##### 



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-Q/A
 Amendment No. 1
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2006
 Or
 o
    
    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. Employerincorporation or organization)
    
    Identification No.)509 Commerce Street,1st Floor, East Wing,Franklin Lakes, NJ
    
    07417(Address of principal executive offices)
    
    (Zip Code)
 Registrants telephone number, including area code:
 (201) 651-5140
 Securities registered pursuant to Section 12(b) of the Act:
 None
 Securities registered pursuant to Section 12(g) of the Act:
 Title of Class
 Common Stock $.01 par value per share
 þ o
  o o þ
 o þ




---



##### 



Description of Amendment No. 1 to Form 10-Q for the three month period ended March 31, 2006
    
    
    Note (1), Summary of Significant Accounting Policies Added updated discussion of
liquidity in Risks and Going Concern Considerations section
    
    Note (1), Summary of Significant Accounting PoliciesRevised the pro-forma disclosures
of net loss and earnings per share for the three month period ended March 31, 2005 required
by SFAS No. 123 as amended by SFAS No. 148
    
    Note (1), Summary of Significant Accounting PoliciesRevised the disclosures about stock based compensation
    
    Added Note (6) to disclose the restatement
    
    
    An informal SEC inquiry about the Companys historical stock option granting and accounting practices;
    
    The potential individual tax consequences to recipients of stock option awards;
    
    The impact of the restatement on our disclosure controls and procedures; and
  2




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##### 



REGEN BIOLOGICS, INC.
 INDEX
 Page No.PART I  Financial Information
    
    
    4Item 1. Financial Statements
    
    
    4Condensed Consolidated Balance Sheets at March 31, 2006 (restated) (unaudited) and December 31, 2005 (restated)
    
    
    4Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2006 (restated)
(unaudited) and 2005 (restated) (unaudited), and the Period from December 21, 1989 (inception) to March 31,
2006 (restated) (unaudited)
    
    
    5Consolidated Statement of Changes in Stockholders Equity (Deficit) and Series A & Series C Redeemable
Convertible Preferred Stock for the Period from December 21, 1989 (inception) to March 31, 2006 (restated)
(unaudited)
    
    
    6Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2006 (restated)
(unaudited) and 2005 (restated) (unaudited) and the Period from December 21, 1989 (inception) to March 31,
2006 (restated) (unaudited)
    
    
    11Notes to Condensed Consolidated Financial Statements (unaudited)
    
    
    12Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    22Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    30Item 4. Controls and Procedures
    
    
    30PART II  Other Information
    
    
    31Item 1. Legal Proceedings
    
    
    31Item 1A. Risk Factors
    
    
    31Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    31Item 3. Defaults upon Senior Securities
    
    
    31Item 4. Submission of Matters to a Vote of Security Holders
    
    
    31Item 5. Other Information
    
    
    31Item 6. Exhibits
    
    
    32Signatures
    
    
    35Certification
 3




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##### 



PART I  Financial Information
 Item 1. Financial Statements
 REGEN BIOLOGICS, INC.
 CONDENSED CONSOLIDATED BALANCE SHEETS
 March 31, 2006
    
    
    December 31, 2005(unaudited)(Restated)
    
    
    (Restated)(1)
    
    
    (1)ASSETSCurrent assetsCash and cash equivalents
    
    $
    7,388
    
    
    $
    9,535Short-term investments
    
    
    1,798
    
    
    
    3,744Trade receivables, net of allowance for
doubtful accounts of $5 and $8, as of March
31, 2006 and December 31, 2005, respectively
    
    
    72
    
    
    
    50Inventory
    
    
    377
    
    
    
    368Prepaid expenses and other current assets
    
    
    354
    
    
    
    295Total current assets
    
    
    9,989
    
    
    
    13,992Property and equipment, net
    
    
    272
    
    
    
    205Investments
    
    
    253
    
    
    
    251Other assets
    
    
    88
    
    
    
    95Total assets
    
    $
    10,602
    
    
    $
    14,543LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)Current liabilities:Accounts payable
    
    $
    1,172
    
    
    $
    984Accounts payable to related party
    
    
    3
    
    
    
    2Accrued expenses
    
    
    843
    
    
    
    1,466Pension liability
    
    
    163
    
    
    
    163Other current liabilities
    
    
    14
    
    
    
    30Total current liabilities
    
    
    2,195
    
    
    
    2,645Other liabilities
    
    
    16
    
    
    
    18Long-term portion of capital leases
    
    
    47
    
    
    
    51Long-term portion of notes payable to related
party, including accrued interest of $1,412
and $1,332 as of March 31, 2006 and December
31, 2005, respectively
    
    
    7,454
    
    
    
    7,374Total liabilities
    
    
    9,712
    
    
    
    10,088Series A redeemable convertible preferred
stock, $.01 par value; 15,309,822 shares
authorized; issued and outstanding 13,260,025
shares at liquidation preference of $5,942 as
of March 31, 2006 and December 31, 2005
    
    
    5,942
    
    
    
    5,942Series C redeemable convertible preferred
stock, $.01 par value; 30,000,000 shares
authorized; issued and outstanding 11,046,637
shares at liquidation preference of $4,950 as
of March 31, 2006 and December 31, 2005
    
    
    4,429
    
    
    
    4,402Stockholders equity (deficit):Common stock, $.01 par value; 165,000,000
shares authorized; issued 69,673,373 shares
at March 31, 2006, and 69,173,678 shares at
December 31, 2005
    
    
    696
    
    
    
    691Additional paid-in capital
    
    
    65,899
    
    
    
    65,487Deficit accumulated during development stage
    
    
    (76,076
    )
    
    
    (72,067
    )Total stockholders deficit
    
    
    (9,481
    )
    
    
    (5,889
    )Total liabilities and stockholders deficit
    
    $
    10,602
    
    
    $
    14,543
 
 (1)
    
    See Note (6), Restatement, of the Notes to Condensed Consolidated Financial Statements.  4




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##### 



REGEN BIOLOGICS, INC.
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 Period fromDecember 21, 1989Three Months Ended March 31,
    
    
    (Inception) to2006
    
    
    2005
    
    
    March 31, 2006(Restated)
    
    
    (Restated)
    
    
    (Restated)(1)
    
    
    (1)
    
    
    (1)Revenue:Sales
    
    $
    157
    
    
    $
    138
    
    
    $
    3,533Royalties
    
    
    11
    
    
    
    17
    
    
    
    245Grant and other revenue
    
    
    
    
    
    
    
    
    
    
    433Total revenue
    
    
    168
    
    
    
    155
    
    
    
    4,211Expenses:Costs of goods sold
    
    
    146
    
    
    
    242
    
    
    
    4,061Research and development
    
    
    2,917
    
    
    
    930
    
    
    
    44,814Business development, general and administrative
    
    
    1,123
    
    
    
    997
    
    
    
    26,125Recognition of expense for the minimum pension liability upon
termination of defined benefit pension plan
    
    
    
    
    
    
    58
    
    
    
    58Total expenses
    
    
    4,186
    
    
    
    2,227
    
    
    
    75,058Operating loss
    
    
    (4,018
    )
    
    
    (2,072
    )
    
