**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**  **June
      30, 2008**  **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 filero
            Accelerated
                fileroNon-accelerated
                filero
            Smaller
                reporting companyx





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 July 31, 2008
      was 2,195,283







TABLE
      OF
      CONTENTS




PagePART
                I - FINANCIAL INFORMATIONItem
                1. Financial Statements (Unaudited)Consolidated
                Balance Sheets as of June 30, 2008 and December 31, 2007
            
            1Consolidated
                Statements of Operations for the Three Months and Six Months Ended
                June
                30, 2008 and 2007
            
            2Consolidated
                Statements of Comprehensive (Loss) Income for the Three Months and
                Six
                Months Ended June 30, 2008 and 2007
            
            3Consolidated
                Statements of Cash Flows for the Six Months Ended June 30, 2008 and
                2007
            
            4Notes
                to Consolidated Financial Statements
            
            5Item
                2. Management's Discussion and Analysis of Financial Condition and
                Results
                of Operations
            
            15Item
                4T. Controls and Procedures
            
            26PART
                II - OTHER INFORMATIONItem
                6. Exhibits
            
            27









**PART
      I.   FINANCIAL INFORMATION**


**Item
      1. Financial Statements**





**PRESSURE
      BIOSCIENCES, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      BALANCE SHEETS**


**(UNAUDITED)**





**June 30,**
            
            **December 31,****2008**
            
            **2007**ASSETSCURRENT
                ASSETSCash
                and cash equivalents
            
            $
            2,835,771
            
            $
            5,424,486Accounts
                receivable
            
            
            122,958
            
            
            118,471Inventories
            
            
            676,516
            
            
            172,548Deposits
            
            
            15,472
            
            
            553,483Prepaid
                income taxes
            
            
            58,463
            
            
            56,863Income
                tax receivable
            
            
            249,541
            
            
            249,541Prepaid
                expenses and other current assets
            
            
            217,977
            
            
            94,783Total
                current assets
            
            
            4,176,698
            
            
            6,670,175PROPERTY
                AND EQUIPMENT, NET
            
            
            308,926
            
            
            257,797OTHER
                ASSETSIntangible
                assets, net
            
            
            303,974
            
            
            328,290TOTAL
                ASSETS
            
            $
            4,789,598
            
            $
            7,256,262LIABILITIES
                AND STOCKHOLDERS' EQUITYCURRENT
                LIABILITIESAccounts
                payable
            
            $
            244,722
            
            $
            152,729Accrued
                employee compensation
            
            
            326,966
            
            
            377,190Accrued
                professional fees and other expenses
            
            
            213,868
            
            
            186,840Income
                taxes payable
            
            
            6,745
            
            
            4,519Deferred
                revenue
            
            
            10,681
            
            
            15,075Total
                current liabilities
            
            
            802,982
            
            
            736,353LONG
                TERM LIABILITIESDeferred
                revenue
            
            
            5,486
            
            
            6,767TOTAL
                LIABILITIES
            
            
            808,468
            
            
            743,120COMMITMENTS
                AND CONTINGENCIES (Note 5)STOCKHOLDERS'
                EQUITYPreferred
                stock; 1,000,000 shares authorized; 0 outstanding
            
            
            -
            
            
            -Common
                stock, $.01 par value; 20,000,000 shares authorized; 2,195,283 shares
                issued and outstanding on June 30, 2008 and 2,192,175 shares issued
                and
                outstanding on December 31, 2007
            
            
            21,953
            
            
            21,922Additional
                paid-in capital
            
            
            6,664,329
            
            
            6,284,616Retained
                (deficit) earnings
            
            
            (2,705,152
            )
            
            206,604Total
                stockholders' equity
            
            
            3,981,130
            
            
            6,513,142TOTAL
                LIABILITIES AND STOCKHOLDERS' EQUITY
            
            $
            4,789,598
            
            $
            7,256,262





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 Ended**
            
            **For the Six Months Ended****June
                30,**
            
            **June
                30,****2008**
            
            **2007**
            
            **2008**
            
            **2007**REVENUE:PCT
                Products, services, other
            
            $
            117,698
            
            $
            136,355
            
            $
            199,171
            
            $
            174,297Grant
                revenue
            
            
            2,486
            
            
            65,772
            
            
            53,389
            
            
            159,451Total
                revenue
            
            
            120,184
            
            
            202,127
            
            
            252,560
            
            
            333,748COSTS
                AND EXPENSES:Cost
                of PCT products and services
            
            
            88,434
            
            
            57,629
            
            
            136,883
            
            
            89,282Research
                and development
            
            
            461,672
            
            
            538,015
            
            
            952,603
            
            
            999,547Selling
                and marketing
            
            
            521,606
            
            
            350,823
            
            
            984,767
            
            
            607,354General
                and administrative
            
            
            635,672
            
            
            624,462
            
            
            1,136,920
            
            
            1,105,544Total
                operating costs and expenses
            
            
            1,707,384
            
            
            1,570,929
            
            
            3,211,173
            
            
            2,801,727Operating
                loss from continuing operations
            
            
            (1,587,200
            )
            
            (1,368,802
            )
            
            (2,958,613
            )
            
            (2,467,979
            )OTHER
                INCOME:Realized
                gain on securities available for sale
            
            
            -
            
            
            1,301,247
            
            
            -
            
            
            2,028,720Interest
                income
            
            
            16,549
            
            
            80,482
            
            
            46,857
            
            
            152,084Total
                other income
            
            
            16,549
            
            
            1,381,729
            
            
            46,857
            
            
            2,180,804(Loss)
                income from continuing operations before income taxes
            
            
            (1,570,651
            )
            
            12,927
            
            
            (2,911,756
            )
            
            (287,175
            )Income
                tax benefit from continuing operations
            
            
            -
            
            
            3,516
            
            
            -
            
            
            44,035(Loss)
                income from continuing operations
            
            
            (1,570,651
            )
            
            16,443
            
            
            (2,911,756
            )
            
            (243,140
            )DISCONTINUED
                OPERATIONS:Gain
                on sale of net assets related to discontinued operations (net of
                income
                tax of $218,060)
            
            
            -
            
            
            1,534,476
            
            
            -
            
            
            1,155,973Net
                (loss) income
            
            $
            (1,570,651
            )
            $
            1,550,919
            
            $
            (2,911,756
            )
            $
            912,833(Loss)
                income per share from continuing operations - basic
            
            $
            (0.72
            )
            $
            0.01
            
            $
            (1.33
            )
            $
            (0.12
            )Income
                per share from discontinued operations - basic
            
            
            -
            
            
            0.74
            
            
            -
            
            
            0.56Net
                (loss) income per share - basic
            
            $
            (0.72
            )
            $
            0.75
            
            $
            (1.33
            )
            $
            0.44(Loss)
                income per share from continuing operations - diluted
            
            $
            (0.72
            )
            $
            0.01
            
            $
            (1.33
            )
            $
            (0.12
            )Income
                per share from discontinued operations - diluted
            
            
            -
            
            
            0.67
            
            
            -
            
            
            0.56Net
                (loss) income per share - diluted
            
            $
            (0.72
            )
            $
            0.68
            
            $
            (1.33
            )
            $
            0.44Weighted
                average number of shares used to calculate (loss) income per share
                -
                basic
            
            
            2,193,598
            
            
            2,065,425
            
            
            2,192,883
            
            
            2,065,425Weighted
                average number of shares used to calculate (loss) income per share
                -
                diluted
            
            
            2,193,598
            
            
            2,296,930
            
            
            2,192,883
            
            
            2,065,425





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


2


**PRESSURE
      BIOSCIENCES, INC. AND SUBSIDIARIES**


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


(UNAUDITED)


