<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 JUNE 30, 1998

                         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 June 30, 1998.

   Common Stock, par value of $.01                     16,661,021
   -------------------------------                     ----------
         (Titles of Class)                         (Number of Shares)

<PAGE>

                              VISION-SCIENCES, INC.
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>

Part I.    Financial Information                                                                               Page
                                                                                                               ----
<S>                                                                                                         <C>
           Consolidated Balance Sheets............................................................................1

           Consolidated Statements of Operations..................................................................2

           Consolidated Statement of Stockholders' Equity.........................................................3

           Consolidated Statements of Cash Flows..................................................................4

           Notes to Consolidated Financial Statements.........................................................5 - 8

           Management's Discussion and Analysis of Financial Condition
             and Results of Operations.......................................................................9 - 11

Part II.   Other Information.....................................................................................12

           Signature.............................................................................................13

</TABLE>

<PAGE>

                     VISION-SCIENCES, INC., AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                                 June 30,        March 31,
                                                                                   1998            1998
                                                                               ------------     -----------
                                                     ASSETS                                      (audited)
                                                     ------
<S>                                                                         <C>             <C>
Current Assets:
     Cash and cash equivalents ............................................   $  2,460,880    $  1,897,905
     Marketable securities ................................................           --           993,146
     Accounts receivable, net of allowance for doubtful
         accounts of $121,000 and $117,000, respectively ..................      1,223,167       1,439,285
     Inventories ..........................................................        712,971         681,106
     Prepaid expenses and deposits ........................................         83,794          86,722
                                                                              ------------    ------------
         Total current assets .............................................      4,480,812       5,098,164
                                                                              ------------    ------------
Property and Equipment, at cost:
     Machinery and equipment ..............................................      2,765,385       2,765,385
     Furniture and fixtures ...............................................        217,461         215,924
     Leasehold improvements ...............................................        304,563         304,563
                                                                              ------------    ------------
                                                                                 3,287,409       3,285,872
     Less-Accumulated depreciation and amortization .......................      2,501,055       2,399,602
                                                                              ------------    ------------
                                                                                   786,354         886,270
                                                                              ------------    ------------
Other Assets, net of accumulated amortization of $71,000
     and $69,000, respectively ............................................        679,725         187,383
                                                                              ------------    ------------
         Total assets .....................................................   $  5,946,891    $  6,171,817
                                                                              ------------    ------------
                                                                              ------------    ------------
                                       LIABILITIES AND STOCKHOLDERS' EQUITY
                                       ------------------------------------
Current Liabilities:
     Acceptances payable to a bank ........................................   $     10,053    $     52,383
     Accounts payable .....................................................        750,068         525,141
     Accrued expenses .....................................................      1,742,899       1,777,775
                                                                              ------------    ------------
         Total current liabilities ........................................      2,503,020       2,355,299
                                                                              ------------    ------------
Stockholders' Equity:
     Common stock, $.01 par value--
         Authorized--25,000,000 shares
         Issued and outstanding--16,661,021 shares at June
         30, 1998 and 16,643,071 shares at March 31, 1998..................        166,610         166,430
     Additional paid-in capital ...........................................     48,105,128      48,083,992
     Accumulated deficit ..................................................    (44,827,867)    (44,433,904)
                                                                              ------------    ------------
         Total stockholders' equity .......................................      3,443,871       3,816,518
                                                                              ------------    ------------
         Total liabilities and stockholders' equity .......................   $  5,946,891    $  6,171,817
                                                                              ------------    ------------
                                                                              ------------    ------------

</TABLE>

          See accompanying notes to consolidated financial statements.

                                      - 1 -

<PAGE>

                     VISION-SCIENCES, INC., AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                FOR THE THREE MONTHS ENDED JUNE 30, 1998 AND 1997
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                           1998             1997
                                                      ------------     ------------
<S>                                                <C>              <C>

Net sales .........................................   $  1,876,735    $  1,864,468
Cost of sales .....................................      1,564,922       1,505,215
                                                      ------------     ------------
     Gross profit .................................        311,813         359,253
Selling, general and administrative expenses ......        689,962         861,109
Research and development expenses .................         52,528         257,925
                                                      ------------     ------------
     Loss from operations .........................       (430,677)       (759,781)
Interest income ...................................         35,481          36,707
Other income ......................................          1,233         111,815
                                                      ------------     ------------

     Net loss .....................................   $   (393,963)   $   (611,259)
                                                      ------------     ------------
                                                      ------------     ------------
Basic and diluted net loss per common share .......   $      (0.02)   $      (0.04)
                                                      ------------     ------------
                                                      ------------     ------------
Shares used in computing basic and diluted net loss
   per common share ...............................     16,648,525      14,696,909
                                                      ------------     ------------
                                                      ------------     ------------

</TABLE>



          See accompanying notes to consolidated financial statements.

