UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
 
 FORM
10-Q
 
 (Mark
One)
 
 x    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
 
 For the quarterly period ended
  March 31,
2009   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 Registrant as Specified in its Charter)
  Massachusetts
              
              04-2652826(State
      or Other Jurisdiction of
              
              (I.R.S.
      EmployerIncorporation
      or Organization)
              
              Identification
      No.)
 
 14
Norfolk Avenue
 South
Easton, Massachusetts
 (Address
of Principal Executive Offices)
 
 02375
 (Zip
Code)
 
 (508)
230-1828
 (Registrant’s
Telephone Number, Including Area Code)
  Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
  x
Yes       o No
  Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.  (Check one):
 Large
      accelerated filer  ̈
                Accelerated
      filer  ̈Non-accelerated
      filer  ̈
                Smaller
      reporting company x
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Exchange
Act Rule 12b-2 of the Exchange Act).
  o
Yes      x No
  The
number of shares outstanding of the Issuer’s common stock as of March 31, 2009
was 2,195,283.
  
  TABLE OF
CONTENTS
  PagePART
      I - FINANCIAL INFORMATIONItem
      1. Financial Statements (Unaudited)Consolidated
      Balance Sheets as of March 31, 2009 and December 31, 2008
                            1Consolidated
      Statements of Operations for the Three Months Ended March 31, 2009 and
      2008
                            2Consolidated
      Statements of Cash Flows for the Three Months Ended March 31, 2009 and
      2008
                            3Notes
      to Consolidated Financial Statements
                            4Item
      2. Management's Discussion and Analysis of Financial Condition and Results
      of Operations
                            14Item
      4T. Controls and Procedures
                            24PART
      II - OTHER INFORMATIONItem
      6. Exhibits
                            25
  
  PART I.   FINANCIAL
INFORMATION
 Item 1. Financial Statements
  PRESSURE
BIOSCIENCES, INC. AND SUBSIDIARIES
 CONSOLIDATED
BALANCE SHEETS
 (UNAUDITED)
 
 March 31,
                                        
                                        
                                        December 31,2009
                                        
                                        
                                        2008ASSETSCURRENT
      ASSETSCash
      and cash equivalents
                                        
                                        $
                                        2,138,685
                                        
                                        
                                        $
                                        868,208Restricted
      cash
                                        
                                        
                                        20,000
                                        
                                        
                                        
                                        50,000Accounts
      receivable, net of allowances of $55,600 at March 31, 2009 and $0 at
      December 31, 2008
                                        
                                        
                                        167,397
                                        
                                        
                                        
                                        209,117Inventories
                                        
                                        
                                        822,503
                                        
                                        
                                        
                                        571,831Deposits
                                        
                                        
                                        15,472
                                        
                                        
                                        
                                        382,236Prepaid
      income taxes
                                        
                                        
                                        6,600
                                        
                                        
                                        
                                        6,600Income
      tax receivable
                                        
                                        
                                        623,262
                                        
                                        
                                        
                                        -Prepaid
      expenses and other current assets
                                        
                                        
                                        72,858
                                        
                                        
                                        
                                        235,111Total
      current assets
                                        
                                        
                                        3,866,777
                                        
                                        
                                        
                                        2,323,103PROPERTY
      AND EQUIPMENT, NET
                                        
                                        
                                        262,469
                                        
                                        
                                        
                                        252,249OTHER
      ASSETSIntangible
      assets, net
                                        
                                        
                                        267,500
                                        
                                        
                                        
                                        279,658TOTAL
      ASSETS
                                        
                                        $
                                        4,396,746
                                        
                                        
                                        $
                                        2,855,010LIABILITIES AND STOCKHOLDERS'
      EQUITYCURRENT
      LIABILITIESAccounts
      payable
                                        
                                        $
                                        315,001
                                        
                                        
                                        $
                                        263,486Accrued
      employee compensation
                                        
                                        
                                        102,464
                                        
                                        
                                        
                                        161,374Accrued
      professional fees and other expenses
                                        
                                        
                                        180,933
                                        
                                        
                                        
                                        278,982Deferred
      revenue
                                        
                                        
                                        176,652
                                        
                                        
                                        
                                        16,705Total
      current liabilities
                                        
                                        
                                        775,050
                                        
                                        
                                        
                                        720,547LONG
      TERM LIABILITIESDeferred
      revenue
                                        
                                        
                                        8,473
                                        
                                        
                                        
                                        10,821TOTAL
      LIABILITIES
                                        
                                        
                                        783,523
                                        
                                        
                                        
                                        731,368COMMITMENTS
      AND CONTINGENCIES (Note 4)STOCKHOLDERS'
      EQUITYPreferred
      stock, $.01 par value; 1,000,000 shares authorized; 156,980 shares issued
      and outstanding on March 31, 2009 and 0 shares on December 31,
      2008
                                        
                                        
                                        1,570
                                        
                                        
                                        
                                        -Common
      stock, $.01 par value; 20,000,000 shares authorized; 2,195,283 shares
      issued and outstanding on March 31, 2009 and on December 31,
      2008
                                        
                                        
                                        21,953
                                        
                                        
                                        
                                        21,953Warrants
      to acquire preferred stock and common stock
                                        
                                        
                                        882,253
                                        
                                        
                                        
                                        -Additional
      paid-in capital
                                        
                                        
                                        8,134,959
                                        
                                        
                                        
                                        6,803,530Accumulated
      deficit
                                        
                                        
                                        (5,427,512
                                        )
                                        
                                        
                                        (4,701,841
                                        )Total
      stockholders' equity
                                        
                                        
                                        3,613,223
                                        
                                        
                                        
                                        2,123,642TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY
                                        
                                        $
                                        4,396,746
                                        
                                        
                                        $
                                        2,855,010
 
 The
accompanying notes are an integral part of these consolidated financial
statements
  1
  PRESSURE
BIOSCIENCES, INC. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF OPERATIONS
 (UNAUDITED)
 
 For the Three Months EndedMarch 31,2009
                        
                        
                        2008REVENUE:PCT
      Products, services, other
                        
                        $
                        222,142
                        
                        
                        $
                        81,473Grant
      revenue
                        
                        
                        84,620
                        
                        
                        
                        50,903Total
      revenue
                        
                        
                        306,762
                        
                        
                        
                        132,376COSTS
      AND EXPENSES:Cost
      of PCT products and services
                        
                        
                        140,243
                        
                        
                        
                        48,449Research
      and development
                        
                        
                        307,224
                        
                        
                        
                        490,931Selling
      and marketing
                        
                        
                        278,416
                        
                        
                        
                        463,161General
      and administrative
                        
                        
                        430,790
                        
                        
                        
                        501,248Total
      operating costs and expenses
                        
                        
                        1,156,673
                        
                        
                        
                        1,503,789Operating
      loss
                        
                        
                        (849,911
                        )
                        
                        
                        (1,371,413
                        )OTHER
      INCOME:Interest
      income
                        
                        
                        2,403
                        
                        
                        
                        30,308Total
      other (expense) income
                        
                        
                        2,403
                        
                        
                        
                        30,308Loss
      before income taxes
                        
                        
                        (847,508
                        )
                        
                        
                        (1,341,105
                        )Income
      tax benefit
                        
                        
                        623,262
                        
                        
                        
                        -Net
      loss
                        
                        $
                        (224,246
                        )
                        
                        $
                        (1,341,105
                        )Loss
      per share - basic and diluted
                        
                        $
                        (0.10
                        )
                        
                        $
                        (0.61
                        )Weighted
      average number of shares used to calculate loss per share - basic and
      diluted
                        
                        
                        2,195,283
                        
                        
                        
                        2,192,175
 
 The
accompanying notes are an integral part of these consolidated financial
statements
  2
  PRESSURE
BIOSCIENCES, INC. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 (UNAUDITED)
 
 For the Three Months EndedMarch 31,2009
                          
                          
                          2008CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      loss
                          
                          $
                          (224,246
                          )
                          
                          $
                          (1,341,105
                          )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Depreciation
      and amortization
                          
                          
                          49,430
                          
                          
                          
                          41,004Stock-based
      compensation expense
                          
                          
                          145,903
                          
                          
                          
                          118,205Bad
      debt expense
                          
                          
                          55,600
                          
                          
                          
                          -Changes
      in operating assets and liabilities:Restricted
      cash
                          
                          
                          30,000
                          
                          
                          
                          -Accounts
      receivable
                          
                          
                          (13,880
                          )
                          
                          
                          11,604Inventories
                          
                          
                          (250,672
                          )
                          
                          
                          (422,512
                          )Deposits
                          
                          
                          366,764
                          
                          
                          
                          341,922Income
      tax receivable
                          
                          
                          (623,262
                          )
                          
                          
                          -Accounts
      payable
                          
                          
                          51,515
                          
                          
                          
                          225,880Accrued
      employee compensation
                          
                          
                          (58,910
                          )
                          
                          
                          (13,046
                          )Deferred
      revenue and other accrued expenses
                          
                          
                          59,550
                          
                          
                          
                          (3,002
                          )Prepaid
      expenses and other current assets
                          
                          
                          162,253
                          
                          
                          
                          (125,854
                          )Net
      cash used in operating activities
                          
                          
                          (249,955
                          )
                          
                          
                          (1,166,904
                          )CASH
      FLOWS FROM INVESTING ACTIVITIES:Additions
      to property and equipment
                          
                          
                          (47,492
                          )
                          
                          
                          (110,762
                          )Net
      cash used in investing activities
                          
                          
                          (47,492
                          )
                          
                          
                          (110,762
                          )CASH
      FLOWS FROM FINANCING ACTIVITIES:Net
      proceeds from the issuance of preferred stock
                          
                          
                          1,567,924
                          
                          
                          
                          -Net
      cash provided by financing activities
                          
                          
                          1,567,924
                          
                          
                          
                          -CHANGE
      IN CASH AND CASH EQUIVALENTS:
                          
                          
                          1,270,477
                          
                          
                          
                          (1,277,666
                          )Cash
      and cash equivalents, beginning of period
                          
                          
                          868,208
                          
                          
                          
                          5,424,486Cash
      and cash equivalents, end of period
                          
                          $
                          2,138,685
                          
                          
                          $
                          4,146,820SUPPLEMENTAL
      INFORMATION:Income
      taxes paid
                          
                          $
                          -
                          
                          
                          $
                          2,790Income
      taxes received
                          
                          
                          -
                          
                          
                          
                          834
 
 The
accompanying notes are an integral part of these consolidated financial
statements
  3
 
 PRESSURE
BIOSCIENCES, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 AS
OF MARCH 31, 2009
 
 1)
                    Business Overview and Management
      Plans
 
 We are a
life sciences company focused on the development and commercialization of a
novel, enabling, platform technology called pressure cycling technology
(“PCT”).  PCT uses cycles of hydrostatic pressure between ambient and
ultra-high levels (up to 35,000 psi and greater) to control bio-molecular
interactions.
 
