<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 SEPTEMBER 30, 1997

                         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)

    6 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 September 30, 1997.


Common Stock, par value of $.01                        14,696,909
-------------------------------                     ----------------
      (Titles of Class)                            (Number of Shares)
<PAGE>
 
                             VISION-SCIENCES, INC.
                               TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S>      <C>                                                          <C>

Part I.     Financial Information                                          Page
                                                                           ----
            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 - 7
 
            Management's Discussion and Analysis of Financial Condition
            and Results of Operations..................................    8 - 9
 
Part II.    Other Information..........................................     10
 
            Signature..................................................     11
</TABLE>
<PAGE>
 
                    VISION-SCIENCES, INC., AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                                  (UNAUDITED)


<TABLE>
<CAPTION>
                                                                   September 30,            March 31,
                                                                        1997                  1997
                                                                   -------------          ------------- 
                                ASSETS                                                      (audited)   
                                ------                                                      ---------   
                                                                 
<S>                                                              <C>                    <C>         
Current Assets: 
  Cash and cash equivalents.....................................    $2,546,632             $2,681,271 
  Accounts receivable, net of allowance for doubtful                                                  
     accounts of $118,000 and $127,000, respectively............       967,697              1,849,407 
  Inventories...................................................       663,617                706,342 
  Prepaid expenses and deposits.................................        77,307                150,021 
                                                                    ----------             ---------- 
     Total current assets.......................................     4,255,253              5,387,041 
                                                                    ----------             ---------- 
                                                                                                      
Property and Equipment, at cost:                                                                      
  Machinery and equipment.......................................     2,732,161              2,684,286 
  Furniture and fixtures........................................       214,626                214,626 
  Leasehold improvements........................................       304,563                304,563 
                                                                    ----------             ---------- 
                                                                     3,251,350              3,203,475 
  Less-Accumulated depreciation and amortization...............      2,192,021              1,949,596 
                                                                    ----------             ---------- 
                                                                     1,059,329              1,253,879 
                                                                    ----------             ---------- 
Other Assets, net of accumulated amortization of $66,000                                              
  and $63,000, respectively....................................        201,833                208,913 
                                                                    ----------             ---------- 
     Total assets..............................................     $5,516,415             $6,849,833 
                                                                    ==========             ========== 
                      LIABILITIES AND STOCKHOLDERS' EQUITY
                      ------------------------------------
Current Liabilities:
  Acceptances payable to a bank................................   $     26,510           $     46,251
  Accounts payable.............................................        848,594                499,142
  Accrued expenses.............................................      1,768,706              1,878,638
                                                                  ------------           ------------
     Total current liabilities.................................      2,643,810              2,424,031
                                                                  ------------           ------------
                                                                                                     
Deferred Credit................................................             --                 36,558
                                                                  ------------           ------------
Stockholders' Equity:                                                                                
  Common stock, $.01 par value--                                                                     
     Authorized--25,000,000 shares                                                                   
     Issued and outstanding--14,696,909 shares at                                                    
     September 30, 1997 and at March 31, 1997..................        146,968                146,968
  Additional paid-in capital...................................     46,098,212             46,098,212
  Accumulated deficit..........................................    (43,372,575)           (41,855,936)
                                                                  ------------           ------------
     Total stockholders' equity................................      2,872,605              4,389,244
                                                                  ------------           ------------
     Total liabilities and stockholders' equity................   $  5,516,415           $  6,849,833
                                                                  ============           ============ 
</TABLE>
          See accompanying notes to consolidated financial statements.


                                     - 1 -
<PAGE>
 
                    VISION-SCIENCES, INC., AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                              Three Months Ended                  Six Months Ended                  
                                                                 September 30,                       September 30,                
                                                           ----------------------------         --------------------------   
                                                              1997             1996                1997           1996          
                                                           -----------      -----------         ----------      ----------  
<S>                                                    <C>               <C>                 <C>              <C>       
Net sales.............................................     $ 1,822,906      $ 2,178,318        $ 3,687,374     $ 3,975,868  
Cost of sales.........................................       1,551,412        2,012,295          3,056,627       3,713,334  
                                                           -----------      -----------         ----------      ----------  
                                                                                                                           
    Gross profit......................................         271,494          166,023            630,747         262,534 
                                                                                                                           
