Exhibit 10.8

                             FUNDS ESCROW AGREEMENT

         This Agreement  (this  "Agreement") is dated as of the 28th day of May,
2004 among Pacific  Biometrics,  Inc., a Delaware  corporation  (the "Company"),
Laurus  Master Fund,  Ltd. (the  "Purchaser"),  and Loeb & Loeb LLP (the "Escrow
Agent"):

                              W I T N E S S E T H:

         WHEREAS,  the  Purchaser  has  advised  the  Escrow  Agent that (a) the
Company and the Purchaser have entered into a Securities Purchase Agreement (the
"Purchase  Agreement") for the sale by the Company to the Purchaser of a secured
convertible  term note (the  "Term  Note"),  (b) the  Company  has issued to the
Purchaser  common  stock  purchase  warrants   (collectively,   the  "Term  Note
Warrants") in connection with the issuance of the Term Note, and (c) the Company
and the Purchaser have entered into a Registration Rights Agreement covering the
registration of the Company's common stock underlying the Term Note and the Term
Note Warrants (the "Term Note Registration Rights Agreement");

         WHEREAS, the Company and the Purchaser wish the Purchaser to deliver to
the Escrow Agent copies of the Documents (as hereafter defined) and the Escrowed
Payment  (as  hereafter  defined)  to be held and  released  by Escrow  Agent in
accordance with the terms and conditions of this Agreement; and

         WHEREAS,  the Escrow Agent is willing to serve as escrow agent pursuant
to the terms and conditions of this Agreement;

         NOW THEREFORE, the parties agree as follows:

                                   ARTICLE I

                                 INTERPRETATION

         1.1. Definitions.  Whenever used in this Agreement, the following terms
shall have the meanings set forth below.

     (a)  "Agreement"  means  this  Agreement,   as  amended,   modified  and/or
          supplemented  from time to time by written agreement among the parties
          hereto.

     (b)  "Closing  Payment"  means  the  closing  payment  to be paid to Laurus
          Capital Management,  LLC, the fund manager, as set forth on Schedule A
          hereto.

     (c)  "Disbursement  Letter"  means that  certain  letter  delivered  to the
          Escrow Agent by each of the  Purchaser  and the Company  setting forth
          wire instructions and amounts to be funded at the Closing.

<PAGE>

     (d)  "Documents"  means copies of the  Disbursement  Letter,  [the Purchase
          Agreement,  the Term Note, the Term Note  Warrants,  and the Term Note
          Registration Rights Agreement.

     (e)  "Escrowed Payment" means $2,500,000.


         1.2. Entire Agreement.  This Agreement constitutes the entire agreement
among the  parties  hereto  with  respect to the  matters  contained  herein and
supersedes all prior agreements, understandings, negotiations and discussions of
the parties,  whether oral or written. There are no warranties,  representations
and other  agreements  made by the parties in connection with the subject matter
hereof except as specifically set forth in this Agreement.

         1.3. Extended Meanings.  In this Agreement words importing the singular
number include the plural and vice versa;  words importing the masculine  gender
include  the  feminine  and  neuter  genders.  The  word  "person"  includes  an
individual,  body  corporate,  partnership,  trustee or trust or  unincorporated
association, executor, administrator or legal representative.

         1.4. Waivers and Amendments.  This Agreement may be amended,  modified,
superseded,  cancelled, renewed or extended, and the terms and conditions hereof
may be waived,  in each case only by a written  instrument signed by all parties
hereto, or, in the case of a waiver, by the party waiving compliance.  Except as
expressly  stated  herein,  no delay on the part of any party in exercising  any
right, power or privilege hereunder shall operate as a waiver thereof, nor shall
any waiver on the part of any party of any right,  power or privilege  hereunder
preclude  any other or future  exercise of any other  right,  power or privilege
hereunder.

         1.5. Headings. The division of this Agreement into articles,  sections,
subsections  and paragraphs and the insertion of headings are for convenience of
reference only and shall not affect the construction or  interpretation  of this
Agreement.

