<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, 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 June 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>
 
 
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 - 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>
 
 
                                            June 30,    March 31,
                                             1997         1997
                                           --------     ---------   
               ASSETS                                   (audited)
               ------                                   ---------
<S>                                       <C>          <C>
Current Assets:
  Cash and cash equivalents.............   $2,942,295   $2,681,271
  Accounts receivable, net of allowance
   for doubtful
     accounts of $116,000 and $127,000,     1,248,413    1,849,407
      respectively......................
  Inventories...........................      677,707      706,342
  Prepaid expenses and deposits.........      113,009      150,021
                                           ----------   ----------
     Total current assets...............    4,981,424    5,387,041
                                           ----------   ----------
 
Property and Equipment, at cost:
  Machinery and equipment...............    2,674,047    2,684,286
  Furniture and fixtures................      214,626      214,626
  Leasehold improvements................      304,563      304,563
                                           ----------   ----------
                                            3,193,236    3,203,475
  Less-Accumulated depreciation and         2,070,809    1,949,596
   amortization.........................   ----------   ----------
                                            1,122,427    1,253,879
                                           ----------   ----------
Other Assets, net of accumulated
 amortization of $65,000
  and $63,000, respectively.............      207,877      208,913
                                           ----------   ----------
     Total assets.......................   $6,311,728   $6,849,833
                                           ==========   ==========
    LIABILITIES AND STOCKHOLDERS' EQUITY
    ------------------------------------

Current Liabilities:

  Acceptances payable to a bank.........   $     47,022   $     46,251
  Accounts payable......................        656,373        499,142
  Accrued expenses......................      1,812,067      1,878,638
                                           ------------   ------------
     Total current liabilities..........      2,515,462      2,424,031
                                           ------------   ------------
                                           
Deferred Credit.........................         18,281         36,558
                                           ------------   ------------
                                           
Stockholders' Equity:                      
  Common stock, $.01 par value--           
     Authorized--25,000,000 shares         
     Issued and outstanding--14,696,909    
     shares at June 30, 1997 and at        
     March 31, 1997.....................        146,968        146,968
  Additional paid-in capital............     46,098,212     46,098,212
  Accumulated deficit...................    (42,467,195)   (41,855,936)
                                           ------------   ------------
     Total stockholders' equity.........      3,777,985      4,389,244
                                           ------------   ------------
     Total liabilities and stockholders'   
      equity............................   $  6,311,728   $  6,849,833
                                           ============   ============
 
</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, 1997 AND 1996
                                  (UNAUDITED)
<TABLE>
<CAPTION>
 
 
                                              1997          1996
                                          -----------   -----------
<S>                                       <C>           <C>
 
Net sales...............................  $ 1,864,468    $ 1,797,550
Cost of sales...........................    1,505,215      1,701,039
                                          -----------    -----------
  Gross profit..........................      359,253         96,511
Selling, general and administrative           861,109      1,458,957
 expenses...............................
Research and development expenses.......      257,925        662,119
                                          -----------    -----------
  Loss from operations..................     (759,781)    (2,024,565)
Interest income.........................       36,707         61,230
Interest expense........................           --             --
Other income (expense), net.............      111,815         20,967
                                          -----------    -----------
 
  Net loss..............................  $  (611,259)   $(1,942,368)
                                          ===========    ===========
Net loss per common share...............      $( 0.04)       $( 0.15)
                                          ===========    ===========
Weighted average shares outstanding.....   14,696,909     12,985,336
                                          ===========    ===========
 
</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               
                              ---------------------------------                                              Total
                                                     $ .01         Additional          Accumulated        Stockholders' 
                                Number of 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                                      --             --               --             (611,259)         (611,259)
                                      ----------       --------      -----------         -----------         ----------
Balance, June 30, 1997                14,696,909       $146,968      $46,098,212         $(42,467,195)       $3,777,985
                                      ==========       ========      ===========         ============        ==========
</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, 1997 AND 1996
                                  (UNAUDITED)
<TABLE>
<CAPTION>
 
 
                                            1997          1996
                                        ------------   --------------
 
