Summary of PRESSURE BIOSCIENCES INC

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

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

- our ability to raise additional equity or debt financing on acceptable terms, if at all;
- our belief that we have sufficient liquidity to finance our current operations through the end of the first quarter of 2009 due to certain cost reduction initiatives we have undertaken;
- our need to take additional cost reduction measures, cease operations or sell our operating assets, if we are unable to obtain additional financing in the near-term;
- the amount of cash necessary to operate our business;
- our plans and expectations with respect to our pressure cycling technology (PCT) operations, including our expected amount of research and development, selling and marketing and general and administrative expense;
- the anticipated timing of commencement and completion of our recently placed purchase order for 50 Barocycler NEP2320 units;
- potential applications and growth for our PCT products;
- market acceptance and the potential for commercial success of our PCT products;
- the expected development and success of new product offerings;
- the expected benefits and results from our research and development efforts;
- the expected benefits and results from our collaboration program;
- the anticipated uses of grant revenue and our expectation of increased grant revenue in future periods;
- 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, including the following:

If we fail to obtain substantial additional capital, we may not be able to continue our business.

Our business will be harmed if we are unable to secure substantial additional capital to fund our current operations beyond the first quarter of 2009. While we are in discussions with potential investors, to date we have been unable to secure additional equity or debt financing on acceptable terms. If we remain unable to secure additional financing in the near-term, we expect to implement a number of additional cost reduction initiatives, such as further reductions in the cost of our workforce and the discontinuation of a number of business initiatives to further reduce our rate of cash utilization and extend our existing cash balances. We believe that these additional cost reduction initiatives, if undertaken, will provide us with additional time to continue our pursuit of additional funding sources and also strategic alternatives. If adequate funds are not available to us on satisfactory terms, we will be required to limit or cease our operations, or otherwise modify our business strategy, which could materially harm our future business prospects. If we are able to obtain additional funds by selling any of our equity securities, the percentage ownership of our stockholders will be reduced, stockholders may experience substantial dilution, the price of our common stock may decline, or the equity securities issued may have rights, preferences or privileges senior to the common stock.

Our actual results and performance, including our ability to raise additional capital, may be adversely affected by current economic conditions.

Our actual results and performance could be adversely affected by the current economic conditions in the global economy, which pose a risk to the overall demand for our products from our customers who may elect to defer or cancel purchases of our products in response to tighter credit markets, negative financial news and general uncertainty in the economy. In addition, our ability to obtain additional financing, on acceptable terms, if at all, may be adversely affected by the crisis in the credit markets and the uncertainty in the current economic climate.

We qualify all of our forward-looking statements by these cautionary statements. You should read this section in combination with the section entitled Management's Discussion and Analysis of Financial Condition and Results of Operations for the year ended December 31, 2007 included in our Annual Report on Form 10-K for the year ended December 31, 2007.

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 application specific kits, which include consumable products and reagents, 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). Since we began our operations as Pressure BioSciences, we have been awarded two SBIR Phase I grants in the aggregate amount of $300,000, and one SBIR Phase II grant, in the amount of $850,000. 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. Our $850,000 SBIR Phase II grant was awarded to us in June 2008, and is to be billed over two years. This grant 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 unfavorable condition of the capital markets prompted us to implement a number of cost reduction initiatives, in July 2008. These cost reduction initiatives include 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 allow us to extend our existing cash balances through the first quarter of 2009.

We need substantial additional capital to fund our current operations beyond the first quarter of 2009. To provide us with some flexibility in structuring the terms of potential financings, in accordance with Nasdaq Marketplace Rule 4350(i)(1)(D), we obtained approval from our stockholders at our special meeting in lieu of an annual meeting held on September 25, 2008 to issue, in connection with one or more capital raising transactions, up to 4,500,000 shares of common stock (including pursuant to preferred stock, options, warrants, convertible debt or other securities exercisable for or convertible into common stock), upon such terms as our Board of Directors shall deem to be in the best interests of our company, for an aggregate consideration of not more than $18,000,000 in cash and at a price not less than 80% of the market price of the our common stock at the time of issuance, such issuances of common stock or other securities exercisable for or convertible into common stock to occur, if at all, in the three month period commencing with the date of the stockholder approval.

