##### 



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

Form 10-Q

|           |  |                                                                |    |  | 
|---------- |  | -------------------------------------------------------------- | -- |  | 
|(Mark One) |  |                                                                |    | 
|(X)        |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE       
|           |  | SECURITIES EXCHANGE ACT OF 1934                               
|           |  | For the quarterly period ended 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 000-20805

ReGen Biologics, Inc.(Exact name of registrant as specified in its charter)

|                                |  |                    
|------------------------------- |  | -------------------
|Delaware                        |  | 23-2476415         
|(State or other jurisdiction of |  | (I.R.S. Employer   
|incorporation or organization)  |  | Identification No.)

|                                         |  |           
|---------------------------------------- |  | ----------
|1290 Bay Dale Drive,                     |  | 21012     
|PMB 351,                                 |  | (Zip Code)
|Arnold, Maryland                         |  |           
|(Address of principal executive offices) |  |           

Registrants telephone number, including area code:
(410) 349-2431

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 (   )

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

The number of shares outstanding of the registrants common stock, $.01
par value, was 29,070,786 as of April 30, 2003.





---



##### 



REGEN BIOLOGICS, INC.

INDEX

|                               |  |                                                                                                                                                                                                                                 |  |   
|------------------------------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --
|PART I  Financial Information |  |                                                                                                                                                                                                                                
|Item 1.                        |  | Financial Statements                                                                                                                                                                                                            |  | 3 
|                               |  | Condensed Consolidated Balance
        Sheets at March 31, 2003 (unaudited) and December 31, 2002                                                                                                                               |  | 3 
|                               |  | Condensed Consolidated Statement
        of Operations for the Three Months Ended March 31, 2003 (unaudited) and
        2002 (unaudited) and the Period from December 21, 1989 to March 31,
        2003 (unaudited)           |  | 4 
|                              
|                               |  | Consolidated Statement of
        Changes in Stockholders Equity (Deficit) and Series A Redeemable
        Convertible Preferred Stock for the Period from December 21, 1989
        (inception) to March 31, 2003 (unaudited) |  | 5 
|                              
|                               |  | Condensed Consolidated Statements
        of Cash Flows for the Three Months Ended March 31, 2003 (unaudited) and
        2002 (unaudited) and the Period from December 21, 1989 to March 31,
        2003 (unaudited)          |  | 9 
|                              
|                               |  | Notes to Condensed Consolidated
        Financial Statements (unaudited)                                                                                                                                                        |  | 10
|Item 2.                        |  | Managements Discussion
        and Analysis of Financial Conditions and Results of Operations                                                                                                                                  |  | 12
|Item 3.                        |  | Quantitative and Qualitative
        Disclosures about Market Risk                                                                                                                                                              |  | 16
|Item 4.                        |  | Controls and Procedures                                                                                                                                                                                                         |  | 16
|PART II  Other Information    |  |                                                                                                                                                                                                                                
|                              
|Item 1.                        |  | Legal Proceedings                                                                                                                                                                                                               |  | 17
|Item 2.                        |  | Changes in Securities and
        Use of Proceeds                                                                                                                                                                               |  | 17
|Item 3.                        |  | Defaults upon Senior Securities                                                                                                                                                                                                 |  | 17
|Item 4.                        |  | Submission of Matters to a
        Vote of Security Holders                                                                                                                                                                     |  | 17
|Item 5.                        |  | Other Information                                                                                                                                                                                                               |  | 17
|Item 6.                        |  | Exhibits and Reports on Form 8-K                                                                                                                                                                                                |  | 17
|Signatures                     |  |                                                                                                                                                                                                                                 |  | 19
|Certifications                 |  |                                                                                                                                                                                                                                 |  | 20

2



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##### 



PART I   Financial Information

Item 1. Financial Statements

REGEN BIOLOGICS, INC.
(A Development Stage Company)

CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)

|                                                      |                                                      |                                                |         |         |                |   |                   |         |   |  | 
|----------------------------------------------------- | ---------------------------------------------------- | ---------------------------------------------- | ------- | ------- | -------------- | - | ----------------- | ------- | - |  | 
|                                                      |                                                      |                                                |         |         | March 31, 2003 |   | December 31, 2002
|                                                      |                                                      |                                                |         |         |                |   |                  
|                                                      |                                                      |                                                |         |         | (unaudited)    |   |                   |         |  
|                                                      |                                                      |                                                | ASSETS  |         |                |   |                   |         |   |  | 
|Current assets:                                       |                                                      |                                                |         |         |                |   |                   |        
|Cash                                                  |                                                      | $                                              | 1       |         |                | $ | 1                 |        
|Short-term investments                                |                                                      |                                                | 2,468   |         |                |   | 3,473             |        
|Receivables                                           |                                                      |                                                | 8       |         |                |   | 8                 |        
|Receivables from related parties                      |                                                      |                                                | 104     |         |                |   | 81                |        
|Inventory                                             |                                                      |                                                | 342     |         |                |   | 262               |        
|Prepaid expenses and other                            |                                                      |                                                | 92      |         |                |   | 91                |        
|                                                      |                                                      |                                                |         |         |                |   |                   |        
|                                                      | Total current assets                                 |                                                |         | 3,015   |                |   |                   | 3,916   |  
|                                                     
|Property and equipment, net                           |                                                      |                                                | 89      |         |                |   | 129               |        
|Other assets                                          |                                                      |                                                | 174     |         |                |   | 181               |        
|                                                      |                                                      |                                                |         |         |                |   |                   |        
|                                                      | Total assets                                         |                                                | $       | 3,278   |                |   | $                 | 4,226   |  
|                                                      |                                                      |                                                |         |         |                |   |                   |        
|                                                      |                                                      | LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT) |         |         |                |   |                  
|Current liabilities:                                  |                                                      |                                                |         |         |                |   |                   |        
|Accounts payable                                      |                                                      | $                                              | 330     |         |                | $ | 251               |        
|Accounts payable to related parties                   |                                                      |                                                | 5       |         |                |   | 7                 |        
|Accrued expenses                                      |                                                      |                                                | 212     |         |                |   | 206               |        
|Accrued merger expenses                               |                                                      |                                                | 198     |         |                |   | 198               |        
|Current portion of capital leases                     |                                                      |                                                | 5       |         |                |   | 5                 |        
|                                                      |                                                      |                                                |         |         |                |   |                   |        
|                                                      | Total current liabilities                            |                                                |         | 750     |                |   |                   | 667     |  
|                                                     
|Pension liability                                     |                                                      |                                                | 144     |         |                |   | 144               |        
|Other liabilities                                     |                                                      |                                                | 41      |         |                |   | 41                |        
|Long-term portion of notes payable and capital leases |                                                      |                                                | 6,768   |         |                |   | 6,735             |        
|                                                      |                                                      |                                                |         |         |                |   |                   |        
|                                                      | Total liabilities                                    |                                                |         | 7,703   |                |   |                   | 7,587   |  
|                                                     
|Series A redeemable convertible preferred stock       |                                                      |                                                | 6,855   |         |                |   | 6,855             |        
|Stockholders equity (deficit):                       |                                                      |                                                |         |         |                |   |                   |        
|Common stock                                          |                                                      |                                                | 291     |         |                |   | 291               |        
|Accumulated other comprehensive loss                  |                                                      |                                                | (58     | )       |                |   | (58               | )      
|Additional paid-in capital                            |                                                      |                                                | 31,373  |         |                |   | 31,373            |        
|Deficit accumulated during development stage          |                                                      |                                                | (42,886 | )       |                |   | (41,822           | )      
|                                                      |                                                      |                                                |         |         |                |   |                   |        
|                                                      | Total stockholders equity (deficit)                 |                                                |         | (11,280 | )              |   |                   | (10,216 | )
|                                                      |                                                      |                                                |         |         |                |   |                   |        
|                                                      | Total liabilities and stockholders equity (deficit) |                                                | $       | 3,278   |                |   | $                 | 4,226   |  
|                                                      |                                                      |                                                |         |         |                |   |                   |        

See accompanying Notes to Condensed Consolidated Financial Statements.

3



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##### 



REGEN BIOLOGICS, INC.
(A Development Stage Company)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)

|                                                                                                                                                                                                   |                           |                                                                 |                |     |                              |       |                |      |                |       |         |        |                   |        | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------- | --------------------------------------------------------------- | -------------- | --- | ---------------------------- | ----- | -------------- | ---- | -------------- | ----- | ------- | ------ | ----------------- | ------ | 
|                                                                                                                                                                                                   |                           |                                                                 |                |     |                              |       |                |      |                |       |         |        | Period from      
|                                                                                                                                                                                                   |                           |                                                                 |                |     |                              |       |                |      |                |       |         |        | December 21, 1989
|                                                                                                                                                                                                   |                           |                                                                 |                |     | Three Months Ended March 31, |       | (Inception) to
|                                                                                                                                                                                                   |                           |                                                                 |                |     | 2003                         |       | 2002           |      | March 31, 2003
|                                                                                                                                                                                                   |                           |                                                                 |                |     |                              |       |                |      |               
|                                                                                                                                                                                                   |                           |                                                                 |                |     | (unaudited)                  |       | (unaudited)    |      | (unaudited)   
|Revenues:                                                                                                                                                                                          |                           |                                                                 |                |     |                              |       |                |      |                |       |         |       
|                                                                                                                                                                                                   | Sales                     |                                                                 | $              | 174 |                              |       | $              | 144  |                |       | $       | 2,307  |                  
|                                                                                                                                                                                                   | Royalties                 |                                                                 |                | 8   |                              |       |                | 27   |                |       |         | 118    |                  
|                                                                                                                                                                                                   | Grant and other revenue   |                                                                 |                |    |                              |       |                |     |                |       |         | 433    |                  
|                                                                                                                                                                                                   |                           |                                                                 |                |     |                              |       |                |      |                |       |         |       
|                                                                                                                                                                                                   |                           |                                                                 | Total revenues |     |                              | 182   |                |      |                | 171   |         |        |                   | 2,858  | 
|Expenses:                                                                                                                                                                                          |                           |                                                                 |                |     |                              |       |                |      |                |       |         |       
|                                                                                                                                                                                                   |                           | Costs of goods sold                                             |                |     | 271                          |       |                |      | 276            |       |         |        | 2,853             |       
|                                                                                                                                                                                                   |                           | Research and development                                        |                |     | 438                          |       |                |      | 574            |       |         |        | 25,614            |       
|                                                                                                                                                                                                   |                           | Business development, general and administrative                |                |     | 556                          |       |                |      | 393            |       |         |        | 11,799            |       
|                                                                                                                                                                                                   |                           | Compensation expense associated with stock options
and warrants |                |     |                             |       |                |      | 271            |       |         |        | 5,975             |       
|                                                                                                                                                                                                   |                           |                                                                 |                |     |                              |       |                |      |                |       |         |       
|                                                                                                                                                                                                   |                           |                                                                 | Total expenses |     |                              | 1,265 |                |      |                | 1,514 |         |        |                   | 46,241 | 
|                                                                                                                                                                                                   |                           |                                                                 |                |     |                              |       |                |      |                |       |         |       
|Operating loss                                                                                                                                                                                     |                           |                                                                 | (1,083         | )   |                              |       | (1,343         | )    |                |       | (43,383 | )     
|                                                                                                                                                                                                   | Merger cost               |                                                                 |                |    |                              |       |                |     |                |       |         | (515   | )                
|                                                                                                                                                                                                   | Interest and other income |                                                                 |                | 5   |                              |       |                | 1    |                |       |         | 1,216  |                  
|                                                                                                                                                                                                   | Rental income             |                                                                 |                | 50  |                              |       |                | 44   |                |       |         | 466    |                  
|                                                                                                                                                                                                   | Interest expense          |                                                                 |                | (36 | )                            |       |                | (110 | )              |       |         | (2,720 | )                
|                                                                                                                                                                                                   | License fees              |                                                                 |                |    |                              |       |                |     |                |       |         | 2,050  |                  
|                                                                                                                                                                                                   |                           |                                                                 |                |     |                              |       |                |      |                |       |         |       
|Net loss                                                                                                                                                                                           |                           | $                                                               | (1,064         | )   |                              | $     | (1,408         | )    |                | $     | (42,886 | )     
|                                                                                                                                                                                                   |                           |                                                                 |                |     |                              |       |                |      |                |       |         |       
|Basic and diluted net loss per share:                                                                                                                                                              |                           | $                                                               | (0.04          | )   |                              | $     | (0.08          | )    |                | $     | (2.48   | )     
|                                                                                                                                                                                                   |                           |                                                                 |                |     |                              |       |                |      |                |       |         |       
|Weighted average number of shares used for calculation of net loss per
share (shares outstanding immediately after reverse merger and
recapitalization used for three months ended March 31, 2002) |                           |                                                                 | 29,071         |     |                              |       | 17,045         |      |                |       | 17,316  |       

See accompanying Notes to Condensed Consolidated Financial Statements.

