
                December 31, 2007
            
            
            2,192,175
            
            $
            21,922
            
            $
            6,284,616
            
            $
            -
            
            $
            -
            
            $
            206,604
            
            $
            6,513,142




The
      accompanying notes are an integral part of these consolidated financial
      statements.




-
          32
          -




**PRESSURE
      BIOSCIENCES, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**FOR
      THE YEARS ENDED DECEMBER 31, 2007 AND 2006**





**For the Year Ended****December 31,****2007**
            
            **2006**CASH
                FLOWS FROM OPERATING ACTIVITIES:Net
                loss
            
            $
            (1,155,661
            )
            $
            (2,413,111
            )Less
                gain on sale of discontinued operations
            
            
            (1,155,973
            )
            
            -Loss
                from continuing operations
            
            $
            (2,311,634
            )
            $
            (2,413,111
            )Adjustments
                to reconcile loss to net cash used in operating
                activities:Depreciation
                and amortization
            
            
            179,446
            
            
            146,256Non-cash,
                stock-based compensation expense
            
            
            367,110
            
            
            660,278Loss
                on disposal of property and equipment
            
            
            -
            
            
            42,781Interest
                received with exchange of stock from Director/CEO
            
            
            -
            
            
            (25,487
            )Realized
                gain on sale of marketable securities
            
            
            (2,028,720
            )
            
            (517,938
            )Changes
                in operating assets and liabilities:Accounts
                receivable
            
            
            (80,976
            )
            
            21,303Inventories
            
            
            (152,890
            )
            
            65,549Deposits
            
            
            (378,183
            )
            
            (156,120
            )Income
                tax receivable
            
            
            460,472
            
            
            (178,891
            )Prepaid
                income taxes
            
            
            (18,176
            )
            
            (38,687
            )Prepaid
                expenses and other current assets
            
            
            (23,307
            )
            
            (15,370
            )Accounts
                payable
            
            
            (21,560
            )
            
            117,894Accrued
                employee compensation
            
            
            134,693
            
            
            148,143Other
                accrued expenses
            
            
            10,129
            
            
            44,966Deferred
                revenue
            
            
            8,617
            
            
            13,225Income
                taxes payable
            
            
            (41,443
            )
            
            (17,767
            )Net
                cash used in operating activities from continuing
                operations
            
            
            (3,896,422
            )
            
            (2,102,976
            )CASH
                FLOWS FROM INVESTING ACTIVITIES:Additions
                to property and equipment
            
            
            (180,915
            )
            
            (65,609
            )Proceeds
                from sale of marketable securities
            
            
            2,033,397
            
            
            518,463Net
                cash provided by investing activities from continuing
                operations
            
            
            1,852,482
            
            
            452,854CASH
                FLOWS FROM FINANCING ACTIVITIES:Repurchase
                of common stock
            
            
            -
            
            
            (323,158
            )Proceeds
                from the issuance of common stock
            
            
            571,133
            
            
            5,400Net
                cash provided by (used in) financing activities from continuing
                operations
            
            
            571,133
            
            
            (317,758
            )CASH
                FLOWS FROM DISCONTINUED OPERATIONS:Operating
                cash flows
            
            
            (218,060
            )
            
            (230,915
            )Cash
                flows from investing activities
            
            
            1,780,071
            
            
            1,117,305Net
                cash provided by discontinued operations
            
            
            1,562,011
            
            
            886,390CHANGE
                IN CASH AND CASH EQUIVALENTS:
            
            
            89,204
            
            
            (1,081,490
            )Cash
                and cash equivalents, beginning of year
            
            
            5,335,282
            
            
            6,416,772Cash
                and cash equivalents, end of year
            
            $
            5,424,486
            
            $
            5,335,282SUPPLEMENTAL
                INFORMATION:Income
                taxes paid
            
            $
            20,800
            
            $
            230,863Income
                taxes received
            
            
            723,801
            
            
            -




The
      accompanying notes are an integral part of these consolidated financial
      statements




-
          33
          -




**PRESSURE
      BIOSCIENCES, INC. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**As
      of December 31, 2007**





**(1)  Business
      Overview and Management Plans**




We
        are a
        life sciences company focused on the development and commercialization of
        a
        novel, enabling, platform technology called pressure cycling technology (“PCT”).
        PCT uses cycles of hydrostatic pressure between ambient and ultra-high levels
        (up to 35,000 psi and greater) to control bio-molecular interactions.
 
 Our
        pressure cycling technology uses internally developed instrumentation that
        is
        capable of cycling pressure between ambient and ultra-high levels at controlled
        temperatures to rapidly and repeatedly control the interactions of
        bio-molecules. Our instrument, the Barocycler®, and our internally developed
        consumables product line, which includes PULSE (Pressure Used to Lyse Samples
        for Extraction) Tubes as well as the ProteoSolveLRSTM kit
        for
        the detergent-free extraction of proteins from lipid-rich samples, together
        make
        up the PCT Sample Preparation System (“PCT SPS”).
 We
          have
          experienced negative cash flows from operations with respect to our pressure
          cycling technology business since its inception. As of December 31, 2007,
          we had
          available cash of approximately $5.4 million. We believe that we have sufficient
          liquidity to fund our operations at their current level, and with planned
          increases in selected areas of our business, into early 2009. The extent
          to
          which we increase our operational costs is dependent upon our judgment
          of the
          investment required to successfully commercialize PCT and our ability to
          secure
          additional funding through equity or debt financing. If we are unable to
          increase the number of installations of Barocycler instruments and if we
          are
          unable to secure additional funding through equity or debt financing we
          will be
          prepared to reduce our spending. We have developed plans based on these
          contingencies and such reductions of spending will include the delay of
          certain
          research and development projects and the reduction of the cost of our
          workforce. We believe that implementing such changes to our business plan
          will
          allow us to extend our existing cash balances into the middle of 2009,
          without
          significantly impacting our short-term commercialization efforts.





**(2)  Summary
      of Significant Accounting Policies**





***(i) Principles
      of Consolidation***





The
      consolidated financial statements include the accounts of Pressure BioSciences,
      Inc., and its wholly-owned subsidiary PBI BioSeq, Inc.





***(ii) Use
      of Estimates***





To
      prepare our consolidated financial statements in conformity with accounting
      principles generally accepted in the United States of America, we are required
      to make significant estimates and assumptions that affect the reported amounts
      of assets and liabilities and disclosure of contingent assets and liabilities
      at
      the date of the financial statements and the reported amounts of revenues and
      expenses during the reporting period. In addition, significant estimates were
      made in projecting future cash flows to quantify impairment of assets, deferred
      tax assets, the costs associated with fulfilling our warranty obligations for
      the instruments that we sell, and the estimates employed in our calculation
      of
      fair value of stock options awarded. We base our estimates on historical
      experience and on various other assumptions that we believe to be reasonable
      under the circumstances, the results of which form the basis for making
      judgments about the carrying values of assets and liabilities that are not
      readily apparent from other sources. Actual results could differ from the
      estimates and assumptions used.





***(iii) Revenue
      Recognition***





We
      recognize revenue in accordance with the Securities and Exchange Commission’s
      (“SEC”) Staff Accounting Bulletin (“SAB”) No. 104, *Revenue
      Recognition* ("SAB
      104"). Revenue is recognized when realized or earned when all the following
      criteria have been met: persuasive evidence of an arrangement exists; delivery
      has occurred and risk of loss has passed to the customer; the seller’s price to
      the buyer is fixed or determinable; and collectibility is reasonably
      assured.




-
          34
          -




**PRESSURE
        BIOSCIENCES, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **As
        of December 31, 2007**




Our
      current instruments, the Barocycler NEP3229 and NEP2320, require a basic level
      of instrumentation expertise to set-up for initial operation. To support a
      favorable first experience for our customers, we send a representative to the
      customer site to install every Barocycler that we sell through our domestic
      sales force. The installation process includes uncrating and setting up the
      instrument and conducting an introductory user training course. Product revenue
      related to current Barocycler instrumentation is recognized upon the
      installation of our instrumentation at the customer location. Product revenue
      related to sales of PCT products to our foreign distributors is recognized
      upon
      shipment through a common carrier. We provide for the expected costs of warranty
      upon the recognition of revenue for the sales of our instrumentation. Our sales
      arrangements do not provide a right of return to our customers. Product revenue
      related to our consumable products such as PULSE Tubes and
      ProteoSolve LRS kits is
      recorded upon shipment through a common carrier. Shipping costs are included
      in
      the costs of sales. Any shipping costs billed to customers are recognized as
      revenue.





In
      accordance with the Financial Accounting Standards Board (“FASB”) Statement of
      Financial Accounting Standards (“SFAS”) No. 13, *“Accounting
      for Leases”* ,
      we
      account for our lease agreements under the operating method. We record revenue
      over the life of the lease term and we record depreciation expense on a
      straight-line basis over the thirty-six month estimated useful life of the
      Barocycler instrument. The depreciation expense associated with assets under
      lease agreement is included in the “Cost of PCT products and services” line item
      in our Consolidated Statements of Operations. We pay all maintenance costs
      associated with the instrument during the term of the leases.





Revenue
      from government grants is recorded when expenses are incurred under the grant
      in
      accordance with the terms of the grant award.





Our
      transactions sometimes involve multiple elements (i.e., products and services).
      Revenue under multiple element arrangements is recognized in accordance with
      Emerging Issues Task Force (“EITF”) Issue No. 00-21, *“Accounting
      for Revenue Arrangements with Multiple Deliverables”* .
      Under
      this method, if an element is determined to be a separate unit of accounting,
      the revenue for the element is based on fair value and determined by vendor
      specific objective evidence (“VSOE”), and recognized at the time of delivery. If
      an arrangement includes undelivered elements that are not essential to the
      functionality of the delivered elements, we defer the fair value of the
      undelivered elements with the residual revenue allocated to the delivered
      elements. Fair value is determined based upon the price charged when the element
      is sold separately. If there is not sufficient evidence of the fair value of
      the
      undelivered elements, no revenue is allocated to the delivered elements and
      the
      total consideration received is deferred until delivery of those elements for
      which objective and reliable evidence of the fair value is not available. We
      provide certain customers with extended service contracts and, to the extent
      VSOE is established, these service revenues are recognized ratably over the
      life
      of the contract which is generally one to four years.




***(iv) Cash
      and Cash Equivalents***





Our
      policy is to invest available cash in short-term, investment grade
      interest-bearing obligations, including money market funds, and bank and
      corporate debt instruments. Securities purchased with initial maturities of
      three months or less are valued at cost plus accrued interest, which
      approximates fair market value, and are classified as cash equivalents.





***(v) Research
      and Development***





Research
      and development costs, which are comprised of costs incurred in performing
      research and development activities including wages and associated employee
      benefits, facilities, consumable products and overhead costs that are expensed
      as incurred. Our research activities are performed at our laboratories in
      Woburn, Massachusetts and Rockville, Maryland and in conjunction with the
      collaboration partner sites.  In support of our research and development
      activities we utilize our Barocycler instruments that are capitalized as fixed
      assets and depreciated over their expected useful life.




-
          35
          -




**PRESSURE
        BIOSCIENCES, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **As
        of December 31, 2007**




***(vi) Inventories***





Inventories
      are valued at the lower of cost or market.  The composition of inventory as
      of December 31, 2007 and 2006 is as follows:





December
                31,2007
            
            2006Raw
                materials
            
            $
            28,115
            
            $
            3,158Finished
                goods
            
            
            144,433
            
            
            16,500Total
            
            $
            172,548
            
            $
            19,658




***(vii) Property
      and Equipment***





Property
      and equipment are stated at cost, less accumulated depreciation. For financial
      reporting purposes, depreciation is recognized using the straight-line method,
      allocating the cost of the assets over their estimated useful lives of three
      years for certain laboratory equipment, from three to five years for management
      information systems and office equipment, and three years for all PCT finished
      units classified as fixed assets.





***(viii) Intangible
      Assets***





We
      have
      classified as intangible assets, costs associated with the fair value of
      acquired intellectual property.  Intangible assets including patents are
      being amortized on a straight-line basis over sixteen years.  We perform a
      quarterly review of our intangible assets for impairment.  When impairment
      is indicated, any excess of carrying value over fair value is recorded as a
      loss. An impairment analysis of intangible assets was performed as of December
      31, 2007. Based on this analysis, we have concluded that no impairment of
      intangible assets had occurred.





***(ix) Long-Lived
      Assets and Deferred Costs***





In
      accordance with the Financial Accounting Standards Board (“FASB”) Statements of
      Financial Accounting Standards (“SFAS”) No. 144, *“Accounting
      for the Impairment or Disposal of Long-Lived Assets”* , if
      indicators of impairment exist, we assess the recoverability of the affected
      long-lived assets by determining whether the carrying value of such assets
      can
      be recovered through the undiscounted future operating cash flows. If impairment
      is indicated, we measure the amount of such impairment by comparing the carrying
      value of the asset to the fair value of the asset and record the impairment
      as a
      reduction in the carrying value of the related asset and a charge to operating
      results. While our current and historical operating losses and cash flow are
      indicators of impairment, we performed an impairment test at December 31, 2007
      and determined that such long-lived assets were not impaired.