    
    (70,847
    )Merger cost
    
    
    
    
    
    
    
    
    
    
    (515
    )Interest and other income
    
    
    119
    
    
    
    57
    
    
    
    1,880Rental income
    
    
    79
    
    
    
    78
    
    
    
    2,313Rent expense
    
    
    (78
    )
    
    
    (77
    )
    
    
    (2,170
    )Interest and other expense
    
    
    (84
    )
    
    
    (53
    )
    
    
    (3,436
    )License fees
    
    
    
    
    
    
    
    
    
    
    2,050Net loss
    
    
    (3,982
    )
    
    
    (2,067
    )
    
    
    (70,725
    )Deemed dividend to Series C Preferred Stockholders upon issuance of
Series C Preferred Stock with a beneficial conversion and amortization
of related issuance costs
    
    
    (27
    )
    
    
    (126
    )
    
    
    (5,351
    )Net loss attributable to common stockholders
    
    $
    (4,009
    )
    
    $
    (2,193
    )
    
    $
    (76,076
    )Basic and diluted net loss per share attributable to common stockholders
    
    $
    (0.06
    )
    
    $
    (0.04
    )
    
    $
    (3.33
    )Weighted average number of shares used for calculation of net loss per
share
    
    
    69,286,465
    
    
    
    53,237,955
    
    
    
    22,848,289
 
 (1)
    
    See Note (6), Restatement, of the Notes to Condensed Consolidated Financial Statements.  5




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##### 



ReGen Biologics, Inc.
( )
 CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY (DEFICIT) AND SERIES
A AND SERIES C REDEEMABLE CONVERTIBLE PREFERRED STOCK
 Series A
    
    
    Series C
    
    
    Stockholders Equity (Deficit)Redeemable
    
    
    Redeemable
    
    
    Series A  F
    
    
    Series B
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    DeficitConvertible
    
    
    Convertible
    
    
    Convertible
    
    
    Convertible
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Accumulated
    
    
    Accumulated
    
    
    TotalPreferred
    
    
    Preferred
    
    
    Preferred
    
    
    Preferred
    
    
    
    
    
    
    
    
    
    
    Additional
    
    
    Deferred
    
    
    During
    
    
    Other
    
    
    StockholdersStock
    
    
    Stock
    
    
    Stock
    
    
    Stock
    
    
    Common Stock
    
    
    Paid-In
    
    
    Stock
    
    
    Development
    
    
    Comprehensive
    
    
    EquityShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Compensation
    
    
    Stage
    
    
    Loss
    
    
    (Deficit)Issuance of common stock at $0.03127 per
share for netassets contributed by founders in May 1990
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,400,000
    
    
    
    1
    
    
    
    44
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    45Issuance of common stock at $0.005 per
share for cash in November 1991
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    700,000
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3Issuance of Series A convertible
preferred stock at $1.00 per share for
cash in April 1991, net of offering costs
of $44
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    725,000
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    681
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    682Issuance 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 $29
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,226,338
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,650
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,650Net loss from inception (December 21,
1989) through December 31, 1992
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,476
    )
    
    
    
    
    
    
    (2,476
    )Balance at December 31, 1992
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,951,338
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    2,100,000
    
    
    
    1
    
    
    
    4,378
    
    
    
    
    
    
    
    (2,476
    )
    
    
    
    
    
    
    1,904Issuance of Series C convertible
preferred stock at $4.50 per share for
cash in December 1993, net of offering
costs of $29
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    550,552
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,448
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,448Exercise of common stock options at $0.30
per share for cash in February 1993
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    200
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Issuance of common stock at $0.30 per
share in 1993 in exchange for services to
a consultant
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,000
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,342
    )
    
    
    
    
    
    
    (1,342
    )Balance at December 31, 1993
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,501,890
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    2,105,200
    
    
    
    1
    
    
    
    6,828
    
    
    
    
    
    
    
    (3,818
    )
    
    
    
    
    
    
    3,012Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,463
    )
    
    
    
    
    
    
    (1,463
    )Balance at December 31, 1994
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,501,890
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    2,105,200
    
    
    
    1
    
    
    
    6,828
    
    
    
    
    
    
    
    (5,281
    )
    
    
    
    
    
    
    1,549Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,959
    )
    
    
    
    
    
    
    (1,959
    )Balance at December 31, 1995
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,501,890
    
    
    $
    1
    
    
    
    
    
    
    
    
    
    
    
    2,105,200
    
    
    $
    1
    
    
    $
    6,828
    
    
    
    
    
    
    $
    (7,240
    )
    
    
    
    
    
    $
    (410
    )
  6




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##### 



ReGen Biologics, Inc.
( )
 CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY (DEFICIT) AND SERIES
A AND SERIES C REDEEMABLE CONVERTIBLE PREFERRED STOCK (CONTINUED)
 Series A
    
    
    Series C
    
    
    Stockholders Equity (Deficit)Redeemable
    
    
    Redeemable
    
    
    Series A  F
    
    
    Series B
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    DeficitConvertible
    
    
    Convertible
    
    
    Convertible
    
    
    Convertible
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Accumulated
    
    
    Accumulated
    
    
    TotalPreferred
    
    
    Preferred
    
    
    Preferred
    
    
    Preferred
    
    
    
    
    
    
    
    
    
    
    Additional
    
    
    Deferred
    
    
    During
    
    
    Other
    
    
    StockholdersStock
    
    
    Stock
    
    
    Stock
    
    
    Stock
    
    
    Common Stock
    
    
    Paid-In
    
    
    Stock
    
    
    Development
    
    
    Comprehensive
    
    
    EquityShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Compensation
    
    
    Stage
    
    
    Loss
    
    
    (Deficit)Balance at December 31, 1995 (brought forward)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,501,890
    
    
    $
    1
    
    
    
    
    
    
    
    
    
    
    
    2,105,200
    
    
    $
    1
    
    
    $
    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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,191,321
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,101
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,101Exercise of common stock options at $0.10,
$0.30, and $0.45 per share in August and
October 1996
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    163,333
    
    
    
    
    
    
    
    43
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    43Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,931
    )
    
    
    
    
    
    
    (1,931
    )Balance at December 31, 1996
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,693,211
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    2,268,533
    
    
    
    1
    
    
    
    14,972
    
    
    
    
    
    
    
    (9,171
    )
    
    
    
    
    
    
    5,803Issuance of Series E convertible preferred
stock at $7.25 per share for cash in August
and September 1997, net of offering costs of
$53
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    335,314
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,378
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,378Exercise of common stock options at $0.10,
$0.30, and $0.45 per share in April, August,
and September 1997
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32,111
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,868
    )
    
    
    
    
    
    
    (3,868
    )Balance at December 31, 1997
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,028,525
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    2,300,644
    
    
    
    1
    
    
    
    17,355
    
    
    
    
    
    
    
    (13,039
    )
    
    
    
    
    
    
    4,318Exercise 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
    
    
    
    
    
    
    
    108
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    108Compensation expense associated with stock
option modifications
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    56
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    56Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,815
    )
    
    
    
    
    
    
    (3,815
    )Balance at December 31, 1998
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,028,525
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    2,460,523
    
    
    
    1
    
    
    
