<PAGE>   1
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-Q

              [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                 For the Quarterly Period Ended: MARCH 31, 1997

                                       OR

             [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

            For the Transition Period From __________ to __________.


                        Commission File Number:  0-27120


                            KENSEY NASH CORPORATION
             (Exact name of registrant as specified in its charter)



                DELAWARE                           36-3316412
      (State or other jurisdiction       (IRS Employer Identification No.)
     of incorporation or organization)



       MARSH CREEK CORPORATE CENTER, 55 EAST UWCHLAN AVENUE, SUITE 204,
                          EXTON, PENNSYLVANIA 19341
             (Address of principal executive offices and zip code)


      Registrant's telephone number, including area code:  (610) 524-0188


     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 requirements for the past 90 days.  Yes  X   No 
                                               ---     ---

     As of April 30, 1997, there were outstanding 7,197,938 shares of Common
Stock, par value $.001, of the registrant.






                                       1




<PAGE>   2


                            KENSEY NASH CORPORATION

                          QUARTER ENDED MARCH 31, 1997



                                     INDEX

<TABLE>
                                                                                PAGE
                                                                                ----
PART I - FINANCIAL INFORMATION
<S>                                                                             <C>
     ITEM 1.  FINANCIAL STATEMENTS
           Condensed Consolidated Balance Sheets
            as of March 31, 1997  (Unaudited) and June 30, 1996 ..............    3

           Condensed Consolidated Statements of Operations
           for the three months and the nine months ended
           March 31, 1997 and 1996 (Unaudited) ...............................    4

           Condensed Consolidated Statements of Cash Flows
            for the nine months ended March 31, 1997 and 1996 (Unaudited) ....    5

           Notes to Condensed Consolidated Financial Statements (Unaudited) ..    6

     ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
              FINANCIAL CONDITION AND RESULTS OF OPERATIONS ..................   10

     ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK .....   14


PART II - OTHER INFORMATION

     ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K ...............................   15


SIGNATURES ...................................................................   16

</TABLE>


                                       2

<PAGE>   3

ITEM 1.         FINANCIAL STATEMENTS

                        PART I - FINANCIAL INFORMATION

                           KENSEY NASH CORPORATION
                    CONDENSED CONSOLIDATED BALANCE SHEETS


<TABLE>
                                                                                        MARCH 31,         JUNE 30,
                                                                                          1997              1996
                                                                                      -----------       ------------
ASSETS                                                                                (UNAUDITED)
<S>                                                                                    <C>              <C>
Current assets:
 Cash and cash equivalents..........................................................      $2,767,251      $4,549,707
 Short-term investments.............................................................       4,427,639       7,184,244
 Trade receivables..................................................................       1,326,669         914,502
 Other receivables (including approximately $30,000 and $21,000 at March  31, 1997
  and June 30, 1996, respectively, due from employees) (Note 6).....................         244,132       1,017,811
 Inventory..........................................................................         698,332         412,843
 Prepaid expenses, accrued interest and other.......................................         315,893         259,906
                                                                                         -----------     -----------
  Total current assets..............................................................       9,779,916      14,339,013
                                                                                         -----------     -----------
Property, plant and equipment, at cost:
 Leasehold improvements.............................................................       2,726,952       1,828,106
 Machinery, furniture and equipment.................................................       2,772,230       1,878,993
                                                                                         -----------     -----------
  Total.............................................................................       5,499,182       3,707,099
 Accumulated depreciation...........................................................      (1,783,896)     (1,344,329)
                                                                                         -----------     -----------
  Net property, plant and equipment.................................................       3,715,286       2,362,770
                                                                                         -----------     -----------
Other assets:
 Restricted investments (Note 5)....................................................       2,917,539       2,917,539
 Leased property under capital leases, less accumulated amortization of $103,468 and
  $102,692 at March  31, 1997 and June 30, 1996, respectively.......................         114,056         112,047
 Noncompete agreement, less accumulated amortization of $88,351 at June 30, 1996....                          11,649
                                                                                         -----------     -----------
  Total other assets................................................................       3,031,595       3,041,235
                                                                                         -----------     -----------
 Total..............................................................................     $16,526,797     $19,743,018
                                                                                         ===========     ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
 Accounts payable...................................................................     $   381,810     $   839,437
 Accrued expenses...................................................................         257,412         400,813
 Current portion of long-term debt and line of credit (Note 4)......................          30,473       6,356,824
 Current portion of capital lease obligations.......................................          45,258          43,807
 Deferred revenue...................................................................           3,750          20,000
                                                                                         -----------     -----------
  Total current liabilities.........................................................         718,703       7,660,881
                                                                                         -----------     -----------
 Deferred revenue - royalty advance (Note 2)........................................       2,926,599
 Obligations under capital leases...................................................          81,787          81,348
 Long-term debt.....................................................................          69,527
                                                                                         -----------     -----------
  Total liabilities.................................................................       3,796,616       7,742,229
                                                                                         -----------     -----------
Commitments and Contingencies (Note 5)                                                    
Stockholders' equity:
 Preferred stock, $.001 par value, 100,000 shares authorized, no shares issued or
  outstanding at March  31, 1997 and June 30, 1996..................................
 Common stock, $.001 par value, 25,000,000 shares authorized,  7,197,938 and
  7,156,493 shares issued and outstanding at March  31, 1997 and June 30, 1996,
  respectively......................................................................           7,197           7,156
Capital in excess of par value......................................................      34,201,069      33,815,216
Accumulated deficit.................................................................     (21,478,085)    (21,821,583)
                                                                                         -----------     -----------
 Total stockholders' equity.........................................................      12,730,181      12,000,789
                                                                                         -----------     -----------
Total...............................................................................     $16,526,797     $19,743,018
                                                                                         ===========     ===========
</TABLE>

