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**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**




**FORM
      10-QSB**




**(Mark
      One)**




ý  **Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
      Act
      of 1934**




**For
      the quarterly period ended** **June
      30, 2006**  **or**




o  **Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
      Act
      of 1934**




**For
      the transition period from _____________ to _____________**




**Commission
      file number** **0-21615**




**PRESSURE
      BIOSCIENCES, INC.**


(Exact
      Name of Small Business Issuer as Specified in its Charter)




**Massachusetts**
            
            **04-2652826**(State
                or Other Jurisdiction of
            
            (I.R.S.
                EmployerIncorporation
                or Organization)
            
            Identification
                No.)**321
                Manley St.****West
                Bridgewater, Massachusetts**
            
            **02379-1040**(Address
                of Principal Executive Offices)
            
            (Zip
                Code)




**(508)
      580-1818**


(Issuer’s
      telephone number, including area code




Check
      whether the Issuer: (1) has filed all reports required to be filed by Section
      13
      or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
      (or for such shorter period that the registrant was required to file such
      reports), and (2) has been subject to such filing requirements for the past
      90
      days.




ý Yes o No




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




o Yes ý No




The
      number of shares outstanding of the Issuer’s common stock as of August 7, 2006
      was 2,426,189 **.**


Transitional
      Small Business Disclosure Format (check one):




o Yes ý No





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TABLE
      OF CONTENTS




PagePART
                I - FINANCIAL INFORMATIONItem
                1. Financial StatementsConsolidated
                Balance Sheets as of June 30, 2006 (Unaudited) and
                December 31, 2005 (Restated)
            3Consolidated
                Statements of Operations for the Three Months and
                Six Months Ended June 30, 2006 and 2005 (Unaudited)
            4Consolidated
                Statements of Comprehensive Income (Loss) for the
                Three Months and Six Months Ended June 30, 2006 and 2005
                (Unaudited)
            5Consolidated
                Statements of Cash Flows for the Six Months Ended
                June 30, 2006 and 2005 (Unaudited)
            6Notes
                to Consolidated Financial Statements as of June 30,
                2006 (Unaudited)
            7Item
                2. Management's Discussion and Analysis of Financial
                Condition or Plan of Operations
            14Item
                3. Controls and Procedures
            25PART
                II - OTHER INFORMATIONItem
                4. Submission of Matters to a Vote of Security
                Holders
            26Item
                6. Exhibits
            26





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**PART
      I.   FINANCIAL INFORMATION**




**Item
      1. Financial Statements**




**PRESSURE
      BIOSCIENCES, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      BALANCE SHEETS**




June
                  30,
              
              December
                  31,ASSETS
              
              2006
              
              2005(unaudited)
              
              (restated)CURRENT
                  ASSETS:Cash
                  and cash equivalents
              
              $
              6,807,580
              
              $
              6,416,772Restricted
                  cash
              
              
              —
              
              
              255,612Accounts
                  receivable, less allowance of $115,908
              
              
              2,473
              
              
              58,798Inventories,
                  net
              
              
              73,389
              
              
              85,207Investments
                  in marketable securities
              
              
              481
              
              
              1,533Escrow
                  deposit related to sale of assets to SeraCare
              
              
              —
              
              
              1,117,305Prepaid
                  income taxes
              
              
              86,075
              
              
              —Income
                  tax receivable
              
              
              506,236
              
              
              531,122Prepaid
                  expenses, deposits, and other current assets
              
              
              278,731
              
              
              75,286Total
                  current assets
              
              
              7,754,965
              
              
              8,541,635PROPERTY
                  AND EQUPMENT, NET
              
              
              205,765
              
              
              282,780OTHER
                  ASSETS:Intangible
                  assets, net
              
              
              401,238
              
              
              425,554Assets
                  transferred under contractual arrangements
              
              
              1,420,996
              
              
              1,420,996Investments
                  in marketable securities
              
              
              2,836,916
              
              
              3,962,810Total
                  other assets
              
              
              4,659,150
              
              
              5,809,360TOTAL
                  ASSETS
              
              $
              12,619,880
              
              $
              14,633,775LIABILITIES
                  AND STOCKHOLDERS' EQUITYCURRENT
                  LIABILITIES:Accounts
                  payable
              
              $
              104,625
              
              $
              56,395Accrued
                  employee compensation
              
              
              149,433
              
              
              94,354Other
                  accrued expenses
              
              
              237,156
              
              
              99,718Income
                  taxes payable
              
              
              84,221
              
              
              63,730Current
                  deferred tax liability
              
              
              —
              
              
              219,949Accrued
                  SeraCare liabilities
              
              
              9,100
              
              
              264,713Liabilities
                  from discontinued operations
              
              
              2,040
              
              
              2,040Total
                  current liabilities
              
              
              586,575
              
              
              800,899LONG
                  TERM LIABILITIESLiabilities
                  from discontinued operations
              
              
              4,976
              
              
              6,120Deferred
                  tax liability
              
              
              982,032
              
              
              1,419,662Liabilities
                  transferred under contractual arrangements
              
              
              1,042,493
              
              
              1,042,493Total
                  long term liabilities
              
              
              2,029,501
              
              
              2,468,275TOTAL
                  LIABILITIES
              
              
              2,616,076
              
              
              3,269,174COMMITMENTS
                  AND CONTINGENCIESSTOCKHOLDERS'
                  EQUITY:Common
                  stock, $.01 par value; 20,000,000 shares authorized,2,426,189
                  and 2,424,189 issued and outstanding in 2006 and 2005,
                  respectively
              
              
              24,262
              
              
              24,242Additional
                  paid-in capital
              
              
              6,479,812
              
              
              6,027,020Loan
                  receivable from Director / CEO
              
              
              (1,000,000
              )
              
              (1,000,000
              )Accumulated
                  other comprehensive income
              
              
              1,848,650
              
              
              2,537,963Retained
                  earnings
              
              
              2,651,080
              
              
              3,775,376Total
                  stockholders' equity
              
              
              10,003,804
              
              
              11,364,601TOTAL
                  LIABILITIES & STOCKHOLDERS' EQUITY
              
              $
              12,619,880
              
              $
              14,633,775
 **The
        accompanying notes are an integral part of these consolidated financial
        statements**


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**PRESSURE
      BIOSCIENCES, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


**(UNAUDITED)**




**For
                  the Three Months Ended**
              
              **For
                  the Six Months Ended****June
                  30,**
              
              **June
                  30,****2006**
              
              **2005**
              
              **2006**
              
              **2005**REVENUE:PCT
                  Products, services, other
              
              $
              28,783
              
              $
              7,612
              
              $
              82,197
              
              $
              10,242Total
                  revenue
              
              
              28,783
              
              
              7,612
              
              
              82,197
              
              
              10,242COSTS
                  AND EXPENSES:Cost
                  of PCT products & services
              
              
              47,104
              
              
              21,166
              
              
              98,650
              
              
              27,687Research
                  and development
              
              
              401,500
              
              
              114,591
              
              
              660,319
              
              
              217,618Selling
                  and marketing
              
              
              128,005
              
              
              38,376
              
              
              195,384
              
              
              53,636General
                  and administrative
              
              
              595,481
              
              
              723,102
              
              
              1,285,107
              
              
              1,031,990Total
                  operating costs and expenses
              
              
              1,172,090
              
              
              897,235
              
              
              2,239,460
              
              
              1,330,931Operating
                  loss from continuing operations
              
              
              (1,143,307
              )
              
              (889,623
              )
              
              (2,157,263
              )
              
              (1,320,689
              )OTHER
                  INCOME (EXPENSE):Realized
                  gain on securities held for sale
              
              
              —
              
              
              —
              
              
              517,938
              
              
              —Other
                  operating (charges), net
              
              
              —
              
              
              (152,285
              )
              
              —
              
              
              (387,637
              )Interest
                  income
              
              
              109,287
              
              
              36,956
              
              
              217,792
              
              
              115,888Total
                  other income (expense)
              
              
              109,287
              
              
              (115,329
              )
              
              735,730
              
              
              (271,749
              )Loss
                  from continuing operations before income taxes
              
              
              (1,034,020
              )
              
              (1,004,952
              )
              
              (1,421,533
              )
              
              (1,592,438
              )Income
                  tax benefit from continuing operations
              
              
              219,759
              
              
              255,390
              
              
              297,237
              
              
              455,136Loss
                  from continuing operations
              
              
              (814,261
              )
              
              (749,562
              )
              
              (1,124,296
              )
              
              (1,137,302
              )Discontinued
                  operations:Income
                  from discontinued operations (net of income tax benefit of
                  $0
              
              
              —
              
              
              656
              
              
              —
              
              
              5,335and
                  $2,411 for the three and six months ended in 2005,
                  respectively)Income
                  from discontinued operations
              
              
              —
              
              
              656
              
              
              —
              
              
              5,335Net
                  loss
              
              $
              (814,261
              )
              $
              (748,906
              )
              $
              (1,124,296
              )
              $
              (1,131,967
              )Loss
                  per share from continuing operations - basic and
                  diluted
              
              $
              (0.34
              )
              $
              (0.31
              )
              $
              (0.46
              )
              $
              (0.32
              )Income
                  per share from discontined operations - basic and
                  diluted
              
              $
              0.00
              
              $
              0.00
              
              $
              0.00
              
              $
              0.00Net
                  loss per share - basic and diluted
              
              $
              (0.34
              )
              $
              (0.31
              )
              $
              (0.46
              )
              $
              (0.32
              )Weighted
                  average number of shares used to calculate net loss per share -
                  basic and
                  diluted
              