    17,519
    
    
    
    
    
    
    
    (16,854
    )
    
    
    
    
    
    
    667Exercise of common stock options at $.725 and
$1.45 per share in April, June and August
1999
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    42,396
    
    
    
    
    
    
    
    32
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32Issuance of Series F convertible preferred
stock at $8.73 per share for cash
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    453,310
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,956
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,956Compensation expense associated with stock
option grants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,436
    
    
    
    (3,247
    )
    
    
    
    
    
    
    
    
    
    
    189Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,458
    )
    
    
    
    
    
    
    (5,458
    )Balance at December 31, 1999
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,481,835
    
    
    $
    1
    
    
    
    
    
    
    
    
    
    
    
    2,502,919
    
    
    $
    1
    
    
    $
    24,943
    
    
    $
    (3,247
    )
    
    $
    (22,312
    )
    
    
    
    
    
    $
    (614
    )
  7




---



##### 



ReGen Biologics, Inc.
( )
 CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY (DEFICIT) AND SERIES
A AND SERIES C REDEEMABLE CONVERTIBLE PREFERRED STOCK (CONTINUED)
 Series A
    
    
    Series C
    
    
    Stockholders Equity (Deficit)Redeemable
    
    
    Redeemable
    
    
    Series A  F
    
    
    Series B
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    DeficitConvertible
    
    
    Convertible
    
    
    Convertible
    
    
    Convertible
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Accumulated
    
    
    Accumulated
    
    
    TotalPreferred
    
    
    Preferred
    
    
    Preferred
    
    
    Preferred
    
    
    
    
    
    
    
    
    
    
    Additional
    
    
    Deferred
    
    
    During
    
    
    Other
    
    
    StockholdersStock
    
    
    Stock
    
    
    Stock
    
    
    Stock
    
    
    Common Stock
    
    
    Paid-In
    
    
    Stock
    
    
    Development
    
    
    Comprehensive
    
    
    EquityShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Compensation
    
    
    Stage
    
    
    Loss
    
    
    (Deficit)Balance at December 31, 1999
(brought forward)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,481,835
    
    
    $
    1
    
    
    
    
    
    
    
    
    
    
    
    2,502,919
    
    
    $
    1
    
    
    $
    24,943
    
    
    $
    (3,247
    )
    
    $
    (22,312
    )
    
    
    
    
    
    $
    (614
    )Compensation expense associated
with stock option grants in prior
year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    738
    
    
    
    
    
    
    
    
    
    
    
    738Compensation expense associated
with stock option grants in
current year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,124
    
    
    
    (1,642
    )
    
    
    
    
    
    
    
    
    
    
    482Stock options cancelled during 2000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,089
    )
    
    
    1,089
    
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,229
    )
    
    
    
    
    
    
    (5,229
    )Balance at December 31, 2000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,481,835
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    2,502,919
    
    
    
    1
    
    
    
    25,978
    
    
    
    (3,062
    )
    
    
    (27,541
    )
    
    
    
    
    
    
    (4,623
    )Exercise of common stock options
at $.10 per share in 2001
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,000
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3Exercise of common stock options
at $1.45 per share in 2001
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    125
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Compensation expense associated
with stock option grants in prior
years
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    935
    
    
    
    
    
    
    
    
    
    
    
    935Compensation expense associated
with stock option grants in
current year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,010
    
    
    
    (833
    )
    
    
    
    
    
    
    
    
    
    
    177Stock options cancelled during 2001
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (161
    )
    
    
    161
    
    
    
    
    
    
    
    
    
    
    
    Deferred
stock compensation
associated with stock option
grants to non-employees in 2001
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    228
    
    
    
    (131
    )
    
    
    
    
    
    
    
    
    
    
    97Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,330
    )
    
    
    
    
    
    
    (4,330
    )Balance at December 31, 2001
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,481,835
    
    
    $
    1
    
    
    
    
    
    
    
    
    
    
    
    2,528,044
    
    
    $
    1
    
    
    $
    27,058
    
    
    $
    (2,930
    )
    
    $
    (31,871
    )
    
    
    
    
    
    $
    (7,741
    )
  8




---



##### 



ReGen Biologics, Inc.
( )
 CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY (DEFICIT) AND SERIES
A AND SERIES C REDEEMABLE CONVERTIBLE PREFERRED STOCK (CONTINUED)
 Series A
    
    
    Series C
    
    
    Stockholders Equity (Deficit)Redeemable
    
    
    Redeemable
    
    
    Series A  F
    
    
    Series B
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    DeficitConvertible
    
    
    Convertible
    
    
    Convertible
    
    
    Convertible
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Accumulated
    
    
    Accumulated
    
    
    TotalPreferred
    
    
    Preferred
    
    
    Preferred
    
    
    Preferred
    
    
    
    
    
    
    
    
    
    
    Additional
    
    
    Deferred
    
    
    During
    
    
    Other
    
    
    StockholdersStock
    
    
    Stock
    
    
    Stock
    
    
    Stock
    
    
    Common Stock
    
    
    Paid-In
    
    
    Stock
    
    
    Development
    
    
    Comprehensive
    
    
    EquityShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Compensation
    
    
    Stage
    
    
    Loss
    
    
    (Deficit)Balance at December 31, 2001 (brought forward)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,481,835
    
    
    $
    1
    
    
    
    
    
    
    
    
    
    
    
    2,528,044
    
    
    $
    1
    
    
    $
    27,058
    
    
    $
    (2,930
    )
    
    $
    (31,871
    )
    
    
    
    
    
    $
    (7,741
    )Issuance of Common Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    301,930
    
    
    
    1
    
    
    
    104
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    105Issuance of Convertible Preferred Stock for
cash and conversion of bridge financing net
of issuance costs of $138
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,564,047
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,716
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,717Deferred stock compensation associated with
stock option grants in 2002
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    370
    
    
    
    (370
    )
    
    
    
    
    
    
    
    
    
    
    Compensation expense associated with stock
options outstanding
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    452
    
    
    
    
    
    
    
    
    
    
    
    452Effect of reverse merger and recapitalization:
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Valuation of warrants associated with bridge
financing
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    657
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    657Valuation of beneficial conversion associated
with bridge financing
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    843
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    843Compensation expense associated with stock
options outstanding recognized as a result of
the reverse merger
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,848
    
    
    
    
    
    
    
    
    
    
    
    2,848Conversion of convertible preferred shares to
Redeemable Convertible Preferred Series A at
liquidation / redemption value
    
    
    15,298,351
    
    
    $
    6,855
    
    
    
    
    
    
    
    
    
    
    
    (5,564,047
    )
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,854
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,855
    )Conversion of convertible preferred shares to
Common Stock and Series B Preferred Shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,481,835
    )
    
    
    (1
    )
    
    
    12,025,656
    
    
    $
    120
    
    
    
    297,146
    
    
    
    3
    
    
    
    (122
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Conversion of Subsidiary Common Stock into
Company Common Stock and Series B Preferred
Shares:
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Elimination of Subsidiary Common Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,829,974
    )
    
    
    (1
    )
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of Company Common Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,781,018
    
    
    
    78
    
    
    
