<PAGE>
                                  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: DECEMBER 31, 2002

                                       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, 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
                                                    ---    ---
         Indicate by check mark whether the registrant is an accelerated filer
(as defined in rule 12b-2 of the Exchange Act). Yes X   No
                                                    ---    ---
           As of January 31, 2003, there were outstanding 10,821,751 shares of
Common Stock, par value $.001, of the registrant.




                                       1
<PAGE>


                             KENSEY NASH CORPORATION
                         QUARTER ENDED DECEMBER 31, 2002


                                      INDEX

<TABLE>
<CAPTION>
                                                                                                                       PAGE
<S>                                                                                                                    <C>
PART I - FINANCIAL INFORMATION

           ITEM 1.   FINANCIAL STATEMENTS
                               Consolidated Balance Sheets
                                 as of December 31, 2002 (Unaudited) and June 30, 2002..............................     3

                               Consolidated Statements of Operations
                                 for the three and six months ended December 31, 2002
                                 and 2001 (Unaudited)...............................................................     4

                               Consolidated Statements of Stockholders' Equity as of
                                 December 31, 2002 (Unaudited) and June 30, 2002....................................     5

                               Consolidated Statements of Cash Flows
                                 for the six months ended December 31, 2002 and 2001 (Unaudited)....................     6

                               Condensed Notes to Consolidated Financial Statements (Unaudited).....................     7

           ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                               FINANCIAL CONDITION AND RESULTS OF OPERATIONS........................................    11

           ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK....................................    18

           ITEM 4.    CONTROLS AND PROCEDURES.......................................................................    18


PART II - OTHER INFORMATION

           ITEM 1.   LEGAL PROCEEDINGS    ..........................................................................    19

           ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............................................    19

           ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K...............................................................    20


SIGNATURES                                ..........................................................................    20

CERTIFICATIONS                            ..........................................................................    21
</TABLE>



                                       2
<PAGE>



PART I - FINANCIAL INFORMATION

ITEM 1.      FINANCIAL STATEMENTS
KENSEY NASH CORPORATION
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                                   DECEMBER 31,
ASSETS                                                                                                 2002              JUNE 30,
CURRENT ASSETS:                                                                                    (UNAUDITED)            2002
                                                                                                   ------------        ------------
<S>                                                                                                <C>                 <C>
  Cash and cash equivalents                                                                        $ 25,153,615        $  3,632,395
  Investments                                                                                        11,355,065          28,241,868
  Trade receivables, net of allowance for doubtful accounts of $152,873 and
     $42,500 at December 31, 2002 and June 30, 2002, respectively                                     3,381,950           3,331,046
  Royalties receivable                                                                                3,886,300           3,370,997
  Officer loans                                                                                       1,936,590           1,882,369
  Other receivables (including approximately $47,000 and $45,000 at                                     193,317             274,620
     December 31, 2002 and June 30, 2002, respectively, due from employees)
  Inventory                                                                                           3,308,264           2,518,924
  Deferred tax asset, current portion                                                                         -           1,313,517
  Prepaid expenses and other                                                                          1,764,909           1,160,834
                                                                                                   ------------        ------------

         Total current assets                                                                        50,980,010          45,726,570
                                                                                                   ------------        ------------

PROPERTY, PLANT AND EQUIPMENT, AT COST:
  Leasehold improvements                                                                              6,709,785           6,116,775
  Machinery, furniture and equipment                                                                 13,040,326          11,229,083
  Construction in progress                                                                              847,087           1,950,427
                                                                                                   ------------        ------------
         Total property, plant and equipment                                                         20,597,198          19,296,285
  Accumulated depreciation                                                                           (9,264,529)         (7,985,357)
                                                                                                   ------------        ------------
         Net property, plant and equipment                                                           11,332,669          11,310,928
                                                                                                   ------------        ------------

OTHER ASSETS:
  Restricted investments                                                                              1,726,780           2,113,072
  Deferred tax asset, non-current portion                                                             1,487,517           1,608,760
  Acquired patents, net of accumulated amortization of $1,291,205 and $1,159,692
     at December 31, 2002 and June 30, 2002, respectively                                             2,805,161           2,936,674
  Goodwill, net of accumulated amortization of $100,037 at December 31, 2002
     and June 30, 2002                                                                                3,284,303           3,284,303
                                                                                                   ------------        ------------
         Total other assets                                                                           9,303,761           9,942,809
                                                                                                   ------------        ------------
TOTAL                                                                                              $ 71,616,440        $ 66,980,307
                                                                                                   ============        ============

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Accounts payable                                                                                 $  1,721,177        $  1,726,370
  Accrued expenses                                                                                    2,080,236           1,084,475
  Current portion of debt                                                                             1,015,955             978,902
  Deferred revenue                                                                                      292,985             293,035
                                                                                                   ------------        ------------
         Total current liabilities                                                                    5,110,353           4,082,782
                                                                                                   ------------        ------------
LONG TERM PORTION OF DEBT                                                                               813,072           1,330,484
                                                                                                   ------------        ------------
         Total liabilities                                                                            5,923,425           5,413,266
                                                                                                   ------------        ------------

STOCKHOLDERS' EQUITY:
  Preferred stock, $.001 par value, 100,000 shares authorized, no shares issued
     or outstanding at December 31, 2002 and June 30, 2002                                                    -                   -
  Common stock, $.001 par value, 25,000,000 shares authorized, 10,771,298 and
     10,748,455 shares issued and outstanding at December 31, 2002 and June 30,
     2002, respectively                                                                                  10,771              10,748
  Capital in excess of par value                                                                     67,916,651          67,289,436
  Accumulated deficit                                                                                (2,342,500)         (5,585,885)
  Accumulated other comprehensive income (loss)                                                         108,093            (147,258)
                                                                                                   ------------        ------------
         Total stockholders' equity                                                                  65,693,015          61,567,041
                                                                                                   ------------        ------------
TOTAL                                                                                              $ 71,616,440        $ 66,980,307
                                                                                                   ============        ============
</TABLE>

See notes to consolidated financial statements.


                                       3
<PAGE>

KENSEY NASH CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)


<TABLE>
<CAPTION>
                                                                       THREE MONTHS ENDED                   SIX MONTHS ENDED
                                                                          DECEMBER 31,                         DECEMBER 31,
                                                              -------------------------------       -------------------------------
                                                                  2002                2001               2002                2001
<S>                                                           <C>                <C>                <C>                <C>
REVENUES:
  Net sales                                                   $  6,403,114       $  4,257,699       $ 11,515,631       $  8,850,878
  Research and development                                         207,940            175,299            364,632            280,733
  Royalty income                                                 3,935,182          2,358,267          7,554,492          4,570,100
                                                              ------------       ------------       ------------       ------------
           Total revenues                                       10,546,236          6,791,265         19,434,755         13,701,711
                                                              ------------       ------------       ------------       ------------

OPERATING COSTS AND EXPENSES:
  Cost of products sold                                          2,932,136          2,029,582          5,320,590          4,165,209
  Research and development                                       3,463,961          2,366,136          6,554,716          5,110,663
  Selling, general and administrative                            1,634,708            995,906          3,205,181          1,906,334
                                                              ------------       ------------       ------------       ------------
           Total operating costs and expenses                    8,030,805          5,391,624         15,080,487         11,182,206
                                                              ------------       ------------       ------------       ------------

INCOME FROM OPERATIONS                                           2,515,431          1,399,641          4,354,268          2,519,505
                                                              ------------       ------------       ------------       ------------

OTHER INCOME:
  Interest income                                                  266,968            478,985            687,852            955,070
  Interest expense                                                 (42,453)           (59,610)           (85,755)          (120,234)
  Other                                                                500             (2,275)               391             (6,481)
                                                              ------------       ------------       ------------       ------------
           Total other income - net                                225,015            417,100            602,488            828,355
                                                              ------------       ------------       ------------       ------------
INCOME BEFORE INCOME TAXES                                       2,740,446          1,816,741          4,956,756          3,347,860
Income tax expense                                                (947,092)          (626,776)        (1,713,371)        (1,155,012)
                                                              ------------       ------------       ------------       ------------
NET INCOME                                                    $  1,793,354       $  1,189,965       $  3,243,385       $  2,192,848
                                                              ============       ============       ============       ============

BASIC EARNINGS PER SHARE                                      $       0.17       $       0.11       $       0.30       $       0.21
                                                              ============       ============       ============       ============
DILUTED EARNINGS PER SHARE                                    $       0.16       $       0.11       $       0.29       $       0.20
                                                              ============       ============       ============       ============

WEIGHTED AVERAGE COMMON
  SHARES OUTSTANDING                                            10,762,939         10,664,773         10,756,554         10,601,932
                                                              ============       ============       ============       ============

DILUTED WEIGHTED AVERAGE COMMON
  SHARES OUTSTANDING                                            11,403,487         11,322,039         11,338,233         11,207,860
                                                              ============       ============       ============       ============
</TABLE>


See notes to consolidated financial statements.

