##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) (X)
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THESECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2004 Or
 (  )
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THESECURITIES 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 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 outstanding shares of the registrants common stock as of
August 10, 2004 was 48,249,533.




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##### Table of Contents



REGEN BIOLOGICS, INC. INDEX PART I  Financial InformationItem 1.
    
    Financial StatementsCondensed Consolidated Balance Sheets at June 30, 2004 (unaudited) and December 31, 2003Condensed Consolidated Statements of Operations for the Three Months Ended June 30, 2004 (unaudited) and 2003 (unaudited), the Six Months Ended June 30, 2004 (unaudited) and 2003 (unaudited) and the Period from December 21, 1989 to June 30, 2004 (unaudited)Consolidated
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 June 30, 2004 (unaudited)Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2004 (unaudited) and 2003 (unaudited) and the Period from December 21, 1989 (inception) to June 30, 2004 (unaudited)Notes to Condensed Consolidated Financial Statements (unaudited)Item 2.
    
    Managements Discussion and Analysis of Financial Conditions and Results of OperationsItem 3.
    
    Quantitative and Qualitative Disclosures about Market RiskItem 4.
    
    Controls and ProceduresPART II  Other InformationItem 1.
    
    Legal ProceedingsItem 2.
    
    Changes in Securities and Use of ProceedsItem 3.
    
    Defaults upon Senior SecuritiesItem 4.
    
    Submission of Matters to a Vote of Security HoldersItem 5.
    
    Other InformationItem 6.
    
    Exhibits and Reports on Form 8-KSignaturesCertificationsExhibit 31.1EXhibit 31.2Exhibit 32.1Exhibit 32.2




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##### Table of Contents



PART I  Financial Information 
 Item 1. Financial Statements REGEN BIOLOGICS, INC.
(A Development Stage Company) 
 CONDENSED CONSOLIDATED BALANCE SHEETS  June 30, 2004
    
    December 31, 2003(unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    15,208
    
    
    $
    8,323Trade receivables
    
    
    51
    
    
    
    11Receivables from related parties
    
    
    68
    
    
    
    Inventory
    
    
    169
    
    
    
    216Prepaid expenses and other current assets
    
    
    216
    
    
    
    247Total current assets
    
    
    15,712
    
    
    
    8,797Property and equipment, net
    
    
    54
    
    
    
    80Other assets
    
    
    137
    
    
    
    152Total assets
    
    $
    15,903
    
    
    $
    9,029LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)Current liabilities:Accounts payable
    
    $
    632
    
    
    $
    408Accounts payable to related parties
    
    
    18
    
    
    
    26Accrued expenses
    
    
    446
    
    
    
    541Current portion of capital leases
    
    
    6
    
    
    
    4Total current liabilities
    
    
    1,102
    
    
    
    979Pension liability
    
    
    158
    
    
    
    144Other liabilities
    
    
    19
    
    
    
    19Long-term portion of capital leases
    
    
    3
    
    
    
    3Long-term portion of notes payable to related
parties, including accrued interest of $1,017 and
$958 as of June 30, 2004 and December 31, 2003,
respectively
    
    
    7,060
    
    
    
    7,001Total liabilities
    
    
    8,342
    
    
    
    8,146Series A redeemable convertible preferred stock, $.01
par value; 30,000,000 shares authorized, liquidation
preference of $6,659; and 14,860,969 shares issued
and outstanding as of June 30, 2004 and $6,855; and
15,298,351 shares issued and outstanding as of
December 31, 2003
    
    
    6,659
    
    
    
    6,855Series C redeemable convertible preferred stock, $.01
par value; 30,000,000 shares authorized, liquidation
preference of $7,227; and 16,128,759 issued and
outstanding as of June 30, 2004 and $9,969; and
22,246,153 issued and outstanding as of December 31,
2003
    
    
    6,194
    
    
    
    8,439Stockholders equity (deficit):Common stock
    
    
    481
    
    
    
    293Accumulated other comprehensive loss
    
    
    (58
    )
    
    
    (58
    )Additional paid-in capital
    
    
    50,092
    
    
    
    37,249Deficit accumulated during development stage
    
    
    (55,807
    )
    
    
    (51,895
    )Total stockholders equity (deficit)
    
    
    (5,292
    )
    
    
    (14,411
    )Total liabilities and stockholders equity (deficit)
    
    $
    15,903
    
    
    $
    9,029
 See accompanying Notes to Condensed Consolidated Financial Statements.




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##### Table of Contents



REGEN BIOLOGICS, INC.
(A Development Stage Company) 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except per share data)
 Period fromThree Months Ended June 30,
    
    Six Months Ended June 30 ,
    
    December 21, 1989(Inception) to2004
    
    2003
    
    2004
    
    2003
    
    June 30, 2004(unaudited)
    
    (unaudited)
    
    (unaudited)
    
    (unaudited)
    
    (unaudited)Revenues:Sales
    
    $
    146
    
    
    $
    24
    
    
    $
    241
    
    
    $
    198
    
    
    $
    2,636Royalties
    
    
    13
    
    
    
    5
    
    
    
    25
    
    
    
    13
    
    
    
    166Grant and other revenue
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    433Total revenues
    
    
    159
    
    
    
    29
    
    
    
    266
    
    
    
    211
    
    
    
    3,235Expenses:Costs of goods sold
    
    
    122
    
    
    
    25
    
    
    
    181
    
    
    
    296
    
    
    
    3,112Research and development
    
    
    919
    
    
    
    737
    
    
    
    1,704
    
    
    
    1,147
    
    
    
    29,171Business development,
general and
administrative
    
    
    813
    
    
    
    695
    
    
    
    1,620
    
    
    
    1,251
    
    
    
    15,346Compensation expense
associated with stock
options and warrants
    
    
    38
    
    
    
    1
    
    
    
    157
    
    
    
    1
    
    
    
    6,499Total expenses
    
    
    1,892
    
    
    
    1,458
    
    
    
    3,662
    
    
    
    2,695
    
    
    
    54,128Operating loss
    
    
    (1,733
    )
    
    
    (1,429
    )
    
    
    (3,396
    )
    
    
    (2,484
    )
    
    
    (50,893
    )Merger cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (515
    )Interest and other income
    
    
    30
    
    
    
    2
    
    
    
    39
    
    
    
    7
    
    
    
    1,273Rental income
    
    
    83
    
    
    
    107
    
    
    
    162
    
    
    
    238
    
    
    
    1,728Rent expense
    
    
    (83
    )
    
    
    (105
    )
    
    
    (161
    )
    
    
    (214
    )
    
    
    (1,592
    )Interest expense
    
    
    (31
    )
    
    
    (27
    )
    
    
    (60
    )
    
    
    (63
    )
    
    
    (3,019
    )License fees
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,050Net loss
    
    $
    (1,734
    )
    
    $
    (1,452
    )
    
    $
    (3,416
    )
    
    $
    (2,516
    )
    
    $
    (50,968
    )Deemed dividend to Series C
Preferred Stockholders upon
issuance of Series C
Preferred Stock with a
beneficial conversion and
amortization of related
issuance cost
    
    
    (444
    )
    
    
    
    
    
    
    (496
    )
    
    
    
    
    
    
    (4,839
    )Net loss attributable to
common stockholders
    
    $
    (2,178
    )
    
    $
    (1,452
    )
    
    $
    (3,912
    )
    
    $
    (2,516
    )
    
    $
    (55,807
    )Basic and diluted net loss
per share attributable to
common stockholders
    
    $
    (0.05
    )
    
    $
    (0.05
    )
    
    $
    (0.11
    )
    
    $
    (0.09
    )
    
    $
    (3.01
    )Weighted average number of
shares used for calculation
of net loss per share
    
    
    41,003,054
    
    
    
    29,070,786
    
    
    
    35,162,690
    
    
    
    29,070,786
    
    
    
    18,540,717
 See accompanying Notes to Condensed Consolidated Financial Statements.




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##### Table of Contents



ReGen Biologics, Inc. ( )
 
 Consolidated Statement
of Changes in Stockholders Equity (Deficit) and 
Series A and Series C Redeemable Convertible Preferred Stock
 Period from December 21, 1989 (inception) to June 30, 2004 (unaudited) (Dollars in thousands, per share data)
 Stockholders Equity (Deficit)Series A Redeemable
    
    Series C Redeemable
    
    Series A - F
    
    Series BConvertible Preferred
    
    Convertible Preferred
    
    Convertible
    
    Convertible PreferredStock
    
    Stock
    
    Preferred Stock
    
    Stock
    
    Common StockShare
    
    Amount
    
    Share
    
    Amount
    
    Shares
    
    Amount
    
    Shares
    
    Amount
    
    Shares
    
    AmountIssuance of common stock
at $0.03127 per share for
net assets contributed by
founders in May 1990
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    
    
    
    
    1,400,000
    
    
    $
    1Issuance 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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    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 $29
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    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
    
    
    
    1Issuance of Series C
convertible preferred
stock at $4.50 per share
for cash in December
1993, net of offering
costs of $29
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    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
    
    
    
    1Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance at December 31, 1994
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,501,890
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    2,105,200
    
    
    
    1Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance at December 31, 1995
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,501,890
    
    
    $
    1
    
    
    
    
    
    
    
    
    
    
    
