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

                                    FORM 10-Q

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

                For the Quarterly Period Ended: DECEMBER 31, 1999

                                       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
                                               ---     ---

         As of January 31, 2000, there were outstanding 7,474,317 shares of
Common Stock, par value $.001, of the registrant.
<PAGE>   2





                             KENSEY NASH CORPORATION

                         QUARTER ENDED DECEMBER 31, 1999


                                      INDEX

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

         ITEM 1.  FINANCIAL STATEMENTS
                           Consolidated Balance Sheets
                             as of December 31, 1999  (Unaudited) and June 30, 1999........................      3

                           Consolidated Statements of Operations
                             for the three and six months ended December 31,
                             1999 and 1998 (Unaudited).....................................................      4

                           Consolidated Statements of Stockholders' Equity as of
                             December 31, 1999 (Unaudited) and June 30, 1999...............................      5

                           Consolidated Statements of Cash Flows
                             for the six months ended December 31, 1999 and 1998 (Unaudited)...............      6

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

         ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS............................................      9


PART II - OTHER INFORMATION

         ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.........................................................     14


SIGNATURES                          .......................................................................     15
</TABLE>






                                       2
<PAGE>   3
PART I - FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS

KENSEY NASH CORPORATION
CONSOLIDATED BALANCE SHEETS
------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                                    December 31,      June 30,
ASSETS                                                                                  1999            1999
CURRENT ASSETS:                                                                      (UNAUDITED)
<S>                                                                                 <C>             <C>
  Cash and cash equivalents                                                         $  1,207,024    $  1,189,083
  Short-term investments                                                               7,629,822       8,479,617
  Trade receivables                                                                    2,714,878       2,247,050
  Royalties receivable  (Note 2)                                                       1,524,873         742,143
  Officer loans                                                                          519,198         264,535
  Other receivables (including approximately $52,336 and $62,000 at
       December 31, 1999 and June 30, 1999, respectively, due from employees)            276,061         170,181
  Inventory (Note 3)                                                                     833,973         748,698
  Prepaid expenses and other                                                             481,847         320,106
                                                                                    ------------    ------------
         Total current assets                                                         15,187,676      14,161,413
                                                                                    ------------    ------------
PROPERTY, PLANT AND EQUIPMENT, AT COST:
  Leasehold improvements                                                               4,023,373       4,023,373
  Machinery, furniture and equipment                                                   5,393,607       4,840,529
  Construction in progress                                                             1,852,923         676,836
                                                                                    ------------    ------------
         Total property, plant and equipment                                          11,269,903       9,540,738
  Accumulated depreciation                                                            (4,409,242)     (3,801,514)
                                                                                    ------------    ------------
         Net property, plant and equipment                                             6,860,661       5,739,224
                                                                                    ------------    ------------
OTHER ASSETS:
  Restricted investments (Note 4)                                                      2,455,725       4,675,725
  Property under capital leases, net                                                      15,519          28,368
  Acquired patents, net of accumulated amortization of $509,164 and $381,873
     at December 31,  1999 and June 30, 1999, respectively                             3,483,245       3,610,536
                                                                                    ------------    ------------
      Total other assets                                                               5,954,489       8,314,629
                                                                                    ------------    ------------

TOTAL                                                                               $ 28,002,826    $ 28,215,266
                                                                                    ============    ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
  Accounts payable                                                                  $  1,278,692    $  1,446,800
  Accrued expenses                                                                       276,271         863,458
  Current portion of debt, obligation under patent acquisition agreement
        and capital lease obligations                                                    179,580         600,398
  Deferred revenue - royalties and other (Note 2)                                          9,250         390,846
                                                                                    ------------    ------------
         Total current liabilities                                                     1,743,793       3,301,502
DEBT and OBLIGATION UNDER CAPITAL LEASES, long-term portion                            5,914,298       6,012,863
                                                                                    ------------    ------------
         Total liabilities                                                             7,658,091       9,314,365
                                                                                    ------------    ------------
COMMITMENTS AND CONTINGENCIES (Note 4):