**For the Three Months Ended**
              
              **For the Six Months Ended****June
                  30,**
              
              **June
                  30,****2008**
              
              **2007**
              
              **2008**
              
              **2007**Net
                  (loss) income
              
              $
              (1,570,651
              )
              $
              1,550,919
              
              $
              (2,911,756
              )
              $
              912,833Holding
                  gain
              
              
              -
              
              
              (329,625
              )
              
              -
              
              
              (27,479
              )Reclassification
                  of unrealized gain to realized gain on securities during the
                  period
              
              
              -
              
              
              (1,301,247
              )
              
              -
              
              
              (2,028,720
              )Unrealized
                  loss on marketable securities
              
              
              -
              
              
              (1,630,872
              )
              
              -
              
              
              (2,056,199
              )Income
                  tax benefit related to items of other comprehensive loss
              
              
              -
              
              
              548,413
              
              
              -
              
              
              671,323Total
                  other comprehensive loss, net of taxes
              
              
              -
              
              
              (1,082,459
              )
              
              -
              
              
              (1,384,876
              )Comprehensive
                  (loss) income
              
              $
              (1,570,651
              )
              $
              468,460
              
              $
              (2,911,756
              )
              $
              (472,043
              )





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


3


**PRESSURE
      BIOSCIENCES, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**(UNAUDITED)**





**For the Six Months Ended****June
                30,****2008**
            
            **2007**CASH
                FLOWS FROM OPERATING ACTIVITIES:Net
                (loss) income
            
            $
            (2,911,756
            )
            $
            912,833Less
                gain on sale of discontinued operations
            
            
            -
            
            
            (1,155,973
            )Loss
                from continuing operations
            
            $
            (2,911,756
            )
            $
            (243,140
            )Adjustments
                to reconcile net loss to net cash used in operating
                activities:Depreciation
                and amortization
            
            
            98,079
            
            
            77,933Stock-based
                compensation expense
            
            
            369,994
            
            
            152,593Realized
                gain on sale of marketable securities
            
            
            -
            
            
            (2,028,720
            )Changes
                in operating assets and liabilities:Accounts
                receivable
            
            
            (4,487
            )
            
            (38,152
            )Inventories
            
            
            (503,968
            )
            
            (219,173
            )Deposits
            
            
            538,011
            
            
            (49,700
            )Accounts
                payable
            
            
            91,993
            
            
            176,766Accrued
                employee compensation
            
            
            (50,224
            )
            
            21,215Deferred
                revenue and other accrued expenses
            
            
            21,353
            
            
            (11,065
            )Prepaid
                expenses and other current assets and other current
                liabilities
            
            
            (122,568
            )
            
            (96,426
            )Net
                cash used in operating activities from continuing
                operations
            
            
            (2,473,573
            )
            
            (2,257,869
            )CASH
                FLOWS FROM INVESTING ACTIVITIES:Additions
                to property and equipment
            
            
            (124,892
            )
            
            (87,207
            )Proceeds
                from sale of marketable securities
            
            
            -
            
            
            2,033,397Net
                cash (used in) provided by investing activities from continuing
                operations
            
            
            (124,892
            )
            
            1,946,190CASH
                FLOWS FROM FINANCING ACTIVITIES:Proceeds
                from the issuance of common stock
            
            
            9,750
            
            
            -Net
                cash provided by financing activities from continuing
                operations
            
            
            9,750
            
            
            -CASH
                FLOWS FROM DISCONTINUED OPERATIONS:Cash
                flows from investing activities
            
            
            -
            
            
            1,780,071Net
                cash provided by discontinued operations
            
            
            -
            
            
            1,780,071CHANGE
                IN CASH AND CASH EQUIVALENTS:
            
            
            (2,588,715
            )
            
            1,468,392Cash
                and cash equivalents, beginning of period
            
            
            5,424,486
            
            
            5,335,282Cash
                and cash equivalents, end of period
            
            $
            2,835,771
            
            $
            6,803,674SUPPLEMENTAL
                INFORMATION:Income
                taxes paid
            
            $
            2,790
            
            $
            20,800Income
                taxes received
            
            
            834
            
            
            -





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




4





**PRESSURE
      BIOSCIENCES, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**AS
      OF JUNE 30, 2008**





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





We
      are a
      life sciences company focused on the development and commercialization of a
      novel, enabling, platform technology called pressure cycling technology (“PCT”).
      PCT uses cycles of hydrostatic pressure between ambient and ultra-high levels
      (up to 35,000 psi and greater) to control bio-molecular
      interactions.




Our
      pressure cycling technology uses internally developed instrumentation that
      is
      capable of cycling pressure between ambient and ultra-high levels at controlled
      temperatures to rapidly and repeatedly control the interactions of
      bio-molecules. Our instrument, the Barocycler®, and our internally developed
      consumables product line, which includes PULSE (Pressure Used to Lyse Samples
      for Extraction) Tubes as well as the ProteoSolve–lrs kit for the detergent-free
      extraction of proteins from lipid-rich samples, together make up the PCT Sample
      Preparation System (“PCT SPS”).





We
      have
      experienced negative cash flows from operations with respect to our pressure
      cycling technology business since its inception. As of June 30, 2008, we had
      a
      cash balance of approximately $2.8 million. In July 2008, we implemented a
      number of cost reduction initiatives, including the delay of certain research
      and development projects, 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,
      and
      a reduction in our workforce which included the re-alignment of our sales force
      from seven full time sales directors to three. We have also delayed the hiring
      of new personnel to fill previously vacated positions. We believe that
      implementing such changes to our business plan will allow us to extend our
      existing cash balances into the middle of 2009, without significantly impacting
      our short-term commercialization efforts.





The
      extent to which we increase, or decrease, our operational costs over the coming
      quarters is dependent upon our judgment of the investment required to
      successfully commercialize PCT and our ability to secure additional funding
      through equity or debt financings. If we are unable to increase the number
      of
      installations of PCT Systems and if we are unable to secure additional funding
      through equity or debt financings, we will undertake additional cost reduction
      measures.




**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 and with the
      instructions to the Quarterly Report on Form 10-Q. Accordingly, they do not
      include all of the information and footnotes required by generally accepted
      accounting principles for complete financial statements. In the opinion of
      management, all adjustments (consisting of only normal recurring adjustments)
      considered necessary for a fair presentation have been included. Operating
      results for the three months and six months ended June 30, 2008 are not
      necessarily indicative of the results that may be expected for the year ending
      December 31, 2008. 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,
      2007.




**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, and in our calculation of fair value of stock options awarded.
      We
      base our estimates on historical experience and on various other assumptions
      that we believe to be reasonable under the circumstances, the results of which
      form the basis for making judgments about the carrying values of assets and
      liabilities that are not readily apparent from other sources. Actual results
      could differ from the estimates and assumptions used.





5


**PRESSURE
        BIOSCIENCES, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
        OF JUNE 30, 2008**


*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
      ProteoSolve-lrs kits is recorded upon shipment through a common carrier.
 Shipping costs are included in the costs of sales. Any shipping costs
      billed to customers are recognized as revenue.





In
      accordance with the Financial Accounting Standards Board (“FASB”) Statement of
      Financial Accounting Standards (“SFAS”) No. 13, *“Accounting
      for Leases”* ,
      we
      account for our lease agreements under the operating method. We record revenue
      over the life of the lease term and we record depreciation expense on a
      straight-line basis over the thirty-six month estimated useful life of the
      Barocycler instrument. The depreciation expense associated with assets under
      lease agreement is included in the “Cost of PCT products and services” line item
      in our consolidated statements of operations. 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 that are expensed
      as incurred. Our research activities are performed at our laboratories in
      Woburn, Massachusetts and Rockville, Maryland and in conjunction with the
      collaboration partner sites.  In support of our research and development
      activities we utilize our Barocycler instruments that are capitalized as fixed
      assets and depreciated over their expected useful life.