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 our securities. To date, they have not been successful in raising any funds for us. In October 2008, we revised the terms of our engagement with EGE to reduce their fees from 3% in cash and 3% in warrants, to 0% cash and 0% warrants, on any funds that the Company raises, without the help of EGE.

While we are in discussions with potential investors, to date we have been unable to secure additional equity or debt financing on acceptable terms. If we remain unable to secure additional financing in the near-term, we expect to implement a number of additional cost reduction initiatives, such as further reductions in the cost of our workforce and the discontinuation of a number of business initiatives to further reduce our rate of cash utilization and extend our existing cash balances. We believe that these additional cost reduction initiatives, if undertaken, will provide us with additional time to continue our pursuit of additional funding sources and also strategic alternatives. In the event that we are unable to obtain financing on acceptable terms, we may be required to limit or cease our operations, pursue a plan to sell our operating assets, or otherwise modify our business strategy, which could materially harm our future business prospects.

RESULTS OF OPERATIONS

Three Months Ended September 30, 2008 and 2007

Revenue

We recognized revenue of $265,662, for the three months ended September 30, 2008, as compared to $138,052 for the same period in the prior year.

PCT Products, Services, Other. Revenue from the sale of PCT products and services was $222,825 for the three months ended September 30, 2008 as compared to $106,787 for the same period in the prior year. During the third quarter of 2008 we completed the installation of 17 Barocycler instruments, as compared to eight in the same period of 2007. During the third quarter of 2008, eight of the installations that we completed were sales to our international distributors, as compared to four in the same period of 2007. The increase in revenue was due to this increase in the number of Barocycler units sold during the period and an increase in rental revenue from units previously installed under lease or rental agreements, partially offset by minimal decreases in consumable and extended service contract revenues.

We expect the number of units installed will continue to increase in future periods as we continue to commercialize our technology, although we may experience some delays in customer purchases due to current economic conditions in the global economy. Furthermore, we may realize some difficulties in signing up new international distribution partners if we are unable to secure additional funding through equity or debt financings. We also expect that some portion of future installations will continue to be for the smaller, lower priced, Barocycler NEP2320 model and some will be placed under lease or short-term rental agreements. Therefore, we expect that the average revenue per installation will continue to fluctuate from period to period as we continue to drive our installed base and commercialize PCT. We also expect that as we continue to expand the installed based of Barocycler instruments in the field we will realize increasing revenues from the sale of consumable products and extended service contracts. In the short-term, these recurring revenue streams may continue to fluctuate from period to period.

Grant revenue. During the three months ended September 30, 2008 and 2007, we recorded $42,837 and $31,265 of grant revenue, respectively. The grant revenue recorded during the third quarter of 2008 was entirely related to the $850,000 SBIR Phase II grant that we were awarded in June 2008. We expect grant revenues to increase over the next several quarters as the amount of time and expense incurred in connection with this Phase II grant continues to increase. The level of grant revenue that we recognize in any given quarter is dependent upon the level of resources we devote to grant related work in the period.

Cost of PCT Products and Services

The cost of PCT products and services was $130,533 for the three months ended September 30, 2008 compared to $42,276 for the comparable period in 2007. This increase in cost of PCT products and services is due primarily to the increase in the number of units installed under sale, lease or rental arrangements during the period. Costs of PCT products and services as a percentage of revenue increased from 40.0% to 58.6% for the three months ended September 30, 2008 compared to the three months ended September 30, 2007. The increase in the cost of PCT products and services as a percentage of revenue was due primarily to two factors; eight of the seventeen units that we installed during the third quarter of 2008 were sold to our international distributors at discounted prices, and, four of the Barocycler units that we sold during the third quarter of 2007 were prototype NEP2320 units that had been previously expensed, in the research and development line within our consolidated statement of operations, as they were developed and built.

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 $376,552 in the third quarter of 2008 as compared to $519,303 in the same period in 2007. During the third 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 third quarter of 2008 and 2007 included $34,262 and $36,023, respectively, of non-cash, stock-based compensation expense. We expect the level of stock-based compensation expense for the fourth quarter of 2008 to be higher than the amount recorded during the third quarter of 2008 due to a grant of stock options to employees and directors at the end of the third quarter of 2008.

We will need to reduce our expenses in all areas of our operations, including research and development, if we are unable to raise additional capital.

