UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-Q/A
                                (Amendment No. 1)

                                   (Mark One)

|X|   Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934 for the Period Ended March 31, 2003

                                       or

|_|   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 0-19278

                                 OSTEOTECH, INC.
             (Exact name of registrant as specified in its charter)

                 Delaware                                 13-3357370
    (State or other jurisdiction of         (I.R.S. Employer Identification No.)
     incorporation or organization)

   51 James Way, Eatontown, New Jersey                       07724
 (Address of principal executive offices)                  (Zip Code)

                                 (732) 542-2800
              (Registrant's telephone number, including area code)

                                 Not Applicable
              (Former name, former address and former fiscal year,
                         if changed since last report)

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. Yes |X| No |_|

                      Applicable Only to Corporate Issuers

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes |X| or No |_|

The number of shares of the registrant's common stock, $.01 par value,
outstanding as of May 7, 2003 was 17,045,629.

<PAGE>

                                Explanatory Note

We are filing this amendment to our Quarterly Report on Form 10-Q for the
quarter ended March 31, 2003, filed with the Securities and Exchange Commission
on May 13, 2003, to reflect restatement of our condensed consolidated balance
sheet as of March 31, 2003, our condensed consolidated statements of operations
and cash flows for the three months ended March 31, 2003 and 2002 and related
footnotes. The restatement corrects errors related to over accruals of certain
expenses caused by a flaw in the Company's computer software identified during
our 2003 year-end closing procedures. The pretax impact on results of operations
of correcting the error related to the computer flaw for the three months ended
March 31, 2003 and 2002 was an increase of $21,000 and $71,000, respectively.
See Note 1 of "Notes to Condensed Consolidated Financial Statements" for a
detailed disclosure of the impacts of this restatement.

This amendment is limited in scope to the portions of our Quarterly Report on
Form 10-Q/A for the quarter ended March 31, 2003 impacted by this restatement
and does not amend, update or change any other items or disclosures contained in
the original Form 10-Q filed on May 13, 2003. Changes have also been made to the
following additional items in this Quarterly Report on Form 10-Q/A as a result
of the restatement:

      o     Part I, Item 1, "Financial Statements"

      o     Part I, Item 2, "Management's Discussion and Analysis of Financial
            Condition and Results of Operations"

      o     Part I, Item 4, "Controls and Procedures"

      o     Part II, Item 6, "Exhibits and Reports on Form 8-K"


                                      -2-
<PAGE>

PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements

                        OSTEOTECH, INC. AND Subsidiaries
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (unaudited)
                             (dollars in thousands)

<TABLE>
<CAPTION>
                                                                        March 31, 2003      December 31, 2002
                                                                           (Restated)
-------------------------------------------------------------------------------------------------------------
ASSETS
-------------------------------------------------------------------------------------------------------------
<S>                                                                         <C>                   <C>
Current assets:
     Cash and cash equivalents                                              $ 12,820              $ 10,040
     Short-term investments                                                    1,966                 3,948
     Accounts receivable, net of allowance of
          $1,189 in 2003 and $943 in 2002                                     14,172                11,545
     Deferred processing costs                                                17,930                15,433
     Inventories                                                               4,540                 4,820
     Income tax receivable                                                     1,758                 3,357
     Deferred tax assets                                                       5,422                 5,431
     Prepaid expenses and other current assets                                 1,710                 1,023
                                                                            ------------------------------
               Total current assets                                           60,318                55,597

Property, plant and equipment, net                                            51,997                53,535
Goodwill, net of accumulated amortization of $404 in 2003 and 2002             1,669                 1,669
Other assets                                                                   4,078                 3,931
-------------------------------------------------------------------------------------------------------------
               Total assets                                                 $118,062              $114,732
=============================================================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY
-------------------------------------------------------------------------------------------------------------
Current liabilities:
     Accounts payable and accrued liabilities                               $ 13,394              $ 10,489
     Current maturities of long-term debt                                      2,661                 2,661
                                                                            ------------------------------
               Total current liabilities                                      16,055                13,150

Long-term debt                                                                15,257                15,922
Other liabilities                                                              1,407                 1,637
-------------------------------------------------------------------------------------------------------------
               Total liabilities                                              32,719                30,709
-------------------------------------------------------------------------------------------------------------

Commitments and contingencies

Stockholders' equity:
     Preferred stock, $.01 par value; 5,000,000 shares
         authorized; no shares issued or outstanding
     Common stock, $.01 par value; 70,000,000 shares
         authorized; issued and outstanding 17,019,817
         shares in 2003 and 17,001,372 shares in 2002                            170                   170
     Additional paid-in capital                                               63,482                63,368
     Accumulated other comprehensive loss                                        103                    78
     Retained earnings                                                        21,588                20,407
-------------------------------------------------------------------------------------------------------------
               Total stockholders' equity                                     85,343                84,023
-------------------------------------------------------------------------------------------------------------
               Total liabilities and stockholders' equity                   $118,062              $114,732
=============================================================================================================
</TABLE>

See accompanying notes to condensed consolidated financial statements.


                                      -3-
<PAGE>

                        OSTEOTECH, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
                  (dollars in thousands, except per share data)

<TABLE>
<CAPTION>
                                                                   2003                2002
Three Months Ended March 31,                                    (Restated)         (Restated)
------------------------------------------------------------------------------------------------
<S>                                                            <C>                <C>
Net revenues:
      Service                                                  $     21,322       $     20,586
      Product                                                         1,157              1,499
                                                               ------------       ------------
                                                                     22,479             22,085

Cost of services                                                      8,725              8,068
Cost of products                                                      1,061                881
                                                               ------------       ------------
                                                                      9,786              8,949
                                                               ------------       ------------

Gross profit                                                         12,693             13,136

Marketing, selling, general and administrative                        9,332             11,229
Research and development                                                990                903
                                                               ------------       ------------
                                                                     10,322             12,132
                                                               ------------       ------------

Operating income                                                      2,371              1,004

Interest expense and other, net                                        (295)              (258)
                                                               ------------       ------------

Income from continuing operations before income taxes                 2,076                746

Income tax provision                                                    895                324
                                                               ------------       ------------

Income from continuing operations                                     1,181                422
Income from discontinued operations                                                          7
------------------------------------------------------------------------------------------------
Net income                                                     $      1,181       $        429
================================================================================================
Earnings per share:
   Basic:
    Income from continuing operations                          $        .07       $        .03
    Discontinued operations
                                                               ------------       ------------
    Net income                                                 $        .07       $        .03
                                                               ============       ============
   Diluted:
    Income from continuing operations                          $        .07       $        .03
    Discontinued operations
                                                               ------------       ------------
    Net income                                                 $        .07       $        .03
                                                               ============       ============
Shares used in computing earnings per share:
   Basic                                                         17,002,455         14,099,267
   Diluted                                                       17,279,283         14,447,407
</TABLE>

See accompanying notes to condensed consolidated financial statements.