Selling, general and administrative expenses..........       1,002,184        1,365,899          1,863,293       2,824,856 
Research and development expenses.....................         277,714          552,470            535,639       1,214,589 
                                                           -----------      -----------        -----------     ----------- 
    Loss from operations..............................      (1,008,404)      (1,752,346)        (1,768,185)     (3,776,911)
                                                                                                                           
Interest income.......................................          36,581           43,795             73,288         105,025 
Other income(expense), net............................          66,444           13,234            178,258          34,201 
                                                           -----------      -----------        -----------     ----------- 
                                                                                                                           
    Net loss..........................................     $  (905,379)     $(1,695,317)       $(1,516,639)    $(3,637,685)
                                                           ===========      ===========        ===========     =========== 
                                                                                                                           
Net loss per common share.............................          $(0.06)          $(0.13)            $(0.10)         $(0.28)
                                                           ===========      ===========        ===========     =========== 
                                                                                                                           
Weighted average shares outstanding...................      14,696,909       13,005,743         14,696,909      12,995,595 
                                                           ===========      ===========        ===========     ===========  
</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
                          ------------------------------
                            Number of           $.01         Additional       Accumulated   Stockholders' 
                             Shares           Par Value    Paid-in-Capital      Deficit        Equity     
                          -------------    -------------   ---------------   ------------   ------------- 
<S>                      <C>             <C>            <C>                <C>           <C>          
Balance, March 31, 1997,     14,696,909      $   146,968   $   46,098,212    $(41,855,936)  $   4,389,244 
 (audited)                                                                                                
                                                                                                          
Net loss                         --                --              --          (1,516,639)     (1,516,639)
                          -------------    -------------   --------------    ------------   ------------- 
Balance, September 30,                                                                                    
 1997                        14,696,909      $   146,968   $   46,098,212    $(43,372,575)  $   2,872,605 
                          =============    =============   ==============    ============   =============  
</TABLE>


          See accompanying notes to consolidated financial statements.



                                     - 3 -
<PAGE>
 
                    VISION-SCIENCES, INC., AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)


<TABLE>
<CAPTION>
                                                                  Six Months Ended        Six Months Ended
                                                                    September 30,           September 30,
                                                                        1997                     1996
                                                                  ----------------        ----------------
<S>                                                               <C>                    <C>          
Cash flows from operating activities:
  Net loss........................................................   $(1,516,639)           $(3,637,685) 
  Adjustments to reconcile net loss to net cash                                                          
   used for operating activities:                                                                        
   Depreciation and amortization..................................       245,596                265,591  
   Loss on disposal of property and equipment.....................        27,856                     --  
   Amortization of deferred credit................................       (36,558)               (36,553) 
   Changes in assets and liabilities:                                                                    
     Accounts receivable..........................................       881,710               (547,029) 
     Inventories..................................................        42,725                296,558  
     Prepaid expenses and deposits................................        72,714                 45,028  
     Accounts payable.............................................       349,452                644,080  
     Accrued expenses.............................................      (109,932)               181,672  
                                                                     -----------            -----------  
      Net cash used for operating activities......................       (43,076)            (2,788,338) 
                                                                     -----------            -----------  
Cash flows provided by (used for) investing activities:                                                  
  Decrease in marketable securities...............................             -              1,980,342  
  Purchase of property and equipment..............................       (75,731)               (83,556) 
  Decrease (increase) in other assets.............................         3,909                (18,535) 
                                                                     -----------            -----------  
      Net cash provided by (used for) investing activities........       (71,822)             1,878,251  
                                                                     -----------            -----------  
                                                                                                         
Cash flows provided by (used for) financing activities:                                                  
  Payments of acceptances payable to a bank.......................       (19,741)               (44,165) 
  Exercise of Stock Options.......................................            --                 80,000  
                                                                     -----------            -----------  
      Net cash provided by (used for) financing activities........       (19,741)                35,835  
                                                                     -----------            -----------  
Net decrease in cash and cash equivalents.........................      (134,639)              (874,252) 
Cash and cash equivalents, beginning of period....................     2,681,271              1,688,651  
                                                                     -----------            -----------  
Cash and cash equivalents, end of period..........................   $ 2,546,632            $   814,399  
                                                                     ===========            ===========   
 
</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 consoliation.