6


**PRESSURE
        BIOSCIENCES, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
        OF JUNE 30, 2008**


*Inventories*





Inventories
      are valued at the lower of cost or market.  The composition of inventory as
      of June 30, 2008 and December 31, 2007 is as follows:





June
                30,
            
            December
                31,2008
            
            2007Raw
                materials
            
            $
            55,916
            
            $
            28,115Finished
                goods
            
            
            620,600
            
            
            144,433Total
            
            $
            676,516
            
            $
            172,548





Our
      finished goods inventory balance as of June 30, 2008 and December 31, 2007
      included 47 and 8 Barocycler instruments, respectively.





*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, 2007 and we reviewed the analysis as of June 30, 2008. 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,
      2007 and we reviewed the analysis as of June 30, 2008. 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.





7




**PRESSURE
        BIOSCIENCES, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
        OF JUNE 30, 2008**


The
      following tables illustrate the level of concentration as a percentage of total
      revenues during the three and six months ended June 30, 2008 and
      2007:





For the Three Months EndedJune
                30,2008
            
            2007Top
                Five Customers
            
            
            89
            %
            
            97
            %Federal
                Agencies
            
            
            4
            %
            
            66
            %




For the Six Months EndedJune
                30,2008
            
            2007Top
                Five Customers
            
            
            69
            %
            
            88
            %Federal
                Agencies
            
            
            22
            %
            
            60
            %





The
      following table illustrates the level of concentration as a percentage of total
      accounts receivable balance as of June 30, 2008 and December 31, 2007:





June 30,
            
            December 31,2008
            
            2007Top
                Five Customers
            
            
            93
            %
            
            94
            %Federal
                Agencies
            
            
            44
            %
            
            41
            %





*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 in the process
      of
      developing a network of manufacturers and sub-contractors to reduce our reliance
      on any single supplier. Until we develop a broader network of manufacturers
      and
      subcontractors, obtaining alternative sources of supply or manufacturing
      services could involve significant delays and other costs and challenges, and
      may not be available to us on reasonable terms, if at all. The failure of a
      supplier or contract manufacturer to provide sufficient quantities, acceptable
      quality and timely products at an acceptable price, or an interruption of
      supplies from such a supplier could harm our business and prospects.





*Computation
      of Loss per Share*





Basic
      (loss) income per share is computed by dividing (loss) income available to
      common shareholders by the weighted average number of common shares outstanding.
      Diluted (loss) income per share is computed by dividing (loss) income available
      to common shareholders by the weighted average number of common shares
      outstanding plus additional common shares that would have been outstanding
      if
      dilutive potential common shares had been issued. For purposes of this
      calculation, stock options are considered common stock equivalents in periods
      in
      which they have a dilutive effect. Stock options that are anti-dilutive are
      excluded from this calculation. The following table illustrates our computation
      of (loss) income per share for the three months and six months ended June 30,
      2008 and 2007:





For the Three Months Ended
            
            For the Six Months EndedJune 30,
            
            June 30,2008
            
            2007
            
            2008
            
            2007Numerator:Loss
                (income) from continuing operations - basic and diluted
            
            $
            (1,570,651
            )
            $
            16,443
            
            $
            (2,911,756
            )
            $
            (243,140
            )Denominator:Weighted
                average shares outstanding - basic
            
            
            2,193,598
            
            
            2,065,425
            
            
            2,192,883
            
            
            2,065,425Net
                effect of dilutive common stock equivalents-based on treasury stock
                method
                using average market price
            
            
            -
            
            
            231,505
            
            
            -
            
            
            -Weighted
                average shares outstanding - diluted
            
            
            2,193,598
            
            
            2,296,930
            
            
            2,192,883
            
            
            2,065,425(Loss)
                income per share from continuing operations - basic
            
            $
            (0.72
            )
            $
            0.01
            
            $
            (1.33
            )
            $
            (0.12
            )(Loss)
                income per share from continuing operations - diluted
            
            $
            (0.72
            )
            $
            0.01
            
            $
            (1.33
            )
            $
            (0.12
            )Shares
                excluded from calculations
            
            
            145,313
            
            
            -
            
            
            187,970
            
            
            169,076




8


**PRESSURE
        BIOSCIENCES, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
        OF JUNE 30, 2008**


*Accounting
      for Income Taxes*





Effective
      January 1, 2007, we adopted the provisions of FASB Interpretation
      No. 48, “ *Accounting*  *for
      Uncertainty in Income Taxes - an Interpretation of FASB Statement
      No. 109”* (“FIN
      48”). FIN 48 clarifies the accounting for uncertainty in income
      taxes recognized in an enterprise’s financial statements in accordance with
      SFAS No. 109, *“Accounting
      for Income Taxes”* .
      This
      interpretation prescribes a recognition threshold and measurement attribute
      for
      the financial statement recognition and measurement of a tax position taken
      or
      expected to be taken in a tax return. FIN 48 also provides guidance on
      de-recognition of tax benefits, classification on the balance sheet, interest
      and penalties, accounting in interim periods, disclosure, and transition.





We
      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.




*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 $251,789 and $40,838 for the
      three months ended June 30, 2008 and 2007, 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, June 30,2008
            
            2007Cost
                of PCT products and services
            
            $
            -
            
            $
            367Research
                and development
            
            
            53,633
            
            
            14,934Selling
                and marketing
            
            
            42,200
            
            
            3,498General
                and administrative
            
            
            155,956
            
            
            22,039Total
                stock-based compensation expense
            
            $
            251,789
            
            $
            40,838








We
      recognized stock-based compensation expense of $369,994 and $152,593 for the
      six
      months ended June 30, 2008 and 2007, 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 Six Months Ended, June 30,2008
            
            2007Cost
                of PCT products and services
            
            $
            -
            
            $
            2,987Research
                and development
            
            
            96,870
            
            
            64,428Selling
                and marketing
            
            
            75,232
            
            
            19,492General
                and administrative
            
            
            197,892
            
            
            65,686Total
                stock-based compensation expense
            
            $
            369,994
            
            $
            152,593





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 historical rate as our assumption in
      calculating future stock-based compensation expense.





During
      the three months ended June 30, 2008 and 2007, the total fair value of stock
      options awarded was $100,556 and $113,518, respectively. During the six months
      ended June 30, 2008 and 2007, the total fair value of stock options awarded
      was
      $228,108 and $381,322, respectively.





9




**PRESSURE
        BIOSCIENCES, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
        OF JUNE 30, 2008**


As
      of
      June 30, 2008, the total estimated fair value of unvested stock options to
      be
      amortized over their remaining vesting period was $523,772. The non-cash, stock
      based compensation expense associated with the vesting of these options will
      be
      $194,358 in 2008, $234,056 in 2009, $90,750 in 2010 and $4,608 in
      2011.





*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.





*Investment
      in Marketable Securities*





As
      of
      June 30, 2008, we had no investments in marketable securities. During the six
      months ended June 30, 2007, we sold our remaining 513,934 shares of Panacos
      Pharmaceuticals, Inc. to generate a realized gain of $2,028,720, on proceeds
      of
      $2,033,397. During 2007, we accounted for this investment in accordance with
      the
      provisions of SFAS 115 *“Accounting
      for Certain Investments in Debt and Equity Securities”* as
      securities available for sale.





*Advertising*





Advertising
      costs are expensed as incurred. During the three months ended June 30, 2008
      and
      2007, we incurred $19,585 and $15,461, respectively in advertising expense.
      During the six months ended June 30, 2008 and 2007, we incurred $26,102 and
      $15,461, respectively in advertising expense.