***(x) Concentrations***





*Credit
      Risk*





Our
      financial instruments that potentially subject us to concentrations of credit
      risk consist primarily of cash, cash equivalents and trade receivables. We
      have
      cash investment policies which, among other things, limit investments to
      investment-grade securities. We perform ongoing credit evaluations of our
      customers, and the risk with respect to trade receivables is further mitigated
      by the fact that many of our customers are government institutions and
      university labs.





During
      2007 and 2006 our top five customers accounted for 66.4% and 80.0% of our total
      revenues, respectively. During 2007, various agencies of the Federal Government
      of the United States in the aggregate accounted for 54.8% of our total
      revenues.





As
      of
      December 31, 2007 and 2006 our top five accounts receivable accounted for 93.8%
      and 92.4% of our total receivables balance, respectively. As of December 31,
      2007, various agencies of the Federal Government of the United States in the
      aggregate accounted for 40.8% of our total accounts receivable.




-
          36
          -




**PRESSURE
        BIOSCIENCES, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **As
        of December 31, 2007**




*Product
      Supply*





Source
      Scientific, LLC has been our sole contract manufacturer for all of our PCT
      instrumentation. During 2007, however, we initiated several engineering
      initiatives to position us for greater independence from any one supplier,
      and
      we are in the process of developing a network of manufacturers and
      sub-contractors to reduce our reliance on any single supplier. Until we develop
      a broader network of manufacturers and subcontractors, obtaining alternative
      sources of supply or manufacturing services could involve significant delays
      and
      other costs and challenges, and may not be available to us on reasonable terms,
      if at all. The failure of a supplier or contract manufacturer to provide
      sufficient quantities, acceptable quality and timely products at an acceptable
      price, or an interruption of supplies from such a supplier could harm our
      business and prospects.





***(xi) Computation
      of Loss per Share***





Basic
      loss per share is computed by dividing loss available to common shareholders
      by
      the weighted average number of common shares outstanding. Diluted loss per
      share
      is computed by dividing loss available to common shareholders by the weighted
      average number of common shares outstanding plus additional common shares that
      would have been outstanding if dilutive potential common shares had been issued.
      For purposes of this calculation, stock options are considered common stock
      equivalents in periods in which they have a dilutive effect. Stock options
      that
      are anti-dilutive are excluded from this calculation. The following table
      illustrates our computation of loss per share for the years ended December
      31,
      2007 and 2006.





For the Year EndedDecember 31,2007
            
            2006Numerator:Loss
                from continuing operations - basic and diluted
            
            $
            (2,311,634
            )
            $
            (2,413,111
            )Denominator:Weighted
                Average Shares Outstanding, basic and diluted
            
            
            2,078,657
            
            
            2,396,077Loss
                per share from continuing operations - basic and diluted
            
            $
            (1.11
            )
            $
            (1.01
            )Shares
                excluded from calculations
            
            
            211,796
            
            
            118,751





***(xii) Accounting
      for Income Taxes***





Effective
      January 1, 2007, we adopted the provisions of FASB Interpretation
      No. 48, “ *Accounting*  *for
      Uncertainty in Income Taxes - an Interpretation of FASB Statement
      No. 109”* (FIN
      48). FIN
      48
      clarifies the accounting for uncertainty in income taxes recognized in an
      enterprise’s financial statements in accordance with SFAS No. 109, *“Accounting
      for Income Taxes”* .
      This
      interpretation prescribes a recognition threshold and measurement attribute
      for
      the financial statement recognition and measurement of a tax position taken
      or
      expected to be taken in a tax return. FIN 48 also provides guidance on
      de-recognition of tax benefits, classification on the balance sheet, interest
      and penalties, accounting in interim periods, disclosure, and transition. We
      adopted FIN 48 effective January 1, 2007. FIN 48 requires significant
      judgment in determining what constitutes an individual tax position as well
      as
      assessing the outcome of each tax position. Changes in judgment as to
      recognition or measurement of tax positions can materially affect the estimate
      of the effective tax rate and consequently, affect our operating results. Prior
      to the adoption of FIN 48, we recorded liabilities related to uncertain tax
      positions based upon Statement of Financial Accounting Standards No. 5,
“Accounting for Contingencies”.





We
      account for income taxes under the asset and liability method, which requires
      recognition of deferred tax assets, subject to valuation allowances, and
      liabilities for the expected future tax consequences of events that have been
      included in the financial statements or tax returns. Deferred income taxes
      reflect the net tax effects of temporary differences between the carrying
      amounts of asset and liabilities for financial reporting and income tax
      purposes. A valuation allowance is established if it is more likely than not
      that all or a portion of the net deferred tax assets will not be realized.




-
          37
          -




**PRESSURE
      BIOSCIENCES, INC. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**As
      of December 31, 2007**





***(xiii) Accounting
      for Stock-Based Compensation***





On
      January 1, 2006, we adopted SFAS No. 123 (revised 2004), *“Share-Based
      Payment”* , or
      SFAS 123R, and its related implementation guidance as promulgated by both the
      FASB, and the SEC SAB 107, associated with the accounting for stock-based
      compensation arrangements of our employees and directors. These pronouncements
      require that equity-based compensation cost be measured at the grant date (based
      upon an estimate of the fair value of the compensation granted) and recorded
      to
      expense over the requisite service period, which generally is the vesting
      period. We adopted SFAS 123R using the modified prospective method in the first
      quarter of 2006.




We
      estimate the fair value of equity-based compensation utilizing the Black-Scholes
      option pricing model. This model requires the input of several factors such
      as
      the expected option term, expected volatility of our stock price over the
      expected term, expected risk-free interest rate over the expected option term,
      expected dividend yield rate over the expected option term, and an estimate
      of
      expected forfeiture rates, and is subject to various assumptions. We believe
      this valuation methodology is appropriate for estimating the fair value of
      stock
      options granted to employees and directors which are subject to SFAS 123R
      requirements. These amounts are estimates and thus may not be reflective of
      actual future results, nor amounts ultimately realized by recipients of these
      grants. These amounts, and the amounts applicable to future quarters, are also
      subject to future quarterly adjustments based upon a variety of factors. The
      following table summarizes the assumptions we utilized for grants of stock
      options to the two sub-groups of our stock option recipients during the twelve
      months ended December 31, 2007 and 2006 :




Assumptions
            
            Outside BoardMembers
            
            Officers &EmployeesExpected
                life
            
            5.0
                (yrs)
            
            6.0
                (yrs)Expected
                volatility
            
            55.66%
                - 77.86%
            
            55.66%
                - 92.53%Risk-free
                interest rate
            
            3.69%
                - 4.94%
            
            3.38%
                - 4.94%Forfeiture
                rate
            
            5.00%
            
            5.00%Expected
                dividend yield
            
            0.0%
            
            0.0%




We
      developed the above referenced assumptions based on the following rationale.
      We
      utilized the simplified method provided by SAB No. 107 to develop our estimate
      of expected term of the stock options granted. Under this method, stock options
      granted to outside board members are estimated to have an expected term of
      5
      years and stock options granted to our CEO and all other officers and employees
      are estimated to have an expected term of 6 years. All stock options granted
      have a 10 year contractual life. The stock options granted to outside directors
      vest immediately and the stock options granted to the CEO and all other officers
      and employees vest ratably over three years. SAB No. 107 provides a simplified
      approach to developing the estimate of expected term based on the average of
      the
      midpoint of the vesting period and the contractual life. The expected volatility
      is assumed to approximate the historical volatility that was observed during
      the
      corresponding expected term for each sub-group of option recipients. The
      risk-free interest rate is a weighted average approximation based on the U.S.
      Treasury yields in effect at the time of the grants. We used a dividend yield
      of
      zero for the calculation because we have never paid cash dividends and we have
      no intention to begin paying dividends in the foreseeable future. While we
      believe these estimates are reasonable, the compensation expense recorded would
      increase if the assumed expected term was increased or a higher expected
      volatility was used.





We
      recognized stock-based compensation expense of $367,110 and $660,278 for the
      years ended December 31, 2007 and 2006, respectively. The following table
      summarizes the effect of this stock-based compensation expense within each
      of
      the line items within our Consolidated Statement of Operations:




Year Ended December 31,2007
            
            2006Cost
                of PCT products and services
            
            $
            4,746
            
            $
            9,955Research
                and development
            
            
            141,115
            
            
            181,609Selling
                and marketing
            
            
            70,770
            
            
            44,086General
                and administrative
            
            
            150,479
            
            
            424,628Total
                stock-based compensation expense
            
            $
            367,110
            
            $
            660,278





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          38
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**PRESSURE
        BIOSCIENCES, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **As
        of December 31, 2007**


The
      provisions of SFAS 123R require that we make an estimate of our forfeiture
      rate
      and adjust the expense that we recognize to reflect the estimated number of
      stock options that will go unexercised. Our historical forfeiture rate has
      been
      approximately 5%, we used this historical rate as our assumption in calculating
      future stock-based compensation expense.





During
      the years ended December 31, 2007 and 2006, the total fair value of stock
      options awarded was $590,912 and $1,089,400, respectively.





As
      of
      December 31, 2007, the total estimated fair value of unvested stock options
      to
      be amortized over their remaining vesting period was $688,624. The non-cash,
      stock based compensation expense associated with the vesting of these options
      will be $411,344 in 2008, $214,101 in 2009 and $63,179 in 2010.





***(xiv)
      Fair Value of Financial Instruments***





Due
      to
      their short maturities, the carrying amounts for cash and cash equivalents,
      accounts receivable, accounts payable, and accrued expenses approximate their
      fair value. Long-term liabilities are primarily related to liabilities
      transferred under contractual arrangements with carrying values that approximate
      fair value.





***(xv)
      Reclassifications***





Certain
      prior year amounts have been reclassified to conform to our current year
      presentation.





***(xvi)
      Recent Accounting Standards***





In
      September 2006, FASB issued SFAS 157, *“Fair
      Value Measurements”* .
      SFAS
      No. 157 establishes a formal framework for measuring fair value under GAAP
      and
      expands on disclosure of fair value measurements. Although SFAS No. 157 applies
      to and amends the provisions of existing FASB and AICPA pronouncements, it
      does
      not, of itself, require any new fair value measurements, nor does it establish
      valuation standards. SFAS No. 157 applies to all other accounting pronouncements
      requiring or permitting fair value measurements, except for: SFAS No. 123R, *“Share-Based
      Payment”* and
      related pronouncements, the practicability exceptions to fair value
      determinations allowed by various other authoritative pronouncements, and AICPA
      Statements of Position 97-2 and 98-9 that deal with software revenue
      recognition. This statement is effective for financial statements issued for
      fiscal years beginning after November 15, 2007, and interim periods within
      those
      fiscal years. We do not expect the adoption of SFAS 157 to have a material
      impact on our consolidated financial statements.





In
      December 2007, the FASB issued SFAS 141 (revised 2007), *“Business
      Combinations”* (“SFAS
      141(R)”) and SFAS No. 160, *“Non-controlling
      Interests in Consolidated Financial Statements – an amendment of ARB
      No. 51”* (“SFAS
      160”).





SFAS
      141(R) significantly changes the accounting for business combinations. Under
      SFAS 141(R), an acquiring entity will be required to recognize all the assets
      acquired and liabilities assumed in a transaction at the acquisition-date at
      fair value with limited exceptions. SFAS 141(R) further changes the accounting
      treatment for certain specific items, including:





-
            Acquisition
                costs will be generally expensed as incurred;




-
            Noncontrolling
                interests (formerly known as “minority interests” – see SFAS 160
                discussion below) will be valued at fair value at the acquisition
                date;




-
            Acquired
                contingent liabilities will be recorded at fair value at the acquisition
                date and subsequently measured at either the higher of such amount
                or the
                amount determined under existing guidance for non-acquired contingencies;




-
            In-process
                research and development will be recorded at fair value as an
                indefinite-lived intangible asset at the acquisition date;




-
          39
          -


**PRESSURE
        BIOSCIENCES, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **As
        of December 31, 2007**




-
            Restructuring
                costs associated with a business combination will be generally expensed
                subsequent to the acquisition date; and




-
            Changes
                in deferred tax asset valuation allowances and income tax uncertainties
                after the acquisition date generally will affect income tax expense.





SFAS
      141(R) includes a substantial number of new disclosure requirements. FAS 141(R)
      applies prospectively to business combinations for which the acquisition date
      is
      on or after January 1, 2009.





SFAS
      160
      establishes new accounting and reporting standards for the non-controlling
      interest in a subsidiary and for the deconsolidation of a subsidiary.
      Specifically, this statement requires the recognition of non-controlling
      interests (minority interests) as equity in the consolidated financial
      statements and separate from the parent’s equity. The amount of net income
      attributable to non-controlling interests will be included in consolidated
      net
      income on the face of the income statement. SFAS 160 clarifies that changes
      in a
      parent’s ownership interest in a subsidiary that does not result in
      deconsolidation are treated as equity transactions if the parent retains its
      controlling financial interest. In addition, this statement requires that a
      parent recognize a gain or loss in net income when a subsidiary is
      deconsolidated. Such gain or loss will be measured using the fair value of
      the
      non-controlling equity investment on the deconsolidation date. SFAS 160 also
      includes expanded disclosure requirements regarding the interests of the parent
      and its non-controlling interest.