                                      -4-
<PAGE>

                        OSTEOTECH, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (unaudited)
                             (dollars in thousands)

<TABLE>
<CAPTION>
                                                              2003           2002
Three Months Ended March 31,                               (Restated)     (Restated)
--------------------------------------------------------------------------------------
<S>                                                         <C>            <C>
Cash Flow From Operating Activities
  Net income                                                $  1,181       $    429
  Adjustments to reconcile income
      to net cash provided by operating activities:
         Depreciation and amortization                         2,150          1,594
         Changes in current assets and liabilities:
             Accounts receivable                              (2,660)        (3,849)
             Deferred processing costs                        (2,477)           752
             Inventories                                         291            256
             Prepaid expenses and other current assets         1,012           (290)
             Accounts payable and other liabilities            2,532          2,067
--------------------------------------------------------------------------------------
Net cash provided by operating activities                      2,029            959

Cash Flow From Investing Activities
  Capital expenditures                                          (475)        (2,512)
  Proceeds from sale of investments                            1,982
  Other, net                                                    (275)            39
--------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities            1,232         (2,473)

Cash Flow From Financing Activities
  Proceeds from issuance of common stock                         114            107
  Principal payments on long-term debt                          (665)          (634)
--------------------------------------------------------------------------------------
Net cash used in financing activities                           (551)          (527)

Effect of exchange rate changes on cash                           70              5
--------------------------------------------------------------------------------------

Net increase (decrease) in cash and cash equivalents           2,780         (2,036)
Cash and cash equivalents at beginning of period              10,040          5,192
--------------------------------------------------------------------------------------
Cash and cash equivalents at end of period                  $ 12,820       $  3,156
======================================================================================

Supplementary cash flow data:
  Cash paid during the period for interest                  $    260       $    267
  Cash paid (refunded) during the period for taxes            (1,658)            80
</TABLE>

See accompanying notes to condensed consolidated financial statements


                                      -5-
<PAGE>

                        OSTEOTECH, INC. AND SUBSIDIARIES
              Notes To Condensed Consolidated Financial Statements
                                   (unaudited)

1.    Restatement of Financial Statements

      During our 2003 year-end closing procedures, the Company identified a
      previously undetected flaw in its computer software used to maintain
      certain accounting records, resulting in over accruals of certain expenses
      in the Company's accounting records. As a result, the Company has restated
      its condensed consolidated financial statements for the periods presented
      herein to reflect the reversal of such over accruals. The effect of the
      restatement on the Company's condensed consolidated balance sheet as of
      March 31, 2003 and on the Company's condensed consolidated statement of
      operations for the three months ended March 31, 2003 and 2002 is shown
      below.

Changes to Consolidated Balance Sheet:

                                                           As of March 31, 2003
                                                          ----------------------
                                                          Reported      Restated
                                                          --------      --------

      Deferred tax assets                                 $  5,784      $  5,422
      Total current assets                                  60,680        60,318
      Total assets                                         118,424       118,062
      Accounts payable and accrued liabilities              14,296        13,394
      Total current liabilities                             16,957        16,055
      Total liabilities                                     33,621        32,719
      Retained earnings                                     21,048        21,588
      Total stockholders' equity                            84,803        85,343
      Total liabilities and stockholders' equity           118,424       118,062
================================================================================

Changes to Consolidated Statement of Operations:

<TABLE>
<CAPTION>
                                                           Three Months Ended             Three Months Ended
                                                              March 31, 2003                March 31, 2002
                                                        ----------------------------------------------------------
                                                        (Reported)      (Restated)      (Reported)      (Restated)
      -------------------------------------------------------------------------------------------------------------
<S>                                                       <C>             <C>             <C>             <C>
      Cost of services                                    $ 8,746         $ 8,725         $ 8,139         $ 8,068
      Gross profit                                         12,672          12,693          13,065          13,136
      Operating income                                      2,350           2,371             933           1,004
      Income from continuing
         operations before income taxes                     2,055           2,076             675             746
      Income tax provision                                    886             895             296             324
      Income from continuing operations                     1,169           1,181             379             422
      Net income                                            1,169           1,181             386             429
      =============================================================================================================
</TABLE>


                                      -6-
<PAGE>

                        OSTEOTECH, INC. AND SUBSIDIARIES
              Notes To Condensed Consolidated Financial Statements
                                   (unaudited)

1A.   Basis of Presentation

      The accompanying unaudited condensed consolidated financial statements
      reflect all adjustments (consisting only of normal recurring accruals)
      considered necessary by management to present fairly the consolidated
      financial position as of March 31, 2003 and the consolidated results of
      operations and the consolidated cash flows for the three months ended
      March 31, 2003 and 2002. The results of operations and cash flows for the
      respective interim periods are not necessarily indicative of the results
      to be expected for the full year. The December 31, 2002 financial
      information has been derived from the audited financial statements for the
      year ended December 31, 2002. The condensed consolidated financial
      statement should be read in conjunction with the audited consolidated
      financial statements for the year ended December 31, 2002, which were
      included as part of Osteotech, Inc.'s (the "Company") Annual Report on
      Form 10-K/A.

2.    Goodwill and Other Intangible Assets

      In January, 2002, the Company adopted Statement of Financial Accounting
      Standard ("SFAS") No. 142, "Goodwill and Other Intangible Assets", and
      accordingly, no longer amortizes goodwill. In accordance with the
      provisions of SFAS No. 142, the Company completed an evaluation of the
      carrying value of its goodwill as of January 1, 2003 and determined that
      there was no impact on the Company's consolidated financial statements as
      a result of such evaluation.

      The Company's other intangibles, which principally represent patents,
      patent applications and licenses, have carrying values of $2,310,000 and
      $2,105,000 as of March 31, 2003 and December 31, 2002, respectively, and
      are being amortized over their estimated useful lives ranging from five to
      ten years.

3.    Stock Options

      The Company has adopted the "disclosure only" provisions of SFAS No. 123,
      "Accounting for Stock Based Compensation", and accordingly, no
      compensation cost has been recognized in the consolidated statements of
      operations. Pro forma information regarding net income and net income per
      share is required by SFAS No. 123, and has been determined as if the
      Company accounted for its stock options under the Fair Value Method of
      that Statement. For purposes of the pro forma disclosures, the estimated
      fair value of the options is amortized on a straight-line basis to expense
      over the options' vesting period.


                                      -7-
<PAGE>

                        OSTEOTECH, INC. AND SUBSIDIARIES
              Notes To Condensed Consolidated Financial Statements
                                   (unaudited)

3.    Stock Options (continued)

      As required by SFAS No. 148, "Accounting for Stock-Based Compensation -
      Transition and Disclosure - an amendment of SFAS No. 123", the following
      table shows the estimated effect on earnings and per share data as if the
      Company had applied the fair value recognition provisions of SFAS No. 123
      to stock-based employee compensation.