                                       4
<PAGE>



KENSEY NASH CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                             CAPITAL                          ACCUMULATED
                                                       COMMON STOCK         IN EXCESS                            OTHER
                                                ------------------------     OF PAR       ACCUMULATED        COMPREHENSIVE
                                                   SHARES      AMOUNT        VALUE          DEFICIT         (LOSS) / INCOME

<S>                                             <C>           <C>         <C>            <C>                 <C>
BALANCE, JUNE 30, 2001                            10,509,431  $  10,509   $ 63,974,745   $ (10,196,713)      $  (227,414)

   Exercise of stock options                         239,024        239      3,314,691
   Net income                                                                                4,610,828
   Foreign currency translation adjustment                                                                        39,379
   Change in unrealized gain on investments                                                                       40,777

   Comprehensive income
                                                  ----------  ---------   ------------   -------------       -----------
BALANCE, JUNE 30, 2002                            10,748,455  $  10,748   $ 67,289,436   $  (5,585,885)      $  (147,258)
                                                  ----------  ---------   ------------   -------------       -----------

   Exercise of stock options                          22,843         23        251,665
   Stock options granted to non-employee                                       375,550
   Net income                                                                                3,243,385
   Foreign currency translation adjustment                                                                         4,507
   Change in unrealized gain on investments                                                                      250,844

   Comprehensive income
                                                  ----------  ---------   ------------   -------------       -----------
BALANCE, DECEMBER 31, 2002  (Unaudited)           10,771,298  $  10,771   $ 67,916,651   $  (2,342,500)      $   108,093
                                                  ==========  =========   ============   =============       ===========

<CAPTION>
                                                   COMPREHENSIVE
                                                        INCOME          TOTAL

<S>                                                <C>              <C>
BALANCE, JUNE 30, 2001                                              $  53,561,127

   Exercise of stock options                                            3,314,930
   Net income                                      $  4,610,828         4,610,828
   Foreign currency translation adjustment               39,379            39,379
   Change in unrealized gain on investments              40,777            40,777
                                                   ------------
   Comprehensive income                            $  4,690,984
                                                   ============     -------------
BALANCE, JUNE 30, 2002                                              $  61,567,041
                                                                    -------------

   Exercise of stock options                                              251,688
   Stock options granted to non-employee                                  375,550
   Net income                                         3,243,385         3,243,385
   Foreign currency translation adjustment                4,507             4,507
   Change in unrealized gain on investments             250,844           250,844
                                                   ------------
   Comprehensive income                            $  3,498,736
                                                   ============     -------------
BALANCE, DECEMBER 31, 2002  (Unaudited)                             $  65,693,015
                                                                    =============
</TABLE>


See notes to consolidated financial statements.


                                       5
<PAGE>



KENSEY NASH CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                                SIX MONTHS ENDED
                                                                                                  DECEMBER 31,
                                                                                    -----------------------------------------
                                                                                           2002                   2001
<S>                                                                                    <C>                     <C>
OPERATING ACTIVITIES:
  Net income                                                                           $  3,243,385            $  2,192,848
  Adjustments to reconcile net income to net cash provided by
       operating activities:
       Depreciation and amortization                                                      1,429,463               1,054,828
  Changes in assets and liabilities which (used) provided cash:
       Accounts receivable                                                                 (539,125)              1,796,007
       Deferred tax asset                                                                 1,434,760               1,174,584
       Prepaid expenses and other current assets                                           (247,303)               (538,155)
       Inventory                                                                           (789,340)               (871,472)
       Accounts payable and accrued expenses                                                990,568                 (79,584)
       Deferred revenue                                                                         (50)                108,842
                                                                                       ------------            ------------
        Net cash provided by operating activities                                         5,522,358               4,837,898
                                                                                       ------------            ------------

INVESTING ACTIVITIES:
  Additions to property, plant and equipment                                             (1,300,913)             (1,644,578)
  Redemption of investments                                                              17,313,708               9,535,000
  Purchase of investments                                                                  (176,061)            (10,930,742)
                                                                                       ------------            ------------
        Net cash provided by (used in) investing activities                              15,836,734              (3,040,320)
                                                                                       ------------            ------------

FINANCING ACTIVITIES:
  Principal payments under capital leases                                                         -                  (1,937)
  Repayments of long term debt                                                             (480,359)               (445,960)
  Sale of restricted investments                                                            386,292                       -
  Proceeds from exercise of stock options                                                   251,688               2,049,739
                                                                                       ------------            ------------
        Net cash provided by financing activities                                           157,621               1,601,842
                                                                                       ------------            ------------

 EFFECT OF EXCHANGE RATE ON CASH                                                               4,507                       -
 INCREASE IN CASH AND CASH EQUIVALENTS                                                   21,516,713               3,399,420
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                            3,632,395               2,841,963
                                                                                       ------------            ------------

CASH AND CASH EQUIVALENTS, END OF PERIOD                                               $ 25,153,615            $  6,241,383
                                                                                       ============            ============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  Cash paid for interest                                                               $     82,140            $    120,234
                                                                                       ============            ============
  Cash paid for income taxes                                                           $                       $     80,000
                                                                                       ============            ============

SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITY:
  Increase in prepaid expense related to
        non-employee stock options  (See Note 8)                                       $    375,550            $
                                                                                       ============            ============
</TABLE>

See notes to consolidated financial statements.


                                       6
<PAGE>



                             KENSEY NASH CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

NOTE 1  -- CONSOLIDATED FINANCIAL STATEMENTS

     BASIS OF PRESENTATION

     The consolidated balance sheet as of December 31, 2002, consolidated
     statements of operations for the three and six months ended December 31,
     2002 and 2001, consolidated statement of stockholders' equity as of
     December 31, 2002 and consolidated statements of cash flows for the six
     months ended December 31, 2002 and 2001 of Kensey Nash Corporation (the
     Company) 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
     at December 31, 2002 and June 30, 2002, results of operations for the three
     and six months months ended December 31, 2002 and 2001, stockholders'
     equity as of December 31, 2002 and June 30, 2002 and cash flows for the six
     months ended December 31, 2002 and 2001 have been made.

     Certain information and note disclosures normally included in the Company's
     annual financial statements, prepared in accordance with accounting
     principles generally accepted in the United States of America, have been
     condensed or omitted. These consolidated financial statements should be
     read in conjunction with the financial statements and notes thereto
     included in the Company's consolidated financial statements filed with the
     Securities and Exchange Commission in the Company's Annual report on Form
     10-K in the fiscal year ended June 30, 2002. The results of operations for
     the three and six month periods ended December 31, 2002 are not necessarily
     indicative of operating results for the full year.

     PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
     The consolidated financial statements include the accounts of Kensey Nash
     Corporation, Kensey Nash Holding Company and Kensey Nash GmbH. All
     intercompany transactions and balances have been eliminated. Kensey Nash
     Holding Company, incorporated in Delaware in January 1992, was formed to
     hold title to certain Company patents and has no operations. Kensey Nash
     GmbH, incorporated in Germany in January 2002, was formed for the purpose
     of European sales and marketing of the TriActiv(TM) Balloon Protected
     Active Flush Extraction System, which was commercially launched in Europe
     in May 2002.