SFAS
      160
      is effective for fiscal years, and interim periods within such year, beginning
      January 1, 2009. Early adoption of both SFAS 141(R) and SFAS 160 is
      prohibited. We do not expect that either SFAS 141(R) or SFAS 160 will have
      a
      material affect on our consolidated results of operations and financial
      condition.





***(xvii)
      Investment in Marketable Securities***





As
      of
      December 31, 2007 and 2006, we held 0 and 513,934 shares of common stock of
      Panacos Pharmaceuticals, Inc., respectively. During 2007 and 2006 we accounted
      for this investment in accordance with the provisions of SFAS 115 *“Accounting
      for Certain Investments in Debt and Equity Securities”* as
      securities available for sale. On December 31, 2006, our balance sheet reflected
      the fair value of our investment in Panacos Pharmaceuticals to be approximately
      $2.1 million, based on the closing price of Panacos Pharmaceutical shares of
      $4.01 per share on that day. During 2007 and 2006 the carrying value of our
      investment in Panacos Pharmaceuticals common stock changed from period to period
      based on changes in the closing price of the common stock on the NASDAQ Global
      Market. We recorded these changes in market value on a quarterly basis as
      unrealized gains and losses in Comprehensive Income or Loss.





***(xviii)
      Advertising***





Advertising
      costs are expensed as incurred. During 2007 and 2006 we incurred $30,572 and
      $0,
      respectively in advertising expense.





***(xvix)
      Rent Expense***





Rental
      costs are expensed as incurred. During 2007 and 2006 we incurred $85,555 and
      $86,864, respectively in rent expense for the use of our corporate office and
      research and development facilities.





**(3)  Discontinued
      Operations**





Source
      Scientific, LLC





In
      June 2004, we transferred certain assets and liabilities of our PBI Source
      Scientific, Inc. subsidiary to a newly formed limited liability company
      known as Source Scientific, LLC. At the time of the transfer, we owned 100%
      of
      the ownership interests of Source Scientific, LLC. We subsequently sold 70%
      of
      our ownership interests of Source Scientific, LLC to Mr. Richard Henson and
      Mr. Bruce A. Sargeant pursuant to a purchase agreement (the “Source
      Scientific Agreement”). As a result of the sale of 70% of our ownership
      interests, Mr. Henson and Mr. Sargeant each owned 35% and we owned the
      remaining 30% of Source Scientific, LLC. Under the Source Scientific Agreement,
      we received notes receivable in the aggregate amount of $900,000 (the “Notes”)
      payable at the end of three years bearing 8% interest. The Source Scientific
      Agreement offered Mr. Henson and Mr. Sargeant the option (“the
      Option”) to purchase our 30% ownership interest in Source Scientific, LLC until
      May 31, 2007, at an escalating premium (10-50%) over our initial ownership
      value, provided that they first paid off the Notes in their
      entirety.




-
          40
          -




**PRESSURE
      BIOSCIENCES, INC. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**As
      of December 31, 2007**




On
      May
      29, 2007, we executed a consent agreement with Mr. Henson and Mr. Sargeant,
      Source Scientific LLC, and BIT Analytical Instruments, Inc. (“the Consent
      Agreement”) pursuant to which the Notes were repaid in full in the aggregate
      amount of $1,201,534 in principal and interest, and Mr. Henson and Mr. Sargeant
      exercised their Option through BIT Analytical Instruments, Inc. to purchase
      our
      remaining 30% ownership interest in Source Scientific, LLC for an aggregate
      price of $578,573. As a result of these transactions, we no longer retain any
      direct or indirect ownership interest in Source Scientific, LLC.





The
      execution of these transactions, and receipt of the funds, triggered our
      recognition of a gain on the sale of assets related to discontinued operations
      of $1,534,476, net of income taxes of $218,060, during the twelve months ended
      December 31, 2007.




Boston
      Biomedica, Inc





On
      September 14, 2004, we completed the sale of substantially all of the assets
      and
      selected liabilities of the BBI Diagnostics and BBI Biotech divisions of our
      legacy company Boston Biomedica, Inc. to SeraCare Life Sciences, Inc. Pursuant
      to the Asset Purchase Agreement, the businesses were sold for $30 million in
      cash of which $27.5 million was paid at the closing and the remaining $2.5
      million was deposited in escrow pursuant to an escrow agreement expiring in
      March 2006. In December 2004, and again in February 2005, we settled
      disagreements with SeraCare Life Sciences, Inc., regarding the value of the
      inventory and accounts receivable in the closing balance sheets by releasing
      approximately $1.4 million from the escrow account. On March 15, 2006, we
      received approximately $1.1 million in remaining escrow funds.





**(5)  Property
      and Equipment**





Property
      and equipment as of December 31, 2007 and 2006 consisted of the following
      components:




2007
            
            2006Laboratory
                and manufacturing equipment
            
            $
            59,361
            
            $
            43,986Office
                equipment
            
            
            105,906
            
            
            64,496PCT
                collaboration, demonstration and leased systems
            
            
            351,838
            
            
            227,708517,105
            
            
            336,190Less
                accumulated depreciation
            
            
            (259,308
            )
            
            (128,494
            )Net
                book value
            
            $
            257,797
            
            $
            207,696





Depreciation
      expense for the years ended December 31, 2007 and 2006 was $130,814 and $97,621,
      respectively.





**(6)  Intangible
      Assets**





Intangible
      assets as of December 31, 2007 reflect an estimate of purchase price
      attributable to patents in connection with the 1998 acquisition of BioSeq,
      Inc.
      and the PCT business. Acquired PCT patents are being amortized to expense on
      a
      straight line basis at the rate of $48,632 per year over their estimated
      remaining useful life of approximately 7 years. Intangible assets at December
      31, 2007 and 2006 consisted of the following:




-
          41
          -


**PRESSURE
        BIOSCIENCES, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **As
        of December 31, 2007**





2007
            
            2006PCT
                Patents
            
            $
            778,156
            
            $
            778,156Less
                accumulated amortization
            
            
            (449,866
            )
            
            (401,234
            )Net
                book value
            
            $
            328,290
            
            $
            376,922





Amortization
      expense for each of the years ended December 31, 2007 and 2006 was
      $48,632.





**(7)  Retirement
      Plan**





We
      provide all of our employees with the opportunity to participate in our
      retirement savings plan. Our retirement savings plan has been qualified under
      Section 401(k) of the Internal Revenue Code. Eligible employees are permitted
      to
      contribute to the plan through payroll deductions within statutory limitations
      and subject to any limitations included in the plan. During 2007 and 2006 we
      contributed $15,708 and $9,565, respectively, in the form of discretionary
      company matching contributions.





**(8)  Income
      Taxes**





The
      components of the benefit for income taxes from continuing operations are as
      follows:





For the Year EndedDecember 31,2007
            
            2006Current
                benefit: federal
            
            $
            481,394
            
            $
            929,961Current
                benefit (provision): state
            
            
            38,820
            
            
            (184,607
            )Total
                current benefit
            
            
            520,214
            
            
            745,354Deferred
                provision: federal
            
            
            -
            
            
            -Deferred
                provision: state
            
            
            -
            
            
            -Total
                deferred provision
            
            
            -
            
            
            -Total
                benefit for income taxes from continuing operations
            
            $
            520,214
            
            $
            745,354





Significant
      items making up the deferred tax assets and deferred tax liabilities as of
      December 31, 2007 and 2006 are as follows:




December
                31,2007
            
            2006Current
                deferred taxes:Inventories
            
            $
            -
            
            $
            24,512Other
                accruals
            
            
            82,748
            
            
            31,536Unrealized
                gain on marketable securities
            
            
            -
            
            
            (669,520
            )Less:
                valuation allowance
            
            
            (82,748
            )
            
            (56,048
            )Total
                current deferred tax liabilities
            
            $
            -
            
            $
            (669,520
            )Long
                term deferred taxes:Accelerated
                tax depreciation
            
            $
            373
            
            $
            (721
            )Source
                Scientific Note, OID
            
            
            -
            
            
            57,989Non-cash,
                stock-based compensation, NQ
            
            
            194,300
            
            
            156,035Goodwill
                and intangibles
            
            
            (132,203
            )
            
            (151,787
            )Operating
                loss carryforwards
            
            
            1,648,542
            
            
            1,359,572Less:
                valuation allowance
            
            
            (1,711,012
            )
            
            (1,421,088
            )Total
                long term deferred tax assets (liabilities), net
            
            
            -
            
            
            -Total
                net deferred tax liabilities
            
            $
            -
            
            $
            (669,520
            )





A
      valuation allowance is established if it is more likely than not that all or
      a
      portion of the deferred tax asset will not be realized.  Accordingly, a
      valuation allowance was established in 2007 and 2006 for the full amount of
      our
      deferred tax assets due to the uncertainty of realization.  During 2006 our
      valuation allowance increased by $245,081. We believe based on our projection
      of
      future taxable operating income for the foreseeable future, it is more likely
      than not that we will not be able to realize the benefit of the deferred tax
      asset at December 31, 2007 and 2006.




-
          42
          -


**PRESSURE
          BIOSCIENCES, INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **As
          of December 31, 2007**


We
      had
      net operating loss carry-forwards for federal income tax purposes of
      approximately $2,476,000 and $577,000 as of December 31, 2007 and 2006,
      respectively.  Included in these numbers are loss carry-forwards that were
      obtained through the acquisition of BioSeq, Inc. and are subject to Section
      382
      NOL limitations.  These net operating loss carry-forwards expire at various
      dates from 2013 through 2025.  We had net operating loss carry-forwards for
      state income tax purposes of approximately $16,165,000 and $13,507,000 as of
      December 31, 2007 and 2006, respectively.  These net operating loss
      carry-forwards expire at various dates from 2008 through 2025.





Our
      effective income tax benefit rate for continuing operations was different than
      the statutory federal income tax benefit rate as follows:





For the Year EndedDecember 31,2007
            
            2006Federal
                tax benefit (provision) rate
            
            
            34
            %
            
            34
            %Permanent
                differences
            
            
            5
            %
            
            -2
            %State
                tax expense
            
            
            3
            %
            
            -4
            %Valuation
                allowance
            
            
            -21
            %
            
            -4
            %Effective
                income tax benefit rate from continuing operations
            
            
            21
            %
            
            24
            %





**(9)  Commitments
      and Contingencies**





*Operating
      Leases*





Our
      corporate offices are currently located at 14 Norfolk Avenue, South Easton,
      Massachusetts 02375.  In November 2007, we signed an 18 month lease
      agreement commencing in February 2008, pursuant to which we lease approximately
      5,500 square feet of office space, with an option for an additional 18 months.
      We pay approximately $6,500 per month for the use of these facilities.





On
      June
      1, 2006, we entered into a lease agreement with Scheer Partners and the Maryland
      Economic Development Corporation, pursuant to which we lease laboratory and
      office space in Rockville, MD. In August 2007, we extended the lease agreement
      through May 31, 2009. We pay approximately $3,300 per month for the use of
      these
      facilities.





On
      March
      1, 2006, we entered into a sub-lease agreement with Proteome Systems, pursuant
      to which we lease approximately 650 square feet of laboratory space plus 100
      square feet of office space from Proteome Systems in Woburn, Massachusetts.
      The
      lease period extends through December 31, 2008 and we pay approximately $3,200
      per month for the use of these facilities.





*Royalty
      Commitments*





In
      1996,
      we acquired our initial equity interest in BioSeq, Inc., which at the time
      was
      developing our original pressure cycling technology.  BioSeq, Inc. acquired
      its pressure cycling technology from BioMolecular Assays, Inc. under a
      technology transfer and patent assignment agreement.  In 1998, we purchased
      all of the remaining outstanding capital stock of BioSeq, Inc., and at such
      time, the technology transfer and patent assignment agreement was amended to
      require us to pay BioMolecular Assays, Inc. a 5% royalty on our sales of
      products or services that incorporate or utilize the original pressure cycling
      technology that BioSeq, Inc. acquired from BioMolecular Assays, Inc.  We
      are also required to pay BioMolecular Assays, Inc. 5% of the proceeds from
      any
      sale, transfer or license of all or any portion of the original pressure cycling
      technology.  These payment obligations terminate in 2016.  During the
      fiscal years ended December 31, 2007 and 2006, we paid BioMolecular Assays,
      Inc.
      $19,596 and $9,809 in royalties.





In
      connection with our acquisition of BioSeq, Inc., we licensed certain limited
      rights to the original pressure cycling technology back to BioMolecular Assays,
      Inc.   This license is non-exclusive and limits the use of the
      original pressure cycling technology by BioMolecular Assays, Inc. solely for
      molecular applications in scientific research and development and in scientific
      plant research and development.  BioMolecular Assays, Inc. is required to
      pay us a royalty equal to 20% of any license or other fees and royalties, but
      not including research support and similar payments, it receives in connection
      with any sale, assignment, license or other transfer of any rights granted
      to
      BioMolecular Assays, Inc. under the license. BioMolecular Assays, Inc. must
      pay
      us these royalties until the expiration of the patents held by BioSeq, Inc.
      in
      1998, which we anticipate will be 2016.  We have not received any royalty
      payments from BioMolecular Assays, Inc. under this license.