*Rent
      Expense*





Rental
      costs are expensed as incurred. During the three months ended June 30, 2008
      and
      2007, we incurred $39,505 and $20,919, respectively in rent expense for the
      use
      of our corporate office and research and development facilities. During the
      six
      months ended June 30, 2008 and 2007, we incurred $71,718 and $41,439,
      respectively in rent expense for the use of our corporate office and research
      and development facilities.





**4)**  **Discontinued
      Operations**




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





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





Upon
      execution of the Consent Agreement we accounted for the total gain on the sale
      of our ownership interests in Source Scientific, LLC as discontinued operations.
      During the three and six months ended June 30, 2007, we recorded a gain on
      sale
      of net assets related to discontinued operations, net of income tax of
      $1,534,476 and $1,155,973, respectively.





10


**PRESSURE
        BIOSCIENCES, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
        OF JUNE 30, 2008**


**5)**  **Commitments
      and Contingencies**





*Operating
      Leases*





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





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





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





*Royalty
      Commitments*





In
      1996,
      we acquired our initial equity interest in BioSeq, Inc., which at the time
      was
      developing our original pressure cycling technology.  BioSeq, Inc. acquired
      its pressure cycling technology from BioMolecular Assays, Inc. under a
      technology transfer and patent assignment agreement.  In 1998, we purchased
      all of the remaining outstanding capital stock of BioSeq, Inc., and at such
      time, the technology transfer and patent assignment agreement was amended to
      require us to pay BioMolecular Assays, Inc. a 5% royalty on our sales of
      products or services that incorporate or utilize the original pressure cycling
      technology that BioSeq, Inc. acquired from BioMolecular Assays, Inc.  We
      are also required to pay BioMolecular Assays, Inc. 5% of the proceeds from
      any
      sale, transfer or license of all or any portion of the original pressure cycling
      technology.  These payment obligations terminate in 2016.  During the
      three months ended June 30, 2008 and 2007, we incurred approximately $5,451
      and
      $6,403, respectively in royalty expense associated with our obligation to BMA
      Laboratories. During the six months ended June 30, 2008 and 2007, we incurred
      approximately $8,451 and $8,503, respectively in royalty expense associated
      with
      our obligation to BMA Laboratories.





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





*Purchase
      Commitments*





We
      have
      taken delivery of all Barocycler instruments previously under open commitments.
      As of June 30, 2008 we have no open purchase commitments to Source Scientific,
      LLC. As of December 31, 2007 we had $379,000 on deposit with Source for 54
      remaining units pursuant to open purchase orders.





*Indemnification*





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





11


**PRESSURE
        BIOSCIENCES, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
        OF JUNE 30, 2008**


*Severance
      and Change of Control Agreements*





Each
      of
      our executive officers, Mr. Schumacher, Mr. Myles, Dr. Ting, Dr. Lazarev, Dr.
      Lawrence, and Mr. Potter, is entitled to receive a severance payment if
      terminated by 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 $1.2 million.




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





**6)**  **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 June 30, 2008 none of these shares have
      been issued.





*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.





*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.  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 June 30, 2008, options to acquire 940,666
      shares were outstanding under the Plan.





12


**PRESSURE
        BIOSCIENCES, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
        OF JUNE 30, 2008**


We
      also
      have 244,000 stock options outstanding under our 1999 Non-qualified Plan and
      6,500 stock options outstanding under our 1994 Incentive Stock Option Plan.
      As
      of June 30, 2008, there were 4,800 shares available for future grant under
      the
      1999 Non-qualified Plan. The 1994 Incentive Stock Option Plan expired;
      therefore, there are no shares available for future grants under this
      plan.




The
      following tables summarize information concerning stock options outstanding
      and
      exercisable:





Weighted
            
            
            
            WeightedAverage
                price
            
            
            
            Average
                priceShares
            
            per
                share
            
            Exercisable
            
            per
                shareBalance
                outstanding, 12/31/2007
            
            
            1,120,500
            
            $
            3.45
            
            
            691,166
            
            $
            3.23Granted
            
            
            87,000
            
            
            4.43Exercised
            
            
            (3,000
            )
            
            3.25Expired
            
            
            -Forfeited
            
            
            (13,334
            )
            
            4.07Balance
                outstanding, 6/30/2008
            
            
            1,191,166
            
            $
            3.52
            
            
            908,166
            
            $
            3.34




Options Outstanding
            
            Options ExercisableWeighted Average
            
            
            
            Weighted AverageRange of Exercise
              Prices
            
            Number of
              Options
            
            Remaining
              Contractual
              Life
            
            Exercise
              Price
            
            Number of
              Options
            
            Remaining
              Contractual
              Life
            
            Exercise
              Price$2.50
                - $2.70
            
            
            159,000
            
            
            4.2
            
            $
            2.64
            
            
            159,000
            
            
            4.2
            
            $
            2.642.71
                - 3.08
            
            
            343,000
            
            
            6.2
            
            
            2.96
            
            
            343,000
            
            
            6.2
            
            
            2.963.09
                - 3.95
            
            
            383,166
            
            
            7.9
            
            
            3.71
            
            
            227,166
            
            
            7.8
            
            
            3.743.96
                - 5.93
            
            
            306,000
            
            
            8.6
            
            
            4.35
            
            
            179,000
            
            
            8.0
            
            
            4.20$2.50
                - $5.93
            
            
            1,191,166
            
            
            7.1
            
            $
            3.52
            
            
            908,166
            
            
            6.6
            
            $
            3.34




The
      aggregate intrinsic value of options outstanding and exercisable as of June
      30,
      2008 and December 31, 2007 is illustrated in the table below:




June 30, 2008
            
            December 31, 2007Stock
                options, outstanding
            
            $
            -
            
            $
            2,162,565Stock
                options, exercisable
            
            
            163,470
            
            
            1,486,007




*Sale
      of Common Stock*





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





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





13


**PRESSURE
        BIOSCIENCES, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
        OF JUNE 30, 2008**


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




14





**ITEM
      2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF
      OPERATION****S**





***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 when needed
                or at
                acceptable terms;-
            our
                belief that we have sufficient liquidity to finance operations at
                the
                current level into mid-2009 due to certain cost reduction initiatives
                we
                have undertaken;-
            our
                plans and expectations with respect to our pressure cycling technology
                (PCT) operations;-
            potential
                growth in the market for our PCT products;-
            market
                acceptance and the potential for commercial success of our PCT
                products;-
            our
                belief that PCT provides a superior solution for sample
                preparation;-
            the
                expected development and success of new product
                offerings;-
            the
                potential applications for PCT;-
            the
                expected benefits and results from our research and development efforts;-
            the
                anticipated impact of the reduction in workforce including the
                re-alignment of our sales force from seven full time sales directors
                to
                three;-
            the
                expected benefits and results from our collaboration
                program;-
            our
                expectation of increased grant revenue during the remainder of 2008
                and
                our expectation of obtaining additional research grants from the
                government in the future;-
            the
                amount of cash necessary to operate our business;-
            the
                availability of net operating losses to offset potential future operating
                income;-
            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 6 of our Annual Report on Form 10-K for the year
      ended
      December 31, 2007, as well as those discussed elsewhere in this Report. We
      qualify all of our forward-looking statements by these cautionary
      statements.





You
      should read this section in combination with the section entitled Management’s
      Discussion and Analysis of Financial Condition and Results of Operations for
      the
      year ended December 31, 2007 included in our Annual Report on Form 10-K for
      the year ended December 31, 2007.