     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>
                                             September 30,       March 31,
                                                 1997              1997
                                               --------          --------
                                                                 (audited)
<S>                                         <C>               <C>
           Raw materials....................   $198,047          $202,833
           Work-in-process..................    133,312           111,538
           Finished goods...................    332,258           391,971
                                               --------          --------
                                               $663,617          $706,342
                                               ========          ========
</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:

                                                          Estimated
               Asset Classification                      Useful Life
               --------------------                      -----------
            Machinery and Equipment ...................... 5 Years
            Furniture and Fixtures ....................... 5 Years

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

     e.   Net Loss Per Common Share:  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.

          On March 3, 1997, the Financial Accounting Standards Board issued
          Statement of Financial Accounting Standards (SFAS) No. 128, Earnings
          Per Share.  SFAS No. 128 establishes standards for computing and
          presenting earnings per share, and applies to entities with publicly
          held common stock or potential common stock.  This statement is
          effective for fiscal years ending after December 15, 1997, and early
          adoption is not permitted.  When adopted, the statement will require
          restatement of prior years' earnings per share.  The Company will
          adopt this statement for its fiscal year ending March 31, 1998.  In
          addition, the Company believes that the adoption of SFAS No. 128 will
          not have a material effect on its financial statements.

     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.



                                     - 6 -
 
<PAGE>
 
                    VISION-SCIENCES, INC., AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)
                                  (Continued)


2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)


     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.



                                     - 7 -
<PAGE>
 
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                        
Results of Operations
---------------------

Net sales for the three and six months ended September 30, 1997 decreased
$355,412 and $288,494, respectively, or 16.3% and 7.3%, respectively, versus the
comparable prior year three-month and six-month periods.  The decrease in sales
was due to a decrease in sales of medical products of $139,814 and $64,801 for
the three-month and six-month periods, respectively, or 12.1% and 3.0%,
respectively, versus the comparable prior year periods.  In addition, industrial
sales decreased $215,598 and $223,693, for the three-month and six-month
periods, respectively, or 21.0% and 12.3%, respectively, versus the comparable
prior year periods.

Sales of the Company's disposable EndoSheath technology increased $54,566 and
$165,204 in the three-month and six-month periods ended September 30, 1997,
respectively, compared to the same periods last year.  In addition, the Company
recorded initial sales of  $52,600 of medical devices to a company in the image-
guided surgery market, under an original equipment manufacturing arrangement.
These increases were offset by a decrease in sales of scopes of $210,230 and
$222,390 for the three-month and six-month periods, respectively, versus the
comparable prior year periods.

Gross profit for the three and six months ended September 30, 1997 increased to
$271,494, or 14.9% of net sales, and $630,747, or 17.1% of net sales,
respectively, versus $166,023, or 7.6% of net sales, and $262,534, or 6.6% of
net sales, for the comparable prior year three-month and six-month periods.  The
increase in gross profit was due primarily to the increase in sales of
disposable EndoSheaths, which have a higher gross profit than endoscopes, and to
reduced factory overhead expenses resulting from reductions in staffing.

Selling, general and administrative expenses for the three and six months ended
September 30, 1997 decreased $363,715, or 27%, and $961,563, or 34%,
respectively, versus the comparable prior year three-month and six-month
periods.  Selling, general and administrative expenses amounted to 55% and 51%
of net sales, respectively, in the three-month and six-month periods ended
September 30, 1997.  For the three-month and six-month periods ended September
30, 1996, these expenses amounted to 63% and 71% of net sales, respectively.
The decrease in these expenses was primarily attributable to reduced
administrative payroll costs and the change from a direct sales force to
independent sales representatives.

Research and development expenses for the three and six months ended September
30, 1997 decreased $274,756, or 50%, and $678,950, or 56%, respectively, versus
the comparable prior year three-month and six-month periods.  These expenses
amounted to 15% of net sales for the three and six months ended September 30,
1997.  In the three-month and six-month periods ended September 30, 1996, these
expenses amounted to 25% and 31% of net sales, respectively.  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.

