<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, 2001

                                       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, 2002, there were outstanding 10,714,544 shares of
Common Stock, par value $.001, of the registrant.


<PAGE>
                             KENSEY NASH CORPORATION
                         QUARTER ENDED DECEMBER 31, 2001


                                      INDEX

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

         ITEM 1.  FINANCIAL STATEMENTS
                           Consolidated Balance Sheets
                             as of December 31, 2001 (Unaudited) and June 30, 2001.........................      3

                           Consolidated Statements of Operations
                             for the three and six months ended December 31, 2001
                             and 2000 (Unaudited)..........................................................      4

                           Consolidated Statements of Stockholders' Equity as of
                             December 31, 2001 (Unaudited) and June 30, 2001...............................      5

                           Consolidated Statements of Cash Flows
                             for the six months ended December 31, 2001 and 2000 (Unaudited)...............      6

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

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


PART II - OTHER INFORMATION

         ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.........................................................     18


SIGNATURES.................................................................................................     19
</TABLE>


                                       2


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


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


<TABLE>
<CAPTION>
                                                                               DECEMBER 31,
ASSETS                                                                             2001          JUNE 30,
CURRENT ASSETS:                                                                 (UNAUDITED)        2001
                                                                               ------------    ------------
<S>                                                                            <C>             <C>
  Cash and cash equivalents                                                    $  6,241,383    $  2,841,963
  Investments                                                                    25,716,804      24,164,887
  Trade receivables, net of allowance for doubtful accounts of $26,456
     and $1,000 at December 31, 2001 and June 30, 2001, respectively              2,412,362       4,623,456
  Royalties receivable                                                            2,356,539       2,270,091
  Officer loans                                                                   1,207,299       1,170,276
  Other receivables (including approximately $335,545 and $41,000 at
     December 31, 2001 and June 30, 2001, respectively, due from employees)         536,217         244,601
  Inventory                                                                       2,192,983       1,321,511
  Deferred tax asset, current portion                                             1,163,727       2,318,741
  Prepaid expenses and other                                                      1,050,254         512,099
                                                                               ------------    ------------

         Total current assets                                                    42,877,568      39,467,625
                                                                               ------------    ------------

PROPERTY, PLANT AND EQUIPMENT, AT COST:
  Leasehold improvements                                                          5,676,760       5,676,760
  Machinery, furniture and equipment                                             10,240,453       7,853,177
  Construction in progress                                                          863,483       1,606,181
                                                                               ------------    ------------

         Total property, plant and equipment                                     16,780,696      15,136,118
  Accumulated depreciation                                                       (7,027,365)     (6,105,575)
                                                                               ------------    ------------
         Net property, plant and equipment                                        9,753,331       9,030,543
                                                                               ------------    ------------

OTHER ASSETS:
  Restricted investments                                                          2,113,072       2,231,251
  Property under capital leases, net                                                                  1,525
  Deferred tax asset, non-current portion                                         2,105,837       2,125,407
  Acquired patents, net of accumulated amortization of $1,028,180 and
     $896,666 at December 31, 2001 and June 30, 2001, respectively                3,068,187       3,199,700
  Goodwill, net of accumulated amortization of $100,037 at December 31, 2001
     and June 30, 2001                                                            3,284,303       3,284,303
                                                                               ------------    ------------
         Total other assets                                                      10,571,399      10,842,186
                                                                               ------------    ------------

TOTAL                                                                          $ 63,202,298    $ 59,340,354

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Accounts payable                                                             $  1,446,737    $  1,891,484
  Accrued expenses                                                                  909,431         544,268
  Current portion of debt and capital lease obligations                             943,200         910,738
  Deferred revenue                                                                  232,194         123,352
                                                                               ------------    ------------

         Total current liabilities                                                3,531,562       3,469,842
                                                                               ------------    ------------

LONG TERM PORTION OF DEBT AND CAPITAL LEASE OBLIGATIONS                           1,829,026       2,309,385
                                                                               ------------    ------------

         Total liabilities                                                        5,360,588       5,779,227
                                                                               ------------    ------------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
  Preferred stock, $.001 par value, 100,000 shares authorized,
     no shares issued or outstanding at December 31, 2001 and June 30, 2001
  Common stock, $.001 par value, 25,000,000 shares authorized,
     10,713,384 and 10,509,431 shares issued and outstanding at
     December 31, 2001 and June 30, 2001,  respectively                              10,713          10,509
  Capital in excess of par value                                                 66,024,280      63,974,745
  Accumulated deficit                                                            (8,003,865)    (10,196,713)
  Accumulated other comprehensive income                                           (189,418)       (227,414)
                                                                               ------------    ------------