-
          43
          -


**PRESSURE
          BIOSCIENCES, INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **As
          of December 31, 2007**


*Purchase
      Commitments*





In
      March
      2007, we executed a purchase order with Source Scientific, LLC under which
      we
      agreed to purchase 20 Barocycler NEP3229 units and nine demonstration (NEP2320)
      units to be used by our sales force. In connection with this purchase order,
      we
      placed deposits with Source Scientific, LLC in the amount of $260,000. The
      nine
      demonstration (NEP2320) instruments were prototype units and were therefore
      billable on a time and materials basis. As of December 31, 2007 we have taken
      possession of all of these completed units and the cost was expensed as incurred
      in research and development expense within our consolidated statement of
      operations. The order for 20 NEP3229 units is based on a fixed bill of materials
      and we are billed for the complete cost of each unit as it is completed, net
      of
      the deposit we placed for each instrument. As of December 31, 2007, none of
      the
      NEP3229’s had been completed. We expect all of these units to be completed and
      available for sale, lease or collaboration in early 2008.





In
      June
      2007, we executed a purchase order with Source Scientific, LLC under which
      we
      agreed to purchase 40 Barocycler NEP2320 units. In connection with this purchase
      order we placed a deposit with Source Scientific, LLC in the amount of $140,000.
      In accordance with the terms of this purchase order, we are billed based on
      a
      fixed bill of materials, for the complete cost of each unit as it is completed,
      net of the deposit we placed for each instrument.





As
      of
      December 31, 2007 we had $379,000 on deposit with Source for 54 remaining units
      pursuant to these purchase orders. As of December 31, 2006 we had $168,000
      on
      deposit with Source for 21 remaining units pursuant to open purchase orders.





*Indemnification*





In
      connection with our sale of substantially all of the assets of Boston Biomedica,
      Inc., (“BBI Core Businesses”) to SeraCare Life Sciences, Inc. in September 2004,
      we continue to be exposed to possible indemnification claims in amounts up
      to
      the purchase price of approximately $29 million. Our indemnification obligations
      for breaches of some representations and warranties relating to compliance
      with
      environmental laws extend until September 14, 2009, representations and
      warranties relating to tax matters extend for the applicable statute of
      limitations period (which varies depending on the nature of claim), and
      representations and warranties relating to our due organization, subsidiaries,
      authorization to enter into and perform the transactions contemplated by the
      Asset Purchase Agreement and brokers fees, extend indefinitely.





*Severance
      and Change of Control Agreements*




Each
      of
      our executive officers; Mr. Schumacher, Mr. Myles, Dr. Ting, Dr. Lazarev, Dr.
      Lawrence and Mr. Potter is entitled to receive a severance payment if terminated
      by us without cause. The severance benefits would include a payment in an amount
      equal to one year of such executive officer’s annualized base salary
      compensation plus accrued paid time off. Additionally, the officer will be
      entitled to receive medical and dental insurance coverage for one year following
      the date of termination. The total commitment related to these agreements in
      the
      aggregate is approximately $1.2 million.




Each
      of
      our executive officers, other than Mr. Schumacher, is entitled to receive a
      change of control payment in an amount equal to one year of such executive
      officer’s annualized base salary compensation, accrued paid time off, and
      medical and dental coverage, in the event of a change of control of the Company.
      In the case of Mr. Schumacher this payment would be equal to two years of
      annualized base salary compensation, accrued paid time off, and two years of
      medical and dental coverage. The total commitment related to these agreements
      in
      the aggregate is approximately $1.5 million.




-
          44
          -


**PRESSURE
          BIOSCIENCES, INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **As
          of December 31, 2007**


**(10)  Stockholders’
      Equity**





*Preferred
      Stock*





In
      1996,
      our Board of Directors authorized the issuance of 1,000,000 shares of preferred
      stock with a par value of $0.01. As of December 31, 2007 none of these shares
      have been issued.





*Common
      Stock*





*Shareholders
      Purchase Rights Plan*





On
      March
      3, 2003, our Board of Directors adopted a shareholder purchase rights plan
      (“the
      Rights Plan”) and declared a distribution of one Right for each outstanding
      share of our Common Stock to shareholders of record at the close of business
      on
      March 21, 2003 (the “Rights”). Initially, the Rights will trade automatically
      with the common stock and separate Right Certificates will not be issued. 
The Rights Plan is designed to deter coercive or unfair takeover tactics and
      to
      ensure that all of our shareholders receive fair and equal treatment in the
      event of an unsolicited attempt to acquire the Company. The Rights Plan was
      not
      adopted in response to any effort to acquire the Company and the Board is not
      aware of any such effort. The Rights will expire on February 27, 2013 unless
      earlier redeemed or exchanged.  Each Right entitles the registered holder,
      subject to the terms of a Rights Agreement, to purchase from the Company one
      one-thousandth of a share of the Company’s Series A Junior Participating
      Preferred Stock at a purchase price of $45.00 per one one-thousandth of a share,
      subject to adjustment. In general, the Rights will not be exercisable until
      a
      subsequent distribution date which will only occur if a person or group acquires
      beneficial ownership of 15% or more of our common stock or announces a tender
      or
      exchange offer that would result in such person or group owning 15% or more
      of
      the common stock. With respect to any person or group who currently beneficially
      owns 15% or more of our common stock, the Rights will not become exercisable
      unless and until such person or group acquires beneficial ownership of
      additional shares of common stock.





Subject
      to certain limited exceptions, if a person or group acquires beneficial
      ownership of 15% or more of our outstanding common stock or if a current 15%
      beneficial owner acquires additional shares of common stock, each holder of
      a
      Right (other than the 15% holder whose Rights become void once such holder
      reaches the 15% threshold) will thereafter have a right to purchase, upon
      payment of the purchase price of the Right, that number of shares of our common
      stock which at the time of such transaction will have a market value equal
      to
      two times the purchase price of the Right  In the event that, at any time
      after a person or group acquires 15% or more of our common stock, we are
      acquired in a merger or other business combination transaction or 50% or more
      of
      its consolidated assets or earning power are sold, each holder of a Right will
      thereafter have the right to purchase, upon payment of the purchase price of
      the
      Right, that number of shares of common stock of the acquiring company which
      at
      the time of such transaction will have a market value of two times the purchase
      price of the Right.





Our
      Board
      of Directors may exchange the Rights (other than Rights owned by such person
      or
      group which have become void), in whole or in part, at an exchange ratio of
      one
      share of common stock per Right (subject to adjustment).  At any time prior
      to the time any person or group acquires 15% or more of our Common Stock, the
      Board of Directors may redeem the Rights in whole, but not in part, at a price
      of $0.001 per Right.





*Stock
      Options*





On
      June
      16, 2005, our stockholders approved our 2005 Equity Incentive Plan (the “Plan”),
      pursuant to which an aggregate of 1,000,000 shares of our common stock was
      reserved for issuance upon exercise of stock options or other equity awards
      made
      under the Plan.  Under the Plan, we may award stock options, stock
      issuances, and other equity interests in the Company to employees, officers,
      directors, consultants, and advisors, and to any other persons the Board of
      Directors deems appropriate. As of December 31, 2007, options to acquire 867,000
      shares are outstanding under the Plan.





We
      also
      have 244,000 stock options outstanding under our 1999 Non-qualified Plan and
      9,500 stock options outstanding under our 1994 Incentive Stock Option Plan.
      As
      of December 31, 2007, there were 4,800 shares available for future grant under
      the 1999 Non-qualified Plan. The 1994 Incentive Stock Option Plan expired;
      therefore, there are no shares available for future grants under this
      plan.




-
          45
          -


**PRESSURE
          BIOSCIENCES, INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **As
          of December 31, 2007**


The
      following tables summarize information concerning options outstanding and
      exercisable:





Stock OptionsWeighted
            
            
            
            WeightedAverage price
            
            
            
            Average priceShares
            
            per share
            
            Exercisable
            
            per shareBalance
                outstanding, 12/31/2005
            
            
            585,000
            
            $
            2.96
            
            
            385,000
            
            $
            2.97Granted
            
            
            382,000
            
            
            3.91Exercised
            
            
            (2,000
            )
            
            2.70Expired
            
            
            (19,500
            )
            
            4.11ForfeitedBalance
                outstanding, 12/31/2006
            
            
            945,500
            
            $
            3.32
            
            
            524,000
            
            $
            3.17Granted
            
            
            200,000
            
            
            4.09Exercised
            
            
            -Expired
            
            
            -Forfeited
            
            
            (25,000
            )
            
            3.58Balance
                outstanding, 12/31/2007
            
            
            1,120,500
            
            $
            3.45
            
            
            691,166
            
            $
            3.23





Options Outstanding
            
            Options ExercisableWeighted Average
            
            
            
            Weighted AverageRange of Exercise
              Prices
            
            Number of
              Options
            
            Remaining
              Contractual
              Life
            
            Exercise
              Price
            
            Number of
              Options
            
            Remaining
              Contractual
              Life
            
            Exercise
              Price$2.50
                - $2.70
            
            
            159,000
            
            
            4.7
            
            $
            2.64
            
            
            159,000
            
            
            4.7
            
            $
            2.642.71
                - 3.08
            
            
            343,000
            
            
            6.7
            
            
            2.96
            
            
            276,333
            
            
            6.5
            
            
            2.973.09
                - 3.95
            
            
            389,500
            
            
            8.3
            
            
            3.71
            
            
            128,833
            
            
            7.9
            
            
            3.703.96
                - 5.93
            
            
            229,000
            
            
            8.7
            
            
            4.31
            
            
            127,000
            
            
            7.9
            
            
            4.05$2.50
                - $5.93
            
            
            1,120,500
            
            
            7.4
            
            $
            3.45
            
            
            691,166
            
            
            6.6
            
            $
            3.23





The
      aggregate intrinsic value of options outstanding as of December 31, 2007 was
      $2,162,565. The aggregate intrinsic value of options exercisable as of December
      31, 2007 was $1,486,007. The aggregate intrinsic value of options outstanding
      as
      of December 31, 2006 was $347,410. The aggregate intrinsic value of options
      exercisable as of December 31, 2006 was $274,355.





*Stock
      Buy-back Program*





During
      the quarter ended September 30, 2006 our board of directors approved a stock
      buy-back program pursuant to which we are authorized to use up to $500,000
      of
      our cash resources to purchase shares of the Company’s common stock in the open
      market or in privately negotiated transactions. As of December 31, 2006, we
      had
      purchased 110,889 shares of our common stock from unaffiliated shareholders
      for
      approximately $2.91 per share. We did not acquire any shares through our stock
      buy-back program during 2007.





*Sale
      of Common Stock*





On
      November 21, 2007, we completed a private placement, pursuant to which we sold
      an aggregate of 126,750 shares of common stock, $0.01 par value (the “Shares”),
      for a purchase price of $5.00 per share, resulting in gross proceeds to us
      of
      approximately $633,750 (the “Private Placement”). The Shares were issued and
      sold to a total of 8 accredited investors pursuant to a Securities Purchase
      Agreement entered into as of November 21, 2007 (the “Securities Purchase
      Agreement”).





The
      Shares were issued in the Private Placement without registration under the
      Securities Act of 1933, as amended (the “Securities Act”), in reliance upon the
      exemption from registration set forth in Rule 506 of Regulation D (“Regulation
      D”) promulgated under the Securities Act. We based such reliance upon
      representations made by each purchaser of Shares, including, but not limited
      to,
      representations as to the purchaser’s status as an “accredited investor” (as
      defined in Rule 501(a) under Regulation D) and the purchaser’s investment
      intent. The Shares were not offered or sold by any form of general solicitation
      or general advertising, as such terms are used in Rule 502 under Regulation
      D.
      The Shares may not be offered or sold in the United States absent an effective
      registration statement or an exemption from the registration requirements under
      applicable federal and state securities laws.




-
          46
          -


**PRESSURE
          BIOSCIENCES, INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **As
          of December 31, 2007**


In
      connection with the Private Placement, we agreed to prepare and file a
      Registration Statement on Form S-3 (the “Registration Statement”) covering the
      resale of the Shares purchased in the Private Placement, and to use its
      commercially reasonable efforts to cause such Registration Statement to be
      declared effective as promptly as possible after the filing thereof and to
      keep
      the Registration Statement continuously effective under the Securities Act
      until
      all shares covered by such Registration Statement have been sold, or may be
      sold
      without volume restrictions pursuant to Rule 144 (or any successor Rule under
      the Securities Act). The Registration Statement was declared effective by the
      SEC on January 22, 2008.