<TABLE>
<CAPTION>
                                                                                     Three Months Ended
                                                                                          March 31,
                                                                             --------------------------------
                                                                                  2003               2002
      (in thousands except per share data)                                     (Restated)         (Restated)
      -------------------------------------------------------------------------------------------------------
<S>                                                                          <C>                 <C>
      Net income
          As reported:
                Income from continuing operations                            $        1,181      $        422
                Discontinued operations                                                                     7
                                                                             --------------------------------
                Net income                                                   $        1,181      $        429
                                                                             ================================
          Impact on income from continuing

              operations and net income related
              to stock-based employee compensation expense, net of tax       $          192      $         68
                                                                             ================================
          Pro forma:
                Income from continuing operations                            $          989      $        354
                Discontinued operations                                                                     7
                                                                             --------------------------------
                Net income                                                   $          989      $        361
                                                                             ================================

      Net income per share
          As reported
             Basic:
                Income from continuing operations                            $          .07      $        .03
                Discontinued operations
                                                                             --------------------------------
                Net income                                                   $          .07      $        .03
                                                                             ================================
             Diluted:
                Income from continuing operations                            $          .07      $        .03
                Discontinued operations
                                                                             --------------------------------
                Net income                                                   $          .07      $        .03
                                                                             ================================

          Pro forma
             Basic:
                Income from continuing operations                            $          .06      $        .03
                Discontinued operations
                                                                             --------------------------------
                Net income                                                   $          .06      $        .03
                                                                             ================================
             Diluted:
                Income from continuing operations                            $          .06      $        .03
                Discontinued operations
                                                                             --------------------------------
                Net income                                                   $          .06      $        .03
       ========================================================================================================
</TABLE>


                                      -8-
<PAGE>

                        OSTEOTECH, INC. AND SUBSIDIARIES
              Notes To Condensed Consolidated Financial Statements
                                   (unaudited)

3.    Stock Options (continued)

      The fair value for the option grants was estimated at the date of grant
      using the Black-Scholes Option-Pricing Model with the following
      weighted-average assumptions:

                                             Three Months Ended March 31,
                                           ---------------------------------
                                                2003              2002
            ----------------------------------------------------------------
            Expected life (years)                 5                5
            Risk free interest rate              2.96%            3.33%
            Volatility factor                   80.00%           80.00%
            Dividend yield                       0.00%            0.00%
            ----------------------------------------------------------------

4.    Discontinued Operations

      On July 10, 2002, the Company completed the sale of the business and
      substantially all of the assets, including the assumption of certain
      liabilities, of its operations located in Leiden, The Netherlands for
      $1,000,000 in cash and a non-interest bearing note with a face value of
      $1,500,000, which the Company discounted based on the acquirer's
      incremental borrowing rate of 5.75%. The note is payable in increasing
      amounts on a quarterly basis beginning in March, 2003 through December,
      2006. The Company received the first scheduled payment due under the note
      in March, 2003. The Company has retained a security interest in all assets
      transferred to the acquirer and received a second mortgage on the land and
      building the acquirer will occupy to collateralize the note. For matters
      arising subsequent to the date of closing, the Company has no on-going
      financial or operational responsibilities with respect to the acquirer.

      These operations represented the Company's ceramic and titanium plasma
      spray coating services and products, which were previously reflected in
      the Company's other segment. The Company recorded a loss of $291,000 on
      the sale of this business in the second quarter of 2002 to reduce the
      carrying value of the assets and liabilities to be sold to fair value.
      Revenues and net income for these operations were $495,000 and $7,000,
      respectively, in the first quarter of 2002. The financial results of these
      operations prior to the sale are reflected in the statements of operations
      as discontinued operations and all prior periods have been reclassified to
      conform to this presentation.

5.    Deferred Processing Costs

      Deferred processing costs consist of the following:

<TABLE>
<CAPTION>
      (in thousands)                                                         March 31, 2003    December 31, 2002
      ----------------------------------------------------------------------------------------------------------
<S>                                                                             <C>                 <C>
      Donor tissue to be processed and distributed by the
        Company                                                                 $   3,182           $   2,411
      Tissue in process                                                             6,189               5,043
      Processed implantable donor tissue to be distributed
         by the Company                                                             6,966               6,234
      Processed implantable donor tissue held for clients                           1,593               1,745
      ----------------------------------------------------------------------------------------------------------
                                                                                $  17,930           $  15,433
      ==========================================================================================================
</TABLE>


                                      -9-
<PAGE>

                        OSTEOTECH, INC. AND SUBSIDIARIES
              Notes To Condensed Consolidated Financial Statements
                                   (unaudited)

6     Inventories

      Inventories consist of the following:

      (in thousands)                 March 31, 2003            December 31, 2002
      --------------------------------------------------------------------------

      Supplies                           $    238                     $   223
      Raw materials                           723                         678
       Finished goods                       3,579                       3,919
      --------------------------------------------------------------------------
                                         $  4,540                     $ 4,820
      ==========================================================================

7.    Debt and Financing Arrangements

      In June, 2002, the Company obtained an automatically declining irrevocable
      standby letter of credit to support the $1,900,000 ($1,029,000 as of March
      31, 2003) due to Medtronic Sofamor Danek, Inc. pursuant to the settlement
      agreement. The commitment under the standby letter of credit is
      $1,900,000, but such commitment decreases over time based on a
      predetermined schedule concurrent with the Company's monthly payments
      under the settlement. As of March 31, 2003, the standby letter of credit
      has been reduced to $1,155,000. The amount committed under the standby
      letter of credit reduces the Company's availability under its $5,000,000
      revolving line of credit. As of March 31, 2003, no amounts were
      outstanding under the revolving line of credit and $3,845,000 was
      available.

8.    Commitments and Contingencies

      Purchase Commitment

      In February, 2001, the Company entered into an exclusive distribution
      agreement with Alphatec Manufacturing, Inc. ("Alphatec") to market and
      distribute a pedicle screw system and a cervical plating system in the
      United States and Canada. Pursuant to the agreement, the Company agreed to
      purchase $6,000,000 of inventory and instrumentation during the two-year
      period beginning April 1, 2002. In October, 2002, pursuant to a letter
      agreement, Alphatec waived the purchase commitment of $3,200,000 for the
      first year of the commitment period (April 1, 2002 to March 31, 2003) for
      a payment of $300,000. The purchase commitment of $2,800,000 for the
      second year (April 1, 2003 to March 31, 2004) of the commitment period is
      still in effect.

      In October, 2002, because of a higher than normal level of complaints, the
      Company temporarily suspended the sale and distribution of Affirm(TM)
      Anterior Cervical Plating System ("Affirm(TM)"). Due to the continuing
      uncertainty surrounding the re-introduction of Affirm(TM) into the market,
      the Company does not expect to purchase sufficient inventory to meet the
      purchase commitment. Accordingly, the Company recorded a provision of
      $1,079,000 in the fourth quarter of 2002 for the penalty that will be due
      for the expected shortfall under the purchase commitment.