              
              2,426,167
              
              
              2,424,189
              
              
              2,425,183
              
              
              3,530,226


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


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**PRESSURE
      BIOSCIENCES, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF COMPREHENSIVE INCOME
      (LOSS)**


**(UNAUDITED** )




**For
                  the Three Months Ended**
              
              **For
                  the Six Months Ended****June
                  30,**
              
              **June
                  30,**Other
                  Comprehensive Income (loss):
              
              **2006**
              
              **2005**
              
              **2006**
              
              **2005**Net
                  Loss
              
              $
              (814,261
              )
              $
              (748,906
              )
              $
              (1,124,296
              )
              $
              (1,131,967
              )Reclassification
                  of unrealized gain to realized gain on securities sold during the
                  period
              
              
              —
              
              
              —
              
              
              (400,722
              )
              
              —Unrealized
                  (loss) gain on marketable securities
              
              
              (1,048,929
              )
              
              2,410,750
              
              
              (727,791
              )
              
              5,460,590Income
                  tax benefit (provision) related to items ofother
                  comprehensive (loss) income
              
              
              422,202
              
              
              (1,012,515
              )
              
              439,200
              
              
              (1,963,748
              )Total
                  other comprehensive (loss) income, net of taxes
              
              
              (626,727
              )
              
              1,398,235
              
              
              (689,313
              )
              
              3,496,842Comprehensive
                  (loss) income
              
              $
              (1,440,988
              )
              $
              649,329
              
              $
              (1,813,609
              )
              $
              2,364,875


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


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**PRESSURE
      BIOSCIENCES, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**(UNAUDITED)**




**For
                  the Six Months Ended****June
                  30,****2006**
              
              **2005**CASH
                  FLOWS FROM OPERATING ACTIVITIES:Net
                  loss
              
              $
              (1,124,296
              )
              $
              (1,131,967
              )Less
                  income from discontinued operations
              
              
              —
              
              
              5,335Loss
                  from continuing operations
              
              
              (1,124,296
              )
              
              (1,137,302
              )Adjustments
                  to reconcile loss from continuing operations to net cashused
                  in operating activities:Depreciation
                  and amortization
              
              
              68,335
              
              
              39,274Non-cash
                  stock-based compensation expense
              
              
              447,410
              
              
              —Loss
                  on sale of propery and equipment
              
              
              42,781Realized
                  gain on sale of marketable securities
              
              
              (517,938
              )
              
              —Interest
                  (receivable) on loan outstanding from Director / CEO
              
              
              —
              
              
              (40,121
              )Changes
                  in operating assets and liabilities:Accounts
                  receivable
              
              
              56,325
              
              
              205,757Inventories
              
              
              11,818
              
              
              (141,146
              )Investments
                  in marketable securities
              
              
              —
              
              
              1,791Income
                  tax receivable
              
              
              24,886
              
              
              (452,725
              )Prepaid
                  income taxes
              
              
              (86,075
              )
              
              —Prepaid
                  expenses, deposits, and other current assets
              
              
              (203,445
              )
              
              151,757Assets
                  and liabilities transferred under contractual obligations,
                  (net)
              
              
              —
              
              
              360,363Accounts
                  payable
              
              
              48,230
              
              
              135,943Accrued
                  employee compensation
              
              
              55,079
              
              
              436,182Other
                  accrued expenses
              
              
              137,437
              
              
              (179,501
              )Income
                  taxes payable
              
              
              20,491
              
              
              —Deferred
                  tax liability
              
              
              (219,949
              )
              
              —Net
                  cash used in operating activities
              
              
              (1,238,911
              )
              
              (619,728
              )CASH
                  FLOWS FROM INVESTING ACTIVITIES:Payments
                  for additions to property and equipment
              
              
              (10,304
              )
              
              (38,147
              )Proceeds
                  from sale of marketable securities
              
              
              518,463
              
              
              —Net
                  cash provided by (used in) investing activities
              
              
              508,159
              
              
              (38,147
              )CASH
                  FLOWS FROM FINANCING ACTIVITIES:Use
                  of funds in repurchase of common stock
              
              
              —
              
              
              (16,303,862
              )Proceeds
                  from the issuance of common stock
              
              
              5,400
              
              
              —Restricted
                  cash payable to Seracare
              
              
              —
              
              
              (15,764
              )Net
                  cash provided by (used in) financing activities
              
              
              5,400
              
              
              (16,319,626
              )CASH
                  FLOW FROM DISCONTINUED OPERATIONS:Operating
                  cash flows, net of taxes
              
              
              (1,145
              )
              
              (47,019
              )Investing
                  cash flows
              
              
              1,117,305
              
              
              —Net
                  cash provided by (used in) discontinued operations
              
              
              1,116,160
              
              
              (47,019
              )INCREASE
                  (DECREASE) IN CASH AND CASH EQUIVALENTS:
              
              
              390,808
              
              
              (17,024,520
              )Cash
                  and cash equivalents, beginning of period
              
              
              6,416,772
              
              
              21,201,790Cash
                  and cash equivalents, end of period
              
              $
              6,807,580
              
              $
              4,177,270SUPPLEMENTAL
                  INFORMATION:Income
                  Taxes Paid
              
              $
              86,075
              
              $
              —Interest
                  Paid
              
              $
              —
              
              $
              —
 **The
        accompanying notes are an integral part of these consolidated financial
        statements**


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**PRESSURE
      BIOSCIENCES, INC. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**AS
      OF JUNE 30, 2006**




**1)**
            **Organization
                and Business
                Activities**





Pressure
      BioSciences, Inc. (“PBI”) is an early-stage company focused on the development
      and commercialization of a novel, 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. PBI currently holds 13 US and 5 foreign patents covering multiple
      applications of PCT in the life sciences field, including in such areas as
      genomic and proteomic sample preparation, pathogen inactivation, the control
      of
      enzymes, immunodiagnostics, and protein purification.




**2)**
            **Interim
                Financial Reporting******





The
      accompanying unaudited consolidated financial statements of Pressure
      BioSciences, Inc., have been prepared in accordance with generally accepted
      accounting principles for interim financial information and with the
      instructions to Form 10-QSB. Accordingly, they do not include all of the
      information and footnotes required by generally accepted accounting principles
      for complete financial statements. In the opinion of management, all adjustments
      (consisting of only normal recurring adjustments) considered necessary for
      a
      fair presentation have been included. Operating results for the three months
      and
      six months ended June 30, 2006 are not necessarily indicative of the results
      that may be expected for the year ending December 31, 2006. For further
      information, refer to the audited consolidated financial statements and
      footnotes thereto included in the Company’s Annual Report on Form 10-KSB/A (the
“Form 10-KSB/A”) for the fiscal year ended December 31, 2005.




**3)**
            **Summary
                of Significant Accounting
                Policies**




*Principles
      of Consolidation*




The
      consolidated financial statements include the accounts of Pressure BioSciences,
      Inc., and its wholly-owned subsidiaries, PBI Biotech Research Laboratories,
      Inc., PBI Source Scientific, Inc., and PBI BioSeq, Inc.




*Use
      of Estimates*




To
      prepare the unaudited consolidated financial statements in conformity with
      generally accepted accounting principles, 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 consolidated financial statements and the reported amounts of revenues
      and
      expenses during the reporting periods. In addition, significant estimates were
      made in projecting future cash flows to quantify impairment of assets, in
      estimates regarding the collectability of accounts receivable, the realizability
      of a loan receivable from our President and Chief Executive Officer, deferred
      taxes, the net realizable value of our inventories, the estimates employed
      in
      our calculation of fair value of stock options awarded to directors, officers
      and employees, as well as an estimate for remaining liabilities associated
      with
      discontinued operations. On an on-going basis, we evaluate our estimates. We
      base our estimates on historical experience and on various other assumptions
      that are believed 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.




*Cash
      and Cash Equivalents and Restricted Cash*




We
      invest
      our available cash in short-term, investment grade, interest bearing
      obligations, including money market funds, municipal notes, 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.




Our
      restricted cash consists of payments from customers of our former business
      units
      who remit payments to us erroneously. When this cash is received in our lockbox
      system we isolate it so that we can return it to SeraCare Life Sciences, Inc.
      (“SeraCare”) in a timely manner. The balances reflected are those indicative of
      timing of transfers to SeraCare. At the time the cash is classified as
      restricted, we record a corresponding liability so the balances have no effect
      on our net assets.  -7-
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            to Table of
            Contents**


**PRESSURE
      BIOSCIENCES, INC. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**AS
      OF JUNE 30, 2006**






*Computation
      of Earnings (Loss) per Share*




Basic
      earnings (loss) per share is computed by dividing income (loss) available to
      common shareholders by the weighted average number of common shares outstanding.
      Diluted earnings per share is computed by dividing income (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.




Potentially
      dilutive securities having a net effect of 111,227 and 146,849 shares were
      excluded from the calculation for the three and six months ended June 30, 2006.
      Potentially dilutive securities having a net effect of 399,722 and 112,519
      shares were excluded from the calculation for the three and six months ended
      June 30, 2005.