**(11)  Related
      Party Transaction**





On
      December 29, 2006, Richard T. Schumacher, President and Chief Executive Officer,
      delivered to us 249,875 shares of his common stock of the Company in full and
      complete satisfaction and payment of all outstanding amounts, including all
      principal and accrued interest, of Mr. Schumacher’s loan receivable to us. The
      loan amount consisted of $1,000,000 in principal and $25,487 in interest accrued
      in the fourth quarter of 2006. The number of shares was determined based upon
      a
      value of $4.10 per share, the volume weighted average trading price of the
      shares of our common stock on the NASDAQ Capital Market during the 60 trading
      days ending on December 29, 2006. In connection with the payment of the loan,
      we
      terminated our security interest in Mr. Schumacher’s shares of common stock, and
      released to Mr. Schumacher the remaining 229,782 shares of common stock
      previously held as collateral.




-
          47
          -




***Report
      of Independent Registered Public Accounting Firm***




To
      the
      Board of Directors of


Pressure
      BioSciences, Inc. and Subsidiaries:





We
      have
      audited the consolidated balance sheets of Pressure BioSciences, Inc., and
      Subsidiaries (the “Company”) as of December 31, 2007 and 2006, and the related
      consolidated statements of operations, comprehensive income (loss), changes
      in
      stockholders’ equity, and cash flows for the years then ended. These financial
      statements are the responsibility of the Company’s management. Our
      responsibility is to express an opinion on these financial statements based
      on
      our audits.





We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the
      consolidated financial statements are free of material misstatement. The Company
      is not required to have, nor were we engaged to perform, an audit of its
      internal control over financial reporting. Our audits included consideration
      of
      internal control over financial reporting as a basis for designing audit
      procedures that are appropriate in the circumstances, but not for the purpose
      of
      expressing an opinion on the effectiveness of the Company’s internal control
      over financial reporting. Accordingly, we express no such opinion. An audit
      also
      includes examining, on a test basis, evidence supporting the amounts and
      disclosures in the consolidated financial statements. An audit also includes
      assessing the accounting principles used and significant estimates made by
      management, as well as evaluating the overall financial statement presentation.
      We believe that our audits provide a reasonable basis for our
      opinion.





In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the financial position of Pressure BioSciences, Inc.,
      and Subsidiaries as of December 31, 2007 and 2006, and the results of their
      operations and their cash flows for the years then ended in conformity with
      accounting principles generally accepted in the United States of
      America.




As
      discussed in Note 2 to the consolidated financial statements, effective January
      1, 2007, the Company adopted FASB Interpretation No. 48, “ *Accounting*  *for
      Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109”.*As discussed in Note 2 to the consolidated financial statements, effective
      January 1, 2006, the Company adopted Financial Accounting Standards Board
      Statement No. 123 (Revised 2004) - "Share-Based Payments."





/s/
      UHY
      LLP




Boston,
      Massachusetts


March
      27, 2008




-
          48
          -





**ITEM
                9.**
              ****CHANGES
                  IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
                  DISCLOSURE.****




None





**ITEM
                9A.**
              ****CONTROLS
                  AND
                  PROCEDURES.****


**Evaluation
      of Disclosure Controls and Procedures**





We
      maintain disclosure controls and procedures that are designed to ensure that
      information required to be disclosed in the reports we file under the Exchange
      Act is recorded, processed, summarized and reported, within the time periods
      specified in the SEC’s rules and forms, and that such information is accumulated
      and communicated to our management, including our President (Principal Executive
      Officer) and our Senior Vice President and Chief Financial Officer (Principal
      Financial Officer), as appropriate, to allow timely decisions regarding required
      disclosure. In designing and evaluating the disclosure controls and procedures,
      management recognized that any controls and procedures, no matter how well
      designed and operated, can provide only reasonable assurance of achieving the
      desired control objectives, as ours are designed to do, and management
      necessarily was required to apply its judgment in evaluating the cost-benefit
      relationship of possible controls and procedures.





As
      of
      December 31, 2007, we carried out an evaluation, under the supervision and
      with
      the participation of our management, including our President (Principal
      Executive Officer) and our Senior Vice President of Finance and Chief Financial
      Officer (Principal Financial Officer) of the effectiveness of the design and
      operation of our disclosure controls and procedures, as defined in
      Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based upon that
      evaluation, our President (Principal Executive Officer) and our Senior Vice
      President of Finance and Chief Financial Officer (Principal Financial Officer)
      concluded that our disclosure controls and procedures are effective in enabling
      us to record, process, summarize, and report information required to be included
      in our periodic SEC filings within the required time period.





**Report
      of Management on Internal Control over Financial Reporting**





We
      are
      responsible for establishing and maintaining adequate internal control over
      financial reporting. Internal control over financial reporting is defined in
      Rule 13a-15(f) and 15d-15(f) under the Exchange Act, as a process designed
      by,
      or under the supervision of our principal executive and principal financial
      officers and effected by our board of directors, management and other personnel
      to provide reasonable assurance regarding the reliability of financial reporting
      and the preparation of financial statements for external purposes in accordance
      with generally accepted accounting principles and includes those policies and
      procedures that:





-
            pertain
                to the maintenance of records that in reasonable detail accurately
                and
                fairly reflect the transactions and disposition of our
                assets;





-
            provide
                reasonable assurance that transactions are recorded as necessary
                to permit
                preparation of financial statements in accordance with generally
                accepted
                accounting principles, and that our receipts and expenditures are
                being
                made only in accordance with authorization of our management and
                directors; and





-
            provide
                reasonable assurance regarding prevention or timely detection of
                unauthorized acquisition, use or disposition of our assets that could
                have
                a material effect on the financial
                statements.





Our
      internal control system is designed to provide reasonable assurance to our
      management and board of directors regarding the preparation and fair
      presentation of published financial statements. Because of its inherent
      limitations, internal control over financial reporting may not prevent or detect
      misstatements. Projections of any evaluation of effectiveness to future periods
      are subject to the risks that controls may become inadequate because of changes
      in conditions, or that the degree of compliance with the policies or procedures
      may deteriorate.




-
          49
          -




We
      have
      assessed the effectiveness of our internal control over financial reporting
      as
      of December 31, 2007. In making this assessment, we used the criteria set forth
      by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)
      in Internal Control-Integrated Framework.





Based
      on
      our assessment, we believe that, as of December 31, 2007, our internal control
      over financial reporting is effective at a reasonable assurance level based
      on
      these criteria.





This
      annual report does not include an attestation report of our registered public
      accounting firm regarding internal control over financial reporting.
      Management's report was not subject to attestation by our registered public
      accounting firm pursuant to temporary rules of the SEC that permit us to provide
      only management's report in this annual report.





**Changes
      in Internal Control Over Financial Reporting**





There
      have been no changes in our internal control over financial reporting that
      occurred during the fourth quarter of 2007 that have materially affected, or
      are
      reasonably likely to materially affect, our internal control over financial
      reporting.




**ITEM
                9B.**
              ****OTHER
                  INFORMATION.****




None.




-
          50
          -





**PART
      III**




**ITEM
                10.**
              ****DIRECTORS,
                  EXECUTIVE OFFICERS AND CORPORATE
                  GOVERNANCE.****




**Our
      Directors**





The
      names
      of our directors, their ages as of March 24, 2008, their committee membership
      and certain biographical information are set forth below **:**




**Name**
            
            **Age**
            
            **Position**
            
            **Director
                Since**
            
            **Year
                Term**
              **Expires
                and**
              **Class**R.
                Wayne Fritzsche(1)
            
            59
            
            Chairman
                of the Board
            
            2003
            
            2009,
                Class ICalvin
                A. Saravis, Ph.D (2)
            
            78
            
            Director
            
            1987
            
            2009,
                Class IJ.
                Donald Payne (1)
            
            52
            
            Director
            
            2003
            
            2010,
                Class IIP.
                Thomas Vogel(1)
            
            68
            
            Director
            
            2004
            
            2010,
                Class IIRichard
                T. Schumacher
            
            57
            
            Director,
                President, Chief Executive Officer and Clerk
            
            1978
            
            2008,
                Class III




(1)  Member
      of
      the Audit Committee, Compensation Committee, and Nominating
      Committee


(2)  Member
      of
      the Compensation Committee, Nominating Committee, and Chairman of the Scientific
      Advisory Board




***Mr.
      R. Wayne Fritzsche*** has
      served as a director and Chairman of our Board of Directors since October 2,
      2003. Mr. Fritzsche has served as a member of our Scientific Advisory Board
      since 1999. Mr. Fritzsche is the founder of Fritzsche & Associates, Inc., a
      consulting firm which provides strategic, financial, and scientific consulting
      to medical companies in the life sciences and healthcare industries, and has
      served as its President since 1991. Since 2003, Mr. Fritzsche has also served
      as
      interim President of Chemokine Pharmaceutical Company, Inc. (formerly PGBP
      Pharmaceuticals), a small molecule discovery company. Since 2001, Mr. Fritzsche
      has served as a board member of Opexa Pharmaceuticals, a multiple sclerosis
      and
      cell immunology therapy company, and Vascular Sciences, Inc., an extracorporeal,
      macular degeneration company. He also previously served as a board member of
      Intelligent Medical Imaging, an automated microscopic imaging company, from
      1994
      to 1997, Clarion Pharmaceuticals, a drug development company, from 1994 to
      1996,
      Nobex Pharmaceuticals, a drug delivery firm, from 1996 to 2001, Cardio Command,
      Inc., a transesophageal cardiac monitoring and pacing firm, from 1999 to 2001,
      and Hesed BioMed, an antisense oligonucleotide and catalytic antibody company,
      from 2000 to 2002. Mr. Fritzsche holds a BA from Rowan University, and an MBA
      from the University of San Diego.





***Dr.
      Calvin A. Saravis*** has
      served as one of our directors since 1986. Dr. Saravis has also served as
      Chairman of our Scientific Advisory Board since 2003. From 1984 to 1998 he
      was
      an Associate Professor of Surgery (Biochemistry) at Harvard Medical School
      (presently emeritus) and from 1983 to 1999, he was an Associate Research
      Professor of Pathology at Boston University School of Medicine (presently
      emeritus). From 1971 to 1997, Dr. Saravis was a Senior Research Associate at
      the
      Mallory Institute of Pathology and from 1979 to 1997 he was a Senior Research
      Associate at the Cancer Research Institute-New England Deaconess Hospital.
      Dr.
      Saravis received his Ph.D. in immunology and serology from Rutgers
      University.





***Mr.
      J. Donald Payne*** has
      served as one of our directors since December 30, 2003. Since September 2001,
      Mr. Payne has served as President and a Director of Nanospectra Biosciences,
      Inc., a privately-held medical device company developing products for cancer.
      Prior to that, Mr. Payne held various executive positions in finance and
      administration of public and private life science companies since 1992, served
      as a financial executive in the energy industry from 1980 through 1990, and
      was
      in public accounting from 1976 to 1980. Mr. Payne received an MBA from Rice
      University in 1992 and a BBA from Texas A&M University in 1976. He is a
      Certified Public Accountant in Texas, and a member of the AICPA and Financial
      Executives Institute.




-
          51
          -




***Mr.
      P. Thomas Vogel*** has
      served as one of our directors since January 9, 2004. Since 2006 Mr. Vogel
      is
      the President of Vogel Associates, a consulting company, and a Principal of
      Franchise Finders, LLC, a franchise consulting company. From April 2002 until
      December 2005, Mr. Vogel served as the President and Chief Executive Officer
      of
      AdipoGenix, Inc, an early-stage drug discovery company focused on obesity and
      metabolic diseases. From 2000 to 2002, Mr. Vogel served as President and Chief
      Executive Officer of Arradial, Inc., an early stage biopharmaceutical company.
      From 1996 to 2000, Mr. Vogel was Chief Executive Officer and Director of Mosaic
      Technologies, Inc., an early-stage molecular biology company. From 1992 to
      1995,
      Mr. Vogel was President of Fisher Scientific Company, a $1 billion laboratory
      supply distribution business. Mr. Vogel served as President of PB Diagnostics
      from 1991 to 1992, as President of Instrumentation Laboratory from 1990 to
      1991,
      and as President of Serono Diagnostics from 1988 to 1990. Mr. Vogel was in
      the
      venture capital arena from 1982 to 1987. Prior to that, from 1974 to 1982,
      Mr.
      Vogel worked in the Diagnostics Division of Abbott Laboratories, Inc., where
      he
      served as Divisional Vice President and General Manager of Diagnostic Products.
      Mr. Vogel graduated from the Georgia Institute of Technology with a Bachelor's
      Degree in Electrical Engineering and from The Wharton Business School with
      a
      Master's Degree in Business Administration.





***Mr.
      Richard T. Schumacher*** ,
      the
      founder of our company, has served as one of our directors since 1978. He has
      served as our Chief Executive Officer since April 16, 2004 and President since
      September 14, 2004. He previously served as Chief Executive Officer and Chairman
      of the Board of our company from 1992 to February 2003. From July 9, 2003 until
      April 14, 2004 he served as a consultant to our company pursuant to a consulting
      agreement. He served as President of our company from 1986 to August 1999.
      Mr.
      Schumacher served as the Director of Infectious Disease Services for Clinical
      Sciences Laboratory, a New England-based medical reference laboratory, from
      1986
      to 1988. From 1972 to 1985, Mr. Schumacher was employed by the Center for Blood
      Research, a nonprofit medical research institute associated with Harvard Medical
      School. Mr. Schumacher received a B.S. in Zoology from the University of New
      Hampshire.