                                      - 2 -

<PAGE>

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




<TABLE>
<CAPTION>

                                      Common  Stock
                              ------------------------------
                                                                     Additional                            Total
                                                      $.01            Paid-in-        Accumulated       Stockholders'
                              Number of Shares     Par Value          Capital            Deficit            Equity
                              ----------------     ---------         ----------       ------------      -------------
                                                       

<S>                              <C>             <C>               <C>               <C>                <C>         
Balance, March 31, 1998,
(audited)                        16,643,071      $    166,430      $ 48,083,992      $(44,433,904)      $  3,816,518

Exercise of stock options            17,950               180            21,136                               21,316
Net loss                               --                --                --            (393,963)          (393,963)
                                 ----------      ------------      ------------      ------------       ------------
Balance, June 30, 1998           16,661,021      $    166,610      $ 48,105,128      $(44,827,867)      $  3,443,871
                                 ----------      ------------      ------------      ------------       ------------
                                 ----------      ------------      ------------      ------------       ------------

</TABLE>

          See accompanying notes to consolidated financial statements.



                                      - 3 -


<PAGE>


                     VISION-SCIENCES, INC., AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                FOR THE THREE MONTHS ENDED JUNE 30, 1998 AND 1997
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                                             1998            1997
                                                                                       ------------      ------------
<S>                                                                                    <C>               <C>         
Cash flows from operating activities:
      Net loss ..................................................................      $  (393,963)      $  (611,259)
     Adjustments to reconcile net loss to net cash used for operating activities:
        Depreciation and amortization ...........................................          103,038           122,798
        Loss on disposal of property and equipment ..............................             --              13,928
        Amortization of deferred credit .........................................             --             (18,276)
        Changes in assets and liabilities:
           Accounts receivable ..................................................          216,118           600,994
           Inventories ..........................................................          (31,865)           28,635
           Prepaid expenses and deposits ........................................            2,928            37,011
           Accounts payable .....................................................          224,927           157,231
           Accrued expenses .....................................................          (34,876)          (66,571)
                                                                                       ------------      ------------
              Net cash provided by operating activities .........................           86,307           264,491
                                                                                       ------------      ------------
Cash flows provided by (used for) investing activities:
      Decrease in marketable securities .........................................          993,146              --
      Purchase of property and equipment ........................................           (1,537)           (3,689)
      Increase in other assets ..................................................         (493,927)             (548)
                                                                                       ------------      ------------
             Net cash provided by (used for) investing activities ...............          497,682            (4,237)
                                                                                       ------------      ------------

Cash flows provided by (used for) financing activities:
      Net proceeds from (payments of) acceptances payable to a bank .............          (42,330)              770
      Proceeds from exercise of stock options ...................................           21,316              --
                                                                                       ------------      ------------
             Net cash provided by (used for) financing activities ...............          (21,014)              770
                                                                                       ------------      ------------

Net increase in cash and cash equivalents .......................................          562,975           261,024
Cash and cash equivalents, beginning of period ..................................        1,897,905         2,681,271
                                                                                       ------------      ------------
Cash and cash equivalents, end of period ........................................      $ 2,460,880       $ 2,942,295
                                                                                       ------------      ------------
                                                                                       ------------      ------------

</TABLE>







          See accompanying notes to consolidated financial statements.


                                      - 4 -


<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, 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 prepared in
     accordance with generally accepted accounting principles 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>

                                                           June 30,     March 31,
                                                             1998          1998
                                                           --------     ----------
                                                                         (audited)
<S>                                                        <C>           <C>     

          Raw materials ..............................     $182,961      $181,125
          Work-in-process ............................      173,508       178,625
          Finished goods .............................      356,502       321,356
                                                           --------      --------
                                                           $712,971      $681,106
                                                           --------      --------
                                                           --------      --------
</TABLE>


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




                                      - 5 -

<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...................................      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: The Company charges foreign currency
          exchange gains or losses, in connection with its purchases of products
          from vendors in Japan, to operations in accordance with SFAS No. 52,
          Foreign Currency Translation.

     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.