STOCKHOLDERS' EQUITY:
  Preferred stock, $.001 par value, 100,000 shares authorized,
       no shares issued or outstanding at December 31, 1999 and June 30, 1999
  Common stock, $.001 par value, 25,000,000 shares authorized,
       7,473,967 and 7,470,710 shares issued and outstanding at December 31, 1999
       and June 30, 1999, respectively                                                     7,475           7,470
  Capital in excess of par value                                                      37,738,991      37,697,452
  Accumulated deficit                                                                (17,043,327)    (18,562,619)
  Accumulated other comprehensive income                                                (358,404)       (241,402)
                                                                                    ------------    ------------
      Total stockholders' equity                                                      20,344,735      18,900,901
                                                                                    ------------    ------------
TOTAL                                                                               $ 28,002,826    $ 28,215,266
                                                                                    ============    ============
</TABLE>


See notes to consolidated financial statements.



                                       3
<PAGE>   4
KENSEY NASH CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                    THREE MONTHS ENDED             SIX MONTHS ENDED
                                                      DECEMBER 31,                   DECEMBER 31,
                                                --------------------------    --------------------------
                                                   1999           1998           1999           1998
<S>                                             <C>            <C>            <C>            <C>
REVENUES (Notes 1 and 2):
  Net sales                                     $ 3,009,292    $ 1,829,058    $ 5,372,912    $ 3,206,036
  Research and development                            8,199        390,530         42,597      1,159,638
  Royalty income                                  1,525,115      1,494,724      2,946,217      2,900,135
                                                -----------    -----------    -----------    -----------
           Total revenues                         4,542,606      3,714,312      8,361,726      7,265,809
                                                -----------    -----------    -----------    -----------

OPERATING COSTS AND EXPENSES:
  Cost of products sold                           1,637,289      1,160,550      3,065,397      2,438,923
  Research and development                        1,315,038      1,429,218      2,639,905      2,826,989
  Selling, general and administrative               809,125        541,366      1,340,445      1,114,895
                                                -----------    -----------    -----------    -----------
           Total operating costs and expenses     3,761,452      3,131,134      7,045,747      6,380,807
                                                -----------    -----------    -----------    -----------

                                                -----------    -----------    -----------    -----------
INCOME FROM OPERATIONS                              781,154        583,178      1,315,979        885,002
                                                -----------    -----------    -----------    -----------

OTHER INCOME:
  Interest income                                   212,851        128,519        436,851        263,232
  Interest expense                                 (117,879)       (59,936)      (232,532)      (125,895)
  Other                                                  25          2,367         (1,006)         2,368
                                                -----------    -----------    -----------    -----------
           Total other income - net                  94,997         70,950        203,313        139,705
                                                -----------    -----------    -----------    -----------

INCOME BEFORE INCOME TAXES                          876,151        654,128      1,519,292      1,024,707
Provision for income taxes (Note 5)
                                                -----------    -----------    -----------    -----------
NET INCOME                                      $   876,151    $   654,128    $ 1,519,292    $ 1,024,707
                                                ===========    ===========    ===========    ===========

BASIC and DILUTED EARNINGS PER
   SHARE (Note 1)                               $      0.12    $      0.09    $      0.20    $      0.14
                                                ===========    ===========    ===========    ===========

WEIGHTED AVERAGE COMMON
  SHARES OUTSTANDING (Note 1)                     7,611,669      7,472,851      7,571,119      7,469,123
                                                ===========    ===========    ===========    ===========
</TABLE>


See notes to consolidated financial statements.


                                       4
<PAGE>   5
KENSEY NASH CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                               CAPITAL
                                                         COMMON STOCK         IN EXCESS
                                                     ---------------------     OF PAR       ACCUMULATED
                                                      SHARES        AMOUNT     VALUE          DEFICIT
<S>                                                   <C>          <C>       <C>            <C>
BALANCE, JUNE 30, 1997                                7,198,251    $ 7,198  $ 34,203,807    $ (22,084,059)

   Exercise of stock options                             61,021         61       556,174

   Shares issued under Patent Acquisition Agreement     200,000        200     2,837,400

   Net income                                                                                     342,682