         Total stockholders' equity                                              57,841,710      53,561,127
                                                                               ------------    ------------

TOTAL                                                                          $ 63,202,298    $ 59,340,354
                                                                               ============    ============
</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,
                                                ----------------------------    ----------------------------
                                                     2001            2000            2001            2000
<S>                                             <C>             <C>             <C>             <C>
REVENUES:
  Net sales                                     $  4,257,699    $  3,096,225    $  8,850,878    $  5,680,965
  Research and development                           175,299         115,000         280,733         116,843
  Royalty income                                   2,358,267       1,925,471       4,570,100       3,922,455
                                                ------------    ------------    ------------    ------------
           Total revenues                          6,791,265       5,136,696      13,701,711       9,720,263
                                                ------------    ------------    ------------    ------------

OPERATING COSTS AND EXPENSES:
  Cost of products sold                            2,029,582       1,611,932       4,165,209       3,326,755
  Research and development                         2,366,136       1,578,222       5,110,663       3,215,272
  Selling, general and administrative                995,906         794,903       1,906,334       1,311,530
  In-process research and development charge                       7,593,597                       7,593,597
                                                ------------    ------------    ------------    ------------
           Total operating costs and expenses      5,391,624      11,578,654      11,182,206      15,447,154
                                                ------------    ------------    ------------    ------------
INCOME (LOSS) FROM OPERATIONS                      1,399,641      (6,441,958)      2,519,505      (5,726,891)
                                                ------------    ------------    ------------    ------------

OTHER INCOME:
  Interest income                                    478,985         480,360         955,070       1,019,062
  Interest expense                                   (59,610)        (75,907)       (120,234)       (101,610)
  Other                                               (2,275)            400          (6,481)            400
                                                ------------    ------------    ------------    ------------
           Total other income - net                  417,100         404,853         828,355         917,852
                                                ------------    ------------    ------------    ------------
INCOME (LOSS) BEFORE INCOME TAXES                  1,816,741      (6,037,105)      3,347,860      (4,809,039)
Income tax expense                                  (626,776)                     (1,155,012)
                                                ------------    ------------    ------------    ------------
NET INCOME (LOSS)                               $  1,189,965    $ (6,037,105)   $  2,192,848    $ (4,809,039)
                                                ============    ============    ============    ============

BASIC EARNINGS (LOSS) PER SHARE                 $       0.11    $      (0.58)   $       0.21    $      (0.46)
                                                ============    ============    ============    ============
DILUTED EARNINGS (LOSS) PER SHARE               $       0.11    $      (0.58)   $       0.20    $      (0.46)
                                                ============    ============    ============    ============

WEIGHTED AVERAGE COMMON
  SHARES OUTSTANDING                              10,664,773      10,459,568      10,601,932      10,457,993
                                                ============    ============    ============    ============

DILUTED WEIGHTED AVERAGE COMMON
  SHARES OUTSTANDING                              11,322,039      10,459,568      11,207,860      10,457,993
                                                ============    ============    ============    ============
</TABLE>


See notes to consolidated financial statements.