See notes to condensed consolidated financial statements.




                                       3



<PAGE>   4


                            KENSEY NASH CORPORATION
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                                  (UNAUDITED)



<TABLE>
<CAPTION>
                                                          THREE MONTHS ENDED           NINE MONTHS ENDED
                                                                MARCH 31,                  MARCH 31,
                                                       --------------------------   ------------------------
                                                          1997           1996          1997         1996
                                                       ----------    ------------   ----------    ----------
<S>                                                  <C>           <C>            <C>           <C>
Revenues:
 Net sales.........................................    $1,229,495       $104,960    $2,721,650     $  883,441
 Research and development..........................       744,885        333,755     2,106,357      1,215,783
 Milestone fees....................................                                  1,050,000
 Royalty income....................................        52,702                      189,566         70,560
                                                       ----------    -----------    ----------    -----------
  Total revenues...................................     2,027,082        438,715     6,067,573      2,169,784
                                                       ----------    -----------    ----------    -----------
Operating costs and expenses:
 Cost of products sold.............................       883,226        177,610     2,153,181      1,141,700
 Research and development..........................     1,222,902        945,054     3,417,790      2,692,305
 Selling, general and administrative...............       423,582        364,437     1,412,551      1,642,668
 Product return....................................                      573,961                      573,961
 Deferred compensation, officers and directors.....                                                 1,493,576
                                                       ----------    -----------    ----------    -----------
  Total operating costs and expenses...............     2,529,710      2,061,062     6,983,522      7,544,210
                                                       ----------    -----------    ----------    -----------
Loss from operations...............................      (502,628)    (1,622,347)     (915,949)    (5,374,426)
                                                       ----------    -----------    ----------    -----------
Other income (expense):
 Interest expense..................................        (5,640)      (160,203)     (178,491)      (804,959)
 Interest income...................................       133,733        240,574       461,069        274,249
 Insurance settlement..............................                                    968,761
 Other.............................................            91         34,230         8,108         55,514
                                                       ----------    -----------    ----------    -----------
  Total other income (expense) --net...............       128,184        114,601     1,259,447       (475,196)
                                                       ----------    -----------    ----------    -----------
Net (loss) income..................................    $ (374,444)   $(1,507,746)   $  343,498    $(5,849,622)
                                                       ==========    ===========    ==========    ===========
(Loss) earnings per common share...................    $    (0.05)   $     (0.21)   $     0.05    $     (1.06)
                                                       ==========    ===========    ==========    ===========
Weighted average common shares outstanding.........     7,197,899      7,156,493     7,326,331      5,520,605
                                                       ==========    ===========    ==========    ===========
</TABLE>

See notes to condensed consolidated financial statements.

