Cautionary Statement Relating to Forward Looking Statements

Information contained in this filing contains "forward-looking statements" which can be identified by the use of forward-looking terminology such as "believes," "expects," "may," "will," "should," "anticipates" or comparable terminology, or by discussions of strategy. We cannot assure you that the future results covered by these forward-looking statements will be achieved. Some of the matters described in the "Risk Factors" section of our Form 10-K constitute cautionary statements which identify factors regarding these forward-looking statements, including certain risks and uncertainties, that could cause actual results to vary materially from the future results indicated in these forward-looking statements. Other factors could also cause actual results to vary materially from the future results indicated in such forward-looking statements.

Management Overview

Given the country's macroeconomic climate, we are seeing elective, non-critical surgeries in some of our markets, such as dental being postponed.

Our goals for 2009 are to develop potential revenue synergies resulting from the merger with TMI, and build on the Company's competitive strengths as we focus on our future. We continue to focus on several long-term strategies in order to meet our goals. The key strategies are to continue to:

• maintain sufficient tissue available for processing from tissue recovery agencies;

• grow distributions in key markets;

• focus on marketing, distribution and regulatory support of our line of xenograft implants;

• develop new allograft and xenograft implants to enhance our current lines of implants;

• maintain our commitment to research and development and focus clinical efforts to support the market acceptance of our allograft and xenograft implants;

• control and, where possible, reduce costs; and

• manage inventory levels consistent with market demand.

Three Months Ended March 31, 2009 Compared With Three Months Ended March 31, 2008

                                                  Three Months Ended
                                                       March 31,
                                                   2009       2008 (1)
                                                    (In thousands)
               Fees from tissue distribution:
               Spine                            $     9,779   $   8,738
               Sports medicine                        9,375       9,215
               Dental                                 7,293       3,486
               Surgical specialties                   4,827       1,562
               Bone graft substitutes                 3,862       4,773
               General orthopedic                     2,425         772
               Other revenues                         1,062       1,364

               Total revenues                   $    38,623   $  29,910

               Domestic revenues                     32,309      26,064
               International revenues                 6,314       3,846

               Total revenues                   $    38,623   $  29,910

(1) Includes revenues of the former Tutogen Medical, Inc. ("TMI") from February 28, 2008 to March 31, 2008; revenues for the period totaled $6,353.

Revenues. Our total revenues increased $8.7 million, or 29.1%, to $38.6 million for the three months ended March 31, 2009 compared to $29.9 million for the three months ended March 31, 2008.

Spine-Revenues from spinal allografts increased $1.1 million, or 11.9%, to $9.8 million for the three months ended March 31, 2009 compared to $8.7 million for the three months ended March 31, 2008. Spine revenues increased primarily due to revenues associated with TMI for the three months ended March 31, 2009 and new products to new distributors. Unit volumes were up 15.1% as a result of higher distributions of cervical grafts to both current and new distributors. Average revenue per unit decreased 2.8% due to changes in product mix.

Sports Medicine-Revenues from sports medicine allografts increased $160,000, or 1.7%, to $9.4 million for the three months ended March 31, 2009 compared to $9.2 million for the three months ended March 31, 2008. Sports medicine revenues increased primarily as a result of favorable impact of distribution mix and increases in average revenue per unit of 13.2%, offset by a decrease in unit volumes of 10.1%.

Dental-Revenues from dental allografts increased $3.8 million, or 109.2%, to $7.3 million for the three months ended March 31, 2009 compared to $3.5 million for the three months ended March 31, 2008. We did not offer dental allografts prior to our merger with TMI, which closed on February 27, 2008.

Surgical Specialties-Revenues from surgical specialty allografts increased $3.2 million, or 209.0%, to $4.8 million for the three months ended March 31, 2009 compared to $1.6 million for the three months ended March 31, 2008. We did not offer surgical specialty allografts (hernia repair, breast reconstruction, ear, nose and throat, ("ENT"), urology, and ophthalmology) prior to our merger with TMI, which closed on February 27, 2008.