      Litigation

      The following is a description of material developments that occurred
      during the three months ended March 31, 2003 and since the filing of the
      Company's Annual Report on Form 10-K for the year ended December 31, 2002.
      Additionally, the Company is party to other litigation incidental to its
      business, none of which, individually or in the aggregate, are expected to
      have a material adverse effect on the Company.


                                      -10-
<PAGE>

                        OSTEOTECH, INC. AND SUBSIDIARIES
              Notes To Condensed Consolidated Financial Statements
                                   (unaudited)

8.    Commitments and Contingencies (continued)

      GenSci Regeneration Laboratories, Inc. v. Osteotech, Inc.; Osteotech, Inc.
      v. GenSci Regeneration Sciences, Inc.

      In January, 1998, the Company filed a patent infringement action against
      GenSci Regeneration Laboratories, Inc. and GenSci Regeneration Sciences,
      Inc. (collectively, "GenSci") alleging that GenSci violated claims of one
      of the patents involving the Company's Grafton(R) Demineralized Bone
      Matrix (DBM) process. In December 2001, as a result of a trial commenced
      in the United States District Court for the Central District of
      California, the Company was awarded damages in the amount of $17,533,634
      for GenSci's infringement of the Company's patents. This damage award was
      reduced by the $3.0 million previously paid by DePuy in 1999 and 2000 in
      settlement of the Company's claims against DePuy in this lawsuit. The
      Company has not recognized any portion of the net award of $14,533,634 in
      its financial statements. On December 21, 2001, GenSci filed for
      bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code.

      On April 21, 2003, the Company announced that it has reached an agreement
      in principle with GenSci to settle the Company's claim against GenSci
      arising out of the patent lawsuit. The settlement, which requires approval
      and confirmation of the GenSci Plan of Reorganization by the bankruptcy
      court, is for an aggregate of $7.5 million. Among other things, the
      settlement requires GenSci to pay the Company $1.0 million upon approval
      of the settlement by the bankruptcy court and to pay the balance of $6.5
      million in 20 equal quarterly payments of $325,000 plus interest at the
      federal judgment rate as measured at the end of each quarter up to a
      maximum of 3% per annum. The settlement is further contingent upon
      GenSci's ability to provide the Company an irrevocable letter of credit,
      or such other form of security acceptable to the Company, in the amount of
      $5.0 million and a security interest in its assets to secure the remaining
      balance of $1.5 million, which will be subordinated only to financing, if
      any, that GenSci may receive from a bank or other institutional lender.

      The settlement is also contingent upon the Company's verification of
      GenSci's claim that its new products do not infringe any claims of the
      Company's patents. If the Company is able to verify GenSci's claim, it
      will issue a covenant to GenSci not to sue it for infringing any of the
      Company's existing patents so long as they do not change the formulation
      of their new products, in the future, in a manner that will then result in
      those products, or any future new products, infringing the Company's
      patents. Additionally, the Company and GenSci have agreed to dismiss all
      other litigation that is currently pending between them.

      Scroggins v. Zimmer Holdings, Inc.

      On or about June 24, 2002, the Company received a complaint filed in the
      United States District Court for the Eastern District of Louisiana against
      numerous defendants, including the Company. The complaint alleges that
      plaintiff received defective medical hardware in connection with a certain
      hip replacement procedure in May, 1992, and that such hardware was
      manufactured or distributed by certain of the defendants other than the
      Company. The procedure involved the use of allograft bone tissue processed
      by the Company and provided by one of our clients. Plaintiff alleges
      personal injuries and $1,000,000 in damages.


                                      -11-
<PAGE>

                        OSTEOTECH, INC. AND SUBSIDIARIES
              Notes To Condensed Consolidated Financial Statements
                                   (unaudited)

8.    Commitments and Contingencies (continued)

      On April 8, 2003, the Company filed a Motion for Summary Judgment seeking
      dismissal of plaintiff's claims with prejudice. On this same date, the
      Company also moved for expedited hearing of its Motion for Summary
      Judgment. On April 11, 2003, the Court granted the Company's motion for
      expedited hearing and ordered that the Company's Motion for Summary
      Judgment be considered on an expedited basis.

      The Company maintains a general liability insurance policy and has
      notified the insurance company of this action. The insurance company has
      agreed to defend this action.

      Regner v. Inland Eye & Tissue Bank of Redlands; Thacker v. Inland Eye &
      Tissue Bank of Redlands; Savitt v. Doheny Eye and Tissue Bank; Sorrels,
      Decker and Blake v. Inland Eye & Tissue Bank, et al.

      The Company is a defendant with several other defendants in four actions
      pending in the Superior Court for the State of California, Los Angeles
      County. One of the suits seeks class action status and initially alleged
      causes of action based on a violation of the California Business and
      Professional Code Section 17200, as well as a number of common law causes
      of action, including negligence, deceit, and intentional and negligent
      infliction of emotional distress. Through dismissals, either by the Court
      or voluntarily by plaintiffs, only the California Business and
      Professional Code claims, which are based on the allegation that
      defendants are engaging in the activity of buying or selling organs or
      tissue for valuable consideration or profit, and certain negligence claims
      remain with respect to the actions. It appears that plaintiffs are seeking
      class action status and injunctive relief and "restitution" with respect
      to their California Business and Professional Code claims. In the Regner
      case, plaintiffs have now filed their motion to certify the class, and the
      opposition to the motion is due on May 17, 2003. In March, 2003, the
      Company was served with the complaint in the Sorrels, Decker and Blake v.
      Inland Eye & Tissue Bank, et al action. This action purports to be a class
      action and alleges violation of Section 17200 and negligence against the
      Company.

      The Company believes that the claims made against it in these actions are
      without merit and will continue to vigorously defend against such claims.

      Litigation is subject to many uncertainties and management is unable to
      predict the outcome of the pending suits and claims. It is possible that
      the results of operations or liquidity and capital resources of the
      Company could be adversely affected by the ultimate outcome of the pending
      litigation or as a result of the costs of contesting such lawsuits. The
      Company is currently unable to estimate the ultimate liability, if any,
      that may result from the pending litigation and, accordingly, no material
      provision for any liability (except for accrued legal costs for services
      previously rendered) has been made for such pending litigation in the
      consolidated financial statements. When the Company is reasonably able to
      determine the probable minimum or ultimate liability, if any, that may
      result from any of the pending litigation, the Company will record a
      provision for such liability to the extent not covered by insurance.