    (78
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Company Common Stock and related equity held
by existing shareholders (net of 18,115
shares held treasury)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,966,966
    
    
    
    89
    
    
    
    2,678
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,767Conversion of Convertible Preferred Series B
Stock to Company Common Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,025,656
    )
    
    
    (120
    )
    
    
    12,025,656
    
    
    
    120
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Minimum Pension Liability Adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (58
    )
    
    
    Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,951
    )
    
    
    
    
    
    
    Net loss and comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,009
    )Balance at December 31, 2002
    
    
    15,298,351
    
    
    
    6,855
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29,070,786
    
    
    
    291
    
    
    
    31,373
    
    
    
    
    
    
    
    (41,822
    )
    
    
    (58
    )
    
    
    (10,216
    )Compensation expense associated with stock
options outstanding
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    664
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    664Issuance of Redeemable Convertible Preferred
Series C Stock, net of issuance costs of
$612, which include the issuance of non-cash
consideration in the form of warrants
    
    
    
    
    
    
    
    
    
    
    22,246,153
    
    
    $
    9,357
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    97
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    97Issuance of Common Stock warrants to Series C
Stockholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (969
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    969
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    969Valuation of beneficial conversion associated
with Series C Stock financing
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,292
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,292
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,292Accretion of beneficial conversion associated
with Series C Stock financing
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,292
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,292
    )
    
    
    
    
    
    
    (4,292
    )Issuance of Common Stock  warrants exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    230,000
    
    
    
    2
    
    
    
    113
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    115Accretion of Series C Stock issuance cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (51
    )
    
    
    
    
    
    
    (51
    )Net loss and comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,989
    )
    
    
    
    
    
    
    (5,989
    )Balance at December 31, 2003
    
    
    15,298,351
    
    
    $
    6,855
    
    
    
    22,246,153
    
    
    $
    8,439
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    29,300,786
    
    
    $
    293
    
    
    $
    37,508
    
    
    $
    
    
    
    $
    (52,154
    )
    
    $
    (58
    )
    
    $
    (14,411
    )
  9




---



##### 



ReGen Biologics, Inc.
( )
 CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY (DEFICIT) AND SERIES
A AND SERIES C REDEEMABLE CONVERTIBLE PREFERRED STOCK (CONTINUED)
 Series A
    
    
    Series C
    
    
    Stockholders Equity (Deficit)Redeemable
    
    
    Redeemable
    
    
    Series A F
    
    
    Series B
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    DeficitConvertible
    
    
    Convertible
    
    
    Convertible
    
    
    Convertible
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Accumulated
    
    
    Accumulated
    
    
    TotalPreferred
    
    
    Preferred
    
    
    Preferred
    
    
    Preferred
    
    
    
    
    
    
    
    
    
    
    Additional
    
    
    Deferred
    
    
    During
    
    
    Other
    
    
    StockholdersStock
    
    
    Stock
    
    
    Stock
    
    
    Stock
    
    
    Common Stock
    
    
    Paid-In
    
    
    Stock
    
    
    Development
    
    
    Comprehensive
    
    
    EquityShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Compensation
    
    
    Stage
    
    
    Loss
    
    
    (Deficit)(Restated)
    
    
    
    
    
    
    (Restated)
    
    
    
    
    
    
    (Restated)(1)
    
    
    
    
    
    
    (1)
    
    
    
    
    
    
    (1)Balance at December 31, 2003
(brought forward)
    
    
    15,298,351
    
    
    $
    6,855
    
    
    
    22,246,153
    
    
    $
    8,439
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    29,300,786
    
    
    $
    293
    
    
    $
    37,508
    
    
    $
    
    
    
    $
    (52,154
    )
    
    $
    (58
    )
    
    $
    (14,411
    )Compensation expense associated with
stock options outstanding
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    684
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    684Accretion of Series C Stock issuance
cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    173
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (173
    )
    
    
    
    
    
    
    (173
    )Recognition of Series C Stock
issuance cost upon conversion
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    589
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (589
    )
    
    
    
    
    
    
    (589
    )Issuance of Common Stock  warrants
exercised net of 8,901 shares held
treasury
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    141,152
    
    
    
    1
    
    
    
    58
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    59Issuance of Common Stock  options
exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    261,109
    
    
    
    3
    
    
    
    77
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    80Issuance of Common Stock  common
stock offering
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,074,595
    
    
    
    121
    
    
    
    9,745
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,866Conversion of Series A Stock to
Common Stock
    
    
    (642,723
    )
    
    
    (288
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    642,723
    
    
    
    6
    
    
    
    282
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    288Conversion of Series C Stock to
Common Stock
    
    
    
    
    
    
    
    
    
    
    (9,302,620
    )
    
    
    (4,168
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,302,620
    
    
    
    93
    
    
    
    4,075
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,168Net loss and comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,201
    )
    
    
    
    
    
    
    (7,201
    )Balance at December 31, 2004
    
    
    14,655,628
    
    
    
    6,567
    
    
    
    12,943,533
    
    
    
    5,033
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51,722,985
    
    
    
    517
    
    
    
    52,429
    
    
    
    
    
    
    
    (60,117
    )
    
    
    (58
    )
    
    
    (7,229
    )Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    454
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    454Accretion of Series C Stock issuance
cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    109
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (109
    )
    
    
    
    
    
    
    (109
    )Recognition of Series C Stock
issuance cost upon conversion
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    110
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (110
    )
    
    
    
    
    
    
    (110
    )Conversion of Series A Preferred
Stock to Common Stock
    
    
    (1,395,603
    )
    
    
    (625
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,395,603
    
    
    
    14
    
    
    
    611
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    625Conversion of Series C Preferred
Stock to Common Stock
    
    
    
    
    
    
    
    
    
    
    (1,896,896
    )
    
    
    (850
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,896,896
    
    
    
    19
    
    
    
    831
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    850Issuance of
Common Stock  work
completed
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100,000
    
    
    
    1
    
    
    
    92
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    93Issuance of Common Stock  options
exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,000
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3Issuance of Common Stock and
warrants  common stock offering
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,011,178
    
    
    
    140
    
    
    
    11,067
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,207Recognition of expense for the
minimum pension liability upon
termination of defined benefit
pension plan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    58
    
    
    
    Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,731
    )
    
    
    
    
    
    
    Net loss and comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,673
    )Balance at December 31, 2005
    
    
    13,260,025
    
    
    $
    5,942
    
    
    
    11,046,637
    
    
    $
    4,402
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    69,146,662
    
    
    $
    691
    
    
    $
    65,487
    
    
    $
    
    
    
    $
    (72,067
    )
    
    $
    
    
    
    $
    (5,889
    )Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    413
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    413Accretion of Series C Stock issuance
cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (27
    )
    
    
    
    
    
    
    (27
    )Issuance of
Common Stock  work
completed
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4Issuance of
Common Stock  options
exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    90,218
    
    
    
    1
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of
Common Stock  conversion
of warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    375,967
    
    
    
    4
    
    
    
    (4
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss and comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,982
    )
    
    
    
    
    
    
    (3,982
    )Balance at March 31, 2006 (unaudited)
    
    
    13,260,025
    
    
    $
    5,942
    
    
    