Selling and Marketing

Selling and marketing expenses increased to $399,380 for the three months ended September 30, 2008 from $379,448 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 third quarter of 2008 and 2007, selling and marketing expense included $11,823 and $19,698, respectively, of non-cash, stock-based compensation expense. We expect the level of stock-based compensation expense for the fourth quarter of 2008 to be higher than the amount recorded during the third quarter of 2008 due to a grant of stock options to employees and directors at the end of the third quarter of 2008.

We will need to reduce our expenses in all areas of our operations, including selling and marketing, if we are unable to raise additional capital.

General and Administrative

General and administrative costs totaled $466,883 for the three months ended September 30, 2008, as compared to $578,238 for the comparable period in 2007. The decrease is due to an overall decrease in investor relations spending and our Sarbanes-Oxley compliance costs, partially offset by an increase in legal costs related to general SEC compliance and patent and trademark work that was performed during the quarter.

During the third quarter of 2008 and 2007, general and administrative expense included $35,200 and $42,396, respectively, of non-cash, stock-based compensation expense. We expect the level of stock-based compensation expense for the fourth quarter of 2008 to be higher than the amount recorded during the third quarter of 2008 due to a grant of stock options to employees and directors at the end of the third quarter of 2008.

We will need to reduce our expenses in all areas of our operations, including general and administrative, if we are unable to raise additional capital.

Operating Loss from Continuing Operations

Our operating loss from continuing operations was $1,107,686 for the three months ended September 30, 2008 as compared to an operating loss from continuing operations of $1,381,213 for the comparable period in 2007. The decrease in the operating loss that we reported was due to our cost cutting measures that we initiated in July 2008 and the increase in revenue recorded.

We will need to reduce our expenses in all areas of our operations if we are unable to raise additional capital.

Interest Income

Interest income totaled $9,481 for the three months ended September 30, 2008 as compared to interest income of $75,732 in the prior year period. The decrease is due to lower average cash balances and lower yields on these balances during the third quarter of 2008, as compared to the third quarter of 2007.

Income Taxes from Continuing Operations

In the quarter ended September 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 $209,503.

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.

Net loss

During the third quarter of 2008 we recorded a net loss of $1,098,205 as compared to a net loss of $1,095,978 in the third quarter of 2007. While our overall level of operating costs in the third quarter of 2008 was lower than the spending incurred during the third quarter of 2007, these costs were not offset by 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.

Nine Months Ended September 30, 2008 and 2007

Revenue

We recognized revenue of $518,222, for the nine months ended September 30, 2008, as compared to $471,799 for the same period in the prior year.

PCT Products, Services, Other. Revenue from the sale of PCT products and services was $421,996 for the nine months ended September 30, 2008 as compared to $281,084 for the same period in the prior year. During the first nine months of 2008 we completed the installation of 31 Barocycler instruments, as compared to 13 in the same period of 2007. During the nine months ended September 30, 2008, twelve of the installations that we completed were sales to our international distributors, as compared to four in the same period of 2007. The increase in revenue was due to an increase in the number of instruments sold and an increase in sales of consumable products extended service contracts as compared to the nine months ended September 30, 2007.

Grant revenue. During the nine months ended September 30, 2008 and 2007, we recorded $96,226 and $190,715 of grant revenue, respectively. 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. During the third quarter of 2008 we began working on our $850,000 SBIR Phase II grant and we expect grant revenues to increase over the next several quarters as the amount of time and expense incurred in connection with this Phase II grant continues to increase. The level of grant revenue that we recognize in any given quarter is dependent upon the level of resources we devote to grant related work in the period.

Cost of PCT Products and Services

The cost of PCT products and services was $267,416 for the nine months ended September 30, 2008 compared to $131,558 for the comparable period in 2007. This increase in cost of PCT products and services was primarily due to our increase in sales of Barocycler units. Costs of PCT products and services as a percentage of revenue increased from 46.8% to 63.4% for the nine months ended September 30, 2008 compared to the nine months ended September 30, 2007. The increase in the cost of PCT products and services as a percentage of revenue was due primarily to two factors; 12 of the 31 units that we installed during the nine months ended September 30, 2008 were sold to our international distributors at discounted prices, and, four of the Barocycler units that we sold during the third quarter of 2007 were prototype NEP2320 units that had been previously expensed, as they were developed and built.

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

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