                                      -12-
<PAGE>

                        OSTEOTECH, INC. AND SUBSIDIARIES
              Notes To Condensed Consolidated Financial Statements
                                   (unaudited)

9.    Comprehensive Income

            Comprehensive income for the three months ended March 31, 2003 and
            2002 was:

<TABLE>
<CAPTION>
                                                            Three Months Ended March 31,
                                                            ----------------------------
                                                              2003              2002
      (dollars in thousands)                               (Restated)        (Restated)
      -----------------------------------------------------------------------------------
<S>                                                       <C>               <C>
      Net income                                          $      1,181      $        429

      Currency translation adjustments                              25               (99)
      -----------------------------------------------------------------------------------

      Comprehensive income                                $      1,206      $        330
      ==================================================================================
</TABLE>

10.   Earnings Per Share

      The following table sets forth the computation of basic and diluted
      earnings per share for the three months ended March 31, 2003 and 2002:

<TABLE>
<CAPTION>
                                                           Three Months Ended March 31,
                                                          ------------------------------
                                                              2003              2002
     (dollars in thousands except per share data)          (Restated)        (Restated)
     -----------------------------------------------------------------------------------
<S>                                                       <C>               <C>
      Income from continuing operations                   $      1,181      $        422
      Discontinued operations                                                          7
                                                          ------------------------------
      Net income available to common stockholders         $      1,181      $        429
                                                          ==============================

     -----------------------------------------------------------------------------------
      Denominator for basic earnings  per share,
          weighted average common shares outstanding        17,002,455        14,099,267
      Effect of dilutive securities, stock options             276,828           348,140
                                                          ------------------------------
      Denominator for diluted earnings per share            17,279,283        14,447,407
                                                          ==============================

     -----------------------------------------------------------------------------------
      Basic earnings per share:
          Income from continuing operations               $        .07      $        .03
          Discontinued operations
                                                          ------------------------------
          Net income                                      $        .07      $        .03
                                                          ==============================

     -----------------------------------------------------------------------------------
      Diluted earnings per share:
          Income from continuing operations               $        .07      $        .03
          Discontinued operations
                                                          ------------------------------
          Net income                                      $        .07      $        .03
                                                          ==============================

     -----------------------------------------------------------------------------------
</TABLE>

Weighted average shares issuable upon the exercise of stock options which were
not included in the calculation of diluted earnings per share were 1,325,325 and
1,161,625 for the three months ended March 31, 2003 and 2002, respectively. Such
shares were not included because they were antidilutive.


                                      -13-
<PAGE>

                        OSTEOTECH, INC. AND SUBSIDIARIES
              Notes To Condensed Consolidated Financial Statements
                                   (unaudited)

11.   Operating Segments

      Summarized in the table below is financial information for our reportable
      segments for the three months ended March 31, 2003 and 2002, after giving
      effect to the divestiture of the Company's operations in The Netherlands:

<TABLE>
<CAPTION>
                                                                            Three Months Ended March 31,
                                                                          -------------------------------
      (dollars in thousands)                                                 2003             2002
                                                                          (Restated)       (Restated)
      ---------------------------------------------------------------------------------------------------
<S>                                                                        <C>               <C>
      Revenues:
            Grafton(R) DBM Segment                                         $ 11,369          $ 12,151
            Base Tissue Segment                                               9,953             8,435
            Other                                                             1,157             1,499
      ---------------------------------------------------------------------------------------------------
            Consolidated                                                   $ 22,479          $ 22,085
      ===================================================================================================
       Operating income (loss):
             Grafton(R) DBM Segment                                        $  3,265          $  1,712
            Base Tissue Segment                                                 179               101
            Other                                                            (1,073)             (809)
      ---------------------------------------------------------------------------------------------------
            Consolidated                                                   $  2,371          $  1,004
      ===================================================================================================
</TABLE>

      Two of our clients, MTF and ARC, in the Grafton(R) DBM and Base Tissue
      Segments together accounted for 56% and 64% of consolidated net revenues
      during the three months ended March 31, 2003 and 2002, respectively.

12.   Reclassifications

      Certain prior year amounts within the financial statements have been
      reclassified to conform to the 2003 presentation.


                                      -14-
<PAGE>

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

Information contained herein contains "forward-looking statements" which can be
identified by the use of forward-looking terminology such as "believes",
"expects", "may", "will", "should", or "anticipates" or the negative thereof or
variations thereon or comparable terminology, or by discussions of strategy. No
assurance can be given that the future results covered by the forward-looking
statements will be achieved. Some of the matters set forth in the "Risk Factors"
section of our Annual Report on Form 10-K for the year ended December 31, 2002
constitute cautionary statements identifying factors with respect to such
forward-looking statements, including certain risks and uncertainties, that
could cause actual results to vary materially from the future results indicated
in such forward-looking statements. Other factors could also cause actual
results to vary materially from the future results indicated in such
forward-looking statements.

FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002

Management's Discussion and Analysis of Financial Condition and Results of
Operations for the three months ended March 31, 2003 and 2002 presented below
has been revised to reflect the restatement of the Company's previously reported
financial statements as discussed in Note 1 of "Notes to Condensed Consolidated
Financial Statements".

Results of Operations

Critical Accounting Policies and Estimates

Critical accounting policies are those that involve subjective or complex
judgments, often as a result of the need to make estimates. The following areas
all require the use of judgments and estimates: product returns, bad debts,
inventories including purchase commitments, deferred processing costs including
rework reserves, property, plant and equipment, intangible assets, current and
deferred income taxes, contingencies and litigation. Estimates in each of these
areas are based on historical experience and various assumptions that we believe
are appropriate. Actual results may differ from these estimates. Our accounting
practices are discussed in more detail in "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and Note 2 of "Notes to
Consolidated Financial Statements" in our Annual Report on Form 10-K for the
year ended December 31, 2002.

Income from Continuing Operations

Consolidated income from continuing operations was $1,181,000 or $.07 diluted
earnings per share for the three months ended March 31, 2003 compared to
consolidated income from continuing operations of $422,000 or $.03 diluted
earnings per share in the same period in 2002. The improvement in consolidated
income from continuing operations between 2003 and 2002 was primarily due to a
decline in operating expenses, which resulted from a decline in legal fees and
the cessation of our funding of the American Tissue Service Foundation in first
quarter 2002.


                                      -15-
<PAGE>

Discontinued Operations

On July 10, 2002, we completed the sale of the business and substantially all of
the assets, including the assumption of certain liabilities, of our operations
in Leiden, The Netherlands for $1,000,000 in cash and a non-interest bearing
note with a face value of $1,500,000. These operations represented our ceramic
and titanium plasma spray coating services and products. We recognized a loss on
the sale of this business of $291,000 in the second quarter of 2002. Revenues
and net income from these operations were $495,000 and $7,000, respectively, for
the three months ended March 31, 2002.

Net Income

Consolidated net income in the first quarter of 2003 was $1,181,000 or $.07
diluted net income per share compared to consolidated net income of $429,000 or
$.03 diluted net income per share in the first quarter of 2002.

The following is a discussion of factors affecting results of continuing
operations after giving effect to the divestiture of the operations of our
subsidiary in The Netherlands for the three months ended March 31, 2003 and
2002.