    11,046,637
    
    
    $
    4,429
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    69,612,847
    
    
    $
    696
    
    
    $
    65,899
    
    
    $
    
    
    
    $
    (76,076
    )
    
    $
    
    
    
    $
    (9,481
    )
 
 (1)
    
    See Note (6), Restatement, of the Notes to Condensed Consolidated Financial Statements.  10




---



##### 



REGEN BIOLOGICS, INC.
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Period fromDecember 21, 1989Three Months Ended March 31,
    
    
    (Inception) to2006
    
    
    2005
    
    
    March 31, 2006(Restated)
    
    
    (Restated)
    
    
    (Restated)(1)
    
    
    (1)
    
    
    (1)Operating ActivitiesNet loss
    
    $
    (3,982
    )
    
    $
    (2,067
    )
    
    $
    (70,725
    )Adjustments to reconcile net loss to net cash used in operating activities:Stock-based compensation
    
    
    302
    
    
    
    152
    
    
    
    8,156Amortization of debt discount for warrant and beneficial conversion feature
    
    
    
    
    
    
    
    
    
    
    1,500Depreciation and amortization
    
    
    13
    
    
    
    8
    
    
    
    2,232Loss on disposal of property and equipment
    
    
    
    
    
    
    
    
    
    
    9Recognition of expense for the minimum pension liability upon termination of defined
benefit pension plan
    
    
    
    
    
    
    58
    
    
    
    58Exchange loss
    
    
    3
    
    
    
    4
    
    
    
    17Changes in operating assets and liabilities:Other current assets and receivables
    
    
    34
    
    
    
    (72
    )
    
    
    (237
    )Inventory
    
    
    (9
    )
    
    
    (9
    )
    
    
    (377
    )Other assets
    
    
    7
    
    
    
    7
    
    
    
    (38
    )Accounts payable and accrued expenses
    
    
    (354
    )
    
    
    (48
    )
    
    
    3,311Other liabilities
    
    
    (19
    )
    
    
    1
    
    
    
    35Net cash used in operating activities
    
    
    (4,005
    )
    
    
    (1,966
    )
    
    
    (56,059
    )Investing ActivitiesPurchases of property and equipment
    
    
    (80
    )
    
    
    (11
    )
    
    
    (2,207
    )Changes in investments
    
    
    1,944
    
    
    
    
    
    
    
    894Net cash provided by (used in ) investing activities
    
    
    1,864
    
    
    
    (11
    )
    
    
    (1,313
    )Financing ActivitiesIssuance of common stock to founders for contributed patents
    
    
    
    
    
    
    
    
    
    
    42Issuance of Series B preferred stock upon conversion of interest payable
    
    
    
    
    
    
    
    
    
    
    6Reduction in payable to stockholder
    
    
    
    
    
    
    
    
    
    
    (76
    )Proceeds from issuance of convertible preferred stock, net of offering costs paid in cash
    
    
    
    
    
    
    
    
    
    
    34,221Proceeds from issuance of common stock and warrants
    
    
    
    
    
    
    
    
    
    
    21,630Repayment of capital lease obligations
    
    
    (3
    )
    
    
    (3
    )
    
    
    (138
    )Proceeds from notes payable
    
    
    
    
    
    
    
    
    
    
    11,410Payments on notes payable
    
    
    
    
    
    
    
    
    
    
    (2,323
    )Net cash (used in) provided by financing activities
    
    
    (3
    )
    
    
    (3
    )
    
    
    64,772Effect of exchange rate changes on cash
    
    
    (3
    )
    
    
    (4
    )
    
    
    (13
    )Net (decrease) increase in cash and cash equivalents
    
    
    (2,147
    )
    
    
    (1,984
    )
    
    
    7,387Cash and cash equivalents at beginning of period
    
    
    9,535
    
    
    
    12,190
    
    
    
    1Cash and cash equivalents at end of period
    
    $
    7,388
    
    
    $
    10,206
    
    
    $
    7,388Supplemental Disclosure of Cash Flow InformationNon-cash disclosure:Issuance of Series B convertible preferred stock upon conversion of notes payable
    
    $
    
    
    
    $
    
    
    
    $
    300Equipment purchased pursuant to capital leases
    
    
    
    
    
    
    61
    
    
    
    198Cancellation of stock options associated with deferred stock compensation
    
    
    
    
    
    
    
    
    
    
    1,250Net assets assumed in merger
    
    
    
    
    
    
    
    
    
    
    2,733Conversion of bridge financing to equity
    
    
    
    
    
    
    
    
    
    
    2,860Beneficial Conversion of Series C Stock
    
    
    
    
    
    
    
    
    
    
    4,292Warrants associated with Series C Stock
    
    
    
    
    
    
    
    
    
    
    969Warrants associated with Series C Stock private placement agent fee
    
    
    
    
    
    
    
    
    
    
    97Conversion of SeriesA Preferred Stock
    
    
    
    
    
    
    
    
    
    
    913Warrants exercised, net share settled
    
    
    4
    
    
    
    1
    
    
    
    14Conversion of Series C Preferred Stock
    
    
    
    
    
    
    750
    
    
    
    5,018Issuance of Common Stock for services rendered
    
    
    
    
    
    
    
    
    
    
    93Non-employee options exercised, net-share settled
    
    
    1
    
    
    
    
    
    
    
    1Cash disclosure:Cash paid for interest
    
    
    1
    
    
    
    2
    
    
    
    321
 
 (1)
    
    See Note (6), Restatement, of the Notes to Condensed Consolidated Financial Statements.  11




---



##### 



REGEN BIOLOGICS, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per unit and per share data)
 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Principles of Consolidation and Basis of Presentation
 Biologics Biologics
   Disclosure about Segments of
an Enterprise and Related Information.
  Risks and Going Concern Considerations
   12




---



##### 



Adoption of New Accounting Pronouncements
 Share-Based Payment ), Accounting for Stock Issued to Employees
 Inventory Costs Inventory Pricing
 Accounting Changes and
Error Corrections Accounting Changes, Reporting Accounting Changes in Interim Financial Statements
 13




---



##### 



Use of Estimates
  Cash and Cash Equivalents and Investments
   Inventories
   March 31,
    
    
    December 31,2006
    
    
    2005(In thousands)Raw material
    
    $
    25
    
    
    $
    24Work in process
    
    
    138
    
    
    
    67Finished goods
    
    
    214
    
    
    
    277$
    377
    
    
    $
    368
 Inventory Costs
 14




---



##### 



Accrued Expenses
  March 31,
    
    
    December 31,2006
    
    
    2005(In thousands)Accrued professional fees
    
    $
    694
    
    
    $
    1,125Accrued wages and vacation
    
    
    81
    
    
    
    240Accrued printing cost
    
    
    48
    
    
    
    56Other accrued cost
    
    
    20
    
    
    
    45$
    843
    
    
    $
    1,466
 Defined Benefit Plan
   Foreign Currency Transactions
  Rental Activities
  Basic and Diluted Loss Per Share
  15




---



##### 



Stock-Based
Compensation
   Accounting for Stock Issued to
Employees,
 Accounting for Stock-Based
CompensationTransition and Disclosure
 Three MonthsEndedMarch 31, 2005(Restated)(1)(In thousands,except per sharedata )Net loss attributable to common stockholders, as reported
    