                                                     ---------     -------  ------------    -------------
BALANCE, JUNE 30, 1998                               7,459,272       7,459    37,597,381      (21,741,377)
                                                     ---------     -------  ------------    -------------

   Exercise of stock options                             11,438         11       100,071

   Net income                                                                                   3,178,758

   Comprehensive loss  (Note 1)

   Comprehensive income

                                                     ---------     -------  ------------    -------------
BALANCE, JUNE 30, 1999                               7,470,710     $ 7,470  $ 37,697,452    $ (18,562,619)
                                                     ---------     -------  ------------    -------------

   Exercise of stock options                             4,342           5        41,539

   Net income                                                                                   1,519,292

   Comprehensive loss  (Note 1)

   Comprehensive income

                                                     ---------     -------  ------------    -------------
BALANCE, DECEMBER 31, 1999                           7,475,052     $ 7,475  $ 37,738,991    $ (17,043,327)
                                                     =========     =======  ============    =============

<CAPTION>
                                                            ACCUMULATED
                                                              OTHER
                                                           COMPREHENSIVE  COMPREHENSIVE
                                                               LOSS       INCOME/(LOSS)     TOTAL
<S>                                                        <C>            <C>           <C>
BALANCE, JUNE 30, 1997                                                                   $12,126,946

   Exercise of stock options                                                                 556,235

   Shares issued under Patent Acquisition Agreement                                        2,837,600

   Net income                                                             $    342,682       342,682
                                                                          ------------   -----------

BALANCE, JUNE 30, 1998                                                                    15,863,463
                                                                                         -----------

   Exercise of stock options                                                                 100,082

   Net income                                                                3,178,758     3,178,758

   Comprehensive loss  (Note 1)                              (241,402)        (241,402)     (241,402)
                                                                          ------------   -----------

   Comprehensive income                                                      2,937,356
                                                                          ------------

                                                           ----------                    -----------
BALANCE, JUNE 30, 1999                                     $ (241,402)                   $18,900,901
                                                           ----------                    -----------

   Exercise of stock options                                                                  41,544

   Net income                                                                1,519,292     1,519,292

   Comprehensive loss  (Note 1)                              (117,002)        (117,002)     (117,002)
                                                                          ------------   -----------

   Comprehensive income                                                   $  1,402,290
                                                                          ============

                                                           ----------                    -----------
BALANCE, DECEMBER 31, 1999                                 $ (358,404)                   $20,344,735
                                                           ==========                    ===========

</TABLE>



See notes to the consolidated financial statements.



                                       5
<PAGE>   6
KENSEY NASH CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                 SIX MONTHS ENDED
                                                                    DECEMBER 31,
                                                              --------------------------
                                                                  1999           1998
<S>                                                           <C>            <C>
OPERATING ACTIVITIES:
  Net income                                                  $ 1,519,292    $ 1,024,707
  Adjustments to reconcile net income to net cash used in
       operating activities:
       Depreciation and amortization                              747,868        576,408
  Changes in assets and liabilities which used cash:
       Accounts receivable                                     (1,611,101)    (1,895,566)
       Prepaid expenses and other current assets                 (161,741)       (43,827)
       Inventory                                                  (85,275)       367,323
       Accounts payable and accrued expenses                     (755,295)       259,759
       Deferred revenue                                          (381,596)      (685,240)
                                                              -----------    -----------
        Net cash used in operating activities                    (727,848)      (396,436)
                                                              -----------    -----------

INVESTING ACTIVITIES:
  Additions to property, plant and equipment                   (1,729,165)      (643,933)
  Sale of investments                                           2,952,793        118,480
                                                              -----------    -----------
        Net cash provided by (used in) investing activities     1,223,628       (525,453)
                                                              -----------    -----------

FINANCING ACTIVITIES:
  Principal payments under capital leases                         (15,930)       (19,302)
  Repayments of patent acquisition obligation                    (503,453)      (214,892)
  Exercise of stock options                                        41,544          1,645
                                                              -----------    -----------
        Net cash used in financing activities                    (477,839)      (232,549)
                                                              -----------    -----------

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                   17,941     (1,154,438)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                  1,189,083      1,407,684
                                                              -----------    -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD                      $ 1,207,024    $   253,246
                                                              ===========    ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  Cash paid for interest                                      $   117,879    $   126,909
                                                              ===========    ===========
  Cash paid for income taxes                                  $              $
                                                              ===========    ===========
</TABLE>


See notes to consolidated financial statements.