4



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##### 



ReGen Biologics, Inc.
(A DEVELOPMENT STAGE COMPANY)Consolidated Statement of Changes in Stockholders Equity (Deficit) and Series A Redeemable Convertible Preferred Stock
Period from December 21, 1989 (inception) to March 31, 2003 (unaudited)(In thousands, except share data)

Stockholders Equity (Deficit)



|                             |                                                                                                                                                                                        |  |                        |  |                 |  |                       |  |              |  |           |           |        |  |        |   |        |  |  |  |  |  |  |  |  |  |           |           |  |  |   |   | 
|---------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------- |  | --------------- |  | --------------------- |  | ------------ |  | --------- | --------- | ------ |  | ------ | - | ------ |  |  |  |  |  |  |  |  |  | --------- | --------- |  |  | - | - | 
|                            
|                             |                                                                                                                                                                                        |  | Redeemable Convertible |  | Convertible     |  | Convertible Preferred |  |              |  |           |           |        |  |       
|                             |                                                                                                                                                                                        |  | Preferred Series A     |  | Preferred Stock |  | Series B              |  | Common Stock
|                            
|                             |                                                                                                                                                                                        |  | Share                  |  | Amount          |  | Shares                |  | Amount       |  | Shares    |           | Amount |  | Shares |   | Amount
|                            
|                             | Issuance of common stock
at $0.03127 per share for
net assets contributed by
founders in May 1990                                                                                      |  |                        |  |                 |  |                       |  |              |  |           |          |        |  | $      |  |        |  |  |  |  |  |  |  |  |  |           | 1,400,000 |  |  | $ | 1 | 
|                            
|                             | Issuance of common stock
at $0.005 per share for
cash in November 1991                                                                                                                 |  |                        |  |                 |  |                       |  |              |  |           |          |        |  |        |  |        |  |  |  |  |  |  |  |  |  |           | 700,000   |  |  |   |  | 
|                            
|                             | Issuance of Series A
convertible preferred
stock at $1.00 per share
for cash in April 1991,
net of offering costs of
$44,281                                                           |  |                        |  |                 |  |                       |  |              |  |           | 725,000   |        |  |        | 1 |        |  |  |  |  |  |  |  |  |  |           |          |  |  |   |  | 
|                            
|                             | Issuance of Series B
convertible preferred
stock at $3.00 per share
for cash and in exchange
for notes payable in
January, March, May, and
July 1992, net of
offering costs of $28,482 |  |                        |  |                 |  |                       |  |              |  |           | 1,226,338 |        |  |        |  |        |  |  |  |  |  |  |  |  |  |           |          |  |  |   |  | 
|                            
|                             | Net loss from inception
(December 21, 1989)
through December 31, 1992                                                                                                                  |  |                        |  |                 |  |                       |  |              |  |           |          |        |  |        |  |        |  |  |  |  |  |  |  |  |  |           |          |  |  |   |  | 
|                            
|Balance at December 31, 1992 |                                                                                                                                                                                        |  |                        |  |                 |  |                       |  |              |  | 1,951,338 |           |        |  | 1      |   |        |  |  |  |  |  |  |  |  |  | 2,100,000 |           |  |  | 1 |  
|                            
|                             | Issuance of Series C
convertible preferred
stock at $4.50 per share
for cash in December
1993, net of offering
costs of $29,023                                                        |  |                        |  |                 |  |                       |  |              |  |           | 550,552   |        |  |        |  |        |  |  |  |  |  |  |  |  |  |           |          |  |  |   |  | 
|                            
|                             | Exercise of common stock
options at $0.30 per
share for cash in
February 1993                                                                                                          |  |                        |  |                 |  |                       |  |              |  |           |          |        |  |        |  |        |  |  |  |  |  |  |  |  |  |           | 200       |  |  |   |  | 
|                            
|                             | Issuance of common stock
at $0.30 per share in
1993 in exchange for
services to a consultant                                                                                           |  |                        |  |                 |  |                       |  |              |  |           |          |        |  |        |  |        |  |  |  |  |  |  |  |  |  |           | 5,000     |  |  |   |  | 
|                            
|                             | Net loss                                                                                                                                                                               |  |                        |  |                 |  |                       |  |              |  |           |          |        |  |        |  |        |  |  |  |  |  |  |  |  |  |           |          |  |  |   |  | 
|                            
|Balance at December 31, 1993 |                                                                                                                                                                                        |  |                        |  |                 |  |                       |  |              |  | 2,501,890 |           |        |  | 1      |   |        |  |  |  |  |  |  |  |  |  | 2,105,200 |           |  |  | 1 |  
|                            
|                             | Net loss                                                                                                                                                                               |  |                        |  |                 |  |                       |  |              |  |           |          |        |  |        |  |        |  |  |  |  |  |  |  |  |  |           |          |  |  |   |  | 
|                            
|Balance at December 31, 1994 |                                                                                                                                                                                        |  |                        |  |                 |  |                       |  |              |  | 2,501,890 |           |        |  | 1      |   |        |  |  |  |  |  |  |  |  |  | 2,105,200 |           |  |  | 1 |  
|                            
|                             | Net loss                                                                                                                                                                               |  |                        |  |                 |  |                       |  |              |  |           |          |        |  |        |  |        |  |  |  |  |  |  |  |  |  |           |          |  |  |   |  | 
|                            
|Balance at December 31, 1995 |                                                                                                                                                                                        |  |                        |  |                 |  |                       |  |              |  | 2,501,890 |           |        |  | 1      |   |        |  |  |  |  |  |  |  |  |  | 2,105,200 |           |  |  | 1 |  
|                            

|                             |                                                                                                                                                                                        |  |            |       |              |  |             |   |               |  |                     |        |                   |  |  |  |  |  |       |        |  
|---------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------- | ----- | ------------ |  | ----------- | - | ------------- |  | ------------------- | ------ | ----------------- |  |  |  |  |  | ----- | ------ | -
|                            
|                             |                                                                                                                                                                                        |  | Additional |       |              |  |             |   |               |  |                     |        | Accumulated Other |  |  |  | 
|                             |                                                                                                                                                                                        |  | Paid In    |       | Deferred     |  | Accumulated |   | Comprehensive |  | Total Stockholders'
|                             |                                                                                                                                                                                        |  | Capital    |       | Compensation |  | Deficit     |   | Loss          |  | Equity (Deficit)   
|                            
|                             | Issuance of common stock
at $0.03127 per share for
net assets contributed by
founders in May 1990                                                                                      |  | $          | 44    |              |  | $           |  |               |  | $                   |       |                   |  |  |  |  |  | $     | 45     |  
|                            
|                             | Issuance of common stock
at $0.005 per share for
cash in November 1991                                                                                                                 |  |            | 3     |              |  |             |  |               |  |                     |       |                   |  |  |  |  |  |       | 3      |  
|                            
|                             | Issuance of Series A
convertible preferred
stock at $1.00 per share
for cash in April 1991,
net of offering costs of
$44,281                                                           |  |            | 681   |              |  |             |  |               |  |                     |       |                   |  |  |  |  |  |       | 682    |  
|                            
|                             | Issuance of Series B
convertible preferred
stock at $3.00 per share
for cash and in exchange
for notes payable in
January, March, May, and
July 1992, net of
offering costs of $28,482 |  |            | 3,650 |              |  |             |  |               |  |                     |       |                   |  |  |  |  |  |       | 3,650  |  
|                            
|                             | Net loss from inception
(December 21, 1989)
through December 31, 1992                                                                                                                  |  |            |      |              |  |             |  |               |  |                     | (2,476 | )                 |  |  |  |  |  |       | (2,476 | )
|                            
|Balance at December 31, 1992 |                                                                                                                                                                                        |  | 4,378      |       |              |  |            |   |               |  | (2,476              | )      |                   |  |  |  |  |  | 1,904 |       
|                            
|                             | Issuance of Series C
convertible preferred
stock at $4.50 per share
for cash in December
1993, net of offering
costs of $29,023                                                        |  |            | 2,448 |              |  |             |  |               |  |                     |       |                   |  |  |  |  |  |       | 2,448  |  
|                            
|                             | Exercise of common stock
options at $0.30 per
share for cash in
February 1993                                                                                                          |  |            | 1     |              |  |             |  |               |  |                     |       |                   |  |  |  |  |  |       | 1      |  
|                            
|                             | Issuance of common stock
at $0.30 per share in
1993 in exchange for
services to a consultant                                                                                           |  |            | 1     |              |  |             |  |               |  |                     |       |                   |  |  |  |  |  |       | 1      |  
|                            
|                             | Net loss                                                                                                                                                                               |  |            |      |              |  |             |  |               |  |                     | (1,342 | )                 |  |  |  |  |  |       | (1,342 | )
|                            
|Balance at December 31, 1993 |                                                                                                                                                                                        |  | 6,828      |       |              |  |            |   |               |  | (3,818              | )      |                   |  |  |  |  |  | 3,012 |       
|                            
|                             | Net loss                                                                                                                                                                               |  |            |      |              |  |             |  |               |  |                     | (1,463 | )                 |  |  |  |  |  |       | (1,463 | )
|                            
|Balance at December 31, 1994 |                                                                                                                                                                                        |  | 6,828      |       |              |  |            |   |               |  | (5,281              | )      |                   |  |  |  |  |  | 1,549 |       
|                            
|                             | Net loss                                                                                                                                                                               |  |            |      |              |  |             |  |               |  |                     | (1,959 | )                 |  |  |  |  |  |       | (1,959 | )
|                            
|Balance at December 31, 1995 |                                                                                                                                                                                        |  | 6,828      |       |              |  |            |   |               |  | (7,240              | )      |                   |  |  |  |  |  | (410  | )     
|                            

See accompanying Notes to Condensed Consolidated Financial Statements

5



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##### 



ReGen Biologics, Inc.
(A DEVELOPMENT STAGE COMPANY)Consolidated Statement of Changes in Stockholders Equity (Deficit) and Series A Redeemable Convertible Preferred Stock
Period from December 21, 1989 (inception) to March 31, 2003 (unaudited)(In thousands, except share data)