Net Revenues

Consolidated net revenues increased 2% to $22,479,000 in the first quarter of
2003 compared to consolidated revenues of $22,085,000 in the corresponding
period in 2002. Domestic net revenues of $20,691,000 in the first quarter of
2003 declined slightly from first quarter 2002 domestic net revenues of
$20,887,000. The decline in domestic revenues was due primarily to the decline
in unit sales volume in Grafton(R) DBM and lower sales of metal spinal implants,
mostly offset by increased base tissue processing fees, increased unit sales
volume in bio-implants and the impact of our January 1, 2003 price increases.
Foreign-based revenues increased 49% to $1,788,000 in the first quarter of 2003
from $1,198,000 in the same period in 2002. The increase in foreign-based
revenues was primarily a result of increased unit sales volume in Grafton(R)
DBM, increased base tissue processing fees and increased unit sales volume in
OsteoPure(TM) Femoral Head processing, partially offset by a decline in bovine
unit sales volume.

Grafton(R) Demineralized Bone Matrix ("DBM") Segment, or Grafton(R) DBM Segment,
revenues declined 6% to $11,369,000 in the first quarter of 2003 from revenues
of $12,151,000 in the same period in 2002. Domestic Grafton(R) DBM Segment
revenues declined 10% to $10,363,000 in first quarter 2003 from revenues of
$11,527,000 in first quarter 2002, primarily as a result of a decline in
Grafton(R) DBM unit sales volume due to a combination of continuing strong
competition and the need to regain sales force momentum as a result of the
fourth quarter 2002 temporary suspension of Base Tissue Segment processing
operations, partially offset by the effects of the January 1, 2003 price
increase. Foreign-based Grafton(R) DBM revenues increased 61% to $1,006,000 in
the first quarter of 2003 from revenues of $624,000 in the same period in the
prior year, primarily as a result of increased unit sales volume and the effects
of the January 1, 2003 price increases.

Base Allograft Tissue Segment, or Base Tissue Segment, revenues increased 18% to
$9,953,000 in the first quarter of 2003 from $8,435,000 in the corresponding
period in 2002. The increase is principally the result of a 27% increase in base
tissue processing fees as a result of a 12% increase in the number of donors
processed for our clients and the direct distribution of Osteotech labeled base
allograft tissue, a 10% increase in bio-implant revenues as a result of
increased unit sales volume and the impact of our January 1, 2003 price
increases. As part of the settlement of a lawsuit in second quarter 2002, we
removed our bio-d(R)


                                      -16-
<PAGE>

Threaded Cortical Bone Dowel, or bio-d(R), from the market in January, 2003.
First quarter 2003 and 2002 revenues include revenues from the bio-d(R) of
$34,000 and $616,000, respectively.

Revenue from other product lines declined 23% in the first quarter of 2003 to
$1,157,000 from $1,499,000 in the same period in 2002. Metal spinal implant
system revenues declined 28%, principally as a result of our suspension of the
sale and distribution of Affirm(TM) Anterior Cervical Plating System in October,
2002 due to a higher than normal level of complaints. Bovine tissue product
revenues declined 19% in the three months ended March 31, 2003 compared to the
corresponding period in 2002, primarily as a result lower unit sales volume.

Two of our clients in the Grafton(R) DBM and Base Tissue Segments, the
Musculoskeletal Transplant Foundation, or MTF, and the American Red Cross, or
ARC, each accounted for 28% of consolidated net revenues during the three months
ended March 31, 2003, respectively. In the three months ended March 31, 2002,
MTF and ARC accounted for 33% and 31%, respectively, of consolidated net
revenues. We have processing agreements with each of these clients. The MTF
agreement expires in December, 2008 and the ARC agreement expires in December,
2006.

Gross Profit

Consolidated gross profit as a percentage of consolidated net revenues was 56%
in the first quarter of 2003 compared to 59% in the first quarter of 2002. The
decline in gross profit margin in 2003 was primarily the result of higher
operating costs, including depreciation, associated with the opening of our new
allograft tissue processing facility in June, 2002 and the underabsorption of
costs in certain product lines that do not have sufficient revenue volume to
offset its related fixed costs.

Marketing, Selling, General and Administrative Expenses

Consolidated marketing, selling, general and administrative expenses decreased
17% in first quarter 2003 to $9,332,000 from $11,229,000 in the corresponding
period in 2002. The decreases in marketing, selling, general and administrative
expenses relates mainly to decreased legal fees as a result of the settlement of
a number of our lawsuits in 2002 and the cessation of our funding of the
American Tissue Services Foundation, partially offset by increased costs for
insurance coverage as a result of the tightening of the insurance markets.

Research and Development Expenses

Consolidated research and development expenses increased 10% in the first
quarter of 2003 to $990,000 from $903,000 in the same period in 2002. The
increase is primarily related to the development of several new Grafton(R) DBM
and bio-implant tissue forms, which we expect to launch in the first half of
2003, costs associated with addressing the technical and scientific requirements
necessary to rework allograft tissue subject to our 2002 tissue quarantine,
which resulted from our temporary suspension of Base Tissue Segment processing,
and costs associated with our continued development of our Plexus(TM)
Technology.

Operating Income

Consolidated operating income increased $1,367,000 to $2,371,000 in the first
quarter of 2003 from $1,004,000 in the first quarter of 2002. Grafton(R) DBM
Segment operating income increased 91% to $3,265,000 in the three months ended
March 31, 2003 from $1,712,000 in the same period in 2002. The increase results
principally from improved gross profit margins in this segment, decreased legal
fees and lower marketing and selling costs. Base Tissue Segment operating income
was $179,000 in the first quarter


                                      -17-
<PAGE>

of 2003 compared to operating income of $101,000 in the corresponding period in
2002. The increase resulted primarily from increased revenues in this segment
and lower legal fees, substantially offset by a decline in gross profit margins,
increased costs for marketing, selling and promotional activities and increased
costs for research and development. Operating losses associated with other
revenues were $1,073,000 and $809,000 in the first quarter of 2003 and 2002,
respectively. The operating loss, which is generated substantially from our
metal spinal implant product line, results primarily from the underabsorption of
costs for which there is not sufficient revenue volume to offset the
infrastructure established to support the product line and the increased costs
associated with marketing, selling and promotional activities.

Income Tax Provision

The effective income tax rate for each of the three months ended March 31, 2003
and 2002 was 43%, which exceeded the United States statutory rate principally
due to state income taxes and non-recognition of tax benefits related to foreign
losses.

Liquidity and Capital Resources

At March 31, 2003 we had cash, cash equivalents and short-term investments of
$14,786,000 compared to $13,988,000 at December 31, 2002. We invest excess cash
in U.S. Government-backed securities and investment grade commercial paper of
major U.S. corporations. The increase in cash, cash equivalents and short-term
investments was primarily due to the improvement in operating results and the
receipt of a Federal income tax refund, partially offset by continued
investments in our business. Working capital increased $1,816,000 to $44,263,000
at March 31, 2003 compared to $42,447,000 at December 31, 2002. The increase in
working capital resulted primarily from an increase in accounts receivables from
clients and customers as a result of the 21% increase in first quarter 2003
revenues as compared to fourth quarter 2002 revenues and additional investments
in deferred processing costs as we rebuild our allograft tissue inventories,
partially offset by an increase in accounts payable and accrued expenses.