                                       6
<PAGE>   7

                             KENSEY NASH CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

NOTE 1 -- CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

       BASIS OF PRESENTATION
       The consolidated balance sheet at December 31, 1999, the consolidated
       statements of operations for the six months ended December 31, 1999 and
       1998 and the consolidated statements of cash flows for the six months
       ended December 31, 1999 and 1998 have been prepared by Kensey Nash
       Corporation (the "Company") and have not been audited by the Company's
       Independent Auditors. In the opinion of management, all adjustments
       (which include only normal recurring adjustments) necessary to present
       fairly the financial position, results of operations and cash flows at
       December 31, 1999 and for all periods presented have been made.

       Certain information and note disclosures normally included in the
       Company's annual financial statements prepared in accordance with
       generally accepted accounting principles have been condensed or omitted.
       These consolidated financial statements should be read in conjunction
       with the financial statements and notes thereto included in the Company's
       June 30, 1999 consolidated financial statements filed with the Securities
       and Exchange Commission on Form 10-K. The results of operations for the
       period ended December 31, 1999 are not necessarily indicative of
       operating results for the full year.

       CASH AND CASH EQUIVALENTS
       Cash and cash equivalents represent cash in banks and short-term
       investments having an original maturity of less than three months.


       EXPORT SALES
       Export sales from the Company's US operations to unaffiliated customers
       in Europe totaled $116,562 and $110,105 for the three months ended
       December 31, 1999 and 1998, respectively and $231,595 and $140,015 for
       the six months ended December 31, 1999 and 1998, respectively.

       EARNINGS PER SHARE
       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.

       COMPREHENSIVE INCOME
       Accumulated other comprehensive loss, shown in the consolidated
       statements of shareholders' equity at December 31, 1999 and June 30,
       1999, 1998 and 1997, is solely comprised of unrealized losses on the
       Company's available-for-sale securities. There were no unrealized gains
       or losses in the years ended June 30, 1998 and 1997. The tax effect of
       other comprehensive income on fiscal years 2000 and 1999 was not
       significant.

NOTE 2 -- DEFERRED REVENUE - ROYALTIES

       Upon receipt of pre-market approval for the 8 French ("F") size
       Angio-Seal device (the "Angio-Seal") from the Food and Drug
       Administration (the "FDA") on September 30, 1996, the Company received a
       $3 million advance on future royalties under the Company's licensing
       agreement (the "Licensing Agreement") with its Strategic Alliance
       Partner, St. Jude Medical, Inc. ("St. Jude"). Such advance was recorded
       as deferred revenue. The Licensing Agreement provides for certain minimum
       royalty payments ("Minimum Royalty") during the first five years after
       receiving FDA approval (each royalty year begins on October 1 and ends on
       September 30). As stipulated in the Licensing Agreement, the $3 million
       advance was reduced in each period by



                                       7
<PAGE>   8
       50% of royalties earned in excess of the Minimum Royalty in any royalty
       year. The remainder of royalties earned was received as cash proceeds by
       the Company. At December 31, 1999 the entire $3 million liability had
       been repaid by the Company via these royalty payment reductions.

NOTE 3 -- 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, 1999         JUNE 30, 1999
                 -----------------         -------------
<S>              <C>                       <C>
Raw materials       $786,070                 $666,271
Work in process       47,903                   82,427
                    --------                 --------
Total               $833,973                 $748,698
                    ========                 ========
</TABLE>


NOTE 4 -- COMMITMENTS AND CONTINGENCIES

       The Company has pledged $1,949,386 in investments as collateral to secure
       certain bank loans to employees which were used by such employees for the
       payment of taxes incurred by such employees as the result of the receipt
       of Common Stock in settlement of the employee stock rights. In exchange
       for the Company pledging collateral for such loans, each affected
       employee has pledged their Common Stock as collateral to the Company. The
       balance outstanding on such employee loans was $1,942,095 at December 31,
       1999.