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

<Table>
<Caption>
                                                                                         ACCUMULATED
                                                               CAPITAL                       OTHER     COMPREHENSIVE
                                           COMMON STOCK       IN EXCESS    ACCUMULATED  COMPREHENSIVE     INCOME /
                                        -------------------    OF PAR        DEFICIT    (LOSS) / GAIN      (LOSS)       TOTAL
                                          SHARES    AMOUNT      VALUE
<S>                                     <C>         <C>      <C>           <C>           <C>            <C>           <C>
BALANCE, JUNE 30, 1999                   7,470,710  $ 7,470  $37,697,452   $(18,562,619)  $(241,402)                  $18,900,901
 Shares issued upon Secondary Offering   2,959,000    2,959   26,247,007                                               26,249,966
 Secondary Offering costs                                       (501,241)                                                (501,241)
 Exercise of stock options                  25,789       26      246,824                                                  246,850
 Net income                                                                   4,749,164                 $4,749,164      4,749,164
 Comprehensive loss                                                                        (241,284)      (241,284)      (241,284)
                                                                                                        ----------
 Comprehensive income                                                                                   $4,507,880
                                                                                                        ==========
                                        ----------  -------   ----------    ------------   --------                    ----------
BALANCE, JUNE 30, 2000                  10,455,499   10,455   63,690,042    (13,813,455)   (482,686)                   49,404,356
                                        ----------  -------   ----------    ------------   --------                    ----------
 Secondary Offering costs                                       (212,681)                                                (212,681)
 Exercise of stock options                  53,932       54      497,384                                                  497,438
 Net income                                                                   3,616,742                 $3,616,742      3,616,742
 Comprehensive gain                                                                         255,272        255,272        255,272
                                                                                                        ----------
 Comprehensive income                                                                                   $3,872,014
                                        ----------  -------  -----------   -------------  ---------     ==========    -----------
BALANCE, JUNE 30, 2001                  10,509,431  $10,509  $63,974,745   $(10,196,713)  $(227,414)                  $53,561,127
                                        ----------  -------  -----------   -------------  ---------                   -----------
 Exercise of stock options                 203,953      204    2,049,535                                                2,049,739
 Net income                                                                   2,192,848                 $2,192,848      2,192,848
 Comprehensive loss                                                                          37,996         37,996         37,996
                                                                                                        ----------
 Comprehensive income                                                                                   $2,230,844
                                        ----------  -------  -----------   -------------  ---------     ==========    -----------
BALANCE, DECEMBER 31, 2001              10,713,384  $10,713  $66,024,280   $ (8,003,865)  $(189,418)                  $57,841,710
                                        ==========  =======  ===========   =============  =========                   ===========
</Table>



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

<Table>
<Caption>
                                                                        SIX MONTHS ENDED
                                                                            DECEMBER 31,
                                                                   -----------------------------
                                                                       2001            2000
<S>                                                                <C>             <C>
OPERATING ACTIVITIES:
  Net income (loss)                                                $  2,192,848    $ (4,809,039)
  Adjustments to reconcile net income (loss) to net cash used in
       operating activities:
       Depreciation and amortization                                  1,054,828         934,783
       In-process research and development charge                                     7,593,597
  Changes in assets and liabilities which provided (used) cash:
       Accounts receivable                                            1,796,007          84,944
       Deferred tax asset                                             1,174,584
       Prepaid expenses and other current assets                       (538,155)       (105,586)
       Inventory                                                       (871,472)       (350,382)
       Accounts payable and accrued expenses                            (79,584)       (589,706)
       Deferred revenue                                                 108,842        (288,850)
                                                                   ------------    ------------
        Net cash provided by operating activities                     4,837,898       2,469,761
                                                                   ------------    ------------

INVESTING ACTIVITIES:
  Additions to property, plant and equipment                         (1,644,578)     (1,248,063)
  Acquisition of THM Biomedcal, Inc.                                                 (6,771,087)
  Redemption of investments                                           9,535,000
  Purchase of investments                                           (10,930,742)     (4,153,462)
                                                                   ------------    ------------
        Net cash used in investing activities                        (3,040,320)    (12,172,612)
                                                                   ------------    ------------

FINANCING ACTIVITIES:
  Principal payments under capital leases                                (1,937)         (5,898)
  Repayments of long term debt                                         (445,960)       (186,088)
  Secondary offering costs                                                             (212,326)
  Exercise of stock options                                           2,049,739          37,137
                                                                   ------------    ------------
        Net cash provided by (used in) financing activities           1,601,842        (367,175)
                                                                   ------------    ------------

 INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                     3,399,420     (10,070,026)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                        2,841,963      24,117,502
                                                                   ------------    ------------

CASH AND CASH EQUIVALENTS, END OF PERIOD                           $  6,241,383    $ 14,047,476
                                                                   ============    ============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  Cash paid for interest                                           $    120,234    $    101,610
                                                                   ============    ============
  Cash paid for income taxes                                       $     80,000    $
                                                                   ============    ============

</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 at December 31, 2001, the consolidated
    statements of operations for the three and six months ended December 31,
    2001 and 2000 and the consolidated statements of cash flows for the six
    months ended December 31, 2001 and 2000 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,
    2001 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 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 June 30, 2001 consolidated financial statements filed with the
    Securities and Exchange Commission on Form 10-K. The results of operations
    for the period ended December 31, 2001 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 and Kensey Nash Holding Company. All intercompany transactions
    and balances have been eliminated. Kensey Nash Holding Company, incorporated
    in Delaware on January 8, 1992, was formed to hold title to certain Company
    patents and has no operations.