 Our
pressure cycling technology uses instrumentation that is capable of cycling
pressure between ambient and ultra-high levels (up to 35,000 psi or greater) at
controlled temperatures to rapidly and repeatedly control the interactions of
bio-molecules. Our pressure-generating instrument is called the
Barocycler®.  Our PCT-related consumables product line includes PULSE
(Pressure Used to Lyse Samples for Extraction) Tubes as well as application
specific (“ProteoSolve”) kits.  Our Barocycler instrument, together
with our consumable products and reagents, make up the PCT Sample Preparation
System (“PCT SPS”).
 
 We have
experienced negative cash flows from operations with respect to our pressure
cycling technology business since its inception.  As of March 31,
2009, we had cash of approximately $2.1 million.  During 2008, we took
a number of cost reduction measures, including a comprehensive restructuring
program to significantly reduce costs, centralize core operations, and refocus
our business strategy in specific areas where our products have found
significant market acceptance.  The restructuring program included: a
reduction in personnel of eight full-time employees (40% of the workforce),
reduction in travel and meeting attendance for all personnel, continued
reduction in investor relations activities, decreases in the base salary of most
of our employees and all of our executive officers, a shutdown of our R&D
facility in Rockville, MD, a consolidation of our R&D activities in
Massachusetts, and delay of several research & development and marketing
programs.  We believe that these initiatives will significantly
decrease our rate of cash utilization, from just under $1 million per quarter in
the second half of 2008 to an average of approximately $600,000 per quarter
during 2009.  We also believe that these actions, taken together with
the proceeds we received from our $1.8 million equity financing completed in
February 2009, will enable us to extend our cash resources into the second
quarter of 2010.
 
 2)
                  Interim Financial
  Reporting
 
 The
accompanying unaudited consolidated financial statements of Pressure
BioSciences, Inc. have been prepared in accordance with accounting principles
generally accepted in the United States of America (“generally accepted
accounting principles” or “GAAP”) for interim financial
information.  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 ended March 31, 2009 are not necessarily indicative of the results that
may be expected for the year ending December 31, 2009.  For further
information, refer to the audited consolidated financial statements and
footnotes thereto included in the Company’s Annual Report on Form 10-K (the
“Form 10-K”) for the fiscal year ended December 31, 2008.
  3)
                Summary of Significant Accounting
      Policies
 
 Principles
of Consolidation
 
 The
consolidated financial statements include the accounts of Pressure BioSciences,
Inc., and its wholly-owned subsidiary PBI BioSeq, Inc.
 
 Use
of Estimates
 
 To
prepare our 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 financial
statements and the reported amounts of revenues and expenses during the
reporting period. In addition, significant estimates were made in projecting
future cash flows to quantify impairment of assets, deferred tax assets and the
costs associated with fulfilling our warranty obligations for the instruments
that we sell, in our calculation of fair value of stock options awarded, and our
allocation of the proceeds from the equity financing between the preferred stock
and warrants sold.  We base our estimates on historical experience and
on various other assumptions that we believe to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results could differ from the estimates and assumptions
used.
  4
  PRESSURE
BIOSCIENCES, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 AS
OF MARCH 31, 2009
 
 Revenue
Recognition
 
 We
recognize revenue in accordance with the Securities and Exchange Commission’s
(“SEC”) Staff Accounting Bulletin (“SAB”) No. 104, Revenue Recognition ("SAB
104"). Revenue is recognized when realized or earned when all the following
criteria have been met: persuasive evidence of an arrangement exists; delivery
has occurred and risk of loss has passed to the customer; the seller’s price to
the buyer is fixed or determinable; and collectibility is reasonably
assured.
 
 Our
current instruments, the Barocycler NEP3229 and NEP2320, require a basic level
of instrumentation expertise to set-up for initial operation. To support a
favorable first experience for our customers, we send a representative to the
customer site to install every Barocycler that we sell through our domestic
sales force. The installation process includes uncrating and setting up the
instrument and conducting introductory user training. Product revenue related to
current Barocycler instrumentation is recognized upon the installation of our
instrumentation at the customer location.  Product revenue related to
sales of PCT products to our foreign distributors is recognized upon shipment
through a common carrier. We provide for the expected costs of warranty upon the
recognition of revenue for the sales of our instrumentation. Our sales
arrangements do not provide our customers with a right of return. Product
revenue related to our consumable products such as PULSE Tubes and application
specific kits is recorded upon shipment through a common carrier.  Shipping
costs are included in the costs of sales.  Any shipping costs billed
to customers are recognized as revenue.
 
 In
accordance with the Financial Accounting Standards Board (“FASB”) Statement of
Financial Accounting Standards (“SFAS”) No. 13, “Accounting for Leases”, we
account for our lease agreements under the operating method. We record revenue
over the life of the lease term and we record depreciation expense on a
straight-line basis over the thirty-six month estimated useful life of the
Barocycler instrument.  The depreciation expense associated with
assets under lease agreement is included in the “Cost of PCT products and
services” line item in our consolidated statements of
operations.  Many of our lease and rental agreements allow the lessee
to purchase the instrument at any point during the term of the agreement with
partial, or full, credit for rental payments previously made.  We pay
all maintenance costs associated with the instrument during the term of the
leases.
 
 Revenue
from government grants is recorded when expenses are incurred under the grant in
accordance with the terms of the grant award.
 
 Our
transactions sometimes involve multiple elements (i.e., products and services).
Revenue under multiple element arrangements is recognized in accordance with
Emerging Issues Task Force (“EITF”) Issue No. 00-21, “Accounting for Revenue Arrangements
with Multiple Deliverables”.  Under this method, if an element
is determined to be a separate unit of accounting, the revenue for the element
is based on fair value and determined by vendor specific objective evidence
(“VSOE”), and recognized at the time of delivery. If an arrangement includes
undelivered elements that are not essential to the functionality of the
delivered elements, we defer the fair value of the undelivered elements with the
residual revenue allocated to the delivered elements. Fair value is determined
based upon the price charged when the element is sold separately. If there is
not sufficient evidence of the fair value of the undelivered elements, no
revenue is allocated to the delivered elements and the total consideration
received is deferred until delivery of those elements for which objective and
reliable evidence of the fair value is not available. We provide certain
customers with extended service contracts and, to the extent VSOE is
established, these service revenues are recognized ratably over the life of the
contract which is generally one to four years.
 
 Cash and Cash
Equivalents
 
 Our
policy is to invest available cash in short-term, investment grade
interest-bearing obligations, including money market funds, and bank and
corporate debt instruments.  Securities purchased with initial
maturities of three months or less are valued at cost plus accrued interest,
which approximates fair market value, and are classified as cash
equivalents.
 
 Research
and Development
 
 Research
and development costs, which are comprised of costs incurred in performing
research and development activities including wages and associated employee
benefits, facilities, consumable products and overhead costs, are expensed as
incurred. Our research activities are performed at our facility in Massachusetts
in conjunction with our collaboration partner sites.  In support of our
research and development activities we utilize our Barocycler instruments that
are capitalized as fixed assets and depreciated over their expected useful
life.
 
 Inventories
 
 Inventories
are valued at the lower of cost or market.  The composition of inventory as
of March 31, 2009 and December 31, 2008 is as follows:
  5
  PRESSURE
BIOSCIENCES, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 AS
OF MARCH 31, 2009
 
 March 31,
                        
                        
                        December 31,2009
                        
                        
                        2008Raw
      materials
                        
                        $
                        129,097
                        
                        
                        $
                        83,451Finished
      goods
                        
                        
                        693,406
                        
                        
                        
                        488,380Total
                        
                        $
                        822,503
                        
                        
                        $
                        571,831
 
 Our
finished goods inventory as of March 31, 2009 included 64 Barocycler
instruments.  Our finished goods inventory as of December 31, 2008
included 34 Barocycler instruments.
 
 Property
and Equipment
 
 Property
and equipment are stated at cost, less accumulated depreciation. For financial
reporting purposes, depreciation is recognized using the straight-line method,
allocating the cost of the assets over their estimated useful lives of three
years for certain laboratory equipment, from three to five years for management
information systems and office equipment, and three years for all PCT finished
units classified as fixed assets.
 
 Intangible
Assets
 
 We have
classified as intangible assets, costs associated with the fair value of
acquired intellectual property.  Intangible assets including patents are
amortized on a straight-line basis over sixteen years.  We perform a
quarterly review of our intangible assets for impairment.  When impairment
is indicated, any excess of carrying value over fair value is recorded as a
loss. An impairment analysis of intangible assets was performed as of December
31, 2008 and we reviewed the analysis as of March 31, 2009.  We have
concluded that there is no impairment of intangible assets.
 
 Long-Lived
Assets and Deferred Costs
 
 In
accordance with FASB SFAS No. 144, “Accounting for the Impairment or
Disposal of Long-Lived Assets”, if indicators of impairment exist, we
assess the recoverability of the affected long-lived assets by determining
whether the carrying value of such assets can be recovered through the
undiscounted future operating cash flows. If impairment is indicated, we measure
the amount of such impairment by comparing the carrying value of the asset to
the fair value of the asset and record the impairment as a reduction in the
carrying value of the related asset and a charge to operating results. While our
current and historical operating losses and cash flow are indicators of
impairment, we performed an impairment test as of December 31, 2008 and we
reviewed the analysis as of March 31, 2009.  We have concluded that
there is no impairment of long-lived assets.
 
 Concentrations
 
 Credit
Risk
 
 Our
financial instruments that potentially subject us to concentrations of credit
risk consist primarily of cash, cash equivalents and trade
receivables.  We have cash investment policies which, among other
things, limit investments to investment-grade securities.  We perform
ongoing credit evaluations of our customers, and the risk with respect to trade
receivables is further mitigated by the fact that many of our customers are
government institutions and university laboratories.
 
 The
following tables illustrate the level of concentration as a percentage of total
revenues during the three months ended March 31, 2009 and 2008:
  6
  PRESSURE
BIOSCIENCES, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 AS
OF MARCH 31, 2009
 
 For the Three Months EndedMarch 31,2009
                    
                    
                    2008Top
      Five Customers
                    
                    
                    67
                    %
                    
                    
                    84
                    %Federal
      Agencies
                    
                    
                    28
                    %
                    
                    
                    40
                    %
 
 The
following table illustrates the level of concentration as a percentage of net
accounts receivable balance as of March 31, 2009 and December 31,
2008:
 
 March 31,
                    
                    
                    December 31,2009
                    
                    
                    2008Top
      Five Customers
                    
                    
                    73
                    %
                    
                    
                    81
                    %Federal
      Agencies
                    
                    
                    8
                    %
                    
                    
                    1
                    %
 
 Product
Supply
 
 Source
Scientific, LLC has been our sole contract manufacturer for all of our PCT
instrumentation. We have initiated several engineering initiatives to position
us for greater independence from any one supplier, and we are developing a
network of manufacturers and sub-contractors to reduce our reliance on any
single supplier for PCT components.  Until we develop a network of
manufacturers and subcontractors, obtaining alternative sources of supply or
manufacturing services could involve significant delays and other costs and
challenges, and may not be available to us on reasonable terms, if at all. The
failure of a supplier or contract manufacturer to provide sufficient quantities,
acceptable quality and timely products at an acceptable price, or an
interruption of supplies from such a supplier could harm our business and
prospects.
 