*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 Financial Accounting Standards Board (the “FASB”), and the
      Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin (“SAB”) No.
      107, or 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. Under this method, stock-based compensation expense recognized in the
      first half of 2006 includes: (a) compensation expense for all equity-based
      payments granted prior to, but not yet vested as of January 1, 2006, based
      on
      the grant date fair value estimated in accordance with the original provisions
      of FASB Statement No. 123, “Accounting for Stock-Based Compensation” (“SFAS
      123”), and (b) compensation expense for all equity-based payments granted
      between January 1, 2006 and June 30, 2006, based on the grant date fair value
      estimated using the Black-Scholes option pricing model. Results for periods
      prior to January 1, 2006 do not include, and have not been restated to reflect
      amounts associated with the requirements of SFAS 123R.




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 options
      to
      the two sub-groups of our stock option recipients during the three and six
      months ended June 30, 2006:




Assumptions
              
              Outside
                  Board Members
              
              CEO
                  and other Officers & EmployeesExpected
                  Life
              
              
              5.0
              
              
              6.0Expected
                  Volatility
              
              
              74.7
              %
              
              88.2
              %Risk-Free
                  Interest Rate
              
              
              4.9
              %
              
              4.9
              %Expected
                  Dividend Yield
              
              
              0.0
              %
              
              0.0
              %





-8-
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**PRESSURE
      BIOSCIENCES, INC. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**AS
      OF JUNE 30, 2006**





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, options
      granted to outside board members are estimated to have an expected term of
      5
      years and options granted to our CEO and all other officers and employees are
      estimated to have an expected term of 6 years. All options granted have a 10
      year contractual life. The options granted to outside directors vest immediately
      and the options granted to the CEO and all other officers and employees vest
      annually, on an equal basis over three years. SAB 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.





As
      a
      result of adopting SFAS 123R on January 1, 2006 we recognized stock-based
      compensation expense of $243,955 and $447,410 for the three and six months
      ended
      June 30, 2006, respectively. The following table summarizes the effect of this
      stock-based compensation expense within our Consolidated Statement of
      Operations:




Three
                  Months Ended
              
              Six
                  Months EndedJune
                  30, 2006
              
              June
                  30, 2006Cost
                  of PCT products & services
              
              $
              2,620
              
              $
              4,714Research
                  and development
              
              
              43,991
              
              
              65,616Selling
                  and marketing
              
              
              11,761
              
              
              20,499General
                  and administrative
              
              
              185,583
              
              
              356,581Total
                  stock-based Compensation expense
              
              $
              243,955
              
              $
              447,410


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
      options that will go unexercised. Due to our early stage of development as
      a
      newly focused company and our limited workforce of eleven employees as of June
      30, 2006, including executive officers, we are challenged to develop an
      appropriate estimate of forfeitures. Based on these circumstances we have opted
      for a conservative position in that we are estimating forfeitures to be 0%
      at
      this time. We will continue to assess this position as our company develops
      and
      our workforce expands. When we feel that we have sufficient data on which to
      base an assumption we will adjust the expense recognized, if
      necessary.





As
      of
      June 30, 2006, the total estimated fair value of unvested stock options to
      be
      amortized over their remaining vesting period was $618,088.





Prior
      to
      January 1, 2006, we accounted for our stock-based compensation under the
      recognition and measurement provisions of APB No. 25, and related
      Interpretations, as permitted by SFAS 123, as amended by SFAS No. 148 *“Accounting
      for Stock-Based Compensation - Transition and Disclosure”* .
      No
      stock-based compensation cost was recognized in the Consolidated Statements
      of
      Operations for the three or six-month period ended June 30, 2005, as all options
      granted under our option plans had an exercise price equal to the fair market
      value of the underlying common stock on the date of grant.


-9-
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**PRESSURE
      BIOSCIENCES, INC. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**AS
      OF JUNE 30, 2006**




The
      following table illustrates the effect on the net loss and the net loss per
      share for the three and six months ended June 30, 2005 as if we had applied
      the
      fair value recognition provisions of SFAS 123 to options granted under our
      stock
      option plans in effect at that time. For purposes of this pro forma disclosure,
      the value of the options is estimated using the Black-Scholes option pricing
      model and amortized to expense over the options’ vesting periods:




Three
                  Months Ended
              
              Six
                  Months EndedJune
                  30, 2005
              
              June
                  30, 2005Net
                  income / (loss) - as reported
              
              $
              (748,906
              )
              $
              (1,131,967
              )Add
                  back: Stock-based compensationin
                  net income / (loss), as reported
              
              
              —
              
              
              —Deduct:
                  Stock-based employee compensationexpense
                  determined under fair value based methodfor
                  all awards, net of related tax effects
              
              
              (287,257
              )
              
              (287,508
              )Net
                  / Income / (Loss) - pro forma
              
              $
              (1,036,163
              )
              $
              (1,419,475
              )Basic
                  and diluted net loss per share - as reported
              
              $
              (0.31
              )
              $
              (0.32
              )Basic
                  and diluted net loss per share - pro forma
              
              $
              (0.43
              )
              $
              (0.40
              )


*Correction
      of an Accounting Error*





In
      May
      2005, the FASB issued SFAS 154, “Accounting Changes and Error Corrections”,
      which replaces APB 20, “Accounting Changes”, and SFAS 3, “Reporting Accounting
      Changes in Interim Financial Statements - An Amendment of APB Opinion No. 28”.
      SFAS 154 provides guidance on the accounting for and the reporting of accounting
      changes and error corrections. It establishes retrospective application, or
      the
      latest practicable date, as the required method for reporting a change in
      accounting principle and the reporting of a correction of an error. SFAS 154
      is
      the required method for reporting a change in accounting principle and the
      reporting of a correction of an error. We have adopted SFAS 154 to correct
      an
      error made during the quarter ended September 30, 2005 and discovered during
      the
      quarter ended March 31, 2006.





On
      March
      15, 2006, we received $1,094,162 from Wells Fargo Corporate Trust Escrow
      Services, representing the remaining principal held in escrow from the 2004
      sale
      of the assets and certain liabilities of our BBI Core Businesses to SeraCare
      Life Sciences Inc. (“SeraCare”), plus interest from January 1 through February
      28, 2006. The receipt of these funds triggered the recognition of taxable
      income, accounted for as an installment sale for federal income tax purposes.
      During the financial statement closing process for the quarter ended March
      31,
      2006, we determined that a deferred tax liability of approximately $220,000
      should have been established during the quarter ended September 30, 2005, the
      period in which we filed our federal income tax return. Upon reexamining
      accounting for income taxes in its entirety, we further determined that the
      deferred tax liability in connection with the unrealized gain on Panacos
      Pharmaceuticals Inc., should be reduced by approximately $60,000, and that
      the
      income tax provision from continuing operations should be increased by $23,000.
      We also determined that the accounting for deferred tax assets needed to be
      adjusted; however, there would be no impact from this adjustment as deferred
      tax
      assets are fully reserved for.





We
      elected to remedy these errors by restating our Annual Report on Form 10-KSB
      for
      the year ended December 31, 2005 and our Quarterly Report on Form 10-QSB for
      the
      quarter ended September 30, 2005. The December 31, 2005 balance sheet presented
      in this Quarterly Report on Form 10-QSB for the period ended June 30, 2006,
      reflects the appropriate adjustments to the income tax accounts and to retained
      earnings.





These
      adjustments did not change our reported pre-tax results from continuing
      operations, but income from continuing operations after income taxes for the
      year ended December 31, 2005 has been reduced from approximately $873,000 to
      approximately $850,000.  -10-
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**PRESSURE
      BIOSCIENCES, INC. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**AS
      OF JUNE 30, 2006**





**4)**
            **Investment
                in Marketable
                Securities**





As
      of
      June 30, 2006, we held 361,996 shares (plus an additional 151,938 shares being
      held in escrow until September 2006) of common stock of Panacos Pharmaceuticals
      Inc. (“Panacos”), a publicly traded company listed on the NASDAQ Global Market.
      We account for this investment in accordance with SFAS 115 *“Accounting
      for Certain Investments in Debt and Equity Securities”* as
      securities available for sale. On June 30, 2006, our balance sheet reflected
      the
      fair value of our investment in Panacos to be approximately $2.8 million, based
      on the closing price of Panacos shares of $5.52 per share on that day. The
      carrying value of our investment in Panacos common stock held will change from
      period to period based on the closing price of the common stock of Panacos
      as of
      the balance sheet date. This change in market value will be recorded by us
      on a
      quarterly basis as an unrealized gain or loss in Comprehensive Income or
      Loss.




**5)**
            **Discontinued
                Operations**





On
      September 14, 2004, we completed the sale of substantially all of the
      assets and selected liabilities of our BBI Diagnostics and BBI Biotech divisions
      to SeraCare. 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 which expired in March 2006. In December 2004, and again
      in February 2005, we settled disagreements with SeraCare 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.




**6)**
            **Assets
                and Liabilities Transferred Under Contractual
                Arrangements**




In
      June
      2004, we completed the sale of substantially all of the assets as well as
      selected liabilities of PBI Source Scientific, Inc. (PBI’s laboratory
      instrumentation division) to Source Scientific, LLC, an entity owned 35% by
      Mr.
      Richard W. Henson, 35% by Mr. Bruce A. Sargeant, and 30% by us. Despite our
      intent to exit the laboratory instrumentation business, we may be viewed as
      having a continuing involvement in the business of Source Scientific, LLC.
      Because of this and other factors, even though the transaction is treated as
      a
      divestiture for legal purposes, we have not recognized the transaction as a
      divestiture for accounting purposes in accordance with SEC SAB Topic 5E, *“Accounting
      for Divestiture of a Subsidiary or Other Business Operation”* . 
      In accordance with SAB Topic 5E, we have recorded the assets and liabilities
      associated with the Source Scientific, LLC operation on our consolidated balance
      sheet as of June 30, 2006 under the captions “Assets transferred under
      contractual arrangements” and “Liabilities transferred under contractual
      arrangements”.