    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 date of the financial statements, as well as
    the reported amounts of revenue and expense during the period.

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

    EXPORT SALES
    There were $104,617 and $264,489 in export sales from the Company's U.S.
    operations to unaffiliated customers in Europe in the three and six months
    ended December 31, 2001, respectively. There were no export sales in the
    three and six months ended December 31, 2000.

    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. Revenue under research and development 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 royalty (historically 12%, became 9% in October 2000
    when a cumulative 1,000,000 units had been sold) on every Angio-Seal unit
    sold by our partner, St. Jude Medical. We recognize the 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 us of their
    total Angio-Seal sales dollars for the month. Royalty payments are received
    within 45 days of the end of each calendar quarter.



                                       7
<PAGE>


    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.

    COMPREHENSIVE INCOME
    The Company accounts for comprehensive income under the provisions of SFAS
    No. 130, Reporting Comprehensive Income (SFAS 130). Accordingly, accumulated
    other comprehensive loss is shown in the consolidated statements of
    shareholders' equity at December 31, 2001, June 30, 2001, 2000 and 1999, and
    is solely comprised of unrealized gains and losses on the Company's
    available-for-sale securities. The tax effect of other comprehensive income
    for the six months ended December 31, 2001 and for the fiscal years ended
    June 30, 2001 and 2000 was $98,000, $117,000 and $0, respectively.

    RECENT PRONOUNCEMENTS
    In June 2001 the Financial Accounting Standards Board (FASB) issued SFAS No.
    141, Business Combinations (SFAS 141), and SFAS No. 142, Goodwill and Other
    Intangible Assets (SFAS 142), which were effective July 1, 2001 for the
    Company, as the Company early adopted 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. SFAS 142 requires that
    goodwill and intangible assets with indefinite useful lives no longer be
    amortized upon adoption of this standard, but instead be tested for
    impairment at least annually. Intangible assets with definite useful lives
    will continue to be amortized over their respective useful lives. The
    Company recorded $100,036 in goodwill amortization expense for the year
    ended June 30, 2001. Goodwill amortization expense for the year ending June
    30, 2002 would have been $205,111 if the Company had decided not to early
    adopt SFAS 142. 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 in the impairment
    of any intangible assets. In accordance with the provisions of SFAS 142,
    the Company has done an evaluation of goodwill for impairment and determined
    that no impairment has occurred as of December 31, 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), which will both be effective for the Company's
    fiscal year beginning July 1, 2002. The Company is currently evaluating all
    of the provisions of SFAS 143 and SFAS 144 and is, therefore, not presently
    able to quantify the impact of adoption.

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:

                                   DECEMBER 31,       JUNE 30,
                                       2001             2001
                                   ------------       ----------

          Raw materials              $1,726,634       $1,062,626
          Work in process               466,349          240,451
          Finished Goods                                  18,434
                                     ----------       ----------
          Total                      $2,192,983       $1,321,511
                                     ==========       ==========

NOTE 3 -- COMMITMENTS AND CONTINGENCIES
    As of December 31, 2001, the Company has pledged $2,113,072 in investments
    as collateral to secure certain bank loans to officers which were used by
    such officers 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, each
    affected officer has pledged their Common Stock as collateral to the
    Company. The loans are repayable at the sooner of the sale of the officer's
    stock or December 2002. The balance outstanding on such officer loans was
    $2,030,620 at December 31, 2001.


                                       8
<PAGE>

NOTE 4 -- INCOME TAXES

    As of June 30, 2001, the Company had net operating loss (NOL) carryforwards
    for federal and state tax purposes totaling $5.4 and $20.0 million,
    respectively. A portion of the NOL may be subject to various statutory
    limitations as to its usage.

    The Company recognized income tax expense for the first time in the quarter
    ended September 30, 2001 as a result of the recognition of a tax benefit in
    fiscal year 2001 related to the realization of certain deferred tax assets
    which had previously been offset by a valuation allowance.