 Computation
of Loss per Share
 
 Basic
loss per share is computed by dividing loss available to common shareholders by
the weighted average number of common shares outstanding.  Diluted
loss per share is computed by dividing loss available to common shareholders by
the weighted average number of common shares outstanding plus additional common
shares that would have been outstanding if dilutive potential common shares had
been issued.  For purposes of this calculation, convertible preferred
stock, warrants to acquire preferred stock convertible into common stock, and
options to acquire common stock are considered common stock equivalents in
periods in which they have a dilutive effect.  Stock options that are
anti-dilutive are excluded from this calculation.
 
 The
following table illustrates our computation of loss per share for the three
months ended March 31, 2009 and 2008:
 
 For the Three Months EndedMarch 31,2009
                    
                    
                    2008Numerator:Loss
      - basic and diluted
                    
                    $
                    (224,246
                    )
                    
                    $
                    (1,341,105
                    )Denominator:Weighted
      average shares outstanding - basic and diluted
                    
                    
                    2,195,283
                    
                    
                    
                    2,192,175Loss
      per share - basic and diluted
                    
                    $
                    (0.10
                    )
                    
                    $
                    (0.61
                    )Shares
      excluded from calculations
                    
                    
                    5,352
                    
                    
                    
                    196,785
 
 Accounting
for Income Taxes
 
 Effective
January 1, 2007, we adopted the provisions of FASB Interpretation
No. 48, “Accounting for Uncertainty in Income Taxes - an
Interpretation of FASB Statement No. 109” (“FIN 48”).  FIN
48 clarifies the accounting for uncertainty in income taxes recognized in
an enterprise’s financial statements in accordance with SFAS No. 109, “Accounting for Income
Taxes”.  This interpretation prescribes a recognition threshold
and measurement attribute for the financial statement recognition and
measurement of a tax position taken or expected to be taken in a tax return. FIN
48 also provides guidance on de-recognition of tax benefits, classification on
the balance sheet, interest and penalties, accounting in interim periods,
disclosure, and transition.
  7
  PRESSURE
BIOSCIENCES, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 AS
OF MARCH 31, 2009
 
 We
account for income taxes under the asset and liability method, which requires
recognition of deferred tax assets, subject to valuation allowances, and
liabilities for the expected future tax consequences of events that have been
included in the financial statements or tax returns. Deferred income taxes
reflect the net tax effects of temporary differences between the carrying
amounts of asset and liabilities for financial reporting and income tax
purposes. A valuation allowance is established if it is more likely than not
that all or a portion of the net deferred tax assets will not be
realized.
 
 In the
quarter ended March 31, 2009, we recorded a benefit for income taxes of $623,262
due to provisions in the American Recovery and Reinvestment Act of 2009 relating
to net operating loss carry-backs.  The cash is expected to be
received during the second half of 2009.  There was no provision for
an income tax benefit during the same period in 2008.  Aside from the
impact of the passage of this congressional act, we do not expect any additional
income tax benefits relating to carry-backs to prior periods.  If we
are successful in commercializing PCT and in generating operating income, then
we may be able to utilize any net operating losses we may have at the time
against such future operating profits.
  Accounting
for Stock-Based Compensation
 
 We
maintain equity compensation plans under which grants of incentive stock options
and non-qualified stock options are granted to employees, independent members of
our Board of Directors and outside consultants.  We recognize equity
compensation expense over the requisite service period using the Black-Scholes
formula to estimate the fair value of the stock options on the date of
grant.  Since January 1, 2006, we have accounted for our stock option
expense in accordance with the provisions of SFAS No. 123 (revised 2004),
“Share-Based Payment”,
or SFAS 123R.
 
 We
recognized stock-based compensation expense of $145,903 and $118,205 for the
three months ended March 31, 2009 and 2008, respectively.  The
following table summarizes the effect of this stock-based compensation expense
within each of the line items of our costs and expenses within our Consolidated
Statements of Operations:
 
 For the Three Months Ended, March 31,2009
                        
                        
                        2008Research
      and development
                        
                        $
                        52,972
                        
                        
                        $
                        43,237Selling
      and marketing
                        
                        
                        21,208
                        
                        
                        
                        33,032General
      and administrative
                        
                        
                        71,723
                        
                        
                        
                        41,936Total
      stock-based compensation expense
                        
                        $
                        145,903
                        
                        
                        $
                        118,205
 
 The
provisions of SFAS 123R require that we make an estimate of our forfeiture rate
and adjust the expense that we recognize to reflect the estimated number of
stock options that will go unexercised. Our historical forfeiture rate has been
approximately 5%, so we used this rate as our assumption in calculating future
stock-based compensation expense.
 
 During
the three months ended March 31, 2009 and 2008, the total fair value of stock
options awarded was $251,730 and $127,552, respectively.
 
 As of
March 31, 2009, the total estimated fair value of unvested stock options to be
amortized over their remaining vesting period was $447,016.  The
non-cash, stock based compensation expense associated with the vesting of these
options will be $231,282 in 2009, $175,170 in 2010 and $40,564 in
2011.
 
 8
  PRESSURE
BIOSCIENCES, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 AS
OF MARCH 31, 2009
 
 Fair
Value of Financial Instruments
 
 Due to
their short maturities, the carrying amounts for cash and cash equivalents,
accounts receivable, accounts payable, and accrued expenses approximate their
fair value. Long-term liabilities are primarily related to liabilities
transferred under contractual arrangements with carrying values that approximate
fair value.
 
 Reclassifications
 
 Certain
prior year amounts have been reclassified to conform to our current year
presentation.
 
 Advertising
 
 Advertising
costs are expensed as incurred.  During the three months ended March
31, 2009 and 2008, we incurred $304 and $6,517 respectively in advertising
expense.
 
 Rent
Expense
 
 Rental
costs are expensed as incurred.  During the three months ended March
31, 2009 and 2008, we incurred $24,573 and $32,213, respectively in rent expense
for the use of our corporate office and research and development
facilities.
 
 4)
                  Commitments and
    Contingencies
 
 Operating
Leases
 
 Our
corporate offices are currently located at 14 Norfolk Avenue, South Easton,
Massachusetts 02375.  In November 2007, we signed an 18 month lease
agreement commencing in February 2008 pursuant to which we lease approximately
5,500 square feet of office space, with an option for an additional 12
months.  We exercised the renewal option to extend the lease term for
one year to end on July 14, 2010.  We pay approximately $6,500 per
month for the use of these facilities.
 
 Effective
January 1, 2009, we terminated our lease agreement with Scheer Partners and the
Maryland Economic Development Corporation, pursuant to which we leased
laboratory and office space in Rockville, MD.  We paid approximately
$3,300 per month for the use of these facilities through December 31, 2008 with
no further obligation.
 
 Effective
January 31, 2009, we terminated our sub-lease agreement with Proteome Systems,
pursuant to which we leased approximately 650 square feet of laboratory space
plus 100 square feet of office space from Proteome Systems in Woburn,
Massachusetts.  We paid approximately $3,200 per month for the use of
these facilities through January 31, 2009 with no further
obligation.
 
 In
connection with the reduction of staff levels and consolidation of operations in
Rockville, MD and Woburn, MA, the Company moved its research and development
activities within Massachusetts.
 
 Royalty
Commitments
 
 In 1996,
we acquired our initial equity interest in BioSeq, Inc., which at the time was
developing our original pressure cycling technology.  BioSeq, Inc. acquired
its pressure cycling technology from BioMolecular Assays, Inc. (“BMA”) under a
technology transfer and patent assignment agreement.  In 1998, we purchased
all of the remaining outstanding capital stock of BioSeq, Inc., and at such
time, the technology transfer and patent assignment agreement was amended to
require us to pay BioMolecular Assays, Inc. a 5% royalty on our sales of
products or services that incorporate or utilize the original pressure cycling
technology that BioSeq, Inc. acquired from BMA.  We are also required to
pay BMA 5% of the proceeds from any sale, transfer or license of all or any
portion of the original pressure cycling technology.  These payment
obligations terminate in 2016.  During the three months ended March 31,
2009 and 2008, we incurred $8,827 and $3,000, respectively in royalty expense
associated with our obligation to BMA.
 
 In
connection with our acquisition of BioSeq, Inc., we licensed certain limited
rights to the original pressure cycling technology back to BMA.   This
license is non-exclusive and limits the use of the original pressure cycling
technology by BMA solely for molecular applications in scientific research and
development and in scientific plant research and development.  BMA is
required to pay us a royalty equal to 20% of any license or other fees and
royalties, but not including research support and similar payments, it receives
in connection with any sale, assignment, license or other transfer of any rights
granted to BMA under the license. BMA must pay us these royalties until the
expiration of the patents held by BioSeq, Inc. in 1998, which we anticipate will
be in 2016.  We have not received any royalty payments from BMA under this
license.
  9
  PRESSURE
BIOSCIENCES, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 AS
OF MARCH 31, 2009
 
 Battelle
Memorial Institute
 
 In
December 2008, we entered into an exclusive patent license agreement with the
Battelle Memorial Institute ("Battelle"). The licensed technology is described
in the patent application filed by Battelle on July 31, 2008 (US serial number
12/183,219). This application includes subject matter related to a method and a
system for improving the analysis of protein samples, including through an
automated, in-line system utilizing pressure and a pre-selected agent to obtain
a digested sample in a significantly shorter period of time than current
methods, while maintaining the integrity of the sample throughout the
preparatory process.  Pursuant to the terms of the agreement we paid
Battelle a non-refundable initial fee.  In addition to royalty
payments on net sales on “licensed products”, we are obligated to make minimum
royalty payments for each year that we retain the rights outlined in the patent
license agreement and we are required to have our first commercial sale of the
licensed products within one year following the issuance of the patent covered
by the licensed technology.
 
 Purchase
Commitments
 
 On
September 18, 2008, we submitted a purchase order to Source Scientific, LLC, the
manufacturer of the Company’s PCT Barocycler instrumentation, for 50 Barocycler
NEP2320 units. Pursuant to the terms of the purchase order, we placed a deposit
with Source Scientific, LLC, of approximately $100,000, representing
approximately 25% of the expected total value of the order, upon submission of
the purchase order.  On November 12, 2008, we placed an additional
deposit of approximately $100,000 with Source Scientific, LLC to provide them
with funds required to commence manufacturing of the NEP2320 units
ordered.  The purchase price for the 50 Barocycler NEP2320 units is
based upon a fixed bill of materials.  We were billed for the unpaid
purchase price of each unit at the time each unit was completed and ready for
sale.
 