**Our
      Executive Officers**





The
      following table sets forth the names, ages and positions of our current
      executive officers:





**Name**
            
            **Age**
            
            **Position**Richard
                T. Schumacher
            
            57
            
            President,
                Chief Executive Officer and DirectorEdward
                H. Myles
            
            36
            
            Senior
                Vice President of Finance, Chief Financial Officer, Treasurer and
                Assistant ClerkEdmund
                Ting, Ph.D.
            
            53
            
            Senior
                Vice President of EngineeringNathan
                P. Lawrence, Ph.D.
            
            53
            
            Vice
                President of MarketingAlexander
                Lazarev, Ph.D.
            
            43
            
            Vice
                President of Research and DevelopmentMatthew
                B. Potter
            
            44
            
            Vice
                President of Sales





Set
      forth
      below is biographical information for each of our executive officers, other
      than
      Mr. Schumacher whose biographical information is set forth above under the
      heading “Our Directors”.





***Mr.
      Edward H. Myles*** was
      appointed to serve as Vice President of Finance and Chief Financial Officer
      on
      April 3, 2006 and was promoted to the position of Senior Vice President of
      Finance and Chief Financial Officer on February 12, 2007. Prior to joining
      Pressure BioSciences, Inc., Mr. Myles served as the controller for EMD
      Pharmaceuticals, a wholly-owned affiliate of Merck KGaA, from 2003 to 2006.
      At
      EMD, Mr. Myles had a wide variety of responsibilities in the areas of accounting
      and business development. Prior to EMD Pharmaceuticals, Mr. Myles worked in
      the
      health care investment banking group of SG Cowen Securities Corporation from
      2002 to 2003. From 2000 to 2002, Mr. Myles was enrolled in the full-time MBA
      program at Washington University in St. Louis, where he co-founded Luminomics,
      an early-stage biotechnology company. Prior to enrolling in graduate
      school, Mr. Myles was the Corporate Controller of Boston Biomedica, Inc. Prior
      to joining Boston Biomedica, Inc., in 1997 he worked at the accounting firms
      Price Waterhouse LLP and Coopers & Lybrand LLP where he held positions of
      increasing responsibility between 1993 and 1997. Mr. Myles became a CPA in
      1996,
      and earned a BSBA, with honors, in accounting and finance from the University
      of
      Hartford, and an MBA from Washington University in St. Louis.




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          52
          -




***Dr.
      Edmund Ting*** joined
      as Senior Vice President of Engineering on April 24, 2006. Prior to joining,
      Dr.
      Ting served as the Chief Research Officer of Avure Technologies, a leading
      worldwide manufacturer of high pressure hydrostatic processing equipment for
      the
      food and materials processing industry, where he worked from 2001 to 2006.
      From
      1990 to 2001, Dr. Ting was employed by Flow International Corporation, a world
      leader in the ultrahigh pressure waterjet cutting technology market, and the
      parent company of Avure Technologies until November 2005. Dr. Ting last held
      the
      position of VP of Engineering Research and Development at Flow International
      Corporation. From 1984 to 1990, Dr. Ting was a research scientist, then a group
      leader at Grumman Aerospace Corporation. Dr. Ting earned a Bachelor of Science
      degree in mechanical engineering from Northeastern University and a Science
      Doctorate in materials science and engineering from the Massachusetts Institute
      of Technology.





***Dr.
      Nathan P. Lawrence*** was
      appointed Vice President of Marketing and Sales on April 1, 2006.  Dr.
      Lawrence joined Pressure BioSciences Inc. in 2005, serving as Director of
      Research and Development until his promotion to Vice President of Marketing
      and
      Business Development in 2006.  Dr. Lawrence was responsible for the
      development of protocols based on Pressure Cycling Technology (PCT).  From
      2004 through 2005, Dr. Lawrence worked for 454 Life Sciences in product
      development.  Prior to 454 Life Sciences, Dr. Lawrence was Director of
      Research and Development for Boston Biomedica, Inc. from 1998-2004.  He was
      responsible for the development of PCT, as well as the development of nucleic
      acid-based diagnostic assays.  Prior to joining Boston Biomedica, Inc., Dr.
      Lawrence held several positions with increasing responsibility in Research
      and
      Development and manufacturing at Becton Dickinson and Gene Trak Systems. 
Dr. Lawrence holds a BA from the University of Miami, an M.S. from Southern
      Connecticut State University, and a Ph.D. from Yale University.




***Dr.
      Alexander Lazarev*** was
      promoted to the position of Vice President of Research and Development,
      effective March 20, 2007. Prior to his promotion he served as our Director
      of
      Research and Development, since joining us on April 3, 2006. Prior to joining
      Pressure BioSciences, Inc., Dr. Lazarev worked as a Visiting Scientist at the
      Barnett Institute of Chemical and Biological Analysis at Northeastern University
      in 2005, and served as a Director of New Technology Development at Proteome
      Systems, Inc., where he was involved in research and development of innovative
      proteomic analysis applications from 2001 until early 2006. From 1998 to 2001,
      Dr. Lazarev was employed as Senior Scientist at the Proteomics Division of
      Genomic Solutions, Inc. Prior to his employment at Genomic Solutions, Inc.,
      Dr.
      Lazarev was employed in an analytical contract service startup company,
      PhytoChem Technologies, Inc., which was founded as a spin-off from ESA, Inc.
      in
      1997. Previously, Dr. Lazarev held various scientific positions at the Ohio
      State University School of Medicine and the Uniformed Services University of
      Health Sciences. Most of his scientific career has been dedicated to development
      of methods and applications for biochemical analysis. Since 2005, Dr. Lazarev
      has been elected as an Executive Board member of the MASSEP.org, a non-profit
      scientific discussion forum dedicated to the promotion and improvement of
      chromatography and other analytical technologies. Dr. Lazarev earned his
      undergraduate and graduate degrees at the University of Kazan, Russian
      Federation.





***Mr.
      Matthew B. Potter*** joined
      PBI as our Vice President of Sales on February 25, 2008 and was appointed an
      executive officer on March 6, 2008.  Mr. Potter has worked in many
      different disciplines that include molecular biology, chromatography,
      personalized medicine, diagnostics, & biophysics. Prior to joining PBI Mr.
      Potter was the Vice President of Sales & Marketing at Abcam, Inc. from July
      2007 to January 2008. Prior to Abcam, Mr. Potter was the National Sales Manager:
      Key Accounts Pharmaceutical at Qiagen, Inc. from July 2005 to May 2007. Prior
      to
      Qiagen, Mr. Potter was Director, Sales and Marketing at MicroCal, LLC from
      January 2000 to July 2005. Mr. Potter is also a former Treasurer of the New
      England Scientific Manufacturers Association and has been cited as a co-author
      and contributor on assorted scientific publications during his tenure working
      at
      the Worcester Foundation for Experimental Biology. Mr. Potter holds a BA in
      Biology from Clark University and an MBA from Assumption College, both located
      in Worcester, MA.




**Section
      16(a) Beneficial Ownership Reporting Compliance**




Section
      16(a) of the Exchange Act requires our executive officers and directors, and
      persons who own more than 10% of our common stock, to file reports of ownership
      and changes in ownership on Forms 3, 4 and 5 with the SEC.




Based
      solely on our review of the copies of such filings we have received and written
      representations from certain reporting persons, we believe that all of our
      executive officers, directors, and greater than 10% stockholders complied with
      all Section 16(a) filing requirements applicable to them during our fiscal
      year
      ended December 31, 2007.




-
          53
          -




**Code
      of Ethics**





Pursuant
      to Section 406 of the Sarbanes-Oxley Act of 2002, we have adopted a Code of
      Ethics for Senior Financial Officers that applies to our principal executive
      officer, principal financial officer, principal accounting officer, controller,
      and other persons performing similar functions. A
      copy of
      the code of ethics is posted on, and may be obtained free of charged from our
      Internet website at http://www.pressurebiosciences.com . If
      we
      make any amendments to this Code of Ethics or grant any waiver, including any
      implicit waiver, from a provision of this Code of Ethics to our principal
      executive officer, principal financial officer, principal accounting officer,
      controller, or other persons performing similar functions, we will disclose
      the
      nature of such amendment or waiver, the name of the person to whom the waiver
      was granted and the date of waiver in a Current Report on Form 8-K.





**Audit
      Committee**




Our
      Board
      of Directors has appointed an Audit Committee of the Board of Directors,
      comprised of Messrs.
      Wayne Fritzsche, J. Donald Payne, and P. Thomas Vogel. The Board of Directors
      has determined that Mr. Payne qualifies as an “audit committee financial expert”
as defined in Item 407(d)(5) of Regulation S-K.




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          54
          -




**ITEM
                11.**
              ****EXECUTIVE
                  COMPENSATION.****


***Compensation
      Committee***





*General* .
      Messrs.
      Fritzsche, Payne, and Vogel and Dr. Saravis are currently the members of the
      Compensation Committee. The Compensation Committee operates pursuant to a
      written charter, a copy of which is publicly available on the investor relations
      portion of our website at *www.pressurebiosciences.com* .
      The
      primary functions of the Compensation Committee include (i) reviewing and
      approving our executive compensation, (ii) reviewing the recommendations of
      the
      President and Chief Executive Officer regarding the compensation of our
      executive officers, (iii) evaluating the performance of the Chief Executive
      Officer, (iv) overseeing the administration and approval of grants of stock
      options and other equity awards under our equity incentive plans, and (v)
      recommending compensation for our Board of Directors and each committee thereof
      for review and approval by the Board of Directors. The Compensation Committee
      held one (1) meeting during calendar 2007.





*Compensation
      Objectives*





In
      light
      of the early stage of commercialization of our products, we recognize the
      importance of attracting and retaining key employees with sufficient experience,
      skills, and qualifications in areas vital to our success, such as operations,
      finance, sales and marketing, research and development and engineering, and
      individuals who are committed to our short- and long-term goals. The
      Compensation Committee has designed our executive compensation programs with
      the
      intent of attracting, motivating, and retaining experienced executives and
      rewarding them for their contributions by offering them a competitive base
      salary, annual cash incentive bonuses, and long-term equity-based incentives,
      typically in the form of stock options. The Compensation Committee strives
      to
      balance the need to retain key employees with financial prudence given our
      history of operating losses and the early stage of our commercialization.





*Executive
      Officers and Director Compensation Process*





The
      Compensation Committee considers and determines executive compensation according
      to an annual and semi-annual objective setting and measurement cycle.
      Specifically, corporate goals for the year are initially developed by our
      executive officers and are then presented to the Board of Directors and
      Compensation Committee for review and approval. Individual goals are intended
      to
      focus on contributions that facilitate the achievement of the corporate goals.
      Individual goals are first proposed by each executive officer, other than the
      President and Chief Executive Officer, then discussed by the entire senior
      executive management team and ultimately compiled and prepared for submission
      to
      the Board of Directors and the Compensation Committee, by the President and
      Chief Executive Officer. The Compensation Committee sets and approves the goals
      for the President and Chief Executive Officer. Generally, corporate and
      individual goals are set during the first quarter of each calendar year. The
      objective setting process is coordinated with our annual financial planning
      and
      budgeting process so our Board of Directors and Compensation Committee can
      consider overall corporate and individual objectives in the context of budget
      constraints and cost control considerations. Annual salary increases, bonuses,
      and equity awards, such as stock option grants, if any, are tied to the
      achievement of these corporate and individual performance goals as well as
      our
      financial position and prospects.





Under
      the
      annual performance review program, the Compensation Committee evaluates
      individual performance against the goals for the recently completed year. The
      Compensation Committee’s evaluation generally occurs in the first quarter of the
      following year. The evaluation of each executive (other than the President
      and
      Chief Executive Officer) begins with a written self-assessment submitted by
      the
      executive to the President and Chief Executive Officer. The President and Chief
      Executive Officer then prepares a written evaluation based on the executive’s
      self-assessment, the President and Chief Executive Officer’s evaluation, and
      input from others within our company. This process leads to a recommendation
      by
      the President and Chief Executive Officer for a salary increase, bonus, and
      equity award, if any, which is then considered by the Compensation Committee.
      In
      the case of the President and Chief Executive Officer, the Compensation
      Committee conducts his performance evaluation and determines his compensation,
      including salary increase, bonus, and equity awards, if any. We generally
      expect, but are not required, to implement salary increases, bonuses, and equity
      awards, for all executive officers, if and to the extent granted, by April
      1st.




-
          55
          -




Non-employee
      director compensation is set by our Board of Directors upon the recommendation
      of the Compensation Committee. In developing its recommendations, the
      Compensation Committee is guided by the following goals: compensation should
      be
      fair relative to the required services for a director of comparable companies
      in
      our industry and at our company’s stage of development; compensation should
      align directors’ interests with the long-term interest of stockholders; the
      structure of the compensation should be simple, transparent, and easy for
      stockholders to understand; and compensation should be consistent with the
      financial resources, prospects, and competitive outlook for our
      company.