    $
    (2,193
    )Add: Total stock-based employee compensation expense as
reported under intrinsic value method (APB No 25) for all
awards, net of related tax effects
    
    
    122Deduct: Total stock-based employee compensation expense
determined under fair value based method (SFAS No. 123) for
all awards, net of related tax effects
    
    
    (270
    )Pro forma net loss attributable to common stockholders
    
    $
    (2,341
    )Net loss per share attributable to common stockholders:Basic and diluted  as reported
    
    $
    (0.04
    )Basic and diluted  pro forma
    
    $
    (0.04
    )Shares
    
    
    53,238
 
 (1)
    
    See Note (6), Restatement, of the Notes to Condensed Consolidated Financial Statements.  Three MonthsendedMarch 31, 2005(Restated)(1)Risk-free interest rate
    
    
    3.75  4.80
    %Dividend yield
    
    
    0
    %Expected lives
    
    10 yearsExpected volatility
    
    
    91.63  105.07
    %
 
 (1)
    
    See Note (6), Restatement, of the Notes to Condensed Consolidated Financial Statements. 16




---



##### 



Three Months EndedMarch 31, 2006Employee & Director(Restated)(1)
    
    Non-EmployeeWeighted average fair value of grants
    
    $
    0.75
    
    
    $
    0.72Risk free interest rate
    
    
    4.75
    %
    
    
    4.79
    %Dividend yield
    
    
    0
    %
    
    
    0
    %Expected lives
    
    7 years
    
    7 yearsExpected volatility
    
    
    74.82
    %
    
    
    74.30
    %
 
 (1)
    
    See Note (6), Restatement, of the Notes to Condensed Consolidated Financial Statements. Employee Stock Option Plan
  Non-Employee Director Option Plan
  17




---



##### 



Non-Employee Director Supplemental Stock Option Plan
  RBio Plans
  Non Plan Grants
   Options OutstandingWeighted-Number of
    
    
    
    
    
    
    Average PriceShares
    
    
    Price Per Share
    
    
    Per ShareBalance at December 31, 2005
    
    
    15,185,744
    
    
    $
    0.08   $13.00
    
    
    $
    0.64Options granted
    
    
    750,000
    
    
    $
    0.84
    
    
    $
    0.84Options exercised, forfeited, expired
    
    
    (123,728
    )
    
    $
    0.26
    
    
    $
    0.26Balance at March 31, 2006
    
    
    15,812,016
    
    
    $
    0.08   $13.00
    
    
    $
    0.64Vested and expected to vest at March 31, 2006
    
    
    15,812,016
    
    
    $
    0.08   $13.00
    
    
    $
    0.64
 18




---



##### 



Options Outstanding
    
    Options ExercisableWeighted
    
    AggregateIntrinsic
    
    
    
    
    
    
    
    
    
    Weighted
    
    AggregateIntrinsicWeighted
    
    Average
    
    Value
    
    
    
    
    
    Weighted
    
    Average
    
    ValueAverage
    
    Remaining
    
    (in thousands)
    
    
    
    
    
    Average
    
    Remaining
    
    (in thousands)Exercise
    
    Contractual
    
    (Restated)
    
    
    
    
    
    Exercise
    
    Contractual
    
    (Restated)Total Shares
    
    Price
    
    Life in Years
    
    (1)
    
    Total Shares
    
    Price
    
    Life in Years
    
    (1)15,812,016
    
    $
    0.64
    
    
    
    5.59
    
    
    $
    8,461
    
    
    
    12,782,454
    
    
    $
    0.65
    
    
    
    5.01
    
    
    $
    7,228
 
 (1)
    
    See Note (6), Restatement, of the Notes to Condensed Consolidated Financial Statements.  Non-vestedWeighted-AverageGrant Date FairNumber of Shares
    
    
    Value
(Restated)
(1)Balance at December 31, 2005
    
    
    2,691,524
    
    
    $
    0.74Granted
    
    
    750,000
    
    
    $
    0.75Vested
    
    
    (411,962
    )
    
    $
    0.72Balance at March 31, 2006
    
    
    3,029,562
    
    
    $
    0.76
 
 (1)
    
    See Note (6), Restatement, of the Notes to Condensed Consolidated Financial Statements.  (2) COMMITMENTS AND CONTINGENCIES
   (3) CONCENTRATIONS OF RISK
     19




---



##### 



Three Months EndedMarch 31,2006
    
    2005Receivables:U.STrade (Linvatec)
    
    
    37
    %
    
    
    72
    %SwitzerlandRelated party (Centerpulse )
    
    
    
    
    
    
    28
    %Trade (various)
    
    
    13
    %
    
    
    Spain (Hoscenter, Polymedic)
    
    
    27
    %
    
    
    Italy (Xmedica)
    
    
    4
    %Germany (Trade-various)
    
    
    8
    %
    
    
    Belgium (Trade-various)
    
    
    11
    %
    
    
    Sales revenue:U.S. (Linvatec)
    
    
    39
    %
    
    
    80
    %SwitzerlandCenterpulse
    
    
    
    
    
    
    20
    %Other (various)
    
    
    7
    %
    
    
    Spain (Hoscenter, Polymedic)
    
    
    20
    %
    
    
    Italy (Xmedica)
    
    
    16
    %
    
    
    Germany (various)
    
    
    16
    %
    
    
    Belgium (various)
    
    
    2
    %
    
    
    Royalties:U.S. (Linvatec)
    
    
    100
    %
    
    
    100
    %
    (4) RELATED PARTY TRANSACTIONS
   20




---



##### 



(5) CAPITAL TRANSACTIONS
  (6) RESTATEMENT
(Dated as of November 20, 2006)
      21




---



##### 



Period fromDecember 21, 1989Three months
    
    Three months
    
    (Inception) toEnded March 31, 2006
    
    Ended March 31, 2005
    
    March 31, 2006(in thousands)Previously
    
    
    
    
    
    Previously
    
    
    
    
    
    PreviouslyReported
    
    Restated
    
    Reported
    
    Restated
    
    Reported
    RestatedResearch and development
    
    $
    2,900
    
    
    $
    2,917
    
    
    $
    913
    
    
    $
    930
    
    
    $
    44,608
    
    
    $
    44,814Business development,
general and administrative
    
    
    1,052
    
    
    
    1,123
    
    
    
    927
    
    
    
    997
    
    
    
    25,221
    
    
    
    26,125Total expenses
    
    
    4,098
    
    
    
    4,186
    
    
    
    2,140
    
    
    
    2,227
    
    
    
    73,948
    
    
    
    75,058Operating loss
    
    
    (3,930
    )
    
    
    (4,018
    )
    
    
    (1,985
    )
    
    
    (2,072
    )
    
    
    (69,737
    )
    
    
    (70,847
    )Net loss
    
    
    (3,894
    )
    
    
    (3,982
    )
    
    
    (1,980
    )
    
    
    (2,067
    )
    
    
    (69,615
    )
    
    
    (70,725
    )Net loss attributable to
common stockholders
    
    
    (3,921
    )
    
    
    (4,009
    )
    