    2,105,200
    
    
    $
    1
   [Continued from above table, first column(s) repeated] Stockholders Equity (Deficit)DeficitAdditional
    
    Deferred
    
    Accumulated
    
    Accumulated Other
    
    Total StockholdersPaid In
    
    Stock
    
    During Development
    
    Comprehensive
    
    EquityCapital
    
    Compensation
    
    Stage
    
    Loss
    
    (Deficit)Issuance of common stock
at $0.03127 per share for
net assets contributed by
founders in May 1990
    
    $
    44
    
    
    $
    
    
    
    $
    
    
    
    
    
    
    
    $
    45Issuance of common stock
at $0.005 per share for
cash in November 1991
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3Issuance of Series A
convertible preferred
stock at $1.00 per share
for cash in April 1991,
net of offering costs
of $44
    
    
    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
    
    
    3,650
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,650Net loss from inception
(December 21, 1989)
through December 31, 1992
    
    
    
    
    
    
    
    
    
    
    (2,476
    )
    
    
    
    
    
    
    (2,476
    )Balance at December 31, 1992
    
    
    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
    
    
    2,448
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,448Exercise of common stock
options at $0.30 per
share for cash in
February 1993
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Issuance of common stock
at $0.30 per share in
1993 in exchange for
services to a consultant
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Net loss
    
    
    
    
    
    
    
    
    
    
    (1,342
    )
    
    
    
    
    
    
    (1,342
    )Balance at December 31, 1993
    
    
    6,828
    
    
    
    
    
    
    
    (3,818
    )
    
    
    
    
    
    
    3,012Net loss
    
    
    
    
    
    
    
    
    
    
    (1,463
    )
    
    
    
    
    
    
    (1,463
    )Balance at December 31, 1994
    
    
    6,828
    
    
    
    
    
    
    
    (5,281
    )
    
    
    
    
    
    
    1,549Net loss
    
    
    
    
    
    
    
    
    
    
    (1,959
    )
    
    
    
    
    
    
    (1,959
    )Balance at December 31, 1995
    
    $
    6,828
    
    
    
    
    
    
    $
    (7,240
    )
    
    
    
    
    
    $
    (410
    )
 See accompanying Notes to Condensed Consolidated Financial Statements




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##### Table of Contents



ReGen Biologics, Inc. ( )
 Consolidated Statement
of Changes in Stockholders Equity (Deficit) and Series 
A and Series C Redeemable Convertible Preferred Stock Period from December 21, 1989 (inception) to June 30, 2004 (unaudited) (Dollars in thousands, except per share data) Stockholders Equity (Deficit)Series A
    
    Series C
    
    Series A - F
    
    Series BRedeemable Convertible
    
    Redeemable Convertible
    
    Convertible
    
    Convertible PreferredPreferred Stock
    
    Preferred Stock
    
    Preferred Stock
    
    Stock
    
    Common StockShares
    
    Amount
    
    Shares
    
    Amount
    
    Shares
    
    Amount
    
    Shares
    
    Amount
    
    Shares
    
    AmountBalance at December 31, 1995 (carried forward)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,501,890
    
    
    $
    1
    
    
    
    
    
    
    
    
    
    
    
    2,105,200
    
    
    $
    1Issuance 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
    
    
    
    
    
    
    
    
    
    
    

    
    
    
    
    
    
    
    
    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
    
    
    
    1Issuance 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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    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
    
    
    
    1Exercise 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
    
    
    
    1Exercise 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
   [Continued from above table, first column(s) repeated] Stockholders Equity (Deficit)DeficitAdditional
    
    
    
    
    
    Accumulated
    
    Accumulated Other
    
    Total StockholdersPaid In
    
    Deferred Stock
    
    During Development
    
    Comprehensive
    
    EquityCapital
    
    Compensation
    
    Stage
    
    Loss
    
    (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
    
    
    8,101
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,101Exercise of common stock options at $0.10, $0.30, and
$0.45 per share in August and October 1996
    
    
    43
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    43Net loss
    
    
    
    
    
    
    
    
    
    
    (1,931
    )
    
    
    
    
    
    
    (1,931
    )Balance at December 31, 1996
    
    
    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
    
    
    2,378
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,378Exercise of common stock options at $0.10, $0.30, and
$0.45 per share in April, August, and September 1997
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5Net loss
    
    
    
    
    
    
    
    
    
    
    (3,868
    )
    
    
    
    
    
    
    (3,868
    )Balance at December 31, 1997
    
    
    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
    
    
    108
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    108Compensation expense associated with stock
option modifications
    
    
    56
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    56Net loss
    
    
    
    
    
    
    
    
    
    
    (3,815
    )
    
    
    
    
    
    
    (3,815
    )Balance at December 31, 1998
    
    
    17,519
    
    
    
    
    
    
    
    (16,854
    )
    
    
    
    
    
    
    667Exercise of common stock options at $.725 and $1.45 per
share in April, June and August 1999
    
    
    32
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32Issuance of Series F convertible preferred stock at
$8.73 per share for cash
    
    
    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
    
    $
    24,943
    
    
    $
    (3,247
    )
    
    $
    (22,312
    )
    
    
    
    
    
    $
    (614
    )
 See accompanying Notes to Condensed Consolidated Financial Statements




---



##### Table of Contents



ReGen Biologics, Inc.
(A DEVELOPMENT STAGE COMPANY)
Consolidated Statement of Changes in Stockholders Equity (Deficit) and Series
A and Series C Redeemable Convertible Preferred Stock

Period from December 21, 1989 (inception) to June 30, 2004 (unaudited) (Dollars in thousands, except per share data) Stockholders Equity (Deficit)Series A Redeemable
    
    Series C RedeemableConvertible
    
    Convertible Preferred
    
    Series A  F Convertible
    
    Series B ConvertiblePreferred Stock
    
    Series C
    
    Preferred Stock
    
    Preferred StockShares
    
    Amount
    
    Shares
    
    Amount
    
    Shares
    
    Amount
    
    Shares
    
    AmountBalance at December 31, 1999 (carried forward)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,481,835
    
    
    $
    1Compensation 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
    
    
    
    1Exercise of common stock options at $.10
per share in 2001
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercise of common stock options at $1.45
per share in 2001
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    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
   [Continued from above table, first column(s) repeated] Stockholders Equity (Deficit)Common Stock
    
    
    
    
    
    
    
    
    
    Deficit Accumulated
    
    Accumulated OtherAdditional Paid In
    
    Deferred Stock
    
    During Development
    
    Comprehensive
    
    Total Stockholders EquityShares
    
    Amount
    
    Capital
    
    Compensation
    
    Stage
    
    Loss
    
    (Deficit)Balance at December 31, 1999 (carried forward)
    
    
    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
    
    
    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
    
    
    2,528,044
    
    
    $
    1
    
    
    $
    27,058
    
    
    $
    (2,930
    )
    
    $
    (31,871
    )
    
    
    
    
    
    $
    (7,741
    )
 See accompanying Notes to Condensed Consolidated Financial Statements




---



##### Table of Contents



ReGen Biologics, Inc.
(A DEVELOPMENT STAGE COMPANY)
Consolidated Statement of Changes in Stockholders Equity (Deficit) and Series
A and Series C Redeemable Convertible Preferred Stock

Period from December 21, 1989 (inception) to June 30,
2004 (unaudited)(Dollars in thousands, except per share data) Stockholders Equity (Deficit)Series A
    
    Series C
    
    Series A - FRedeemable Convertible
    
    Redeemable Convertible
    
    Convertible
    
    Series BPreferred Stock
    
    Preferred Stock
    
    Preferred Stock
    
    Convertible Preferred StockShares
    
    Amount
    
    Shares
    
    Amount
    
    Shares
    
    Amount
    
    Shares
    
    AmountBalance at December 31, 2001 (carried forward)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,481,835
    
    
    $
    1Issuance of Common StockIssuance of Convertible Preferred Stock for cash and conversion of
bridge financing net of issuance costs of $138
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,564,047
    
    
    
    1Deferred stock compensation associated with stock option grants in
2002Compensation expense associated with stock options outstandingEffect of reverse merger and recapitalization:Valuation of warrants associated with bridge financingValuation of beneficial conversion associated with bridge financingCompensation expense associated with stock options
outstanding recognized as a result of the reverse
mergerConversion 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
    
    
    $
    120Conversion of Subsidiary Common Stock into Company Common Stock
and Series B Preferred Shares:Elimination of Subsidiary Common StockIssuance of Company Common StockCompany Common Stock and related equity held by
existing shareholders (net of 18,115 shares held treasury)Conversion of Convertible Preferred Series B Stock to Company
Common Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,025,656
    )
    
    
    (120
    )Minimum Pension LiabilityNet lossOther Comprehensive LossBalance at December 31, 2002
    
    
    15,298,351
    
    
    
    6,855
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Compensation expense associated with stock options outstandingIssuance 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
    
    
    $
    9,357Issuance of Common Stock warrants to Series C Stockholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (969
    )Valuation of beneficial conversion associated with Series C Stock
financing
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,292
    )Accretion of beneficial conversion associated with Series C Stock
financing
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,292Issuance of Common Stock  warrants exercisedAccretion of Series C Stock issuance cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51Net loss and comprehensive lossBalance at December 31, 2003
    
    
    15,298,351
    
    
    $
    6,855
    
    
    
