<PAGE>


                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D. C. 20459

                                    FORM 10-Q

                   QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                     FOR THE QUARTER ENDED DECEMBER 31, 2000

                         COMMISSION FILE NUMBER 0-20970

                              VISION-SCIENCES, INC.
             (Exact name of registrant as specified in its charter)


                    DELAWARE                                   13-3430173
        (State or other jurisdiction of                       (IRS Employer
         incorporation or organization)                  Identification Number)

         9 STRATHMORE ROAD, NATICK, MA                            01760
    (Address of principal executive offices)                    (Zip Code)

Registrant's telephone number, including area code            (508) 650-9971

                                      NONE
                        (Former name, former address, and
                former fiscal year if changed since last report)


     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirement for the past 90 days.

                                 Yes X           No __


     Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of December 31, 2000.

          COMMON STOCK, PAR VALUE OF $.01         26,520,831
                  (Title of Class)            (Number of Shares)


<PAGE>




                              VISION-SCIENCES, INC.
                                TABLE OF CONTENTS


Part I. Item 1. Financial Information                                      PAGE
                                                                            ----

                Consolidated Balance Sheets....................................3

                Consolidated Statements of Operations..........................4

                Consolidated Statement of Stockholders' Equity.................5

                Consolidated Statements of Cash Flows..........................6

                Notes to Consolidated Financial Statements..................7-12

        Item 2. Management's Discussion and Analysis of Financial
                  Condition and Results of Operations..................... 13-16

        Item 3. Qualitative and Quantitative Disclosure about
                  Market Risk................................................ 17

Part II. Other Information

        Item 6. Exhibits and Reports on Form 8-K..............................18

        Signature.............................................................19



                                       2
<PAGE>


                     VISION-SCIENCES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                    December 31,      March 31,
                                                        2000            2000
                                                    ------------      ---------
                                                                      (AUDITED)
                                                                       -------
<S>                                                 <C>            <C>
                                ASSETS
Current Assets:
  Cash and cash equivalents.......................  $  4,301,971   $  1,581,381
  Accounts receivable, net of allowance
    for doubtful accounts of $103,000 and
    $156,000, respectively........................     1,057,806      1,079,590
  Inventories.....................................     1,153,790      1,278,084
  Prepaid expenses and deposits...................       203,726         76,743
                                                    ------------   -------------
      Total current assets........................     6,717,293      4,015,798
                                                    ------------   -------------

Property and Equipment, at cost:
  Machinery and equipment.........................     2,973,556      2,870,944
  Furniture and fixtures..........................       208,934        202,067
  Motor vehicles..................................             -         20,949
  Leasehold improvements..........................       450,396        313,154
                                                    ------------   -------------
                                                       3,632,886      3,407,114
  Less-Accumulated depreciation and amortization..     3,028,476      2,846,318
                                                    ------------   -------------
                                                         604,410        560,796
                                                    ------------   -------------

Equity investment in 3DV Systems, Ltd.............             -        222,553
Other Assets, net of accumulated amortization of
     $27,000 and $22,000, respectively............       104,027        108,783
                                                    ------------   -------------
      Total assets................................  $  7,425,730   $  4,907,930
                                                    ============   =============

                LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
  Acceptances payable to a bank.................... $     46,876  $      32,512
  Current portion notes payable to stockholders....       54,197              -
  Current portion obligation under capital lease...       51,374              -
  Accounts payable.................................      508,189        374,684
  Accrued expenses.................................    1,439,139      1,586,248
                                                    ------------   -------------
      Total current liabilities....................    2,099,775      1,993,444
                                                    ------------   -------------

Note payable to stockholders.......................      100,000              -
Obligation under capital lease.....................       37,820              -

Potential obligations to non-qualified
  option holders...................................      157,100              -
Stockholders' Equity:
  Common stock, $.01 par value--
      Authorized--50,000,000 shares
      Issued and outstanding--26,520,831 shares
      at December 31, 2000 and 20,901,128 shares
      at March 31, 2000............................      265,207        209,010
  Additional paid-in capital.......................   57,603,943     54,054,458
  Accumulated deficit..............................  (52,838,115)   (51,348,982)
                                                    ------------   -------------
      Total stockholders' equity...................    5,031,035      2,914,486
                                                    ------------   -------------
      Total liabilities and stockholders' equity... $  7,425,730   $  4,907,930
                                                    ============   =============
</TABLE>

          See accompanying notes to consolidated financial statements.