     The preparation of the consolidated financial statements in conformity with
     accounting principles generally accepted in the United States of America
     necessarily requires management to make estimates and assumptions. These
     estimates and assumptions, which may differ from actual results, will
     affect the reported amounts of assets and liabilities and disclosure of
     contingent assets and liabilities at the dates of the financial statements,
     as well as the reported amounts of revenue and expense during the periods.

     CASH, CASH EQUIVALENTS AND INVESTMENTS
     Cash and cash equivalents represent cash in banks and short-term
     investments having an original maturity of less than three months. Our
     investment portfolio consists primarily of high quality U.S. government or
     corporate securities and certificates of deposit with maturities of one to
     fifteen years. The portfolio includes only available for sale marketable
     securities with active secondary or resale markets to ensure portfolio
     liquidity. See Comprehensive Income below for the treatment of unrealized
     holding gains and losses.

     EXPORT SALES
     There were $20,440 and $186,996 in export sales from the Company's U.S.
     operations to unaffiliated customers in Europe in the three and six months
     ended December 31, 2002, respectively. Export sales for three and six
     months ended December 31, 2001 were $104,140 and $263,912, respectively.

     REVENUE RECOGNITION
     The Company recognizes revenue under the provisions of Staff Accounting
     Bulletin (SAB) No. 101, Revenue Recognition in Financial Statements (SAB
     101). Accordingly, sales revenue is recognized when the related product is
     shipped. All product is shipped F.O.B. shipping point. Revenue under
     research and development



                                       7
<PAGE>

     contracts is recognized as the related costs are incurred. Advance payments
     received for products or services are recorded as deferred revenue and are
     recognized when the product is shipped or services are performed.

     The Company receives a 9% royalty on every Angio-Seal(TM) unit sold by St.
     Jude Medical, its licensee. The Company recognizes the royalty revenue, in
     accordance with the Licensing Agreement between the Company and St. Jude
     Medical, at the end of each month when St. Jude Medical advises the Company
     of the total Angio-Seal sales dollars for the month. Royalty payments are
     received within 45 days of the end of each calendar quarter.

     EARNINGS PER SHARE
     Earnings per share are calculated in accordance with SFAS No. 128, Earnings
     per Share, which requires the Company to report both basic and diluted
     earnings per share (EPS). Basic and diluted EPS are computed using the
     weighted average number of shares of common stock outstanding, with common
     equivalent shares from options included in the diluted computation when
     their effect is dilutive.

     STOCK-BASED COMPENSATION
     Stock-based compensation cost is accounted for under SFAS No. 123,
     Accounting for Stock-Based Compensation (SFAS 123), which permits continued
     application of the intrinsic value method of Accounting Principles Board
     Opinion No. 25, Accounting for Stock Issued to Employees (APB 25). Under
     the intrinsic value method, compensation cost represents the excess, if
     any, of the quoted market price of the Company's common stock at the grant
     date over the amount the grantee must pay for the stock. The Company's
     policy is to grant stock options at the fair market value at the date of
     grant. Options granted to non-employees, as defined under SFAS 123, is
     recorded as compensation expense. The Company did not grant any options to
     non-employees for the three and six months ended December 31, 2001. See
     Note 8 for options granted to a non-employee during the period ended
     December 31, 2002.

     COMPREHENSIVE INCOME
     The Company accounts for comprehensive income under the provisions of SFAS
     No. 130, Reporting Comprehensive Income (SFAS 130). Accordingly,
     accumulated other comprehensive income (loss) is shown in the consolidated
     statements of stockholders' equity at December 31, 2002 and June 30, 2002,
     and is comprised of unrealized gains and losses on the Company's
     available-for-sale securities and foreign currency translation adjustments.
     The tax effect of other comprehensive income for the six months ended
     December 31, 2002 and for the fiscal year ended June 30, 2002 was $129,000,
     and $21,000, respectively.

     GOODWILL
     Goodwill represents the excess of cost over the fair value of the
     identifiable net assets of THM Biomedical, Inc. (THM), a company acquired
     in September 2000. Effective July 1, 2001, the Company adopted SFAS No.
     141, Business Combinations (SFAS 141) and SFAS No. 142, Goodwill and Other
     Intangible Assets (SFAS 142). SFAS 141 requires that the purchase method of
     accounting be used for all business combinations subsequent to June 30,
     2001 and specifies criteria for recognizing intangible assets acquired in a
     business combination. Under SFAS 142, goodwill and intangible assets with
     indefinite useful lives are no longer amortized, but are subject to annual
     impairment tests. Intangible assets with definite useful lives will
     continue to be amortized over their respective useful lives. The early
     adoption of SFAS 142 did not result in the reclassification of any
     intangible assets, changes in the amortization periods for those intangible
     assets with definite lives or the impairment of any intangible assets.

     NEW PRONOUNCEMENTS
     In June 2001 and August 2001, the FASB issued SFAS No. 143, Accounting for
     Asset Retirement Obligations (SFAS 143) and SFAS No. 144, Accounting for
     the Impairment or Disposal of Long-Lived Assets (SFAS 144), respectively,
     which were effective for the Company's fiscal year beginning July 1, 2002.
     The adoption of these two statements did not have a material impact on the
     Company's financial position or operations.

     In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements
     No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
     Corrections (SFAS 145), which was effective for the Company's fiscal



                                       8
<PAGE>

     year beginning July 1, 2002. The Company's adoption of SFAS 145 is not
     expected to have a material effect on the Company's financial position or
     operations.

     In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated
     with Exit or Disposal Activities (SFAS 146), which requires that a
     liability for a cost associated with an exit or disposal activity be
     recognized when the liability is incurred rather than at the date of a
     commitment to an exit or disposal plan and nullifies EITF 94-3. SFAS 146
     applies to exit or disposal activities initiated after December 31, 2002.
     SFAS 146 is not expected to have a material impact on the Company's
     financial position or operations.

     In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
     Compensation - Transition and Disclosure - an amendment of FASB Statement
     No. 123, Accounting for Stock-Based Compensation, to provide alternative
     methods of transition for a voluntary change to the fair value based method
     of accounting for stock-based employee compensation. In addition, SFAS No.
     148 amends the disclosure requirements of SFAS 123 to require prominent
     disclosures in both annual and interim financial statements about the
     method of accounting for stock-based employee compensation and the effect
     of the method used on reported results, which is effective for the
     Company's interim period beginning January 1, 2003. However, as early
     application is encouraged, the Company has implemented the "disclosure
     only" provisions of SFAS No. 148 in the current filing.

NOTE 2  -- INVENTORY

     Inventory is stated at the lower of cost (determined by the average cost
     method, which approximates first-in, first-out) or market. Inventory
     primarily includes the cost of material utilized in the processing of the
     Company's products and is as follows:

<TABLE>
<CAPTION>
                                                      DECEMBER 31,          JUNE 30,
                                                          2002               2002
                                                      ----------           ----------
<S>                                                   <C>                  <C>
                Raw materials                         $2,585,723           $2,193,438
                Work in process                          722,541              325,486
                                                      ----------           ----------

                Total                                 $3,308,264           $2,518,924
                                                      ==========           ==========
</TABLE>

NOTE 3 -- THM ACQUISITION

     On September 1, 2000 the Company acquired THM, a developer of porous,
     biodegradable, tissue-engineering devices for the repair and replacement of
     musculoskeletal tissues, for approximately $10.5 million plus acquisition
     costs of approximately $239,000. The transaction was financed with $6.6
     million of the Company's cash and a note payable to the shareholders of THM
     in the amount of $4.5 million (the Acquisition Obligation). The Acquisition
     Obligation is due in equal quarterly installments of $281,250 beginning on
     December 31, 2000 and ending on September 30, 2004. Accordingly, the
     present value of the cash payments (discounted based upon the Company's
     then available borrowing rate of 7.5%) of $3,833,970 was recorded as a
     liability on the Company's consolidated financial statements, with a
     remaining balance of $1,829,026 and $2,309,385 at December 31, 2002 and
     June 30, 2002, respectively.