    22,246,153
    
    
    $
    8,439
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
   [Continued from above table, first column(s) repeated] Stockholders Equity (Deficit)DeficitAccumulated
    
    AccumulatedCommon Stock
    
    Additional
Paid In
    
    Deferred Stock
    
    During
Development
    
    Other
Comprehensive
    
    Total
StockholdersShares
    
    Amount
    
    Capital
    
    Compensation
    
    Stage
    
    Loss
    
    Equity (Deficit)Balance at December 31, 2001 (carried forward)
    
    
    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
    
    
    
    
    
    
    
    
    
    
    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
    
    
    
    
    
    
    
    
    
    
    (6,854
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,855
    )Conversion of convertible preferred shares to Common Stock and
Series B Preferred Shares
    
    
    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
    )
    
    
    1Issuance 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
    
    
    
    120Minimum Pension Liability
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (58
    )
    
    
    (58
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,951
    )
    
    
    
    
    
    
    (9,951
    )Other Comprehensive Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,009
    )Balance at December 31, 2002
    
    
    29,070,786
    
    
    
    291
    
    
    
    31,373
    
    
    
    
    
    
    
    (41,822
    )
    
    
    (58
    )
    
    
    (10,216
    )Compensation expense associated with stock options outstanding
    
    
    
    
    
    
    
    
    
    
    405
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    405Issuance 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
    
    
    
    
    
    
    
    
    
    
    97
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    97Issuance of Common Stock warrants to Series C Stockholders
    
    
    
    
    
    
    
    
    
    
    969
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    969Valuation of beneficial conversion associated with Series C Stock
financing
    
    
    
    
    
    
    
    
    
    
    4,292
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,292Accretion of beneficial conversion associated with Series C Stock
financing
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,292
    )
    
    
    
    
    
    
    (4,292
    )Issuance of Common Stock  warrants exercised
    
    
    230,000
    
    
    
    2
    
    
    
    113
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    115Accretion of Series C Stock issuance cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (51
    )
    
    
    
    
    
    
    (51
    )Net loss and comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,730
    )
    
    
    
    
    
    
    (5,730
    )Balance at December 31, 2003
    
    
    29,300,786
    
    
    $
    293
    
    
    $
    37,249
    
    
    $
    
    
    
    $
    (51,895
    )
    
    $
    (58
    )
    
    $
    (14,411
    )
 See accompanying Notes to Condensed Consolidated Financial Statements.




---



##### Table of Contents



ReGen Biologics, Inc.
(A DEVELOPMENT STAGE COMPANY)
Consolidated Statement of Changes in Stockholders Equity (Deficit) and Series
A and Series C Redeemable Convertible Preferred Stock Period from
December 21, 1989 (inception) to June 30, 2004
(unaudited)(Dollars in thousands, except per share data) Stockholders Equity (Deficit)Series A
    
    Series C
    
    Series A - FRedeemable Convertible
    
    Redeemable Convertible
    
    Convertible
    
    Series BPreferred Stock
    
    Preferred Stock
    
    Preferred Stock
    
    Convertible Preferred StockShares
    
    Amount
    
    Shares
    
    Amount
    
    Shares
    
    Amount
    
    Shares
    
    AmountBalance at December 31, 2003
    
    
    15,298,351
    
    
    $
    6,855
    
    
    
    22,246,153
    
    
    $
    8,439
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    Compensation expense associated with stock options
outstandingAccretion of Series C Stock issuance cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100Recognition of Series C Stock issuance cost upon conversion
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    396Issuance of Common Stock  warrants exercised net of 8,901
shares held treasuryIssuance of Common Stock  options exercisedIssuance of Common Stock  common stock offeringConversion of Series A Stock to Common Stock
    
    
    (437,382
    )
    
    
    (196
    )Conversion of Series C Stock to Common Stock
    
    
    
    
    
    
    
    
    
    
    (6,117,394
    )
    
    
    (2,741
    )Net loss and comprehensive lossBalance at June 30, 2004 (unaudited)
    
    
    14,860,969
    
    
    $
    6,659
    
    
    
    16,128,759
    
    
    $
    6,194
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
   [Continued from above table, first column(s) repeated] Stockholders Equity (Deficit)DeficitAccumulated
    
    AccumulatedCommon Stock
    
    Additional
    
    
    
    
    
    During
    
    Other
    
    TotalPaid In
    
    Deferred Stock
    
    Development
    
    Comprehensive
    
    StockholdersShares
    
    Amount
    
    Capital
    
    Compensation
    
    Stage
    
    Loss
    
    Equity (Deficit)Balance at December 31, 2003
    
    
    29,300,786
    
    
    $
    293
    
    
    $
    37,249
    
    
    $
    
    
    
    $
    (51,895
    )
    
    $
    (58
    )
    
    $
    (14,411
    )Compensation expense associated with stock options
outstanding
    
    
    
    
    
    
    
    
    
    
    184
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    184Accretion of Series C Stock issuance cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (100
    )
    
    
    
    
    
    
    (100
    )Recognition of Series C Stock issuance cost upon conversion
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (396
    )
    
    
    
    
    
    
    (396
    )Issuance of Common Stock  warrants exercised net of 8,901
shares held treasury
    
    
    79,211
    
    
    
    1
    
    
    
    30
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31Issuance of Common Stock  options exercised
    
    
    80,000
    
    
    
    1
    
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13Issuance of Common Stock  common stock offering
    
    
    12,074,595
    
    
    
    121
    
    
    
    9,745
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,866Conversion of Series A Stock to Common Stock
    
    
    437,382
    
    
    
    4
    
    
    
    192
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    196Conversion of Series C Stock to Common Stock
    
    
    6,117,394
    
    
    
    61
    
    
    
    2,680
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,741Net loss and comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,416
    )
    
    
    
    
    
    
    (3,416
    )Balance at June 30, 2004 (unaudited)
    
    
    48,089,368
    
    
    $
    481
    
    
    $
    50,092
    
    
    $
    
    
    
    $
    (55,807
    )
    
    $
    (58
    )
    
    $
    (5,292
    )
 See accompanying Notes to Condensed Consolidated Financial Statements.




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##### Table of Contents



REGEN BIOLOGICS, INC.
(A Development Stage Company) 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
  Period fromSix Months Ended June 30,
    
    December 21, 1989(Inception) to2004
    
    2003
    
    June 30, 2004(unaudited)
    
    (unaudited)
    
    (unaudited)Operating ActivitiesNet loss
    
    $
    (3,416
    )
    
    $
    (2,516
    )
    
    $
    (50,968
    )Adjustments to reconcile net loss to net cash used in operating activities:Compensation expense associated with stock options
    
    
    157
    
    
    
    1
    
    
    
    6,501Amortization of debt discount for warrant and beneficial conversion
feature
    
    
    
    
    
    
    
    
    
    
    1,500Non-cash interest expense
    
    
    59
    
    
    
    63
    
    
    
    1,213Depreciation and amortization
    
    
    40
    
    
    
    63
    
    
    
    2,166Loss on disposal of property and equipment
    
    
    
    
    
    
    
    
    
    
    9Changes in operating assets and liabilities:Other current assets and receivables
    
    
    (49
    )
    
    
    58
    
    
    
    (214
    )Inventory
    
    
    47
    
    
    
    (10
    )
    
    
    (169
    )Other assets
    
    
    15
    
    
    
    14
    
    
    
    (87
    )Accounts payable and accrued expenses
    
    
    121
    
    
    
    192
    
    
    
    785Other liabilities
    
    
    14
    
    
    
    (25
    )
    
    
    33Net cash used in operating activities
    
    
    (3,012
    )
    
    
    (2,160
    )
    
    
    (39,231
    )Investing ActivitiesPurchases of property and equipment
    
    
    (10
    )
    
    
    (20
    )
    
    
    (1,993
    )Changes in short-term investments
    
    
    
    
    
    
    2,184
    
    
    
    2,945Net cash provided by (used in) investing activities
    
    
    (10
    )
    
    
    2,164
    
    
    
    952Financing 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, net of offering costs paid in cash
    
    
    9,909
    
    
    
    
    
    
    
    10,325Repayment of capital lease obligations
    
    
    (2
    )
    
    
    (4
    )
    
    
    (119
    )Proceeds from notes payable
    
    
    
    
    
    
    
    
    
    
    11,410Payments on notes payable
    
    
    
    
    
    
    
    
    
    
    (2,323
    )Net cash provided by (used in) financing activities
    
    
    9,907
    
    
    
    (4
    )
    
    
    53,486Net increase (decrease) in cash
    
    
    6,885
    
    
    
    
    
    
    
    15,207Cash at beginning of period
    
    
    8,323
    
    
    
    1
    
    
    
    1Cash at end of period
    
    $
    15,208
    
    
    $
    1
    
    
    $
    15,208Supplemental 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
    
    
    4
    
    
    
    
    
    
    
    128Cancellation 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 Series A Stock
    
    
    196
    
    
    
    
    
    
    
    196Warrants exercised, cashless transaction
    
    
    10
    
    
    
    
    
    
    
    10Conversion of Series C Stock
    
    
    2,741
    
    
    
    
    
    
    
    2,741Cash disclosure:Cash paid for interest
    
    
    1
    
    
    
    
    
    
    