                                       3
<PAGE>



                     VISION-SCIENCES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                    Three Months Ended         Nine Months Ended
                                                       December 31,               December 31,
                                                -------------------------   -------------------------
                                                    2000         1999          2000         1999
                                                -----------   -----------   -----------   -----------
<S>                                             <C>           <C>           <C>           <C>
Net sales..................................     $ 1,946,289   $ 1,861,488   $ 5,232,914   $ 5,218,053
Cost of sales..............................       1,284,636     1,262,256     3,558,277     3,933,811
                                                -----------   -----------   -----------   -----------

  Gross profit.............................         661,653       599,232     1,674,637     1,284,242

Selling, general and administrative
expenses...................................         802,951       792,552     2,302,532     2,397,675
Research and development expenses..........         299,850        46,958       694,168       143,878
                                                -----------   -----------   -----------   -----------
  Loss from operations.....................        (441,148)     (240,278)   (1,322,063)   (1,257,311)

Interest income............................          18,452        26,517        61,196        85,990
Equity in losses of 3DV Systems Ltd....                   -    (1,055,400)     (222,553)   (3,077,400)
Other income (expense), net................          (5,244)          258        (4,651)        3,342
                                                -----------   -----------   -----------   -----------

  Net loss.................................     $  (427,940)  $(1,268,903)  $(1,488,071)  $(4,245,379)
                                                ===========   ===========   ===========   ===========

Basic and diluted net loss per common share     $     (0.02)  $     (0.06)  $     (0.07)  $     (0.22)
                                                ===========   ===========   ===========   ===========

Shares used in computing basic and diluted
net loss per common share                        21,115,611    20,210,231    20,992,136    19,659,206
                                                ===========   ===========   ===========   ===========
</TABLE>




          See accompanying notes to consolidated financial statements.



                                       4
<PAGE>


                     VISION-SCIENCES, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                                   (UNAUDITED)



<TABLE>
<CAPTION>
                                      Common Stock
                                 ---------------------
                                                                                               Total            Total
                                   Number       $.01        Additional       Accumulated    Stockholders'   Comprehensive
                                 of Shares    Par Value   Paid-in-Capital      Deficit         Equity           Loss
                                 ----------   ---------   ---------------   -------------   -------------   -------------
<S>                              <C>          <C>         <C>               <C>             <C>             <C>
Balance, March 31, 2000
(audited)                        20,901,128   $209,010    $54,054,458       $(51,348,982)   $ 2,914,486

Exercise of stock options            32,285        323              -                  -            323
Stock compensation to non-
  employees                                          -        309,309                  -        309,309
Foreign exchange loss                     -          -              -             (1,062)        (1,062)     $    (1,062)
Sale of common stock, net         5,587,418     55,874      3,397,276                  -      3,453,150
Reclass for amounts
potentially due non-qualified
option holders                            -          -       (157,100)                 -       (157,100)
Net loss                                  -          -              -         (1,488,071)    (1,488,071)      (1,488,071)

                                 ----------   ---------   ---------------   -------------   -------------   -------------
Total comprehensive
  income (loss)                                                                                              $(1,489,133)
                                                                                                            =============

Balance December 31, 2000        26,520,831   $265,207    $57,603,943       $(52,838,115)   $ 5,031,035
                                 ==========   =========   ===============   =============   =============

</TABLE>



          See accompanying notes to consolidated financial statements.



                                       5
<PAGE>




                     VISION-SCIENCES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                        Nine Months Ended   Nine Months Ended
                                                        December 31, 2000   December 31, 1999
                                                        -----------------   -----------------
<S>                                                       <C>                 <C>
Cash flows from operating activities:
  Net loss..............................................   $(1,488,071)        $(4,245,379)
  Adjustments to reconcile net loss to net cash
    used for operating activities:
    Depreciation and amortization.......................       190,696             318,418
    Equity in losses of 3DV Systems, Ltd................       222,553           3,077,400
    Loss on disposal of property and equipment..........         2,773                   -
    Stock compensation to non-employees.................       309,309                   -
    Changes in assets and liabilities:
      Accounts receivable...............................        21,784             130,151
      Inventories.......................................       124,294            (367,085)
      Prepaid expenses and deposits.....................      (126,983)             (8,274)
      Accounts payable..................................       133,505             (19,463)
      Accrued expenses..................................      (147,109)             35,749
      Deferred development fee..........................             -            (331,200)
                                                           ------------        ------------
        Net cash used for operating activities..........      (757,249)         (1,409,683)
                                                           ------------        ------------
Cash flows provided by (used for) investing activities
  Decrease in marketable securities.....................             -             708,658
  Purchase of property and equipment, net...............      (232,327)           (161,678)
  Investment in 3DV Systems, Ltd........................             -          (1,500,000)
  Decrease in other assets..............................             -              13,333
                                                           ------------        ------------
        Net cash used for investing activities..........      (232,327)           (939,687)
                                                           ------------        ------------