NOTE 5 -- THM ACQUISITION

    On September 1, 2000 the Company acquired THM Biomedical, Inc. (THM), a
    developer of porous, biodegradable, tissue-engineering products 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 $281,000 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 available borrowing rate of 7.5%) of
    $3.8 million was recorded as a liability on the Company's financial
    statements, with a remaining balance of $2.8 million at December 31, 2001.

    The acquisition has been accounted for under the purchase method of
    accounting and THM's results of operations are included in those of the
    Company since the date of acquisition. The purchase price has been allocated
    to the assets acquired and liabilities assumed based on their estimated fair
    values on the date of acquisition. The allocation has resulted in goodwill
    of approximately $3.4 million, which was originally being amortized, on a
    straight-line basis over 17 years. The following is a summary of the
    allocation (in thousands):

    Assets                                               $   400
    Accrued expenses and other liabilities                  (702)
    In-process research and development                    7,594
    Excess of cost over net assets acquired (goodwill)     3,384
                                                         -------
                                                         $10,676
                                                         =======

    A significant portion of the purchase price was identified as acquired
    in-process research and development (IPR&D). The valuation of IPR&D was
    performed in an independent appraisal using proven valuation procedures and
    techniques and represents the estimated fair market value based on
    risk-adjusted cash flows related to the IPR&D programs. The IPR&D consists
    of four primary research and development programs that are expected to reach
    completion between late 2002 and 2005. At the date of acquisition, the
    development of these programs had not yet reached technological feasibility
    and the IPR&D had no alternative future uses. Accordingly, these costs were
    immediately expensed in the consolidated statement of operations on the
    acquisition date.

    The following unaudited pro-forma financial information assumes that the
    acquisition had occurred as of the beginning of the earliest period
    presented:

                                        SIX MONTHS             SIX MONTHS
                                           ENDED                  ENDED
                                         12/31/01               12/31/00
                                        ------------           ------------
    Total revenue                       $ 13,701,711           $ 10,987,158
                                        ============           ============
    IPR&D Charge                        $      --              $ (7,593,597)
                                        ============           ============
    Net income                          $  2,192,848           $ (3,834,430)
                                        ============           ============
    Basic earnings per share            $       0.21           $      (0.37)
                                        ============           ============
    Diluted earnings per share          $       0.20           $      (0.37)
                                        ============           ============



                                       9
<PAGE>

    These pro forma results are based on certain assumptions and estimates. The
    pro forma results do not necessarily represent results that would have
    occurred if the acquisition had taken place at the beginning of the
    specified periods, nor are they indicative of the results of future combined
    operations.


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.

OVERVIEW

We were founded in 1984 and our common stock became publicly traded in December
1995. We have been profitable in our last sixteen fiscal quarters (excluding the
one time IPR&D charge taken in our second quarter of fiscal year 2001).

Revenues

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

Net Sales. Net sales is comprised of absorbable biomaterials products and
Angio-Seal(TM)devices we manufactured and sold to St. Jude Medical.

         Biomaterials. The biomaterials component of net sales represents the
         sale of our biomaterials products to customers for use in the following
         markets: orthopedics, cardiology, drug/biologics delivery, dental 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 brought in new customers, increased sales to those customers over
         the past four years, assisted in the development of new product
         offerings and expanded our marketing activities. We believe this growth
         will continue because of greater acceptance by the medical community of
         biomaterials and technological advances which have expanded the
         applications for our biomaterials products. In the three and six months
         ended December 31, 2001, the Angio-Seal components represent only 33%
         and 38% of our total biomaterial sales, respectively.

         Angio-Seal. In August 2000, St. Jude Medical transitioned the
         manufacturing of 6F Angio-Seal devices from Kensey Nash to their
         facility. We do not expect any revenue from the manufacture of
         completed Angio-Seal devices in the future. The manufacture of the 6F
         Angio-Seal represented $358,000, or 6% of our total net sales for the
         six months ended December 31, 2000. For the six months ended December
         31, 2001, we experienced 56% growth in our net sales despite the loss
         of the 6F Angio-Seal device manufacturing business.

Research and Development Revenue. Research and development revenue in the three
and six months ended December 31, 2000 was derived from a National Institute of
Standards & Technology (NIST) grant, under which we are researching cartilage
regeneration utilizing our porous tissue matrix (PTM) technology. This project
will continue through early fiscal year 2003. This grant was acquired in
conjunction with our acquisition of THM in September 2000. 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 project 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. As a result, royalty income will continue to be a
significant source of revenue. The unit growth for the three and six months
ended December 31, 2001 over the three and six months ended December 31, 2000
was partially offset by the reduction in our royalty rate, from 12% to 9%, in
accordance with our licensing agreements. This rate reduction occurred 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. We anticipate this next
reduction will not occur until fiscal year 2005.