Bone Graft Substitutes-Revenues from bone graft substitutes decreased $911,000, or 19.1%, to $3.9 million for the three months ended March 31, 2009 compared to $4.8 million for the three months ended March 31, 2008. Bone graft substitutes revenues decreased primarily due to delays in launching new products and an unfavorable impact of distribution mix. Average revenue per unit decreased 35.0% due to changes in product mix. This resulted from higher unit volumes with Zimmer Dental which has lower average revenues per unit.

General Orthopedic-Revenues from general orthopedic allografts increased $1.6 million or 214.1%, to $2.4 million for the three months ended March 31, 2009 compared to $772,000 for the three months ended March 31, 2008. The increase is primarily attributable to $1.5 million of revenues associated with TMI for the three months ended March 31, 2009 versus one month in 2008.

Other Revenues-Revenues from other sources, consisting of tissue recovery fees, biomedical laboratory fees, deferred revenues, shipping fees, distribution of reproductions of our allografts to distributors for demonstration purposes, decreased by $302,000, or 22.1%, to $1.1 million for the three months ended March 31, 2009 compared to $1.4 million for the three months ended March 31, 2008 primarily due to lower tissue recovery fees. Prior to the merger with TMI we were recovering tissue for TMI.

Costs of Processing and Distribution. Costs of processing and distribution increased by $4.4 million, or 27.1%, to $20.5 million for the three months ended March 31, 2009. As a percentage of revenues, costs of processing and distribution decreased from 53.9% for the three months ended March 31, 2008 to 53.0% for the three months ended March 31, 2009.

The increase in cost of processing and distribution was primarily due to higher levels of tissue distributed during the quarter. The decrease in cost of processing as a percentage of revenues is due primarily to the acquired TMI product lines which overall had higher average gross margins than those previously recognized by Regeneration Technologies. Gross margin increased from 46.1% for the three months ended March 31, 2008 to 47.0% for the three months ended March 31, 2009.

Marketing, General and Administrative Expenses.Marketing, general and administrative expenses increased by $4.4 million, or 42.7%, to $14.9 million for the three months ended March 31, 2009 from $10.5 million for the three months ended March 31, 2008. Marketing, general and administrative expenses increased as a percentage of revenues from 35.0% for the three months ended March 31, 2008 to 38.7% for the three months ended March 31, 2009. The increase is primarily attributable to including three months of TMI expenses in 2009 versus one month in the prior year. Domestic increases included distributor commissions of $743,000, as a result of higher commissions on the acquired dental product line of implants; an increase in domestic payroll and benefits expense of $647,000, an increase in legal expenses of $611,000 due primarily to on-going patent litigation; an increase in travel of $300,000; an increase in marketing programs of $165,000; an increase in accounting, bank fees, bad debt expense and executive meeting fees of $379,000; and an increase in utilities, rent and insurance of $253,000. In addition, a $1.4 million increase in marketing, general and administrative costs was associated with the TMI German and French business operations.

Research and Development Expenses. Research and development expenses decreased by $93,000, or 4.8%, to $1.8 million for the three months ended March 31, 2009 from $1.9 million for the three months ended March 31, 2008. As a percentage of revenues, research and development expenses decreased from 6.4% for the three months ended March 31, 2008 to 4.7% for the three months ended March 31, 2009. The decrease was primarily due to lower studies and research expenses of $275,000, lower legal and consulting expenses of $141,000 offset by an increase in domestic payroll and benefits expense of $170,000, and the addition of $156,000 in research and development expenses associated with the TMI German operations.

Restructuring Charges. As a result of the merger with TMI we implemented a formal restructuring plan which resulted in $42,000 of expenses for the three months ended March 31, 2009. These expenses represent severance benefits.