       In addition, under the terms of the Company's Financing Agreement, the
       Company has placed the remaining proceeds of such agreement into a
       certificate of deposit ("CD"). The CD is restricted for capital
       expenditure purposes only. The balance of the CD at December 31, 1999 is
       $506,339 and is included in restricted investments due to the capital
       expenditure restriction placed on its use.

NOTE 5 -- INCOME TAXES

       As of June 30, 1999, the Company had net operating loss carryforwards for
       federal and state tax purposes totaling $14.8 and $3 million,
       respectively. As such, no provision has been made for income taxes for
       the three or six months ended December 31, 1999 or 1998. A portion of the
       NOL may be subject to various statutory limitations as to its usage.




                                       8
<PAGE>   9

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

OVERVIEW

Kensey Nash Corporation (the "Company") designs, develops and manufactures, both
individually and in conjunction with third parties, medical devices for use
primarily in the cardiovascular and orthopedic markets.

The Company is a leader in the cardiac catheterization puncture closure market
with its Angio-Seal device. The Angio-Seal is an absorbable medical device for
the sealing of arterial punctures created during cardiovascular procedures such
as angiography, angioplasty, atherectomy and the placement of stents. The
Company participates in the puncture closure market primarily through its
relationship with its Strategic Alliance Partner, St. Jude Medical, Inc. ("St.
Jude"), from which it generates royalty income, research and development funding
and sales revenue through the manufacture of Angio-Seal devices and components
for the Angio-Seal.

In February 1999, the Company announced European Community ("CE") Mark Approval
had been granted for the new 6F Angio-Seal puncture closure device. CE Mark
approval allows the sale of the device throughout the European Union. This
smaller version of the Company's 8F Angio-Seal, currently marketed in both the
US and Europe, is designed to seal arterial punctures 6F and smaller and
addresses the largest segment of the puncture closure market. The Company is
awaiting approval in the US from the Food and Drug Administration ("FDA") for
the 6F Angio-Seal.

The Company's latest product in the cardiovascular market is a revascularization
device, the Aegis Vortex System ("AVS"). The AVS is designed to open occluded
saphenous vein bypass grafts ("SVGs") while minimizing the risk of embolization,
a common problem with current treatment alternatives. The Company is developing
the AVS using its intellectual property and in-house expertise. The Company
announced the initiation of clinical trials for the AVS in July 1999.

In addition, the Company has developed leading technology in the area of
absorbable biomaterials and continues to expand its capabilities. The Company is
currently manufacturing absorbable collagen and polymer products for third
parties for use in orthopedic, cardiovascular, tissue regeneration, bone growth
protein and drug delivery applications, among others.

The following discussion and analysis should be read in conjunction with the
Consolidated Financial Statements and the notes thereto contained elsewhere in
this report.

THREE MONTHS ENDED DECEMBER 31, 1999 COMPARED TO THREE MONTHS ENDED DECEMBER 31,
1998

Revenues for these periods consisted of net sales, research and development
revenue and royalty income. Revenues increased 22% to $4,543,000 in the three
months ended December 31, 1999 from $3,714,000 in the three months ended
December 31, 1998. Net sales of products increased 65% to $3,009,000 from
$1,829,000 for the three months ended December 31, 1999 and 1998, respectively.
Research and development revenues decreased 98% to $8,000 from $391,000 for the
three months ended December 31, 1999 and 1998, respectively. The increase in net
sales was attributable to an increase in sales of 6F Angio-Seal commercial
devices and increased sales of commercial bioabsorbable OEM polymer and collagen
products.  The Company is currently providing St. Jude with 6F Angio-Seal
devices for the European market. The Company expects St. Jude to commence
manufacturing these devices by the end of its fiscal year 2000. During the
fiscal year ended June 30, 1999, St. Jude informed the Company that it would be
performing all ongoing research and development in-house. As such, research and


                                       9
<PAGE>   10

development revenue has significantly declined from the three month period
ending December 31, 1998. The Company does not expect research and development
revenue to be a significant revenue component in the future.