    
    (2,106
    )
    
    
    (2,193
    )
    
    
    (74,966
    )
    
    
    (76,076
    )Basic and diluted net loss
per share attributable to
common stockholders
    
    $
    (0.06
    )
    
    $
    (0.06
    )
    
    $
    (0.04
    )
    
    $
    (0.04
    )
    
    $
    (3.28
    )
    
    $
    (3.33
    )
   March 31, 2006
    
    December 31, 2005Previously Reported
    
    Restated
    
    Previously Reported
    
    Restated(In thousands)
    
    (In thousands)Additional paid-in capital
    
    $
    64,789
    
    
    $
    65,899
    
    
    $
    64,465
    
    
    $
    65,487Deficit accumulated during development stage
    
    $
    (74,966
    )
    
    $
    (76,076
    )
    
    $
    (71,045
    )
    
    $
    (72,067
    )
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
(Dollars in thousands, except per share data)
  Business
  ®
 22




---



##### 




    
    Obtaining FDA clearance of the collagen scaffold;
    
    Further developing our distribution and marketing programs for the CMI and other ReGen
products in Europe and certain other countries;
    
    Developing our distribution and marketing programs for the collagen scaffold and other ReGen products in the U.S.; and
    
    Conducting further research on selected product opportunities within our research and development pipeline.
    
    
    Reinforcement of the remaining meniscus;
    
    Support of natural growth of new tissue;
    
    Minimized degenerative changes;
    
    Return of a significantly greater proportion of pre-injury activity levels; and
    
    Maintenance of joint stability.
 23




---



##### 




    
    Single-handed operation, provided by a patented delivery handle, which allows a surgeon
complete control over targeting sutures;
    
    Better viewing and access to all areas of the meniscus, provided by cannulae options;
    
    Easier and safer passage of suture needles;
    
    Simple loading and pre-attached sutures reducing surgery time; and
    
    More accurate repair of meniscus tears by surgeons with less assistance in the operating room.
    Critical Accounting Policies
  24




---



##### 



Share Based Payment Inventory Costs
 STOCK-BASED COMPENSATION EXPENSE Accounting for Stock Issued to Employees
  INVENTORY VALUATION:
 Inventory Costs
  Results of Operations
 Three Months Ended March 31, 2006 Compared to Three Months Ended March 31, 2005
 REVENUE.
 25




---



##### 



COST OF GOODS SOLD.
   RESEARCH AND DEVELOPMENT.
 26




---



##### 



BUSINESS DEVELOPMENT, GENERAL AND ADMINISTRATIVE.
 RECOGNITION OF EXPENSE FOR THE MINIMUM PENSION LIABILITY
 NON-OPERATING INCOME (EXPENSE).
 27




---



##### 



Liquidity and Capital Resources
 Cash and cash equivalents
     Cash flows
  March 31,2006
    
    
    2005(In thousands)Net cash used in operations
    
    $
    (4,005
    )
    
    $
    (1,966
    )Net cash provided by (used in) investing activities
    
    
    1,864
    
    
    
    (11
    )Net cash used in financing activities
    
    
    (3
    )
    
    
    (3
    )Effect of exchange rate changes on cash
    
    
    (3
    )
    
    
    (4
    )Net decrease in cash and cash equivalents
    
    $
    (2,147
    )
    
    $
    (1,984
    )
   28




---



##### 



29




---



##### 



Item 3. Quantitative and Qualitative Disclosures about Market Risk
  Item 4. Controls and Procedures
  Evaluation of Disclosure Controls and Procedures.
    Changes in Internal Control over Financial Reporting.
 30




---



##### 



PART II
 Item 1. Legal Proceedings
  Item 1A. Risk Factors
  As a result of our internal review of our historical stock option
granting and accounting practices and related restatement of  our
financial statements, we have become subject to an informal SEC inquiry, which may not be resolved favorably and will require significant management time and attention and accounting and legal resources, which could adversely affect our business, results of operations and cash flows.
  As a
result of  our internal review of our historical stock option
granting and accounting practices and related restatement of
our financial statements, there may be negative tax consequences to our
employees which could subject us to litigation or which may result in
additional cash or non-cash compensation expense to reimburse
employees for all or a portion of such loss.
  Our failure to have effective disclosure controls and procedures could
hinder our ability to provide accurate financial and other information in our
filings with the Securities and Exchange Commission, which could
subject us to SEC investigation and private litigation, and could
have an adverse effect on our business, results of operations or
financial condition.
  Item 2. Unregistered Sales of Equity Securities and Use of Proceeds (dollars in thousands, except
per share data)
  Item 3. Defaults upon Senior Securities
  Item 4. Submission of Matters to a Vote of Security Holders
  Item 5. Other Information
  31




---



##### 



Item 6. Exhibits
   Number
    
    Description2.1
    
    Agreement and Plan of Merger by and among ReGen Biologics, Inc., Aros Corporation and Aros Acquisition
Corporation dated as of June 7, 2002(1)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 (as amended)(22)3.2
    
    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(8)4.3*
    
    ReGen Biologics, Inc. Employee Stock Option Plan, Amended and Restated Effective January 31, 2003(10)4.4*
    
    ReGen Biologics, Inc. Non-Employee Director Stock Option Plan, Amended and Restated Effective January 31,
2003(10)4.5
    
    Registration Rights Agreement between the Company and the Investors listed therein(7)4.6
    
    Registration Agreement between the Company and Certain Stockholders, dated December 28, 1995(13)4.7
    
    Amendment No. 1 to Rights Agreement between the Company and EquiServe Trust Company, N.A. dated as of June 7,
2002(9)4.8
    
    Registration Agreement between the Company and each of Iowa Health Centers, P.C. d/b/a Iowa Heart Center,
P.C., Mercy Hospital Medical Center, Mark A. Tannenbaum, M.D. and Iowa Heart Institute dated January 7,
1997(12)4.9
    
    Nonqualified Stock Option Agreements between the Company and each of Iowa Health Centers, P.C. d/b/a Iowa
Heart Center, P.C., Mercy Hospital Medical Center and Mark A. Tannenbaum, M.D., dated January 7, 1997(14)4.10*
    
    Form of Employee Incentive Stock Option Agreement(22)4.11*
    
    ReGen Biologics, Inc. Non-Employee Director Supplemental Stock Option Plan Amended and Restated Effective
January 31, 2003(16)4.12
    
    Common Stock Registration Rights Agreement by and among ReGen Biologics, Inc., and the stockholders named
therein, dated as of April 19, 2004(17)4.13*
    
    Form of Incentive Stock Option Agreement(18)4.14*
    
    Form of Nonqualified Director Supplemental Stock Option Agreement(18)4.15
    
    Subscription Agreement by and between ReGen Biologics, Inc. and the Investors named therein dated as of July
14, 2005(21)4.16
    
    Form of Warrant Agreement by and between ReGen Biologics, Inc. and the Individuals named therein, dated as of
July 14, 2005(21)
 32




---



##### 



Number
    
    Description4.17*
    
    Form of Nonqualified Non-Employee Director Stock Option Agreement(22)4.18*
    
    Form of Nonqualified Employee, Non-Employee Director or Consultant Stock Option Agreement(22)4.19*
    