         1.6.  Law  Governing  this  Agreement;  Consent to  Jurisdiction.  This
Agreement  shall be governed by and construed in accordance with the laws of the
State of New York  without  regard to  principles  of  conflicts  of laws.  With
respect to any suit,  action or proceeding  relating to this Agreement or to the
transactions contemplated hereby ("Proceedings"),  each party hereto irrevocably
submits to the exclusive  jurisdiction  of the courts of the County of New York,
State of New York and the United States  District court located in the county of
New York in the State of New York.  Each party  hereto  hereby  irrevocably  and
unconditionally  (a) waives  trial by jury in any  Proceeding  relating  to this
Agreement and for any related counterclaim and (b) waives any objection which it
may have at any time to the  laying of venue of any  Proceeding  brought  in any
such  court,  waives any claim  that such  Proceedings  have been  brought in an
inconvenient forum and further waives the right to object,  with respect to such
Proceedings,  that such court does not have  jurisdiction  over such  party.  As
between the Company and the Purchaser, the prevailing party shall be entitled to
recover from the other party its reasonable  attorneys'  fees and costs.  In the
event that any provision of this Agreement is determined by a court of competent
jurisdiction  to be  invalid  or  unenforceable,  then  the  remainder  of  this
Agreement shall not be affected and shall remain in full force and effect.

                                       2
<PAGE>

         1.7.  Construction.  Each  party  acknowledges  that its legal  counsel
participated  in the  preparation of this Agreement and,  therefore,  stipulates
that the rule of construction  that  ambiguities are to be resolved  against the
drafting party shall not be applied in the  interpretation  of this Agreement to
favor any party against the other.

                                   ARTICLE II

                APPOINTMENT OF AND DELIVERIES TO THE ESCROW AGENT

         2.1.  Appointment.  The Company and the  Purchaser  hereby  irrevocably
designate  and appoint the Escrow  Agent as their  escrow agent for the purposes
set forth  herein,  and the Escrow Agent by its  execution  and delivery of this
Agreement  hereby  accepts such  appointment  under the terms and conditions set
forth herein.

         2.2.  Copies of Documents to Escrow Agent. On or about the date hereof,
the Purchaser shall deliver to the Escrow Agent copies of the Documents executed
by the Company to the extent it is a party thereto.

         2.3. Delivery of Escrowed Payment to Escrow Agent. On or about the date
hereof, the Purchaser shall deliver to the Escrow Agent the Escrowed Payment.

         2.4.  Intention  to  Create  Escrow  Over  the  Escrowed  Payment.  The
Purchaser  and the Company  intend that the  Escrowed  Payment  shall be held in
escrow by the Escrow Agent and released  from escrow by the Escrow Agent only in
accordance with the terms and conditions of this Agreement.

                                  ARTICLE III

                                RELEASE OF ESCROW

         3.1.  Release of Escrow.  Subject to the provisions of Section 4.2, the
Escrow Agent shall release the Escrowed Payment from escrow as follows:

     (a)  Promptly  following  receipt by the Escrow  Agent of (i) copies of the
          fully executed Documents and this Agreement, (ii) the Escrowed Payment
          in  immediately  available  funds,  (iii) joint  written  instructions
          ("Joint  Instructions")  executed  by the  Company  and the  Purchaser
          setting forth the payment  direction  instructions with respect to the
          Escrowed  Payment and (iv) Escrow  Agent's  verbal  instructions  from
          David Grin  and/or  Eugene  Grin  (each of whom is a  director  of the
          Purchaser)  indicating  that all  closing  conditions  relating to the
          Documents have been satisfied and directing that the Escrowed  Payment
          be  disbursed  by the  Escrow  Agent  in  accordance  with  the  Joint
          Instructions,  then the Escrowed Payment shall be deemed released from
          escrow and shall be promptly  disbursed in  accordance  with the Joint

                                       3
<PAGE>

          Instructions.   The  Joint   Instructions   shall   include,   without
          limitation,  Escrow Agent's  authorization to retain from the Escrowed
          Payment  Escrow  Agent's fee for acting as Escrow Agent  hereunder and
          the Closing Payment for delivery to Laurus Capital Management,  LLC in
          accordance with the Joint Instructions.