                                      - 6 -


<PAGE>



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


3.   Subsequent Event

     In August 1998 the Company signed an Investment Agreement (the "Agreement")
     to acquire 25% of the fully diluted share capital of 3DV Systems Ltd.
     ("3DV"), an Israeli company that is a wholly-owned subsidiary of RDC Rafael
     Development Corporation Ltd. ("RDC"), an Israeli company, for $3 million in
     cash. As part of this investment, the Company made a non-refundable advance
     of $500,000 to 3DV in May 1998, which is included in Other Assets on the
     Company's balance sheet at June 30, 1998. This advance will be credited
     against the $3 million purchase price. In addition, the Company has the
     right to acquire an additional 60% of the share capital of 3DV in the
     future, at the then fair market value, under certain conditions, and RDC
     has the right to require the Company to purchase up to the remaining 75%,
     including 15% which would be owned by employees of 3DV, under certain
     conditions. In addition, the Agreement requires the Company to issue
     500,000 shares of common stock to RDC in exchange for the right to purchase
     the additional 60% of 3DV and certain other rights. The payment of the
     remaining $2.5 million and the issuance of the 500,000 shares of common
     stock is expected to occur at the closing of the transaction, scheduled for
     August 17, 1998.

     In August 1998 the Company signed a License and Manufacturing Agreement
     (the "L&M Agreement") with 3DV giving the Company exclusive worldwide
     rights to commercially exploit products in certain fields of use that
     incorporate, or use, component parts embodying technology developed by 3DV.
     The L&M Agreement allows the Company to sublicense certain rights under the
     L&M Agreement to approved assigns. Asahi Optical Co. Ltd., ("Asahi"), a
     Japanese company, is defined as the sole approved assign.

     In August 1998 the Company executed a Memorandum of Understanding (the
     "MOU") with Imagineering, Ltd. to acquire exclusive rights to research to
     be performed in association with certain innovations (the "Innovations")
     that improve the performance of CMOS-based Image Sensors. The MOU grants
     the Company exclusive rights to any resulting patent applications and
     patent rights that result from such research. A consultant to Imagineering,
     Ltd. will perform the research, and the Company plans to grant the
     consultant a nonstatutory stock option for 1,000,000 shares of the
     Company's common stock, which shall vest 100% upon the delivery of the
     Innovations. In addition, the Company plans to fund the cost of the
     research by Imagineering, Ltd., initially for a period of one year.





                                      - 7 -


<PAGE>



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


3.   Subsequent Event (Continued)

     In August 1998 the Company also executed a License Agreement (the
     "License") with Asahi granting Asahi exclusive rights, as an approved
     assign under the L&M Agreement, to certain technology in certain fields and
     allowing Asahi to acquire from the Company and 3DV certain products having
     application in those fields. In addition, the License granted Asahi a
     worldwide, perpetual, royalty-free license to patentable and non-patentable
     technology relating to the utilization or application of CMOS-based Image
     Sensors, as researched or developed by the Company. Notwithstanding that
     license, the Company has reserved the right to use the technology licensed
     to Asahi in products bearing the Company's own trademarks within certain
     fields of use. The Company has received a letter of intent from Asahi
     indicating Asahi will pay the Company $5 million at the scheduled closing
     on August 17, 1998 in exchange for new shares of the Company's common stock
     and the rights associated with the License discussed above.
















                                      - 8 -


<PAGE>



                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Operations
---------------------

Net sales for the three months ended June 30, 1998 increased $12,267, or 0.7%,
compared to the prior year three-month period. Sales of medical products
decreased by $112,695, or 10%, while sales of industrial products increased by
$124,962, or 16%, compared to the prior year three-month period. Sales of
endoscopes declined $139,000 while sales of the Company's disposable
EndoSheath(R) products increased by $32,000. The decline in sales of endoscopes
was due primarily to lower sales to the ENT market which resulted from the
timing of orders received from the Company's distributor of ENT products, and to
manufacturing delays at the Company's major supplier of ENT scopes. Sales of
EndoSheaths to the ENT market increased 31%, compared to the same period in
fiscal 98, while sales of EndoSheaths to the gastroenterology market declined by
18%. The increase in sales of industrial products was due primarily to increased
demand for the Company's products by the defense market.

Gross profit for the three months ended June 30, 1998 decreased to $311,813, or
17% of net sales, from $359,253, or 19% of net sales, for the comparable prior
year three-month period. Gross profit improved due to higher selling prices for
EndoSheaths, and higher volume of industrial products; however, manufacturing
costs increased by $206,000 resulting from the reassignment of certain personnel
previously devoted to research and development.

Selling, general and administrative expenses for the three months ended June 30,
1998 decreased $171,000, or 20%, compared to the prior year three-month period,
and amounted to 37% of net sales in the current three-month period. For the
three-month period ended June 30, 1997, selling, general and administrative
expenses amounted to 46% of net sales. The decrease in these expenses was due
primarily to reductions in costs for payroll, temporary help and product
promotion.