During
      the six months ended June 30, 2006, Source Scientific, LLC recognized net income
      of approximately $100,000. In accordance with SAB Topic 5E we excluded this
      net
      income from our Consolidated Statement of Operations and made no adjustment
      to
      the accounts captioned “Assets transferred under contractual arrangements” and
“Liabilities transferred under contractual arrangements”. SAB Topic 5E requires
      that we recognize the losses of Source Scientific, LLC to the extent such losses
      exceed profits in the same fiscal year. In accordance with SAB Topic 5E, we
      will
      continue this accounting treatment until circumstances have changed or until
      the
      net assets of the Source Scientific, LLC business have been written down to
      zero
      (or a net liability is recognized in accordance with GAAP).





**7)**
            **Related
                Party Transaction**





As
      of
      June 30, 2006, we evaluated the recoverability of the $1,000,000 loan receivable
      from our President, CEO, and a director, Mr. Richard T. Schumacher, which
      is reflected on the accompanying balance sheet in stockholders' equity as a
      loan
      receivable. Our evaluation of the recoverability of the loan receivable included
      an analysis of the value of the 479,657 shares of our common stock which are
      held as collateral. This test included a review of the current trading price
      of
      our common stock. After performing the impairment test, we determined that
      the
      loan receivable was not impaired. We will continue to monitor and test the
      collateral for impairment due in large part to the relatively low trading volume
      of our common stock and recent volatility in stock price, ranging from a low
      of
      $3.11 per share to a high of $4.79 per share from January 1, 2006 to June 30,
      2006.


-11-
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**PRESSURE
      BIOSCIENCES, INC. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**AS
      OF JUNE 30, 2006**




**8)**
            **Inventories**





Inventories
      represented are primarily finished Barocycler TM units
      available for sale and those units at various stages of manufacture. As of
      June
      30, 2006, finished goods included BarocyclerTM NEP3229 units and PULSETM
Tubes.




As
      of
      June 30, 2006, inventories were comprised as follows:




June
                  30,2006Raw
                  materials
              
              $
              18,658Work-in-process
              
              
              21,258Finished
                  goods
              
              
              33,473Total
              
              $
              73,389




**9)**
            **Commitments
                and Contingencies**





*Royalty
      Commitments*




In
      1998,
      we acquired all the remaining outstanding common stock of BioSeq, Inc., a
      development-stage company involved with PCT. In accordance with the provisions
      of a technology transfer agreement assumed in the transaction, we are obligated
      to pay a 5% royalty on net sales until March 2016. For purposes of the
      royalty calculation, net sales include the trade revenues related to units
      sold
      or leased as well as PULSETM Tube revenue. The royalty obligation that we accrued
      for the six months ended June 30, 2006 was approximately $4,000.




*Research
      and Development Collaboration*




On
      February 1, 2006, we entered into an agreement with the University of New
      Hampshire (“UNH”) pursuant to which UNH agreed to perform certain research and
      development services for us through December 31, 2006. Subject to the terms
      of
      the agreement, we will pay UNH an aggregate of $157,850 during the term of
      the
      agreement.




*Operating
      Leases*




On
      March
      1, 2006, we entered into a sub-lease agreement with Proteome Systems, Inc.,
      pursuant to which we have agreed to lease approximately 650 sq. feet of
      laboratory space plus 100 sq. feet of office space from Proteome Systems in
      Woburn, Massachusetts. The lease period will expire on December 31, 2006. We
      will pay $2,350 per month for the use of these facilities.





*Purchase
      Commitments*





In
      April
      2006, we executed a purchase order with Source Scientific, LLC under which
      we
      agreed to purchase 25 Barocycler NEP3229 units. In connection with this purchase
      order, we submitted a deposit to Source Scientific, LLC for $200,000. In
      accordance with the terms of the agreement, we expect that the units will be
      completed during the fourth quarter of this year. We will be billed for the
      complete cost of each unit as it is completed. Finished goods will stay at
      Source Scientific, LLC for shipment directly to our customers.  -12-
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**PRESSURE
      BIOSCIENCES, INC. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**AS
      OF JUNE 30, 2006**





**10)**
            **Stockholders’
                Equity**





*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 common stock were reserved
      for the issuance upon exercise of stock options or other equity awards made
      under the Plan. Under the Plan, our board of directors has authority to grant
      options or other equity awards to employees, officers, directors, consultants,
      and advisors. As of June 30, 2006, there were 656,000 stock options granted
      and
      outstanding under the 2005 Equity Incentive Plan and 344,000 shares available
      for future grants.





We
      also
      have 244,000 outstanding under our 1999 Non-Qualified Plan and 9,500 options
      outstanding under our 1994 Incentive Stock Option Plan. As of June 30, 2006,
      there were 4,800 shares available for future grant under the 1999 Non-Qualified
      Plan. The 1994 Incentive Stock Option Plan has expired; therefore, there are
      no
      shares available for future grants under this plan.





Under
      our
      1999 Employee Stock Purchase Plan, eligible employees are entitled to purchase
      shares of our stock at 85% of the market value as determined at the beginning
      and end of the offering period. A total of 250,000 shares had been reserved
      for
      this plan. As of June 30, 2006, there were 197,326 shares available for future
      issuance under this plan. As of July 29, 2004, this plan was suspended; however,
      the board of directors has the ability to reactivate the Plan at its
      discretion.





During
      the first six months of 2006, our board of directors granted stock options
      to
      our employees, officers, and to our board of directors. The following tables
      present summarized data relative to our stock option plans:




The
      following tables summarize information concerning options outstanding and
      exercisable as of June 30, 2006:




Stock
                  OptionsWeightedAverage
                  priceShares
              
              per
                  shareBalance
                  outstanding, 12/31/2005
              
              
              585,000
              
              $
              2.96Granted
              
              
              346,000
              
              
              3.98Exercised
              
              
              (2,000
              )
              
              2.70Expired
              
              
              (19,500
              )
              
              4.24Forfeited
              
              
              —Balance
                  outstanding, 6/30/2006
              
              
              909,500
              
              $
              3.32




Options
                  Outstanding
              
              Options
                  ExercisableRange
                  of Exercise Prices
              
              Weighted
                  Average Remaining Life
              
              Number
                  of
                Options
              
              Weighted
                  Average
                Exercise
                  Price
              
              Number
                  of
                Options
              
              Weighted
                  Average
                Exercise
                  Price$2.50-$2.70
              
              
              6.1
              
              
              159,000
              
              $
              2.64
              
              
              159,000
              
              $
              2.642.71-3.08
              
              
              8.1
              
              
              343,000
              
              
              2.96
              
              
              209,000
              
              
              2.983.09-3.97
              
              
              9.5
              
              
              280,500
              
              
              3.79
              
              
              64,500
              
              
              3.923.98-4.25
              
              
              9.3
              
              
              127,000
              
              
              4.12
              
              
              67,000
              
              
              4.13$2.50-$4.25
              
              
              8.4
              
              
              909,500
              
              $
              3.32
              
              
              499,500
              
              $
              3.15


-13-
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  **ITEM
      2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR
      PLAN OF OPERATIONS**





***SPECIAL
      NOTE REGARDING FORWARD-LOOKING STATEMENTS***





*This
      Quarterly Report on Form 10-QSB contains forward-looking statements within
      the
      meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
      Securities Exchange Act of 1934.  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
                operations;**•*
            *our
                anticipated costs and expenses with respect to our
                business;**•*
            *market
                acceptance and the potential for commercial success of our PCT
                products;**•*
            *the
                sufficiency of our working capital and our belief that we have sufficient
                liquidity to finance operations into 2008;**•*
            *our
                ability to develop future collaborations with partners who generate
                and
                disseminate meaningful and beneficial scientific
                data;**•*
            *the
                expected results of our current and future collaboration
                agreements;**•*
            *our
                ability to sell additional Barocycler instruments**to
                existing and future collaboration partners;**•*
            *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 or to conform to actual
      results.  Factors that could cause or contribute to differences in our
      future financial results include those discussed in the risk factors set forth
      in Item 6 of our Annual Report on Form 10-KSB, as amended, for the year ended
      December 31, 2005, as well as those discussed elsewhere in this report. We
      qualify all of our forward-looking statements by these cautionary
      statements.*





*You
      should read this section in combination with the section entitled Management’s
      Discussion and Analysis of Financial Condition and Results of Operations for
      the
      year ended December 31, 2005, included in our Annual Report on Form 10-KSB,
      as amended, for the year ended December 31, 2005 and in our Quarterly
      Report on Form 10-QSB for the three and six months ended June 30,
      2006.*


-14-
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***Overview***





Pressure
      BioSciences, Inc. (“PBI”) is an early-stage company focused on the development
      and commercialization of a novel, 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. PBI currently holds 13 US and 5 foreign patents covering multiple
      applications of PCT in the life sciences field, including in such areas as
      genomic and proteomic sample preparation, pathogen inactivation, the control
      of
      enzymes, immunodiagnostics, and protein purification.