     (b)  Upon  receipt  by the  Escrow  Agent  of a  final  and  non-appealable
          judgment,  order, decree or award of a court of competent jurisdiction
          (a "Court Order") relating to the Escrowed  Payment,  the Escrow Agent
          shall remit the Escrowed  Payment in accordance  with the Court Order.
          Any Court Order shall be  accompanied by an opinion of counsel for the
          party  presenting  the Court Order to the Escrow Agent (which  opinion
          shall be  satisfactory  to the Escrow  Agent) to the  effect  that the
          court issuing the Court Order is a court of competent jurisdiction and
          that the Court Order is final and non-appealable.

         3.2.  Acknowledgement of Company and Purchaser;  Disputes.  The Company
and the Purchaser  acknowledge that the only terms and conditions upon which the
Escrowed  Payment are to be released  from escrow are as set forth in Sections 3
and 4 of this Agreement.  The Company and the Purchaser reaffirm their agreement
to abide by the terms and  conditions  of this  Agreement  with  respect  to the
release of the Escrowed Payment.  Any dispute with respect to the release of the
Escrowed  Payment  shall be  resolved  pursuant  to  Section  4.2 or by  written
agreement between the Company and Purchaser.

                                   ARTICLE IV

                           CONCERNING THE ESCROW AGENT

         4.1.  Duties  and  Responsibilities  of the  Escrow  Agent.  The Escrow
Agent's duties and responsibilities  shall be subject to the following terms and
conditions:

     (a)  The  Purchaser and the Company  acknowledge  and agree that the Escrow
          Agent (i) shall not be required to inquire into whether the Purchaser,
          the Company or any other party is entitled to receipt of any  Document
          or all or any  portion  of the  Escrowed  Payment;  (ii)  shall not be
          called upon to construe or review any Document or any other  document,
          instrument or agreement  entered into in connection  therewith;  (iii)
          shall be  obligated  only for the  performance  of such  duties as are
          specifically  assumed by the Escrow Agent pursuant to this  Agreement;
          (iv) may rely on and shall be protected in acting or  refraining  from
          acting upon any written notice,  instruction,  instrument,  statement,
          request or document  furnished  to it  hereunder  and  believed by the
          Escrow  Agent in good faith to be genuine  and to have been  signed or
          presented by the proper  person or party,  without  being  required to
          determine the  authenticity  or correctness of any fact stated therein
          or the  propriety or validity or the service  thereof;  (v) may assume
          that any person  purporting  to give notice or make any  statement  or
          execute any document in connection with the provisions hereof has been
          duly  authorized  to do so;  (vi)  shall  not be  responsible  for the
          identity, authority or rights of any person, firm or company executing
          or delivering  or  purporting to execute or deliver this  Agreement or
          any  Document  or any funds  deposited  hereunder  or any  endorsement

                                       4
<PAGE>

          thereon or  assignment  thereof;  (vii) shall not be under any duty to
          give the property held by Escrow Agent hereunder any greater degree of
          care than Escrow Agent gives its own similar property;  and (viii) may
          consult  counsel  satisfactory  to Escrow  Agent  (including,  without
          limitation,  Loeb & Loeb,  LLP or such other counsel of Escrow Agent's
          choosing),  the  opinion  of  such  counsel  to be full  and  complete
          authorization and protection in respect of any action taken,  suffered
          or omitted by Escrow Agent  hereunder in good faith and in  accordance
          with the opinion of such counsel.