Net Other Income (Expense). Net other income was $93,000 for the three months ended March 31, 2009 compared to net other expense of $11,000 for the three months ended March 31, 2008. Interest expense decreased by $52,000 for the three months ended March 31, 2009 to $123,000 from $175,000 for the three months ended March 31, 2008 due to additional interest paid on long-term obligations. Interest income decreased by $71,000 for the three months

ended March 31, 2009 to $111,000 from $182,000 for the three months ended March 31, 2008 due to the lower interest earned on the investment of excess cash in interest bearing cash equivalents than the comparable prior year period. Foreign exchange gain was $105,000 for the three months ended March 31, 2009 compared to foreign exchange loss of $18,000 for the three months ended March 31, 2008 due to the strengthening of the dollar versus the Euro and lower inter-company balances at March 31, 2009.

Income Tax Provision. Income tax provision for the three months ended March 31, 2009 was $409,000 compared to $391,000 for the three months ended March 31, 2008. Our effective tax rate for the three months ended March 31, 2009 and 2008 was 28.4% and 37.7%, respectively. Our effective tax rate for the three months ended March 31, 2009 compared to the three months ended March 31, 2008 decreased primarily as a result of increased profitability with the TMI processing facility in Germany with lower associated tax rates.

Liquidity and Capital Resources

Cash Flows - Three Months Ended March 31, 2009 Compared With Three Months Ended March 31, 2008.

Our cash used in operating activities were $6.6 million for the three month period ended March 31, 2009, compared to $160,000 for the three month period ended March 31, 2008. The increase in cash used in operating activities was primarily due to increases in accounts receivable and inventories, partially offset by an increase in accounts payable.

At March 31, 2009, we had 42 days of sales outstanding in trade accounts receivable, an increase of 4 days compared to March 31, 2008. At March 31, 2009, we had 316 days of inventory on hand, an increase of 67 days compared to March 31, 2008. Days sales in inventory at March 31, 2009 is higher than the prior year period primarily due to significant success of our donor sourcing organization to obtain higher levels of inventory to support recent and anticipated 2009 product launches and future quarterly distributions.

Our cash used in investing activities was $420,000 for the three month period ended March 31, 2009, compared to cash provided by investing activities of $840,000 for the three month period ended March 31, 2008. Our investing activities for the three month period ended March 31, 2009 consisted primarily of purchases of property, plant and equipment of $308,000. Our investing activities for the three months ended March 31, 2008 consisted primarily of purchases of property, plant and equipment of $803,000, offset by cash acquired with the merger with TMI, net of transaction costs, of $1.6 million.

Our net cash used in financing activities was $17,000 for the three months ended March 31, 2009 compared to $325,000 for the three month period ended March 31, 2008. Net cash used in financing activities for the three months ended March 31, 2009 consisted of net payments on short-term obligations of $1.2 million, proceeds on long-term obligations of $1.5 million, proceeds from exercises of stock options of $19,000, and payments on long-term obligations of $301,000. Net cash used in financing activities for the three months ended March 31, 2008 consisted of payments on long-term obligations of $606,000 and proceeds from exercise of stock options of $281,000.

Liquidity.

As of March 31, 2009, we had $13.1 million of cash and cash equivalents. We believe that our working capital as of March 31, 2009, together with our borrowing ability under our revolving line of credits, will be adequate to fund our on-going operations for the next twelve months.

Certain Commitments.

On November 24, 2008, we entered into a License Agreement with LifeNet Health, Inc. ("LifeNet") to license from LifeNet certain intellectual property rights that may be used in or useful to our tissue processing efforts. The term of the License Agreement is for seven years or the remaining life of any patent covered by the License Agreement, whichever is longer. Total monetary consideration for the License Agreement is $4.9 million, to be paid in five annual installments of $1.0 million in each of November 2008 through 2012.