Stockholders Equity (Deficit)



|                                               |                                                                                                                                             |  |                        |  |                 |  |                       |  |              |  |           |           |        |   |        |   |        |  |  |  |  |  |  |  |  |  |           |         |  |   |   |   | 
|---------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------- |  | --------------- |  | --------------------- |  | ------------ |  | --------- | --------- | ------ | - | ------ | - | ------ |  |  |  |  |  |  |  |  |  | --------- | ------- |  | - | - | - | 
|                                              
|                                               |                                                                                                                                             |  | Redeemable Convertible |  | Convertible     |  | Convertible Preferred |  |              |  |           |           |        |   |       
|                                               |                                                                                                                                             |  | Preferred Series A     |  | Preferred Stock |  | Series B              |  | Common Stock
|                                              
|                                               |                                                                                                                                             |  | Share                  |  | Amount          |  | Shares                |  | Amount       |  | Shares    |           | Amount |   | Shares |   | Amount
|                                              
|Balance at December 31, 1995 (carried forward) |                                                                                                                                             |  |                        |  |                 |  |                       |  |              |  | 2,501,890 |           |        | $ | 1      |   |        |  |  |  |  |  |  |  |  |  | 2,105,200 |         |  | $ | 1 |  
|                                              
|                                               | Issuance of Series D convertible preferred
stock at $7.25 per share for cash in March
and April 1996, net of offering costs of
$536,062     |  |                        |  |                 |  |                       |  |              |  |           | 1,191,321 |        |   |        |  |        |  |  |  |  |  |  |  |  |  |           |        |  |   |   |  | 
|                                              
|                                               | Exercise of common stock options at $0.10,
$0.30, and $0.45 per share in August and
October 1996                                            |  |                        |  |                 |  |                       |  |              |  |           |          |        |   |        |  |        |  |  |  |  |  |  |  |  |  |           | 163,333 |  |   |   |  | 
|                                              
|                                               | Net loss                                                                                                                                    |  |                        |  |                 |  |                       |  |              |  |           |          |        |   |        |  |        |  |  |  |  |  |  |  |  |  |           |        |  |   |   |  | 
|                                              
|Balance at December 31, 1996                   |                                                                                                                                             |  |                        |  |                 |  |                       |  |              |  | 3,693,211 |           |        |   | 1      |   |        |  |  |  |  |  |  |  |  |  | 2,268,533 |         |  |   | 1 |  
|                                              
|                                               | Issuance of Series E convertible preferred
stock at $7.25 per share for cash in August
and September 1997, net of offering costs
of $53,220 |  |                        |  |                 |  |                       |  |              |  |           | 335,314   |        |   |        |  |        |  |  |  |  |  |  |  |  |  |           |        |  |   |   |  | 
|                                              
|                                               | Exercise of common stock options at $0.10,
$0.30, and $0.45 per share in April,
August, and September 1997                                  |  |                        |  |                 |  |                       |  |              |  |           |          |        |   |        |  |        |  |  |  |  |  |  |  |  |  |           | 32,111  |  |   |   |  | 
|                                              
|                                               | Net loss                                                                                                                                    |  |                        |  |                 |  |                       |  |              |  |           |          |        |   |        |  |        |  |  |  |  |  |  |  |  |  |           |        |  |   |   |  | 
|                                              
|Balance at December 31, 1997                   |                                                                                                                                             |  |                        |  |                 |  |                       |  |              |  | 4,028,525 |           |        |   | 1      |   |        |  |  |  |  |  |  |  |  |  | 2,300,644 |         |  |   | 1 |  
|                                              
|                                               | Exercise of common stock options at $0.10,
$0.20, $1.27, and $1.45 per share in May,
July, November and December 1998,
respectively         |  |                        |  |                 |  |                       |  |              |  |           |          |        |   |        |  |        |  |  |  |  |  |  |  |  |  |           | 159,879 |  |   |   |  | 
|                                              
|                                               | Compensation expense associated with stock
option modifications                                                                             |  |                        |  |                 |  |                       |  |              |  |           |          |        |   |        |  |        |  |  |  |  |  |  |  |  |  |           |        |  |   |   |  | 
|                                              
|                                               | Net loss                                                                                                                                    |  |                        |  |                 |  |                       |  |              |  |           |          |        |   |        |  |        |  |  |  |  |  |  |  |  |  |           |        |  |   |   |  | 
|                                              
|Balance at December 31, 1998                   |                                                                                                                                             |  |                        |  |                 |  |                       |  |              |  | 4,028,525 |           |        |   | 1      |   |        |  |  |  |  |  |  |  |  |  | 2,460,523 |         |  |   | 1 |  
|                                              
|                                               | Exercise of common stock options at $.725
and $1.45 per share in April, June and
August 1999                                                |  |                        |  |                 |  |                       |  |              |  |           |          |        |   |        |  |        |  |  |  |  |  |  |  |  |  |           | 42,396  |  |   |   |  | 
|                                              
|                                               | Issuance of Series F convertible preferred
stock at $8.73 per share for cash                                                                |  |                        |  |                 |  |                       |  |              |  |           | 453,310   |        |   |        |  |        |  |  |  |  |  |  |  |  |  |           |        |  |   |   |  | 
|                                              
|                                               | Compensation expense associated with stock
option grants                                                                                    |  |                        |  |                 |  |                       |  |              |  |           |          |        |   |        |  |        |  |  |  |  |  |  |  |  |  |           |        |  |   |   |  | 
|                                               | Net loss                                                                                                                                    |  |                        |  |                 |  |                       |  |              |  |           |          |        |   |        |  |        |  |  |  |  |  |  |  |  |  |           |        |  |   |   |  | 
|                                              
|Balance at December 31, 1999                   |                                                                                                                                             |  |                        |  |                 |  |                       |  |              |  | 4,481,835 |           |        |   | 1      |   |        |  |  |  |  |  |  |  |  |  | 2,502,919 |         |  |   | 1 |  
|                                              

|                                                       |                                                                                                                                                             |   |            |       |              |   |             |                   |   |                     |         |                       |   |  |   |       |        |  
|------------------------------------------------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ---------- | ----- | ------------ | - | ----------- | ----------------- | - | ------------------- | ------- | --------------------- | - |  | - | ----- | ------ | -
|                                                      
|                                                       |                                                                                                                                                             |   | Additional |       |              |   |             |                   |   |                     |         | **Accumulated offer** |   | 
|                                                       |                                                                                                                                                             |   | Paid In    |       | Deferred     |   | Accumulated | **Comprehensive** |   | Total Stockholders
|                                                       |                                                                                                                                                             |   | Capital    |       | Compensation |   | Deficit     | **Loss**          |   | Equity (Deficit)   
|                                                      
|Balance
        at December 31, 1995 (carried forward) |                                                                                                                                                             | $ | 6,828      |       |              | $ |            |                   |   | $                   | (7,240  | )                     |   |  | $ | (410  | )     
|                                                      
|                                                       | Issuance
        of Series D convertible preferred stock at $7.25 per share for cash
        in March and April 1996, net of offering costs of $536,062     |   |            | 8,101 |              |   |             |                  |   |                     |         |                      |   |  |   |       | 8,101  |  
|                                                      
|                                                       | Exercise
        of common stock options at $0.10, $0.30, and $0.45 per share in August
        and October 1996                                            |   |            | 43    |              |   |             |                  |   |                     |         |                      |   |  |   |       | 43     |  
|                                                      
|                                                       | Net loss                                                                                                                                                    |   |            |      |              |   |             |                  |   |                     |         | (1,931                | ) |  |   |       | (1,931 | )
|                                                      
|Balance
        at December 31, 1996                   |                                                                                                                                                             |   | 14,972     |       |              |   |            |                   |   |                     | (9,171  | )                     |   |  |   | 5,803 |       
|                                                      
|                                                       | Issuance
        of Series E convertible preferred stock at $7.25 per share for cash
        in August and September 1997, net of offering costs of $53,220 |   |            | 2,378 |              |   |             |                  |   |                     |         |                      |   |  |   |       | 2,378  |  
|                                                      
|                                                       | Exercise
        of common stock options at $0.10, $0.30, and $0.45 per share in April,
        August, and September 1997                                  |   |            | 5     |              |   |             |                  |   |                     |         |                      |   |  |   |       | 5      |  
|                                                      
|                                                       | Net loss                                                                                                                                                    |   |            |      |              |   |             |                  |   |                     |         | (3,868                | ) |  |   |       | (3,868 | )
|                                                      
|Balance
        at December 31, 1997                   |                                                                                                                                                             |   | 17,355     |       |              |   |            |                   |   |                     | (13,039 | )                     |   |  |   | 4,318 |       
|                                                      
|                                                       | Exercise
        of common stock options at $0.10, $0.20, $1.27, and $1.45 per share in
        May, July, November and December 1998, respectively         |   |            | 108   |              |   |             |                  |   |                     |         |                      |   |  |   |       | 108    |  
|                                                      
|                                                       | Compensation
        expense associated with stock option modifications                                                                                     |   |            | 56    |              |   |             |                  |   |                     |         |                      |   |  |   |       | 56     |  
|                                                      
|                                                       | Net loss                                                                                                                                                    |   |            |      |              |   |             |                  |   |                     |         | (3,815                | ) |  |   |       | (3,815 | )
|                                                      
|Balance
        at December 31, 1998                   |                                                                                                                                                             |   | 17,519     |       |              |   |            |                   |   |                     | (16,854 | )                     |   |  |   | 667   |       
|                                                      
|                                                       | Exercise
        of common stock options at $.725 and $1.45 per share in April, June and
        August 1999                                                |   |            | 32    |              |   |             |                  |   |                     |         |                      |   |  |   |       | 32     |  
|                                                      
|                                                       | Issuance
        of Series F convertible preferred stock at $8.73 per share for cash                                                                        |   |            | 3,956 |              |   |             |                  |   |                     |         |                      |   |  |   |       | 3,956  |  
|                                                      
|                                                       | Compensation
        expense associated with stock option grants                                                                                            |   |            | 3,436 |              |   |             | (3,247            | ) |                     |         |                      |   |  |   |       | 189    |  
|                                                       | Net loss                                                                                                                                                    |   |            |      |              |   |             |                  |   |                     |         | (5,458                | ) |  |   |       | (5,458 | )
|                                                      
|Balance
        at December 31, 1999                   |                                                                                                                                                             |   | 24,943     |       |              |   | (3,247      | )                 |   |                     | (22,312 | )                     |   |  |   | (614  | )     
|                                                      

See accompanying Notes to Condensed Consolidated Financial Statements

6



---



##### 



ReGen Biologics, Inc.
(A DEVELOPMENT STAGE COMPANY)Condensed Statement of Changes in Stockholders Equity (Deficit) and Series A Redeemable Convertible Preferred Stock
Period from December 21, 1989 (inception) to March 31, 2003 (unaudited)(In thousands, except share data)

Stockholders Equity (Deficit)



|                                               |                                                                                          |  |                        |  |                 |  |                       |  |              |  |           |   |        |   |        |   |        |  |  |  |  |  |  |  |  |  |           |        |  |   |   |   | 
|---------------------------------------------- | ---------------------------------------------------------------------------------------- |  | ---------------------- |  | --------------- |  | --------------------- |  | ------------ |  | --------- | - | ------ | - | ------ | - | ------ |  |  |  |  |  |  |  |  |  | --------- | ------ |  | - | - | - | 
|                                              
|                                               |                                                                                          |  | Redeemable Convertible |  | Convertible     |  | Convertible Preferred |  |              |  |           |   |        |   |       
|                                               |                                                                                          |  | Preferred Series A     |  | Preferred Stock |  | Series B              |  | Common Stock
|                                              
|                                               |                                                                                          |  | Share                  |  | Amount          |  | Shares                |  | Amount       |  | Shares    |   | Amount |   | Shares |   | Amount
|                                              
|Balance at December 31, 1999
(carried forward) |                                                                                          |  |                        |  |                 |  |                       |  |              |  | 4,481,835 |   |        | $ | 1      |   |        |  |  |  |  |  |  |  |  |  | 2,502,919 |        |  | $ | 1 |  
|                                              
|                                               | Compensation expense associated
with stock option grants in prior
year                   |  |                        |  |                 |  |                       |  |              |  |           |  |        |   |        |  |        |  |  |  |  |  |  |  |  |  |           |       |  |   |   |  | 
|                                              
|                                               | Compensation expense associated
with stock option grants in
current year                 |  |                        |  |                 |  |                       |  |              |  |           |  |        |   |        |  |        |  |  |  |  |  |  |  |  |  |           |       |  |   |   |  | 
|                                              
|                                               | Stock options cancelled during 2000                                                      |  |                        |  |                 |  |                       |  |              |  |           |  |        |   |        |  |        |  |  |  |  |  |  |  |  |  |           |       |  |   |   |  | 
|                                              
|                                               | Net loss                                                                                 |  |                        |  |                 |  |                       |  |              |  |           |  |        |   |        |  |        |  |  |  |  |  |  |  |  |  |           |       |  |   |   |  | 
|                                              
|Balance at December 31, 2000                   |                                                                                          |  |                        |  |                 |  |                       |  |              |  | 4,481,835 |   |        |   | 1      |   |        |  |  |  |  |  |  |  |  |  | 2,502,919 |        |  |   | 1 |  
|                                              
|                                               | Exercise of common stock options
at $.10 per share in 2001                               |  |                        |  |                 |  |                       |  |              |  |           |  |        |   |        |  |        |  |  |  |  |  |  |  |  |  |           | 25,000 |  |   |   |  | 
|                                              
|                                               | Exercise of common stock options
at $1.45 per share in 2001                              |  |                        |  |                 |  |                       |  |              |  |           |  |        |   |        |  |        |  |  |  |  |  |  |  |  |  |           | 125    |  |   |   |  | 
|                                              
|                                               | Compensation expense associated
with stock option grants in prior
years                  |  |                        |  |                 |  |                       |  |              |  |           |  |        |   |        |  |        |  |  |  |  |  |  |  |  |  |           |       |  |   |   |  | 
|                                              
|                                               | Compensation expense associated
with stock option grants in
current year                 |  |                        |  |                 |  |                       |  |              |  |           |  |        |   |        |  |        |  |  |  |  |  |  |  |  |  |           |       |  |   |   |  | 
|                                              
|                                               | Stock options cancelled during 2001                                                      |  |                        |  |                 |  |                       |  |              |  |           |  |        |   |        |  |        |  |  |  |  |  |  |  |  |  |           |       |  |   |   |  | 
|                                              
|                                               | Deferred stock compensation
associated with stock option
grants to non-employees in 2001 |  |                        |  |                 |  |                       |  |              |  |           |  |        |   |        |  |        |  |  |  |  |  |  |  |  |  |           |       |  |   |   |  | 
|                                              
|                                               | Net loss                                                                                 |  |                        |  |                 |  |                       |  |              |  |           |  |        |   |        |  |        |  |  |  |  |  |  |  |  |  |           |       |  |   |   |  | 
|                                              
|Balance at December 31, 2001                   |                                                                                          |  |                        |  |                 |  |                       |  |              |  | 4,481,835 |   |        |   | 1      |   |        |  |  |  |  |  |  |  |  |  | 2,528,044 |        |  |   | 1 |  
|                                              