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 internally developed instrumentation that
      is
      capable of cycling pressure between ambient and ultra-high levels at controlled
      temperatures to rapidly and repeatedly control the interactions of
      bio-molecules. Our instrument, the Barocycler®, and our internally developed
      consumables product line, which includes PULSE (Pressure Used to Lyse Samples
      for Extraction) Tubes as well as the ProteoSolve-lrs  kit
      for
      the detergent-free extraction of proteins from lipid-rich samples, together
      make
      up the PCT Sample Preparation System (“PCT SPS”).





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





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


-
            pathogen
                inactivation;


-
            protein
                purification;


-
            control
                of chemical (enzymatic) reactions; and


-
            immunodiagnostics.





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





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





To
      support our current strategy, our primary focus is the execution of our
      commercialization plan for PCT in sample preparation. If we are successful
      commercializing our technology in the sample preparation market, we believe
      that
      our financial results will be positively affected by a combination of the
      revenue from the sale, lease, and rental of the Barocycler instruments, and
      by
      the recurring revenue streams that we hope to realize from the sale of the
      single-use PULSE Tubes, PCT-dependent kits, and  extended
      service contracts on our instrumentation. We believe the recurring revenue
      streams that could be generated from our instruments in the field are a very
      important component of our future financial success. Therefore, we believe
      that
      in the short-term it is more important for us to focus on increasing the number
      of installed Barocyclers in the field than it is for us to record revenue in
      the
      current period. To this end, we have offered our prospective customers the
      opportunity to lease or rent the Barocycler instruments, and in some cases
      we
      have engaged in short-term reagent rental agreements. Under a reagent rental
      agreement we provide the customer with a Barocycler instrument in exchange
      for a
      minimum purchase commitment of consumable products. While these lease, rental
      and reagent rental arrangements do not provide us with the immediate revenue
      of
      an instrument sale, they do serve to expand the utilization of PCT and they
      provide a stream of revenue in the form of rental payments and consumable
      purchases. We define sales, leases, rentals and reagent rentals of Barocycler
      instruments as revenue-generating installations.





We
      also
      derive revenue from Small Business Innovation Research (“SBIR”) grants awarded
      to us by the National Institutes of Health (NIH). In 2006 and 2007, we received
      two SBIR Phase I grants in the aggregate amount of $300,000. These grants have
      funded experiments to demonstrate the feasibility of using pressure cycling
      technology in various applications in the life sciences. We have several SBIR
      Phase I and II grants under review at the present time. In June 2008, we were
      notified that the Company was awarded its first Phase II SBIR Grant from the
      NIH. The grant is for $850,000 to be billed over two years and will help fund
      continuing experiments directed towards the development and commercialization
      of
      novel, automated, and reproducible methods for the extraction of clinically
      important protein biomarkers, sub-cellular molecular complexes, and organelles
      (such as mitochondria) from cells and tissues using the our patented pressure
      cycling technology.





In
      furtherance of our commercialization strategy, throughout 2007 and early 2008
      we
      increased spending in all major areas of our business. Although we continued
      to
      receive very positive feedback from our prospective customers our
      commercialization plans had not developed as quickly as we had hoped and our
      revenues in the first half of 2008 failed to meet our internal expectations.
      The
      underperformance of our sales, relative to our internal plans, combined with
      our
      view of the condition of the capital markets prompted us to implement a number
      of cost reduction initiatives, including the delay of certain research and
      development projects, 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,
      and
      a reduction in our workforce which included the re-alignment of our domestic
      sales force from seven full time sales directors to three. We have also delayed
      the hiring of new personnel to fill previously vacated positions. We believe
      that implementing such changes to our business plan will allow us to extend
      our
      existing cash balances into the middle of 2009, without significantly impacting
      our short-term commercialization efforts.





16




The
      extent to which we increase, or decrease, our operational costs over the coming
      quarters is dependent upon our judgment of the investment required to
      successfully commercialize PCT and our ability to secure additional funding
      through equity or debt financings. If we are unable to increase the number
      of
      installations of PCT Systems and if we are unable to secure additional funding
      through equity or debt financings, we will undertake additional cost reduction
      measures.





In
      June
      2008, we engaged Emerging Growth Equities, Ltd. (“EGE”), an investment banking
      firm located in King of Prussia, PA., to assist us in identifying potential
      and
      suitable investors in a private placement of the Company’s securities. The
      engagement of EGE contemplates a private placement of the Company’s securities
      exempt from the registration requirements under Regulation D promulgated under
      the Securities Act of 1933, as amended of up to $8,000,000, or more at the
      Company’s discretion. We can provide no assurance that any such equity or debt
      offerings will occur, or that additional financing will be available to us
      on
      acceptable or affordable terms.




17


**RESULTS
      OF OPERATIONS**




**Three
      Months Ended June 30, 2008 and 2007**




*Revenue*




We
      recognized revenue of $120,184, for the three months ended June 30, 2008, as
      compared to $202,127 for the same period in the prior year.





*PCT
      Products, Services, Other* .
      Revenue
      from the sale of PCT products and services was $117,698 for the three months
      ended June 30, 2008 as compared to $136,355 for the same period in the prior
      year. During the second quarter of 2008 we completed the installation of seven
      Barocycler instruments at customer locations, as compared to four in the same
      period of 2007. The decrease in revenue, despite an increase in the number
      of
      installations was due in part to a shift in product mix; three of the seven
      installations in the second quarter of 2008 were sales of the less expensive
      NEP2320 whereas all four installations in the second quarter of 2007 were sales
      of our more expensive NEP3229. Also contributing to this decrease was the fact
      that two of our seven installations were made pursuant to short-term rental
      agreements, which generally range from three to twelve months in length. These
      agreements have a minimal impact on current period revenues but provide a
      revenue stream over the life of the respective agreements in the form of rental
      payments and purchases of our consumable products.





We
      expect
      the number of units installed will continue to increase in future periods as
      we
      continue to commercialize our technology. We also expect that some portion
      of
      future installations will 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.





*Grant
      revenue* .
      During
      the three months ended June 30, 2008 and 2007, we recorded $2,486 and $65,772
      of
      grant revenue, respectively, in connection with our two SBIR Phase I grants.
      This decrease in grant revenue during the second quarter of 2008 as compared
      to
      the same period in 2007 was due to the completion of billing of our two Phase
      I
      grants. We expect grant revenues to increase in the remaining quarters of 2008
      as the work on our recently awarded SBIR Phase II grant will begin in the third
      quarter and continue at varying levels for the next six to eight quarters.
      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 $88,434 for the three months ended June 30,
      2008 compared to $57,629 for the comparable period in 2007. This increase in
      cost of PCT products and services despite a decrease in revenue is due to an
      adjustment of approximately $40,000 to reduce our estimated warranty liability
      during 2007. Aside from this adjustment our cost of PCT products and services,
      as a percentage of PCT revenue in the second quarter of 2008 is consistent
      with
      the same period in 2007.





**** The
      relationship between our 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 decreased to $461,672 in the second quarter of
      2008
      as compared to $538,015 in the same period in 2007. During the second quarter
      of
      2008 we delayed certain engineering initiatives to reduce our overall operating
      expense. During the same period in 2007 we incurred substantial costs related
      to
      the development of prototype NEP2320 instrumentation.





Research
      and development expense recognized in the second quarter of 2008 and 2007
      included $53,633 and $14,934, respectively, of non-cash, stock-based
      compensation expense. We expect the level of stock-based compensation expense
      for the remaining quarters of 2008 to be similar to the amount recorded during
      the current quarter.





We
      plan
      to maintain our current headcount in research and development until we secure
      additional funding through equity or debt financings. We believe that with
      our
      existing staff, we can continue to pursue what we believe to be our most
      important research and development programs.