NOTE 4 -- OFFICER LOANS

     The Company has granted loans to a current officer of the Company totaling
     $1.8 million, which were for personal use and are collateralized by the
     officer's stock. Interest on the loans ranges from 5.25% to 7% and is based
     on the prime rate of interest. Total interest income earned by the Company
     on these loans for the three and six months ended December 31, 2002 and
     2001 was $26,859 and $54,221 and $18,387 and $37,018 respectively and has
     been capitalized into the loan balance. No additional principal amounts
     were loaned in the three and six months ended December 31, 2002. Interest
     and principal on the loans are due at the earlier of the sale of a portion
     of the officer's stock or March 2003. Under the Sarbanes-Oxley Act of 2002,
     these loans may not be renewed or extended after their due date.


                                       9
<PAGE>

NOTE 5 -- COMMITMENTS AND CONTINGENCIES

     As of December 31, 2002, the Company had pledged $1,726,780 in investments
     as collateral to secure a bank loan to an officer which were used by the
     officer for the payment of taxes incurred as the result of the receipt of
     Common Stock at the Company's initial public offering in December 1995. In
     exchange for the Company pledging collateral for such loans, the affected
     officer had pledged his Common Stock as collateral to the Company. The
     balance outstanding on such officer loans was $1,726,780 at December 31,
     2002. The Company's security pledge related to these loans was released by
     the bank on February 13, 2003.

NOTE 6 -- INCOME TAXES

     As of June 30, 2002, the Company had net operating loss (NOL) carryforwards
     for federal and state tax purposes totaling $1.9 and $20.0 million,
     respectively. A portion of the NOL carryforwards may be subject to various
     statutory limitations as to its usage.

NOTE 7 -- STOCK OPTION PLANS

    The Company has adopted the "disclosure only" provisions of SFAS No. 123, as
    amended by SFAS 148. Accordingly, no compensation cost has been recognized
    for the Company's two stock option plans. Had compensation cost for the
    plans been determined based on the fair market value at the grant date for
    awards, consistent with the provisions of SFAS No. 123, as amended by SFAS
    148, the Company's fully-taxed net income and earnings per share for the
    three and six months ended December 31, 2002 and 2001 would have been
    reduced to the pro forma amounts below:

<TABLE>
<CAPTION>
   THREE MONTHS ENDED:                    DECEMBER 31, 2002                    DECEMBER 31, 2001
                                 ------------------------------------ -------------------------------------
                                   AS REPORTED         PRO FORMA        AS REPORTED           PRO FORMA
                                 ------------------ ----------------- ------------------  -----------------
<S>                              <C>                <C>               <C>                 <C>
   Net income                       $1,793,354         $1,359,968        $1,189,965           $66,720
   Income per share:
      Basic                            $0.17             $0.13              $0.11              $0.01
      Diluted                          $0.16             $0.12              $0.11              $0.01
<CAPTION>


   SIX MONTHS ENDED:                      DECEMBER 31, 2002                    DECEMBER 31, 2001
                                 ------------------------------------ -------------------------------------
                                     AS REPORTED      PRO FORMA         AS REPORTED         PRO FORMA
                                 ------------------ ----------------- ------------------  -----------------
<S>                              <C>                <C>               <C>                 <C>
   Net income                       $3,243,385         $2,396,466        $2,192,848          ($185,431)
   Income per share:
      Basic                            $0.30             $0.22              $0.21             ($0.02)
      Diluted                          $0.29             $0.21              $0.20             ($0.02)
</TABLE>

NOTE 8 -- CONSULTING CONTRACTS

    In October 2002, the Company granted options to purchase 50,000 shares of
    common stock to a physician in exchange for a five-year consulting agreement
    related to the development of a carotid artery application for the
    TriActiv(TM) Balloon Protected Flush Extraction System.

    The Company has calculated the fair value of these non-employee options in
    accordance with SFAS No.123, as $375,550 using the Black-Scholes
    option-pricing model. This amount has been recorded as prepaid consulting
    expense and an increase to additional paid in capital at December 31, 2002.
    The prepaid expense will be amortized to research and development expense
    over the five-year term of the agreement. Accordingly, $18,778, was recorded
    as a component of R&D for the three months ended December 31, 2002.



                                       10
<PAGE>

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

The following discussion and analysis should be read in conjunction with our
financial statements and the related notes included in this report and the
Company's consolidated financial statements filed with the Securities and
Exchange Commission in the Company's Annual Report on Form 10-K for the fiscal
year ended June 30, 2002.

OVERVIEW

We are a leader in cardiovascular medical technology and have significant
experience and expertise in the design, development, manufacture and processing
of absorbable biomaterials for medical applications. The Angio-Seal(TM) Vascular
Closure Device (Angio-Seal), of which we were the original designer, developer
and manufacturer, is currently the leader in the arterial puncture closure
device market, estimated to be a potential $600 million to $1 billion market.
The Angio-Seal is designed to seal and close femoral artery punctures made
during diagnostic and therapeutic cardiovascular catheterizations. St. Jude
Medical, Inc. acquired the worldwide license to the Angio-Seal in March of 1999.
St. Jude Medical develops, manufactures, markets, and distributes the product
worldwide. Additionally, we developed the TriActiv(TM) Balloon Protected Flush
Extraction System (the TriActiv), a device designed to provide distal protection
during saphenous vein graft treatment. This market opportunity is currently
estimated at $300 to $500 million. The TriActiv was commercially launched in
Europe in May 2002 and is in clinical trials in the United States. In addition,
we have significant experience in designing, developing, manufacturing and
processing proprietary biomaterials products for the orthopaedics, cardiology,
drug/biologics delivery, periodontal, general surgery and wound care markets. We
intend to continue to leverage our proprietary knowledge and expertise in all of
these markets to develop new products and technologies and to explore additional
applications for our existing products.

Revenues. Our revenues consist of three components: net sales, research and
development revenue and royalty income.

Net Sales. Net sales is comprised of sales of absorbable biomaterials products
and the TriActiv.

     Biomaterials. The biomaterials component of net sales represents the sale
     of our biomaterials products to customers for use in the following markets:
     orthopaedics, cardiology, drug/biologics delivery, periodontal, general
     surgery and wound care. In 1997, our biomaterials sales were comprised
     almost 100% of the absorbable collagen and polymer components of the
     Angio-Seal supplied to our strategic alliance partner. Since that time, we
     have experienced significant sales growth in our biomaterials products as
     we have expanded our customer base and marketing activities, increased
     sales to existing customers and assisted in the development of new product
     offerings. For fiscal 2002, the Angio-Seal components represented only 42%
     of our total biomaterial sales. For the three and six months ended December
     31, 2002, the Angio-Seal components represented 60% and 59%, respectively,
     of our total biomaterials sales. We believe the growth in our overall
     biomaterials sales, which was 52% and 31% in the three and six months ended
     December 31, 2002 over the comparable periods in fiscal 2002, will continue
     because of greater acceptance by the medical community of biomaterials and
     technological advances which have expanded the applications for our
     biomaterials products.

     TriActiv. The TriActiv was commercially launched in Europe in the fourth
     quarter of fiscal 2002. We are selling direct to the market in Germany and
     through distributors throughout the rest of Europe. We have entered into
     distribution agreements for sales in the United Kingdom, Ireland,
     Switzerland, and Austria as of December 31, 2002 and are in the process of
     identifying distributors for the rest of Europe. While TriActiv sales were
     less than 1% of our total sales for the three and six months ended December
     31, 2002, we anticipate the TriActiv will become a more significant
     component of net sales during the remainder of fiscal 2003 as we gain new
     accounts in the European markets. We anticipate commercial launch of
     TriActiv in the U.S. in the second half of fiscal 2004.