Cash flows provided by (used for) financing activities:
  Foreign exchange losses...............................        (1,062)             (4,982)
  Proceeds from notes payable to stockholders...........       154,197                   -
  Proceeds from obligations under capital lease.........        89,194                   -
  Proceed from acceptances payable to a bank............        14,364              49,610
  Proceeds from the sale of common stock, net...........     3,453,150           1,500,000
  Exercise of stock options.............................           323             159,587
                                                           ------------        ------------
        Net cash provided by financing activities.......     3,710,166           1,704,215
                                                           ------------        ------------
Net increase (decrease) in cash and cash equivalents....     2,720,590            (645,155)
Cash and cash equivalents, beginning of period..........     1,581,381           2,224,863
                                                           ------------        ------------
Cash and cash equivalents, end of period................   $ 4,301,971         $ 1,579,708
                                                           ============        ============
</TABLE>


          See accompanying notes to consolidated financial statements.



                                       6
<PAGE>


                     VISION-SCIENCES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


1. BASIS OF PRESENTATION

   The unaudited consolidated financial statements included herein have been
   prepared by the Company in accordance with generally accepted accounting
   principles, without audit, pursuant to the rules and regulations of the
   Securities and Exchange Commission and include, in the opinion of
   management, all adjustments (consisting only of normal and recurring
   adjustments) that the Company considers necessary for a fair presentation
   of such information. Certain information and footnote disclosures normally
   included in financial statements have been condensed or omitted pursuant to
   such rules and regulations. The Company believes, however, that its
   disclosures are adequate to make the information presented not misleading.
   These consolidated financial statements should be read in conjunction with
   the audited consolidated financial statements and notes thereto included in
   the Company's latest annual report to stockholders. The results for the
   interim periods presented are not necessarily indicative of results to be
   expected for the full fiscal year.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

   The accompanying consolidated financial statements reflect the application
   of certain accounting policies described below:

   a. PRINCIPLES OF CONSOLIDATION: The accompanying consolidated financial
      statements include the accounts of the Company and its wholly-owned
      subsidiaries. All material intercompany accounts and transactions have
      been eliminated in consolidation.

   b. CASH EQUIVALENTS: Cash equivalents are carried at amortized cost, which
      approximates market value. Cash equivalents are short-term, highly liquid
      investments with original maturities of less than three months.

   c. INVENTORIES: Inventories are stated at the lower of cost or market using
      the first-in, first-out (FIFO) method and consist of the following:
<TABLE>
<CAPTION>
                                          December 31,     March 31,
                                              2000           2000
                                          ------------    -----------
                                                           (audited)
<S>                                       <C>            <C>
      Raw materials..................       $ 125,661     $  176,620
      Work-in-process................         225,077        215,626
      Finished goods.................         803,052        885,838
                                          ------------    -----------
                                           $1,153,790     $1,278,084
                                          ============    ===========
</TABLE>

      Work-in-process and finished goods inventories consist of material,
      labor, and manufacturing overhead.



                                       7
<PAGE>






                     VISION-SCIENCES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                                   (Continued)


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

   d. DEPRECIATION AND AMORTIZATION: The Company provides for depreciation
      and amortization using the straight-line method in amounts that allocate
      the cost of the assets to operations over their estimated useful lives as
      follows:

<TABLE>
<CAPTION>
                                                       Estimated
             Asset Classification                      Useful Life
             --------------------                      -----------
<S>                                                      <C>
         Machinery and Equipment .................       3-5 Years
         Furniture and Fixtures ..................         5 Years
</TABLE>

      Leasehold improvements are amortized over the shorter of their estimated
      useful lives or the lives of the leases.