18




*Selling
      and Marketing*




Selling
      and marketing expenses increased to $521,606 for the three months ended June
      30,
      2008 from $350,823 for the comparable period in 2007. This increase in selling
      and marketing expense was primarily the result of our increase in the size
      of
      our domestic sales force, the addition of a Vice President of Sales in February
      2008, and the continued emphasis on strategic marketing programs.





During
      the second quarter of 2008 and 2007, selling and marketing expense included
      $42,200 and $3,498, respectively, of non-cash, stock-based compensation expense.
      We expect the level of stock-based compensation expense for the remaining
      quarters of 2008 to be similar to the amount recorded during the current
      quarter.




We
      expect
      selling and marketing expense to decrease in the third and fourth quarter,
      until
      we secure additional funding through equity or debt financings. As part of
      our
      cost reduction measures we re-aligned our domestic sales force from seven full
      time sales directors to three. We believe this re-alignment, and our other
      cost
      reduction measures, provides us with a manageable balance between the need
      to
      conserve our cash resources and the need to support our short-term
      commercialization plans.




*General
      and Administrative*




General
      and administrative costs totaled $635,672 for the three months ended June 30,
      2008, as compared to $624,462 for the comparable period in 2007. The increase
      is
      due to a charge of $100,556 of non-cash stock-based compensation expense in
      connection with the grant of non-qualified, fully-vested stock options to
      purchase 10,000 shares of our common stock to each of our four independent
      directors in April 2008. Aside from this non-cash charge our general and
      administrative spending decreased due to an overall decrease in investor
      relations spending, Sarbanes-Oxley compliance costs, and other cost reduction
      efforts.





We
      expect
      that general and administrative spending, excluding stock-based compensation
      expense, in the remaining quarters of 2008 will approximate the level of
      spending incurred during the second quarter.





*Operating
      Loss from Continuing Operations*





Our
      operating loss from continuing operations was $1,587,200 for the three months
      ended June 30, 2008 as compared to an operating loss from continuing operations
      of $1,368,802 for the comparable period in 2007. The operating loss from
      continuing operations for the three months ended June 30, 2008 included $251,789
      of non-cash, stock-based compensation expense as compared to $40,838 in the
      comparable period in 2007. Aside from non-cash, stock-based compensation
      expense, our operating loss during the second quarter of 2008 was approximately
      the same as the operating loss during the second quarter of 2007. These results
      are partially due to our cost reduction measures implemented during the second
      quarter of 2008, such as the delaying several research and development projects
      and delaying the hiring of new personnel to fill previously vacated positions,
      partially offset by increased spending in sales and marketing and a decrease
      in
      gross profit due to the overall decrease in grant related revenue.





The
      extent to which we increase, or decrease, our operational costs over the coming
      quarters is dependent upon our judgment of the investment required to
      successfully commercialize PCT and our ability to secure additional funding
      through equity or debt financings. We expect that the gross profit from
      increasing revenues will partially mitigate the impact of our increased
      spending, if any, on our overall operating loss.





*Realized
      gain of sale on securities held for sale*





In
      the
      three months ended June 30, 2007 we completed the liquidation of our investment
      in Panacos Pharmaceuticals and realized a gain on securities sold of
      $1,301,247.





*Interest
      Income*




Interest
      income totaled $16,549 for the three months ended June 30, 2008 as compared
      to
      interest income of $80,482 in the prior year period. The decrease is due to
      lower average cash balances and lower yields on these balances during 2008,
      as
      compared to 2007.




*Income
      Taxes from Continuing Operations*




In
      the
      quarter ended June 30, 2008, we did not record a benefit for income taxes from
      continuing operations. During the same period in 2007, we recorded a benefit
      for
      income taxes of $3,516.





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





19




*Gain
      on Assets Related to Discontinued Operations*





During
      the second quarter of 2008 there were no charges for discontinued operations.
      During the first half of 2007, we realized a gain on the sale of Source
      Scientific, LLC of $1,155,973. This gain is comprised of the $378,503 charge
      that we recorded in the first quarter of 2007 under the provisions of Staff
      Accounting Bulletin (“SAB”) Topic 5E, *“Accounting
      for Divestiture of a Subsidiary or Other Business Operation* (“SAB
      Topic 5E”) and the gain of $1,534,476, net of income taxes of $218,060, that we
      recorded during the second quarter of 2007, the period in which we completed
      the
      sale. We recorded this gain in connection with the receipt on May 29, 2007
      of
      $1,780,071 from Mr. Richard W. Henson and Mr. Bruce A. Sargeant, the principals
      of Source Scientific, LLC, as full payment for their purchase of our remaining
      interest in that business.





Upon
      completion of the transaction, we accounted for the total gain on the sale
      of
      our ownership interests in Source Scientific, LLC as discontinued operations.
      The charge that we recorded during the first quarter of 2007, under the
      provisions of SAB Topic 5E, was reclassified as discontinued operations to
      reflect this change.





*Net
      loss*





During
      the second quarter of 2008 we recorded a net loss of $1,570,651 as compared
      to
      net income of $1,550,919 in the second quarter of 2007. While our overall level
      of operating costs in the second quarter of 2008 was similar to the level of
      spending in the second quarter of 2007, these costs were not offset by the
      gain
      on sale of marketable securities, gain on sale of assets from discontinued
      operations, and the benefit from income taxes, during 2008, as was the case
      in
      2007. We expect our net loss for the full year of 2008 to be higher than the
      net
      loss reported for the full year in 2007 .





**Six
      Months Ended June 30, 2008 and 2007**




*Revenue*




We
      recognized revenue of $252,560, for the six months ended June 30, 2008, as
      compared to $333,748 for the same period in the prior year.





*PCT
      Products, Services, Other* .
      Revenue
      from the sale of PCT products and services was $199,171 for the six months
      ended
      June 30, 2008 as compared to $174,297 for the same period in the prior year.
      During the first half of 2008 we completed the installation of fourteen
      Barocycler instruments at customer locations, as compared to five in the same
      period of 2007. The modest increase in revenue, despite a significant increase
      in the number of installations was due in part to a shift in product mix; four
      of the fourteen installations in the first half of 2008 were sales of the less
      expensive NEP2320 whereas all five installations in the first half of 2007
      were
      sales of the more expensive NEP3229. Also contributing to this trend was
      the fact that six of our fourteen installations in the first half of 2008 were
      made pursuant to short-term rental agreements, which generally range from three
      to twelve months in length. These agreements have a minimal impact on current
      period revenues but provide a revenue stream over the life of the respective
      agreements in the form of rental payments and purchases of our consumable
      products.





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





*Grant
      revenue* .
      During
      the six months ended June 30, 2008 and 2007, we recorded $53,389 and $159,451
      of
      grant revenue, respectively, in connection with our two SBIR Phase I grants.
      This decrease in grant revenue was due to a shift in resources from grant
      related activities to other research and development projects when the remaining
      Phase I grant was completed during the second quarter of 2008. We expect grant
      revenues to increase in the remaining quarters of 2008 as the work on our
      recently awarded SBIR Phase II grant will begin in the third quarter and
      continue, at varying levels, for the next six to eight quarters. 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 $136,883 for the six months ended June 30,
      2008
      compared to $89,282 for the comparable period in 2007. This increase in cost
      of
      PCT products and services was primarily due to an adjustment of approximately
      $40,000 to reduce our estimated warranty liability during 2007. Aside from
      this
      adjustment our cost of PCT products and services, as a percentage of PCT revenue
      decreased in the first half of 2008 as compared to the first half of 2007.
      This
      increase in our gross margin during the first half of 2008 as compared to the
      first half of 2007 is due to a favorable shift in the mix of the products that
      we sold. During the first half of 2008 four of the fourteen instruments that
      we
      installed were NEP2320 instruments that were sold during the period. Although
      the NEP2320 is a less expensive alternative for our customers it typically
      yields a higher gross margin when we sell at, or near, list price. We did not
      sell any NEP2320’s during the first half of 2007. Revenues from the sale of
      consumable products, such as PULSE Tubes and ProteoSolve kits also increased
      in
      the first six months of 2008 as compared to the same period in 2007. Our
      consumable products typically yield higher gross margins than our Barocycler
      instruments.