|                                                       |                                                                                                          |   |            |        |              |   |             |                   |                     |   |         |                       |   |   |        |        |  
|------------------------------------------------------ | -------------------------------------------------------------------------------------------------------- | - | ---------- | ------ | ------------ | - | ----------- | ----------------- | ------------------- | - | ------- | --------------------- | - | - | ------ | ------ | -
|                                                      
|                                                       |                                                                                                          |   | Additional |        |              |   |             |                   |                     |   |         | **Accumulated offer** |  
|                                                       |                                                                                                          |   | Paid In    |        | Deferred     |   | Accumulated | **Comprehensive** | Total Stockholders
|                                                       |                                                                                                          |   | Capital    |        | Compensation |   | Deficit     | **Loss**          | Equity (Deficit)   
|                                                      
|Balance
        at December 31, 1999 (carried forward) |                                                                                                          | $ | 24,943     |        |              | $ | (3,247      | )                 |                     | $ | (22,312 | )                     |   | $ | (614   | )     
|                                                      
|                                                       | Compensation
        expense associated with stock option grants in prior year                           |   |            |       |              |   |             | 738               |                     |   |         |                      |   |   |        | 738    |  
|                                                      
|                                                       | Compensation
        expense associated with stock option grants in current year                         |   |            | 2,124  |              |   |             | (1,642            | )                   |   |         |                      |   |   |        | 482    |  
|                                                      
|                                                       | Stock
        options cancelled during 2000                                                              |   |            | (1,089 | )            |   |             | 1,089             |                     |   |         |                      |   |   |        |       |  
|                                                      
|                                                       | Net loss                                                                                                 |   |            |       |              |   |             |                  |                     |   |         | (5,229                | ) |   |        | (5,229 | )
|                                                      
|Balance
        at December 31, 2000                   |                                                                                                          |   | 25,978     |        |              |   | (3,062      | )                 |                     |   | (27,541 | )                     |   |   | (4,623 | )     
|                                                      
|                                                       | Exercise
        of common stock options at $.10 per share in 2001                                       |   |            | 3      |              |   |             |                  |                     |   |         |                      |   |   |        | 3      |  
|                                                      
|                                                       | Exercise
        of common stock options at $1.45 per share in 2001                                      |   |            |       |              |   |             |                  |                     |   |         |                      |   |   |        |       |  
|                                                      
|                                                       | Compensation
        expense associated with stock option grants in prior years                          |   |            |       |              |   |             | 935               |                     |   |         |                      |   |   |        | 935    |  
|                                                      
|                                                       | Compensation
        expense associated with stock option grants in current year                         |   |            | 1,010  |              |   |             | (833              | )                   |   |         |                      |   |   |        | 177    |  
|                                                      
|                                                       | Stock
        options cancelled during 2001                                                              |   |            | (161   | )            |   |             | 161               |                     |   |         |                      |   |   |        |       |  
|                                                      
|                                                       | Deferred
        stock compensation associated with stock option grants to non-employees
        in 2001 |   |            | 228    |              |   |             | (131              | )                   |   |         |                      |   |   |        | 97     |  
|                                                      
|                                                       | Net loss                                                                                                 |   |            |       |              |   |             |                  |                     |   |         | (4,330                | ) |   |        | (4,330 | )
|                                                      
|Balance
        at December 31, 2001                   |                                                                                                          |   | 27,058     |        |              |   | (2,930      | )                 |                     |   | (31,871 | )                     |   |   | (7,741 | )     
|                                                      

See accompanying Notes to Condensed Consolidated Financial Statements

7



---



##### 



ReGen Biologics, Inc.
(A DEVELOPMENT STAGE COMPANY)Condensed Statement of Changes in Stockholders Equity (Deficit) and Series A Redeemable Convertible Preferred Stock
Period from December 21, 1989 (inception) to March 31, 2003 (unaudited)(In thousands, except share data)

Stockholders Equity (Deficit)



|                                                                                                                      |                                                                                                                           |                                        |            |                        |  |                 |       |                       |  |              |           |            |   |        |   |        |   |        |             |            |  |   |      |     |  |  |            |         |            |   |     |   |    |  
|--------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------- | -------------------------------------- | ---------- | ---------------------- |  | --------------- | ----- | --------------------- |  | ------------ | --------- | ---------- | - | ------ | - | ------ | - | ------ | ----------- | ---------- |  | - | ---- | --- |  |  | ---------- | ------- | ---------- | - | --- | - | -- | -
|                                                                                                                     
|                                                                                                                      |                                                                                                                           |                                        |            | Redeemable Convertible |  | Convertible     |       | Convertible Preferred |  |              |           |            |   |        |   |       
|                                                                                                                      |                                                                                                                           |                                        |            | Preferred Series A     |  | Preferred Stock |       | Series B              |  | Common Stock
|                                                                                                                     
|                                                                                                                      |                                                                                                                           |                                        |            | Share                  |  | Amount          |       | Shares                |  | Amount       |           | Shares     |   | Amount |   | Shares |   | Amount
|                                                                                                                     
|Balance at December 31, 2001 (carried forward)                                                                        |                                                                                                                           |                                        |            |                        |  |                 |       |                       |  |              | 4,481,835 |            |   | $      | 1 |        |   |        |             |            |  |   |      |     |  |  | 2,528,044  |         |            | $ | 1   |  
|                                                                                                                     
|Issuance of Common Stock                                                                                              |                                                                                                                           |                                        |            |                        |  |                 |       |                       |  |              |           |            |   |        |   |        |   |        |             |            |  |   |      |     |  |  | 301,930    |         |            |   | 1   |  
|                                                                                                                     
|Issuance of Convertible Preferred Stock for cash and
conversion of bridge financing net of issuance costs of
$138,070 |                                                                                                                           |                                        |            |                        |  |                 |       |                       |  |              | 5,564,047 |            |   |        | 1 |        |   |        |             |            |  |   |      |     |  |  |            |         |            |   |     |  
|                                                                                                                     
|Deferred stock compensation associated with stock option
grants in 2002                                               |                                                                                                                           |                                        |            |                        |  |                 |       |                       |  |              |           |            |   |        |   |        |   |        |             |            |  |   |      |     |  |  |            |         |            |   |     |  
|                                                                                                                     
|Compensation expense associated with stock options
outstanding                                                        |                                                                                                                           |                                        |            |                        |  |                 |       |                       |  |              |           |            |   |        |   |        |   |        |             |            |  |   |      |     |  |  |            |         |            |   |     |  
|                                                                                                                     
|Effect of reverse merger and recapitalization:                                                                        |                                                                                                                           |                                        |            |                        |  |                 |       |                       |  |              |           |            |   |        |   |        |   |        |             |            |  |   |      |     |  |  |            |         |            |   |     |  
|                                                                                                                     
|                                                                                                                      | Valuation of warrants associated with bridge financing                                                                    |                                        |            |                        |  |                 |       |                       |  |              |           |            |   |        |   |        |   |        |             |            |  |   |      |     |  |  |            |         |            |   |     |   |   
|                                                                                                                     
|                                                                                                                      | Valuation of beneficial conversion associated with bridge
financing                                                       |                                        |            |                        |  |                 |       |                       |  |              |           |            |   |        |   |        |   |        |             |            |  |   |      |     |  |  |            |         |            |   |     |   |   
|                                                                                                                     
|                                                                                                                      | Compensation expense associated with stock options
outstanding recognized as a result of the reverse merger               |                                        |            |                        |  |                 |       |                       |  |              |           |            |   |        |   |        |   |        |             |            |  |   |      |     |  |  |            |         |            |   |     |   |   
|                                                                                                                     
|                                                                                                                      | Conversion of convertible preferred shares to Redeemable
Convertible Preferred Series A at liquidation /
redemption value |                                        |            | 15,298,351             |  |                 | $     | 6,855                 |  |              |           | (5,564,047 | ) |        |   | (1     | ) |        |             |            |  |   |      |     |  |  |            |         |            |   |     |   |   
|                                                                                                                     
|                                                                                                                      | Conversion of convertible preferred shares to Common
Stock and Series B Preferred Shares                                  |                                        |            |                        |  |                 |       |                       |  |              |           | (4,481,835 | ) |        |   | (1     | ) |        |             | 12,025,656 |  |   |      | 120 |  |  |            | 297,146 |            |   |     | 3 |   
|                                                                                                                     
|Conversion of Subsidiary Common Stock into Company Common
Stock and Series B Preferred Shares:                        |                                                                                                                           |                                        |            |                        |  |                 |       |                       |  |              |           |            |   |        |   |        |   |        |             |            |  |   |      |     |  |  |            |         |            |   |     |  
|                                                                                                                     
|                                                                                                                      |                                                                                                                           | Elimination of Subsidiary Common Stock |            |                        |  |                 |       |                       |  |              |           |            |   |        |   |        |   |        |             |            |  |   |      |     |  |  |            |         | (2,829,974 | ) |     |   | (1 | )
|                                                                                                                     
|                                                                                                                      |                                                                                                                           | Issuance of Company Common Stock       |            |                        |  |                 |       |                       |  |              |           |            |   |        |   |        |   |        |             |            |  |   |      |     |  |  |            |         | 7,781,018  |   |     |   | 78 |  
|                                                                                                                     
|Company Common Stock and related equity held by
existing shareholders (net of 18,115 shares held treasury)            |                                                                                                                           |                                        |            |                        |  |                 |       |                       |  |              |           |            |   |        |   |        |   |        |             |            |  |   |      |     |  |  | 8,966,966  |         |            |   | 89  |  
|                                                                                                                     
|Minimum Pension Liability                                                                                             |                                                                                                                           |                                        |            |                        |  |                 |       |                       |  |              |           |            |   |        |   |        |   |        |             |            |  |   |      |     |  |  |            |         |            |   |     |  
|                                                                                                                     
|Conversion of Convertible Preferred Series B Stock to
Company Common Stock                                            |                                                                                                                           |                                        |            |                        |  |                 |       |                       |  |              |           |            |   |        |   |        |   |        | (12,025,656 | )          |  |   | (120 | )   |  |  | 12,025,656 |         |            |   | 120 |  
|                                                                                                                     
|Net loss                                                                                                              |                                                                                                                           |                                        |            |                        |  |                 |       |                       |  |              |           |            |   |        |   |        |   |        |             |            |  |   |      |     |  |  |            |         |            |   |     |  
|                                                                                                                     
|Balance at December 31, 2002                                                                                          |                                                                                                                           |                                        | 15,298,351 |                        |  |                 | 6,855 |                       |  |              |          |            |   |        |  |        |   |        |            |            |  |   |     |     |  |  | 29,070,786 |         |            |   | 291 |  
|                                                                                                                     
|Net loss                                                                                                              |                                                                                                                           |                                        |            |                        |  |                 |       |                       |  |              |           |            |   |        |   |        |   |        |             |            |  |   |      |     |  |  |            |         |            |   |     |  
|                                                                                                                     
|Balance at March 31, 2003                                                                                             |                                                                                                                           |                                        | 15,298,351 |                        |  | $               | 6,855 |                       |  |              |          |            |   | $      |  |        |   |        |            |            |  | $ |     |     |  |  | 29,070,786 |         |            | $ | 291 |  
|                                                                                                                     