During
      the first six months of 2006 we have made important progress in the execution
      of
      our business plan.  The key priorities for this year include: the continued
      development and public dissemination of third party scientific data to support
      market acceptance of our products, continued development of our infrastructure
      in support of our anticipated future growth, continued addition of qualified
      personnel to serve on our senior management team, and continued diligence
      towards the management of our financial resources.  Selected developments
      that illustrate our progress this year are listed below:





•
            On
                February 1, 2006 we entered into an agreement with the University
                of New
                Hampshire, pursuant to which UNH agreed to perform certain research
                and
                development services for us through December 31, 2006. Subject to
                the
                terms of the agreement, we will pay UNH an aggregate of $157,850
                during
                the term of the agreement.•
            On
                March 1, 2006 we entered into a sub-lease agreement with Proteome
                Systems,
                Inc., pursuant to which we have agreed to lease approximately 650
                sq. feet
                of laboratory space plus 100 sq. feet of office space from Proteome
                Systems located in Woburn, Massachusetts until December 31, 2006.
                We will
                pay $2,350 per month for the use of these facilities.•
            On
                March 15, 2006, we received $1,094,162 from Wells Fargo Corporate
                Trust
                Escrow Services, representing the remaining principal held in escrow
                from
                the 2004 sale of the assets and certain liabilities of our BBI Core
                Businesses to SeraCare Life Sciences Inc. (“SeraCare”), plus interest from
                January 1 through February 28, 2006.•
            During
                the first quarter of 2006 we sold a total of 57,900 shares of Panacos
                Pharmaceuticals stock for a realized, pre-tax gain of
                $517,938.•
            In
                April 2006, we entered into an agreement with Source Scientific,
                LLC to
                purchase an additional 25 Barocycler NEP3229 units.•
            On
                April 3, 2006, we announced that we made important additions to our
                Senior
                Management Team including the promotion of Dr. Nathan Lawrence to
                the
                newly created position of Vice President of Marketing & Business
                Development, the hiring of Dr. Alexander V. Lazarev as our Director
                of
                Research and Development, and the hiring of Mr. Edward H. Myles as
                our
                Vice President of Finance & CFO.•
            On
                April 24, 2006 we announced the hiring of Dr. Edmund Ting as our
                Senior
                Vice President of Engineering.•
            In
                June 2006, we installed and invoiced the Federal Bureau of Investigation
                (FBI) for a Barocycler NEP3229 that they committed to purchase during
                the
                first quarter of 2006. The FBI had been working with our scientists
                to
                evaluate PCT’s ability to extract DNA from bone fragments, blood, hair,
                and skin.•
            In
                July 2006, we announced that DermTech International has leased a
                Barocycler NEP3229 for a three year period. DermTech decided to use
                the
                PCT SPS as the primary, front-end extraction method for recovering
                ribonucleic acid (RNA) from skin cells harvested via their proprietary
                Epidermal Genetic Information Retrieval (EGIR)
                platform.


-15-
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Our
      pressure cycling technology uses an instrument that is capable of cycling
      pressure between ambient and ultra-high levels at controlled temperatures to
      rapidly and repeatedly control the interactions of biomolecules. PCT utilizes
      our Barocycler instrument and disposable PULSE Tubes (together, the PCT Sample
      Preparation System, or the PCT SPS) to release nucleic acids, proteins, and
      small molecules from plant/animal cells and tissues, as well as other organisms
      that are not easily disrupted by standard chemical and physical methods. Our
      patented and proprietary pressure cycling technology employs a unique approach
      that 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*•*
            control
                of enzymatic actions*•*
            protein
                purification;*•*
            pathogen
                inactivation;*•*
            immunodiagnostics;*•*
            DNA
                sequencing; and*•*
            food
                safety.





*Near-Term
      Strategy*




Our
      near-term strategy is to market PCT for use in sample preparation in the life
      sciences field, with particular focus in the area of the extraction of nucleic
      acids, proteins, and small molecules from cells and tissues. To this end, we
      have developed scientific collaborations with a number of leading laboratories
      and academic institutions in the United States, which we expect will remain
      ongoing throughout 2006 and beyond. We enter into these collaborations with
      parties that we view to have a high likelihood of purchasing our Barocycler
      instrument and disposable PULSE Tubes. We also pursue collaboration partners
      whose research is synergistic with our plans to expand the use of PCT into
      new
      areas of sample preparation. In both cases, we expect that our collaboration
      partners will generate data that will be publicly disseminated in scientific
      publications and presentations.





Our
      collaboration program was initiated in June 2005 with the intention of placing
      twelve Barocycler NEP3229 units in selected strategic customer sites for trial
      periods of three months or longer. We believe that this program has provided
      potential customers with the opportunity to develop and collect independent
      and
      objective data.  Since the initiation of the collaboration program, our
      instruments have been evaluated by investigators in approximately twenty
      independent laboratories.  Some of our collaborations have resulted in the
      withdrawal of the instrument; others have resulted in extensions of time,
      expansion of research scope, and the publication of favorable third party data.
      Many programs are still ongoing, and a few evaluations have lead to the sale
      or
      lease of Barocycler instruments.  In all cases we have gained valuable
      knowledge about our technology and various aspects of the markets that we are
      trying to penetrate.  We believe that this knowledge will be beneficial to
      us as we continue to expand our collaboration program and our sales and
      marketing efforts.




During
      the first half of 2006, our sales and marketing efforts were focused on
      fostering our relationships and providing technical and scientific support
      to
      new and existing collaboration partners. During this period we also participated
      in industry trade shows and meetings to generate new leads, expand awareness
      of
      our company and products within the scientific community, continue to learn
      about competitive technologies, and learn more about the additional potential
      uses of PCT. We expect these efforts to continue throughout 2006, as our sales
      and marketing plan calls for participation in several more trade and industry
      shows.  -16-
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            to Table of
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During
      the first half of 2006, four of our collaborators presented data that they
      generated with PCT at national or regional scientific meetings. The data
      generated were in the areas of genomic and proteomic research. One presentation
      in particular focused on the extraction of protein from adipose tissue, an
      area
      of laboratory medicine that is important in diabetes research, but that has
      presented a particularly difficult sample preparation task for scientists over
      the years. The collaborators indicated in their presentation that they extracted
      significantly more protein using PCT than they had ever extracted using any
      other current extraction method. Another presentation focused on the use of
      PCT
      to extract nucleic acids and proteins from plants and soil.





During
      the first half of 2006, we focused our engineering R&D efforts on two
      specific areas: improvements in the design of several key component parts of
      our
      Barocycler instrument, and improvements in the design of the disposable PULSE
      Tubes. The goal of these efforts was to continue to improve the performance
      and
      capabilities of the NEP3229 bench-top unit, and to further improve the
      extraction capability of the PULSE Tube. These efforts are important to our
      near-term strategy, as the continued improvement of our product line is critical
      to our commercial success.





During
      the first half of 2006, we focused our applications R&D efforts on a number
      of exciting and potentially large commercial areas, including but not limited
      to: the differential lysis of organelles and other bio-molecules; the extraction
      of nucleic acids and proteins from formalin-fixed paraffin-embedded (FFPE)
      tissues; the extraction of proteins from adipose tissue; the modification of
      PULSE Tubes to allow for the extraction of bio-molecules from a variety of
      plant
      and animal samples in sizes that are far below currently acceptable levels;
      the
      extraction of nucleic acids and proteins from potential anti-bioterror agents;
      the extraction of important bio-molecules from microbial samples; and the
      extraction of bio-molecules from cancer tissues.




*Mid
      and Long-Term Strategy*




Our
      mid
      and long-term strategy includes the continued expansion of PCT in the area
      of
      sample preparation, with particular focus in developing a miniaturized, portable
      Barocycler unit for field use, as well as developing a robust, high speed,
      48/96
      well instrument for high throughput applications. Our mid and long-term strategy
      also includes research and development efforts in other potentially large and
      exciting markets outside of sample preparation, such as:




·
            the
                inactivation of pathogens in human blood, therapeutics, and
                vaccines;




·
            the
                purification of proteins;




·
            the
                control of enzymatic actions; and




·
            the
                enhancement of*in
                vitro*diagnostics, particularly
                immunodiagnostics.




The
      timing and the manner in which we pursue our mid and long-term strategy depends
      on a number of factors. Specifically, it depends on the level of success that
      we
      realize in pursuit of our near-term strategy in sample preparation. Our pursuit
      of these mid and long-term strategic markets also depends on our view regarding
      the cost and the value of these markets to us, and the level of scale up and
      funding required entering these markets.


-17-
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**RESULTS
      OF OPERATIONS**




**THREE
      MONTHS ENDED JUNE 30, 2006 AND 2005**




*Revenue*




We
      recognized revenue of $28,783 for the three months ended June 30, 2006, as
      compared to $7,612 for the three months ended June 30, 2005. Our revenue for
      the
      second quarter of 2006 included the sale of a Barocycler NEP3229 and several
      hundred PULSE Tubes.




*Cost
      of PCT Products and Services*




The
      cost of PCT products and services was $47,104 for the three months ended June
      30, 2006 compared to $21,166 for the comparable period in 2005. The increase
      in
      2006 as compared to the same period in 2005 is primarily due to increased
      product sales. Additionally, the cost of products and services includes the
      increased cost of field support and deployment costs related to the placement,
      and maintenance, of collaboration site units and purchased units.




Included
      in the cost of PCT Products and Services for the three months ended June 30,
      2006 is a $2,620 non-cash, stock-based compensation charge recognized in
      accordance with SFAS 123R.