    315
 See accompanying Notes to Condensed Consolidated Financial Statements.




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##### Table of Contents



REGEN BIOLOGICS, INC.
(A Development Stage Company) 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Dollars 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 (consisting of normal recurring accruals)
necessary to present fairly the financial position and the results of
operations for the interim periods. ReGen will continue to require additional capital to 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 Collagen Meniscus Implant, or 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 margins. 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, 2003. ReGen currently operates in one business segment that develops and
manufactures tissue growth and repair products for unmet markets in both the
U.S. and globally. 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. Concentrations of Risk The Company currently has two principal customers, which market and sell
the Companys two current products. Customer A has the license to sell the
SharpShooter product. Customer B, which is also a shareholder of the Company,
has a non-exclusive license to sell the CMI product outside of the United
States and a license to sell the SharpShooter product in a limited manner in
connection with the sale of the CMI. Concentrations of receivables and revenues
by customer are as follows: Three Months Ended June 30,
    
    Six Months Ended June 30,
    
    December 31,2004
    
    2003
    
    2004
    
    2003
    
    2003Accounts receivable:Customer A
    
    
    43
    %
    
    
    83
    %
    
    
    43
    %
    
    
    83
    %
    
    
    100
    %Customer B
    
    
    57
    %
    
    
    17
    %
    
    
    57
    %
    
    
    17
    %
    
    
    0
    %Sales revenues:Customer A
    
    
    46
    %
    
    
    5
    %
    
    
    66
    %
    
    
    24
    %
    
    
    23
    %Customer B
    
    
    54
    %
    
    
    95
    %
    
    
    34
    %
    
    
    76
    %
    
    
    77
    %Royalties:Customer A
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
 In several cases the Company relies on a single vendor to supply critical
materials or components. All of these materials and components can currently be
obtained by alternative suppliers, subject to the time and other resources
required to initiate new vendor relationships.




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##### Table of Contents



Adoption of New Accounting Pronouncements In January 2003, the FASB issued Interpretation No. 46 (FIN 46),
Consolidation of Variable Interest Entities. Interpretation No. 46 requires a
variable interest entity to be consolidated by a company if that company is
subject to a majority of the risk of loss from the variable interest entitys
activities or is entitled to receive a majority of the entitys residual
returns or both. Previously, entities were generally consolidated by a company
that had a controlling financial interest through ownership of a majority
voting interest in the entity. In December 2003, the FASB issued FIN 46
(revised December 2003), Consolidation of Variable Interest Entities,(FIN 46R)
to clarify some of the provisions of FIN 46. For the year ended December 31,
2003, the Company was required to apply the provisions of FIN 46 that relate to
special purpose entities (SPEs) created prior to February 1, 2003. Adoption of
these provisions did not have a material impact on the Companys financial
statements. For the quarter ended March 31, 2004, the Company is required to
adopt the provisions related to non-SPEs created prior to February 1, 2003, and
the provisions related to all entities, regardless of whether an SPE, that were
created subsequent to January 31, 2003. Adoption of these provisions did not
have a material impact on the Companys financial statements. In December 2003, the FASB issued FASB Statement No. 132 (revised 2003),
Employers Disclosures about Pensions and Other Postretirement Benefits. The
revised standard requires new disclosures in addition to those required by the
original standard about the assets, obligations, cash flows and net periodic
benefit cost of defined benefit pension plans and other defined benefit
postretirement plans. As revised, SFAS No. 132 is effective for financial
statements with fiscal years ending after December 15, 2003. The interim-period
disclosures required by this standard are effective for interim periods
beginning after December 15, 2003. See Defined Benefit Plan for newly
required interim disclosures. Reclassifications Certain prior year and inception to June 30, 2004 balances have been
reclassified to conform to the current periods presentation. Cash and Cash Equivalents The Company considers all highly liquid investments purchased with a
maturity of 90 days or less at the date of acquisition to be cash equivalents
and as such has classified cash held in a money market account and sweep
account as cash equivalents. The Company held cash equivalents of $14,471 and
$8,091 in a money market account and $737 and $232 in a sweep account as of
June 30, 2004 and December 31, 2003, respectively. 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 build-up in the stage of completion using estimated labor inputs
for each stage and historical yields reduced by estimated usage for quality
control testing and for research and development. Inventory consists of the following: June 30,
    
    December 31,2004
    
    2003(In thousands)Raw material
    
    $
    23
    
    
    $
    29Work in process
    
    
    51
    
    
    
    16Finished goods
    
    
    95
    
    
    
    171$
    169
    
    
    $
    216
 Inventory was adjusted down $107 and $62 during the periods ended June 30,
2004 and December 31, 2003, respectively, to reflect values at the lower of
cost or market. At June 30, 2004, 38% of the units in inventory are valued at
below the Companys cost. Due to a high degree of fixed costs in the production
process, and the early stage of market acceptance for the Companys products,
current sales and production volumes are not adequate to provide for per unit
costs that are lower than the current market prices.




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##### Table of Contents



Accrued Expenses Accrued expenses consist of the following: June 30,
    
    December 31,2004
    
    2003(In thousands)Accrued professional fees
    
    $
    298
    
    
    $
    190Accrued officer compensation
    
    
    
    
    
    
    178Accrued printing cost
    
    
    25
    
    
    
    26Accrued common stock registration cost
    
    
    55
    
    
    
    75Accrued vacation
    
    
    37
    
    
    
    22Other accrued cost
    
    
    31
    
    
    
    50$
    446
    
    
    $
    541
 Defined Benefit Plan Prior to the reverse merger and recapitalization, the Company sponsored a
defined benefit pension plan (Pension Plan) covering all former employees of
National Health Advisors, a subsidiary of the Company acquired in 1997. The
Pension Plan was amended to freeze benefit accruals and the entry of new
participants effective October 31, 1997. The sale of the Companys APACHE
business in 2001 resulted in the termination of all remaining participants in
the Pension Plan. The Company previously disclosed in its financial statements for the year
ended December 31, 2003, that it did not expect to make contributions to the
plan during 2004 and as of June 30, 2004 no contributions have been made.
Pension expense during the three month periods ended June 30, 2004 and 2003 was
not material. Stock Based Compensation The Company has adopted the disclosure only provisions of SFAS No. 123.
Accordingly, if the exercise price of the Companys employee stock options
equals or exceeds the estimated fair value of the underlying stock on the date
of grant, no compensation expense is generally recognized. Had compensation costs for the Companys stock options been determined
based on SFAS No. 123 as amended by SFAS No. 148, the Companys net loss
attributable to common stockholders and net loss per share attributable to
common stockholders would have been as follows (dollars in thousands, except
per share data): Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2004
    
    2003
    
    2004
    
    2003Net loss attributable to common stockholders, as reported
    
    $
    (2,178
    )
    
    $
    (1,452
    )
    
    $
    (3,912
    )
    
    $
    (2,516
    )Add: Total stock-based employee compensation
expense as reported under intrinsic value method
(APB No 25) for all awards, net of related tax effects
    
    
    32
    
    
    
    
    
    
    
    145
    
    
    
    Deduct: Total stock-based employee compensation expense
determined under fair value based method (SFAS
No. 123) for all awards, net of related tax effects
    
    
    (166
    )
    
    
    (46
    )
    
    
    (419
    )
    
    
    (92
    )Pro forma net loss attributable to common stockholders
    
    $
    (2,312
    )
    
    $
    (1,498
    )
    
    $
    (4,186
    )
    
    $
    (2,608
    )Net loss per share attributable to common stockholders:Basic and diluted  as reported
    
    $
    (0.05
    )
    
    $
    (0.05
    )
    
    $
    (0.11
    )
    
    $
    (0.09
    )Basic and diluted  pro forma
    
    $
    (0.06
    )
    
    $
    (0.05
    )
    
    $
    (0.12
    )
    
    $
    (0.09
    )Shares
    
    
    41,003,054
    
    
    
    29,070,786
    
    
    
    35,162,690
    
    
    
