1100441--3/16/2006--REGENERATION_TECHNOLOGIES

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We depend heavily upon a limited number of sources of human tissue, and any failure to obtain tissue from these sources in a timely manner will interfere with our ability to process and distribute allografts. If we fail to maintain our existing strategic relationships or are unable to identify additional distributors of our implants, our revenues may decrease. If third party payors fail to provide appropriate levels of reimbursement for the use of our implants, our revenues would be adversely affected. If we fail to maintain the high processing standards that our implants require or if we are unable to develop processing capacity as required, our commercial opportunity will be reduced or eliminated. Our allograft and xenograft implants and technologies could become subject to significantly greater regulation by the FDA, which could disrupt our business. The allograft industry is subject to additional local, state, federal and international government regulations and any increased regulations of our current or future activities could significantly increase the cost of doing business, thereby reducing our profitability. Our success will depend on the continued acceptance of our allograft and xenograft implants and technologies by the medical community. Rapid technological changes will affect us and our customers, which could result in reduced demand for our allografts. We face intense competition, which could result in reduced acceptance and demand for our implants and technologies. If we do not manage the medical release of donor tissue into processing in an efficient manner, it could affect our profitability. Negative publicity concerning methods of human tissue recovery and screening of donor tissue in our industry could reduce demand for our allografts and impact the supply of available donor tissue. If our patents and the other means we use to protect our intellectual property prove to be inadequate, our competitors could exploit our intellectual property to compete more effectively against us. Our success will depend in part on our ability to operate without infringing on or misappropriating the proprietary rights of others, and if we are unable to do so we may be liable for damages. We or our competitors may be exposed to product liability claims which could cause us to be liable for damages or cause investors to think we will be liable for similar claims in the future. If we are not successful in expanding our distribution activities into international markets, we will not be able to pursue one of our strategies for increasing our revenues. The value of our investment in Organ Recovery Systems, Inc. is dependent on the financial success of this venture.

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1100441--3/16/2006--REGENERATION_TECHNOLOGIES_INC