|                                                                                                                      |                                                                                                                           |                                        |        |            |     |              |        |             |  |               |         |                  |  |       |     |             |  |   |         |        |   | 
|--------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------- | -------------------------------------- | ------ | ---------- | --- | ------------ | ------ | ----------- |  | ------------- | ------- | ---------------- |  | ----- | --- | ----------- |  | - | ------- | ------ | - | 
|                                                                                                                     
|                                                                                                                      |                                                                                                                           |                                        |        |            |     |              |        |             |  |               |         |                  |  |       |     | Accumulated |  |   |         |       
|                                                                                                                      |                                                                                                                           |                                        |        | Additional |     |              |        |             |  |               |         |                  |  | Other |     | Total      
|                                                                                                                      |                                                                                                                           |                                        |        | Paid In    |     | Deferred     |        | Accumulated |  | Comprehensive |         | Stockholders'   
|                                                                                                                      |                                                                                                                           |                                        |        | Capital    |     | Compensation |        | Deficit     |  | Loss          |         | Equity (Deficit)
|                                                                                                                     
|Balance at December 31, 2001 (carried forward)                                                                        |                                                                                                                           | $                                      | 27,058 |            |     | $            | (2,930 | )           |  | $             | (31,871 | )                |  |       |     |             |  | $ | (7,741  | )     
|                                                                                                                     
|Issuance of Common Stock                                                                                              |                                                                                                                           |                                        | 104    |            |     |              |        |             |  |               |         |                  |  |       |     |             |  |   | 105     |       
|                                                                                                                     
|Issuance of Convertible Preferred Stock for cash and
conversion of bridge financing net of issuance costs of
$138,070 |                                                                                                                           |                                        | 6,716  |            |     |              |        |             |  |               |         |                  |  |       |     |             |  |   | 6,717   |       
|                                                                                                                     
|Deferred stock compensation associated with stock option
grants in 2002                                               |                                                                                                                           |                                        | 370    |            |     |              | (370   | )           |  |               |         |                  |  |       |     |             |  |   |         |       
|                                                                                                                     
|Compensation expense associated with stock options
outstanding                                                        |                                                                                                                           |                                        |        |            |     |              | 452    |             |  |               |         |                  |  |       |     |             |  |   | 452     |       
|                                                                                                                     
|Effect of reverse merger and recapitalization:                                                                        |                                                                                                                           |                                        |        |            |     |              |        |             |  |               |         |                  |  |       |     |             |  |   |         |       
|                                                                                                                     
|                                                                                                                      | Valuation of warrants associated with bridge financing                                                                    |                                        |        | 657        |     |              |        |             |  |               |         |                  |  |       |     |             |  |   |         | 657    |  
|                                                                                                                     
|                                                                                                                      | Valuation of beneficial conversion associated with bridge
financing                                                       |                                        |        | 843        |     |              |        |             |  |               |         |                  |  |       |     |             |  |   |         | 843    |  
|                                                                                                                     
|                                                                                                                      | Compensation expense associated with stock options
outstanding recognized as a result of the reverse merger               |                                        |        |            |     |              |        | 2,848       |  |               |         |                  |  |       |     |             |  |   |         | 2,848  |  
|                                                                                                                     
|                                                                                                                      | Conversion of convertible preferred shares to Redeemable
Convertible Preferred Series A at liquidation /
redemption value |                                        |        | (6,854     | )   |              |        |             |  |               |         |                  |  |       |     |             |  |   |         | (6,855 | )
|                                                                                                                     
|                                                                                                                      | Conversion of convertible preferred shares to Common
Stock and Series B Preferred Shares                                  |                                        |        | (122       | )   |              |        |             |  |               |         |                  |  |       |     |             |  |   |         |        |  
|                                                                                                                     
|Conversion of Subsidiary Common Stock into Company Common
Stock and Series B Preferred Shares:                        |                                                                                                                           |                                        |        |            |     |              |        |             |  |               |         |                  |  |       |     |             |  |   |         |       
|                                                                                                                     
|                                                                                                                      |                                                                                                                           | Elimination of Subsidiary Common Stock |        |            | 1   |              |        |             |  |               |         |                  |  |       |     |             |  |   |         |        |   | 
|                                                                                                                     
|                                                                                                                      |                                                                                                                           | Issuance of Company Common Stock       |        |            | (78 | )            |        |             |  |               |         |                  |  |       |     |             |  |   |         |        |   | 
|                                                                                                                     
|Company Common Stock and related equity held by
existing shareholders (net of 18,115 shares held treasury)            |                                                                                                                           |                                        | 2,678  |            |     |              |        |             |  |               |         |                  |  |       |     |             |  |   | 2,767   |       
|                                                                                                                     
|Minimum Pension Liability                                                                                             |                                                                                                                           |                                        |        |            |     |              |        |             |  |               |         |                  |  |       | (58 | )           |  |   | (58     | )     
|                                                                                                                     
|Conversion of Convertible Preferred Series B Stock to
Company Common Stock                                            |                                                                                                                           |                                        |        |            |     |              |        |             |  |               |         |                  |  |       |     |             |  |   |         |       
|                                                                                                                     
|Net loss                                                                                                              |                                                                                                                           |                                        |        |            |     |              |        |             |  |               | (9,951  | )                |  |       |     |             |  |   | (9,951  | )     
|                                                                                                                     
|Balance at December 31, 2002                                                                                          |                                                                                                                           |                                        | 31,373 |            |     |              |       |             |  |               | (41,822 | )                |  |       | (58 | )           |  |   | (10,216 | )     
|                                                                                                                     
|Net loss                                                                                                              |                                                                                                                           |                                        |        |            |     |              |        |             |  |               | (1,064  | )                |  |       |     |             |  |   | (1,064  | )     
|                                                                                                                     
|Balance at March 31, 2003                                                                                             |                                                                                                                           | $                                      | 31,373 |            |     | $            |       |             |  | $             | (42,886 | )                |  | $     | (58 | )           |  | $ | (11,280 | )     
|                                                                                                                     

See accompanying Notes to Condensed Consolidated Financial Statements

8



---



##### 



REGEN BIOLOGICS, INC.
(A Development Stage Company)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

|                                                                             |                                                                             |                                       |        |                              |     |                |        |                |     |   |         |              |      |  
|---------------------------------------------------------------------------- | --------------------------------------------------------------------------- | ------------------------------------- | ------ | ---------------------------- | --- | -------------- | ------ | -------------- | --- | - | ------- | ------------ | ---- | -
|                                                                             |                                                                             |                                       |        |                              |     |                |        |                |     |   |         |             
|                                                                             |                                                                             |                                       |        |                              |     |                |        |                |     |   |         | Period from 
|                                                                             |                                                                             |                                       |        |                              |     |                |        |                |     |   |         | December 21,
|                                                                             |                                                                             |                                       |        | Three Months Ended March 31, |     | 1989          
|                                                                             |                                                                             |                                       |        |                              |     | (Inception) to
|                                                                             |                                                                             |                                       |        | 2003                         |     | 2002           |        | March 31, 2003
|                                                                             |                                                                             |                                       |        |                              |     |                |        |               
|                                                                             |                                                                             |                                       |        | (unaudited)                  |     | (unaudited)    |        | (unaudited)   
|Operating Activities                                                         |                                                                             |                                       |        |                              |     |                |        |                |     |   |         |             
|Net loss                                                                     |                                                                             | $                                     | (1,064 | )                            |     | $              | (1,408 | )              |     | $ | (42,886 | )           
|Adjustments to reconcile net loss to net cash used in operating activities:  |                                                                             |                                       |        |                              |     |                |        |                |     |   |         |             
|                                                                             | Compensation expense associated with stock options                          |                                       |        |                             |     |                |        | 271            |     |   |         | 5,975        |     
|                                                                             | Issuance of common stock to consultant for services                         |                                       |        |                             |     |                |        |               |     |   |         | 2            |     
|                                                                             | Amortization of debt discount for warrant and beneficial
conversion feature |                                       |        |                             |     |                |        |               |     |   |         | 1,500        |     
|                                                                             | Non-cash interest expense                                                   |                                       |        | 35                           |     |                |        | 108            |     |   |         | 916          |     
|                                                                             | Depreciation and amortization                                               |                                       |        | 49                           |     |                |        | 62             |     |   |         | 2,082        |     
|                                                                             | Loss on disposal of property and equipment                                  |                                       |        |                             |     |                |        |               |     |   |         | 9            |     
|                                                                             | Changes in operating assets and liabilities:                                |                                       |        |                              |     |                |        |                |     |   |         |              |     
|                                                                             |                                                                             | Other current assets and receivables  |        |                              | (24 | )              |        |                | (13 | ) |         |              | (149 | )
|                                                                             |                                                                             | Inventory                             |        |                              | (80 | )              |        |                | 12  |   |         |              | (342 | )
|                                                                             |                                                                             | Other assets                          |        |                              | 7   |                |        |                |    |   |         |              | (124 | )
|                                                                             |                                                                             | Accounts payable and accrued expenses |        |                              | 83  |                |        |                | 182 |   |         |              | 434  |  
|                                                                             |                                                                             | Other liabilities                     |        |                              |    |                |        |                |    |   |         |              | 41   |  
|                                                                             |                                                                             |                                       |        |                              |     |                |        |                |     |   |         |             
|Net cash used in operating activities                                        |                                                                             |                                       | (994   | )                            |     |                | (786   | )              |     |   | (32,542 | )           
|Investing Activities                                                         |                                                                             |                                       |        |                              |     |                |        |                |     |   |         |             
|Purchases of property and equipment                                          |                                                                             |                                       | (9     | )                            |     |                |       |                |     |   | (1,948  | )           
|Changes in short-term investments                                            |                                                                             |                                       | 1,005  |                              |     |                | (201   | )              |     |   | 477     |             
|                                                                             |                                                                             |                                       |        |                              |     |                |        |                |     |   |         |             
|Net cash provided by (used in) investing activities                          |                                                                             |                                       | 996    |                              |     |                | (201   | )              |     |   | (1,471  | )           
|Financing Activities                                                         |                                                                             |                                       |        |                              |     |                |        |                |     |   |         |             
|Issuance of common stock to founders for contributed patents                 |                                                                             |                                       |       |                              |     |                |       |                |     |   | 42      |             
|Issuance of Series B preferred stock upon conversion of interest payable     |                                                                             |                                       |       |                              |     |                |       |                |     |   | 6       |             
|Reduction in payable to stockholder                                          |                                                                             |                                       |       |                              |     |                |       |                |     |   | (76     | )           
|Proceeds from issuance of convertible preferred stock, net of offering
costs |                                                                             |                                       |       |                              |     |                |       |                |     |   | 24,767  |             
|Proceeds from issuance of common stock                                       |                                                                             |                                       |       |                              |     |                |       |                |     |   | 301     |             
|Repayment on capital lease obligations                                       |                                                                             |                                       | (2     | )                            |     |                | (1     | )              |     |   | (114    | )           
|Proceeds from notes payable                                                  |                                                                             |                                       |       |                              |     |                | 988    |                |     |   | 11,410  |             
|Payments on notes payable                                                    |                                                                             |                                       |       |                              |     |                |       |                |     |   | (2,323  | )           
|                                                                             |                                                                             |                                       |        |                              |     |                |        |                |     |   |         |             
|Net cash provided by (used in) financing activities                          |                                                                             |                                       | (2     | )                            |     |                | 987    |                |     |   | 34,013  |             
|Net (decrease) increase in cash                                              |                                                                             |                                       |       |                              |     |                |       |                |     |   |        |             
|Cash at beginning of period                                                  |                                                                             |                                       | 1      |                              |     |                | 1      |                |     |   | 1       |             
|                                                                             |                                                                             |                                       |        |                              |     |                |        |                |     |   |         |             
|Cash at end of period                                                        |                                                                             | $                                     | 1      |                              |     | $              | 1      |                |     | $ | 1       |             
|                                                                             |                                                                             |                                       |        |                              |     |                |        |                |     |   |         |             

See accompanying Notes to Condensed Consolidated Financial Statements.