Interest income, net, for the three and six months ended September 30, 1997,
decreased $7,214 and $31,737, respectively, versus the comparable prior year
three-month and six-month periods due to lower cash balances.  The Company had
lower cash balances during the three and six months ended September 30, 1997
versus the comparable prior year three-month and six-month periods due to its
using cash primarily to fund operating losses during the fiscal year ended March
31, 1997.


                                     - 8 -
                                        
<PAGE>
 
Results of Operations (Continued)
---------------------            

Other income (expense), net for the three and six months ended September 30,
1997 increased $53,210 and $144,057, respectively, versus the comparable prior
year three-month and six-month periods, due primarily to increased royalty
income from both new and existing agreements, including an initial license fee
of $50,000 received in the three months ended June 30, 1997.  The Company does
not expect similar improvement in royalty income in future periods, as the
agreement which was the primary source of royalties for the three and six months
ended September 30, 1997 expired July 1, 1997.

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

As of September 30, 1997, the Company had $2,546,632 in cash and cash
equivalents, and working capital of $1,611,443.  The Company also had a cash
collateralized demand line of credit with a bank for borrowings of up to
$250,000.  At September 30, 1997, there was approximately $223,000 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 decreased $134,639 in total from March 31, 1997, due primarily
to funding losses for the six-month period and the purchase of capital
equipment.

The Company's net accounts receivable decreased $881,710 to $967,697 at
September 30, 1997, from $1,849,407 at March 31, 1997.  This decrease was
primarily attributable to improved collections.  During the period ended
September 30, 1997, the Company's inventories decreased $42,725 to $663,617.
The decrease was primarily attributable to reductions in finished goods
resulting from increased sales of sheaths, and reduced purchases of raw material
for scopes. The Company's capital expenditures during the six months ended
September 30, 1997 were approximately $75,700.  The Company anticipates that
capital expenditures for the fiscal year ending March 31, 1998 will be less than
$250,000.

The Company has incurred losses since its inception and losses are expected to
continue at least through the fiscal year ending March 31, 1998.  To date, the
Company has funded the losses principally with proceeds from public and private
equity financings.  The Company will be required to obtain additional financing
or an alternative means of support; however, there can be no assurances that
such funding or financial support will be available or adequate to allow the
Company to continue as a going concern.  The Company is currently pursuing
various sources of financial support.  In the event that these or other plans
are not successful, there is substantial doubt concerning the Company's ability
to continue as a going concern.



                                     - 9 -
<PAGE>
 
                          PART II - OTHER INFORMATION


ITEM 4:  SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS

(a)  The Company held the 1997 Annual General Meeting of Shareholders (the
"Annual Meeting") on August 18, 1997.  At the Annual Meeting, the following
actions were taken:

1.   The stockholders elected Kenneth W. Anstey and Dr. Gerald B. Lichtenberger
     as Class III Directors, to serve for a three-year term. Holders of
     13,676,536 and 13,677,536 shares of Common Stock voted for Mr. Anstey and
     Dr. Lichtenberger, respectively; and

2.   The stockholders ratified the appointment of Arthur Andersen LLP as the
     Company's independent auditors for the current fiscal year by a vote of
     13,674,966 shares of Common Stock for, 17,240 shares of Common Stock
     against and 24,690 shares of Common Stock not voting.

ITEM 5: OTHER INFORMATION

(a) On October 29, 1997 the Company reported that, effective with the opening of
business on October 30, 1997, its securities would be listed on The Nasdaq
SmallCap Market (SM).  The Company was notified by The Nasdaq Stock Market,
Inc., that, as of the fiscal quarter ended June 30, 1997, it failed to meet the
net tangible assets requirement as set forth in NASD Marketplace Rule
4450(a)(3), and, as a result, the listing of the Company's securities would be
moved from the Nasdaq National Market (SM) to The Nasdaq SmallCap Market.  NASD
Marketplace Rules state that minimum net tangible assets of $4.0 million are
required for continued National Market listing.  At June 30, 1997, the Company's
net tangible assets were $3.78 million.

ITEM 6:  EXHIBITS AND REPORTS ON FORM 8-K

   (a)   Exhibits

         27.  Financial Data Schedule

   (b)   Reports on Form 8-K

         The Registrant has filed no reports on Form 8-K during the quarter
         ended September 30, 1997.



                                     - 10 -
<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: November 6, 1997                 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)



                                      - 11 -