                                       4


<PAGE>   5


                            KENSEY NASH CORPORATION
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                  (UNAUDITED)



<TABLE>
<CAPTION>
                                                                       NINE MONTHS ENDED
                                                                            MARCH 31,
                                                                    -----------------------
                                                                       1997         1996
                                                                    ----------   ----------
<S>                                                               <C>           <C>
Operating activities:
 Net income (loss)...........................................        $343,498    $(5,849,622)
 Adjustments to reconcile net loss to net cash
  used in operating activities:
   Depreciation and amortization.............................         449,207        300,369
   Loss on sale of property, plant and equipment.............                          4,175
   Deferred compensation.....................................                      1,728,110
   Interest expense not requiring cash.......................                        461,226
 Changes in assets and liabilities which provided 
  (used) cash:
   Accounts receivable.......................................         361,512       (652,786)
   Prepaid expenses, accrued interest and other 
     current assets..........................................         (55,987)      (255,507)
   Inventory.................................................        (285,489)       (72,306)
   Accounts payable and accrued expenses.....................        (601,028)       220,108
   Increase in deferred revenue accounts.....................       2,910,349
                                                                   ----------    -----------
Net cash provided (used) in operating activities.............       3,122,062     (4,116,233)
                                                                   ----------    -----------
Investing activities:
   Sale (purchase) of investments............................       2,756,605     (9,909,759)
   Additions to property, plant and equipment................      (1,792,082)      (401,726)
   Insurance proceeds on property and equipment..............                        274,839
                                                                   ----------    -----------
Net cash provided by (used in) investing activities..........         964,523    (10,036,646)
                                                                   ----------    -----------

Financing activities:
   Principal payments under capital leases...................           1,890        (42,752)
   Proceeds from long-term debt..............................         100,000
   Repayments of long-term debt..............................      (6,356,824)    (6,769,263)
   Proceeds from line of credit..............................                      1,037,327
   Net advance borrowings and repayments.....................                     (1,816,522)
   Proceeds from IPO.........................................                     29,091,296
   Proceeds from issuance of common stock....................         385,893
                                                                   ----------    -----------
Net cash (used in) provided by financing activities..........      (5,869,041)    21,500,086
                                                                   ----------    -----------

(Decrease) increase in cash and cash equivalents.............      (1,782,456)     7,347,207
Cash and cash equivalents, beginning of period...............       4,549,707          7,866
                                                                   ----------    -----------
Cash and cash equivalents, end of period.....................      $2,767,251    $ 7,355,073
                                                                   ==========    ===========
Supplemental disclosure of cash flow information:
   Cash paid during the period for interest..................      $1,535,315    $   343,733
                                                                   ==========    ===========
</TABLE>

See notes to condensed consolidated financial statements.

                                       5




<PAGE>   6


                            KENSEY NASH CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                  (UNAUDITED)

NOTE 1 --CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

      BASIS OF PRESENTATION

      The condensed consolidated balance sheet at June 30, 1996 has been
      condensed from the audited balance sheet at that date.  The condensed
      consolidated balance sheet at March 31, 1997, the condensed consolidated
      statements of operations for the three months and the nine months ended
      March 31, 1997 and 1996 and the condensed consolidated statements of cash
      flows for the nine months ended March 31, 1997 and 1996 have been
      prepared by Kensey Nash Corporation (the "Company") and have not been
      audited by the Company's Independent Auditors.  In the opinion of
      management, all adjustments (which include only normal recurring
      adjustments) necessary to present fairly the financial position, results
      of operations and cash flows at March 31, 1997 and for all periods
      presented have been made.

      Certain information and note disclosures normally included in the
      Company's annual financial statements prepared in accordance with
      generally accepted accounting principles have been condensed or omitted.
      These condensed consolidated financial statements should be read in
      conjunction with the financial statements and notes thereto included in
      the Company's June 30, 1996 consolidated financial statements filed with
      the Securities and Exchange Commission on Form 10-K.  The results of
      operations for the period ended March 31, 1997 are not necessarily
      indicative of operating results for the full year.

      NET (LOSS) INCOME PER SHARE
      For the three months and the nine months ended March 31, 1997, net (loss)
      income per share is computed using the weighted average number of shares
      of common stock outstanding.  Common equivalant shares from options are
      included in the computation (using the treasury stock method) when their
      effect is dilutive.  For the nine months ended March 31, 1996 the
      weighted average common shares outstanding have been increased by 446,437
      shares which is the number of Common Stock equivalents issued within one
      year of the Company's public offering, with exercise or issue prices
      below the initial public offering price.

      STATEMENT OF CASH FLOWS
      For purposes of reporting cash flows, all highly liquid investments with
      original maturities of three months or less are considered cash
      equivalents.