     (b)  The  Purchaser  and the Company  acknowledge  that the Escrow Agent is
          acting  solely as a  stakeholder  at their request and that the Escrow
          Agent shall not be liable for any action taken by Escrow Agent in good
          faith and  believed  by Escrow  Agent to be  authorized  or within the
          rights or powers  conferred upon Escrow Agent by this  Agreement.  The
          Purchaser and the Company hereby, jointly and severally, indemnify and
          hold  harmless  the Escrow Agent and any of Escrow  Agent's  partners,
          employees,  agents and  representatives  from and  against any and all
          actions  taken or omitted  to be taken by Escrow  Agent or any of them
          hereunder and any and all claims, losses, liabilities,  costs, damages
          and expenses  suffered  and/or incurred by the Escrow Agent arising in
          any manner  whatsoever out of the  transactions  contemplated  by this
          Agreement and/or any transaction related in any way hereto,  including
          the fees of outside  counsel and other costs and expenses of defending
          itself against any claims,  losses,  liabilities,  costs,  damages and
          expenses  arising  in  any  manner  whatsoever  out  the  transactions
          contemplated by this Agreement  and/or any transaction  related in any
          way  hereto,  except  for such  claims,  losses,  liabilities,  costs,
          damages and expenses  incurred by reason of the Escrow  Agent's  gross
          negligence  or willful  misconduct.  The Escrow Agent shall owe a duty
          only to the Purchaser and Company under this Agreement and to no other
          person.

     (c)  The Purchaser  and the Company  shall jointly and severally  reimburse
          the Escrow Agent for its reasonable  out-of-pocket expenses (including
          counsel  fees  (which  counsel  may be Loeb & Loeb  LLP or such  other
          counsel of the Escrow Agent's  choosing)  incurred in connection  with
          the performance of its duties and  responsibilities  hereunder,  which
          shall not (subject to Section 4.1(b)) exceed $1,500.

     (d)  The Escrow Agent may at any time resign as Escrow  Agent  hereunder by
          giving five (5) business days prior written  notice of  resignation to
          the  Purchaser  and  the  Company.  Prior  to the  effective  date  of
          resignation  as specified in such notice,  the  Purchaser  and Company
          will  issue  to the  Escrow  Agent  a  Joint  Instruction  authorizing
          delivery of the  Documents  and the  Escrowed  Payment to a substitute
          Escrow  Agent  selected  by  the  Purchaser  and  the  Company.  If no
          successor Escrow Agent is named by the Purchaser and the Company,  the
          Escrow  Agent may apply to a court of  competent  jurisdiction  in the
          State of New York for  appointment  of a successor  Escrow Agent,  and
          deposit the Documents  and the Escrowed  Payment with the clerk of any
          such court and/or otherwise commence an interpleader or similar action
          for a determination of where to deposit the same.

                                       5
<PAGE>

     (e)  The Escrow  Agent does not have and will not have any  interest in the
          Documents  and the  Escrowed  Payment,  but is serving  only as escrow
          agent, having only possession thereof.

     (f)  The Escrow  Agent shall not be liable for any action  taken or omitted
          by it in good faith and  reasonably  believed  by it to be  authorized
          hereby or within the rights or powers conferred upon it hereunder, nor
          for action  taken or omitted by it in good  faith,  and in  accordance
          with advice of counsel  (which counsel may be Loeb & Loeb, LLP or such
          other counsel of the Escrow Agent's choosing), and shall not be liable
          for any  mistake  of fact or  error  of  judgment  or for any  acts or
          omissions  of any kind except to the extent any such  liability  arose
          from its own willful misconduct or gross negligence.

     (g)  This Agreement sets forth  exclusively  the duties of the Escrow Agent
          with respect to any and all matters  pertinent  thereto and no implied
          duties or obligations shall be read into this Agreement.

     (h)  The  Escrow  Agent  shall  be  permitted  to act as  counsel  for  the
          Purchaser or the Company, as the case may be, in any dispute as to the
          disposition  of the Documents and the Escrowed  Payment,  in any other
          dispute  between the  Purchaser  and the  Company,  whether or not the
          Escrow Agent is then holding the Documents and/or the Escrowed Payment
          and continues to act as the Escrow Agent hereunder.