                                       11
<PAGE>

Research and Development Revenue. Research and development revenue in the three
and six months ended December 31, 2002 was derived from two National Institute
of Standards & Technology (NIST) grants. Under the first grant, we are
researching cartilage regeneration utilizing our porous tissue matrix (PTM)
technology. We received all remaining funds under this grant in our second
quarter of fiscal 2003. In addition, in October 2001, we received a second NIST
grant, under which we are researching a synthetic vascular graft also utilizing
our porous tissue matrix (PTM) technology. This grant will continue through
early fiscal year 2005.

Royalty Income. We receive a royalty on every Angio-Seal unit sold worldwide. We
anticipate sales of the Angio-Seal will continue to grow as St. Jude Medical
continues to expand its sales and marketing efforts and releases future
generations of the Angio-Seal and as market adoption of vascular closure devices
increases. As a result, we expect that royalty income will continue to be a
significant source of revenue. Our current royalty rate is 9%. The original rate
of 12% was contractually reduced from 12% to 9%, in accordance with our
licensing agreements during the quarter ended December 31, 2000, when a
cumulative one million Angio-Seal units had been sold. There will be one further
decrease in the royalty rate, to 6%, upon reaching four million cumulative units
sold. While we previously anticipated this reduction would occur in our fiscal
year 2005, exceptionally strong Angio-Seal sales in the first half of fiscal
2003, as well as current and forecasted market growth trends have lead us to
revise our estimate, and we now anticipate that the rate reduction will occur in
late fiscal 2004.

Cost of Products Sold. We have experienced an overall increase in gross margin
during the three and six months ended December 31, 2002, reflecting the higher
volume of our biomaterials products. This increased volume from both our
existing customers and new customers has resulted in manufacturing efficiencies.
The volume increase also results in our fixed costs being spread over a greater
number of units. We anticipate the gross margin on our biomaterials products
will continue to improve with continued increased sales volume. This increase in
gross margin will be partially offset by lower gross margins associated with
initial sales of the TriActiv, as we expect margins on the initial TriActiv
sales to be minimal due to the start-up nature of the manufacturing process. As
a result of this product mix, for fiscal 2003, we believe our total gross
margin, across all product lines, will be only slightly improved over fiscal
2002. As volumes increase and the manufacturing process matures for the
TriActiv, we expect the gross margin on TriActiv to increase.

Research and Development Expense. Research and development expense consists of
expenses incurred for the development of our proprietary technologies, such as
the TriActiv system, absorbable biomaterials products and technologies and other
development programs, including expenses under the NIST programs. In December
2001, we began our TriActiv U.S. pivotal clinical study, a planned 500-800
patient randomized trial. We originally had been approved to conduct the study
at up to 50 sites, but we have recently received Food and Drug Administration
(FDA) approval to increase the number of sites to 75 around the U.S. We
anticipate trial enrollment will continue through the first quarter of fiscal
2004. We anticipate research and development expense will continue to increase
as we pursue commercialization of the TriActiv system in the United States, as
well as explore opportunities for our other technologies, including the
continued development of proprietary biomaterials technologies.

Selling, General and Administrative Expense. Selling, general and administrative
expenses include general and administrative costs, as well as costs related to
the sales and marketing of our products. The costs of our patent litigation are
also included within selling, general and administrative expenses. The sales and
marketing component of selling, general and administrative expenses has
increased as we have commercialized the TriActiv in Europe and move toward
commercialization of the TriActiv in the U.S. In January 2002, we received CE
Mark approval from the European regulatory authority for the TriActiv, which
allows commercial sale of the product in the European Union. Effective January
2002, we established a subsidiary in Germany, Kensey Nash Europe GmbH, and hired
a Vice President of European sales. We have established a European sales and
marketing team and will continue to add personnel to this team as required to
meet our clinical and sales goals. This team will sell the product direct in the
German market and support our distributor relationships in the rest of Europe.
We anticipate sales and marketing expenses will continue to increase as we
expand our European sales team and prepare for U.S. commercial launch. We also
continue to evaluate opportunities for commercialization of the TriActiv in the
United States and to expand the marketing efforts for our biomaterials business.




                                       12
<PAGE>



CRITICAL ACCOUNTING POLICIES

Revenue Recognition. We recognize revenue under the provisions of Staff
Accounting Bulletin (SAB) No. 101, Revenue Recognition in Financial Statements
(SAB 101). Accordingly, sales revenue is recognized when the related product is
shipped. All of our shipments are F.O.B. shipping point. Revenue under research
and development contracts is recognized as the related costs are incurred.
Royalty revenue is recognized as the related product is sold. Advance payments
received for products or services are recorded as deferred revenue and are
recognized when the product is shipped or services are performed.

Stock-Based Compensation. We account for stock-based compensation costs under
SFAS No. 123, Accounting for Stock-Based Compensation (SFAS 123), as amended by
SFAS No. 148 (SFAS 148) which permits continued application of the intrinsic
value method of Accounting Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees (APB 25). Under the intrinsic value method, compensation
cost represents the excess, if any, of the quoted market price of the Company's
common stock at the grant date over the amount the grantee must pay for the
stock. Our policy is to grant stock options at the fair market value at the date
of grant. Therefore, we have not recognized any compensation expense for options
granted to employees. We account for stock-based awards to non-employees using
the fair value method in accordance with SFAS No. 123, which requires using a
Black-Scholes option-pricing model to determine the fair value of the option at
the original grant date. Options granted to non-employees, as defined under SFAS
123, as amended by SFAS 148 and Emerging Issues Task Force (EITF) 96-18, are
recorded as expense over the service period.

Research and Development Expenses. Research and development charges, including
clinical trials expense, are expensed as incurred.


RESULTS OF OPERATIONS

COMPARISON OF THREE MONTHS ENDED DECEMBER 31, 2002 AND 2001

Total Revenues. Total revenues increased 55% to $10.5 million in the three
months ended December 31, 2002 from $6.8 million in the three months ended
December 31, 2001. Net sales of products increased 50% to $6.4 million from $4.3
million for the three months ended December 31, 2002 and 2001, respectively. Net
sales for the three months ended December 31, 2002 consisted almost entirely of
biomaterials sales, as TriActiv sales were less than 1% of total sales. Sales
for the three months ended December 31, 2001 consisted entirely of biomaterials
sales.

Research and Development Revenues. Research and development revenues increased
19% to $208,000 from $175,000 for the three months ended December 31, 2002 and
2001, respectively. These revenues consist of amounts generated under our two
NIST grants. The increase over the prior year primarily reflects increased
activity under the synthetic vascular graft grant which generated $120,403 in
revenue for the three months ended December 31, 2002 compared to $65,318 for the
three months ended December 31, 2001. This increased activity was offset by a
decrease in articular cartilage grant revenue as funding under this grant
concluded in October 2002.

Royalty Income. Royalty income increased 67% to $3.9 million from $2.4 million
in the three months ended December 31, 2002 and 2001, respectively. This
increase reflects a greater number of units sold as well as an increase in
average selling price for the Angio-Seal. Royalty units increased 53% as
approximately 234,000 Angio-Seal units were sold to end-users during the three
months ended December 31, 2002 compared to approximately 153,000 units sold
during the three months ended December 31, 2001. This unit increase was due to
St. Jude Medical's increased sales and marketing efforts and the launch in
January 2002 of the STS platform, a new generation of the Angio-Seal product
line, resulting in market share gains for the entire Angio-Seal product line in
both the US and European markets.

Cost of Products Sold. Cost of products sold increased 44% to $2.9 million in
the three months ended December 31, 2002 from $2.0 million in the three months
ended December 31, 2001. While overall cost of products sold increased, gross
margin also increased 2 points or 4%, from 52% to 54%, in the three months ended
December 31, 2001 and 2002,




                                       13
<PAGE>

respectively, reflecting the high margins on our biomaterials products and
continued allocation of overhead across increased sales volumes, resulting in a
decrease in per unit costs.

