883697--3/28/2006--REGEN_BIOLOGICS

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We are a development stage company and have no significant operating history with which investors can evaluate our business and prospects. Our debt level could adversely affect our financial health and affect our ability to run our business. Product introductions or modifications may be delayed or canceled if we are unable to obtain FDA clearance or approval and we are unable to sell the collagen scaffold or CMI in the U.S. Off-label promotion of our products could result in substantial penalties. The collagen scaffold and CMI are novel products and they contain biologic materials and so may face additional obstacles to FDA clearance or approval. Sales of our products are largely dependent upon third party reimbursement and our performance may be harmed by health care cost containment and coverage initiatives. We may be subject to product liability claims and our limited product liability insurance may not be sufficient to cover the claims, or we may be required to recall our products. Negative publicity or medical research regarding the health effects of the types of products used in the collagen scaffold and the CMI could affect us. To be commercially successful, we will have to convince physicians that using our products to repair damaged menisci is an effective alternative to existing therapies and treatments. We are dependent on a few products. We will need to obtain financing in the future which may be difficult and may result in dilution to our stockholders. We may face challenges to our patents and proprietary rights. The terms of our Credit Agreements with Zimmer, the successor-in-interest to Centerpulse, subject us to the risk of foreclosure on certain intellectual property. We are dependent on a single or a limited number of suppliers and the loss of any of these suppliers could adversely affect our business. Our reliance on third parties to distribute our products may increase our operating costs and reduce our operating margins. Developing a sales and marketing organization is difficult, expensive and time-consuming. Our reliance on Zimmer as a shareholder and lender may allow it to exert control over our actions. Disruption of our manufacturing could adversely affect our business, financial condition and results of operations. Our success depends upon our ability to recruit and retain key personnel. If we, or our third party suppliers, do not comply with laws regulating the protection of the environment and health and human safety, our business could be adversely affected. Our business could be materially adversely impacted by risks inherent in international markets. Our full Board of Directors, which is not fully independent, acts as the compensation committee; therefore, compensation and benefits may be excessive, inadequate or improperly structured. The price of our common stock has been, and will likely continue to be, volatile. Ownership of our stock is concentrated and this small group of stockholders may exercise substantial control over our actions. A substantial number of shares of our common stock are eligible for sale and this could cause our common stock price to decline significantly. The subordination of our common stock to our preferred stock could hurt common stockholders. The exercise of warrants or options may depress our stock price and may result in dilution to our common stockholders. We issue common stock and grant stock options and warrants as payment for consulting services and the exercise of such options and warrants may result in dilution to our common stockholders. We may not be able to utilize all of our net operating loss carryforwards. We have established several anti-takeover measures that could delay or prevent a change of our control.

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883697--3/28/2006--REGEN_BIOLOGICS_INC