     (i)  The  provisions of this Section 4.1 shall survive the  resignation  of
          the Escrow Agent or the termination of this Agreement.

         4.2.  Dispute  Resolution;  Judgments.  Resolution of disputes  arising
under this Agreement shall be subject to the following terms and conditions:

     (a)  If any dispute  shall arise with respect to the  delivery,  ownership,
          right  of  possession  or  disposition  of the  Documents  and/or  the
          Escrowed  Payment,  or if the  Escrow  Agent  shall  in good  faith be
          uncertain as to its duties or rights hereunder, the Escrow Agent shall
          be authorized, without liability to anyone, to (i) refrain from taking
          any  action  other  than to  continue  to hold the  Documents  and the
          Escrowed  Payment  pending  receipt  of a Joint  Instruction  from the
          Purchaser  and  Company,  (ii)  commence  an  interpleader  or similar
          action,  suit or  proceeding  for the  resolution of any such dispute;
          and/or (iii) deposit the  Documents and the Escrowed  Payment with any
          court of  competent  jurisdiction  in the State of New York,  in which
          event the  Escrow  Agent  shall  give  written  notice  thereof to the
          Purchaser  and  the  Company  and  shall  thereupon  be  relieved  and
          discharged  from all further  obligations  pursuant to this Agreement.
          The Escrow  Agent  may,  but shall be under no duty to,  institute  or
          defend any legal  proceedings  which relate to the  Documents  and the
          Escrowed  Payment.  The  Escrow  Agent  shall have the right to retain
          counsel  if it  becomes  involved  in  any  disagreement,  dispute  or
          litigation on account of this Agreement or otherwise  determines  that
          it is  necessary to consult  counsel  which such counsel may be Loeb &
          Loeb LLP or such other counsel of the Escrow Agent's choosing.

                                       6
<PAGE>

     (b)  The Escrow  Agent is hereby  expressly  authorized  to comply with and
          obey any Court Order.  In case the Escrow Agent obeys or complies with
          a Court Order,  the Escrow Agent shall not be liable to the  Purchaser
          and Company or to any other person,  firm, company or entity by reason
          of such compliance.

                                   ARTICLE V

                                 GENERAL MATTERS

         5.1. Termination.  This escrow shall terminate upon disbursement of the
Escrowed  Payment in accordance with the terms of this Agreement or earlier upon
(i) the agreement in writing of the Purchaser and Company;  (ii) the resignation
of the Escrow Agent in accordance  with the terms hereof;  or (iii) the date ten
(10) days after the date hereof.

         5.2. Notices. All notices,  requests,  demands and other communications
required or permitted  hereunder shall be in writing and shall be deemed to have
been duly given one (1) day after being sent by telecopy (with copy delivered by
overnight courier, regular or certified mail):

(a)      If to the Company, to:


         Pacific Biometrics, Inc.
         220 W. Harrison Street
         Seattle, WA 98119

         Attention:        Ronald R. Helm
         Facsimile:        (206) 298 - 9838

         with a copy to:
         Cairncross & Hempelmann, P.S
         524 Second Avenue, Suite 500
         Seattle, Washington 9810

         Attention:        Tim Woodland, Esq.
         Facsimile:       (206) 254-4524



(b)      If to the Purchaser, to:

          LAURUS MASTER FUND, LTD.
          c/o Ironshore Corporate Services Ltd.
          P.O. Box 1234 G.T., Queensgate House, South Church Street
          Grand Cayman, Cayman Islands
          Fax: 212-541-4434
          Attention:  John Tucker, Esq.

                                       7
<PAGE>

(c)      If to the Escrow Agent, to:

          Loeb & Loeb LLP
          345 Park Avenue
          New York, New York 10154
          Fax:  (212) 407-4990
          Attention:  Scott J. Giordano, Esq.

or to such other address  as any of them shall give to the others by notice made
pursuant to this Section 5.2.