Royalty income increased 2% to $1,525,000 from $1,495,000 in the three months
ended December 31, 1999 and 1998, respectively.  The increase in royalty income
is primarily attributable to strong growth in the international markets due to
the 6F Angio-Seal sales. Royalty rates are based on volume of units sold (rates
decline as certain cumulative unit sales levels are reached) and are equivalent
in both the domestic and foreign licensing agreements with St. Jude.

Cost of products sold increased 41% to $1,637,000 in the three months ended
December 31, 1999 from $1,161,000 in the three months ended December 31, 1998.
This increase reflects greater net sales of products offset by favorable product
mix. In addition, the significant increase in net sales brings the Company
closer to full utilization of its capacity and absorption of overhead, resulting
in a favorable gross margin trend.

Research and development expense, including regulatory and clinical expense,
decreased 8% to $1,315,000 in the three months ended December 31, 1999 from
$1,429,000 in the three months ended December 31, 1998. This decrease in
expenses is mainly attributable to the shift of almost all of the development
for the Angio-Seal to St. Jude as well as the commercialization of the 6F
product. This decrease is offset by the Company's continued development efforts
in revascularization technology, including clinical trials which it is currently
conducting for the AVS. The Company also continues to expand its development
efforts with respect to its biomaterials products, including absorbable polymers
and collagen. The Company expects research and development expense to increase
as it investigates and develops new products, conducts clinical trials and seeks
regulatory approval for its proprietary products.

Selling, general and administrative expense increased 49% to $809,000 in the
three months ended December 31, 1999 from $541,000 in the three months ended
December 31, 1998. This increase was primarily a result of higher litigation
costs related to the Company's ongoing patent infringement suit, as well as
increased marketing efforts related to the AVS.

Interest expense increased 97% to $118,000 in the three months ended December
31, 1999 from $60,000 in the three months ended December 31, 1998. This increase
was due to an increase in the Company's outstanding debt from $2,000,000 at
December 31, 1998 to $6,075,000 at December 31, 1999. Interest income increased
66% to $213,000 in the three months ended December 31, 1999 from $129,000 in the
three months ended December 31, 1998 as a result of an increase in average total
cash and investment balances.

SIX MONTHS ENDED DECEMBER 31, 1999 COMPARED TO SIX MONTHS ENDED DECEMBER 31,
1998

Revenues for these periods consisted of net sales, research and development
revenue, and royalty income. Revenues increased 15% to $8,362,000 in the six
months ended December 31, 1999 from $7,266,000 in the six months ended December
31, 1998. Net sales of products increased 68% to $5,373,000 from $3,206,000 for
the six months ended December 31, 1999 and 1998, respectively. Research and
development revenues decreased 96% to $43,000 from $1,160,000 for the six months
ended December 31, 1999 and 1998, respectively. The increase in net sales was
attributable to an increase of 6F Angio-Seal commercial devices and increased
sales of commercial bioabsorbable OEM polymer and collagen products.



                                       10
<PAGE>   11
The Company is currently providing St. Jude with 6F Angio-Seal devices for the
European market. The Company expects St. Jude to commence manufacturing these
devices by the end of its fiscal year 2000. During the fiscal year ended June
30, 1999, St. Jude informed the Company that it would be performing all ongoing
research and development in-house. As such, research and development revenue has
significantly declined from the six month period ending December 31, 1998. The
Company does not expect research and development revenue to be a significant
revenue component in the future.

Royalty income increased 2% to $2,946,000 from $2,900,000 in the six months
ended December 31, 1999 and 1998, respectively.  The increase in royalty income
is primarily attributable to strong growth in the international markets due to
the 6F Angio-Seal sales. Royalty rates are based on volume of units sold and are
equivalent in both the domestic and foreign licensing agreements with St. Jude.

Cost of products sold increased 26% to $3,065,000 in the six months ended
December 31, 1999 from $2,439,000 in the six months ended December 31, 1998.
This increase reflects greater net sales of products offset by favorable trends
in gross margins. In addition, the significant increase in net sales brings the
Company closer to full utilization of its capacity and absorption of overhead,
resulting in a favorable gross margin trend.