Research and Development Expense. Research and development expense increased 46%
to $3.5 million in the three months ended December 31, 2002 compared to $2.4
million in the three months ended December 31, 2001. This increase was
attributable to our continued development efforts on the TriActiv, including
clinical trial expenses. Research and development expenses as a percentage of
revenue decreased from 35% to 33% for the three month period ended December 31,
2001 and December 31, 2002, respectively. Research and development expenses
related to the TriActiv increased $773,000, or 51%, to $2.3 million in the three
months ended December 31, 2002 from $1.5 million in the three months ended
December 31, 2001. We also continued to expand our development efforts on our
biomaterials products including our work under the NIST grants.
Biomaterials-related spending increased $279,000, or 31%, to $1.2 million in the
three months ended December 31, 2002 from $900,000 in the three months ended
December 31, 2001.

Selling, General and Administrative Expense. Selling, general and administrative
expense increased 64% to $2.5 million in the three months ended December 31,
2002 from $1.4 million in the three months ended December 31, 2001. This
increase was primarily the result of increased sales and marketing expenses,
which increased $353,000 to $678,000 in the three months ended December 31, 2002
from $325,000 in the three months ended December 31, 2001. This increase related
to TriActiv European sales and marketing efforts. In addition, general and
administrative expenses increased $286,000, to $957,000, in the three months
ended December 31, 2002 from $671,000 in the three months ended December 31,
2001. This increase was attributable to several factors including a $142,000
increase in personnel costs in support of our continued sales and research and
development growth. In addition, professional services and public company
expenses, including audit and legal fees, D&O insurance, board of director
costs, and SEC filing fees increased $77,000, primarily as a result of the
requirements of the Sarbanes-Oxley Act of 2002. Also contributing to the higher
expenses were our legal fees incurred in connection with our patent infringement
suit (See Part II;Item 1-Legal Proceedings). These fees increased to $57,000 for
the three months ended December 31, 2002 from $16,000 for the three months ended
December 31, 2001. These costs related to our motion for reconsideration of
prior orders, subsequent filing of appeal, filing of briefs, and oral arguments
heard in December 2002.

Net Interest Income. Interest expense decreased 29% to $42,000 in the three
months ended December 31, 2002 from $60,000 in the three months ended December
31, 2001. This decrease was the result of a lower principal balance on the THM
Biomedical acquisition obligation as we continue to make the required quarterly
payments. Interest income decreased by 44% to $267,000 in the three months ended
December 31, 2002 from $479,000 in the three months ended December 31, 2001.
Although our cash and investment balances have increased, this increase was more
than offset by lower interest rates.

Other Income (Expense). Other non-operating income/(expense) was $500 and
$(2,275) for the three months ended December 31, 2002 and 2001, respectively,
representing gains/ (losses) on the disposals of fixed assets.

Net Income. Net income increased to $1.8 million in the three months ended
December 31, 2002 from a net income of $1.2 million in the three months ended
December 31, 2001. Net income for the three months ended December 31, 2002 was
the result of $2.7 million of income before income taxes, offset in part by a
$947,000 charge for income taxes. Net income for the three months ended December
31, 2001 was the result of $1.8 million of income before income taxes, offset in
part by a $627,000 charge for income taxes.


COMPARISON OF SIX MONTHS ENDED DECEMBER 31, 2002 AND 2001

Revenues. Revenues increased 42% to $19.4 million in the six months ended
December 31, 2002 from $13.7 million in the six months ended December 31, 2001.
Net sales of products increased 30%, to $11.5 million from $8.9 million for the
six months ended December 31, 2002 and 2001, respectively. Net sales for the six
months ended December 31, 2002 consisted almost entirely of biomaterials sales,
as TriActiv sales were less than 1% of total sales. Sales for the six months
ended December 31, 2001 consisted entirely of biomaterials sales.



                                       14
<PAGE>

Research and Development Revenues. Research and development revenues increased
30% to $365,000 from $281,000 for the six months ended December 30, 2002 and
2001, respectively. In the prior year, revenues were generated under the NIST
articular cartilage development grant for the entire six months and under the
NIST vascular graft grant for three of the six months as this grant was obtained
in October 2001. The increase over the prior year reflects the additional three
months of the synthetic vascular graft grant, which generated $171,666 in
revenue for the six months ended December 31, 2002.

Royalty Income. Royalty income increased 65% to $7.6 million from $4.6 million
in the six months ended December 31, 2002 and 2001, respectively. This increase
reflects a greater number of units sold as well as an increase in average
selling price for the Angio-Seal. Royalty units increased 53% as approximately
448,000 Angio-Seal units were sold to end-users during the six months ended
December 31, 2002 compared to approximately 292,000 units sold during the six
months ended December 31, 2001. This unit increase was due to St. Jude Medical's
increased sales and marketing efforts and the launch in January 2002 of the STS
platform, a new generation of the Angio-Seal product line, resulting in market
share gains for the entire Angio-Seal product line in both the US and European
markets.

Cost of Products Sold. Cost of products sold increased 28% to $5.3 million in
the six months ended December 30, 2002 from $4.2 million in the six months ended
December 31, 2001. While overall cost of products sold increased, gross margin
also increased to 54% from 53%. This increase reflects the high margins on our
biomaterials products as well as continued allocation of overhead across greater
sales volumes, resulting in a decrease in per unit costs.

Research and Development Expense. Research and development expense increased 28%
to $6.6 million in the six months ended December 31, 2002 from $5.1 million in
the six months ended December 31, 2001. This increase was mainly attributable to
our continued development efforts on the TriActiv system, including clinical
trial expenses. Research and development expenses as a percentage of revenue
decreased from 37% to 34% for the six month period ended December 31, 2001 and
December 31, 2002, respectively. Research and development expenses related to
the TriActiv increased $927,000, or 28%, to $4.3 million in the six months ended
December 31, 2002 from $3.3 million in the six months ended December 31, 2001.
We also continued to expand our development efforts on our biomaterials
products, including our work under the NIST grants. Biomaterials-related
spending increased $517,000, or 29%, to $2.3 million in the six months ended
December 31, 2002 from $1.8 million in the six months ended December 31, 2001.
We expect research and development expense to increase as we investigate and
develop new products, conduct clinical trials and seek regulatory approvals for
our proprietary products.

Selling, General and Administrative. Selling, general and administrative expense
increased 68% to $3.2 million in the six months ended December 31, 2002 from
$1.9 million in the six months ended December 31, 2001. This increase was
primarily the result of sales and marketing expenses, which increased to $1.4
million in the six months ended December 31, 2002 from $591,000 in the six
months ended December 31, 2001, primarily due to increased TriActiv European
sales and marketing efforts. In addition, general and administrative expenses
increased 41%, or $543,000, to $1.9 million in the six months ended December 31,
2002 from $1.3 million in the six months ended December 31, 2001. This increase
was attributable to $253,000 of increased personnel costs to support our
continued sales and research and development growth. In addition, professional
services and public company expenses, including audit and legal fees, D&O
insurance, board of directors costs, and SEC filing fees increased $108,000 as a
result of new SEC and governmental regulations in addition to our continued
growth. Also contributing to the higher expenses was a $108,000 increase in the
allowance for doubtful accounts primarily reflecting a reserve for a receivable
from a company which has filed for bankruptcy. This reserve represented
approximately 50% of the customer's balance at the time it filed for bankruptcy.
Litigation expenses for our patent infringement suit increased to $88,000 for
the six months ended December 31, 2002 from $50,000 for the six months ended
December 31, 2001. These costs related to our motion for reconsideration of
prior orders, subsequent filing of appeal, filing of briefs, and oral arguments
heard in December 2002.

Net Interest Income. Interest expense decreased 29% to $86,000 in the six months
ended December 31, 2002 from $120,000 in the six months ended December 31, 2001.
This decrease was the result of a lower principal balance on the THM Biomedical
acquisition obligation, as we continued to make the required quarterly payments.
Interest income decreased to $688,000 in the six months ended December 31, 2002
from $955,000 million in the six months




                                       15
<PAGE>

ended December 31, 2001. Although our cash and investment balances increased,
this increase was more than offset by lower interest rates.

Other Income (Expense). Other non-operating income/(expense) was $391 and
$(6,481) for the six months ended December 31, 2002 and 2001, respectively,
representing gains/(losses) on the disposal of fixed assets.