    29,070,786




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##### Table of Contents



Rental Activities The Company subleases space in one of its facilities to an unrelated third
party. Rental income and expense associated with this sublease are recorded
below operating loss. Rental expense includes an allocation of building
related expenses based on the ratio of subleased space to total space. (2) RELATED PARTY TRANSACTIONS The Company has a cost reimbursement agreement with a shareholder of the
Company. For the periods ended June 30, 2004 and December 31, 2003, the Company
is entitled to, and recorded as a reduction of business development expenses,
reimbursement of approximately $10 and $90, respectively. For the three months ended June 30, 2004 and June 30, 2003, 54% and 95%,
respectively of the Companys revenues were from sales to Customer B, a related
party. For the six months ended June 30, 2004 and June 30, 2003, 34% and 76%,
respectively of the Companys revenues were from sales to Customer B, a related
party. At June 30, 2004 and December 31, 2003, approximately $18 and $26 of
accounts payable were due to related parties for services or reimbursed
expenses including officers or directors who are also shareholders. The
Company has paid $39 and $107 to the afore mentioned related parties during the
six months ended June 30, 2004 and the year ended December 31, 2003,
respectively. During the second quarter 2004 the Company made a donation of
approximately $8 to the Steadman Hawkins Foundation for orthopedic research.
Dr. Steadman, a director and shareholder of the Company is the director of the
Foundation. (3) FINANCINGS AND CAPITAL TRANSACTIONS The Series C Stock and Series A Stock are subject to Registration Rights
Agreements entered into as of September 23, 2003 and September 30, 2003 whereby
the holders of such shares have, in certain circumstances, the right to require
the Company to register the common shares into which the Series C Stock and the
Series A Stock is convertible. ReGen has received notice from certain holders
of the Series C Stock and Series A Stock, representing 35,549,814 shares,
requesting that ReGen register such shares pursuant to the terms of the
Registration Rights Agreements. In the second quarter of 2004, holders of 437,382 shares of Series A
Redeemable Convertible Preferred Stock and 6,117,394 shares of Series C
Redeemable Convertible Preferred Stock exercised their right to convert their
shares to an equal number of shares of common stock. As a result of this
conversion, $396 of unamortized issuance cost associated with the Series C
Stock was immediately recognized as a deemed dividend to preferred stockholders
for purposes of determining net loss attributable to common stockholders. The
Common Stock issued upon conversion is included in the shares for which ReGen
has received notice requesting registration. On April 19, 2004, the Company completed a private placement for
12,074,595 shares of restricted common stock at a price per share of $0.85,
resulting in proceeds net of issuance costs of approximately $9,866 (the April
Financing). The common stock sold in the private placement may be registered
by the Company on one or more registration statements to be filed with the SEC,
and will be subject to lock-up provisions for a period of 150 days after the
completion of the private placement. On July 14, 2004, the Company filed a preliminary registration statement
(the Registration Statement) with the SEC on Form S-1 for registration of
47,624,409 shares of common stock. The shares being registered include common
shares registered pursuant to the Registration Rights Agreements (issuable upon
the conversion of certain shares of Series A Stock and Series C Stock) and the
shares issued in the April Financing. The Registration Statement was declared
effective with the SEC on July 23, 2004.




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results
of Operations (dollars in thousands, except per share data and per unit data) 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 condensed 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. You should not place undue reliance on these
forward-looking statements, which apply only as of the date of this Form 10-Q. Business We are a leading orthopedic products company that develops and
manufactures tissue growth and repair products for unmet markets in both the
U.S. and globally. Our primary product, the Collagen Meniscus Implant, or CMI,
is an implant designed to facilitate growth of new tissue to replace removed or
missing meniscus tissue in the human knee. A damaged meniscus is frequently
treated with an arthroscopic surgical procedure known as a partial
meniscectomy. During this procedure, surgeons remove damaged meniscus tissue
leaving less meniscus tissue to support the knee and protect the patient from
further degeneration or injury. The CMI represents the only product of which we
are aware with the potential to facilitate the growth of new tissue in the
space created when meniscus tissue is removed through a partial meniscectomy
procedure. As indicated from the preliminary results of our clinical studies,
the greatest benefits to the patient from implantation of the CMI are seen in
the patients who have undergone prior treatment to their meniscus, and include:  
    
    Substantial growth of new tissue in the meniscus, which does not otherwise
re-grow after removal in a partial meniscectomy;
    
    Significantly greater return to a more active lifestyle than those patients
receiving only a partial meniscectomy; and
    
    A highly correlated relationship between the patients pain and function,
and their degree of return to pre-injury activity, e.g. CMI patients
experience an approximately equal level of pain as do the patients in the
control group who received only a partial meniscectomy, but do so at a
significantly higher return to pre-injury activity levels. In November 2002, ReGen completed the required enrollment and related
surgical procedures for its CMI clinical trial in the U.S. At the request of
surgeons participating in the trial, additional patients were enrolled and
surgeries completed by early 2003. All patients included in the trial are
expected to complete two years of follow-up prior to ReGens submission of the
results in its PMA to the FDA. ReGen expects the last of these two-year
clinical follow-up exams will be completed by early 2005, with submission of
the completed PMA to the FDA shortly thereafter. The process of review by the
FDA is uncertain, but ReGen expects that the FDA Orthopedic Panel will issue
its recommendation to the FDA in late 2005 or early 2006, with a final decision
from the FDA thereafter. Should the FDA approve the CMI for sale in the U.S.,
sales of the CMI in the U.S. are not expected to occur until, at the earliest,
late 2006. The FDA has not yet approved the CMI and there is no guarantee that we
will obtain such approval. If we were to obtain FDA approval, we believe the
following trends may be relevant to the performance of the Company. The number
of partial meniscectomy procedures is expected to grow by approximately 5% per
year for the foreseeable future due to the aging population, the growing
proportion of weekend warriors and the lack of viable alternatives. The
number of patients that would be eligible for a medial CMI implant in the U.S.,
if the CMI were approved by the FDA, is expected to increase to over 40% of all
partial meniscectomy procedures, or approximately 476,000 patients, by 2010.
We estimate that, based on the expected average sales price of the CMI in the
U.S. if the CMI had been approved by the FDA, the U.S. market for the CMI in
2002 would have been approximately $850 million, and is expected to increase to
approximately $1.7 billion by 2010 if the CMI is approved by the FDA. This
estimate is based on an assumed average reimbursed sales price of $3,500 for
the CMI, and does not include surgeon and other facility costs. Sales of the
CMI in the U.S. will not occur until it has been approved for sale in the U.S.
by the FDA.




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The CMI is currently cleared for sale in Europe, Australia and Chile. The
CMI is distributed outside the U.S. on a non-exclusive basis by the Centerpulse
unit (Centerpulse) of Zimmer Holdings, Inc. (NYSE: ZMH) (Zimmer). We also sell the SharpShooter Tissue Repair System, or SharpShooter, a
suturing device used to facilitate the surgical implantation of the CMI, as
well as to perform other similar arthroscopic meniscal repair procedures. The
SharpShooter is currently marketed through a worldwide distribution agreement
with Linvatec Corporation (Linvatec), a subsidiary of ConMed (NASDAQ: CNMD).
The SharpShooter is cleared for sale in the U.S., Europe, Canada, Australia,
Chile and Japan. In general, we have seen positive reception to the CMI by surgeons and
patients in Europe. The CMI is approved for sale in most European countries and
Australia, but application for reimbursement approval in certain countries,
including Germany, the largest European country, is still underway. The primary
business of Centerpulse, the Companys non-exclusive distribution partner in
Europe, is the development, production and marketing of joint replacement
products for the knee, hip and other joints. We do not believe that Centerpulse
has committed the necessary resources to building a marketing and sales
initiative for sports medicine products in general or the CMI in particular. In
August 2003, Centerpulse agreed to be acquired by Zimmer, and on October 2,
2003 Zimmer announced the completion of its exchange offers. The acquisition by
Zimmer resulted in beneficial ownership by Zimmer of 98.7% of Centerpulses
issued shares. We believe that the ongoing acquisition and business
integration-related activities that affected Centerpulse throughout 2003 were
disruptive to the focus of its limited resources on building a sports medicine
marketing business in general, and on selling the CMI in particular. We
believe this trend will continue in 2004. In 2003 Centerpulse was obligated to sell a minimum of 800 CMIs. On
February 5, 2004 Centerpulse delivered its final sales report for the calendar
year ended December 31, 2003. This report indicated that Centerpulse failed to
meet the minimum sales requirements. According to the terms of the distribution
agreement with Centerpulse, we had 45 calendar days from receipt of the final
sales report to exercise the options provided to us in the agreement. We have
elected to amend the distribution agreement to make the distribution rights to
the CMI held by Centerpulse non-exclusive. Pursuant to the terms of the
distribution agreement, this election took effect on April 17, 2004, 30 days
from the date of Centerpulses receipt of our notice. Our current strategy is to focus on the following initiatives:  
    
    Obtaining FDA approval of the CMI;
    
    Developing our distribution and marketing capabilities for the CMI
both in the U.S. and throughout certain other countries;
    
    Launching the CMI in the U.S.; and
    
    Conducting further research on select product opportunities within
our research and development pipeline to determine whether to pursue
further development of these opportunities. Our long-term strategy is to capitalize on our proven collagen scaffold
technology by continuing to design, develop, manufacture, and market our own
products, as well as partner with key market leaders to develop and market
products in other targeted therapeutic areas. Our Core Technology Our core technology focuses on guided tissue generation. That is, if the
body is provided with a suitable environment for cellular ingrowth, the body
has the ability to use its own cell structures to grow new tissue. We have
developed a proprietary type I bovine collagen scaffold material that uses the
bodys own cells to grow new tissue. The various tissue matrix engineering
processes used in the design of this scaffold are the basis of our tissue
growth technology and product offerings. Our proprietary processes are capable
of producing implants with the various physical properties required for
remodeling each specific target tissue. Our initial application, the CMI, uses
this technology to guide the generation of new tissue in the medial meniscus of
the knee. Collagen is a multifunctional family of proteins with unique structural
characteristics. To date, 19 different proteins can be classified as collagen,
making collagen the most abundant protein in the human body. Among the various
collagens, type I collagen is the most abundant and is the major constituent of
bone, skin, and tendon.