20




The
      relationship between our cost of PCT products and services and PCT revenue
      will
      continue to 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 decreased to $952,603 in the first half of 2008
      as
      compared to $999,547 in the same period in 2007. Research and development costs
      in 2007 included significant spending associated with the design and development
      of the Barocycler NEP2320. The decrease was partially offset by increases in
      compensation-related costs due to the planned expansion of our research and
      development capabilities in the second half of 2007 and early 2008.





Research
      and development expense recognized in the first half of 2008 and 2007 included
      $96,870 and $64,428, respectively, of non-cash, stock-based compensation
      expense. We expect the level of stock-based compensation expense for the
      remaining quarters of 2008 to be similar to the amount recorded in the second
      quarter.





We
      plan
      to maintain our current headcount in research and development until we secure
      additional funding through equity or debt financings. We believe that with
      our
      existing staff, we can continue to pursue what we believe to be our most
      important research and development programs.





*Selling
      and Marketing*




Selling
      and marketing expenses increased to $984,767 for the six months ended June
      30,
      2008 from $607,354 for the comparable period in 2007. This increase in selling
      and marketing expense was primarily the result of our increase in the size
      of
      our domestic sales force, the addition of a Vice President of Sales in February
      2008 and the continued emphasis on strategic marketing programs.





During
      the first half of 2008 and 2007, selling and marketing expense included $75,232
      and $19,492, respectively, of non-cash, stock-based compensation expense. We
      expect the level of stock-based compensation expense for the remaining quarters
      of 2008 to be similar to the amount recorded in the second quarter.




We
      expect
      selling and marketing expense to decrease in the third and fourth quarter,
      until
      we secure additional funding through equity or debt financings. As part of
      our
      cost reduction measures we re-aligned our domestic sales force from seven full
      time sales directors to three. We believe this re-alignment, and our other
      cost
      reduction measures, provides us with a manageable balance between the need
      to
      conserve our cash resources and the need to support our short-term
      commercialization plans.




*General
      and Administrative*




General
      and administrative costs totaled $1,136,920 for the six months ended June 30,
      2008, as compared to $1,105,544 for the comparable period in 2007. The increase
      is primarily due to the fact that stock-based compensation expense recorded
      in
      general and administrative costs increased to $197,892 in the first half of
      2008, as compared to $65,686 in the first half of 2007. Of this increase in
      stock-based compensation, $100,556 was recorded in connection with the grant
      of
      non-qualified, fully-vested stock options to purchase 10,000 shares of our
      common stock to each of our four independent directors in April 2008. Aside
      from
      these non-cash charges our general and administrative spending decreased due
      to
      an overall decrease in investor relations spending, Sarbanes-Oxley compliance
      costs and other cost reduction efforts.





We
      expect
      that general and administrative spending, excluding stock-based compensation
      expense, in the remaining quarters of 2008 to approximate the level of spending
      in incurred during the second quarter.





*Operating
      Loss from Continuing Operations*





Our
      operating loss from continuing operations was $2,958,613 for the six months
      ended June 30, 2008 as compared to $2,467,979 for the comparable period in
      2007.
      The operating loss from continuing operations for the six months ended June
      30,
      2008 included $369,994 of non-cash, stock-based compensation expense as compared
      to $152,593 in the comparable period in 2007. The remaining increase in
      operating loss from continuing operations was primarily the result of the
      increases in activities within our selling and marketing function and a decrease
      in gross profit due to the decrease in grant revenue recorded in the first
      half
      of 2008 as compared to the first half of 2007.





21




The
      extent to which we increase, or decrease, our operational costs over the coming
      quarters is dependent upon our judgment of the investment required to
      successfully commercialize PCT and our ability to secure additional funding
      through equity or debt financings. We expect that the gross profit from
      increasing revenues will partially mitigate the impact of our increased
      spending, if any, on our overall operating loss.





*Realized
      gain of sale on securities held for sale*





In
      the
      six months ended June 30, 2007 we completed the liquidation of our investment
      in
      Panacos Pharmaceuticals and realized a gain on securities sold of
      $2,028,720.





*Interest
      Income*




Interest
      income totaled $46,857 for the six months ended June 30, 2008 as compared to
      interest income of $152,084 in the prior year period. The decrease is due to
      lower average cash balances and lower yields on these balances during 2008,
      as
      compared to 2007.




*Income
      Taxes from Continuing Operations*




In
      the
      six months ended June 30, 2008, we did not record a benefit for income taxes
      from continuing operations. During the same period in 2007, we recorded a
      benefit for income taxes of $44,035.





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





*Gain
      on Assets Related to Discontinued Operations*





During
      the first half of 2008 there were no charges for discontinued operations. During
      the first half of 2007, we realized a gain on the sale of Source Scientific,
      LLC
      of $1,155,973. This gain is comprised of the $378,503 charge that we recorded
      in
      the first quarter of 2007 under the provisions of Staff Accounting Bulletin
      (“SAB”) Topic 5E, *“Accounting
      for Divestiture of a Subsidiary or Other Business Operation* (“SAB
      Topic 5E”) and the gain of $1,534,476, net of income taxes of $218,060, that we
      recorded during the second quarter of 2007, the period in which we completed
      the
      sale. We recorded this gain in connection with the receipt on May 29, 2007
      of
      $1,780,071 from Mr. Richard W. Henson and Mr. Bruce A. Sargeant, the principals
      of Source Scientific, LLC, as full payment for their purchase of our remaining
      interest in that business.





Upon
      completion of the transaction, we accounted for the total gain on the sale
      of
      our ownership interests in Source Scientific, LLC as discontinued operations.
      The charge that we recorded during the first quarter of 2007, under the
      provisions of SAB Topic 5E, was reclassified as discontinued operations to
      reflect this change.





*Net
      loss*





During
      the first half of 2008 we recorded a net loss of $2,911,756 as compared to
      net
      income of $912,833 in the first half of 2007. The net loss is the result of
      increased operating loss from continuing operations in the first half of 2008
      relative to the same period in 2007. Additionally, although we expect our
      revenue to increase, our net loss in 2008 will not be mitigated by the gain
      on
      sale of marketable securities, gain on sale of assets from discontinued
      operations, and the benefit from income taxes, as was the case in 2007. We
      therefore expect our net loss for the full year of 2008 to be higher than the
      net loss reported for the full year in 2007.





**LIQUIDITY
      AND FINANCIAL CONDITION**





As
      of
      June 30, 2008, our working capital position was $3,373,716, the primary
      components of which were cash and cash equivalents, accounts receivable,
      inventory, prepaid expenses, deposits, and income taxes receivable. Our working
      capital balance was partially offset by accounts payable, accrued employee
      compensation, and other accrued expenses. As of December 31, 2007, our working
      capital balance was $5,933,822, the primary components of which were cash and
      cash equivalents, income taxes receivable, prepaid expenses, and deposits.
      We
      expect to continue to fund our operations from our working capital balance.