 As of
December 31, 2008 we had approximately $163,000 on deposit with Source
Scientific, LLC for 40 remaining units pursuant to open purchase
orders.  In addition, in December 2008, we put the remaining $203,758
amount of the purchase order in an escrow account, which funds were to be
released to pay the remaining balance due when units were
completed.  The amount held in escrow is included as a component
within the line item Deposits on the Balance Sheet.  As of March 31,
2009, we had no funds on deposit with Source Scientific, LLC because the
remaining units pursuant to the purchase order were completed and received by
the Company during the first quarter of 2009.
 
 Indemnification
 
 In
connection with our sale of substantially all of the assets of Boston Biomedica,
Inc. (“BBI Core Businesses”) to SeraCare Life Sciences, Inc. in September 2004,
we continue to be exposed to possible indemnification claims in amounts up to
the purchase price of approximately $29 million.  Our indemnification
obligations for breaches of some representations and warranties relating to
compliance with environmental laws extend until September 14, 2009,
representations and warranties relating to tax matters extend for the applicable
statute of limitations period (which varies depending on the nature of claim),
and representations and warranties relating to our due organization,
subsidiaries, authorization to enter into and perform the transactions
contemplated by the Asset Purchase Agreement and brokers fees, extend
indefinitely.
 
 Severance and Change of Control
Agreements
 
 Each of
our executive officers is entitled to receive a severance payment if terminated
by the Company without cause.  The severance benefits would include a
payment in an amount equal to one year of each executive officer’s annualized
base salary compensation plus accrued paid time off.  Additionally,
each executive officer will be entitled to receive medical and dental insurance
coverage for one year following the date of termination.  The total
commitment related to these agreements in the aggregate is approximately $1.0
million.
 
 Each of
our executive officers, other than Mr. Richard T. Schumacher, our President and
Chief Executive Officer, is entitled to receive a change of control payment in
an amount equal to one year of such executive officer’s annualized base salary
compensation, accrued paid time off, and medical and dental coverage, in the
event of a change of control of the Company.  In the case of Mr.
Schumacher, this payment would be equal to two years of annualized base salary
compensation, accrued paid time off, and two years of medical and dental
coverage.  The total commitment related to these agreements in the
aggregate is approximately $1.3 million.
  10
  PRESSURE
BIOSCIENCES, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 AS
OF MARCH 31, 2009
 
 5)
                  Stockholders’
  Equity
 
 Preferred
Stock
 
 In 1996,
our Board of Directors authorized the issuance of 1,000,000 shares of preferred
stock with a par value of $0.01. As of March 31, 2009, 156,980 of these shares
have been issued.
 
 On
February 12, 2009, we completed a private placement, pursuant to which we sold
an aggregate of 156,980 units for a purchase price of $11.50 per unit (the
“Purchase Price”), resulting in gross proceeds to us of $1,805,270 (the “Private
Placement”).  Each unit consists of  (i) one share of a
newly created series of preferred stock, designated “Series A Convertible
Preferred Stock,” par value $0.01 per share (the “Series A Convertible
Preferred Stock”) convertible into 10 shares of our common stock, (ii) a
warrant to purchase one share of Series A Convertible Preferred Stock at an
exercise price equal to $12.50 per share, with a term expiring 15 months after
the date of closing (“15 Month Preferred Stock
Warrant”); and (iii) a warrant to purchase 10 shares of common stock at
an exercise price equal to $2.00 per share, with a term expiring 30 months after
the date of closing (the “30 Month Common Stock
Warrants”).  We did not pay any placement fees associated with
this transaction but the expenses related to the offering totaled approximately
$233,000.
 
 The
proceeds from the sale of each unit was allocated between the Series A
Convertible Preferred Stock, the 15 Month Preferred Stock Warrant and the 30
Month Common Stock Warrant based on the relative estimated fair value of each
security.  The estimated fair value of the warrants were determined
using the Black-Scholes formula, resulting in an allocation of the gross
proceeds of $882,253 to the total warrants issued.  The allocation of
the gross proceeds to the Series A Convertible Preferred Stock was
$923,017.  In accordance with the provisions of Emerging Industry Task
Force Issue 00-27: Application of Issue No. 98-5 to Certain Convertible
Instruments, an additional adjustment between Additional Paid in Capital and
Accumulated Deficit of $489,803 was recorded to reflect an implicit non-cash
dividend related to the allocation of proceeds between the stock and warrants
issued.
 
 Series A Convertible
Preferred Stock
 
 Each
share of Series A Convertible Preferred Stock will receive a cumulative dividend
at the rate of 5% per annum of the Purchase Price, payable semi-annually on June
30 and December 31, commencing on June 30, 2009 (with the first payment to be
pro-rated based on the number of days occurring between the date of issuance and
June 30, 2009).  Dividends may be paid in cash or in shares of common
stock at our option, subject to certain conditions.  The shares of
Series A Convertible Preferred Stock also are entitled to a liquidation
preference, such that in the event of any voluntary or involuntary liquidation,
dissolution or winding up of our company, the holders of Series A Convertible
Preferred Stock will be paid out of the assets of the Company available for
distribution to the our stockholders before any payment shall be paid to the
holders of common stock, an amount per share equal to the Purchase Price, plus
accrued and unpaid dividends.
 
 Each
share of Series A Convertible Preferred Stock is convertible into 10 shares of
common stock at any time at the option of the holder, subject to adjustment for
stock splits, stock dividends, recapitalizations and similar transactions (the
“Conversion
Ratio”). Unless waived under certain circumstances by the holder of
Series A Convertible Preferred Stock, such holder’s shares of Series A
Convertible Preferred Stock may not be converted if upon such conversion the
holder’s beneficial ownership would exceed certain thresholds.  Each
share of Series A Convertible Preferred Stock will automatically be converted
into shares of common stock at the Conversion Ratio then in
effect:  (i) if, after 12 months from the closing of the Private
Placement, the common stock trades on the Nasdaq Capital Market (or other
primary trading market or exchange on which the common stock is then traded) at
a price equal to $4.00 for 20 out of 30 consecutive trading days with average
daily trading volume of at least 10,000 shares or (ii) upon a registered public
offering by the Company at a per share price equal to $2.30 with aggregate gross
proceeds to the Company of not less than $10 million.
 
 The
holders of Series A Convertible Preferred Stock are not entitled to vote on any
matters presented to the stockholders of the Company for their action or
consideration at any meeting of stockholders of the Company (or by written
consent of stockholders in lieu of meeting), except that the holders of Series A
Convertible Preferred Stock may vote separately as a class on any matters that
would amend, alter or repeal any provision of our Restated Articles of
Organization, as amended, in a manner that adversely affects the powers,
preferences or rights of the Series A Convertible Preferred Stock and such
holders may also vote on any matters required by law.
 
 At any
time after February 11, 2014, upon 30 days written notice, we have the right to
redeem the outstanding shares of Series A Convertible Preferred Stock at a price
equal to the Purchase Price, plus all accrued and unpaid dividends
thereon.  The redemption price may be paid in two annual
installments.
  11
  PRESSURE
BIOSCIENCES, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 AS
OF MARCH 31, 2009
 
 Warrants
  The
warrants have the following exercise prices and terms:  (i) the 15
Month Preferred Stock Warrants have an exercise price equal to $12.50 per share,
with a term expiring on May 12, 2010; and (ii) the 30 Month Common Stock
Warrants have an exercise price equal to $2.00 per share, with a term expiring
on August 12, 2011.Unless waived under
certain circumstances by the holder of the warrant, such holder’s warrants may
not be exercised if upon such exercise the holder’s beneficial ownership would
exceed certain thresholds.
 
 Each of
the 15 Month Preferred Stock Warrants and the 30 Month Common Stock Warrants
permit the holder to conduct a “cashless exercise” at any time after the holder
of the warrant becomes an “affiliate” (as defined in the Securities Purchase
Agreement) of the Company.
 
 The
warrant exercise price and/or number of shares issuable upon exercise of the
applicable warrant will be subject to adjustment for stock dividends, stock
splits or similar capital reorganizations, as set forth in the
warrants.
 
 Subject
to the terms and conditions of the applicable warrants, the Company has the
right to call for cancellation of the 15 Month Preferred Stock Warrants if the
volume weighted average price of our common stock on the Nasdaq Capital Market
(or other primary trading market or exchange on which our common stock is then
traded) equals or exceeds $1.75 for either (i) 10 consecutive trading days or
(ii) 15 out of 25 consecutive trading days.   Subject to the
terms and conditions of the 30 Month Common Stock Warrant, the Company has the
right to call for cancellation the 30 Month Common Stock Warrant if the volume
weighted average price for our common stock on the Nasdaq Capital Market (or
other primary trading market or exchange on which our common stock is then
traded) equals or exceeds $2.80 for either (i) 10 consecutive trading days or
(ii) 15 out of 25 consecutive trading days.
 
 Common
Stock
 
 Shareholders Rights
Plan
 
 On March
3, 2003, our Board of Directors adopted a shareholder rights plan (“the Rights
Plan”) and declared a distribution of one Right for each outstanding share of
our common stock to shareholders of record at the close of business on March 21,
2003 (the “Rights”). Initially, the Rights will trade automatically with the
common stock and separate Right Certificates will not be issued.  The
Rights Plan is designed to deter coercive or unfair takeover tactics and to
ensure that all of our shareholders receive fair and equal treatment in the
event of an unsolicited attempt to acquire the Company. The Rights Plan was not
adopted in response to any effort to acquire the Company and the Board is not
aware of any such effort. The Rights will expire on February 27, 2013 unless
earlier redeemed or exchanged.  Each Right entitles the registered holder,
subject to the terms of a Rights Agreement, to purchase from the Company one
one-thousandth of a share of the Company’s Series A Junior Participating
Preferred Stock at a purchase price of $45.00 per one one-thousandth of a share,
subject to adjustment. In general, the Rights will not be exercisable until a
subsequent distribution date which will only occur if a person or group acquires
beneficial ownership of 15% or more of our common stock or announces a tender or
exchange offer that would result in such person or group owning 15% or more of
the common stock. With respect to any person or group who currently beneficially
owns 15% or more of our common stock, the Rights will not become exercisable
unless and until such person or group acquires beneficial ownership of
additional shares of common stock.
 
 Subject
to certain limited exceptions, if a person or group acquires beneficial
ownership of 15% or more of our outstanding common stock or if a current 15%
beneficial owner acquires additional shares of common stock, each holder of a
Right (other than the 15% holder whose Rights become void once such holder
reaches the 15% threshold) will thereafter have a right to purchase, upon
payment of the purchase price of the Right, that number of shares of our common
stock which at the time of such transaction will have a market value equal to
two times the purchase price of the Right.  In the event that, at any time
after a person or group acquires 15% or more of our common stock, we are
acquired in a merger or other business combination transaction or 50% or more of
our consolidated assets or earning power are sold, each holder of a Right will
thereafter have the right to purchase, upon payment of the purchase price of the
Right, that number of shares of common stock of the acquiring company which at
the time of such transaction will have a market value of two times the purchase
price of the Right.
 