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The structure of animal type I collagen is highly similar to the structure
of human type I collagen. This finding is supported by data from our current
U.S. clinical trial. Based on the important functions of type I collagen in the
body and the biocompatibility of animal type I collagen, this material has
become increasingly popular as a biomaterial for clinical applications,
particularly in the repair and generation of new tissue. 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. Actual results could differ from those estimates.
For further discussion of our accounting policies see Note 1 Summary of
Significant Accounting Policies of the Notes to Condensed Consolidated Financial
Statements. Results of Operations Three and Six Months Ended June 30, 2004 Compared to Three and Six Months Ended
June 30, 2003 REVENUE.The Companys revenue for the three months ended June 30, 2004 was
$159 compared with $29 for the same period in 2003, an increase of
approximately $130 or 448%. Revenue for the six months ended June 30, 2004 was
$266 compared with $211 for the same period in 2003, an increase of
approximately $55 or 26%. These increases result from higher product sales to
our distributors and related royalties. CMI sales were $57 for the three months ended June 30, 2004 compared with $0
for the same period in 2003, an increase of $57 or 100%, due to the higher
number of CMI units ordered by and therefore shipped to Centerpulse. Unit
shipments of the CMI during the three months ended June 30, 2004 were 113
compared with 0 units shipped in the same period in 2003, an increase of 113
units, or 100%. CMI sales were $57 for the six months ended June 30, 2004
compared with $68 for the same period in 2003, a decrease of $11 or 16%, due to
the lower number of CMI units ordered by and therefore shipped to Centerpulse.
Unit shipments of the CMI during the six months ended June 30, 2004 were 113
compared with 139 units shipped in the same period in 2003, a decrease of 26
units, or 19%. Shipments of the CMI, and therefore revenue to the Company have
been historically inconsistent. Effective April 17, 2004, we elected to convert
our distribution agreement with Centerpulse to non-exclusive and continue to
discuss with them potential future distribution relationships. SharpShooter sales in the three months ended June 30, 2004 approximated $89
compared with $24 for the same period in 2003, a net increase of $65 or 271%.
SharpShooter sales to Centerpulse for the three months ended June 30, 2004 were
$21 compared to $23 for the same period in 2003, a decrease of $2 or 9%. This
decrease was offset by the increase in SharpShooter sales to Linvatec, ReGens
primary distributor for the SharpShooter. SharpShooter sales to Linvatec for
the three months ended June 30, 2004 were $68 compared to $1 for the same
period in 2003, an increase of $67 or 6700%. SharpShooter sales to Linvatec
accounted for approximately 77% of total SharpShooter sales for the three
months ended June 30, 2004 and 5% for the three months ended June 30, 2003.
SharpShooter sales were $184 for the six months ended June 30, 2004 compared
with $130 for the same period in 2003 an increase of $54, or 42%. SharpShooter
sales to Centerpulse for the six month period ended June 30, 2004 were $24
compared to $82 for the same period in 2003, a decrease of $58 or 71%. This
decrease was offset by the increase in SharpShooter sales to Linvatec.
SharpShooter sales to Linvatec for the six months ended June 30, 2004 were $160
compared to $48 for the same period in 2003, an increase of $112 or 233%.
SharpShooter sales to Linvatec accounted for approximately 87% of total
SharpShooter sales for the six months ended June 30, 2004 and 37% for the six
months ended June 30, 2003. Royalties received from Linvatec for the three months ended June 30, 2004
approximated $13 compared with $5 for the same period in 2003, an increase of
$8 or 160%. Royalties received for the six months ended June 30, 2004
approximated $25 compared with $13 for the same period in, 2003 an increase of
$12 or 92%.




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In March and April 2003, Conmed, the parent company of Linvatec announced that
it had completed the acquisition of Bionx Implants, Inc. (Bionx) and that it
would be integrating the sale of the Bionx products with its orthopedic
subsidiary, Linvatec. As part of this integration, Conmed announced that it
would be reorganizing its 90 direct orthopedic sales representatives into 18
exclusive sales agent groups that would eventually manage 230 sales
professionals in the U.S. While shipments of the SharpShooter products have
been historically inconsistent, we believe that these corporate and operating
organizational matters had affected activities at Linvatec, such that orders of
our products throughout most of 2003 were negatively impacted. Linvatecs
sales of the SharpShooter increased sequentially by 46% in the third quarter of
2003, 40% in the fourth quarter of 2003, 8% in the first quarter 2004 and 7% in
the second quarter 2004, suggesting that our sales and royalty revenue, driven
by Linvatec sales, will continue to improve in 2004 if this trend continues. COST OF GOODS SOLD.Cost of goods sold approximated $122 for the three months
ended June 30, 2004 compared with $25 for the same period in 2003, an increase
of $97, or 388%, directly correlated to the increase in sales, particularly
sales of CMI, which have a higher relative per unit cost. For the three months
ended June 30, 2004 and 2003, respectively, CMI costs accounted for $53 and
approximately $0. For the three months ended June 30, 2004 and 2003,
respectively, SharpShooter costs accounted for approximately $69 and $25. Cost
of goods sold approximated $181 for the six months ended June 30, 2004 compared
with $296 for the same period in 2003, a decrease of $115, or 39%, directly
correlated to the decrease in CMI sales, which have a higher relative per unit
cost. For the six months ended June 30, 2004 and 2003, respectively, CMI costs
accounted for $53 and approximately $97. For the six months ended June 30, 2004
and 2003, respectively, SharpShooter costs accounted for approximately $128 and
$199. At June 30, 2004, 38% of the units in inventory are valued at below the
Companys cost. Due to a high degree of fixed costs in the production process,
and the early stage of market acceptance for its products, current sales and
production volumes are not adequate to provide for per unit costs that are
lower than the current market price for some of the Companys products. RESEARCH AND DEVELOPMENT.Research and development expenses for the three
months ended June 30, 2004 approximated $919 compared with $737 for the same
period in 2003, an increase of approximately $182, or 25%. Research and
development expenses for the six months ended June 30, 2004 approximated $1,704
compared with $1,147 for the same period in 2003, an increase of approximately
$557, or 49%. These increases result from (i) the higher proportion of CMI
units produced for development and quality control purposes versus those
produced for commercial resale during the three and six month periods ended June
30, 2004 as compared with the same periods in 2003, and (ii) increased
development costs, primarily for consulting services, in connection with the
Pre-market Approval submission for the CMI. Management expects these trends to
continue through 2004, as we prepare our PMA for submission to the FDA. In
early July 2004 the Company submitted the manufacturing module of the modular
PMA for the CMI to the FDA, an important step toward a final decision from the
FDA regarding approval of the CMI. BUSINESS DEVELOPMENT, GENERAL AND ADMINISTRATIVE.Business development, general
and administrative expenses approximated $813 for the three months ended June
30, 2004 compared with $695 for the same period in 2003, an increase of
approximately $118, or 17%, resulting primarily from (i) an increase of
approximately $169 in professional services including legal representation,
accounting services and stock transfer and exchange services, (ii) an increase
of approximately $4 in employee compensation, (iii) an increase of
approximately $73 in printing cost related to security filings, (iv) an
increase of approximately $25 in investor relations and (v) an offsetting
decrease of approximately $158 related to expensed financing costs incurred in
connection with the Series C financing that closed in September 2003. Business
development, general and administrative expenses approximated $1,620 for the
six months ended June 30, 2004 compared with $1,251 for the same period in
2003, an increase of approximately $369, or 29%, resulting primarily from (i)
an increase of approximately $361 in professional services including legal
representation, accounting services and stock transfer and exchange services,
(ii) an increase of approximately $26 in employee compensation, (iii) an
increase of approximately $73 in printing cost related to security filings,
(iv) an increase of approximately $59 in investor relations and (v) an
offsetting decrease of approximately $158 related to expensed financing costs
incurred in connection with the Series C financing. Management expects these
trends to continue through 2004. COMPENSATION EXPENSE ASSOCIATED WITH STOCK OPTIONS AND WARRANTS.Compensation
expense associated with stock options and warrants for the three months ended
June 30, 2004 approximated $38, compared to $1 for the same period in 2003.
Stock based compensation expense for the three months ended June 30, 2004
consisted of (i) $6 for non-employees and ii) $32 for employees. Compensation
expense associated with stock options and warrants for the six months ended
June 30, 2004 approximated $157, compared to $1 for the same period in 2003.
Stock based compensation expense for the six months ended June 30, 2004
consisted of (i) $12 for non-employees and ii) $145 for employees.