Cash flows from operating activities:
<S>                                       <C>           <C>
     Net loss...........................   $ (611,259)   $(1,942,368)
     Adjustments to reconcile net loss
      to net cash used for operating
      activities:
        Depreciation and amortization...      122,798        134,462
        Loss on disposal of property           13,928             --
         and equipment..................
        Amortization of deferred credit.      (18,276)       (18,276)
        Changes in assets and
         liabilities:
           Accounts receivable..........      600,994       (121,991)
           Inventories..................       28,635        335,506
           Prepaid expenses and deposits       37,011         (3,477)
           Accounts payable.............      157,231        212,040
           Accrued expenses.............      (66,571)        39,254
                                           ------------  -----------
              Net cash provided by            
               (used for) operating
               activities...............      264,491     (1,364,850) 
                                           ------------  -----------
Cash flows provided by (used for)
 investing activities:
      Decrease in marketable securities.           --      1,765,396
      Purchase of property and equipment       (3,689)      (121,134)
      Increase in other assets..........         (548)          (552)
                                           ------------  -----------
             Net cash provided by (used        (4,237)     1,643,710
              for) investing activities.
                                           ------------  -----------
Cash flows provided by (used for)
 financing activities:
      Net proceeds from (payments of)                
       acceptances payable to a bank....          770        (65,780)
      Proceeds from exercise of stock                                
       options..........................           --         60,000  
                                           ------------  -----------
             Net cash provided by (used                               
              for) financing activities.          770         (5,780) 
 
                                           ------------  ----------- 
Net increase in cash and cash                                        
 equivalents............................      261,024        273,080 
Cash and cash equivalents, beginning of                              
 period.................................    2,681,271      1,688,651 
                                           ------------  ----------- 
Cash and cash equivalents, end of period   $2,942,295    $ 1,961,731  
                                           ============  =========== 
 
Supplemental disclosures of cash flow
 information:
               Cash paid during the                                  
                period for interest.....   $      --     $       --  
                                           ============  =========== 
</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,
                                                        1997       1997
                                                      --------  ---------
                                                                (audited)
<S>                                                   <C>       <C> 
          Raw materials..........................      $211,918  $202,833
          Work-in-process........................       183,659   111,538
          Finished goods.........................       282,130   391,971
                                                       --------  --------
                                                       $677,707  $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:

<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.   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 ended 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>
 
     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 months ended June 30, 1997 increased $66,918, or 3.7%,
versus the  comparable prior year three-month period.  The increase in sales was
primarily due to an increase in sales of medical products of $75,013, or 7.5%,
partially offset by a decline in sales of industrial products of $8,095, or 1%,
versus the comparable prior year three-month period.  The increase in sales of
medical products was due primarily to improved acceptance of the Company's
disposable EndoSheath/R/ technology in the ENT and sigmoidoscopy markets. For
the three months ended June 30, 1997, sales of ENT and sigmoidoscope sheaths
increased 21% and 18%, respectively, versus the comparable prior year three-
month period. This increase was partially offset by a decline in sales of
endoscopes and accessories.

Gross profit for the three months ended June 30, 1997 increased to $359,253, or
19% of net sales, versus $96,511, or 5% of net sales, for the comparable prior
year three-month period.  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 months ended June 30,
1997 decreased $598,000, or 41%, versus the comparable prior year three-month
period, and amounted to 46% of net sales in the current three-month period.  For
the three-month period ended June 30, 1996, selling, general and administrative
expenses amounted to 81% of net sales.  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 months ended June 30, 1997
decreased $404,194, or 61%, versus the comparable prior year three-month period,
and amounted to 14% of net sales for the current three-month period.  In the
three-month period ended June 30, 1996, these expenses amounted to 37% 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.

Interest income, net, for the three months ended June 30, 1997, decreased
$24,523 versus the comparable prior year three-month period due to lower cash
balances.  The Company had lower cash balances during the three-month period
ended June 30, 1997 versus the comparable prior year three-month period due to
its use of cash to primarily fund operating losses during the fiscal year ended
March 31, 1997.

Other income (expense) net, for the three months ended June 30, 1997, increased
$90,848 compared to the prior year three-month period due primarily to increased
royalty income from both new and existing agreements, including an initial
license fee of $50,000 from a company.  This fee is for the non-exclusive use of
certain technology of the Company in the fields of gynecology and urology.

                                     - 8 -
<PAGE>
 
Liquidity and Capital Resources
-------------------------------

As of June 30, 1997, the Company had $2,942,295 in cash and cash equivalents,
and working capital of $2,465,962.  The Company also had a cash collateralized
demand line of credit with a bank for borrowings of up to $250,000.  At June 30,
1997, 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
$261,024 in total from March 31, 1997, due primarily to an increase of $264,491
from operations, partially offset by purchases of capital equipment.

The Company's net accounts receivable decreased $600,994 to $1,248,413 at June
30, 1997, from $1,849,407 at March 31, 1997.  This decrease was primarily
attributable to improved collections.  During the period ended June 30, 1997,
the Company's inventories decreased $28,635 to $677,707.  The decrease was
primarily attributable to reductions in finished goods resulting from increased
sales. The Company's capital expenditures during the three months ended June 30,
1997 were approximately $3,700.  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 first two quarters of 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)   None

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 June 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:  August 8, 1997       By:

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


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



   

                                     - 11 -