 Our Board
of Directors may exchange the Rights (other than Rights owned by such person or
group which have become void), in whole or in part, at an exchange ratio of one
share of common stock per Right (subject to adjustment).  At any time prior
to the time any person or group acquires 15% or more of our common stock, the
Board of Directors may redeem the Rights in whole, but not in part, at a price
of $0.001 per Right.
  12
  PRESSURE
BIOSCIENCES, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 AS
OF MARCH 31, 2009
 
 Stock
Options
 
 On June
16, 2005, our stockholders approved our 2005 Equity Incentive Plan (the “Plan”)
pursuant to which an aggregate of 1,000,000 shares of our common stock were
reserved for issuance upon exercise of stock options or other equity awards made
under the Plan.  On September 25, 2008, our stockholders approved an
amendment to our 2005 Equity Incentive Plan pursuant to which the number of
shares reserved for issuance upon exercise of stock options or other equity
awards made under the plan was increased from 1,000,000 shares to 1,500,000
shares.  Under the Plan, we may award stock options, shares of common
stock, and other equity interests in the Company to employees, officers,
directors, consultants, and advisors, and to any other persons the Board of
Directors deems appropriate.
 
 As of
March 31, 2009, options to acquire 1,290,500 shares were outstanding under the
Plan.  We also have 244,000 stock options outstanding under our 1999
Non-qualified Plan.  As of March 31, 2009, there were 4,800 shares
available for future grant under the 1999 Non-qualified Plan.
  The
following tables summarize information concerning stock options and warrants
outstanding and exercisable:
 
 Stock Options
                                                        
                                                        
                                                        WarrantsWeighted
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        WeightedAverage price
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        Average price
                                                        
                                                        
                                                        TotalShares
                                                        
                                                        
                                                        per share
                                                        
                                                        
                                                        Shares
                                                        
                                                        
                                                        per share
                                                        
                                                        
                                                        Shares
                                                        
                                                        
                                                        ExercisableBalance
      outstanding, 12/31/2006
                                                        
                                                        
                                                        945,500
                                                        
                                                        
                                                        $
                                                        3.32
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        945,500
                                                        
                                                        
                                                        
                                                        524,000Granted
                                                        
                                                        
                                                        200,000
                                                        
                                                        
                                                        
                                                        4.09Exercised
                                                        
                                                        
                                                        -Expired
                                                        
                                                        
                                                        -Forfeited
                                                        
                                                        
                                                        (25,000
                                                        )
                                                        
                                                        
                                                        3.58Balance
      outstanding, 12/31/2007
                                                        
                                                        
                                                        1,120,500
                                                        
                                                        
                                                        $
                                                        3.45
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        1,120,500
                                                        
                                                        
                                                        
                                                        691,166Granted
                                                        
                                                        
                                                        231,500
                                                        
                                                        
                                                        
                                                        2.94Exercised
                                                        
                                                        
                                                        (3,000
                                                        )
                                                        
                                                        
                                                        3.25Expired
                                                        
                                                        
                                                        (1,500
                                                        )
                                                        
                                                        
                                                        3.25Forfeited
                                                        
                                                        
                                                        (125,001
                                                        )
                                                        
                                                        
                                                        4.01Balance
      outstanding, 12/31/2008
                                                        
                                                        
                                                        1,222,499
                                                        
                                                        
                                                        $
                                                        3.30
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        1,222,499
                                                        
                                                        
                                                        
                                                        932,334Granted
                                                        
                                                        
                                                        450,000
                                                        
                                                        
                                                        
                                                        0.77
                                                        
                                                        
                                                        
                                                        3,139,600
                                                        
                                                        
                                                        
                                                        1.63
                                                        
                                                        
                                                        
                                                        3,589,600Exercised
                                                        
                                                        
                                                        -Expired
                                                        
                                                        
                                                        -Forfeited
                                                        
                                                        
                                                        (137,999
                                                        )
                                                        
                                                        
                                                        3.40
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        (137,999
                                                        )Balance
      outstanding, 3/31/2009
                                                        
                                                        
                                                        1,534,500
                                                        
                                                        
                                                        $
                                                        2.55
                                                        
                                                        
                                                        
                                                        3,139,600
                                                        
                                                        
                                                        $
                                                        1.63
                                                        
                                                        
                                                        
                                                        4,674,100
                                                        
                                                        
                                                        
                                                        4,175,947
 
 Options Outstanding
                                            
                                            
                                            Options ExercisableWeighted Average
                                            
                                            
                                            
                                            
                                            
                                            Weighted AverageRange of Exercise
                                              Prices
                                            
                                            
                                            Number of
                                              Options
                                            
                                            
                                            Remaining
                                              Contractual
                                              Life
                                            
                                            
                                            Exercise
                                              Price
                                            
                                            
                                            Number of
                                              Options
                                            
                                            
                                            Remaining
                                              Contractual
                                              Life
                                            
                                            
                                            Exercise
                                              Price$
                                            0.77
                                            
                                            
                                            -
                                            
                                            
                                            $
                                            2.70
                                            
                                            
                                            
                                            669,000
                                            
                                            
                                            
                                            7.7
                                            
                                            
                                            $
                                            1.24
                                            
                                            
                                            
                                            327,346
                                            
                                            
                                            
                                            6.4
                                            
                                            
                                            $
                                            1.692.71
                                            
                                            
                                            -
                                            
                                            
                                            
                                            3.08
                                            
                                            
                                            
                                            319,500
                                            
                                            
                                            
                                            5.9
                                            
                                            
                                            
                                            2.93
                                            
                                            
                                            
                                            265,000
                                            
                                            
                                            
                                            5.2
                                            
                                            
                                            
                                            2.973.09
                                            
                                            
                                            -
                                            
                                            
                                            
                                            3.95
                                            
                                            
                                            
                                            302,000
                                            
                                            
                                            
                                            7.2
                                            
                                            
                                            
                                            3.67
                                            
                                            
                                            
                                            252,667
                                            
                                            
                                            
                                            7.1
                                            
                                            
                                            
                                            3.683.96
                                            
                                            
                                            -
                                            
                                            
                                            
                                            5.93
                                            
                                            
                                            
                                            244,000
                                            
                                            
                                            
                                            7.7
                                            
                                            
                                            
                                            4.24
                                            
                                            
                                            
                                            191,334
                                            
                                            
                                            
                                            7.5
                                            
                                            
                                            
                                            4.19$
                                            0.77
                                            
                                            
                                            -
                                            
                                            
                                            $
                                            5.93
                                            
                                            
                                            
                                            1,534,500
                                            
                                            
                                            
                                            7.2
                                            
                                            
                                            $
                                            2.55
                                            
                                            
                                            
                                            1,036,347
                                            
                                            
                                            
                                            6.5
                                            
                                            
                                            $
                                            2.97
 
 The
aggregate intrinsic value of options outstanding and exercisable as of March 31,
2009 and December 31, 2008 has been negative due the stock price as of period
end compared to the option weighted average exercise price.
  13
  ITEM
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
 
 SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
 
 This
Quarterly Report on Form 10-Q 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
      ability to raise additional equity or debt financing on acceptable terms,
      if at all;-
                      our
      belief that we have sufficient liquidity to finance operations into the
      second quarter of 2010;-
                      our
      need to take additional cost reduction measures, cease operations or sell
      our operating assets, if we are unable to obtain sufficient additional
      financing in the future;-
                      the
      amount of cash necessary to operate our business;-
                      our
      ability to reduce our rate of cash utilization to an average of
      approximately $600,000 per quarter during 2009;-
                      the
      anticipated uses of grant revenue and increased grant revenue in future
      periods;-
                      potential
      growth in the market for our PCT products;-
                      our
      plans and expectations with respect to our pressure cycling technology
      (PCT) operations, including our expected amount of research and
      development, selling and marketing and general and administrative
      expense;-
                      market
      acceptance and the potential for commercial success of our PCT
      products;-
                      our
      belief that PCT provides a superior solution for sample
      preparation;-
                      our
      belief that PCT has achieved significant market acceptance in the mass
      spectrometry market;-
                      the
      expected development and success of new product offerings, including our
      new PCT Micro-Tube Adaptor Kits for accelerated proteolytic
      digestion;-
                      the
      potential applications for PCT;-
                      the
      expected benefits and results from our research and development
      efforts;-
                      the
      expected benefits and results from our collaboration
    program;-
                      our
      expectation of obtaining additional research grants from the government in
      the future;-
                      the
      expected tax benefits we may receive due to the American Recovery and
      Reinvestment Act of 2009;-
                      our
      ability to utilize net operating losses in the future;-
                      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 this 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 and
operating results include those discussed in the risk factors set forth in Item
1 of our Annual Report on Form 10-K for the year ended December 31, 2008, as
well as those discussed elsewhere in this Report, including the
following:
  If
we fail to obtain substantial additional capital, we may not be able to continue
our business.
  Based on
our current projections, we believe our current cash resources, which include
the funds we received from the private placement completed in February 2009, are
sufficient to fund our normal operations into the second quarter of
2010.
  We will
need additional capital sooner than we currently expect if we experience
unforeseen costs or expenses, unanticipated liabilities or delays in
implementing our business plan, developing our products and achieving commercial
sales. We also believe that we will need substantial capital to accelerate the
growth and development of our pressure cycling technology products and services
in the sample preparation area, as well as for applications in other areas of
life sciences.
  14
  Our
actual results and performance, including our ability to raise additional
capital, may be adversely affected by current economic conditions.
 
 Our
actual results and performance could be adversely affected by the current
economic conditions in the global economy, which pose a risk to the overall
demand for our products from our customers who may elect to defer or cancel
purchases of our products in response to tighter credit markets, negative
financial news, and general uncertainty in the economy.  In addition,
our ability to obtain additional financing, on acceptable terms, if at all, may
be adversely affected by the crisis in the credit markets and the uncertainty in
the current economic climate.
 
 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, 2008 included in our Annual
Report on Form 10-K for the year ended December 31, 2008.
 
 15
  OVERVIEW
 
 We are a
life sciences company focused on the development and commercialization of a
novel, enabling, platform technology called pressure cycling technology (“PCT”).
PCT uses cycles of hydrostatic pressure between ambient and ultra-high levels
(up to 35,000 psi and greater) to control bio-molecular
interactions.
 
 Our
pressure cycling technology uses instrumentation that is capable of cycling
pressure between ambient and ultra-high levels (up to 35,000 psi or greater) at
controlled temperatures to rapidly and repeatedly control the interactions of
bio-molecules.  Our pressure-generating instrument is called the
Barocycler®.  Our PCT-related consumables product line includes PULSE
(Pressure Used to Lyse Samples for Extraction) Tubes as well as application
specific (“ProteoSolve”) kits.  Our Barocycler instrument, together
with our consumable products and reagents, make up the PCT Sample Preparation
System (“PCT SPS”).
 