We
      expect
      that the cost of PCT products and services will decrease as a percent of sales
      as we sell more units and thereby spread the fixed costs of product placement
      and support over a greater revenue base.





*Research
      and Development*




Research
      and development expenditures increased to $401,500 in the second quarter of
      2006
      as compared to $114,591 in the second quarter of 2005. Primary reasons for
      the
      increase include the growth of our dedicated research and development staff
      from
      two full-time employees in the second quarter of 2005 to five full-time
      employees during the second quarter of 2006. This increase in research and
      development headcount is in support of our strategy to continue to evaluate
      and
      offer new applications of PCT within the life sciences sample preparation field.
      Additionally, with the hiring of Dr. Edmund Ting as our Senior Vice President
      of
      Engineering in April 2006, we expanded our research and development capabilities
      to include engineering expertise. Included in the second quarter of 2006 is
      an
      accrual for relocation costs, in accordance with Dr. Ting’s employment
      agreement.





Included
      in the research and development expense recognized in the second quarter of
      2006
      was a $43,991 non-cash, stock-based compensation charge recognized in accordance
      with SFAS 123R. We expect non-cash, stock-based compensation expense charged
      to
      research and development to increase in future quarters of 2006 as we continue
      to hire additional scientific personnel and make modest option grants to these
      important new employees.




We
      plan
      to continue increasing our investment in research and development in both
      existing and new applications of sample preparation, including the areas of
      forensics, anti-bioterrorism, and differential cell lysis. We are also investing
      research and development resources toward the continued improvement of the
      operating performance of our current bench top Barocycler, including the
      re-engineering of several key component parts, as well as the design and
      development of additional Barocycler instruments, from small, portable units
      to
      larger, high throughput, fully automated machines. We feel that these scientific
      and engineering investments will allow us to better penetrate and serve our
      target markets while eventually expanding our operating margins on Barocycler
      instruments and PULSE Tubes.




*Selling
      and Marketing*




Selling
      and marketing expenses increased to $128,005 for the three months ended June
      30,
      2006 from $38,376 for the comparable period in 2005. This increase was driven
      primarily by an increase in trade shows attended and sponsored, and a general
      increase in selling and marketing activities that we engaged in during the
      second quarter of 2006.





During
      the second quarter of 2006, we recognized an $11,761 non-cash, stock-based
      compensation charge in accordance with the provisions of SFAS 123R.  -18-
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            to Table of
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We
      expect
      to continue our increased focus on selling and marketing activities for the
      remainder of 2006. Consistent with our increased selling and marketing focus,
      on
      April 4, 2006 we announced the promotion of Dr. Nathan P. Lawrence to the newly
      created position of Vice President of Marketing and Business Development.
      Beginning in the second quarter of 2006, all of Dr. Lawrence’s costs have been
      accounted for in this function as his activities are now heavily focused on
      fostering new relationships and driving the overall marketing effort of our
      PCT
      business.




*General
      and Administrative*




General
      and administrative costs totaled $595,481 for the three months ended June 30,
      2006, as compared to $723,102 for the comparable period in 2005. This decrease
      was the result of a $400,000 bonus paid to Mr. Richard T. Schumacher, our
      President and CEO, during the second quarter of 2005. The bonus was approved
      by
      the compensation committee of the board of directors to reimburse Mr. Schumacher
      for his lost wages and costs incurred in connection with his termination of
      employment in February 2003 and to reward Mr. Schumacher for his valuable
      contributions in restructuring and redirecting the Company. Excluding this
      bonus, general and administrative costs increased by $272,379 during the second
      quarter of 2006 as compared to the same period in 2005. A significant portion
      of
      this increase relates to the recognition of $185,583 non-cash, stock-based
      compensation charge in accordance with SFAS 123R during the second quarter
      2006.
      Also contributing to the increase is the hiring of Edward H. Myles as our Vice
      President of Finance & Chief Financial Officer on April 3, 2006, and the
      accrual of his relocation costs as stipulated in his employment agreement.
      Additionally, we incurred incremental legal, accounting, consulting, and service
      provider fees associated with the restatement of our 2005 financial statements.




Of
      the
      $185,583 non-cash, stock-based compensation charge recognized in accordance
      with
      SFAS 123R, $153,633 related to a charge for options granted to the independent
      members of our board of directors in April 2006. In accordance with SFAS 123R,
      options that are fully vested upon grant, such as options granted to the
      independent members of our board of directors, are to be expensed for the entire
      fair value in the period of grant.




*Operating
      Loss from Continuing Operations*




The
      operating loss of the PCT business, from continuing operations was $1,143,307
      for the three months ended June 30, 2006 as compared to an operating loss from
      continuing operations of $889,623 for the comparable period in 2005. The
      increase in operating loss from continuing operations was primarily the result
      of increases in activities within all aspects of our business.





The
      operating loss from continuing operations for the three months ended June 30,
      2006 included $243,955 of non-cash, stock-based compensation charges recognized
      in accordance with SFAS 123R. The same period for 2005 did not include any
      such
      charges as we adopted the modified prospective approach to implementing SFAS
      123R on January 1, 2006, and therefore we are not required to restate prior
      periods, which did not include any stock-based, compensation charges in the
      financial statements.




We
      plan
      to continue our increasing level of activity in all areas of our business,
      particularly sales and marketing and research and development, for the remainder
      of 2006. Consequently we expect our operating loss from continuing operations
      for 2006 to exceed that of 2005.




*Other
      Operating (Charges), net*




The
      non-PCT related activities of PBI Source Scientific, Inc. reflect the
      operating results of Source Scientific, LLC. Source Scientific, LLC generated
      an
      operating profit of approximately $1,500 during the three months ended June
      30,
      2006; however, we did not reflect any of this profit in our consolidated
      financial statements. In accordance with the provisions of SEC SAB Topic No.
      5E
      we only recognize a loss generated from Source Scientific LLC to the extent
      it
      exceeds net profit in the same fiscal year. Based on this rule, the approximate
      $100,000 of net profit generated by Source Scientific, LLC during the first
      quarter of 2006 and the $1,500 generated during the second quarter was not
      recognized in our interim financial statements. For the comparative quarter
      ended June 30, 2005, we recorded an operating charge of $152,285.




*Interest
      Income*




Interest
      income totaled $109,287 for the three months ended June 30, 2006 as compared
      to
      interest income of $36,953 in the prior year period. The increase in interest
      income is due to a higher average cash balance and higher interest rates earned
      on cash and cash equivalents.


-19-
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            Contents**




*Income
      Taxes*




In
      the
      quarter ended June 30, 2006, we recorded a tax benefit from continuing
      operations of $219,759. During the same period in 2005, we recorded a tax
      benefit of $255,390. Our benefit rate was less favorable than in the comparable
      period of the prior year primarily because a large portion of the non-cash,
      stock-based compensation expense recognized in 2006, in accordance with SFAS
      123R, is not deductible for income tax purposes.




*Income
      from Discontinued Operations*




For
      the
      three months ended June 30, 2006, the net income from discontinued operations
      was $0, as compared to net income of $656 for the same period in
      2005.




*Net
      Loss*




For
      the
      quarter ended June 30, 2006, we realized a net loss $814,261 compared to a
      net
      loss of $748,906 for the quarter ended June 30, 2005. The increase in our net
      loss reported in the second quarter of 2006 as compared to the second quarter
      of
      2005 is primarily the result of the increased investment in the areas of
      research and development and sales and marketing, partially offset by the
      $400,000 bonus paid to Mr. Schumacher during the second quarter of 2005. Also
      contributing to the increased net loss is the $243,955 in non-cash, stock-based
      compensation charge recorded in 2006; no non-cash, stock-based compensation
      charge was recorded in 2005. The increased investment in our operating
      activities is consistent with our business objectives of expanding the
      scientific advancement and the commercialization of Pressure Cycling
      Technology.




**SIX
      MONTHS ENDED JUNE 30, 2006 AND 2005**




*Revenue*




During
      the six months ended June 30, 2006 we recognized total revenue of $82,197,
      as
      compared to $10,242 for the same period in 2005. Our revenue for the first half
      of 2006 included the sale of two Barocycler instruments, several thousand PULSE
      Tubes, and various component parts for the Barocycler NEP33229. In addition
      to
      the revenue recognized we also executed a three year lease agreement for a
      Barocycler instrument with DermTech International on the last day of the second
      quarter of 2006. We will begin recognizing monthly lease revenue in the third
      quarter of this year.




*Cost
      of PCT Products and Services*




The
      cost
      of PCT products and services was $98,650 for the six months ended June 30,
      2006
      compared to $27,687 for the comparable period in 2005. The increase in 2006
      was
      primarily the result of selling more products during 2006 than 2005.
      Additionally, the cost of products and services includes the increased cost
      of
      field support and deployment costs related to the placement, and maintenance,
      of
      collaboration site units.




Included
      in the cost of PCT Products and Services is a $4,714 non-cash, stock-based
      compensation charge recognized in accordance with SFAS 123R.





We
      expect
      that cost of PCT products and services will decrease as a percent of sales
      as we
      sell more units and thereby spread the fixed costs of products and services
      over
      a greater revenue base.