Net cash provided by operating activities was $2,029,000 and $959,000 in the
three months ended March 31, 2003 and 2002, respectively. The increase resulted
primarily from improved profitability compared to the prior year, increased
non-cash charges, principally depreciation and amortization, an increase in
accounts payable and accrued expenses and the receipt of a Federal income tax
refund, partially offset by an increase in accounts receivables from clients and
customers as a result of the 21% increase in first quarter 2003 revenues as
compared to fourth quarter 2002 revenues and additional investments in deferred
processing costs resulting from our efforts to rebuild our allograft tissue
inventories.

Cash provided by investing activities was $1,232,000 in the three months ended
March 31, 2003 compared to cash used in investing activities of $2,473,000 in
the three months ended March 31, 2002. Cash provided by investing activities in
first quarter 2003 was primarily generated from the sale of short-term
investments of $1,982,000, partially offset by capital expenditures of $475,000.
Cash used in investing activities in first quarter 2002 was principally the
result of capital expenditures of $2,512,000.

Net cash used in financing activities was $551,000 and $527,000 in the three
months ended March 31, 2003 and 2002, respectively, and results primarily from
principal payments on long-term debt, partially offset by proceeds from the sale
of common stock under our employee stock purchase plan and from the exercise of
stock options.


                                      -18-
<PAGE>

We have a Credit Facility with a U.S. bank that includes: a $5,000,000 revolving
line of credit, a building mortgage loan and an equipment term loan. At March
31, 2003, there were no borrowings under the revolving line of credit,
$4,156,000 was outstanding under the building mortgage loan and $13,762,000 was
outstanding under the equipment term loan. In support of the amounts due under
the settlement of certain patent litigation, we provided an automatically
declining irrevocable standby letter of credit in an original amount of
$1,900,000. As of March 31, 2003, the standby letter of credit has been reduced
to $1,155,000. Amounts committed under this standby letter of credit decrease
over time based on a predetermined schedule concurrent with our monthly payments
under the settlement and reduce the amounts available under the revolving line
of credit. As of March 31, 2003, no amounts were outstanding under the revolving
line of credit and $3,845,000 was available.

As of March 31, 2003, there were no material changes in our contractual
obligations or long-term debt from that disclosed in Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operations,
Liquidity and Capital Resources" in our Annual Report on Form 10-K for the year
ended December 31, 2002.

We believe that our cash and cash equivalents and available lines of credit,
together with anticipated future cash flows from operations, will be sufficient
to meet our forecasted cash needs for the next twelve months. From time to time
we may seek additional funds through equity or debt financing. However, there
can be no assurance that such additional funds will be available, or if
available, that such funds will be available on favorable terms.

Impact of Inflation and Foreign Currency Exchange Fluctuations

Results of operations for the periods discussed above have not been materially
affected by inflation or foreign currency fluctuations.

Litigation

Osteotech, Inc. is involved in various legal proceedings involving product
liability and patent infringement claims. For a discussion of these matters see,
Note 8 of "Notes to Condensed Consolidated Financial Statements" included
elsewhere herein and PART II. ITEM 1. LEGAL PROCEEDINGS, and our Annual Report
on Form 10-K for the year ended December 31, 2002. It is possible that our
results of operations or liquidity and capital resources could be adversely
affected by the ultimate outcome of pending litigation or as a result of the
costs of contesting such lawsuits.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For information regarding our exposure to certain market risks, see Item 7A,
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK, in our Annual Report
on Form 10-K for the year ended December 31, 2002. There have been no
significant changes in our market risk exposures from the fiscal 2002 year-end.


                                      -19-
<PAGE>

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

Under the supervision and with the participation of our management, including
our Chief Executive Officer and Chief Financial Officer, we evaluated the
effectiveness of the design and operation of our disclosure controls and
procedures (as defined in Rule 13a - 15(e) under the Exchange Act) as of March
31, 2003 (the "Evaluation Date"). Based upon that evaluation, and taking into
consideration of the additional procedures discussed below, the Chief Executive
Officer and Chief Financial Officer concluded that as of the Evaluation Date our
disclosure controls and procedures were effective in timely alerting them to the
material information relating to us (or our consolidated subsidiaries) required
to be included in our periodic SEC filings.

Changes in Internal Controls

There were no significant changes made in our internal controls over financial
reporting during the period covered by this report, however, in March, 2004, as
described below, we made changes in our internal controls over financial
reporting.

On March 2, 2004, we announced that we would restate our consolidated financial
statements as a result of over accruals of certain expenses caused by a
previously undetected flaw in our computer software that is used to maintain
certain accounting records. Executive management and the Audit Committee were
informed by our independent auditors that they considered that there was a
"material weakness" (as defined under standards established by the American
Institute of Certified Public Accountants) relating to the timely review and
monitoring of certain account analyses, including the account related to this
portion of our computer software. Other than the matters discussed above related
to the previously undetected flaw in our computer system, no other matters were
identified that required adjustment to or disclosure in our consolidated
financial statements. We have corrected the flaw in our computer software and
have instituted more comprehensive review and monitoring procedures to mitigate
the risk of errors occurring in the future.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The following is a description of material developments that occurred during the
quarter ended March 31, 2003 in lawsuits reported in the Company's Annual Report
on Form 10-K for the year ended December 31, 2002. Additionally, we are a party
to other litigation incidental to our business, none of which, individually or
in the aggregate, are expected to have a material adverse effect.


                                      -20-
<PAGE>

GenSci Regeneration Laboratories, Inc. v. Osteotech, Inc.; Osteotech, Inc. v.
GenSci Regeneration Sciences, Inc.

In January, 1998, we filed a patent infringement action against GenSci
Regeneration Laboratories, Inc. and GenSci Regeneration Sciences, Inc.
(collectively, "GenSci") alleging that GenSci violated claims of one of the
patents involving our Grafton(R) Demineralized Bone Matrix (DBM) process. In
December 2001, as a result of a trial commenced in the United States District
Court for the Central District of California, we were awarded damages in the
amount of $17,533,634 for GenSci's infringement of our patents. This damage
award was reduced by the $3.0 million previously paid by DePuy in 1999 and 2000
in settlement of our claims against DePuy in this lawsuit. We have not
recognized any portion of the net award of $14,533,634 in our financial
statements. On December 21, 2001, GenSci filed for bankruptcy protection under
Chapter 11 of the U.S. Bankruptcy Code.