                                       10
<PAGE>
Cost of Products Sold. We have experienced an overall increase in gross margin
during the three and six months ended December 31, 2001 reflecting the higher
volume of our biomaterials products and the elimination of lower margin
Angio-Seal device sales. This increase in sales volume allows us to spread our
fixed costs of manufacturing over a greater number of units. We anticipate our
gross margin will continue to improve as our biomaterials sales levels increase
and our product mix becomes more favorable.

Research and Development Expense. Research and development expense consists of
expenses incurred for the development of our proprietary technologies such as
the TriActiv(TM) system, absorbable biomaterials products and technologies and
other development programs, including expenses under the NIST program. While we
no longer perform research and development on the Angio-Seal, the progression of
the TriActiv system into the clinical trial phase and our continued development
of proprietary biomaterials products and technologies has offset this decrease.
In January 2002, we received CE Mark approval from the European regulatory
authority for the TriActiv system, which allows commercial sale of the product
in the European union. 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.

Selling, General and Administrative. Selling, general and administrative
expenses include general and administrative costs as well as costs related to
the marketing of our products. During the three and six months ended December
31, 2001 and 2000, the costs of our patent litigation are also included within
selling, general and administrative expenses. The marketing component of
selling, general and administrative expenses has increased as we move toward
commercialization of the TriActiv system in both Europe and the United States.
We received CE Mark approval for the TriActiv System in January 2002. During the
quarter ended December 31, 2001 we established a subsidiary in Germany and hired
a Vice President of European sales. We will continue to add personnel to our
European marketing team as we will be selling the TriActiv system direct to the
market in Germany and are in the process of identifying distributors for the
rest of Europe. We anticipate sales and marketing expenses will continue to
increase as we will launch the product in Europe in our fourth fiscal quarter of
2002. We also continue to evaluate opportunities for commercialization of the
TriActiv system in the United States and expand the marketing efforts for our
biomaterials business.

RESULTS OF OPERATIONS

COMPARISON OF THREE MONTHS ENDED DECEMBER 31, 2001 AND 2000

Revenues. Revenues increased 32% to $6.8 million in the three months ended
December 31, 2001 from $5.1 million in the three months ended December 31, 2000.
Net sales of products increased 38%, to $4.3 million from $3.1 million for the
three months ended December 31, 2001 and 2000, respectively. Net sales for the
three months ended December 31, 2001 and 2000 consisted entirely of biomaterials
sales. The final shipment of Angio-Seal devices was made in the three months
ended September 30, 2000.

Research and Development Revenues. Research and development revenues increased
52% to $175,000 from $115,000 for the three months ended December 30, 2001 and
2000, respectively. Prior year revenues were generated under the NIST articular
cartilage development grant acquired in conjunction with the THM acquisition.
The increase over the prior year reflects the addition of a second NIST grant
for synthetic vascular graft research in October 2001.

Royalty Income. Royalty income increased 22% to $2.4 million from $1.9 million
in the three months ended December 31, 2001 and 2000, respectively. This
increase was achieved despite the contractual 25% reduction in the Angio-Seal
royalty rate from 12% to 9% during the quarter ended December 31, 2000 and
reflects a greater number of units sold as well as an increase in average
selling price for the Angio-Seal. Royalty units increased 34% as approximately
153,000 Angio-Seal units were sold to end-users during the three months ended
December 31, 2001 compared to approximately 114,000 units sold during the three
months ended December 31, 2000. This unit increase was due to St. Jude Medical's
increased sales and marketing efforts and continued strong sales of the 6F and
8F Angio-Seal in the worldwide market.

Cost of Products Sold. Cost of products sold increased 26% to $2.0 million in
the three months ended December 31, 2001 from $1.6 million in the three months
ended December 31, 2000. While overall cost of products sold increased,




                                       11
<PAGE>

gross margin also increased to 52% from 48%. This increase reflects the higher
margins on our biomaterials products as well as continued allocation of overhead
across greater sales volumes, which results in a decrease in per unit costs.