Net Income. Net income increased to $3.2 million in the six months ended
December 31, 2002. Net income for the six months ended December 31, 2002 was the
result of $4.9 million of income before income taxes offset in part by a $1.7
million charge for income taxes. Net income for the six months ended December
31, 2001 was the result of $3.4 million of income before income taxes offset by
a $1.2 charge for income taxes.

LIQUIDITY AND CAPITAL RESOURCES

Net cash provided by our operating activities was $5.5 million and $4.8 million
in the six months ended December 31, 2002 and 2001, respectively. In the six
months ended December 31, 2002, changes in asset and liability balances provided
$850,000 of cash, in addition to net income of $3.2 million and non-cash
depreciation and amortization of $1.4 million. In the six months ended December
31, 2001, changes in asset and liability balances provided $1.6 million of cash,
in addition to net income of $2.2 million and non-cash depreciation and
amortization of $1.1 million.

Our cash, cash equivalents and investments were $36.5 million at December 31,
2002. In addition, we had $1.7 million in restricted investment accounts. We had
pledged this $1.7 million in investments as collateral to secure a bank loan
made to an officer to pay taxes incurred by this officer when he received common
stock at the time of our initial public offering. The Company's security pledge
related to these loans was released by the bank on February 13, 2003.

We have a $5.1 million capital spending plan for fiscal 2003, of which $1.3
million has been spent on machinery, equipment, furniture and fixtures and
leasehold improvements through December 31, 2002. These expenditures are related
to the continued expansion of our manufacturing capabilities for our
biomaterials and TriActiv product lines.

We have a $1.8 million obligation to the shareholders of THM Biomedical, Inc., a
company we acquired in September 2000. The obligation is due in equal quarterly
installments of $281,250, which began on December 31, 2000 and end on September
30, 2004.

We plan to continue to spend substantial amounts to fund clinical trials, to
gain regulatory approvals and to continue to expand research and development
activities, particularly for the TriActiv and our biomaterials products. We
believe our current cash and investment balances in addition to cash generated
from operations, will be sufficient to meet our operating and capital
requirements through at least the second quarter of fiscal 2004. Our future
capital requirements and the adequacy of available funds will depend, however,
on numerous factors, including market acceptance of our existing and future
products; the successful commercialization of products in development; progress
in our product development efforts; the magnitude and scope of such efforts;
progress with pre-clinical studies, clinical trials and product clearance by the
FDA and other agencies; the cost and timing of our efforts to expand our
manufacturing capabilities; the cost of filing, prosecuting, defending and
enforcing patent claims and other intellectual property rights; competing
technological and market developments; and the development of strategic
alliances for the marketing of certain of our products. There can be no
assurance that we will generate cash from operations in future periods.

The terms of any future equity financing may be dilutive to our stockholders and
the terms of any debt financing may contain restrictive covenants which limit
our ability to pursue certain courses of action. Our ability to obtain financing
is dependent on the status of our future business prospects, as well as
conditions prevailing in the relevant capital markets. No assurance can be given
that any additional financing will be made available to us or will be available
on acceptable terms should such a need arise.

Our estimate of the time periods for which our cash and cash equivalents will be
adequate to fund operations is a forward looking statement within the meaning of
Private Securities Litigation Reform Act of 1995 and is subject to risks and


                                       16
<PAGE>

uncertainties. Actual results may differ materially from those contemplated in
such forward-looking statements. In addition to those described above, factors
which may cause such a difference are set forth below under the caption "Risks
Related to Our Business" as well as under the heading "Risk Factors" in our
annual report on Form 10-K.

ACQUISITION OF THM BIOMEDICAL, INC.

On September 1, 2000, we acquired THM Biomedical, Inc. (THM), a developer of
porous, biodegradable, tissue-engineering devices for the repair and replacement
of musculoskeletal tissues, for approximately $10.5 million plus acquisition
costs of approximately $228,000. The transaction was financed with $6.6 million
in cash and a note payable to the shareholders of THM in the amount of $4.5
million (the Acquisition Obligation). The Acquisition Obligation is due in equal
quarterly installments of $281,250 which began on December 31, 2000 and end on
September 30, 2004. Accordingly, the present value of the cash payments
(discounted based upon our available borrowing rate of 7.5%) of $3.9 million was
recorded as a liability on the Company's financial statements, with a remaining
balance of $1.8 million and $2.3 million at December 31, 2002 and June 30, 2002,
respectively.

Since the date of the acquisition, as planned, we have primarily devoted our
development efforts of the acquired porous tissue matrix (PTM) technology to an
articular cartilage application and an other bone application and have expended
approximately $1,073,000 on such efforts through December 31, 2002. In addition,
we received 510(k) approval for a proprietary PTM based product, ImproVise(TM),
an absorbable cement flow restrictor for use in certain orthopaedic surgical
procedures.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report includes forward-looking statements within the meaning of Section
21E of the Securities Exchange Act of 1934. We have based these forward-looking
statements largely on our current expectations and projections about future
events and trends affecting our business. In this report, the words "believe",
"may", "will", "estimate", "continue", "anticipate", "intend", "expect", "plan"
and similar expressions, as they relate to Kensey Nash, our business or our
management, are intended to identify forward-looking statements, but they are
not exclusive means of identifying them.

A number of risks, uncertainties and other factors could cause our actual
results, performance, financial condition, cash flows, prospects and
opportunities to differ materially from those expressed in, or implied by, the
forward-looking statements. These risks, uncertainties and other factors
include, among other things:

     -    general economic and business conditions, both nationally and in our
          markets;

     -    our expectations and estimates concerning future financial performance
          and financing plans;

     -    the impact of competition;

     -    anticipated trends in our business;

     -    existing and future regulations affecting our business;

     -    strategic alliances and acquisition opportunities; and

     -    other risk factors set forth under "Risk Factors" above.

We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise
after the date of this report. Our 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 our common stock.




                                       17
<PAGE>

RISKS RELATED TO OUR BUSINESS

There are many risk factors that could adversely affect our business, operating
results and financial condition. These risk factors, described in detail in our
Annual Report on Form 10-K, include but are not limited to:

     -    our ability to successfully commercialize the TriActiv system in the
          European Union;
     -    our ability to obtain regulatory approval for the TriActiv system in
          the United States;
     -    subsequent to regulatory approval in the U.S., our ability to
          successfully commercialize the TriActiv system;
     -    our reliance on revenues from the Angio-Seal product line;
     -    the performance of St. Jude Medical as the manufacturer, marketer and
          distributor of the Angio-Seal product;
     -    our dependence on the continued growth and success of our biomaterials
          products;
     -    our dependence on our biomaterials customers for marketing and
          obtaining regulatory approval for their products;
     -    our ability to obtain any additional required funding for future
          development and marketing of the TriActiv product as well as our
          biomaterials products;
     -    the competitive markets for our products and our ability to respond
          more quickly than our competitors to new or emerging technologies and
          or changes in customer requirements;
     -    the acceptance of our products by the medical community;
     -    our dependence on key vendors and key personnel;
     -    the use of hazardous materials which could expose us to future
          environmental liabilities;
     -    our ability to expand our management systems and controls to support
          anticipated growth;
     -    dilution of ownership interests of our stockholders by future
          acquisitions or strategic alliances;
     -    risks related to our intellectual property, including patent and
          proprietary rights and trademarks; and
     -    risks related to our industry, including potential for litigation,
          ability to obtain reimbursement for our products and our products'
          exposure to extensive government regulation.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our interest income and expense are sensitive to changes in the general level of
interest rates. In this regard, changes in interest rates affect the interest
earned on our cash, cash equivalents and investments.