      INVESTMENTS
      Investments at March 31, 1997 and June 30, 1996 consist of short-term
      Certificates of Deposit and U.S. Treasury Bills.  Such investments have
      been classified as available for sale securities except for those pledged
      as collateral which are included in restricted investments (see Note 5).
      As of March 31, 1997 and June 30, 1996, the fair market value of all
      investments approximates original cost.

      EXPORT SALES
      Export sales from the Company's U.S. operations to unaffiliated
      customers in Europe totaled $46,975 and $594,530 for the three and nine
      months ended March 31, 1996, respectively, and $802,950 and $1,270,050
      for the three and nine months ended March 31, 1997, respectively.


      NEW ACCOUNTING PRONOUNCEMENTS

      Effective July 1, 1996, the Company formally adopted Statement of
      Financial Accounting Standards ("SFAS") No. 121. "Accounting for the
      Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
      Of".  This statement requires that long-lived assets be reviewed for
      impairment whenever events or changes in circumstances indicate that the
      carrying amount of an asset may not be recoverable.  The resultant
      impairment, if any, is measured based on the fair value of the asset.
      The adoption of SFAS No. 121 did not have a material impact on the
      Company.


                                       6




<PAGE>   7




      Effective July 1, 1996, the Company formally adopted SFAS No. 123,
      "Accounting for Stock-based Compensation Plans."  The Company will adopt
      this statement by disclosing proforma net income and net earnings per
      share amounts assuming the fair value method in the fiscal year end 1997
      financial statements, as required.  As a result, the adoption of this
      statement will not have any impact on reported results of operations and
      financial position.


      In February 1997, the Financial Accounting Standards Board ("FASB")
      issued SFAS No. 128, "Earnings per Share".  This statement will be
      effective for financial reporting purposes for both interim and year end
      financial statements ending after December 15, 1997.  The Company
      anticipates that this statement will not have a material effect on its
      financial statements


NOTE 2 -- ANGIO-SEAL PREMARKET APPROVAL

      On September 30, 1996, the Company received premarket approval for the 8
      French ("F") size Angio-Seal device (the "Angio-Seal") from the Food and
      Drug Administration (the "FDA").  Under the Company's licensing agreement
      (the "Licensing Agreement") with American Home Products ("AHP"), a
      milestone fee of $1,050,000 was earned upon receipt of FDA approval.

      The Company also received a $3,000,000 advance on future royalties,
      which, as stipulated in the Licensing Agreement, will be reduced in each
      period by 50% of royalties earned.  The remainder of royalties earned
      will be received as cash proceeds by the Company.  Accordingly, the
      advance (less 50% of royalties earned subsequent to FDA approval) has
      been recorded as deferred revenue of $2,926,599 by the Company at March
      31, 1997.


NOTE 3 -- INVENTORY

      Inventory primarily includes the cost of material utilized in the
      processing of the Company's products.  Inventory is as follows:



<TABLE>
<CAPTION>
                            MARCH 31, 1997   JUNE 30, 1996
                            --------------   --------------
          <S>              <C>             <C>
         Raw Materials          $639,094          $394,043
         Work in Process          59,238            18,800
                            --------------   --------------
         Total                  $698,332          $412,843
                            ==============   ==============
</TABLE>

NOTE 4 -- LINE OF CREDIT AND LONG TERM DEBT

      At June 30, 1996, the amount available under the Company's credit
      agreement with AHP (the "Credit Agreement") was $5,000,000.  Debt
      outstanding under the Credit Agreement included accrued interest of
      $1,356,824 at June 30, 1996.  Interest accrued at a rate of prime plus 2%
      (10.25% at June 30, 1996) and was payable at maturity.  Loans made under
      this facility matured at the earlier of receipt of premarket approval for
      the Angio-Seal from the FDA or December 31, 1996, and were therefore
      classified as a current obligation at June 30, 1996.  Under the terms of
      the Credit Agreement, AHP could offset fiscal 1997 milestones and
      advances against amounts due under the Credit Agreement at maturity.

      Upon FDA approval for the Angio-Seal on September 30, 1996, the balance
      outstanding under the Credit Agreement, including principal and interest,
      was $6,517,348. The Company repaid such amount, net of the milestone and
      royalty offset of $4,050,000, in October 1996.  There are no further
      amounts available or due under the Credit Agreement.