On April 21, 2003, we announced that we have reached an agreement in principle
with GenSci to settle our claim against GenSci arising out of the patent
lawsuit. The settlement, which requires approval and confirmation of the GenSci
Plan of Reorganization by the bankruptcy court, is for an aggregate of $7.5
million. Among other things, the settlement requires GenSci to pay us $1.0
million upon approval of the settlement by the bankruptcy court and to pay the
balance of $6.5 million in 20 equal quarterly payments of $325,000 plus interest
at the federal judgment rate as measured at the end of each quarter up to a
maximum of 3% per annum. The settlement is further contingent upon GenSci's
ability to provide us an irrevocable letter of credit, or such other form of
security acceptable to us, in the amount of $5.0 million and a security interest
in its assets to secure the remaining balance of $1.5 million, which will be
subordinated only to financing, if any, that GenSci may receive from a bank or
other institutional lender.

The settlement is also contingent upon our verification of GenSci's claim that
its new products do not infringe any claims of our patents. If we are able to
verify GenSci's claim, we will issue a covenant to GenSci not to sue it for
infringing any of our existing patents so long as they do not change the
formulation of their new products, in the future, in a manner that will then
result in those products, or any future new products, infringing our patents.
Additionally, the parties have agreed to dismiss all other litigation that is
currently pending between them.

Scroggins v. Zimmer Holdings, Inc.

On or about June 24, 2002, we received a complaint filed in the United States
District Court for the Eastern District of Louisiana against numerous
defendants, including us. The complaint alleges that plaintiff received
defective medical hardware in connection with a certain hip replacement
procedure in May, 1992, and that such hardware was manufactured or distributed
by certain of the defendants other than us. The procedure involved the use of
allograft bone tissue processed by us and provided by one of our clients.
Plaintiff alleges personal injuries and $1,000,000 in damages.

On April 8, 2003, we filed a Motion for Summary Judgment seeking dismissal of
plaintiff's claims with prejudice. On this same date, we also moved for
expedited hearing of our Motion for Summary Judgment. On April 11, 2003, the
Court granted our motion for expedited hearing and ordered that our Motion for
Summary Judgment be considered on an expedited basis.

We maintain a general liability insurance policy and have notified the insurance
company of this action. The insurance company has agreed to defend this action.


                                      -21-
<PAGE>

Regner v. Inland Eye & Tissue Bank of Redlands; Thacker v. Inland Eye & Tissue
Bank of Redlands; Savitt v. Doheny Eye and Tissue Bank; Sorrels, Decker and
Blake v. Inland Eye & Tissue Bank, et al.

We are a defendant with several other defendants in four actions pending in the
Superior Court for the State of California, Los Angeles County. One of the suits
seeks class action status and initially alleged causes of action based on a
violation of the California Business and Professional Code Section 17200, as
well as a number of common law causes of action, including negligence, deceit,
and intentional and negligent infliction of emotional distress. Through
dismissals, either by the Court or voluntarily by plaintiffs, only the
California Business and Professional Code claims, which are based on the
allegation that defendants are engaging in the activity of buying or selling
organs or tissue for valuable consideration or profit, and certain negligence
claims remain with respect to the actions. It appears that plaintiffs are
seeking class action status and injunctive relief and "restitution" with respect
to their California Business and Professional Code claims. In the Regner case,
plaintiffs have now filed their motion to certify the class, and the opposition
to the motion is due on May 17, 2003. In March, 2003, we were served with the
complaint in the Sorrels, Decker and Blake v. Inland Eye & Tissue Bank, et al
action. This action purports to be a class action and alleges violation of
Section 17200 and negligence against us.

We believe that the claims made against us in these actions are without merit
and will continue to vigorously defend against such claims.


                                      -22-
<PAGE>

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)   Exhibits (numbered in accordance with Item 601 of Regulation S-K)

        Exhibit                                                         Page
        Number    Description                                          Number
        ------    -----------                                          ------

         3.1      Restated Certificate of Incorporation of               ^
                  Osteotech, as amended

         3.2      Third Amended and Restated Bylaws of Osteotech         ^

         3.4      Certificate of Retirement and Prohibition of           ^^
                  Reissuance of Shares of Osteotech, Inc., dated
                  April 4, 2002

         4.1      Rights Agreement dated as of February 1, 1996          ^
                  between Osteotech, Inc. and Registrar and
                  Transfer Co., as amended

       10.40      Second Allonge to Agreement of Amendment to            ^^^
                  Loan and Security Agreement, Mortgage,
                  Assignment of Leases and Other Documents by and
                  among Fleet National Bank, Osteotech, Inc., CAM
                  Implants, Inc., Osteotech, B.V., H.C. Implants,
                  B.V., Osteotech Implants, B.V., Osteotech/CAM
                  Services, B.V., Osteotech, S.A. and OST
                  Developpement, S.A. dated March 27, 2003

        31.1      Certification of Chief Executive Officer               *
                  pursuant to Section 302 of the Sarbanes-Oxley
                  Act of 2002

        31.2      Certification of Chief Financial Officer               *
                  pursuant to Section 302 of the Sarbanes-Oxley
                  Act of 2002

        32.1      Certification of Chief Executive Officer               *
                  pursuant to Section 906 of the Sarbanes-Oxley
                  Act of 2002

        32.2      Certification of Chief Financial Officer               *
                  pursuant to Section 906 of the Sarbanes-Oxley
                  Act of 2002

*     Filed herewith.

^     Previously filed as an exhibit to the Company's Annual Report on Form 10-K
      for the fiscal year ended December 31, 2001 and incorporated herein by
      reference thereto.

^^    Previously filed as an exhibit to the Company's Quarterly Report on Form
      10-Q for the quarter ended June 30, 2002 and incorporated herein by
      reference thereto.

^^^   Previously filed as an exhibit to the Company's Quarterly Report on Form
      10-Q for the quarter ended March 31, 2003 filed with the Securities and
      Exchange Commission on May 13, 2003 and incorporated herein by reference.

(b)   Reports on Form 8-K

      On March, 4, 2003, we filed with the Commission a Current Report on Form
      8-K to announce that we had reported our fourth quarter and year-end
      operating results.

      On February 3, 2003, we filed with the Commission a Current Report on Form
      8-K to announce that we had entered into a three-year agreement with
      SpineVision, SA and SpineVision, Inc. (collectively, "SpineVision") to
      exclusively market and distribute in the United States and Puerto Rico
      SpineVision's Plus(TM) Pivot Link Universal System, C3(TM) Anterior
      Cervical Plating System and Uni-Thread(TM) Universal Thread Spinal System.


                                      -23-
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

Date:  April 23, 2004                       Osteotech, Inc.
                                            ----------------------------------
                                            (Registrant)


Date:  April 23, 2004                 By:   /S/ Richard W. Bauer
                                            ----------------------------------
                                            Richard W. Bauer
                                            President, Chief Executive Officer
                                            (Principal Executive Officer)


Date:  April 23, 2004                 By:   /S/ Michael J. Jeffries
                                            ----------------------------------
                                            Michael J. Jeffries
                                            Executive Vice President,
                                            Chief Financial Officer
                                            (Principal Financial Officer and
                                            Chief Accounting Officer)


                                      -24-