In
      evaluating executive officer and director compensation, the Compensation
      Committee considers the practices of companies of similar size, geographic
      location, and market focus. In order to develop reasonable benchmark data the
      Compensation Committee has referred to publicly available sources such as
      Salary.com and the BioWorld Survey. While the Compensation Committee does not
      believe benchmarking is appropriate as a stand-alone tool for setting
      compensation due to the unique aspects of our business objectives and current
      stage of development, the Compensation Committee generally believes that
      gathering this compensation information is an important part of its
      compensation-related decision making process.





The
      Compensation Committee has the authority to hire and fire advisors and
      compensation consultants as needed and approve their fees. No advisors or
      compensation consultants were hired or fired in fiscal 2007.





The
      Compensation Committee is also authorized to delegate any of its
      responsibilities to subcommittees or individuals as it deems appropriate. The
      Compensation Committee did not delegate any of its responsibilities in fiscal
      2007.





In
      February 2008, our Board of Directors met with senior management and discussed
      the 2007 business and financial results and reviewed the proposed objectives
      for
      2008. The Board of Directors and the Compensation Committee also reviewed the
      proposed 2008 budget and operating plan and determined that discussions of
      salaries, bonuses and equity awards should be deferred until the middle of
      the
      year. Considering this, the Compensation Committee recommended, and the Board
      of
      Directors approved the following actions to be taken:




·
            Implement
                a 4% cost of living increase for all employees hired prior to December
                31,
                2007, except for Mr. Schumacher, and for our regional sales directors,
                effective immediately.




·
            Grant
                each non-employee member of the Board of Directors non-qualified
                stock
                options to purchase 10,000 shares of our common stock, effective
                on April
                15, 2008.




-
          56
          -




**EXECUTIVE
      COMPENSATION**




**Summary
      Compensation Table**




The
      Summary Compensation Table below sets forth the total compensation paid or
      earned for the fiscal years ended December 31, 2007 and 2006 for: (i) each
      individual serving as our Chief Executive Officer (“CEO”) or acting in a similar
      capacity during any part of fiscal 2007 and 2006; and (ii) the other two most
      highly paid executive officers (collectively, the "Named Executive
      Officers").




Option
            
            All otherName
                and Principal Position
            
            Fiscal Year
            
            Salary
                (1)
            
            Bonus
                (2)
            
            Awards (3)
            
            Compensation (4)
            
            TotalRichard
                T. Schumacher
            
            
            2007
            
            $
            288,697
            
            $
            -
            
            $
            102,297
            
            $
            12,069
            
            $
            403,063President & Chief Executive Officer
            
            
            2006
            
            
            267,981
            
            
            55,000
            
            
            67,987
            
            
            15,628
            
            
            406,596Edward
                H. Myles
            
            
            2007
            
            
            178,538
            
            
            -
            
            
            45,993
            
            
            3,306
            
            
            227,837Senior
                Vice President of Finance
            
            
            2006
            
            
            120,962
            
            
            17,000
            
            
            40,018
            
            
            50,349
            
            
            228,329&
                Chief Financial OfficerEdmund
                Ting, Ph.D
            
            
            2007
            
            
            185,673
            
            
            -
            
            
            50,304
            
            
            3,163
            
            
            239,140Senior Vice President of Engineering
            
            
            2006
            
            
            114,423
            
            
            17,500
            
            
            40,340
            
            
            3,234
            
            
            175,497







(1)
      Salary refers to base salary compensation paid through the Company’s normal
      payroll process.


(2)
      A
      cash bonus is paid to executive officers based on a combination of factors
      including the performance of the company relative to specific objectives, the
      financial condition of the company, and the performance of the individual
      executive relative to specific objectives. Amounts for 2006 reflect bonuses
      earned in 2006 and paid in February 2007. The Compensation Committee has
      deferred the discussion of executive bonuses for 2007, to be paid in 2008,
      until
      the middle of 2008.


(3)
      Amounts shown do not reflect compensation received by the Named Executive
      Officers. Instead, the amounts shown are the compensation costs recognized
      by
      the Company in each of the fiscal years presented for option awards as
      determined pursuant to SFAS 123R. Please refer to Note 2, xiii, “ *Accounting
      for Stock-Based Compensation* ”
in
      the
      Notes to our Consolidated Financial Statements included in this Annual Report
      on
      Form 10-K for the year ended December 31, 2007, for the relevant assumptions
      used to determine the valuation of our stock option grants. Based on the
      assumptions outlined in the Notes to the Company’s Consolidated Financial
      Statements the value of our stock options awarded to executives and other
      employees during 2006 and 2007 was between $2.55 and $3.00 per
      option.


(4)
“All
      Other Compensation” includes the company’s match to the executives’ 401(k)
      contribution and premiums paid on life insurance for the executive. Both of
      these benefits are available to all employees of the company. In the case of
      Mr.
      Schumacher, “All Other Compensation” also includes $7,980 in premiums paid by
      the company for a life insurance policy to which Mr. Schumacher’s wife is the
      beneficiary.





**Outstanding
      Equity Awards at Fiscal-Year End**





The
      following table sets forth certain information regarding outstanding stock
      options awards for each of the Named Executive Officers as of December 31,
      2007.




Name
            
            Number
                of
              Securities
              Underlying
              Unexercised
              Options
                #
              Exercisable
            
            Number of Securities
              Underlying
              UnexercisedOptions
              #Unexercisable
                (1)
            
            Option
              Exercise
              Price
                ($)
            
            Option
              Expiration
              DateRichard
                T. Schumacher
            
            
            40,000
            
            
            0
            
            
            $2.60
            
            
            5/2/2011President & Chief Executive Officer
            
            
            60,000
            
            
            0
            
            
            $3.08
            
            
            2/11/201230,000
            
            
            0
            
            
            $2.70
            
            
            12/2/201250,000
            
            
            25,000
            (2)
            
            $2.92
            
            
            6/17/201510,000
            
            
            20,000
            (2)
            
            $3.86
            
            
            3/30/20160
            
            
            70,000
            (2)
            
            $3.51
            
            
            2/12/2017Edward
                H. Myles
            
            
            18,334
            
            
            36,666
            (3)
            
            $3.86
            
            
            4/3/2016Senior
                Vice President of Finance&
                Chief Financial OfficerEdmund
                Y. Ting, Ph.D
            
            
            20,000
            
            
            40,000
            (4)
            
            $3.87
            
            
            4/24/2016Senior
                Vice President of Engineering




-
          57
          -


(1)
        All
        unvested stock options listed in this column were granted to the Named Executive
        Officer pursuant to the Company’s 2005 Equity Incentive Plan. All of such stock
        options vest ratably over three years and expire ten years after the date
        of
        grant. Unvested stock options become fully vested and exercisable upon a
        change
        of control of the Company.


(2)
      Options to purchase 75,000 shares of common stock were granted to Mr. Schumacher
      on June 17, 2005, of which options to purchase 25,000 shares became vested
      on
      June 17, 2006, and an additional 25,000 became vested on June 17,
      2007. Options to purchase 30,000 shares of common stock were granted to Mr.
      Schumacher on March 30, 2006 of which 10,000 became vested on March 30,
      2007. Options to purchase 70,000 shares of common stock were granted to Mr.
      Schumacher on February 12, 2007.


(3)
      Options to purchase 55,000 shares of common stock were granted to Mr. Myles
      on
      April 3, 2006, 18,334 became vested on April 3, 2007.


(4)
      Options to purchase 60,000 shares of common stock were granted to Dr. Ting
      on
      April 24, 2006, 20,000 became vested on April 24, 2007.





**Retirement
      Plan**





All
      employees, including the Named Executive Officers, may participate in our 401(k)
      Plan. Under the 401(k) Plan, employees may elect to make before tax
      contributions of up to 60% of their base salary, subject to current Internal
      Revenue Service limits. The 401(k) Plan does not permit an investment in our
      common stock. We match employee contributions up to 50% of the first 2% of
      the
      employee’s contribution. Our contribution is 100% vested
      immediately.





**Severance
      Arrangements**





Each
      of
      our executive officers; Mr. Schumacher, Mr. Myles, Dr. Ting, Dr. Lazarev, Dr.
      Lawrence and Mr. Potter is entitled to receive a severance payment if terminated
      by us without cause. The severance benefits would include a payment in an amount
      equal to one year of such executive officer’s annualized base salary
      compensation plus accrued paid time off. Additionally, the officer will be
      entitled to receive medical and dental insurance coverage for one year following
      the date of termination.





**Change-in-Control
      Arrangements**





Each
      of
      our executive officers, other than Mr. Schumacher, is entitled to receive a
      change of control payment in an amount equal to one year of such executive
      officer’s annualized base salary compensation, accrued paid time off, and
      medical and dental coverage, in the event of a change of control of the Company.
      In the case of Mr. Schumacher this payment would be equal to two years of
      annualized base salary compensation, accrued paid time off, and two years of
      medical and dental coverage.





Pursuant
      to the Company’s 2005 Equity Incentive Plan (the “Plan”), any unvested stock
      options held by a Named Executive Officer will become fully vested upon a change
      in control (as defined in the Plan) of the Company.





**Director
      Compensation**





The
      following table sets forth certain information regarding compensation earned
      or
      paid to the Company’s directors during fiscal 2007.




Name
            
            Fees Earned or
              Paid in Cash (1)
            
            OptionAwards (2)
            
            TotalR.
                Wayne Fritzsche
            
            $
            32,000
            
            $
            -
            
            $
            32,000Calvin
                A. Saravis, Ph.D
            
            
            32,000
            
            
            -
            
            
            32,000J.
                Donald Payne
            
            
            32,000
            
            
            -
            
            
            32,000P.
                Thomas Vogel
            
            
            32,000
            
            
            -
            
            
            32,000




The
      Company’s non-employee directors receive the following compensation for service
      as a director of the Company:




(1)
      A
      quarterly stipend of $8,000, of which $4,000 is compensation for attending
      meetings of the full Board of Directors (whether telephonic or in-person) and
      $4,000 is compensation for attending committee meetings. There is no limit
      to
      the number of meetings of the Board of Directors or committees that may be
      called. Cash compensation is paid on or immediately prior to the last day of
      each fiscal quarter.


(2)
      During 2007 the Board of Directors decided not to award fully vested,
      non-qualified stock options to its non-employee members.




-
          58
          -




**ITEM
                12.**
              ****SECURITY
                  OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
                  STOCKHOLDER
                  MATTERS.****


**Beneficial
      Ownership Information**





The
      following table sets forth certain information as of March 24, 2008, as to
      shares of our common stock beneficially owned by: (i) each person
      (including any “group” as that term is used in Section 13(d)(3) of the
      Exchange Act) known by us to be the beneficial owner of 5% or more of our common
      stock, (ii) each of our executive officers listed in the Summary
      Compensation Table under Item 11 of this report, (iii) each of our
      directors and (iv) all of our directors and executive officers as a
      group.





We
      have
      determined beneficial ownership in accordance with the rules of the SEC.
      Except as indicated by the footnotes below, we believe, based on the information
      furnished to us, that the persons and entities named in the table below have
      sole voting and investment power with respect to all shares of common stock
      that
      they beneficially own.




Name
            
            Number
                of
              Shares
                of
              Common Stock
              Beneficially
              Owned
                (1)
            
            Percent of
              ClassLloyd
                I. Miller, III (2)*
            
            
            157,686
            
            
            5.5
            %4550
                Gordon DriveNaples,
                FL 34102Richard
                T, Schumacher (3)(4)*
            
            
            449,154
            
            
            15.8
            %130
                Lake Ridge DriveTaunton,
                MA 02780Edward
                H. Myles
            
            
            38,667
            
            
            1.4
            %Edmund
                Y. Ting, Ph.D
            
            
            42,000
            
            
            1.5
            %All
                other executive officers
            
            
            80,116
            
            
            2.8
            %R.
                Wayne Fritzsche
            
            
            63,000
            
            
            2.2
            %Calvin
                A. Saravis, Ph.D
            
            
            100,000
            
            
            3.5
            %J.
                Donald Payne
            
            
            62,000
            
            
            2.2
            %P.
                Thomas Vogel
            
            
            60,000
            
            
            2.1
            %All
                Executive Officers and Directors as a Group (4)
            
            
            894,937
            
            
            31.4
            %








*
      Address
      provided for beneficial owners of more than 5% of the common stock.


(1)
      Includes the following shares of common stock issuable upon exercise of options
      exercisable within 60 days after March 24, 2008: Mr. Schumacher – 223,334; Dr.
      Saravis - 110,000; Mr. Fritzsche - 73,000; Mr. Payne - 68,000; Mr. Vogel -
      70,000; Mr. Myles – 36,667; Dr. Ting – 40,000.


(2)
      Based
      on information contained in a Schedule 13 G/A filed with the SEC on February
      11,
      2008, Mr. Miller reports shared voting and shared dispositive power as to
      150,646 shares of common stock and sole voting power and sole dispositive power
      to 7,040 shares.