                                       7




<PAGE>   8


      In October 1996, the Company entered into a $100,000 revolving credit and
      term loan agreement (the "Agreement") bearing  interest at a fixed rate
      of 8.75%.  Under the terms of the Agreement the Company may borrow up to
      $100,000 for the acquisition of capital equipment.  On April 1, 1997, the
      line of credit converts to a term loan due in 36 monthly installments of
      principal and interest.  The Agreement is collateralized by a first
      security interest in the equipment purchased with the proceeds.  At March
      31, 1997, the Company had borrowed $100,000 under the Agreement.


NOTE 5 -- COMMITMENTS AND CONTINGENCIES

      The Company entered into an agreement whereby the Company pledged
      $2,917,539 in investments as collateral to secure certain bank loans to
      employees which were used by such employees for the payment of taxes
      incurred by such employees as the result of the receipt of Common Stock
      in settlement of the Employee Stock Rights.  In exchange for the Company
      pledging collateral for such loans, each affected employee has pledged
      their Common Stock as collateral to the Company.  The balance outstanding
      on such employee loans was $2,183,015 at March 31, 1997.

NOTE 6 -- MAJOR DAMAGE TO FACILITY

      On January 8, 1996, the Company's facility sustained significant damage
      from a roof collapse resulting from a major snowstorm.  The production of
      the Company's products was halted until the destroyed facilities could be
      reconstructed.  Construction was completed in late March 1996 and
      production resumed at such time.  The Company maintains insurance for
      both property damage and business interruption.  The policy providing the
      coverage is subject to a $1,000 deductible.

      Under the property damage portion of the policy, the Company recovered
      $1,186,619 as final settlement for property damage in fiscal year 1996.
      Of this amount, $500,000 was received during fiscal year 1996 and  the
      remaining $686,619 recorded as a component of other receivables at June
      30, 1996 and received in July 1996.

      Under the business interruption portion of the policy, the Company
      recovered $1,309,882 as final settlement for loss of earnings in December
      1996.  Of this amount, $287,742 representing incurred continuing fixed
      payroll costs and related benefits, which were covered expenses under the
      policy, had been recorded as a component of other receivables at June 30,
      1996.  The related cost of products sold, selling, general and
      administrative expense and research and development expense was offset in
      the consolidated statements of operations at June 30, 1996.  The
      remainder of the settlement, net of related fees, has been recorded as a
      separate component of other income as of March 31, 1997.

NOTE 7 -- INCOME TAXES

      As of June 30, 1996, the Company had net operating loss carryforwards
      for federal and state tax purposes totaling $17.2 and $1 million,
      respectively.   As such, no provision has been made for income taxes for
      the nine months ended March 31, 1997.


                                       8




<PAGE>   9



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

         OVERVIEW


     The Company designs, develops and manufactures a proprietary line of
absorbable medical devices for the sealing of arterial punctures created during
diagnostic and therapeutic cardiovascular procedures such as angiography,
angioplasty, atherectomy, placement of stents and other interventional
procedures.  The Company's proprietary principal product, the Angio-Seal, has
been designed to provide a safe, effective and rapid method of sealing arterial
punctures.  The Company's goal is to replace the current standard of care,
manual compression, with the Angio-Seal by introducing a device which allows
for faster treatment, reduced procedure cost and enhanced patient comfort.  The
time required for manual pressure generally ranges from 10 to 30 minutes and in
some instances several hours.  The Angio-Seal is designed to take a trained
physician less than two minutes to place and eliminate the need for manual
pressure following the procedure.  The Company is developing other sizes of the
Angio-Seal, including 6F and 10F sizes (together with Angio-Seal, the
"Angio-Seal Product Line"), to address broader market applications.  In
addition to the Angio-Seal Product Line, the Company manufactures its
proprietary collagen for use by third parties, and is developing additional
products related to its puncture closure technology. The Company is also
developing a rotary catheter for application in opening occluded bypass grafts.


     The Company has a strategic relationship with AHP whereby AHP has the
rights to manufacture and market the Angio-Seal Product Line worldwide.  The 8F
Angio-Seal was approved for sale in Europe (CE Mark) in September 1995 and in
the United States in September 1996.  The Angio-Seal is also approved for sale
in Canada and Australia.


     The Company announced on January 27, 1997 a voluntary recall by
Sherwood-Davis & Geck, a subsidiary of AHP, of six Angio-Seal lots distributed
in the United States and three Angio-Seal lots distributed in Europe.  This
action was taken because the companies had identified a potential for a very
low incidence of damage to a component of the Angio-Seal device during the
assembly process at the manufacturing facility of Sherwood-Davis & Geck's
affiliate, Quinton Instrument Company.  This potential damage could have
resulted in an unexpected break of the suture during product use.  Modification
of the manufacturing process was implemented to correct the problem, a PMA
supplement was filed with the FDA and approved, and the product was
reintroduced to the U.S. market on April 28, 1997.

THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS ENDED MARCH 31, 1996

     Revenues for these periods consisted of net sales, research and
development revenue and royalty income.  Revenues increased 362% to $2,027,000
in the three months ended March 31, 1997 from $439,000 in the three months
ended March 31, 1996.  Net sales of products increased 1,071% to $1,229,000
from $105,000 for the three months ended March 31, 1997 and 1996, respectively.
Research and development revenues increased 123% to $745,000 from $334,000 for
the three months ended March 31, 1997 and 1996, respectively.  The increase in
net sales is mainly attributable to the increased sale of subassemblies to
AHP's facility in Tullamore, Ireland to meet demand for the Angio-Seal in the   
European market and increased Angio-Seal component sales to AHP's Bothell,
Washington facility for production intended for the U.S. market.  Revenues for
the three months ended March 31, 1996 were significantly impacted by halted
production resulting from the roof collapse (see Note 6 to the Condensed
Consolidated Financial Statements).  The increase in research and development
revenues relates to increased activity in contract research and development
revenue from AHP for the clinical trial program and for additional sizes of and
product enhancements to the Angio-Seal Product Line as well as assistance to
AHP in resolving the recent product recall issue.  Royalty income was $53,000
for the three months ended March 31, 1997. There was no royalty income

                                       9




<PAGE>   10

in the three months ended March 31, 1996.   Royalty income for the three months
ended March 31, 1997 reflects units sold in the European market.  Although FDA
approval was received on September 30, 1996, royalties on U.S. sales for the
three months ended March 31, 1997 were insignificant due to the product recall  
issue (discussed above in the overview).   As the Company and AHP increase
production and continue to introduce the Angio-Seal in Europe and in the United
States, the Company expects royalty income to become a significant source of
revenue.  Royalty rates are based on volume of units sold and are comparable in
both the domestic and foreign licensing agreements with AHP.

     Cost of products sold increased 396% to $883,000 in the three months ended
March 31, 1997 from $178,000 in the three months ended March  31, 1996.  This
increase reflects greater net sales of products offset by manufacturing
efficiencies realized as production levels rise.  Cost of products sold was
affected in the three months ended March 31, 1996 by the lack of production
related to the roof collapse.

     Research and development expense, including regulatory and clinical
expense, increased 29% to $1,223,000 in the three months ended March 31, 1997
from $945,000 in the three months ended March 31, 1996.  This increase was
primarily due to an increase in personnel costs and outside expenses in
conjunction with the development of the Angio-Seal Product Line and rotary
technology.  The Company expects research and development expense to continue
at recent levels as it develops additional sizes of the Angio-Seal,
investigates and develops new products, including the rotary catheter, conducts
clinical trials, seeks regulatory approval for its products and implements
manufacturing improvements related to the collagen business.

     Selling, general and administrative expense increased 16% to $424,000
in the three months ended March 31, 1997 from $364,000 in the three months
ended March 31, 1996.  This increase was primarily due to additional personnel
costs and investor relation and regulatory reporting expenses incurred as the
Company evaluated its requirements in relation to being a publicly held
company.

     In the three months ended March 31, 1996 a one time charge of $574,000 was
recognized when, as a result of internal routine testing, all remaining
inventory at AHP's Tullamore, Ireland facility was withdrawn.  Corrective
action was taken and the issue was successfully resolved.

     Interest expense significantly decreased to $6,000 in the three months
ended March 31, 1997 from $160,000 in the three months ended March 31, 1996.
This decrease was due to the repayment of certain investor notes with the
proceeds of the IPO in December 1995 as well as the repayment of the Credit
Agreement in October 1996 following receipt of FDA approval. Interest income
decreased to $134,000 in the three months ended March 31, 1997 from $241,000 in
the three months ended March 31, 1996.  This is attributable to a  portion of
outstanding debt being repaid with cash on hand instead of bank financing, thus
reducing investment levels while also reducing outstanding debt.

     Other income for the three months ended March 31, 1996 represents the last
installment of a government grant for research and development.