   e. BASIC AND DILUTED NET LOSS PER COMMON SHARE: Basic and diluted
      net loss per common share is based on the weighted average number of
      common shares outstanding. Shares of common stock issuable pursuant to
      stock options and warrants have not been considered, as their effect would
      be antidilutive.

   f. REVENUE RECOGNITION: The Company recognizes revenue upon product shipment.

   g. FOREIGN CURRENCY TRANSACTIONS: In accordance with SFAS No. 52, FOREIGN
      CURRENCY TRANSLATION, the Company charges foreign currency exchange gains
      or losses, in connection with its purchases of products from vendors in
      Japan, to operations, and charges foreign exchange translation gains and
      losses to retained earnings.

   h. INCOME TAXES: The Company accounts for income taxes under the liability
      method in accordance with SFAS No. 109, ACCOUNTING FOR INCOME TAXES. Under
      SFAS No. 109, deferred tax assets or liabilities are computed based upon
      the differences between the financial statement and income tax bases of
      assets and liabilities as measured by the enacted tax rates.

      The Company has recorded a valuation allowance equal to its net deferred
      tax asset due to the uncertainty of realizing the benefit of this asset.

   i. POTENTIAL OBLIGATIONS TO NON-QUALIFIED OPTION HOLDERS: The
      Company follows the consensus of the Emerging Issues Task Force ("EITF")
      Issue 00-19, DETERMINATION OF WHETHER SHARE SETTLEMENT IS WITHIN THE
      CONTROL OF THE COMPANY FOR PURPOSES OF APPLYING EITF ISSUE NO. 96-13,
      `ACCOUNTING FOR DERIVATIVE FINANCIAL INSTRUMENTS INDEXED TO, AND
      POTENTIALLY SETTLED IN, A COMPANY'S OWN STOCK'. The Company records the
      fair value of non-qualified options granted to non-employees as temporary
      equity on the Company's balance sheet.



                                       8
<PAGE>


                     VISION-SCIENCES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                                   (Continued)

3. INVESTMENTS IN ISRAEL

   3DV SYSTEMS LTD.

   The Company accounts for its investment in 3DV Systems Ltd. ("3DV") using
   the equity method of accounting. Due to the Company's commitment to finance
   the working capital needs of 3DV, the Company absorbed 100% of the losses
   of 3DV up through December 23, 1999. On that date, 3DV completed a second
   round of financing which resulted in an amendment to the Agreement between
   3DV and the Company signed on August 6, 1998. The effect of that amendment
   was to eliminate the Company's option to purchase the remaining shares of
   3DV under certain conditions, and to exempt the Company from guaranteeing
   the working capital requirements of 3DV. Subsequent to December 23, 1999,
   the Company continued to account for its investment in 3DV using the equity
   method of accounting. However, after December 23, 1999 the Company included
   only its proportional share of 3DV's losses, not 100% of 3DV's losses.

   In the three months ended June 30, 2000, 3DV incurred losses of
   approximately $2,412,000. As the Company's investment in 3DV totaled
   $222,553 at March 31, 2000, the Company recognized equity in losses of 3DV
   of the total value of that investment in the three months ended June 30,
   2000, and recognized no losses in the three-month periods ended September
   30, 2000 and December 31, 2000. In the three and nine months ended December
   31, 1999, the Company recognized $1,055,400 and $3,077,400, respectively,
   of the losses of 3DV.

   In April and May 2000, 3DV executed a third round of financing with
   investors other than the Company. In November 2000 an outside investor in
   3DV exercised an option to purchase the common stock of 3DV. As a result,
   as of December 31, 2000, the Company owns approximately 24% of the
   outstanding shares of 3DV.


4. EGYPT PROJECT

   In September 2000, the Company contributed $269,000 to the University of
   Georgia ("UGA") in support of the University of Georgia Hepatitis Project,
   Proposal No. 022297-01 (the "Egypt Project"). Payments were comprised of a
   direct grant of $119,000 contributed by the Company, and $150,000
   contributed in the form of a loan (the "Loan") to UGA. The Loan bears no
   interest and only stipulates that it will be repaid to the Company in the
   event that the total funds received by UGA for the Egypt Project exceed its
   first-year budget.