    Form of Nonqualified Non-Employee Director Stock Option Agreement for the Supplemental Stock Option Plan(22)4.20
    
    Amended and Restated Stockholders Agreement by and among the Company and the Stockholders named therein dated
as of September 21, 2005(23)4.21
    
    Certificate of Designations, Preferences and Rights of Series A Convertible Preferred Stock of the Company (28)4.22
    
    Certificate of Designations, Preferences and Rights of Series C Convertible Preferred Stock of the Company (7)10.1*
    
    Employment agreement by and between Gerald E. Bisbee, Jr., Ph. D. and ReGen Biologics, Inc. dated September
22, 1998 and amended September 12, 2000(11)10.2
    
    Form of Indemnification Agreement(4)10.3*
    
    Employment Agreement by and between Brion D. Umidi and ReGen Biologics, Inc. dated March 23, 2004(15)10.4
    
    License Agreement by and between ReGen Biologics, Inc. and Linvatec Corporation dated April 7, 2000(15)10.5
    
    Credit Agreement by and between ReGen Biologics, Inc. and Sulzer Medica USA Holding Company dated March 14,
2000(15)10.6
    
    Agreement by and among Sulzer Medica USA Holding Co., Sulzer Biologics Inc. Sulzer Orthopedics Ltd. and ReGen
Biologics, Inc. dated February 20, 2001(15)10.7*
    
    Assignment and Royalty Agreement by and among ReGen Biologics, Inc. Modified Polymer Components, Inc. and Dr.
J. Richard Steadman dated April 9, 1997(15)10.8
    
    Exclusive License Agreement by and between ReGen Biologics, Inc. and Dr. Shu-Tung Li dated August 24, 1995(15)10.9*
    
    First Amendment to Employment Agreement by and between Gerald E. Bisbee, Jr., Ph. D. and ReGen Biologics, Inc.
dated March 23, 2004(15)10.10
    
    Common Stock Purchase Agreement by and among ReGen Biologics, Inc., and the Individuals named therein, dated
as of April 19, 2004(17)10.11
    
    Agreement by and between ReGen Biologics, Inc. and MedWork AG dated as of January 1, 2005(19)10.12
    
    Credit Agreement by and between ReGen Biologics, Inc. and Sulzer Medica USA Holding Company dated November 30,
1998(20)10.13
    
    Distributor Agreement by and between ReGen Biologics, Inc. and XMedica effective as of October 24, 2005(24)21.1
    
    Subsidiaries of the Registrant(26)31.1
    
    Section 302 Certification from
Gerald E. Bisbee, Jr., dated November 20, 2006(29)31.2
    
    Section 302 Certification from
Brion Umidi, dated November 20, 2006(29)32.1
    
    Section 906 Certification from
Gerald E. Bisbee, Jr., dated November 20, 2006(29)32.2
    
    Section 906 Certification from
Brion Umidi, November 20, 2006(29)
 
 (1)
    
    Incorporated herein by reference to the Companys Report on Form 10-Q for the quarter ended
June 30, 2002 (File No. 000-20805).(2)
    
    Incorporated herein by reference to the Companys Report on Form 10-Q/ A for the quarter
ended March 31, 2001 (File No. 000-20805).(3)
    
    Incorporated herein by reference to the Companys Report on Form 8-K filed on July 18, 2001
(File No. 000-20805).(4)
    
    Incorporated herein by reference to the Companys Report on Form 8-K filed on March 17, 2004
(File No. 000-20805). 33




---



##### 



(5)
    
    Incorporated herein by reference to the Companys Report on Form 10-Q for the quarter ended
June 30, 1997 (File No. 000-20805).(6)
    
    Incorporated herein by reference to the Companys Registration Statement on Form S-3, filed
on November 19, 2003 (File No. 333-110605).(7)
    
    Incorporated herein by reference to the Companys Report on Form 8-K, filed on September 25,
2003 (File No. 000-20805).(8)
    
    Incorporated herein by reference to the Companys Report on Form 8-K filed on June 4, 1997
(File No. 000-20805).(9)
    
    Incorporated herein by reference to the Companys Report on Form 10-Q for the quarter ended
June 30, 2002 (File No. 000-20805).(10)
    
    Incorporated herein by reference to the Companys Proxy Statement on Schedule 14A filed on
April 14, 2003 (File No. 000-20805).(11)
    
    Incorporated herein by reference to the Companys Report on Form 8-K/A, filed on September 4,
2002 (File No. 000-20805).(12)
    
    Incorporated herein by reference to the Companys Current Report on Form 8-K filed on January
14, 1997 (File No. 000-20805).(13)
    
    Incorporated herein by reference to the Companys Registration Statement on Form S-1, filed
on June 4, 1996 (File No. 333-04106).(14)
    
    Incorporated herein by reference to the Companys Report on Form 10-Q for the quarter ended
March 31, 1997 (File No. 000-20805).(15)
    
    Incorporated herein by reference to the Companys Report on Form 10-K for the year ended
December 31, 2003 (File No. 000-20805)(16)
    
    Incorporated herein by reference to the Companys Registration Statement on Form S-1/A, filed
on January 14, 2004 (File No. 333-110605).(17)
    
    Incorporated herein by reference to the Companys Registration Statement on Form S-1, filed
on April 26, 2004 (File No. 33-114867).(18)
    
    Incorporated herein by reference to the Companys Report on Form 10-Q for the quarter ended
March 31, 2004 (File No. 000-20805).(19)
    
    Incorporated herein by reference to the Companys Report on Form 10-K for the year ended
December 31, 2004 (File No. 000-20805).(20)
    
    Incorporated herein by reference to the Companys Report on Form 10-Q for the quarter ended
March 31, 2005 (File No. 000-20805).(21)
    
    Incorporated herein by reference to the Companys Report on Form 8-K, filed on July 19, 2005
(File No. 000-20805).(22)
    
    Incorporated herein by reference to the Companys Report on Form 10-Q for the quarter ended
June 30, 2005 (File No. 000-20805).(23)
    
    Incorporated herein by reference to the Companys Report on Form 8-K, filed on September 22,
2005 (File No. 000-20805).(24)
    
    Incorporated herein by reference to the Companys Report on Form 10-Q for the quarter ended
September 30, 2005 (File No. 000-20805).(25)
    
    Incorporated herein by reference to the Companys Registration Statement on Form S-1 filed on
July 22, 2005 (File No. 333-126835).(26)
    
    Incorporated herein by reference to the Companys Report on Form 10-K for the year ended
December 31, 2005 (File No. 000-20805).(27)
    
    Incorporated herein by reference to the Companys Report on Form 8-K, filed on September 25,
2003 (File No. 000-20805).(28)
    
    Incorporated herein by reference to the Companys Post-Effective Amendment No. 1 to
Registration Statement on Form S-1, filed on April 28, 2006 (File No. 333-126835).(29)
    
    Included with this filing.9*
    
    Management Contract or Compensatory Plan or Arrangement 34




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SIGNATURES
  REGEN BIOLOGICS, INC.By:
    /s/ BRION D. UMIDIBrion D. UmidiSenior Vice President and
Chief Financial Officer 35