9



---



##### 



REGEN BIOLOGICS, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)

(1)   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

On June 21, 2002, ReGen Biologics, Inc (ReGen or the Company) acquired
RBio, Inc., formerly named ReGen Biologics, Inc. The acquisition was recorded
for accounting purposes as a reverse merger and recapitalization. For purposes
of this Form 10-Q, the historical financial statements of RBio, Inc., including
related notes, have replaced the prior historical financial statements of the
Company.

The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with the instructions to Form 10-Q and do not
include all the information and notes required by accounting principles
generally accepted in the United States for complete financial statements. In
the opinion of management, the accompanying condensed consolidated financial
statements contain all adjustments necessary to present fairly the financial
position and the results of operations for the interim periods.

ReGen will continue to require additional capital to complete the U.S. CMI
clinical trial, further develop its products and further develop sales and
distribution channels for its products around the world. Accordingly, the
Company is still considered a development stage enterprise. Management believes
that ReGen will emerge from the development stage when the CMI product is
available for sale in the U.S. or sales of all of its products have reached a
volume that will provide for positive gross margin.

For further information, refer to the consolidated financial statements
and notes included in ReGens Annual Report on
Form 10-K/A for the year ended December 31, 2002.

ReGen currently operates in one business segment that designs, develops,
manufactures and markets minimally invasive human implants and medical devices
for the repair and regeneration of damaged human tissue. ReGen is managed and
operated as one business segment. Accordingly, ReGen does not prepare financial
information for separate product areas and does not have separate reportable
segments as defined by Statement of Financial Accounting Standards (SFAS) No.
131, Disclosure about Segments of an Enterprise and Related Information.

ReGen is actively pursuing additional permanent equity capital in order to
support ongoing operations, and believes it requires one or more such
financings before it will be in a position to support itself through positive
operating earnings and cash flow. ReGen expects a financing to occur by
September 30, 2003, or before such time as current cash and short-term
investments are depleted. This financing is necessary to fund operations
through 2003 at the current level. Certain existing investors in ReGen, who
have invested in previous rounds of financing, have indicated their interest in
participating in the next financing. ReGen has received a written commitment
from one of its existing shareholders for an investment in the next financing
subject to certain conditions which are customary in such a commitment. While
ReGen has been successful in the past in obtaining the necessary capital to
support its operations, there is no guarantee that ReGen will be able to obtain
additional equity capital under commercially reasonable terms and conditions,
or at all.

Since the filing of its Form 10-K/A for the period ended December 31,
2002, ReGen has continued to meet with potential investors and undertake other
activities in preparation for the financing discussed above.

Concentrations of Risk

The Company currently has two principal customers that market and sell the
Companys two current products. The first customer has the license to sell the
Sharp Shooter product. The second customer, which is also a stockholder of the
Company, has the license to sell the CMI product outside of the United States.
Concentrations of receivables and receivables from related parties and revenues
by customer as of and for the quarters ended March 31, 2003 and 2002 are as
follows:

|                |  |            |  |  |     |                              |  |      |  |     |   |  |  |  |  |  |  |  |  | 
|--------------- |  | ---------- |  |  | --- | ---------------------------- |  | ---- |  | --- | - |  |  |  |  |  |  |  |  | 
|                |  |            |  |  |     | Three Months Ended March 31,
|                |  |            |  |  |     |                             
|                |  |            |  |  |     | 2003                         |  | 2002
|Receivables:    |  |            |  |  |     |                              |  |      |  |     |   |  |  |  |  |  |  |  |  | 
|                |  | Customer A |  |  | 7   | %                            |  |      |  | 76  | % | 
|                |  | Customer B |  |  | 93  | %                            |  |      |  | 24  | % | 
|Sales revenues: |  |            |  |  |     |                              |  |      |  |     |   |  |  |  |  |  |  |  |  | 
|                |  | Customer A |  |  | 27  | %                            |  |      |  | 78  | % | 
|                |  | Customer B |  |  | 73  | %                            |  |      |  | 22  | % | 
|Royalties:      |  |            |  |  |     |                              |  |      |  |     |   |  |  |  |  |  |  |  |  | 
|                |  | Customer A |  |  | 100 | %                            |  |      |  | 100 | % | 

10



---



##### 



Adoption of New Accounting Pronouncements

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
CompensationTransition and Disclosurean amendment of SFAS 123.This statement
amends SFAS No. 123, Accounting for Stock-Based Compensation,to provide
alternative methods of transition for voluntary change to the fair value based
method of accounting for stock-based employee compensation. In addition, this
statement amends the disclosure requirements of SFAS No. 123 to require
prominent disclosures in both annual and interim financial statements about the
method of accounting for stock-based employee compensation and the effect of
the method used on reported results. The Company has chosen to continue to
account for employee stock-based compensation using the intrinsic value method
prescribed in APB Opinion No. 25 and related Interpretations. Accordingly,
compensation expense for stock options issued to employees is measured as the
excess, if any, of the fair market value of the Companys stock at the date of
the grant over the exercise price of the related option.

Had compensation costs for the Companys stock options issued to employees
been determined based on SFAS No. 123, the Companys net loss and loss per
share would have been as follows:

|                                                                                                                                                           |  |                             |        |      |  |   |        |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------- | ------ | ---- |  | - | ------ | -
|                                                                                                                                                           |  | Three Months Ended March 31
|                                                                                                                                                           |  |                            
|                                                                                                                                                           |  | 2003                        |        | 2002
|                                                                                                                                                           |  |                             |        |     
|Net loss, as reported                                                                                                                                      |  | $                           | (1,064 | )    |  | $ | (1,408 | )
|Add: Total stock-based
employee compensation expense
as reported under intrinsic
value method (APB No. 25) for
all awards, net of related tax
effects      |  |                             |       |      |  |   | 239    |  
|Deduct: Total stock-based
employee compensation expense
determined under fair value
based method (SFAS No. 123)
for all awards, net of related
tax effects |  |                             | (46    | )    |  |   | (474   | )
|                                                                                                                                                           |  |                             |        |      |  |   |        |  
|Pro forma net loss                                                                                                                                         |  | $                           | (1,110 | )    |  | $ | (1,643 | )
|                                                                                                                                                           |  |                             |        |      |  |   |        |  
|Earnings per share:                                                                                                                                        |  |                             |        |      |  |   |        |  
|Basic and diluted  as reported                                                                                                                            |  | $                           | (0.04  | )    |  | $ | (0.08  | )
|                                                                                                                                                           |  |                             |        |      |  |   |        |  
|Basic and diluted  pro forma                                                                                                                              |  | $                           | (0.04  | )    |  | $ | (0.10  | )
|                                                                                                                                                           |  |                             |        |      |  |   |        |  
|Shares                                                                                                                                                     |  |                             | 29,071 |      |  |   | 17,045 |  

Reclassifications

Certain prior period and inception to March 31, 2003 balances have been
reclassified to conform to the current years presentation.

Short-term Investments

At March 31, 2003 and December 31, 2002, all investments are debt
securities classified as held to maturity, and, accordingly, are carried at
amortized cost, which approximates fair value. The cost of securities sold is
based on the specific identification method, when applicable. The Company had
$2,468 and $3,473 of short-term investments invested in U.S. and foreign
government agency and corporate securities as of March 31, 2003 and December 31,
2002, respectively. The Company did not have any material realized or
unrealized gains or losses at March 31, 2003 and December 31, 2002 and for the
periods then ended.

Inventories

Inventories are valued at the lower of actual cost or market, using the
first-in, first-out (FIFO) method. Work in process is calculated by estimating
the number of units that will be successfully converted to finished goods,
based upon a straight-line build-up in the stage of completion, and historical
yields reduced by estimated usage for quality control testing. Inventories
consisted of the following:

|                |  |           |     |              |  |   |     | 
|--------------- |  | --------- | --- | ------------ |  | - | --- | 
|                |  | March 31, |     | December 31,
|                |  | 2003      |     | 2002        
|                |  |           |     |             
|Raw materials   |  | $         | 23  |              |  | $ | 24  | 
|Work in process |  |           | 197 |              |  |   | 146 | 
|Finished goods  |  |           | 122 |              |  |   | 92  | 
|                |  |           |     |              |  |   |     | 
|Total           |  | $         | 342 |              |  | $ | 262 | 
|                |  |           |     |              |  |   |     | 

Inventory was adjusted down approximately $43 during the first quarter of 2003
to reflect values at the lower of cost or market.

11



---



##### 



Item 2.   Managements Discussion and Analysis of Financial Condition and Results of Operations

On June 21, 2002, ReGen Biologics, Inc (ReGen) acquired RBio, Inc.,
formerly named ReGen Biologics, Inc. The acquisition was recorded for
accounting purposes as a reverse merger and recapitalization. For purposes of
this filing, the historical financial statements of RBio, Inc. including
related notes have replaced the prior historical financial statements of ReGen.

The following discussion and analysis should be read in conjunction with
the consolidated financial statements and related notes included elsewhere in
this Form 10-Q. This section of the Form 10-Q contains forward-looking
statements that involve risks and uncertainties, such as statements about our
plans, objectives, expectations and intentions. We use words such as
anticipate, believe, expect, future and intend and similar
expressions to identify forward-looking statements. Our actual results could
differ materially from those anticipated in these forward-looking statements
for many reasons, in this Form 10-Q. You should not place undue reliance on
these forward-looking statements, which apply only as of the date of this Form
10-Q.

Overview

We are a biological remodeling company that designs, develops,
manufactures and markets minimally invasive human implants and medical devices
for the repair and remodeling of damaged human tissue. Our biological
remodeling scaffold has been applied to a variety of therapeutic applications
and we plan to continue to develop and introduce tissue re-growth products
based on our patented technologies.

Our flagship product, the Collagen Meniscus Implant, or the CMI, is an
implant product for the meniscus of the human knee. The CMI is approved for
sale in Europe, Australia and Chile and is expected to be selectively available
in Canada later in 2003. The CMI is distributed by Centerpulse Orthopedics
Division (NYSE: CEP) under a distribution agreement providing Centerpulse with
the right to distribute the product outside the U.S., so long as certain
minimum sales levels as defined in the distribution agreement are realized.

We also sell the SharpShooter Tissue Repair System, or the SharpShooter, a
suturing device used to facilitate the surgical implant of the CMI as well as
to perform other similar arthroscopic meniscal repair procedures. The
SharpShooter is currently approved for sale in the United States, Europe,
Canada, Australia, Chile and Japan. It is distributed by Linvatec Corporation,
a division of Conmed (NASDAQ: CNMD) under a worldwide distribution agreement.

ReGen is currently pursuing approval to sell the CMI in the U.S. We have
recently completed the required enrollment in the largest U.S. clinical trial
to-date involving arthroscopic surgery of the knee. This trial, called the CMI
Multicenter Pivotal Trial, or MCT, consists of 288 patients, 14 centers, and 23
surgeons. Enrollment and surgeries were completed in the fourth quarter of
2002. Since the U.S. Food and Drug Administration requires clinical follow-up
at two years post surgical procedure on orthopedic clinical trial patients, we
expect to submit the Pre-Market Approval, or PMA, application to the
FDA shortly after completion of the two-year clinical follow-up. We have pursued a phased
analytical strategy for the MCT data. Results from our current analyses to-date
are promising. Approximately 80% of the
patients in the MCT are at least one year post index surgical procedure and
approximately 70% are  at least two years post index surgical
procedure.