In
      the
      July 2008, we implemented a number of cost reduction initiatives, including
      the
      delay of certain research and development projects, 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, and a reduction in our workforce which includes the
      re-alignment of our sales force from seven full time sales directors to three.
      We have also delayed the hiring of new personnel to fill previously vacated
      positions. We believe that implementing such changes to our business plan will
      allow us to extend our existing cash balances into the middle of 2009, without
      significantly impacting our short-term commercialization efforts.





22




The
      extent to which we increase, or decrease, our operational costs over the coming
      quarters is dependent upon our judgment of the investment required to
      successfully commercialize PCT and our ability to secure additional funding
      through equity or debt financings. If we are unable to increase the number
      of
      installations of PCT Systems and if we are unable to secure additional funding
      through equity or debt financings, we will undertake additional cost reduction
      measures.





In
      June
      2008, we engaged Emerging Growth Equities, Ltd. (“EGE”), an investment banking
      firm, to assist us in raising equity financing to support our research and
      development activities, commercialization efforts, working capital requirements,
      and general corporate purposes. The engagement of EGE contemplates a private
      placement of our securities exempt from the registration requirements under
      Regulation D promulgated under the Securities Act of 1933, as amended of up
      to
      $8,000,000, or more at our discretion (the “Financing”). We have agreed to pay
      EGE a cash fee of 8% of the gross proceeds from the Financing and to issue
      EGE
      warrants to purchase 8% of the number of securities issued in the Financing.
      The
      warrants will have a five year term and an exercise price equal to the price
      of
      the securities issued in the Financing. However, EGE will receive a lower fee
      of
      3% of the gross proceeds from the Financing and warrants to purchase 3% of
      the
      number of securities issued in the Financing with respect to specifically
      identified potential investors with whom we have a prior relationship. EGE
      is
      also entitled to a retainer of $7,500 per month for three months.





Either
      EGE or we may terminate the engagement in general with prior written notice.
      If
      during the 12 month period following termination of the engagement we sell
      securities to any investor introduced to us by EGE, we will pay a declining
      fee
      to EGE based upon the number of months elapsed since the date of termination,
      commencing with a cash fee of 8% of the gross proceeds received from such
      investors, plus warrants to purchase 8% of the number of securities issued
      to
      such investors in the first month following termination of the engagement and
      with such fees being reduced by 1/12 for each month following such termination.
      We have also agreed to customary indemnification of EGE in connection with
      the
      Financing. Notwithstanding our engagement of EGE, we can provide no assurance
      that any such equity offerings will occur, or that additional financing will
      be
      available to us of acceptable or affordable terms.




Net
      cash
      used in continuing operations for the six months ended June 30, 2008 was
      $2,473,573 as compared to net cash used in continuing operations of $2,257,869
      for the six months ended June 30, 2007.





Net
      cash
      used in investing activities for the six months ended June 30, 2008 was $124,892
      as compared to cash provided of $1,946,190 for the same period in the prior
      year. The cash used in the first half of 2008 was the result of the purchase
      of
      furniture and fixtures associated with our move to new corporate offices and
      Barocycler instruments that we purchased and installed under collaboration
      or
      lease agreements. The cash generated in the same period in 2007 was from the
      liquidation of shares of Panacos common stock, partially offset by purchases
      of
      fixed assets.





Net
      cash
      provided by financing activities for the six months ended June 30, 2008 was
      due
      to an exercise of employee stock options to purchase 3,000 shares of our common
      stock.





Net
      cash
      provided by discontinued operations during 2007 of $1,780,071 was due to the
      completion of the divestiture of Source Scientific, LLC.





**COMMITMENTS
      AND CONTINGENCIES**




*Operating
      Leases*





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





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





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





23




*Royalty
      Commitments*





In
      1996,
      we acquired our initial equity interest in BioSeq, Inc., which at the time
      was
      developing our original pressure cycling technology.  BioSeq, Inc. acquired
      its pressure cycling technology from BioMolecular Assays, Inc. under a
      technology transfer and patent assignment agreement.  In 1998, we purchased
      all of the remaining outstanding capital stock of BioSeq, Inc., and at such
      time, the technology transfer and patent assignment agreement was amended to
      require us to pay BioMolecular Assays, Inc. a 5% royalty on our sales of
      products or services that incorporate or utilize the original pressure cycling
      technology that BioSeq, Inc. acquired from BioMolecular Assays, Inc.  We
      are also required to pay BioMolecular Assays, Inc. 5% of the proceeds from
      any
      sale, transfer or license of all or any portion of the original pressure cycling
      technology.  These payment obligations terminate in 2016.  During the
      three months ended June 30, 2008 and 2007, we incurred $5,451 and $6,403,
      respectively in royalty expense associated with our obligation to BMA
      Laboratories. During the six months ended June 30, 2008 and 2007, we incurred
      approximately $8,451 and $8,503, respectively in royalty expense associated
      with
      our obligation to BMA Laboratories.





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





*Purchase
      Commitments*





We
      have
      taken delivery of all Barocycler instruments previously under open commitments.
      As of June 30, 2008 we have no open purchase commitments to Source Scientific,
      LLC. As of December 31, 2007 we had $379,000 on deposit with Source for 54
      remaining units pursuant to open purchase orders.





*Indemnification*





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





*Severance
      and Change of Control Agreements*




Each
      of
      our executive officers, Mr. Schumacher, Mr. Myles, Dr. Ting, Dr. Lazarev, Dr.
      Lawrence, and Mr. Potter, is entitled to receive a severance payment if
      terminated by 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 $1.2 million.




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




**RECENT
      ACCOUNTING STANDARDS**




In
      September 2006, the FASB issued 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. As
      of June 30, 2008, the Company’s financial assets subject to SFAS 157 consisted
      of held to maturity investments in marketable securities and investments in
      non-publicly traded companies; financial liabilities consisted of derivatives
      for forward contracts. The Company determined fair value for the investments
      in
      marketable securities and the derivative liabilities based on quoted market
      prices in active markets (i.e., Level 1 as defined under SFAS 157); fair value
      for investments in non-publicly traded companies was based on third party
      valuation models (i.e., Level 2 as defined under SFAS 157). The Company does
      not
      believe that the adoption of SFAS 157 to non-financial assets and liabilities
      will significantly effect its financial statements.





24




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





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





-
            Acquisition
                costs will be generally expensed as incurred;




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




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




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




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




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





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





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





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




25




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




As
      of
      June 30, 2008, we carried out an evaluation, under the supervision and with
      the
      participation of our management, including our President and Chief Executive
      Officer (Principal Executive Officer) and Chief Financial Officer (Principal
      Financial Officer) of the effectiveness of the design and operation of our
      disclosure controls and procedures, as defined in Rules 13a-15(e) and
      15d-15(e) under the Securities Exchange Act of 1934. Based upon that evaluation,
      our President and Chief Executive Officer (Principal Executive Officer) and
      Chief Financial Officer (Principal Financial Officer) concluded that our
      disclosure controls and procedures are effective in enabling us to record,
      process, summarize, and report information required to be included in our
      periodic SEC filings within the required time period 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 President and Chief Executive Officer (Principal
      Executive Officer) and Chief Financial Officer (Principal Financial Officer)
      to
      allow timely decisions regarding required disclosure.





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




26





**PART
      II. OTHER INFORMATION**





**ITEM
      6. EXHIBITS**





**Exhibits**
            
            
            **Reference**31.1
            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




27




**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: August
                14, 2008
            By:
            */s/**Richard
                T. Schumacher*Richard
                T. Schumacher
              President
                & Chief Executive Officer
              (Principal
                Executive Officer)




Date:
                August 14, 2008
            By:
            */s/ Edward
                H. Myles*Edward
                H. Myles
              Senior
                Vice President of Finance & Chief Financial Officer and
                Treasurer
              (Principal
                Financial and Accounting Officer)




28