                                       9
<PAGE>



                     VISION-SCIENCES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                                   (Continued)



4. EGYPT PROJECT (CONTINUED)

   The Company obtained the $150,000 by borrowing the funds from two of its
   principal shareholders, who are also directors of the Company. The terms of
   the loans were three years, and the loans incurred interest at a rate of
   9.5%, payable quarterly, beginning December 2000. Principal and interest
   were payable in cash or in Common Stock, $.01 par value, of the Company.
   The number of shares of Common Stock used to make any payments were to be
   calculated based upon the closing sale price of the Company's Common Stock
   on the Nasdaq SmallCap Market on the day prior to the date the payment is
   due. In January 2001, the Company paid off the loans, including interest of
   $4,197.

   The Egypt Project had progressed to a point that, as of December 31, 2000,
   the Company would not have been able to recover funds contributed to UGA in
   the three months ended September 30, 2000. Accordingly, in the three months
   ended December 31, 2000 the Company expensed approximately $243,000 that
   had been recorded as a prepaid asset at September 30, 2000.

5. STOCKHOLDERS EQUITY

   On December 29, 2000 the Company completed a private equity placement with
   four members of the Company's Board of Directors, three of whom are
   employees of the Company, (collectively, the "Insiders") and a group of
   other private investors. The company sold an aggregate of 5,587,418 shares
   of common stock at a price of $.62 per share, which represents 80% of the
   average closing price of the common stock on the Nasdaq SmallCap Market
   during the five trading days ended December 11, 2000. The Insiders
   purchased 3,468,096 shares and the other investors purchased 2,119,322
   shares. The Company received all the proceeds in exchange for newly issued
   shares of common stock. Proceeds from two of the investors totaling
   $131,000, were received on January 2, 2001 and are recorded as
   subscriptions receivable in prepaid expenses and deposits on the Company's
   balance sheet as of December 31, 2000.

6. SEGMENT INFORMATION

   The Company has three reportable segments - Medical, Industrial and
   Corporate. The medical segment designs, manufactures and sells EndoSheaths
   and sells endoscopes to users in the health care industry. The industrial
   segment designs, manufactures and sells borescopes to a variety of users,
   primarily in the aircraft maintenance industry. In addition, the industrial
   segment manufactures and repairs endoscopes for the medical segment. The
   corporate segment consists of certain administrative expenses beneficial to
   the Company as a whole and the management oversight of the Company's
   investment in 3DV Systems Ltd., Vision-Sciences Ltd. and the Egypt Project.

   The accounting policies of the segments are described in the summary of
   significant accounting policies. The Company evaluates segment performance
   based upon operating income. Identifiable assets are those used directly in
   the operations of each segment. Corporate assets include cash, marketable
   securities, the assets of Vision-Sciences, Ltd. and the investment in 3DV.
   The carrying value of the investment in 3DV at December 31, 2000 was $0.
   Data regarding management's view of the Company's segments are provided in
   the following table.



                                       10
<PAGE>





                     VISION-SCIENCES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                                   (Continued)

5. SEGMENT INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
Three months ended December 31,       Medical    Industrial   Corporate     Adjustments     Total
-------------------------------     ----------   ----------   -----------   -----------   ----------
<S>                                 <C>          <C>          <C>            <C>          <C>
2000
Sales to external customers         $1,020,334   $  925,955   $         -    $        -   $1,946,289
Intersegment sales                           -      128,770                    (128,770)           -
Interest income, net                         -            -        18,452             -       18,452
Operating income (loss)                (96,996)      72,087      (416,239)            -     (441,148)
Depreciation and amortization           48,179       10,470             -             -       58,649
Other significant non-cash items:
Equity in losses of 3DV Systems              -            -             -             -            -
Total assets                         2,394,989    1,165,335     4,398,423      (533,017)   7,425,730
Expenditures for fixed assets           95,032            -             -             -       95,032

1999
Sales to external customers          $ 919,513    $ 941,975   $         -    $        -   $1,861,488
Intersegment sales                           -      172,340             -      (172,340)           -
Interest income, net                         -            -        26,517             -       26,517
Operating income (loss)               (133,635)      20,912      (127,555)            -     (240,278)
Depreciation and amortization           94,847        3,961         2,084             -      100,892
Other significant non-cash items:
Equity in losses of 3DV Systems              -            -    (1,055,400)            -   (1,055,400)
Total assets                         2,415,368      821,364     2,409,174      (619,648)   5,026,258
Expenditures for fixed assets           39,244            -        21,660             -       60,904
</TABLE>



                                       11
<PAGE>





                     VISION-SCIENCES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                                   (Continued)