We have not conducted a complete analysis of all variables or clinical
endpoints. A more extensive analysis of the clinical outcomes data will be
conducted over time.

A damaged meniscus is frequently repaired by an arthroscopic surgical
procedure known as a partial meniscectomy. ReGen estimates that in 2002, there
were 783,000 partial meniscectomy procedures in the U.S. During this procedure
surgeons remove damaged meniscus tissue leaving less meniscus tissue to support
the knee and protect the patient from further complications or injury. For
many patients, the CMI represents an alternative procedure with the potential
to re-grow much of the tissue otherwise lost in partial meniscectomy
procedures, allowing a return to a more active lifestyle.

We plan to continue to develop and commercialize new products which will
allow us to capitalize on our clinically proven collagen scaffold technology by
continuing to design, develop, manufacture, and market our own applications,
and to partner with key market leaders to: (1) develop products in targeted
therapeutic areas; and (2) distribute ReGen-developed products.

Critical Accounting Policies

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. ReGen believes, given current facts and
circumstances, its estimates and assumptions are reasonable, adhere to
accounting principles generally accepted in the United States, and are
consistently applied. Actual results could differ from those estimates.

We have identified below some of the more significant accounting policies
we follow in preparing the accompanying condensed consolidated financial
statements.

Revenue Recognition

12



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We recognize revenue in accordance with the provisions of Staff Accounting
Bulletin No. 101, Revenue Recognition in Financial Statements, whereby revenue
is not recognized until it is realized or realizable and earned. Revenue is
recognized when all of the following criteria are met: persuasive evidence of
an arrangement exists, delivery has occurred, the sellers price to the buyer
is fixed or determinable and collection of such revenue is reasonably assured.
We generally recognize revenue from product sales upon the shipment of such
products to our distributors. Title of product passes to the customers FOB
origin.

We receive royalties from our licensees. Royalties are generally due under
the license agreements when the licensee sells the product to a third party. If
determinable at the time we publish our results, royalties are recognized when
the licensee has sold the product to the end user and we have fulfilled our
obligations under the applicable agreement. If not determinable at the time
results are published, royalties are recognized in the period they become
determinable.

License fees represent payments received from distributors for exclusive
perpetual licenses to sell our products in various geographic areas. These fees
are recognized as other income when all performance criteria in the underlying
agreement have been met. Generally, license fees for existing license
arrangements are not recurring.

Inventory Valuation

Inventory is valued at the lower of cost or market. Market is based on
current sales of product to existing customers reduced by an estimate of cost
to dispose. 43% of our inventory is being carried at market. Work in process
is calculated by estimating the number of units that will be successfully
converted to finished goods, based upon a straight-line build-up in the stage
of completion, and historical yields reduced by estimated usage for quality
control testing.

During 2001 and 2002, the Company shipped certain components of the
SharpShooter that were later identified to have the potential to become
non-sterile. The Company instituted a recall of such product components during
2002. Ultimately, in the fourth quarter of 2002 the Company agreed to take
title of the returned product rather than issuing a credit to the customer. The
Company received and included in inventory the reworked product at a net
carrying amount equal to the original carrying amount of the returned inventory
less a reserve representing the estimated cost to rework the product. Costs
incurred and paid to rework the returned inventory will be included in
inventory to the extent of the original carrying amount. Completion of the
rework and FDA approval of the reworked packaging may involve additional costs
which can not currently be anticipated. Any such additional costs would be
recorded when management becomes aware of the factors which may require the
additional costs. Outside of the returns associated with the product recall
described above, the Companys history of product returns has been
insignificant.

Research and Development Costs

Research and development costs are expensed as incurred. We will continue
to incur research and development costs as we continue our product development
activities and pursue regulatory approval to market our products. Research and
development costs have, and will continue to include expenses for internal
development, personnel, clinical trials, regulatory compliance and filings,
validation of processes, start up costs to establish commercial manufacturing
capabilities and related facilities, supplies and other expenses.

Stock Based Compensation

We have accounted for our employee stock-based compensation in accordance
with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees. No expense is recognized for options issued to employees where the
exercise price is equal to or greater than the market value of the underlying
security. Expense is recognized in the financial statements for options issued
to employees where the option price is below the fair value of the underlying
security, for options issued to non-employees and for options and warrants
issued in connection with financing and equity transactions (collectively
referred to as compensatory options).

If ReGen had elected to recognize compensation based on the fair value of
options granted to employees as prescribed by Statement of Financial Account
Standards (SFAS) No. 123, net loss and net loss per share would have been
$(1,110,000) and $(0.04), and $(1,643,000) and $(0.10) for the three months
ended March 31, 2003 and 2002, respectively.

For periods prior to the merger of the Company with RBio, expense
associated with compensatory options and warrants has been measured based on
managements estimate of the fair value of the underlying security (which in
turn is based on managements estimate of the fair value of RBio.)

Income Taxes

The Company had a net operating loss carryforwards at December 31, 2002 of
approximately $33.4 million and a research and development tax credit of
approximately $410,000. The federal net operating loss and credit carryforwards
will begin to expire in 2006, if not utilized. The state net operating loss and
credit carryforwards started to expire in 2000, and will continue to expire if
not utilized. The utilization of net operating loss carryforwards may be
limited due to changes in the ownership of the Company, and the effect of the
reverse merger and recapitalization completed on June 21, 2002.

Results of Operations

13



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Three Months Ended March 31, 2003 Compared to Three Months Ended March 31, 2002

REVENUE. Revenue increased $30,000, or 21%, to approximately $174,000 for the
three months ended March 31, 2003 from approximately $144,000 for the same
period in 2002. This increase in revenues resulted primarily from increased
sales of the CMI product. CMI sales increased approximately $38,000, or 127%,
to approximately $68,000 for the three months ended March 31, 2003 from $30,000
during the three months ended March 31, 2002. This increase was due to an
increase in the CMI units shipped during the period to Centerpulse Orthopedics
Division, ReGens distributor of the CMI outside of the U.S. CMI unit
shipments increased by 76 units, or 121%, to 139 for the three months ended
March 31, 2003 from 63 for the same period in 2002. SharpShooter sales
decreased by approximately $7,000, or 6%, to approximately $106,000 for the
three months ended March 31, 2003 from approximately $113,000 for the same
period in 2002, primarily due to a decrease in the number of SharpShooter
product components shipped during the period to Linvatec Corporation, ReGens
primary distributor for the SharpShooter. Sales to and royalties received from
Linvatec Corporation accounted for approximately 30% of revenue for the three
months ended March 31, 2003 and approximately 78% for the three months ended
March 31, 2002.

COST OF GOODS SOLD. Cost of goods sold decreased by approximately $5,000, or
2%, to approximately $271,000 for the three months ended March 31, 2003 from
approximately $276,000 for the three months ended March 31, 2002. This decrease
is related to the warranty reserve booked in the first quarter of 2002 of
approximately $72,000. For the three months ended March 31, 2003 and 2002
respectively, CMI costs accounted for approximately $89,000 and $42,000 and
SharpShooter costs accounted for approximately $174,000 and $143,000. At March
31, 2003, 43% of our inventory is being carried at market. Due to a high degree
of fixed costs in the production process, and the early stage of market
acceptance for our products, current sales and production volumes are not
adequate to provide for per unit costs that are lower than the current market
price for certain of our products.

RESEARCH AND DEVELOPMENT. Research and development expenses decreased by
approximately $136,000, or 24%, to approximately $438,000 for the three months
ended March 31, 2003 from approximately $574,000 for the three months ended
March 31, 2002. Research and development expenses have decreased due to an
intentional reduction in research and development spending associated with new
products for cash management purposes.

BUSINESS DEVELOPMENT, GENERAL AND ADMINISTRATIVE. Business development, general
and administrative expenses increased by approximately $163,000, or 41%, to
approximately $556,000 for the three months ended March 31, 2003, compared with
$393,000 for the three months ended March 31, 2002. These costs include the
costs of marketing, business development, corporate operations, finance and
accounting, and other general expenses, and have increased primarily as a
result of the merger and the costs associated with periodic reporting and other
necessary activities of being a public company, which would not have been
reflected in the first quarter of 2002 operating results.

COMPENSATION EXPENSE ASSOCIATED WITH STOCK OPTIONS AND WARRANTS. Compensation
expense associated with stock options and warrants was $0 for the three months
ended March 31, 2003, compared to approximately $271,000 for the three months
ended March 31, 2002. ReGen made no stock option grants in the first quarter of
2003 and all deferred compensation was expensed in the second quarter of 2002
at the time of the reverse merger and recapitalization.

NON-OPERATING INCOME (EXPENSE). Non-operating income (expense) consists of
interest and other income, rental income and interest expense. Interest and
other income increased to approximately $5,000 for the three months ended March
31, 2003 from $1,000 for the three months ended March 31, 2002. This increase
was primarily the result of an increase in the amount of short term investments
during that period. Rental income increased by approximately $6,000 to
approximately $50,000 for the three months ended March 31, 2003 from
approximately $44,000 for the three months ended March 31, 2002. The increase
was due to an increase in the sub-lease rent. Interest expense decreased
approximately $74,000 for the three months ended March 31, 2003 from the three
months ended March 31, 2002. The decrease was primarily due to the elimination
of interest expense on the bridge loan financing which was converted to equity
in the second quarter of 2002.

Liquidity and Capital Resources

Cash and short-term investments were $2.5 million as of March 31, 2003
compared with $3.5 million as of December 31, 2002. The decrease in cash and
short-term investments is primarily the result of cash used to support the
normal operations of ReGen.

Cash used in operating activities of approximately $1.0 million resulted
primarily from an increase in other current assets, receivables and inventory
of approximately $104,000, a decrease in other assets of approximately $7,000
and an increase in accounts payable and accrued expenses of $83,000 together
with non-cash items of $84,000 and a net loss of $1.1 million.

During the three months ended March 31, 2003, ReGen used approximately
$1.0 million in short-term investments, purchased $9,000 of property and
equipment and paid down $2,000 of capital lease obligations.

ReGen anticipates that it will continue to incur net losses that will
require additional financing until, at the earliest, ReGen receives FDA
approval for its CMI product and is able to market the CMI product in the
United States. In the fourth quarter of 2002 ReGen completed the required
enrollment and related surgical procedures for its CMI clinical trial in the
U.S. All patients are expected to complete two years of follow-up prior to
ReGens submission of the results in its Pre-market Approval Application, or
PMA, to the FDA. ReGen expects these two-year clinical follow-up exams will be
completed in the fourth quarter of 2004, with submission of the completed PMA
to the FDA shortly

14



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thereafter. The process of review by the FDA is uncertain, but ReGen
expects that the FDA will issue its ruling in 2005. Should the FDA approve the
CMI for sale in the U.S., sales of the CMI in the U.S. will not occur until, at
the earliest, in late 2005.

Although the CMI is approved and distributed in Europe, Australia and
Chile, it is not approved for sale in the U.S., and ReGen is making no claim
regarding its safety, effectiveness or its potential for FDA approval.

In addition to regulatory related hurdles, in order to approach a position
of positive operating earnings and cash flow, ReGen will need to effectively
address various other operating issues, including special reimbursement
provisions for the surgeons and facilities that will be responsible for
implanting ReGens CMI or other future products. While ReGen is actively
working to address these issues, there is no guarantee that ReGen will be able
to obtain special reimbursement provisions, or obtain them in any given time
frame.

ReGen is actively pursuing additional permanent equity capital in order to
support ongoing operations, and believes it requires one or more such
financings before it will be in a position to support itself through positive
operating earnings and cash flow. ReGen expects a financing to occur by
September 30, 2003, or before such time as current cash reserves are depleted.
This financing is necessary to fund operations through 2003 at the current
level. Certain existing investors in ReGen, who have invested in previous
rounds of financing, have indicated their interest in participating in the next
financing. ReGen has received a written commitment from one of its existing
shareholders for an investment in the next financing subject to certain
conditions which are customary in such a commitment. While ReGen has been
successful in the past in obtaining the necessary capital to support its
operations, there is no guarantee that ReGen will be able to obtain additional
equity capital under commercially reasonable terms and conditions, or at all.