*Research
      and Development*




Research
      and development expenditures increased to $660,319 in the first half of 2006
      as
      compared to $217,618 in the first half of 2005. Primary reasons for the increase
      include the increase in dedicated research and development personnel from two
      full-time employees in the first half of 2005 to five full-time employees during
      the first half of 2006. Additionally, with the hiring of Dr. Edmund Ting as
      our
      Senior Vice President of Engineering we expanded our research and development
      capabilities to include engineering expertise. Furthermore, in accordance with
      Dr. Ting’s employment agreement, we accrued relocation costs during the second
      quarter of 2006. The overall increase in our applications and engineering
      related research and development investment is in support of our overall
      strategy to continue to evaluate and offer new applications and products for
      PCT
      within the life sciences sample preparation field.  -20-
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            to Table of
            Contents**




Included
      in the research and development expense recognized in the first half of 2006
      was
      $65,616 non-cash, stock-based compensation charges in accordance with SFAS
      123R.
      We expect non-cash, stock-based compensation expense charged to research and
      development to increase in future quarters of 2006 as we continue to hire
      additional scientific personnel and make modest option grants to these important
      new employees.





We
      plan
      to continue increasing our investment in research and development in both
      existing and new applications in sample preparation, including the areas of
      forensics, anti-bioterrorism, and differential cell lysis. We are also investing
      research and development resources toward the continued improvement of the
      operating performance of our current bench-top Barocycler  instrument,
      including the re-engineering of several component parts, as well as the design
      and development of additional Barocycler instruments, from small, portable
      units
      to larger, high throughput, fully automated instruments. We feel that these
      scientific and engineering investments will allow us to better penetrate and
      serve our target markets while eventually expanding our operating margins on
      Barocycler instruments and PULSE Tubes.





*Selling
      and Marketing*




Selling
      and marketing expenses increased to $195,384 for the six months ended June
      30,
      2006 from $53,636 for the comparable period in 2005. This increase was driven
      primarily by the increase in trade shows attended and sponsored, and a general
      increase in the amount of selling and marketing activity that we were engaged
      in
      during the first half of 2006.




During
      the first six months of 2006 we recognized $20,499 of non-cash, stock-based
      compensation costs in accordance with SFAS 123R.





We
      expect
      to continue this increased focus on selling and marketing activities for the
      remainder of 2006. Consistent with this increased focus, we announced the
      promotion of Dr. Nathan P. Lawrence to the newly created position of Vice
      President of Marketing and Business Development, on April 4, 2006. Beginning
      in
      the second quarter of 2006, all of Dr. Lawrence’s costs have been accounted for
      in this function as his activities are heavily focused on fostering new
      relationships and driving the overall marketing effort of our PCT business.




*General
      and Administrative*




General
      and administrative costs totaled $1,285,107 for the six months ended June 30,
      2006, as compared to $1,031,990 for the comparable period in 2005. During the
      first half of 2006 we incurred incremental general and administrative costs
      due
      partially to the fact that for the first quarter we did not have a full-time
      Chief Financial Officer. These incremental costs included consulting and
      temporary help in addition to the higher than expected legal, accounting, and
      tax consulting expense associated with the restatement of our 2005 financial
      statements during the second quarter of 2006.




Included
      in our general and administrative costs was a non-cash, stock-based compensation
      charge of $356,581 recognized in accordance with SFAS 123R. Of this amount,
      $313,071 related to charges for options granted to the independent members
      of
      our board of directors in 2006. In accordance with SFAS 123R, options that
      are
      fully vested upon grant, such as options granted to the independent members
      of
      our board of directors, are to be expensed for the entire fair value in the
      period of grant.





During
      the second quarter of 2006 Mr. Edward H. Myles was appointed our Vice President
      of Finance & CFO, additionally; we hired one full-time employee at the
      administrative level during the second quarter. Aside from these additions
      to
      our general and administrative staff, we do not expect significant additional
      changes to our corporate infrastructure for the remainder of 2006.




*Operating
      Loss from Continuing Operations*




The
      operating loss of the PCT business, our continuing operations, was $2,157,263
      for the six months ended June 30, 2006 as compared to an operating loss from
      continuing operations of $1,320,689 for the comparable period in 2005. The
      increase in operating loss from continuing operations was the result of
      increases in activities within all aspects of our business, including a
      significant increase in staff and activities within our research and development
      function, as well as non-cash stock-based compensation charges related to option
      grants to the independent members of our board of directors and employees.  -21-
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            to Table of
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The
      operating loss from continuing operations for the six months ended June 30,
      2006
      included $447,410 of non-cash, stock-based compensation charges recognized
      in
      accordance with SFAS 123R. The same period for 2005 did not include any such
      charges as we adopted the modified prospective approach to implementing SFAS
      123R on January 1, 2006, and therefore we are not required to restate prior
      periods, which did not include any stock-based compensation charges in the
      financial statements.





We
      plan
      to continue increasing the level of activity in our sales and marketing and
      research and development functions for the remainder of 2006. Consequently
      we
      expect our operating loss from continuing operations for 2006 to exceed that
      of
      2005.




*Gain
      on Sale of Securities*




In
      the
      six months ended June 30, 2006, we recorded a gain on the sale of 57,900 shares
      of our Panacos Pharmaceuticals shares in accordance with SFAS 115 *“Accounting
      for Certain Investments in Debt and Equity Securities”* as
      securities available for sale. The shares sold in the six month period generated
      a pre-tax gain of $517,938. There was no gain on the sale of securities during
      the first half of 2005.




*Other
      Operating (Charges), net*




The
      non-PCT related activities of PBI Source Scientific, Inc. reflect the
      operating results of Source Scientific, LLC. Source Scientific, LLC generated
      an
      operating profit of approximately $100,000 during the six months ended June
      30,
      2006; however, we did not reflect any of this profit in our consolidated
      financial statements. In accordance with the provisions of SEC SAB Topic No.
      5E
      we only recognize a loss generated from Source Scientific LLC to the extent
      it
      exceeds net profit in the same fiscal year. Based on this rule, the approximate
      $100,000 of net profit generated by Source Scientific, LLC was not recognized
      in
      our interim financial statements. For the comparative six months ended June
      30,
      2005, we recorded an operating charge of $387,637.




*Interest
      Income*




Interest
      income totaled $217,792 for the six months ended June 30, 2006 as compared
      to
      interest income of $115,888 in the prior year period. The increase in interest
      income in 2006 as compared to 2005 is primarily due to higher average cash
      balances and higher interest rates earned on cash and cash equivalents.




*Income
      Taxes*




In
      the
      six months ended June 30, 2006, we recorded a tax benefit from continuing
      operations of $297,237. During the same period in 2005, we recorded a tax
      benefit of $455,136. Our benefit rate was less favorable than in the comparable
      period of the prior year primarily because a large portion of the non-cash,
      stock-based compensation expense recognized in 2006, in accordance with SFAS
      123R, is not deductible for income tax purposes.




*Income
      from Discontinued Operations*




For
      the
      six months ended June 30, 2006, the net income from discontinued operations
      was
      $0, as compared to net income of $5,335 for the same period in
      2005.




*Net
      Loss*




The
      net
      loss for the six months ended June 30, 2006 was $1,124,296 compared to a net
      loss of $1,131,967 for the six months ended June 30, 2005. This decrease in
      our
      net loss is primarily the result of the realized gain of $517,938 from the
      sale
      of 57,900 shares of Panacos Pharmaceuticals and an increase in interest income
      recognized during the first half of 2006. These favorable items were almost
      entirely offset by increased spending in all functional areas of our business;
      particularly sales and marketing and research and development. This increased
      investment in our operating activities is consistent with our business
      objectives of expanding the scientific advancement and the commercialization
      of
      PCT.  -22-
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            to Table of
            Contents**




**LIQUIDITY
      AND FINANCIAL CONDITION**




As
      of June 30, 2006, our working capital position was $7,168,390, the primary
      components of which were cash and cash equivalents, income taxes receivable,
      prepaid expenses and deposits, and inventories, partially offset by accounts
      payable, accrued employee compensation, other accrued expenses, and accrued
      income taxes. As of December 31, 2005, our working capital balance was
      $7,740,736, the primary components of which were cash and cash equivalents,
      escrow deposits and income taxes receivable. This decrease in working capital
      of
      $572,346 was primarily a result of the use of cash to fund our operations for
      the first six months of 2006, partially offset by the proceeds generated from
      the sale of Panacos shares and interest income earned during the period. 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 working
      capital to fund our operations at their current level, and with planned
      increases in operations, into 2008. The extent to which we increase our
      operations is dependent upon our view of the investment required to successfully
      commercialize PCT, balanced with our desire to pursue additional external
      capital. At this time we do not feel that we need to rely on external funding
      to
      pursue our near-term strategy.




Net
      cash
      used in continuing operations for the six months ended June 30, 2006 was
      $1,238,911 as compared to net cash used in continuing operations of $619,728
      for
      the six months ended June 30, 2005. The cash used in operations for the first
      half of fiscal 2006 was to support on-going operations. The primary reasons
      for
      the increase in cash utilization include the general increase in our ongoing
      business activities which contributed to a larger operating loss for the period,
      the payment of a $200,000 deposit to Source Scientific LLC for the manufacture
      of 25 Barocyclers, and the utilization of the current deferred tax liability
      associated with the installment sale treatment of the SeraCare sale.