Research and Development Expense. Research and development expense increased 50%
to $2.4 million in the three months ended December 31, 2001 from $1.6 million in
the three months ended December 31, 2000. This increase was mainly attributable
to our continued development efforts on the TriActiv system, including clinical
trial expenses. We also continued to expand our development efforts on our
biomaterials products including our work under the NIST articular cartilage
development grant. 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 25% to $996,000 in the three months ended December 31, 2001 from
$795,000 in the three months ended December 31, 2000. This increase was
primarily the result of sales and marketing expenses which increased to $325,000
in the three months ended December 31, 2001 from $190,000 in the three months
ended December 31, 2000 related to primarily to increased marketing efforts on
the TriActiv system. In addition, general and administrative expenses increased
$69,000, to $655,000 in the three months ended December 31, 2001 from $586,000
in the three months ended December 31, 2000. This was primarily attributable to
$65,000 of increased personnel costs in our human resources, management
information systems (MIS) and finance departments to support our continued
growth. Litigation expenses for our patent infringement suit, which are included
in selling, general and administrative expense, decreased to $16,000 for the
three months ended December 31, 2001 from $19,000 from the three months ended
December 31, 2000.

Net Interest Income. Interest expense decreased 21% to $60,000 in the three
months ended December 31, 2001 from $76,000 in the three months ended December
31, 2000. This decrease was the result of a lower principal balance on the THM
Biomedical acquisition obligation as we have made four quarterly payments to
date. Interest income decreased slightly to $479,000 in the three months ended
December 31, 2001 from $480,000 in the three months ended December 31, 2000.
Although our cash and investment balances have increased, this has been offset
by lower interest rates.

Other Non-Operating Income (Expense). Other non-operating expense was $2,000 for
the three months ended December 31, 2001 and represents a loss on the disposal
of fixed assets.

Net Income. Net income increased to $1.2 million in the three months ended
December 31, 2001 from a net loss of $6.0 million in the three months ended
December 31, 2000. Net income for the three months ended December 31, 2001 was
the result of $1.8 million of income before income taxes and a $627,000 charge
for income taxes. This is our second quarter of recognizing income tax expense
as a result of the recognition of a tax benefit in fiscal year 2001 related to
the realization of certain deferred tax assets which had previously been offset
by a valuation allowance. The $6.0 million net loss for the three months ended
December 31, 2000 was the result of the $7.6 million IPR&D charge. Prior to this
charge, net income would have been $1.6 million. There was no income tax expense
for this period.


COMPARISON OF SIX MONTHS ENDED DECEMBER 31, 2001 AND 2000

Revenues. Revenues increased 41% to $13.7 million in the six months ended
December 31, 2001 from $9.7 million in the six months ended December 31, 2000.
Net sales of products increased 56%, to $8.9 million from $5.7 million for the
six months ended December 31, 2001 and 2000, respectively. Biomaterials sales
increased 60%, as the $8.9 million of sales for the six months ended December
31, 2001 were entirely biomaterials sales compared to $5.3 million in the six
months ended December 31, 2000. The six months ended December 2000 included
$358,000 of Angio-Seal device sales to St. Jude Medical. St. Jude Medical
transitioned the manufacturing of these devices to their facility in August
2000.

Research and Development Revenues. Research and development revenues increased
40% to $281,000 from $117,000 for the six months ended December 30, 2001 and
2000, respectively. Prior year revenues were generated under the NIST articular
cartilage development grant acquired in conjunction with the THM acquisition.



                                       12
<PAGE>

The increase over the prior year reflects the addition of a second NIST grant
for synthetic vascular graft research in October 2001.

Royalty Income. Royalty income increased 17% to $4.6 million from $3.9 million
in the six months ended December 31, 2001 and 2000, respectively. This increase
was achieved despite the contractual 25% reduction in the Angio-Seal royalty
rate, from 12% to 9%, during the quarter ended December 31, 2000 and reflects a
greater number of units sold as well as an increase in average selling price for
the Angio-Seal. Royalty units increased 38% as approximately 292,000 Angio-Seal
units were sold to end-users during the six months ended December 31, 2001
compared to approximately 211,000 units sold during the six months ended
December 31, 2000. This unit increase was due to St. Jude Medical's increased
sales and marketing efforts and continued strong sales of the 6F and 8F
Angio-Seal in the worldwide market.