         5.3.  Interest.  The Escrowed  Payment shall not be held in an interest
bearing account nor will interest be payable in connection therewith.

         5.4.  Assignment;  Binding  Agreement.  Neither this  Agreement nor any
right or obligation hereunder shall be assignable by any party without the prior
written consent of the other parties  hereto.  This Agreement shall inure to the
benefit of and be binding  upon the parties  hereto and their  respective  legal
representatives, successors and assigns.

         5.5.  Invalidity.  In the event that any one or more of the  provisions
contained  herein,  or the  application  thereof  in any  circumstance,  is held
invalid,  illegal, or unenforceable in any respect for any reason, the validity,
legality and  enforceability of any such provision in every other respect and of
the  remaining  provisions  contained  herein  shall not be in any way  impaired
thereby,  it being intended that all of the rights and privileges of the parties
hereto shall be enforceable to the fullest extent permitted by law.

         5.6.  Counterparts/Execution.  This  Agreement  may be  executed in any
number  of  counterparts  and  by  different   signatories  hereto  on  separate
counterparts,  each of which, when so executed, shall be deemed an original, but
all such  counterparts  shall  constitute but one and the same  agreement.  This
Agreement may be executed by facsimile transmission.


                                       8
<PAGE>

         IN WITNESS WHEREOF,  the parties hereto have executed this Funds Escrow
Agreement as of the date and year first above written.

                                       COMPANY:

                                       PACIFIC BIOMETRICS, INC.

                                       By:     /s/ Ronald R. Helm
                                              ----------------------------------
                                       Name:  Ronald Helm
                                       Title:  Chief Executive Officer

                                       PURCHASER:

                                       LAURUS MASTER FUND, LTD.

                                       By:     /s/
                                              ----------------------------------
                                       Name:
                                       Title:

                                       ESCROW AGENT:

                                       LOEB & LOEB LLP

                                       By:     /s/
                                              ----------------------------------
                                       Name:
                                       Title:

                                       9
<PAGE>

                      SCHEDULE A TO FUNDS ESCROW AGREEMENT
                      ------------------------------------

PURCHASER                          PRINCIPAL NOTE AMOUNT
----------------------------------------------------------------------
LAURUS MASTER FUND, LTD.,          Term Note in an aggregate principal
c/o Ironshore Corporate Services    amount of $2,500,000
 Ltd., P.O. Box 1234 G.T.,
 Queensgate House, South Church
 Street, Grand Cayman, Cayman
 Islands
Fax: 345-949-9877
----------------------------------------------------------------------
TOTAL                                                      $2,500,000
----------------------------------------------------------------------

FUND MANAGER                       CLOSING PAYMENT
----------------------------------------------------------------------
LAURUS CAPITAL MANAGEMENT, L.L.C.  Closing payment payable in
825 Third Avenue, 14th Floor        connection with investment by
New York, New York 10022            Laurus Master Fund, Ltd. for which
Fax: 212-541-4434                   Laurus Capital Management, L.L.C.
                                    is the Manager.
----------------------------------------------------------------------
TOTAL                                                         $87,500
----------------------------------------------------------------------

WARRANTS

WARRANT RECIPIENT                     WARRANTS IN CONNECTION WITH
                                       OFFERING
------------------------------------------------------------------------
LAURUS MASTER FUND, LTD.              Term Note Warrant exercisable into
A Cayman Island corporation           681,818 shares of common stock of
c/o Ironshore Corporate Services Ltd. the Company issuable in connection
P.O. Box 1234 G.T.                    with the Term Note.
Queensgate House, South Church
 Street
Grand Cayman, Cayman Islands
Fax: 345-949-9877
-------------------------------------------------------------------------
TOTAL                                 Warrants exercisable into 681,818
                                       shares of common stock of the
                                       Company
-------------------------------------------------------------------------

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