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NON-OPERATING INCOME (EXPENSE).Non-operating income (expense) consists of
interest and other income, rental income, rental expense, interest expense and
license fees. Interest and other income approximated $30 for the three months
ended June 30, 2004 compared with $2 for the same period in 2003, an increase
of approximately $28. Interest and other income approximated $39 for the six
months ended June 30, 2004 compared with $7 for the same period in 2003, an
increase of approximately $32. These increases are primarily related to higher
balances of cash and cash equivalents during the respective periods in 2004. Net rental
income, which is sub-lease rental revenue less rent and operating expenses
related to the sub-leased portion of the Companys Redwood City, CA facility,
approximated $0 for the three months ended June 30, 2004 compared with $2 for
the same period in 2003. Net rental income approximated $1 for the six months
ended June 30, 2004 compared with $24 for the same period in 2003. Sub-lease
rent was reduced pursuant to amendments to the sub-lease agreement, which
became effective June 1, 2003. Interest expense for the three months ended June
30, 2004 approximated $31 compared with $27 for the same period in 2003, an
increase of approximately $4. Interest expense for the six months ended June
30, 2004 approximated $60 compared with $63 for the same period in 2003, a
decrease of approximately $3. The increase and decrease are primarily due to
fluctuating interest rates. Liquidity and Capital Resources On April 19, 2004, the Company completed a private placement for
12,074,595 shares of restricted common stock at a price per share of $0.85 (the
April Financing), resulting in proceeds net of issuance costs of approximately
$9,866, which the Company has deposited into its money market account. The
common stock sold in the private placement may be registered by the Company on
one or more registration statements to be filed with the SEC, and will be
subject to lock-up provisions for a period of 150 days after the completion of
the private placement. On July 14, 2004, the Company filed a preliminary
registration statement with the SEC on Form S-1 for registration of 47,624,409
common shares to be sold at the election of the selling stockholders. The
shares being registered include common shares registered pursuant to the
Registration Rights Agreements with the holders of Series A Stock and Series C
Stock (issuable upon the conversion of certain shares of Series A Stock and
Series C Stock) and the common shares issued pursuant to the April Financing.
The Registration Statement was declared effective with the SEC on July 23,
2004. Cash and cash equivalents were approximately $15,208 as of June 30, 2004
compared with approximately $8,323 as of December 31, 2003. The increase in
cash and cash equivalents is primarily the net effect of cash used to support the normal
operations of ReGen offset by net proceeds of $9,866 from the April Financing. Cash used in operating activities of approximately $3,012 resulted from
the net loss of approximately $3,416, adjusted to account for a net decrease in
accounts receivables, inventory and other assets of approximately $13, a net
increase in accounts payable, accrued expenses and other liabilities of $135,
together with adjustments for non-cash items, depreciation, compensation and
interest expense, totaling $256. During the six months ended June 30, 2004, ReGen invested approximately
$14 to purchase property and equipment including $4 pursuant to financing lease
accounted for as a capital lease. During the six months ended June 30, 2004 ReGens financing activities
provided approximately $9,907, including approximately $31 in proceeds from the
exercise of 69,930 common stock warrants, $13 in proceeds from the exercise of
80,000 common stock options and $9,866 in net proceeds from the April
Financing, offset by $2 repayment of capital lease obligations. Through June 30, 2004, the Company has incurred cumulative net operating
losses of approximately $51,000 and used approximately $39,200 in cash for
operating activities. ReGen anticipates that it will continue to incur net
losses at least until ReGen receives FDA approval for its CMI product and is
able to market the CMI product in the United States. Due primarily to
incremental spending necessary for the preparation and submission of the
Pre-market Approval Application (the PMA) for the CMI, cash required to
support operating activities is expected to increase by approximately $2,000 in
2004 and is expected to further increase in future periods as the Company
begins to incur additional expenses associated with the preparation for and
launch of sales of the CMI product in the U.S., if approved by the FDA.




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The Company anticipates that additional funds will be required to satisfy
expenses associated with the preparations for and, if approved, the launch of,
sales of the CMI in the U.S., and other marketing, distribution and product
development related activities. Such additional funds may be obtained in the
form of debt financing, equity financing, or both. While the Company has been
successful in the past in obtaining the necessary capital to support its
operations, there is no guarantee that the Company will be able to obtain
additional equity capital under commercially reasonable terms and conditions,
or at all. Based upon current cash reserves, net proceeds received from the
April Financing, and planned spending rates, management believes the Company
has adequate cash on hand to support ongoing operations through the expected
date of the FDA decision regarding U.S. marketing of our CMI product in 2006. SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS Cautionary Note Regarding Forward-Looking Statements Statements in this filing, which are not historical facts, are
forward-looking statements under provisions of the Private Securities
Litigation Reform Act of 1995. All forward-looking statements involve risks and
uncertainties. Such statements are based on the current expectations and
beliefs of the managements of ReGen and RBio and are subject to a number of
factors and uncertainties that could cause actual results to differ materially
from those described in the forward-looking statements, including those
discussed in the Risk Factors section of the Form S-1 declared effective July
23, 2004. We wish to caution readers that the following important factors,
among others, in some cases have affected, and in the future could affect our
actual results and could cause our actual results in fiscal 2004 and beyond to
differ materially from those expressed in any forward-looking statements made
by us or on our behalf. Important factors that could cause actual results to differ materially
include but are not limited to our ability to complete the Collagen Meniscus
Implant, or CMI, clinical trial and obtain U.S. Food and Drug Administration,
or 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, our ability to be listed on a national
securities exchange or quotation system, our ability to adapt to economic,
political and regulatory conditions affecting the healthcare industry and other
unforeseen events that may impact our business. Our quarterly revenues and operating results have varied significantly in
the past and are likely to vary from quarter to quarter in the future. Quarterly revenues and operating results may fluctuate as a result of a
variety of factors, including the ability of our distribution partners to
market and sell our products, variable customer demand for our products and
services, our investments in research and development or other corporate
resources, our ability to effectively and consistently manufacture our
products, and avoid costs associated with the recall of defective or
potentially defective products, the ability of our vendors to effectively and
timely deliver necessary materials and product components, acquisitions of
other companies or assets, the timing of new product introductions, changes in
distribution channels, sales and marketing promotional activities and trade
shows and general economic conditions. Further, due to the relatively fixed
nature of most of our costs, which primarily include personnel, facilities and
related costs, any unanticipated shortfall in revenue in any fiscal quarter
would have an adverse effect on our results of operations in that quarter.
Accordingly, our operating results for any particular quarterly period may not
necessarily be indicative of results for future periods. 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. 
 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, 2003.
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 exposure since December 31,
2003.




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Item 4. Controls and Procedures We maintain disclosure controls and procedures within the meaning of
Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended, or the
Exchange Act. Our disclosure controls and procedures (Disclosure Controls),
are designed to ensure that information required to be disclosed by the Company
in the reports filed under the Exchange Act, such as this Quarterly Report on
Form 10-Q, is recorded, processed, summarized and reported within the time
periods specified in the U.S. Securities and Exchange Commissions rules and
forms. Our Disclosure Controls are also designed to ensure that such
information is accumulated and communicated to our management, including our
Chief Executive Officer and Chief Financial Officer, as appropriate, to allow
for timely decisions regarding required disclosure. In designing and evaluating
our Disclosure Controls, management recognized that any controls and
procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control objectives, and
management necessarily was required to apply its judgment in evaluating and
implementing possible controls and procedures. Evaluation of Disclosure Controls and Procedures. As of the end of the
period covered by this Quarterly Report on Form 10-Q, we evaluated the
effectiveness of the design and operation of the Companys disclosure controls
and procedures, which was done under the supervision and with the participation
of our management, including our Chief Executive Officer and our Chief
Financial Officer. Immediately following the Signatures section of this
Quarterly Report on Form 10-Q are certifications of our Chief Executive Officer
and Chief Financial Officer, which are required in accordance with Rule 13a-14
of the Exchange Act. This Controls and Procedures section includes the
information concerning the controls evaluation referred to in the
certifications and it should be read in conjunction with the certifications for
a more complete understanding of the topics presented. Based on the controls
evaluation, our Chief Executive Officer and Chief Financial Officer have
concluded that, as of the date of their evaluation, our Disclosure Controls and
Procedures were effective to ensure that material information is made known to
management, including our Chief Executive Officer and Chief Financial Officer,
particularly during the period when our periodic reports are being prepared. Changes in Internal Control Over Financial Reporting. There has been no
change in the Companys internal control over financial reporting that occurred
during the Companys second fiscal quarter of 2004 that has materially
affected, or is reasonably likely to materially affect, the Companys internal
control over financial reporting. 
 PART II 
 Item 1. Legal Proceedings We are a defendant or party from time to time in lawsuits incidental to
our business. We are not currently subject to any material legal proceedings. 
 Item 2. Changes in Securities and Use of Proceeds (dollars in thousands, except
per share data) On April 19, 2004, the Company completed a private placement for
12,074,595 shares of restricted common stock at a price per share of $0.85,
resulting in proceeds net of issuance costs of approximately $9,866 (the April
Financing). The common stock sold in the private placement may be registered
by the Company on one or more registration statements to be filed with the SEC,
and will be subject to lock-up provisions for a period of 150 days after the
completion of the private placement. All of these shares were issued in
reliance upon an exemption from the registration requirements of the federal
securities laws pursuant to Section 4(2) of the Securities Act because the
shares were only offered to accredited investors. 
 Item 3. Defaults upon Senior Securities None.




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Item 4. Submission of Matters to a Vote of Security Holders The 2004 annual meeting of stockholders was held on May 25 2004. The
matters on which the stockholders voted, in person or by proxy, were: (i) to
elect six directors to serve until the Companys next annual meeting of
stockholders and until their successors are duly elected and qualified; (ii) to
approve a one for eight reverse stock split of all of ReGens issued and
outstanding Common Stock, subject to the authority of the Board; (iii) to
approve the proposal to amend our Employee Stock Option Plan to increase the
number of shares reserved for issuance under the Employee Stock Option Plan by
3,000,000 shares from 6,450,000 to 9,450,000 shares; (iv) to approve the
proposal to amend our Non-Employee Director Stock Option Plan to increase the
number of shares reserved for issuance under the Non-Employee Director Stock
Option Plan by 1,000,000 shares from 1,500,000 to 2,500,000 shares; and (v) to
ratify the appointment of Ernst & Young LLP as our independent accountants for
the current fiscal year. The results of the voting are shown below: Election of directors: Name of
    
    Number of
    
    Number ofNominee
    
    Votes For
    
    Votes WithheldGerald E. Bisbee, Jr., Ph.D.
    