 We have
experienced negative cash flows from operations with respect to our pressure
cycling technology business since our inception. As of March 31, 2009, we had
cash of approximately $2.1 million.  During 2008, we took a number of
cost reduction measures, including a comprehensive restructuring program to
significantly reduce costs, centralize core operations, and refocus our business
strategy in specific areas where our products have found significant market
acceptance. The restructuring program included: a reduction in personnel of
eight full-time employees (40% of the workforce), reduction in travel and
meeting attendance for all personnel, continued reduction in investor relations
activities, decreases in the base salary of most of our employees and all of our
executive officers, a shutdown of our R&D facility in Rockville, MD, a
consolidation of our R&D activities in Massachusetts, and delay of several
research & development and marketing programs.  We believe that
these initiatives will significantly decrease our rate of cash utilization, from
just under $1 million per quarter in the second half of 2008 to an average of
approximately $600,000 per quarter during 2009.  We also believe that
these actions, taken together with the proceeds we received from our $1.8
million equity financing completed in February 2009, will enable us to extend
our cash resources into the second quarter of 2010.
 
 Despite
the difficulty in the capital markets and the necessity to implement a very
challenging restructuring program during the second half of 2008, we are quite
proud of the number of accomplishments that we realized during the first quarter
of 2009.  These successes include:
 
 ·
              Sale of Series A Convertible
      Preferred Stock and Warrants in a Private Placement – On February
      12, 2009, we received approximately $1.8 million from the sale of 156,980
      units, consisting of shares of Series A Convertible Preferred Stock and
      warrants, in a private placement to 35 accredited
    investors.
 
 ·
              Phase I SBIR Grant Award
      – During the first quarter, we were notified by the National
      Institute of Allergy and Infectious Diseases (“NIAID”) of the National
      Institutes of Health (NIH) that we had been awarded a Phase I SBIR grant
      (1R43A1081518-01) for a total of $109,998 to be billed over six
      months.  Entitled “Sample Preparation Using Pressure for
      Microbiome Studies and Clinical Diagnostics”, the grant will help fund
      research studies focused on discovering and cataloging the microbes that
      live on and in the human body.
 
 ·
              Presentation by Dr. Alexander
      Ivanov - Dr. Ivanov of the Harvard School of Public Health
      delivered a presentation at the 13th
      annual international meeting of the Association of Biomolecular Resource
      Facilities (“ABRF”) in February 2009 entitled “Searching for Efficient and
      High-Throughput Alternatives for Essential Sample Preparation Techniques
      in Mass Spectrometry-based Functional Proteomics”.  Dr. Ivanov
      and his colleagues stated that “good control, efficiency, and
      reproducibility of protein extraction from cells and tissues are essential
      for diverse biological and basic research applications” and that
      “effective and specific proteolytic digestion of proteins prior to mass
      spectrometry (“MS”) analysis is one of the fundamental techniques most
      commonly used in any proteomics laboratory”.  Dr. Ivanov and his
      colleagues concluded that “PCT resulted in significant improvement of
      throughput and reproducibility of sample preparation for proteomic
      analysis” and that “superior extraction rates were observed with
      pressure-assisted sample preparation”.  Dr. Ivanov’s
      presentation was awarded the “Best Poster Presentation” at the ABRF Annual
      Meeting.
 
 ·
              The Journal of Biomolecular
      Techniques Outstanding Manuscript Award -This annual award
      recognizes the best research article published each year in the
      Journal.  The 2009 award was presented to scientists from PBI
      and the Harvard School of Public Health for their manuscript “Tissue
      Fractionation by Hydrostatic Pressure Cycling Technology: the Unified
      Sample Preparation Technique for Systems Biology Studies” at the February
      2009 ABRF Annual Meeting.  The paper discussed the unique
      ability of PCT and the Company’s patent-pending ProteoSolve-SBTM reagent
      kit to simultaneously extract DNA, RNA, proteins, and lipids from the same
      sample.  The award was accepted by Dr. Vera Gross of PBI, the
      paper’s corresponding author.
 
 ·
              Third Consecutive Quarter of
      Double Digit Growth of PCT Sample Preparation System Installations –On May 5, 2009, we announced that total revenue for the first
      quarter of 2009 was $306,762 compared to $132,376 for the comparable
      period in 2008, a 132% increase.  We also announced that we had
      installed 10 PCT Sample Preparation Systems in the quarter, an increase of
      three installations from the first quarter
2008.
  16
  
 ·
              Continued Reduction in our
      Rate of Cash Utilization –On May 5, 2009, we announced that our
      operating loss for the first quarter of 2009 was $849,911 compared to
      $1,371,413 for the same period in 2008, a decrease of $521,502, or
      38%.  We also announced that our cash used in first quarter 2009
      operating activities was approximately $655,000, as compared to
      approximately $1,212,000 for the same quarter of
  2008.
 
 ·
              Measured Progress on the
      Development of the PCT MicroTube Adapter Kits for Accelerated Proteolytic
      Digestion –We are working on the development of new “micro-tube”
      adaptor kits for our two existing Barocycler instruments.  These
      new PCT-based products are expected to allow an increase in throughput of
      greater than 10-fold in a number of important application areas, while
      maintaining or increasing the quality of results.  These new
      products are also expected to allow us to enter into several exciting
      markets heretofore unavailable to us, such as the large sample preparation
      market for mass spectrometry.  Feedback and data received from
      our beta testing sites on the new micro-tube format have been very
      positive, productive, and encouraging.  We have also made
      significant progress on the remaining development issues related to the
      adapter kits.  We believe that we will meet the expected release
      date of June 30, 2009.
 
 We hold
13 United States and 6 foreign patents covering multiple applications of PCT in
the life sciences field. Our pressure cycling technology employs a unique
approach that we believe has the potential for broad use in a number of
established and emerging life sciences areas, including;
 
 -
                      
                      sample
      preparation for genomic, proteomic, and small molecule
      studies;-
                      
                      pathogen
      inactivation;-
                      
                      protein
      purification;-
                      
                      control
      of chemical (particularly enzymatic) reactions; and-
                      
                      Immunodiagnostics
      (clinical laboratory
testing).
 
 Since we
began operations as Pressure BioSciences in February 2005, we have installed 84
Barocycler instruments, including 10 instruments in the first quarter of 2009,
41 instruments in 2008, 20 instruments in 2007, 8 instruments in 2006, and 5
instruments in 2005.  Our customers include researchers at academic
laboratories and government agencies, as well as biotechnology, pharmaceutical
and other life sciences companies in the United States, and six foreign
distribution partners.
  17
  RESULTS OF
OPERATIONS
  Three
Months Ended March 31, 2009 and 2008
  Revenue
  We
recognized revenue of $306,762 for the three months ended March 31, 2009, as
compared to $132,376 for the same period in the prior year.
 
 PCT Products, Services,
Other. Revenue from the sale of PCT products and services was $222,142
for the three months ended March 31, 2009 as compared to $81,473 for the same
period in the prior year.  During the first quarter of 2009, we
completed the installation of ten Barocycler instruments, as compared to seven
in the same period of 2008.  Seven of the ten were domestic
installations and three were international sales, compared to five domestic
installations and two international sales for the same quarter in
2008.  The increase in revenue observed in the first quarter of 2009
was due in part to this increase in the number of Barocycler units sold during
the period, as well as to increased sales of consumable products and to
PCT-related scientific services that were provided.
 
 We expect
the number of units installed will continue to increase in future periods as we
continue to commercialize our technology, although we may experience some delays
in customer purchases due to current economic conditions in the global
economy.  Furthermore, we may realize some difficulties in signing up
new international distribution partners if we are unable to secure additional
funding through equity or debt financings.  We also expect that some
portion of future installations will continue to be for the smaller, lower
priced, Barocycler NEP2320 model and some will be placed under lease or
short-term rental agreements.  Therefore, we expect that the average
revenue per installation will continue to fluctuate from period to period as we
continue to drive our installed base and commercialize PCT.  We also
expect that as we continue to expand the installed based of Barocycler
instruments in the field we will realize increasing revenues from the sale of
consumable products and extended service contracts.  In the
short-term, these recurring revenue streams may continue to fluctuate from
period to period.
 
 Grant Revenue. During the
three months ended March 31, 2009 and 2008, we recorded $84,620 and $50,903 of
grant revenue, respectively.  Grant revenue recorded during the first
quarter of 2009 was related to the $850,000 SBIR Phase II grant that we were
awarded in June 2008 and to an SBIR Phase I grant of approximately $110,000
awarded in January 2009.  We expect grant revenues to increase over
the next several quarters as the amount of time and expense incurred in
connection with these grants continues to increase.  The level of
grant revenue that we recognize in any given quarter is dependent upon the level
of resources we devote to grant related work in the period.
 
 Cost
of PCT Products and Services
  The cost
of PCT products and services was $140,243 for the three months ended March 31,
2009 compared to $48,449 for the comparable period in 2008.  This
increase in cost of PCT products and services was due primarily to the increase
in the number of units installed under sale, lease, or rental arrangements
during the period and the corresponding increase in the related royalties on PCT
products.  Costs of PCT products and services as a percentage of
revenue increased to 63.1% for the three months ended March 31, 2009, as
compared to 59.5% for the three months ended March 31, 2008.  The
increase in the cost of PCT products and services as a percentage of revenue was
due primarily to two factors: (a) three of the ten units that we installed
during the first quarter of 2009 were sold to our international distributors at
usual, discounted prices, compared to two units to international distributors in
the same period of 2008, and (b) one of the Barocycler units sold during the
first quarter of 2008 was a collaboration model NEP3229 that had been previously
expensed resulting in a lower cost of PCT products in the prior
year.
 
 The
relationship between the cost of PCT products and services and PCT revenue will
depend greatly on the mix of instruments we sell, the quantity of such
instruments, and the mix of consumable products that we sell in a given
period.
 
 Research
and Development
  Research and development expenditures
were $307,224 in the first quarter of 2009 as compared to $490,931 in the same
period in 2008, a decline of 37%.  This decline in R&D expenses
was primarily due to the significant restructuring and cost-reduction programs
that we initiated in the third and fourth quarters of 2008, including the
termination of seven R&D employees.  The headcount in R&D
during the first quarter of 2009 was three, compared to ten during the same
period in 2008. The
decline in expenses was also due to a significant decrease in the number of
R&D projects being funded by the Company during the first quarter of
2009.
 
 Research
and development expense recognized in the first quarters of 2009 and 2008
included $52,972 and $43,237 of non-cash, stock-based compensation expense,
respectively.  We expect that the level of stock-based compensation
expense in the near future will be higher than the amount recorded during the
first quarter of 2009, due to a grant of stock options at the end of the
quarter.
  18
 
 Selling
and Marketing
  Selling
and marketing expenses decreased to $278,416 for the three months ended March
31, 2009 from $463,161 for the comparable period in 2008, a decline of $184,745
or 40%.  This decline in selling and marketing expense was primarily
due to the significant restructuring and cost-reduction programs that we
initiated in the third and fourth quarters of 2008, including the termination of
four sales directors and one marketing assistant.  The headcount in
selling and marketing during the first quarter of 2009 was four, compared to
eleven during the same period in 2008.  A significant decrease in
advertising, exhibit booth rental, and travel cost expense also contributed to
the reduction in overall selling and marketing expense incurred during the first
quarter of 2009.
 