Research and development expense, including regulatory and clinical expense,
decreased 7% to $2,640,000 in the six months ended December 31, 1999 from
$2,827,000 in the six months ended December 31, 1998. This decrease in expenses
is mainly attributable to the shift of almost all of the development for the
Angio-Seal to St. Jude as well as the commercialization of the 6F product. This
decrease is offset by the Company's continued development efforts in
revascularization technology, including clinical trials which it is currently
conducting for the AVS. The Company also continues to expand its development
efforts with respect to its biomaterials products, including absorbable polymers
and collagen. The Company expects research and development expense to increase
as it investigates and develops new products, conducts clinical trials and seeks
regulatory approval for its proprietary products.

Selling, general and administrative expense increased 20% to $1,340,000 in the
six months ended December 31, 1999 from $1,115,000 in the six months ended
December 31, 1998. This increase was primarily a result of higher litigation
costs related to the Company's ongoing patent infringement suit, as well as
increased marketing efforts related to the AVS.

Interest expense increased 85% to $233,000 in the six months ended December 31,
1999 from $126,000 in the six months ended December 31, 1998. This increase was
due to an increase in the Company's outstanding debt from $2,000,000 at December
31, 1998 to $6,075,000 at December 31, 1999. Interest income increased 66%, to
$437,000 in the six months ended December 31, 1999, from $263,000 in the six
months ended December 31, 1998 as a result of an increase in average total cash
and investment balances.

LIQUIDITY AND CAPITAL RESOURCES

Net cash used in the Company's operating activities was $728,000 and $396,000
during the six months ended December 31, 1999 and 1998, respectively. In the six
months ending December 31, 1999, changes in asset and liability balances
resulted in a net $2,995,000 use of cash, which was offset by a net income of
$1,519,000 and non-cash depreciation and amortization of $748,000. Changes in
asset and liability



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<PAGE>   12

balances resulted in a net $1,998,000 use of cash offset by net income of
$1,025,000 and non-cash depreciation and amortization of $576,000 in the six
months ending December 31, 1998.

The Company's cash, cash equivalents and short-term investments were $8,837,000
at December 31, 1999. In addition, the Company has $2,456,000 in restricted
investment accounts (not included in the $8,837,000). The Company has pledged
$1,949,000 in investments as collateral to secure bank loans made to employees
for the payment of taxes incurred by such employees as a result of their receipt
of Common Stock at the time of the initial public offering. In exchange for the
Company pledging this collateral, the employees have pledged their Common Stock
as collateral to the Company. The Company also has $507,000 in investments
restricted for capital spending through June 30, 2000 under the terms of a
Financing Agreement which provided a total of $5 million. Related to this
funding, the Company has a capital spending plan for fiscal year 2000 of which,
for the six months ended December 31, 1999, $1.7 million was expended primarily
on machinery, equipment and leasehold improvements. These expenditures were
related to the continued expansion of the Company's manufacturing capabilities,
principally its collagen and polymer product lines.

The Company received a $3.0 million royalty advance under the Licensing
Agreement upon receipt of FDA approval of the Angio-Seal in fiscal year 1997.
This royalty advance has been reduced in each period by 50% of the excess of
royalty income over minimum royalties stipulated within the Licensing
Agreements. During the six months ended December 31, 1999, the liability was
reduced to $0.

In November 1997, the Company acquired patents under a Patent Acquisition
Agreement in exchange for 200,000 shares of common stock and a series of eight
quarterly cash payments, which began on March 31, 1998, totaling $1.2 million.
The patents were recorded on the balance sheet at the value of the shares on the
date of the agreement plus the present value of the $1.2 million cash and any
legal and other related costs incurred to acquire such patents. The present
value of the cash payments ($1.1 million) was recorded on the balance sheet as
an obligation which was reduced to $0 during the six months ended December 31,
1999.

The Company plans 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 its revascularization technology and
biomaterials products.

The Company believes cash generated from operations as well as funds available
under financing arrangements with its bank will be sufficient to meet the
Company's operating and capital requirements for the next twelve months.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company's interest income and expense are most sensitive to changes in the
general level of interest rates. In this regard, changes in interest rates
affect the interest earned on the Company's cash, cash equivalents and
investments as well as interest paid on its debt.