    
    53,553,387
    
    
    
    10,603Abhi Acharya, Ph.D.
    
    
    53,553,387
    
    
    
    10,603Alan Baldwin
    
    
    53,553,387
    
    
    
    10,603Richard Fritschi
    
    
    53,553,387
    
    
    
    10,603Robert G. McNeil, Ph.D.
    
    
    53,553,387
    
    
    
    10,603Richard J. Steadman, M.D.
    
    
    53,553,387
    
    
    
    10,603
 Approval of a one for eight reverse stock split of all of ReGens issued and
outstanding Common Stock, subject to the authority of the Board: Number ofNumber of
    
    Number of
    
    VotesVotes For
    
    Votes Against
    
    Abstaining
    
    Not Voted53,272,920
    
    
    288,083
    
    
    
    2,987
    
    
    
    -0-
 Approval of the proposal to amend our Employee Stock Option Plan: Number of
    
    Number of
    
    Number ofVotes For
    
    Votes Against
    
    Votes Abstaining
    
    Not Voted46,847,287
    
    
    611,166
    
    
    
    33,899
    
    
    
    6,071,638
 Approval of the proposal to amend our Non-Employee Director Stock Option Plan: Number ofNumber of
    
    Number of
    
    VotesVotes For
    
    Votes Against
    
    Abstaining
    
    Not Voted46,763,390
    
    
    682,463
    
    
    
    46,499
    
    
    
    6,071,638
 Ratification of the selection of Ernst &Young LLP as independent auditors: Number ofNumber of
    
    Number of
    
    VotesVotes For
    
    Votes Against
    
    Abstaining
    
    Not Voted53,351,267
    
    
    211,273
    
    
    
    1,450
    
    
    
    -0-
 
 Item 5. Other Information None.




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Item 6. Exhibits and Reports on Form 8-K (a) Exhibits. The following Exhibits are filed herewith and made a part hereof: 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(5)3.2
    
    Certificate of Amendment to the Certificate of Incorporation(6)3.3
    
    Amended and Restated By-Laws(4)3.4
    
    Certificate of Amendment of the Amended and Restated Certificate of
Incorporation(17)4.1
    
    Specimen Common Stock Certificate(7)4.2
    
    Rights Agreement between the Company and First Chicago Trust
Company of New York, dated as of May 6, 1997(9)4.3
    
    ReGen Biologics, Inc. Employee Stock Option Plan, Amended and
Restated Effective January 31, 2003(12)4.4
    
    ReGen Biologics, Inc. Non-Employee Director Stock Option Plan,
Amended and Restated Effective January 31, 2003(12)4.5
    
    Registration Rights Agreement between the Company and the Investors
listed therein(8)4.6
    
    Registration Agreement between the Company and Certain
Stockholders, dated December 28, 1995(18)4.7
    
    Amendment No. 1 to Rights Agreement between the Company and
EquiServe Trust Company, N.A. dated as of June 7, 2002(10)4.8
    
    Nonqualified Stock Option Agreement between the Company and The
Cleveland Clinic Foundation, dated August 19, 1994(18)4.9
    
    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(14)4.10
    
    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(19)4.11
    
    Form of Nonqualified Director Stock Option Agreement(11)4.12
    
    Stockholders Agreement by and among the several stockholders named
therein, dated as of June 21, 2002(15)4.13
    
    Amendment to Stockholders Agreement by and among Allen & Company
Incorporated and the several stockholders named therein, dated as
of December 4, 2002(16)4.14
    
    ReGen Biologics, Inc. Non-Employee Director Supplemental Stock
Option Plan Amended and Restated Effective January 31, 2003(21)4.15
    
    Common Stock Registration Rights Agreement by and among ReGen Biologics, Inc., and
the stockholders named therein, dated as of April 19, 2004(22)10.1
    
    Employment agreement by and between Gerald E. Bisbee, Jr., Ph. D.
and ReGen Biologics, Inc. dated September 22, 1998 and amended




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September 12, 2000(13)10.2
    
    Form of Indemnification Agreement(4)10.3
    
    Distributorship Agreement by and between ReGen Biologics, Inc. and
Sulzer Orthopedics AG dated February 16, 1996(20)10.4
    
    Employment agreement by and between Brion D. Umidi and ReGen
Biologics, Inc. dated March 23, 2004(20)10.5
    
    Amendment to Distributorship Agreement by and between ReGen
Biologics, Inc. and Sulzer Orthopedics AG dated January 18,
2002(20)10.6
    
    License Agreement by and between ReGen Biologics, Inc. and Linvatec
Corporation dated April 7, 2000(20)10.7
    
    Credit Agreement by and between ReGen Biologics, Inc. and Sulzer
Medica USA Holding Company dated March 14, 2000(20)10.8
    
    Agreement by and among Sulzer Medica USA Holding Co., Sulzer
Biologics Inc. Sulzer Orthopedics Ltd. and ReGen Biologics, Inc.
dated February 20, 2001(20)10.9
    
    Assignment and Royalty Agreement by and among ReGen Biologics, Inc.
Modified Polymer Components, Inc. and Dr. J. Richard Steadman dated
April 9, 1997(20)10.10
    
    Exclusive License Agreement by and between ReGen Biologics, Inc.
and Dr. Shu-Tung Li dated August 24, 1995(20)10.11
    
    First Amendment to Employment Agreement by and between Gerald E.
Bisbee, Jr., Ph. D. and ReGen Biologics, Inc. dated March 23,
2004(20)10.12
    
    Common Stock Purchase Agreement by and among ReGen Biologics, Inc., and the
Individuals named therein, dated as of April 19, 2004(22)31.1
    
    Section 302 Certification from Gerald E. Bisbee, Jr., dated August 12,
2004(23)31.2
    
    Section 302 Certification from Brion Umidi, dated August 12, 2004(23)32.1
    
    Section 906 Certification from Gerald E. Bisbee, Jr., dated August 12,
2004(23)32.2
    
    Section 906 Certification from Brion Umidi, dated August 12, 2004(23)
  (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).(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 Report on Form 10-Q
for the quarter ended June 30, 2001 (File No. 000-20805).(7)
    
    Incorporated herein by reference to the Companys Registration
Statement on Form S-3, filed on November 19, 2003 (File No.
333-110605).(8)
    
    Incorporated herein by reference to the Companys Report on Form 8-K,
filed on September 25, 2003 (File No. 000-20805).(9)
    
    Incorporated herein by reference to the Companys Report on Form 8-K
filed on June 4, 1997 (File No. 000-20805).(10)
    
    Incorporated herein by reference to the Companys Report on Form 10-Q
for the quarter ended June 30, 2002 (File No. 000-20805).(11)
    
    Incorporated herein by reference to the Companys Report on Form 10-K
for the year ended December 31, 1997 (File No. 000-20805).(12)
    
    Incorporated herein by reference to the Companys Proxy Statement on
Schedule 14A filed on April 14, 2003 (File No. 000-20805).




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##### Table of Contents



(13)
    
    Incorporated herein by reference to the Companys Report on Form
8-K/A, filed on September 4, 2002 (File No. 000-20805).(14)
    
    Incorporated herein by reference to the Companys Current Report on
Form 8-K filed on January 14, 1997 (File No. 000-20805).(15)
    
    Incorporated herein by reference to the Companys Report on Form SC
13D filed on March 24, 2003 (File No. 005-49089).(16)
    
    Incorporated herein by reference to the Companys Report on Form SC
13D/A filed on October 3, 2003 (File No. 005-49089).(17)
    
    Incorporated herein by reference to the Companys Report on Form 8-K,
filed on January 6, 2003 (File No. 000-20805).(18)
    
    Incorporated herein by reference to the Companys Registration
Statement on Form S-1, filed on June 4, 1996 (File No. 333-04106).(19)
    
    Incorporated herein by reference to the Companys Report on Form 10-Q
for the quarter ended March 31, 1997 (File No. 000-20805).(20)
    
    Incorporated herein by reference to the Companys Report on Form 10-K
for the year ended December 31, 2003 (File No. 000-20805)(21)
    
    Incorporated herein by reference to the Companys Registration
Statement on Form S-1/A, filed on January 14, 2004 (File No.
333-110605).(22)
    
    Incorporated herein by reference to the Companys Registration
Statement on Form S-1, filed on April 26, 2004 (File No. 33-114867)(23)
    
    Included with this filing.
 (b) Reports on Form 8-K. A Current Report on Form 8-K was filed on April 23, 2004 to announce that on
April 19, 2004 the Company completed a $10,263,402 private equity placement
with the sale of common stock to certain institutional and other accredited
investors. A Current Report on Form 8-K was filed on June 10, 2004 to announce the
appointment of William R. Timken to the board of directors and the Audit
Committee of the board of directors. A Current Report on Form 8-K was filed on July 29, 2004 to announce the
submission of the Companys manufacturing module of its PMA for the CMI product
to the FDA.




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##### Table of Contents



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 August 12, 2004. REGEN BIOLOGICS, INC
By: /s/ BRION D. UMIDI
Brion D. UmidiSenior Vice President and
Chief Financial Officer