NINE MONTHS ENDED MARCH 31, 1997 COMPARED TO NINE MONTHS ENDED MARCH 31, 1996

     Revenues for these periods consisted of net sales, research and
development revenue, milestone fees and royalty income.  Revenues increased
180% to $6,068,000 in the nine months ended March 31, 1997 from $2,170,000 in
the nine months ended March 31, 1996.  Net sales of products increased 208% to
$2,722,000 from $883,000 for the nine months ended March 31, 1997 and 1996,
respectively.  Research and development revenues increased 73% to $2,106,000
from $1,216,000 for the nine months ended March 31, 1997 and 1996,
respectively.  The increase in net sales was mainly attributable to the
increased sales of subassemblies to AHP to meet demand for the Angio-Seal in
the European market, increased Angio-Seal component sales to AHP's Bothell,
Washington facility for production intended for

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<PAGE>   11

the U.S. market and increased clinical and marketing device requirements.  The
increase in research and development revenues related to increased activity in
contract research and development from AHP for the clinical trial program and
for additional sizes of and product enhancements to the Angio-Seal Product
Line.  The $1.05 million milestone fee in the nine months ended March 31, 1997
represents the final milestone under the License Agreement with AHP which was
earned by the Company upon receipt of FDA premarket approval.  Royalty income
increased 168% to $190,000 from $71,000 in the nine months ended March 31, 1997
and 1996, respectively.  This increase reflects initial Angio-Seal sales in the
U.S. market, following FDA approval, as well as a greater number of units sold
in the European market versus the same period a year earlier.   

     Cost of products sold increased 89% to $2,153,000 in the nine months ended
March 31, 1997 from $1,142,000 in the nine months ended March 31, 1996.  This
increase reflects greater net sales of products offset by manufacturing
efficiencies realized as production levels rise.

     Research and development expense, including regulatory and clinical
expense, increased 27% to $3,418,000 in the nine months ended March 31, 1997
from $2,692,000 in the nine months ended March 31, 1996.  This increase was
primarily due to an increase in personnel costs and outside expenses in
conjunction with the development of the Angio-Seal Product Line and rotary
technology.  

     Selling, general and administrative expense decreased 14% to $1,413,000 in
the nine months ended March 31, 1997 from $1,643,000 in the nine months ended
March 31, 1996.  This decrease was primarily due to the recording of deferred
compensation for employees other than officers and directors of $589,000 in the
nine months ended March 31, 1996 offset by personnel costs and investor
relation and regulatory reporting expenses, incurred in relation to being a
publicly held company, in the nine months ended March 31, 1997.  Since the
Company's IPO in December 1995, no deferred compensation expense has been
incurred.

     During the nine months ended March 31, 1996 a one time charge of $574,000
was recognized when, as a result of internal routine testing, all remaining
inventory at AHP's Tullamore, Ireland facility was withdrawn.  Corrective
action was taken and the issue successfully resolved.

     Deferred compensation expense, officers and directors, of $1,494,000 in
the nine months ended March 31, 1996 resulted from the recording of deferred
compensation prior to the IPO.

     Interest expense decreased 78% to $178,000 in the nine months ended March
31, 1997 from $805,000 in the nine months ended March 31, 1996.  This decrease
was due to the repayment of the  Credit Agreement in October 1996 in connection
with receipt of  FDA approval of the Angio-Seal as well as the repayment of
certain investor notes with the proceeds of the IPO in December 1995.
Interest income increased to $461,000 in the nine months ended March 31, 1997
from $274,000 in the nine months ended March 31, 1996.  The nine months ended
March 31, 1997 reflects interest earned on the cash equivalents and investments
purchased with the proceeds of the IPO.  In comparison, the nine months ended
March 31, 1996 reflects only three months of interest earned on investments
purchased with the IPO proceeds.

     During the nine months ended March 31, 1997, the Company received
$1,310,000 in final settlement of the business interruption portion of their
insurance claim of which $969,000 was recorded as other income.

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<PAGE>   12



     LIQUIDITY AND CAPITAL RESOURCES

     The Company has financed its operations since inception through the sale
of equity securities, licensing of technology, research and development
arrangements, debt and product sales.  On December 13, 1995, the Company
completed the IPO, issuing 2.7 million shares of Common Stock at $12.00 per
share, resulting in approximately $29.1 million in net proceeds to the Company.
The proceeds have been and are being used primarily for research and
development, including clinical trials; expansion of the Company's
manufacturing capabilities; repayment of certain indebtedness; and working
capital and general corporate purposes.