Research and development expenses for the three months ended June 30, 1998
decreased $205,000, or 80%, compared to the prior year three-month period, and
amounted to 3% of net sales for the current three-month period. In the
three-month period ended June 30, 1997, these expenses amounted to 14% of net
sales. The decrease in these expenses was due primarily to reduced headcount
resulting from the Company's decision to focus primarily on improvements in its
existing products.

Other income for the three months ended June 30, 1998, decreased $111,000
compared to the prior year three-month period due primarily to the expiration on
July 1, 1997 of an agreement that was the primary source of royalties for the
three-month period ended June 30, 1997. In addition, during the three months
ended June 30, 1997 the Company received an initial license fee of $50,000 from
a company for the non-exclusive use of certain technology of the Company in the
fields of gynecology and urology.








                                      - 9 -


<PAGE>



Liquidity and Capital Resources
-------------------------------

As of June 30, 1998, the Company had $2,461,000 in cash and cash equivalents,
and working capital of $1,978,000. The Company also had a cash collateralized
demand line of credit with a bank for borrowings of up to $250,000. At June 30,
1998, there was approximately $240,000 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
$563,000 in total from March 31, 1998, due primarily to the sale of $993,000 of
marketable securities. Proceeds from the sale of marketable securities were
partially used to make a non-refundable advance of $500,000 to 3DV Systems Ltd.,
an Israeli company that is wholly-owned by RDC Rafael Development Corporation
Ltd., an Israeli company.

The Company's net accounts receivable decreased $216,000 to $1,223,000 at June
30, 1998, from $1,439,000 at March 31, 1998. This decrease was primarily
attributable to lower sales in the three months ended June 30, 1998, compared to
the three months ended March 31, 1998. During the period ended June 30, 1998,
the Company's inventories increased $32,000 to $713,000. The increase was
primarily attributable to the higher order rate for industrial products. The
Company's capital expenditures during the three months ended June 30, 1998 were
approximately $1,500. The Company anticipates that capital expenditures for the
fiscal year ending March 31, 1999 will be less than $250,000.

As discussed in Note 3 to the consolidated financial statements, in August 1998
the Company expects to receive $5 million from Asahi in exchange for new shares
of the Company's common stock and rights under a license agreement. In August
1998 the Company will make a final payment of $2.5 million to RDC for 25% of the
fully diluted share capital of 3DV. The Company has committed to provide working
capital to 3DV for the years 1999 and 2000, based upon approved budgets for
those years. In addition, the Company has committed to fund research for
CMOS-based Image Sensors by Imagineering, Ltd.

The Company has incurred losses since its inception, and losses are expected to
continue through the fiscal year ending March 31, 1999. The Company has funded
the losses principally with the proceeds from public and private equity
financings. In April 1998 management implemented plans to further reduce the
funds required to operate its business of manufacturing and selling endoscopes
and EndoSheaths, and believes the Company, as restructured, will not require
additional outside funding during fiscal 1999 for that business. The plans
implemented in the three months ended June 30, 1998 included a reduction in
headcount in April and the consolidation of the Natick facility into one
building. However, there can be no assurances that additional funding will not
be necessary, and management may be required to obtain additional financing or
an alternative means of support during fiscal year 1999.







                                     - 10 -


<PAGE>



The Company is currently in the process of evaluating its information technology
infrastructure to assess its exposure to the "Year 2000" computer problem. Based
upon its work to date, the Company believes that no critical software systems
will be impacted by this situation. Systems currently used by the Company are
already "Year 2000" compliant. The Company does not currently have information
regarding the "Year 2000" compliance status of its customers or suppliers, and
there can be no assurance that that the Company's customers and suppliers will
not be adversely affected by the "Year 2000" problem. Nonetheless, the Company
believes that the "Year 2000" problem will not have a material impact on the
Company's business operations or financial condition.




















                                     - 11 -


<PAGE>



                           PART II - OTHER INFORMATION


Item 4: Submission of Matters to a Vote of Security-Holders

     (a)  None

Item 6: Exhibits and Reports on Form 8-K

     (a)  Exhibits

          27.  Financial Data Schedule

     (b)  Reports on Form 8-K

          None.










                                     - 12 -

<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:  August 12, 1998     By:  

                           /s/ Dr. Gerald B. Lichtenberger, Ph.D.
                           --------------------------------------
                           Dr. Gerald B. Lichtenberger, Ph.D.
                           Executive Vice President, Chief Operating Officer



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





                                     - 13 -