The Company's investment portfolio consists primarily of high quality US
government securities and certificates of deposit with an average maturity of
one year or less. The Company mitigates default risk by investing in what it
believes 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, 1999, the Company's
total portfolio consisted of approximately $11.3 million of investments, all of
which had maturities within one year. Additionally, the Company generally holds
securities until maturity. Therefore, the Company does not expect its




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<PAGE>   13
results of operations or cash flows to be materially impacted due to a sudden
change in interest rates. The Company has $1,075,000 in fixed rate debt,
for which the risk would be an inability to refinance if rates decreased. The
remaining $5 million of the Company's debt fluctuates with the US treasury rate
and is therefore subject to increases in US interest rates. The estimated
potential reduction in earnings from a one-point increase in the Five Year US
treasury rate for the six months ended December 31, 1999 would have been
approximately $25,000.

YEAR 2000 COMPLIANCE

The Company is aware of computer program issues associated with existing
computer systems as the year 2000 has arrived.  The year 2000 problem is
pervasive and complex, as virtually every computer operation was affected in
some way by the rollover of the two-digit year value from 99 to 00. The issue is
whether computer systems and embedded controls properly recognized date
sensitive information when the year changed to 2000 ("Year 2000 Compliance
Issue"). Systems that did not properly recognize such information could have
resulted in system failures or miscalculations causing disruptions to operations
and normal business activities.

The Company has completed its assessment of potential year 2000 issues and the
associated potential risks. The Company has assessed the impact of the year 2000
issues and believes that its business products and services will not be
significantly impacted. The Company has identified all financial, informational
and operational systems and found that all critical processes incorporating
these systems are 2000 compliant. The Company is verifying the readiness of its
significant customers and suppliers, including St. Jude, through the
distribution of a questionnaire. This process was substantially completed as of
December 31, 1999. The Company does not warrant, however, that these companies'
year 2000 compliance activities will be completely successful. The Company
continues to monitor the situation and refine its contingency plans as
appropriate.

The Company began work on the computer Year 2000 Compliance Issue in fiscal year
1998. Software applications, hardware and related information and
non-information technologies have been upgraded or replaced to ensure that all
systems are Year 2000 compliant. Replacing hardware or software in this fashion
is considered a normal cost of doing business and is being expensed or
capitalized as appropriate. Management does not anticipate that the costs of
year 2000 compliance will have a material effect on the Company's results of
operations, cash flows or financial position. The Company does not presently
expect that its operations will be materially affected by problems with its
computer systems or those of third parties with whom it deals.

Statements contained in this Form 10-Q that are not historical facts are
forward-looking statements that are made pursuant to the Safe Harbor provisions
of the Private Securities Litigation Reform Act of 1995. The Company cautions
that a number of important factors could cause the Company's actual results for
fiscal year 2000 and beyond to differ materially from those in any
forward-looking statements made by, or on behalf of, the Company. These
important factors include, without limitation, the time, effort and priority
level that St. Jude attaches to the Angio-Seal and St. Jude's ability to
successfully manufacture, market and distribute the Angio-Seal, the Company's
ability to manufacture Angio-Seal components, the results of ongoing clinical
trials for the AVS and other products and timing of additional regulatory
approvals in the United States and in countries outside of Europe including
Japan, announcements of technological innovations or the introduction of new
products by the Company, its customers or its competitors, competition of
puncture closure and occluded SVG devices in general, general business
conditions in the healthcare industry and general economic conditions. Results
of operations in any past period should not be considered indicative of the
results to be expected for future periods. Fluctuations in operating results may
also result in fluctuations in the price of the common stock.



                                       13
<PAGE>   14
                         PART II - OTHER INFORMATION

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

         A.       Exhibits.

                  None

         B.       Reports on Form 8-K.

                  None

         C.       Financial Data Schedule



                                       14
<PAGE>   15


                                   SIGNATURES

         Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                                KENSEY NASH CORPORATION


Date:    February 14, 2000                      By: /s/ Wendy F. DiCicco
                                                    ----------------------------
                                                    Wendy F. DiCicco
                                                    Chief Financial Officer





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