5. SEGMENT INFORMATION (CONTINUED)

<TABLE>
<CAPTION>
Nine months ended December 31,        Medical    Industrial   Corporate     Adjustments      Total
-------------------------------      ---------   ----------   ---------     -----------   ------------
<S>                                 <C>          <C>          <C>           <C>           <C>
2000
Sales to external customers         $2,707,103   $2,525,811   $         -             -    $ 5,232,914
Intersegment sales                           -      387,098                    (387,098)             -
Interest income, net                         -            -        61,196             -         61,196
Operating income (loss)               (360,041)      48,273    (1,010,295)            -     (1,322,063)
Depreciation and amortization          170,218       20,469             9             -        190,696
Other significant non-cash items:
Equity in losses of 3DV Systems              -            -      (222,553)            -       (222,553)
Total assets                         2,394,989    1,165,335     4,398,423      (533,017)     7,425,730
Expenditures for fixed assets          103,777      142,945       (14,395)            -        232,327

1999
Sales to external customers        $ 2,494,982   $2,723,071   $         -    $        -    $ 5,218,053
Intersegment sales                           -      430,699             -      (430,699)             -
Interest income, net                         -            -        85,990             -         85,990
Operating income (loss)               (862,004)      37,085      (432,392)            -     (1,257,311)
Depreciation and amortization          291,948       20,393         6,077             -        318,418
Other significant non-cash items:
Equity in losses of 3DV Systems              -            -    (3,077,400)            -     (3,077,400)
Total assets                         2,415,368      821,364     2,409,174      (619,648)     5,026,258
Expenditures for fixed assets          138,018        2,000        21,660             -        161,678
</TABLE>



                                       12
<PAGE>






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


RESULTS OF OPERATIONS

Except for the historical information herein, the matters discussed in this Form
10-Q include forward-looking statements that may involve a number of risks and
uncertainties. Future results may vary significantly based upon a number of
important factors including, but not limited to, risks in market acceptance of
new products and services and continuing demand for same, the impact of
competitive products and pricing, seasonality, changing economic conditions, and
other risk factors detailed in the Company's most recent annual report and other
filings with the Securities and Exchange Commission.

Net sales for the three months ended December 31, 2000 ("Q3 01") were
$1,946,000, an increase of $85,000, or 5%, compared to the three-month period
ended December 31, 1999 ("Q3 00"). During this period sales of medical products
increased by $101,000, or 11%, and sales of industrial products decreased by
$16,000, or 2%.

The increase in medical sales was due primarily to increases in sales of
EndoSheaths(R) of $43,000, of endoscopes of $40,000 and of repairs of $18,000.
Sales of EndoSheaths(R) for the Ear-Nose-Throat ("ENT") market increased by
$13,000, and sales of EndoSheaths to the gastrointestinal ("GI") market
increased by $29,000. Sales of ENT endoscopes increased by $48,000 and sales of
sigmoidoscopes decreased by $8,000.

The increase in sales of ENT EndoSheaths was due to an increase in the units
shipped, offset by lower prices. The Company shipped approximately 51,000 ENT
EndoSheaths in Q3 01, an increase of 7,900 compared to shipments of
approximately 43,100 in Q3 00. Shipments to international distributors comprised
approximately 49% of total ENT EndoSheath shipments in Q3 01, compared to
approximately 31% in Q3 00. International demand for the Company's ENT
EndoSheath continues to be high, especially in Europe and Australia. Although
during the three months ended December 31, 2000, the Company acquired
approximately 31 new domestic ENT customers, shipments to all domestic customers
declined in Q3 01, compared to Q3 00, due to lower demand. Although the average
sales price for ENT EndoSheaths sold to international distributors is lower than
the average sales price for domestic customers, the higher volume of
international shipments offset the lower volume of domestic shipments.

In addition to the year-to-year increase in the unit sales of ENT
EndoSheaths, the unit sales increased by approximately 1% in Q3 01 compared
to the three-month period ended September 30, 2000. This increase was due
primarily to an increase in shipments to domestic customers of 8%, offset
partially by a decline of 5% in shipments to international distributors.

The increase in sales of ENT endoscopes was due primarily to higher demand from
both domestic customers and international distributors in Q3 01, compared to Q3
00. The Company expects demand for ENT endoscopes will increase in the future as
it penetrates the domestic and international markets for these endoscopes.

The lower sales of industrial products in Q3 01, compared to Q3 00 were due
primarily to slightly lower demand during this period for the Company's products
by the defense and aircraft maintenance markets.