     Net cash provided by the Company's operating activities during the nine
months ended March 31, 1997 was $3,122,000 compared to a use of $4,116,000 for
the nine months ended March 31, 1996.  This fluctuation was primarily due to
the recording of deferred revenue in conjunction with the receipt of $3,000,000
in advance royalties from AHP in October 1996 as well as net income of
$343,000 for the period ended March 31, 1997 compared to a net loss of
$5,850,000 for the period ending March 31, 1996.  The net loss for the period
ended March 31, 1996 was significantly offset by non-cash adjustments for
deferred compensation and interest expense.  Changes in asset and liability
balances for the nine months ended March 31, 1997 (excluding the deferred
revenue change) resulted in a $132,000 use of cash in operating activities
offset by a $449,000 non-cash adjustment for depreciation.

     Capital expenditures were $1,792,000 for the nine months ended March 31,
1997, $1,041,000 of which related to reconstruction and expansion of the
Company's facility.  The remaining capital expenditures related to the
expansion of the Company's manufacturing capabilities.

     The Company's cash, cash equivalents and short-term investments were
$7,195,000 at March 31, 1997.  In addition, the Company has pledged $2,918,000
in investments (not included in the $7,195,000) as collateral to secure bank
loans made to employees for the payment of taxes incurred by such employees as
a result of their receipt of Common Stock in settlement of the Employee Stock
Rights at the time of the IPO.  In exchange for the Company's pledging this
collateral, the employees have pledged their Common Stock as collateral to the
Company (see Note 5 to the Condensed Consolidated Financial Statements).

     The Company repaid $6,517,000 of debt and accrued interest outstanding
under the AHP Credit Agreement in October 1996.  The debt matured upon FDA
premarket approval of the Angio-Seal which was received on September 30, 1996.
The FDA approval required AHP to pay the Company a total of $4,050,000 (a
$1,050,000 milestone fee earned upon approval and a $3,000,000 royalty
advance).  The Company used the milestone fee, royalty advance and cash on hand
to repay the Credit Agreement balance.

     The Company anticipates that its results of operations will fluctuate for
the foreseeable future due to a number of factors.  Such factors include AHP's
performance in the marketing, manufacturing and distribution of the Angio-Seal
Product Line, the timing of future regulatory approvals in the United States
and in countries outside of Europe including Japan, the results of ongoing and
planned clinical trials for the Angio-Seal and other products, the acceptance
of the Company's products in the marketplace and competitive products generally
and in particular those designed for the sealing of arterial site punctures.

     The Company plans to continue to expend substantial resources in funding
clinical trials to gain regulatory approvals, make additional marketing claims
and continue to expand research and development activities.

     The Company believes the IPO proceeds combined with cash generated from
operations will be sufficient to meet the Company's operating and capital
requirements for at least the next twelve months.


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<PAGE>   13


     Statements contained in this Form 10-Q that are not historical facts are
forward-looking statements that are made pursuant to the Safe Harbor provisions
of the Private Securities Litigation Reform Act of 1995.  The Company cautions
that a number of important factors could cause the Company's actual results for
fiscal 1997 and beyond to differ materially from those in any forward-looking
statements made by, or on behalf of, the Company.  These important factors
include, without limitation, the time, effort and priority level that AHP
attaches to the Angio-Seal and AHP's ability to successfully market and
manufacture the Angio-Seal, the Company's ability to manufacture Angio-Seal
components, the results of ongoing clinical trials and timing of additional
regulatory approvals, announcements of technological innovations or the
introduction of new products by the Company or its competitors, competition by
rival developers of puncture closure devices, general business conditions in
the healthcare industry and general economic conditions. Results of operations
in any past period should not be considered indicative of the results to be
expected for future periods.  Fluctuations in operating results may also result
in fluctuations in the price of the Common Stock.  A more complete description
of these risks, uncertainties and assumptions are included in the Company's
filings with the Securities and Exchange Commission.  The Company undertakes no
obligation to update or revise these forward-looking statements to reflect new
events or uncertainties.


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
NOT APPLICABLE.



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<PAGE>   14


                          PART II - OTHER INFORMATION


ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

     A. Exhibits.

        None

     B. Reports on Form 8-K.

        None

     C. Financial Data Schedule


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<PAGE>   15


                                   SIGNATURES

     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.

                             KENSEY NASH CORPORATION



Date:  May 15, 1997          By:  /s/ Joseph W. Kaufmann
                                  --------------------------------------
                                  Joseph W. Kaufmann
                                  President, Chief Executive Officer and
                                  Chief Financial Officer






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