On May 14, 2007, we entered into an exclusive distribution agreement with Zimmer with an initial term of 10 years, relating to certain new bone graft substitutes products. As part of the agreement, Zimmer has agreed to make three payments to us totaling $5.0 million for the aforementioned exclusive distribution rights, and maintain certain minimum order volumes commencing in 2010. The first payment of $1.0 million was made at the time of entering the agreement. The second payment of $2.0 million was made in the first quarter of 2008. As a result of a product launch delay, the final payment of $2.0 million is expected to be paid in the second quarter of 2009. The $5.0 million exclusivity payment has been deferred and is being recognized as other revenue on a straight-line basis over the initial term of the contract. The contract provides for repayment, on a pro rata basis, of the exclusivity payments during the initial contract term for specific events of non-performance, as defined in the agreement. The agreement also includes automatic two-year renewal terms, as well as buy-out provisions by both parties upon proper notice of cancellation.

The Company's short-term borrowings and long-term obligations are as follows:

                                      Current
                                   Interest Rate            Maturity Date        March 31, 2009              December 31, 2008
                                                                             (Euro)     (US Dollar)        (Euro)      (US Dollar)
                                                                                                 (In Thousands)
Short-Term Borrowings
United States
Revolving
Credit Facility                                      (1)                               $          -                   $       1,500

Germany
Revolving
Credit Facilities:
Line of Credit - 1                          6.50 %   (2)        None         €   869           1,148     €    1,023           1,442
Line of Credit - 2                          9.63 %   (3)        None             430             568             -               -
Interim Line of Credit                      6.00 %   (3)         (6)             794           1,049            868           1,224

                                                                               2,093           2,765          1,891           4,166

Long-Term Obligations
United States
Revolving
Credit Facility                             3.01 %   (4)       2/2011                          1,500                             -

Term Loan                                   3.51 %   (5)       2/2011                          1,625                          1,750

Germany
Term Loans:
Senior Debt                                 5.00 %   (3)       6/2011            220             291            244             344
Construction I                              5.15 %   (3)       3/2012            750             991            812           1,145
Construction II                             5.60 %   (3)       12/2016           880           1,162            880           1,241
Construction III                            5.75 %   (3)       9/2012            182             240            195             275

                                                                             € 2,032           2,684     €    2,131           3,005

Capital Leases                        5.00%-8.46 %         5/2010 - 2/2011                       282                             65

                                                                                               6,091                          4,820
Less current portion                                                                          (1,721 )                       (1,637 )

Long-term portion                                                                              4,370                          3,183


Total Debt                                                                             $       8,856                  $       8,986

(1) Refinanced with long-term revolving credit facility

(2) Fixed interest rate is negotiated annually in March

(3) Fixed interest rates

(4) LIBOR plus 2.5% to 3.5%

(5) LIBOR plus 3.0%

(6) Interim line of credit matures upon conversion to term loan upon completion of construction

The revolving credit facility with the U.S. bank contains various restrictive covenants which limit, among other things, indebtedness, liens and minimum cash balances. Under the agreement, the credit facility and term loan are secured by the Company's domestic accounts receivable and inventory. The Company is required to maintain an average cash on hand balance of $5.0 million with the financial institution.

Under the terms of the revolving credit facilities with two German banks, the Company may borrow up to 1.5 million Euros (1.0 million Euros and 500,000 Euros, respectively), or approximately $2.0 million for working capital needs. The 1.0 million Euro revolving credit facility is secured by a mortgage on the Company's German facility and a 4.0 million Euro guarantee by TMI. The 500,000 Euro revolving credit facility is secured by accounts receivable of TMI's German subsidiary.

In 2008, the Company entered into a financing agreement with a German bank to finance the expansion of its processing facility in Germany. The agreement calls for an interim line of credit of up to 900,000 Euros or approximately $1.2 million while the expansion is completed, which is expected to occur in May 2009, upon which the line of credit will convert to a term loan.

At March 31, 2009, the Company had an outstanding interest rate swap agreement relating to the German term loan of 750,000 Euros, or $991,000 maturing March 31, 2012. Under this agreement, the Company pays a fixed interest rate of 5.15%. Payments or receipts on the agreement are recorded as adjustments to interest expense. Such adjustments have not been significant.