Since the filing of its Form 10-K/A for the period ended December 31,
2002, ReGen has continued to meet with potential investors and undertake other
activities in preparation for the financing discussed above.

CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS

We caution you that certain statements contained in or incorporated by
reference into this Form 10-Q, or which are otherwise made by us or on our
behalf are forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Forward-looking statements include
statements that are predictive in nature, which depend upon or refer to future
events or conditions, which include words such as believe, plan,
anticipate, estimate, expect, intend, seek or similar expressions.
In addition, any statements concerning future financial performance, ongoing
business strategies or prospects, and possible future actions, which may be
provided by our management, are also forward-looking statements.
Forward-looking statements are based on current expectations and projections
about future events and are subject to risks, uncertainties, and assumptions
about our company, economic and market factors and the industry in which we do
business, among other things. These statements are not guaranties of future
performance and we undertake no obligation to publicly update any
forward-looking statements, whether as a result of new information, future
events or otherwise.

Actual events and results may differ materially from those expressed or
forecasted in forward-looking statements due to a number of factors. Important
factors that could cause actual results to differ materially include, but are
not limited to, our ability to complete the CMI clinical trial and obtain FDA
approval, our ability to obtain additional financing, the ability of our
distribution partners to effectively market and sell our products, our ability
to procure product components and effectively produce products for resale, our
ability to control production quantities and inventory in order to avoid
unanticipated costs such as outdated inventory, the timely collection of our
accounts receivable, our ability to attract and retain key employees, our
ability to timely develop new products and enhance existing products, the
occurrence of certain operating hazards and uninsured risks, our ability to
protect proprietary information and to obtain necessary licenses on
commercially reasonable terms, the impact of governmental regulations, changes
in technology, marketing risks, other unforeseen events that may impact our
business and our ability to adapt to economic, political and regulatory
conditions affecting the healthcare industry.

Our filings with the SEC are available to the public from commercial
document retrieval services and at the Web site maintained by the SEC at
http://www.sec.gov.

15



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Item 3.   Quantitative and Qualitative Disclosures About Market Risk

For information regarding ReGens exposure to certain market risks, see
Item 7A, Quantitative and Qualitative Disclosures About Market Risk, in the
Companys Annual Report on Form 10-K/A for the year ended December 31, 2002.
Except as described in the Managements Discussion and Analysis of Financial
Condition and Results of Operations, there have been no significant changes in
our financial instrument portfolio or market risk exposures since December 31,
2002.

Item 4.   Controls and Procedures

We have established and maintains disclosure controls and procedures that
are designed to ensure that material information required to be disclosed by
ReGen in the reports that it files under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported within the time periods specified
in the Securities and Exchange Commissions rules and forms, and that such
information is accumulated and communicated to the Companys management,
including the Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow timely decisions regarding required disclosure.

Within the 90 days prior to the date of this quarterly report, under the
supervision and with the participation of ReGens Chief Executive Officer and
Chief Financial Officer, our management carried out an evaluation of the
effectiveness of the design and operation of disclosure controls and
procedures. Based upon that evaluation, the Chief Executive Officer and Chief
Financial Officer concluded that our disclosure controls and procedures are
effective as of the date of such evaluation in time to alert them to material
information relating to ReGen (including its consolidated subsidiaries)
required to be included in ReGens periodic SEC filings.

There have been no significant changes to our internal controls or in
other factors that could significantly affect internal controls subsequent to
the date we carried out our evaluation.

16



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PART II

Item 1.   Legal Proceedings

None.

Item 2.   Changes in Securities and Use of Proceeds

None.

Item 3.   Defaults upon Senior Securities

None.

Item 4.   Submission of Matters to a Vote of Security Holders

None.

Item 5.   Other Information

ReGen appointed Avhi Acharya to the board commencing May 8, 2003 and
expiring at the 2004 annual meeting of stockholders.

Item 6.   Exhibits and Reports on Form 8-K

(a) Exhibits.

The following Exhibits are filed herewith and made a part hereof:

|            |  |                                                                                                                                                                              
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                  
|2.1         |  | Agreement and Plan of Merger by and among ReGen Biologics, Inc., Aros Corporation and Aros Acquisition
Corporation dated as of June 7, 2002(12)                              
|2.2         |  | Agreement and Plan of Merger among the Company, NHA Acquisition Corporation, National Health Advisors,
Ltd., Scott A. Mason and Donald W. Seymour dated as of June 2, 1997(5)
|2.3         |  | Agreement and Plan of Merger among the Company and MetaContent, Inc. dated as of March 21, 2001(2)                                                                           
|2.4         |  | Asset Purchase Agreement between Cerner Corporation and the Company dated as of April 7, 2001(3)                                                                             
|2.5         |  | Amendment No. 1 to Asset Purchase Agreement by and between Cerner Corporation and the Company dated as of
June 11, 2001(3)                                                   
|3.1         |  | Amended and Restated Certificate of Incorporation(1)                                                                                                                         
|3.2         |  | Certificate of Amendment to the Certificate of Incorporation(5)                                                                                                              
|3.3         |  | Certificate of Ownership and Merger(13)                                                                                                                                      
|3.4         |  | Certificate of Amendment to the Certificate of Incorporation(13)                                                                                                             
|3.5         |  | Amended and Restated By-Laws(4)                                                                                                                                              
|4.1         |  | Specimen Common Stock Certificate(6)                                                                                                                                         
|4.2         |  | Rights Agreement between the Company and First Chicago Trust Company of New York, dated as of May 6, 1997(7)                                                                 
|4.3         |  | ReGen Biologics, Inc. Non-Employee Director Option Plan(1)                                                                                                                   
|4.4         |  | ReGen Biologics, Inc. Non-Employee Director Supplemental Stock Option Plan Amended and Restated Effective
April 5,2001                                                       
|4.5         |  | Registration Agreement between the Company and Certain Stockholders, dated December 28, 1995(6)                                                                              
|4.6         |  | Amendment No. 1 to Rights Agreement between the Company and Equiserve Trust Company, N.A., dated as of June
7, 2002                                                          
|4.7         |  | Form of Nonqualified Director Stock Option Agreement(11)                                                                                                                     
|4.8         |  | ReGen Biologics, Inc. Employee Stock Option Plan, Amended and Restated Effective June 21, 2002                                                                               
|4.9         |  | ReGen Biologics, Inc. Non-Employee Director Stock Option Plan, Amended June 21, 2002                                                                                         
|10.1        |  | Employment agreement by and between Gerald E. Bisbee, Jr., Ph. D. and ReGen Biologics, Inc. dated September
22, 1998 and amended on September 12, 2000                       
|99.1        |  | Certification of Chief Executive Officer                                                                                                                                     
|99.2        |  | Certification of Chief Financial Officer                                                                                                                                     

17



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|            |  |                                                                                                                                                                                                                                                                                                                   
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                       
|(1)         |  | Incorporated herein by reference to the Companys Report on Form 10-Q for the quarter ended June 30, 1997 (File No. 0-20805)                                                                                                                                                                                      
|(2)         |  | Incorporated herein by reference to the Companys Report on Form 10-Q/ A for the quarter ended March 31, 2001 (File No. 0-20805)                                                                                                                                                                                  
|(3)         |  | Incorporated herein by reference to the Companys Report on Form 8-K dated April 12, 2001
(File No. 0-20805)                                                                                                                                                                                                      
|(4)         |  | Incorporated herein by reference to the Companys Report on Form 10-K for the year ended December 31, 2000 (File No. 0-20805)                                                                                                                                                                                     
|(5)         |  | Incorporated herein by reference to the Companys Report on Form 10-Q for the quarter ended June 30, 2001 (File No. 000-20805)                                                                                                                                                                                    
|(6)         |  | Incorporated herein by reference to the Companys Registration Statement on Form S-1
(File No. 333-04106)                                                                                                                                                                                                         
|(7)         |  | Incorporated herein by reference to the Companys Current Report on Form 8-K filed on June 4, 1997 (File No. 0-20805)                                                                                                                                                                                             
|(8)         |  | Incorporated herein by reference to the Companys Report on Form 10-Q for the quarter ended March 31, 1999 (File No. 0-20805)                                                                                                                                                                                     
|(9)         |  | Incorporated herein by reference to the Companys Current Report on Form 8-K filed on January 14, 1997 (File No. 0-20805)                                                                                                                                                                                         
|(10)        |  | Incorporated herein by reference to the Companys Report on Form 10-Q for the quarter ended March 31, 1997 (File No. 0-20805)                                                                                                                                                                                     
|(11)        |  | Incorporated herein by reference to the Companys Report on Form 10-K for the year ended December 31, 1997 (File No. 0-20805)                                                                                                                                                                                     
|(12)        |  | Incorporated herein by reference to the Companys Report on Form 10-Q/A for the quarter ended June 30, 2002 (File No. 0-20805)                                                                                                                                                                                    
|(13)        |  | Incorporated herein by reference to the Companys Current Report on Form 8-K filed on January 6, 2003 setting forth the Certificate of Ownership and Merger, Certificate of
Amendment of the Amended and Restated Certificate of Incorporation and letter to Shareholders dated January 6, 2003 (File No. 0-20805)
|(14)        |  | Incorporated herein by reference to the Companys Report on Form 10-K/A for the year ended December 31, 2002
(File No. 0-20805)                                                                                                                                                                                   

(b)  Reports on Form 8-K.

Current Report on Form 8-K on January 6, 2003.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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 on May 15, 2003.

REGEN BIOLOGICS, INC.

By:    /s/ BRION D. UMIDI

|                                                                 | 
|---------------------------------------------------------------- | 
|Brion D. Umidi
Senior Vice President and
Chief Financial Officer | 

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CERTIFICATION
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Gerald E. Bisbee, Jr., certify that:

1.     I have reviewed this quarterly report on Form 10-Q of ReGen Biologics, Inc.;

2.     Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made,
not misleading with respect to the period covered by this quarterly report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material respects
the financial condition, results of operations and cash flows of the registrant as of,
and for, the periods presented in this quarterly report;

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) Designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period in
which this quarterly report is being prepared;

b) Evaluated the effectiveness of the registrants disclosure controls and procedures
as of a date within 90 days prior to the filing date of this quarterly report (the
Evaluation Date); and

c) Presented in this quarterly report our conclusions about the effectiveness of the
disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.     The registrants other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrants auditors and the audit committee of the
registrants board of directors (or persons performing the equivalent function):

a) All significant deficiencies in the design or operation of internal controls which
could adversely affect the registrants ability to record, process, summarize and
report financial data and have identified for the registrants auditors any material
weaknesses in internal controls; and

b) Any fraud, whether or not material, that involves management or other employees who
have a significant role in the registrants internal controls; and

6.     The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to the
date of our most recent evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.

May 15, 2003



|By: | /s/ GERALD E. BISBEE, JR.
|--- | -------------------------



| | Gerald E. Bisbee, Jr.President and
Chief Executive Officer
| | ----------------------------------------------------------

20



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CERTIFICATION
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Brion Umidi, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of ReGen Biologics, Inc.;

2.     Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made,
not misleading with respect to the period covered by this quarterly report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material respects
the financial condition, results of operations and cash flows of the registrant as of,
and for, the periods presented in this quarterly report;

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) Designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period in
which this quarterly report is being prepared;

b) Evaluated the effectiveness of the registrants disclosure controls and procedures
as of a date within 90 days prior to the filing date of this quarterly report (the
Evaluation Date); and

c) Presented in this quarterly report our conclusions about the effectiveness of the
disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.     The registrants other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrants auditors and the audit committee of the
registrants board of directors (or persons performing the equivalent function):

a) All significant deficiencies in the design or operation of internal controls which
could adversely affect the registrants ability to record, process, summarize and
report financial data and have identified for the registrants auditors any material
weaknesses in internal controls; and

b) Any fraud, whether or not material, that involves management or other employees who
have a significant role in the registrants internal controls; and

6.     The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to the
date of our most recent evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.

May 15, 2003



|By: | /s/ BRION UMIDI
Brion UmidiChief Financial Officer
|--- | --------------------------------------------------

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