                                       13
<PAGE>




                 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                   (Continued)


Net sales for the nine months ended December 31, 2000 increased by $15,000, or
0%, compared to the nine months ended December 31, 1999. During this period,
sales of medical products increased by $212,000, or 9%, and sales of industrial
products declined by $197,000, or 7%.

The increase in medical sales was due primarily to higher sales of ENT
EndoSheaths of $294,000, higher sales of ENT endoscopes of $7,000, offset by
lower sales of GI EndoSheaths of $111,000. The higher sales of ENT EndoSheaths
was due to higher demand from both domestic customers and international
distributors, compared to the nine months ended December 31, 1999.

The lower sales of industrial products were due primarily to lower demand from
the defense and aircraft maintenance markets.

Gross profit in Q3 01 increased to $662,000, or 34% of net sales, compared to
$599,000, or 32% of net sales in Q3 00. Gross profit increased in both the
medical and industrial segments, due primarily to higher sales, lower overhead
spending, improved efficiencies in manufacturing our new Slide-On(TM) ENT
EndoSheaths and more efficient use of inventory.

Gross profit for the nine months ended December 31, 2000 increased to
$1,675,000, or 32% of net sales, compared to $1,284,000, or 25% of net sales,
for the comparable prior year nine-month period. The increase in gross profit
was due primarily to higher volume of ENT EndoSheaths, lower overhead spending
and improved manufacturing efficiencies, compared to the same period in fiscal
2000.

Selling, general and administrative expenses in Q3 01 increased by $10,000, or
1% compared to Q3 00. Selling, general and administrative expenses amounted to
41% of net sales, compared to 43% in Q3 00. The increase in these expenses was
primarily attributable to higher expenses for legal costs relating to existing
and new patents.

For the nine months ended December 31, 2000 selling, general and administrative
expenses decreased by $95,000, or 4%. Selling, general and administrative
expenses were 44% of sales for the nine months ended December 31, 2000, compared
to 46% of sales in the same period in fiscal 2000. The decrease in these
expenses was due primarily to lower expenses for commissions, payrolls,
consulting services and product promotion expenses.


                                       14
<PAGE>






                 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                   (Continued)

Research and development expenses increased by $253,000 in Q3 01 compared to Q3
00, and were 15% of sales in Q3 01, compared to 3% of sales in Q3 00. The higher
expenses for research and development were due to the company's participation in
the Egypt Project (see Note 4) and to stock compensation to an Imagineering Ltd.
consultant working on the CMOS sensors.

The purpose of the Egypt Project is to determine the rate of cross-infection of
hepatitis C virus from the use of flexible endoscopes. The Company expects the
Egypt Project to comprise multiple phases over a period of two years. There is
no guarantee that the Company will participate in the Egypt Project beyond its
current commitment.

During the fourth quarter of fiscal 2000 the Imagineering Ltd. consultant
delivered certain innovations designed to improve the performance of
CMOS-based image sensors, as per his contractual obligation, and the Company
granted an option for 1,000,000 shares of the Company's common stock with a
fair market value of $422,000 as compensation for work performed. According
to the Statement of Financial Accounting Standard ("SFAS") No. 123,
ACCOUNTING FOR STOCK-BASED COMPENSATION, the Company is required to
recalculate the fair value of the option on a quarterly basis until the
option lapses or is exercised. For the three months ended December 31, 2000,
the Company recorded compensation expense of $11,000 for the time value of
the option.

For the nine-month period ended December 31, 2000 research and development
expenses increased by $550,000, and were 13% of sales, compared to 3% of sales
for the same period in fiscal 2000. The increase in research and development
expenses was due primarily to costs related to the Egypt Project of $269,000,
compensation expense related to a stock option granted to the Imagineering Ltd.
consultant of $257,000, and expenses related to Vision-Science, Ltd., the
Company's Israeli subsidiary.

Equity in losses of 3DV Systems for the three and nine months ended December 31,
2000 decreased by $1,055,400 and $3,077,400, respectively, due to the Company no
longer being responsible for funding the working capital needs of 3DV.

The net loss per share for the three months ended December 31, 2000 was $.02,
compared to $.06 per share for the same period last year. Without the expenses
related to the Egypt Project, the compensation expense related to an option
granted to a non-employee and equity in losses of 3DV, the loss would have been
$.01 per share for each of the three-month periods ended December 31, 2000 and
1999.