 We
recorded an allowance for bad debts of $55,600 in the first quarter of
2009.  Due to our continued increase in sales and the number and type
of customers, we concluded that it was appropriate to initiate a bad debt
allowance.
 
 During
the first quarter of 2009 and 2008, selling and marketing expense included
$21,208 and $33,032 of non-cash, stock-based compensation expense,
respectively.  We expect the level of stock-based compensation expense
in the near future will be higher than the amount recorded during the first
quarter of 2009 due to a grant of stock options at the end of the
quarter.
 
 General
and Administrative
  General
and administrative costs totaled $430,790 for the three months ended March 31,
2009 as compared to $501,248 for the comparable period in 2008, a decrease of
$70,458 or 14%.  This decrease in general and administrative expense
was primarily due to the significant restructuring and cost-reduction programs
that we initiated in the third and fourth quarters of 2008.  The
decline in expenses was also due to a significant decrease in investor relations
costs, and compensation savings from the resignation of our Chief Financial
Officer in November 2008.  At this time, the Company is not actively
pursuing a replacement for the CFO.
 
 During
the first quarters of 2009 and 2008, general and administrative expense included
$71,723 and $41,936 of non-cash, stock-based compensation expense,
respectively.  We expect the level of stock-based compensation expense
in the near future will be higher than the amount recorded during the first
quarter of 2009 due to a grant of stock options at the end of the
quarter.
 
 Operating
Loss
 
 Our
operating loss was $849,911 for the three months ended March 31, 2009 as
compared to $1,371,413 for the comparable period in 2008, a decrease of $521,502
or 38%.  During the second half of 2008, we initiated a number of cost
reduction measures, including a comprehensive restructuring program to
significantly reduce costs, centralize core operations, and refocus our business
strategy in specific areas where our products had found significant market
acceptance. The restructuring program included: a reduction in personnel of
twelve full-time employees, reduction in travel and meeting attendance for all
personnel, continued reduction in investor relations activities, decreases in
the base salary of most of our employees and all of our executive officers, a
shutdown of our R&D facility in Rockville, MD, a consolidation of our
R&D activities in Massachusetts, and delay or cancellation of several
research and development and marketing programs.
 
 We
believe that these initiatives will significantly decrease our rate of cash
utilization, from just under $1 million per quarter in the second half of 2008
to an average of approximately $600,000 per quarter during 2009.
 
 Interest
Income
  Interest
income totaled $2,403 for the three months ended March 31, 2009 as compared to
interest income of $30,308 in the prior year period.  The decrease is
due to lower average cash balances and lower yields on these balances during the
first quarter of 2009, as compared to the first quarter of 2008.
  Income
Taxes
  In the
quarter ended March 31, 2009, we recorded a benefit for income taxes of $623,262
due to provisions in the American Recovery and Reinvestment Act of 2009 relating
to net operating loss carry-backs.  The cash is expected to be
received during the second half of 2009.  There was no provision for
an income tax benefit during the same period in 2008.  Aside from the
impact of the passage of this law, we do not expect any additional income tax
benefits relating to carry-backs to prior periods.  If we are
successful in commercializing PCT and in generating operating income, then we
may be able to utilize any net operating losses we may have at the time against
such future operating profits.
  19
 
 Net
Loss
 
 During
the first quarter of 2009, we recorded a net loss of $224,246 or $(0.10) per
share, as compared to $1,341,105 or $(0.61) per share in the first quarter of
2008.  Our net loss in the first quarter of 2009 was lower than the
corresponding net loss of the first quarter of 2008 principally due to the
recognition of an expected federal income tax refund of $623,262 pursuant to the
American Recovery and Reinvestment Act of 2009 as well as the result of
increased revenue and lower operating costs.
 
 LIQUIDITY AND FINANCIAL
CONDITION
 
 As of
March 31, 2009, our working capital position was $3,091,727, the primary
components of which were cash and cash equivalents, accounts receivable,
inventory, prepaid expenses, deposits, and income taxes receivable, partially
offset by accounts payable, accrued employee compensation, and other accrued
expenses.  As of December 31, 2008, our working capital position was
$1,602,556, the primary components of which were cash and cash equivalents,
accounts receivable, inventory, prepaid expenses, and deposits.
 
 During
the second half of 2008, we took a number of cost reduction measures, including
a comprehensive restructuring program to significantly reduce costs, centralize
core operations, and refocus our business strategy in specific areas where our
products had found significant market acceptance. The restructuring program
included: a reduction in personnel of twelve full-time employees, reduction in
travel and meeting attendance for all personnel, continued reduction in investor
relations activities, decreases in the base salary of most of our employees and
all of our executive officers, a shutdown of our R&D facility in Rockville,
MD, a consolidation of our R&D activities in Massachusetts, and the delay or
cancellation of several research and development and marketing
programs.  We believe that these initiatives significantly decreased
our rate of cash utilization, from just under $1 million per quarter during the
second half of 2008 to an expected average of approximately $600,000 per quarter
during 2009.
 
 On
December 19, 2008, we received $200,000 from one of our distributors in the
escrow account for the private placement.  Prior to February 12, 2009,
the distributor requested that the $200,000 be used as payment for anticipated
future purchases of our PCT instrument and consumable products, and not for an
investment in the private placement.  This amount was recorded as
deferred revenue in the first quarter of 2009.  As of March 31, 2009,
$162,800 remained in deferred revenue for future product
purchases.  Three Barocycler units have been shipped against this
advance payment.
 
 We
believe that because of the cost restructuring measures we have undertaken,
together with the $1,805,270 we received in connection with our February 2009
private placement of units (consisting of Series A Convertible Preferred Stock
and warrants), we have sufficient cash resources to fund normal operations into
the second quarter of 2010.  We believe we will need substantial
additional capital to fund our operations beyond the second quarter of
2010.   If we are able to obtain additional capital or otherwise
increase our revenues, we may increase spending in specific research and
development applications and engineering projects and may hire additional sales
personnel or invest in targeted marketing programs.  In the event that
we are unable to obtain financing on acceptable terms, or at all, we may be
required to limit or cease our operations, pursue a plan to sell our operating
assets, or otherwise modify our business strategy, which could materially harm
our future business prospects.
 
 Net cash
used in operations for the three months ended March 31, 2009 was $249,955 as
compared to $1,166,904 for the three months ended March 31, 2008.  The
decrease in cash used in operations in 2009 as compared to 2008 is principally
the result of the estimated federal income tax receivable, increased revenues
and lower operating expenses in 2009.
 
 Net cash
used in investing activities for the three months ended March 31, 2009 was
$47,492 as compared to cash used of $110,762 for the same period in the prior
year.  During the first quarter of 2009, we received and installed
three Barocycler instruments under collaboration or lease
agreements.  Cash used in the three months of 2008 was for the
purchase of furniture and fixtures associated with our move to new corporate
offices, and for Barocycler instruments that we purchased and installed under
collaboration or lease agreements
 
 Net cash
provided by financing activities for the three months ended March 31, 2009 was
$1,567,924.  On February 12, 2009, we completed a private placement,
pursuant to which we sold an aggregate of 156,980 units for a purchase price of
$11.50 per unit (the “Purchase Price”), resulting in gross proceeds to us of
$1,805,270 (the “Private Placement”).  Each unit consists
of  (i) one share of a newly created series of preferred stock,
designated “Series A Convertible Preferred Stock,” par value $0.01 per share
(the “Series A
Convertible Preferred Stock”) convertible into 10 shares of our common
stock, (ii) a warrant to purchase, at the purchaser’s election to be made within
7 days of the closing, either 10 shares of our common stock, at an exercise
price equal to $1.25 per share, with a term expiring 15 months after the date of
closing (“15 Month
Common Stock Warrant”), or one share of Series A Convertible Preferred
Stock at an exercise price equal to $12.50 per share, with a term expiring 15
months after the date of closing (“15 Month Preferred Stock
Warrant”) (all of the purchasers elected the 15 Month Preferred Stock
Warrants); and (iii) a warrant to purchase 10 shares of common stock at an
exercise price equal to $2.00 per share, with a term expiring 30 months after
the date of closing (the “30 Month Common Stock
Warrants”).  The expenses related to the offering totaled
approximately $233,000.
  20
 
 Non-cash
Financing Activity
 
 We
recorded $11,622 for the dividend payable on the Series A Convertible Preferred
Stock from the date that the preferred stock was issued on February 12, 2009
through March 31, 2009.  This expense was recorded against Accumulated
Deficit, a line item on the Consolidated Balance Sheet.  The Company
intends to pay the dividend by issuing shares of unregistered common stock on
June 30, 2009.
 
 COMMITMENTS AND
CONTINGENCIES
  Operating
Leases
 
 Our
corporate offices are currently located at 14 Norfolk Avenue, South Easton,
Massachusetts 02375.  In November 2007, we signed an 18 month lease
agreement commencing in February 2008 pursuant to which we leased approximately
5,500 square feet of office space, with an option for an additional 12
months.  We exercised the renewal option to extend the lease term for
one year to end on July 14, 2010.  We pay approximately $6,500 per
month for the use of these facilities.
 
 Effective
January 1, 2009, we terminated our lease agreement with Scheer Partners and the
Maryland Economic Development Corporation, pursuant to which we leased
laboratory and office space in Rockville, MD.  We paid approximately
$3,300 per month for the use of these facilities through December 31, 2008, and
we have no further obligations under the lease.
 
 Effective
January 31, 2009, we terminated our sub-lease agreement with Proteome Systems,
pursuant to which we leased approximately 650 square feet of laboratory space
plus 100 square feet of office space from Proteome Systems in Woburn,
Massachusetts.  We paid approximately $3,200 per month for the use of
these facilities through January 31, 2009, and we have no further obligations
under the lease.
 
 In
connection with the reduction of staff levels and consolidation of operations in
Rockville, MD and Woburn, MA, the Company moved its research and development
activities within Massachusetts.
 
 Royalty
Commitments
 
 In 1996,
we acquired our initial equity interest in BioSeq, Inc., which at the time was
developing our original pressure cycling technology.  BioSeq, Inc. acquired
its pressure cycling technology from BioMolecular Assays, Inc. (“BMA”) under a
technology transfer and patent assignment agreement.  In 1998, we purchased
all of the remaining outstanding capital stock of BioSeq, Inc., and at such
time, the technology transfer and patent assignment agreement was amended to
require us to pay BioMolecular Assays, Inc. a 5% royalty on sales of
products or services that incorporate or utilize the original pressure cycling
technology that BioSeq, Inc. acquired from BMA.  We are also required to
pay BMA 5% of the proceeds from any sale, transfer, or license of all or any
portion of the original pressure cycling technology.  These payment
obligations terminate in 2016.  During the three months ended March 31,
2009 and 2008, we incurred $8,827 and $3,000 in royalty expense associated with
our obligation to BMA, respectively.
 