(3)
      Does
      not include 15,162 shares of common stock held by Mr. Schumacher’s minor son as
      his wife exercises all voting and investment control over such
      shares.


(4)
      Includes an aggregate of 694,334 shares of common stock that the current
      directors and executive officers have the right to acquire upon exercise of
      outstanding stock options exercisable within sixty (60) days after March 24,
      2008.




-
          59
          -




**Equity
      Compensation Plan Information**





We
      maintain a number of equity compensation plans for employees, officers,
      directors and other entities and individuals whose efforts contribute to our
      success. The table below sets forth certain information as of our fiscal year
      ended December 31, 2007 regarding the shares of our common stock available
      for
      grant or granted under our equity compensation plans.




Plan Category
            
            Number of
              securities to be
              issued upon
              exercise of
              outstanding options
            
            Weighted-average
              exercise price of
              outstanding
              options
            
            Number of securities
              remaining available
              for future issuance
              under equity
              compensation plansEquity
                compensation plans approved by security holders
            
            
            1,120,500
            
            $
            3.45
            
            
            137,800


Includes
        the following plans: 1994 ISO Stock Option Plan, 1999 Non-Qualified Stock
        Option
        Plan, and 2005 Equity Incentive Plan.


**ITEM
                13.**
              ****CERTAIN
                  RELATIONSHIPS AND RELATED TRANSACTIONS; AND DIRECTOR
                  INDEPENDENCE.****


**Related
      Persons Transactions**





On
      December 29, 2006, Richard T. Schumacher, our President and Chief Executive
      Officer, delivered to us 249,875
      shares of his common stock of the company in full and complete satisfaction
      and
      payment of all outstanding amounts, including all principal and accrued
      interest, of Mr. Schumacher’s loan payable to us. The loan amount consisted of
      $1,000,000 in principal and $25,487 in interest accrued in the quarter ended
      December 31, 2006. The number of shares was determined based upon a value of
      $4.10 per share, the volume weighted average trading price of the shares of
      our
      common stock on the NASDAQ Capital Market during the 60 trading days ending
      on
      December 29, 2006. In connection with the payment of the loan, we terminated
      our
      security interest in Mr. Schumacher’s shares of common stock, and released to
      Mr. Schumacher the remaining 229,782 shares of common stock previously held
      as
      collateral.





**Director
      Independence**





The
      Board
      of Directors has reviewed the qualifications of each of Messrs. Fritzsche,
      Payne, Vogel and Dr. Saravis, constituting more than a majority of our
      directors, and has affirmatively determined that each individual is “independent”
      as such term is defined under the current listing standards of the NASDAQ Stock
      Market. The Board of Directors has determined that none of these directors
      has a
      material relationship with us that would interfere with the exercise of
      independent judgment. In addition, each member of the Audit Committee is
      independent as required under Section 10A(m)(3) of the Securities Exchange
      Act
      of 1934, as amended.




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          60
          -




**ITEM
                  14.**
                **PRINCIPAL
                    ACCOUNTANT FEES AND
                    SERVICES**




**Independent
      Registered Public Accounting Fees**




The
      following is a summary of the fees billed to the Company by UHY LLP (“UHY”), our
      principal accountant, for the fiscal years ended December 31, 2007 and December
      31, 2006, respectively:





**Fiscal 2007 Fees**
            
            **Fiscal 2006 Fees****($)**
            
            **($)**Audit
                Fees
            
            $
            105,691
            
            $
            155,162Audit-Related
                Fees
            
            
            24,791
            
            
            -$
            130,482
            
            $
            155,162





*Audit
      Fees* .
      Consists of aggregate fees billed for professional services rendered for the
      audit of our consolidated financial statements and review of the interim
      consolidated financial statements included in quarterly reports, as well as
      services that are normally provided by the independent registered public
      accounting firm in connection with statutory and regulatory filings or
      engagements.





*Audit-Related
      Fees* .
      Consists of aggregate fees billed for assurance and related services that are
      reasonably related to the performance of the audit or review of our consolidated
      financial statements and are not reported under “Audit Fees.” Fees billed by UHY
      for 2007 were fees associated with consents delivered in connection with the
      Company’s Registration Statement on Form S-3 and certain agreed upon procedures
      with respect to Source Scientific, LLC.





There
      were no other fees for services rendered by UHY other than those described
      above.





**Audit
      Committee Policy on Pre-Approval of Services**





The
      Audit
      Committee’s policy is to pre-approve all audit and permissible non-audit
      services provided by the independent registered public accounting firm. These
      services may include audit services, audit-related services, tax services,
      and
      other services. Pre-approval is generally provided for up to one year. The
      Audit
      Committee may also pre-approve particular services on a case-by-case
      basi





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          61
          -





**PART
      IV**


**ITEM
              15.**
            **EXHIBITS.**







**Exhibit
                No.**
            
            
            **Reference**3.1
            
            Amended
                and Restated Articles of Organization of the Company
            A-3.1**3.2
            
            Articles
                of Amendment to Amended and Restated Articles of Organization of
                the
                Company
            B-3.1**3.3
            
            Amended
                and Restated Bylaws of the Company
            A-3.2**3.4
            
            Amendment
                to Amended and Restated Bylaws of the Company
            C-3.3**4.1
            
            Specimen
                Certificate for Shares of the Company’s Common Stock
            D-4.1**4.2
            
            Description
                of Capital Stock (contained in the Amended and Restated Articles
                of
                Organization, as amended, of the Company filed as Exhibits 3.1 and
                3.2)
            A-3.1
                & 3.2**4.3
            
            Rights
                Agreement dated as of February 27, 2003 between the Company and
                Computershare Trust Company, Inc.
            E-4**4.4
            
            Amendment
                No. 1 to Rights Agreement dated April 16, 2004 between the Company
                and
                Computershare Trust Company, Inc.
            F-4**4.5
            
            Securities
                Purchase Agreement dated November 21, 2007 between the Company and
                the
                purchasers named therein
            G-4.9**4.6
            
            Registration
                Rights Agreement dated November 21, 2007 between the Company and
                the
                purchasers named therein
            G-4.10**10.1
            
            1994
                Employee Stock Option Plan*
            A-10.16**10.2
            
            1999
                Non-Qualified Stock Option Plan*
            H**10.3
            
            1999
                Employee Stock Purchase Plan*
            H**10.4
            
            2005
                Equity Incentive Plan.*
            I-99.1**10.5
            
            Description
                of Compensation for Certain Directors*
            Filed
                herewith10.6
            
            Severance
                Agreement between the registrant and Richard T.
                Schumacher*
            Filed
                herewith10.7
            
            Form
                of Severance Agreement including list of officers to whom
                provided*
            Filed
                herewith10.8
            
            LLC
                Membership Interest Purchase Agreement dated June 8, 2004 by and
                between
                BBI Source Scientific Inc., Boston Biomedica, Inc., and Source Scientific,
                LLC.
            J-2.1**10.9
            
            Consent
                Agreement, dated May 29, 2007, by and among the registrant, PBI Source
                Scientific, Inc., Source Scientific, LLC, BIT Analytical Instruments,
                Inc., Richard W. Henson and Bruce A. Sargeant.
            K-10.1**10.10
            
            Asset
                Purchase Agreement dated April 16, 2004 between the Company, BBI
                Biotech
                Research Laboratories, Inc. and SeraCare Life Sciences,
                Inc.
            F-1**10.11
            
            Technology
                Transfer and Patent Assignment Agreement dated October 7, 1996, between
                Bioseq, Inc. and BioMolecular Assays, Inc.
            Filed
                herewith10.12
            
            Amendment
                to Technology Transfer and Patent Assignment Agreement dated October
                8,
                1998 between Bioseq, Inc. and BioMolecular Assays, Inc.
            Filed
                herewith10.13
            
            Nonexclusive
                License Agreement dated September 30, 1998 between Bioseq, Inc. and
                BioMolecular Assays, Inc.
            Filed
                herewith10.14
            
            Flex
                Space Office Lease dated May 5, 2005 by and between Saul Holding
                Limited Partnership and the registrant
            L-10.1**10.15
            
            Agreement
                for Research Services dated February 1, 2006 by and between the registrant
                and the University of New Hampshire
            M-10.1**10.17
            
            Loan
                Repayment Agreement with Richard T. Schumacher dated December 29,
                2006
            N-10.1**23.1
            
            Consent
                of Independent Registered Public Accounting Firm
            Filed
                herewith31.1
            
            Principal
                Executive Officer Certification Pursuant to Item 601(b)(31) of Regulation
                S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act
                of
                2002
            Filed
                herewith31.2
            
            Principal
                Financial and Accounting Officer Certification Pursuant to Item 601(b)(31)
                of Regulation S-K, as adopted pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002
            Filed
                herewith32.1
            
            Principal
                Executive Officer Certification Pursuant to Item 601(b)(32) of Regulation
                S-K, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
                of
                2002
            Filed
                herewith32.2
            
            Principal
                Financial and Accounting Officer Certification Pursuant to Item 601(b)(32)
                of Regulation S-K, as adopted pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002
            Filed
                herewith




-
          62
          -




A
            We
                previously filed this exhibit with the referenced exhibit number
                as an
                exhibit to the registrant’s Registration Statement on Form S-1
                (Registration No. 333-10759) filed with the Commission on August
                23,
                1996.B
            We
                previously filed this exhibit with the referenced exhibit number
                as an
                exhibit to the registrant’s Quarterly Report on Form 10-Q for the fiscal
                quarter ended September 30, 2004.C
            We
                previously filed this exhibit with the referenced exhibit number
                as an
                exhibit to the registrant’s Annual Report on Form 10-K for the fiscal year
                ended December 31, 2002.D
            We
                previously filed this exhibit with the referenced exhibit number
                as an
                exhibit to the registrant’s Annual Report on Form 10-KSB for the fiscal
                year ended December 31, 2004.E
            We
                previously filed this exhibit with the referenced exhibit number
                as an
                exhibit to the registrant’s Current Report on Form 8-K filed with the
                Commission March 12, 2003.F
            We
                previously filed this exhibit with the referenced exhibit number
                as an
                exhibit to the registrant’s Current Report on Form 8-K filed with the
                Commission April 16, 2004.G
            We
                previously filed this exhibit with the referenced exhibit number
                as an
                exhibit to the registrant’s Registration Statement on Form S-3
                (Registration No. 333-148227) filed with the Commission on December
                20,
                2007.H
            We
                previously filed this exhibit as an appendix to the registrant’s proxy
                statement filed June 14, 1999.I
            We
                previously filed this exhibit with the referenced exhibit number
                as an
                exhibit to the registrant’s Registration Statement on Form S-8 (Reg. No.
                333-128594) filed with the Commission on September 26,
                2005.J
            We
                previously filed this exhibit with the referenced exhibit number
                as an
                exhibit to the registrant’s Current Report on Form 8-K filed with the
                Commission June 16, 2004.K
            We
                previously filed this exhibit with the referenced exhibit number
                as an
                exhibit to the registrant’s Current Report on Form 8-K filed with the
                Commission on June 1, 2007.L
            We
                previously filed this exhibit with the referenced exhibit number
                as an
                exhibit to the registrant’s Current Report on Form 8-K filed with the
                Commission on May 11, 2005.M
            We
                previously filed this exhibit with the referenced exhibit number
                as an
                exhibit to the registrant’s Current Report on Form 8-K filed with the
                Commission on February 7, 2006.N
            We
                previously filed this exhibit with the referenced exhibit number
                as an
                exhibit to the registrant’s Current Report on Form 8-K filed with the
                Commission on December 29, 2006.





-
          63
          -





**SIGNATURES**





Pursuant
      to the requirements of Section 13 or 15(d) 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.




Date: 
                March 27, 2008
            Pressure
                BioSciences, Inc.By:
            */s/
                Richard T. Schumacher*Richard
                T. SchumacherPresident
                and Chief Executive Officer




Pursuant
      to the requirements of the Securities Exchange Act of 1934, this report has
      been
      signed below by the following persons on behalf of the registrant and in the
      capacity and on the dates indicated.




**SIGNATURES**
            
            **TITLES**
            
            **DATE***/s/**Richard
                T. Schumacher*
            
            President,
                Chief Executive Officer (Principal Executive Officer )
            
            March
                27, 2008Richard
                T. Schumacher*/s/**Edward
                H. Myles*
            
            Senior
                Vice President and Chief Financial Officer (Principal Financial and
                Principal Accounting Officer) and Treasurer
            
            March
                  27, 2008Edward
                H. Myles*/s/
                R. Wayne Fritzsche*
            
            Director
                and Chairman of the Board
            
            March
                  27, 2008R.
                Wayne Fritzsche*/s/**J.
                Donald Payne*
            
            Director
            
            March
                  27, 2008J.
                Donald Payne*/s/
                Calvin A. Saravis, Ph.D.*
            
            Director
            
            March
                  27, 2008Calvin
                A. Saravis, Ph. D.*/s/
                P. Thomas Vogel*
            
            Director
            
            March
                  27, 2008P.
                Thomas Vogel