                                       15
<PAGE>




                 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                   (Continued)

The net loss per share for the nine months ended December 31, 2000 was $.07,
compared to $.22 per share for the nine months ended December 31, 1999. Without
the expenses related to the Egypt Project, the compensation expense related to
an option granted to a non-employee and the equity in losses of 3DV, the loss
would have been $.04 per share and $.06 per share for the nine months ended
December 31, 2000 and 1999, respectively.

LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 2000, the Company had $4,302,000 in cash and cash
equivalents, and working capital of $4,618,000. The Company also had a cash
collateralized demand line of credit with a bank for borrowings of up to
$250,000. At December 31, 2000, there was approximately $203,000 available under
this line for use in support of general working capital needs and the issuance
of commercial and standby letters of credit.

The Company's cash and cash equivalents increased by $2,721,000 in the nine
months ended December 31, 2000, due primarily to cash provided by financing of
$3,710,000, offset by net cash used in operations of $757,000 and purchases of
equipment and leasehold improvements of $232,000.

USE OF PROCEEDS

The Company expects to use the proceeds of $3.4 million raised in a private
placement for working capital, the purchase of new manufacturing equipment and
for general corporate purposes. The Company has entered into a contract for
approximately $203,000 for the design and manufacture of new equipment for
manufacturing its ENT EndoSheaths, and has made an advance payment to the
supplier of $60,000 during the three months ended December 31, 2000. The Company
expects to make another progress payment for the new equipment in the fourth
quarter of fiscal 2001 amounting to approximately $60,000. The Company expects
total spending for property and equipment will not exceed $350,000 for all of
fiscal year 2001. The Company expects the new equipment will be in place during
the third quarter ending December 31, 2001.

The Company has incurred losses since its inception, and losses are expected to
continue at least during the fiscal year ending March 31, 2001. The Company has
funded the losses principally with the proceeds from public and private equity
financings. Management believes that the Company will not require additional
financial support for the remainder of fiscal year 2001 or for the fiscal year
2002. Management continues to pursue additional sources of capital; however,
there can be no assurance that additional funding will be available, or
available on reasonable terms.



                                       16
<PAGE>




ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISK

The Company, in the normal course of business, is subject to the risks
associated with fluctuations in interest rates and changes in foreign currency
exchange rates.

INTEREST AND MARKET RISK

The Company maintains a portfolio of marketable, primarily fixed income,
available-for-sale securities of various issuers, types and maturities. The
Company has not used derivative financial instruments in its investment
portfolio. The Company attempts to limit its exposure to interest rate and
credit risk by placing its investments with high-quality financial institutions
and has established investment guidelines relative to diversification and
maturities designed to maintain safety and liquidity.

Investments in both fixed-rate and floating-rate interest earning instruments
carry a degree of interest rate risk. Fixed-rate securities may have their fair
market value adversely impacted due to a rise in interest rates, while
floating-rate securities may produce less income than expected if interest rates
decline. Due in part to these factors, the Company's future investment income
may fall short of expectations due to changes in interest rates, or the Company
may suffer losses in principal if forced to sell securities which have seen a
decline in market value due to changes in interest rates.

FOREIGN CURRENCY EXCHANGE

The Company faces exposure, due to purchases of raw materials from Japanese
suppliers, to adverse movements in the value of the Japanese Yen. This exposure
may change over time, and could have a materially adverse effect on the
Company's financial results. The Company may attempt to limit this exposure by
purchasing forward contracts, as required. Most of the Company's liabilities are
settled within 90 days of receipt of materials. At December 31, 2000 the
Company's liabilities relating to Japanese Yen were approximately $97,000.




                                       17


<PAGE>

PART II - OTHER INFORMATION

ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K

        (b) Reports on Form 8-K

            None.


                                       18
<PAGE>



                                    SIGNATURE

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


                                       Vision-Sciences, Inc.


Date: February 14, 2001                By:


                                       /S/ GERALD B. LICHTENBERGER
                                       ---------------------------
                                       Dr. Gerald B. Lichtenberger, Ph. D.
                                       Vice President of Business Development



                                       /S/ JAMES A. TRACY
                                       ------------------
                                       James A. Tracy
                                       Vice President Finance, Chief Financial
                                       Officer and Controller (Principal
                                       Financial Officer and Principal
                                       Accounting  Officer)






                                       19