 In
connection with our acquisition of BioSeq, Inc., we licensed certain limited
rights to the original pressure cycling technology back to BMA.   This
license is non-exclusive and limits the use of the original pressure cycling
technology by BMA solely for molecular applications in scientific research and
development and in scientific plant research and development.  BMA is
required to pay us a royalty equal to 20% of any license or other fees and
royalties, but not including research support and similar payments, it receives
in connection with any sale, assignment, license or other transfer of any rights
granted to BMA under the license.  BMA must pay us these royalties
until the expiration of the patents held by BioSeq, Inc. in 1998, which we
anticipate will be in 2016.  We have not received any royalty payments from
BMA under this license.
 
 Battelle
Memorial Institute
 
 In
December 2008, we entered into an exclusive patent license agreement with the
Battelle Memorial Institute ("Battelle"). The licensed technology is described
in the patent application filed by Battelle on July 31, 2008 (US serial number
12/183,219). This application includes subject matter related to a method and a
system for improving the analysis of protein samples, including through an
automated, in-line system utilizing pressure and a pre-selected agent to obtain
a digested sample in a significantly shorter period of time than current
methods, while maintaining the integrity of the sample throughout the
preparatory process.  Pursuant to the terms of the agreement, we paid
Battelle a non-refundable initial fee.  In addition to royalty
payments on net sales on “licensed products”, we are obligated to make minimum
royalty payments for each year that we retain the rights outlined in the patent
license agreement. and we are required to have our first commercial sale of the
licensed products within one year following the issuance of the patent covered
by the licensed technology.
  21
 
 Purchase
Commitments
 
 On
September 18, 2008, we submitted a purchase order to Source Scientific, LLC, the
manufacturer of the Company’s PCT Barocycler instrumentation, for 50 Barocycler
NEP2320 units. Pursuant to the terms of the purchase order, we placed a deposit
with Source Scientific, LLC, of approximately $100,000, representing
approximately 25% of the expected total value of the order, upon submission of
the purchase order.  On November 12, 2008, we placed an additional
deposit of approximately $100,000 with Source Scientific, LLC to provide them
with funds required to commence manufacturing of the NEP2320 units
ordered.  The purchase price for the 50 Barocycler NEP2320 units is
based upon a fixed bill of materials.  We were billed for the unpaid
purchase price of each unit at the time each unit was completed and ready for
sale.
 
 As of
December 31, 2008 we had $163,006 on deposit with Source Scientific, LLC for 40
remaining units pursuant to open purchase orders.  In addition, in
December 2008, we put the remaining $203,758 amount of the purchase order in an
escrow account, which funds were to be released to pay the remaining balance due
when units were completed.  The amount held in escrow is included as a
component within the line item Deposits on the Balance Sheet.  As of
March 31, 2009, we had no funds on deposit with Source Scientific, LLC because
the remaining units pursuant to the purchase order were completed and received
by PBI during the first quarter of 2009.
 
 Indemnification
 
 In
connection with our sale of substantially all of the assets of Boston Biomedica,
Inc. (“BBI Core Businesses”) to SeraCare Life Sciences, Inc. in September 2004,
we continue to be exposed to possible indemnification claims in amounts up to
the purchase price of approximately $29 million.  Our indemnification
obligations for breaches of some representations and warranties relating to
compliance with environmental laws extend until September 14, 2009,
representations and warranties relating to tax matters extend for the applicable
statute of limitations period (which varies depending on the nature of claim),
and representations and warranties relating to our due organization,
subsidiaries, authorization to enter into and perform the transactions
contemplated by the Asset Purchase Agreement, and brokers fees, extend
indefinitely.
 
 Severance
and Change of Control Agreements
 
 Each of
our executive officers is entitled to receive a severance payment if terminated
by the Company without cause. The severance benefits would include a payment in
an amount equal to one year of each executive officer’s annualized base salary
compensation plus accrued paid time off. Additionally, each executive officer
will be entitled to receive medical and dental insurance coverage for one year
following the date of termination. The total commitment related to these
agreements in the aggregate is approximately $1.0 million.
  Each of
our executive officers, other than Mr. Richard T. Schumacher, our President and
Chief Executive Officer, is entitled to receive a change of control payment in
an amount equal to one year of such executive officer’s annualized base salary
compensation, accrued paid time off, and medical and dental coverage, in the
event of a change of control of the Company.  In the case of Mr.
Schumacher, this payment would be equal to two years of annualized base salary
compensation, accrued paid time off, and two years of medical and dental
coverage. The total commitment related to these agreements in the aggregate is
approximately $1.3 million.The severance payment is
meant to induce the executive to become an employee of the Company and to remain
in the employ of the Company, in general, and particularly in the occurrence of
a change in control.
  RECENT ACCOUNTING
STANDARDS
 
 On
January 1, 2008, the Company adopted Statement of Financial Accounting Standards
No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 defines fair
value, establishes a framework for measuring the fair value of assets and
liabilities, and expands disclosure requirements regarding the fair value
measurement. SFAS 157 does not expand the use of fair value measurements. This
statement, as issued, is effective for financial statements issued for fiscal
years beginning after November 15, 2007, and interim periods within those
fiscal years. FASB Staff Position (FSP) FAS No. 157-2 was issued in February
2008 and deferred the effective date of SFAS 157 for nonfinancial assets and
liabilities to fiscal years beginning after November 2008. As such, the Company
adopted SFAS 157 as of January 1, 2008 for financial assets and liabilities
only. There was no significant effect on the Company’s financial statements. The
Company does not believe that the adoption of SFAS 157 to non-financial assets
and liabilities will significantly effect its financial
statements.
  22
 
 In
December 2007, the FASB issued SFAS 141 (revised 2007), “BusinessCombinations” (“SFAS
141(R)”) and SFAS No. 160, “Non-controlling Interests in
Consolidated Financial Statements – an amendment of ARB
No. 51” (“SFAS 160”).
 
 SFAS
141(R) significantly changes the accounting for business combinations. Under
SFAS 141(R), an acquiring entity will be required to recognize all the assets
acquired and liabilities assumed in a transaction at the acquisition-date at
fair value with limited exceptions. SFAS 141(R) further changes the accounting
treatment for certain specific items, including:
  -
              Acquisition
      costs will be generally expensed as
incurred;
  -
              Non-controlling
      interests (formerly known as “minority interests” – see SFAS 160
      discussion below) will be valued at fair value at the acquisition
      date;
  -
              Acquired
      contingent liabilities will be recorded at fair value at the acquisition
      date and subsequently measured at either the higher of such amount or the
      amount determined under existing guidance for non-acquired
      contingencies;
  -
              In-process
      research and development will be recorded at fair value as an
      indefinite-lived intangible asset at the acquisition
  date;
  -
              Restructuring
      costs associated with a business combination will be generally expensed
      subsequent to the acquisition date;
and
  -
              Changes
      in deferred tax asset valuation allowances and income tax uncertainties
      after the acquisition date generally will affect income tax
      expense.
  In April
2008, the FASB issued FASB Staff Position (“FSP”) No. FAS 142-3, Determination
of the Useful Life of Intangible Assets (“FSP 142-3”). FSP 142-3 removes the
requirement under Statement of Financial Accounting Standards (SFAS) No. 142,
Goodwill and Other Intangible Assets to consider whether an intangible asset can
be renewed without substantial cost or material modifications to the existing
terms and conditions, and replaces it with a requirement that an entity consider
its own historical experience in renewing similar arrangements, or a
consideration of market participant assumptions in the absence of historical
experience. FSP 142-3 also requires entities to disclose information that
enables users of financial statements to assess the extent to which the expected
future cash flows associated with the asset are affected by the entity’s intent
and/or ability to renew or extend the arrangement. We have adopted FSP 142-3.
The adoption of this statement does not have any impact to our financial
statements.
 
 SFAS 160
establishes new accounting and reporting standards for the non-controlling
interest in a subsidiary and for the deconsolidation of a subsidiary.
Specifically, this statement requires the recognition of non-controlling
interests (minority interests) as equity in the consolidated financial
statements and separate from the parent’s equity. The amount of net income
attributable to non-controlling interests will be included in consolidated net
income on the face of the income statement. SFAS 160 clarifies that changes in a
parent’s ownership interest in a subsidiary that does not result in
deconsolidation are treated as equity transactions if the parent retains its
controlling financial interest. In addition, this statement requires that a
parent recognize a gain or loss in net income when a subsidiary is
deconsolidated. Such gain or loss will be measured using the fair value of the
non-controlling equity investment on the deconsolidation date. SFAS 160 also
includes expanded disclosure requirements regarding the interests of the parent
and its non-controlling interest.
 
 We have
adopted SFAS 160 and the statement does not have a material affect on our
consolidated results of operations and financial condition.
 
 In March
2008, the FASB issued Statement of Financial Accounting Standards No. 161,
“Disclosures about Derivative Instruments and Hedging Activities (“SFAS 161”), –
an amendment of FASB Statement No. 133”, which requires additional disclosures
about the objectives of derivative instruments and hedging activities, the
method of accounting for such instruments under SFAS No. 133 and its related
interpretations, and a tabular disclosure of the effects of such instruments and
related hedged items on our financial position, financial performance, and cash
flows. We adopted SFAS No. 161 and our adoption of SFAS No. 161 did not have a
material impact on our financial statements.
  23
 
 ITEM
4T. 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 of 1934
filings are 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 was
necessarily required to apply its judgment in evaluating the cost-benefit
relationship of possible controls and procedures.
  As of
March 31, 2009, we carried out an evaluation, under the supervision and with the
participation of our management, including our Principal Executive Officer and
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 Principal Executive Officer and 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, and to ensure that
information required to be disclosed in such reports that we file or submit
under the Securities Exchange Act of 1934 is accumulated and communicated to our
management, including our Principal Executive Officer and Principal Financial
Officer, to allow timely decisions regarding required disclosure.
 
 There
have been no changes in our internal controls 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 controls over
financial reporting.
  24
  PART II. OTHER
INFORMATION
 
 ITEM 6. EXHIBITS
  Exhibits
                    
                    
                    
                    Reference31.1
                    
                    Principal
      Executive Officer Certification Pursuant to Item 601(b)(31) of Regulation
      S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
      2002
                    
                    Filed
      herewith31.2
                    
                    Principal
      Financial Officer Certification Pursuant to Item 601(b)(31) of Regulation
      S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
      2002
                    
                    Filed
      herewith32.1
                    
                    Principal
      Executive Officer Certification Pursuant to Item 601(b)(32) of Regulation
      S-K, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002
                    
                    Filed
      herewith32.2
                    
                    Principal
      Financial Officer Certification Pursuant to Item 601(b)(32) of Regulation
      S-K, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002
                    
                    Filed
      herewith
  25
  SIGNATURES
  Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
  PRESSURE
      BIOSCIENCES, INC.Date: May
      15, 2009
                      By:
                      /s/ Richard T.
      SchumacherRichard
      T. Schumacher
                        President
      & Chief Executive Officer
                        (Principal
      Executive Officer, Principal Financial Officer and
                        Principal
      Accounting
Officer)
  26