Net
      cash
      provided by investing activities for the six months ended June 30, 2006 was
      $508,159 as compared to cash used of $38,147 for the same period in the prior
      year. The cash generated in the first six months of 2006 was entirely from
      the
      sale of 57,900 shares of Panacos common stock, partially offset by minimal
      purchases of fixed assets. We will continue to monitor the market price of
      Panacos common stock with the intent of liquidating our position at what we
      consider to be favorable terms. We expect that our investment in fixed assets
      will increase in future quarters as we make modest additions to our staff and
      operating facilities.




Net
      cash
      generated from financing activities for the six months ended June 30, 2006
      of
      $5,400, relates to the exercise of stock options by an outside director. During
      the first six months of 2005 we used cash in financing activities of
      $16,319,626. In February 2005, we completed our issuer tender offer in which
      we
      purchased from stockholders an aggregate of 5,203,001 shares of our common
      stock.




Net
      cash
      generated by discontinued operations for the six months ended June 30, 2006
      was
      $1,116,160 as compared to net cash used in discontinued operations of $47,019
      for same period of 2005. This cash generated in the first quarter of 2006
      relates to the receipt of the $1,094,162 from Wells Fargo Corporate Trust Escrow
      Services, representing the remaining principal held in escrow from the 2004
      sale
      of the assets and certain liabilities of our BBI Core Businesses to SeraCare,
      and interest from January 1 through February 28, 2006. We also received all
      accrued interest for the prior year.




**RELATED
      PARTY TRANSACTION**




As
      of
      June 30, 2006, we evaluated the recoverability of the $1,000,000 loan receivable
      from Mr. Schumacher, which is reflected on the balance sheet in
      stockholders' equity as a loan receivable. Our evaluation of the recoverability
      of the loan receivable included an analysis of the value of the 479,657 shares
      of our common stock that are held as collateral. This test included a review
      of
      the current trading price of our common stock. After performing the impairment
      test, we determined that the loan receivable was not impaired. We will continue
      to monitor and test the collateral for impairment due in large part to the
      relatively low trading volume of our common stock and recent volatility in
      stock
      price, ranging from a low of $3.11 per share to a high of $4.79 per share from
      January 1, 2006 to June 30, 2006.





**COMMITMENTS
      AND CONTINGENCIES**




*Royalty
      Commitments*




In
      1998,
      we acquired all the remaining common stock outstanding of BioSeq Inc., a
      development stage company involved with PCT. In accordance with the provisions
      of a technology transfer agreement assumed in the transaction, we are obligated
      to pay a 5% royalty on net sales until March 2016. For purposes of the
      royalty calculation, net sales include the trade revenues related to units
      sold
      or leased as well as PULSE Tube revenues. The royalty obligation that we accrued
      for the first six months of 2006 was approximately $4,000.


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*Research
      and Development Collaboration*




On
      February 1, 2006, we entered into an agreement with the University of New
      Hampshire, pursuant to which UNH agreed to perform certain research and
      development services for us through December 31, 2006. Subject to the terms
      of
      the agreement, we will pay UNH an aggregate of $157,850 for the services they
      provide.




*Operating
      Leases*





On
      March
      1, 2006, we entered into a sub-lease agreement with Proteome Systems, Inc.,
      pursuant to which we have agreed to lease approximately 650 sq. feet of
      laboratory space plus 100 sq. feet of office space from Proteome Systems in
      Woburn, Massachusetts. The lease period will expire on December 31, 2006. We
      will pay $2,350 per month for the use of these facilities.





*Purchase
      Commitments*




In
      April
      2006, we executed a purchase order with Source Scientific, LLC under which
      we
      agreed to purchase 25 Barocycler NEP3229 units. In connection with this purchase
      order, we submitted a deposit to Source Scientific, LLC for $200,000. In
      accordance with the terms of the agreement, we expect that the units will be
      completed by the fourth quarter of this year. We will be billed for the complete
      cost of each unit as it is completed. Finished goods will stay at Source
      Scientific, LLC for shipment directly to our customers.




**CRITICAL
      ACCOUNTING POLICIES**





The
      critical accounting policies we utilized in the preparation of the accompanying
      interim financial statements are set forth in Part II, Item 6 of our Annual
      Report on Form 10-KSB/A for the year ended December 31, 2005, under the heading
      "Management's Discussion and Analysis of Financial Condition or Plan of
      Operation”. Additionally, we have adopted the following:




*Correction
      of an Accounting Error*





In
      May
      2005, the FASB issued SFAS 154, “Accounting Changes and Error Corrections”,
      which replaces APB 20, “Accounting Changes”, and SFAS 3, “Reporting Accounting
      Changes in Interim Financial Statements - An Amendment of APB Opinion No. 28”.
      SFAS 154 provides guidance on the accounting for and the reporting of accounting
      changes and error corrections. It establishes retrospective application, or
      the
      latest practicable date, as the required method for reporting a change in
      accounting principle and the reporting of a correction of an error. SFAS 154
      is
      the required method for reporting a change in accounting principle and the
      reporting of a correction of an error. We have adopted SFAS 154 to correct
      an
      error made during the quarter ended September 30, 2005 and discovered during
      the
      quarter ended March 31, 2006.




On
      March
      15, 2006, we received $1,094,162 from Wells Fargo Corporate Trust Escrow
      Services, representing the remaining principal, and interest, held in
      escrow from the 2004 sale of the assets and certain liabilities of our BBI
      Core
      Businesses to SeraCare Life Sciences Inc., (“SeraCare”). The receipt of these
      funds triggered the recognition of taxable income, accounted for as an
      installment sale for federal income tax purposes. During the financial statement
      closing process for the quarter ended March 31, 2006, we determined that a
      deferred tax liability of approximately $220,000 should have been established
      during the quarter ended September 30, 2005, the period in which we filed our
      federal income tax return. Upon re-examining our accounting for income taxes
      in
      entirety we further determined that the deferred tax liability in connection
      with the unrealized gain on Panacos should be reduced by approximately $60,000,
      and that the income tax provision from continuing operations should be increased
      by approximately $23,000. We also determined that the accounting for deferred
      tax assets needed to be adjusted; however, there was no impact from this
      adjustment as deferred tax assets are fully reserved for.  -24-
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We
      elected to remedy these errors by restating our Annual Report on Form 10-KSB,
      for the year ended December 31, 2005 and our Quarterly Report on Form 10-QSB
      for
      the quarter ended September 30, 2005. The December 31, 2005 balance sheet
      presented in this Quarterly Report on Form 10-QSB for the quarter ended June
      30,
      2006 reflects the appropriate adjustments to the income tax accounts and to
      retained earnings.





These
      adjustments did not change our reported pre-tax results from continuing
      operations, but income from continuing operations after income taxes for the
      year ended December 31, 2005 has been reduced from approximately $873,000 to
      approximately $850,000.




**ITEM
      3. CONTROLS AND PROCEDURES**




We
      maintain disclosure controls and procedures that are designed to ensure that
      information required to be disclosed in our Securities Exchange Act reports
      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 and Chief Executive
      Officer (Principal Executive Officer) 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
      June 30, 2006, we carried out an evaluation, under the supervision and with
      the
      participation of our management, including our President and Chief Executive
      Officer (Principal Executive Officer) 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 Securities Exchange Act of 1934. Based upon that evaluation,
      our President and Chief Executive Officer (Principal Executive Officer) 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.





There
      have been no changes in our internal control over financial reporting that
      occurred during the period covered by this Report that have materially affected,
      or are reasonably likely to materially affect, our internal control over
      financial reporting.  -25-
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**PART
      II. OTHER INFORMATION**




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





The
      Company held a Special Meeting in Lieu of Annual Meeting of Stockholders on
      June
      15, 2006 (the “Meeting”). At the Meeting, the stockholders elected two Class II
      directors to hold office until the 2009 Annual Meeting of Stockholders and
      until
      their successors are duly elected and qualified.  The voting results with
      respect to the election of directors were as follows:




Director
              
              Affirmative
                  Votes
              
              Votes
                Withheld/AbstainedR.
                  Wayne Fritzche
              
              
              1,712,939
              
              
              42,440Calvin
                  A. Saravis
              
              
              1,711,789
              
              
              43,590


The
      terms
      of each of Mr. Richard T. Schumacher, Mr. J. Donald Payne and Mr. P. Thomas
      Vogel all continued following the Meeting.





**ITEM
      6. EXHIBITS**




**Exhibits**
            
            **Reference**10.1
            Purchase
                Order with Source Scientific, LLC dated April 3, 2006.
            
            A-10.131.1
            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
            
            Filedherewith31.2
            Principal
                Financial 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
            
            Filedherewith32.1
            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
            
            Filedherewith32.2
            Principal
                Financial 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
            
            Filedherewith





We
      previously filed this exhibit with the Commission on April 5, 2006 with the
      referenced exhibit number as an exhibit to our Current Report on Form 8-K (SEC
      File No. 0-21615) dated April 5, 2006, and the previously filed exhibit is
      incorporated herein by reference.  -26-
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**SIGNATURES**




In
      accordance with the requirements of the Exchange Act, the registrant caused
      this
      report to be signed on its behalf by the undersigned thereunto duly
      authorized.




**PRESSURE
              BIOSCIENCE, INC.**Date: August
              11, 2006
            By:
            /s/ Richard
              T. SchumacherRichard
                T. Schumacher
              President,
                Chief
                Executive Officer & Treasurer
              (Principal Executive
                Officer)




By:
            /s/ Edward
              H.
              MylesEdward
                H. Myles
              Vice
                President of Finance & Chief Financial Officer
              (Principal Financial and Accounting
                Officer)




-27-