Our investment portfolio consists primarily of high quality U.S. government and
corporate securities and certificates of deposit with maturities ranging from
one to fifteen years. We mitigate default risk by investing in what we believe
are the safest and highest credit quality securities and by monitoring the
credit rating of investment issuers. The portfolio includes only marketable
securities with active secondary or resale markets to ensure portfolio
liquidity, and there are limitations regarding duration of investments. These
available-for-sale securities are subject to interest rate risk and decrease in
market value if interest rates increase. At December 31, 2002, our total
portfolio consisted of approximately $13.1 million of investments, with
maturities from one to fifteen years. While our investments may be sold at
anytime because the portfolio includes available for sale marketable securities
with active secondary or resale markets to ensure portfolio liquidity, we
generally hold securities until the earlier of their call date or their
maturity. Therefore, we do not expect our results of operations or cash flows to
be materially impacted due to a sudden change in interest rates. We had $1.8
million in outstanding debt at December 31, 2002, related to the acquisition of
THM.

ITEM 4. CONTROLS AND PROCEDURES

      (a) The Chief Executive Officer and the Chief Financial Officer of the
Company (its principal executive officer and principal financial officer,
respectively) have concluded, based on their evaluation as of a date within 90
days prior to the date of the filing of this Report, that the Company's
disclosure controls and procedures are effective to ensure that information
required to be disclosed by the Company in the reports filed or submitted by it
under the Securities Exchange Act of 1934, as amended, is recorded, processed,
summarized and reported within the time periods specified in the SEC's rules and
forms, and include controls and procedures designed to ensure that information
required to be disclosed by the Company in such reports is accumulated and
communicated to the Company's management, including the President and Chief
Executive




                                       18
<PAGE>

Officer and the Chief Financial Officer of the Company, as appropriate to allow
timely decisions regarding required disclosure.

       (b) There were no significant changes in the Company's internal controls
or in other factors that could significantly affect these controls subsequent to
the date of such evaluation.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We, along with St. Jude Medical, filed a patent infringement suit against
Perclose, Inc., a competitor in the puncture closure market. The original suit,
filed in 1998, along with a subsequent amendment filed in 1999, both filed in
Federal District Court for the Eastern District of Pennsylvania, claim that
Perclose infringes our U.S. patent numbers 5,676,689 and 5,861,004. These
patents cover systems and methods related to sealing percutaneous punctures. We
seek damages and an order to permanently enjoin Perclose from making, using or
selling products that infringe these patents. In November, 1999, Abbott
Laboratories acquired Perclose.

Perclose filed four counterclaims against our suit in answer to the complaint.
The first counterclaim seeks to declare our patents invalid and not infringed.
The additional counterclaims asserted by Perclose allege that our claims are
frivolous and assert various antitrust counter-claims, including price
discrimination, predatory pricing and attempted monopolization of the puncture
closure market.

The U.S. District Court, Eastern District of Pennsylvania, entered a Markman
hearing Order regarding claims interpretation, in favor of the defendant
Perclose. The judge denied our Motion for Reconsideration on August 21, 2001,
and the parties stipulated a Final Judgement, which was entered on October 19,
2001. On November 15, 2001, we filed a timely Notice of Appeal, thereby
initiating an appeal in the Court of Appeals for the Federal circuit (CAFC).
Oral arguments were heard on December 3, 2002. On February 5, 2003 the CAFC
issued its opinion in which it affirmed the District Court. We, together with
St. Jude Medical, are exploring the options available at this point in the case.

We are unable to predict the final outcome of this suit or whether the
resolution of this matter could materially affect our results of operations,
cash flows or financial position. The Company has expensed legal costs, as a
component of selling, general and administrative expenses, as services have been
incurred.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Company's 2002 Annual Meeting of Stockholders was held on December 4, 2002.
At the Annual Meeting, the Company's stockholders (i) elected Douglas G. Evans,
P.E., Walter Maupay and C. McCollister Evarts, M.D. as Class I Directors to the
Company's board of directors, and (ii) ratified the appointment by the Company's
board of directors of Deloitte & Touche LLP as the independent auditors of the
Company's financial statements for the fiscal year ending June 30, 2003. The
following summarizes the voting results for such actions:

<TABLE>
<CAPTION>
                                                          Number of        Number of                         Broker
                                                          Votes For      Votes Withheld      Abstentions     Non-Votes
                                                     ----------------------------------------------------------------------
<S>                                                  <C>                 <C>                 <C>            <C>
         Douglas G. Evans, P.E.                          8,820,269             5,403               0              0

         Walter Maupay                                   8,820,269             5,403               0              0

         C. McCollister Evarts, M.D.                     8,820,269             5,403               0              0

         Ratification of the Appointment
         of Deloitte & Touche LLP                        8,788,000            33,181             4,491            0
</TABLE>



                                       19
<PAGE>

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

     A.   Exhibits.

          99.1  Certification of Chief Executive Officer pursuant to Section 906
                of the Sarbanes-Oxley Act of 2002.

          99.2  Certification of Chief Financial Officer pursuant to Section 906
                of the Sarbanes-Oxley Act of 2002.


     B.   Reports on Form 8-K.

          None.

                                   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:      February 14, 2003                By:   /s/ Wendy F. DiCicco
                                                  ------------------------------
                                                      Wendy F. DiCicco
                                                      Chief Financial Officer









                                       20
<PAGE>

                                 CERTIFICATIONS
I, Joseph W. Kaufmann, certify that:

     1. I have reviewed this quarterly report on Form 10-Q of Kensey Nash
     Corporation;

     2. Based on my knowledge, this quarterly report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this quarterly report;

     3. Based on my knowledge, the financial statements, and other financial
     information included in this quarterly report, fairly present in all
     material respects the financial condition, results of operations and cash
     flows of the registrant as of, and for, the periods presented in this
     quarterly report;

     4. The registrant's other certifying officer and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

          a) designed such disclosure controls and procedures to ensure that
          material information relating to the registrant, including its
          consolidated subsidiaries, is made known to us by others within those
          entities, particularly during the period in which this quarterly
          report is being prepared;

          b) evaluated the effectiveness of the registrant's disclosure controls
          and procedures as of a date within 90 days prior to the filing date of
          this quarterly report (the "Evaluation Date"); and

          c) presented in this quarterly report our conclusions about the
          effectiveness of the disclosure controls and procedures based on our
          evaluation as of the Evaluation Date;

     5. The registrant's other certifying officer and I have disclosed, based on
     our most recent evaluation, to the registrant's auditors and the audit
     committee of registrant's board of directors (or persons performing the
     equivalent function):

          a) all significant deficiencies in the design or operation of internal
          controls which could adversely affect the registrant's ability to
          record, process, summarize and report financial data and have
          identified for the registrant's auditors any material weaknesses in
          internal controls; and

          b) any fraud, whether or not material, that involves management or
          other employees who have a significant role in the registrant's
          internal controls; and

     6. The registrant's other certifying officer and I have indicated in this
     quarterly report whether or not there were significant changes in internal
     controls or in other factors that could significantly affect internal
     controls subsequent to the date of our most recent evaluation, including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.

Dated: February 14, 2003

                               /s/ Joseph W. Kaufmann
                               ----------------------------------------------
                               Joseph W. Kaufmann
                               Chief Executive Officer, President and Secretary




                                       21
<PAGE>

I, Wendy F. DiCicco, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Kensey Nash
Corporation;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a) designed such disclosure controls and procedures to ensure that material
     information relating to the registrant, including its consolidated
     subsidiaries, is made known to us by others within those entities,
     particularly during the period in which this quarterly report is being
     prepared;

     b) evaluated the effectiveness of the registrant's disclosure controls and
     procedures as of a date within 90 days prior to the filing date of this
     quarterly report (the "Evaluation Date"); and

     c) presented in this quarterly report our conclusions about the
     effectiveness of the disclosure controls and procedures based on our
     evaluation as of the Evaluation Date;

5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

     a) all significant deficiencies in the design or operation of internal
     controls which could adversely affect the registrant's ability to record,
     process, summarize and report financial data and have identified for the
     registrant's auditors any material weaknesses in internal controls; and

     b) any fraud, whether or not material, that involves management or other
     employees who have a significant role in the registrant's internal
     controls; and

6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Dated: February 14, 2003
                                                    /s/ Wendy F. DiCicco, CPA
                                                    ----------------------------
                                                    Wendy F. DiCicco, CPA
                                                    Chief Financial Officer





                                       22