Cost of Products Sold. Cost of products sold increased 25% to $4.2 million in
the six months ended December 30, 2001 from $3.3 million in the six months ended
December 31, 2000. While overall cost of products sold increased, gross margin
also increased to 53% from 41%. This increase reflects the high margins on our
biomaterials products as well as continued allocation of overhead across greater
sales volumes, which results in a decrease in per unit costs.

Research and Development Expense. Research and development expense increased to
59% to $5.1 million in the six months ended December 31, 2001 from $3.2 million
in the six months ended December 31, 2000. This increase was mainly attributable
to our continued development efforts on the TriActiv system, including clinical
trial expenses. We also continued to expand our development efforts on our
biomaterials products including our work under the NIST articular cartilage and
synthetic vascular graft development grants. 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 45% to $1.9 million in the six months ended December 31, 2001 from
$1.3 million in the six months ended December 31, 2000. This increase was
primarily the result of sales and marketing expenses which increased to $591,000
in the six months ended December 31, 2001 from $267,000 in the six months ended
December 31, 2000 related primarily to increased marketing efforts on the
TriActiv system as we prepare for the commercial launch of this product in
Europe in the fourth fiscal quarter of 2002 and continue to evaluate our market
strategy for the U.S. In addition, general and administrative expenses increased
24%, or $246,000, to $1.3 million in the six months ended December 31, 2001 from
$1.0 million in the six months ended December 31, 2000. This was attributable to
$170,000 of increased personnel costs in our human resources, management
information systems (MIS) and finance departments to support our continued
growth. Litigation expenses for our patent infringement suit increased to
$50,000 for the six months ended December 31, 2001 from $4,000 from the six
months ended December 31, 2000. These costs related to our motion for
reconsideration of prior orders and subsequent filing of appeal, which occurred
in November 2001.

Net Interest Income. Interest expense increased 18% to $120,000 in the six
months ended December 31, 2001 from $102,000 in the six months ended December
31, 2000. This increase was the result of interest expense on the THM Biomedical
acquisition obligation for a full six months in the current year as opposed to
four months of expense in the prior year. Interest income decreased slightly to
$955,000 in the six months ended December 31, 2001 from $1.0 million in the six
months ended December 31, 2000. Although our cash and investment balances have
increased, this has been offset by lower interest rates.

Other Non-Operating Income (Expense). Other non-operating expense was $6,000 for
the six months ended December 31, 2001 and represents a loss on the disposal of
fixed assets.

Net Income. Net income increased to $2.2 million in the six months ended
December 31, 2001 from a net loss of $4.8 million in the six months ended
December 31, 2000. Net income for the six months ended December 31, 2001 was the
result of $3.3 million of income before income taxes and a $1.2 million charge
for income taxes. This is our first fiscal year of recognizing income tax
expense as a result of the recognition of a tax benefit in fiscal year 2001
related to the realization of certain deferred tax assets which had previously
been offset by a valuation allowance. The $4.8 million net




                                       13
<PAGE>

loss for the six months ended December 31, 2000 was the result of the $7.6
million IPR&D charge. Prior to this charge, net income would have been $2.8
million. There was no income tax expense for this period.


LIQUIDITY AND CAPITAL RESOURCES

Net cash provided by our operating activities was $4.8 million and $2.5 million
in the six months ended December 31, 2001 and 2000, respectively. 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. In the six months ended December
31, 2000, changes in asset and liability balances used $1.2 million of cash. The
net loss of $4.8 million was offset by the $7.6 million and $935,000 non-cash
charges for the write-off of in-process research and development and
depreciation and amortization, respectively.

Our cash, cash equivalents and short-term investments were $32.0 million at
December 31, 2001. In addition, we had $2.1 million in restricted investment
accounts. We have pledged $2.1 million in investments as collateral to secure
bank loans made to employees to pay taxes incurred by these employees when they
received common stock at the time of our initial public offering. In exchange
for our pledging this collateral, the employees have pledged their common stock
to us as collateral.

We have a $4.1 million capital spending plan for fiscal 2002, of which $1.6
million has been spent primarily on machinery and equipment. These expenditures
are related to the continued expansion of our manufacturing capabilities for our
biomaterials and TriActiv product lines.

We have a $2.8 million obligation to the shareholders of THM Biomedical, Inc., a
company we acquired in September 2000 (see below). 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 to expand our facilities to accomodate the
manufacturing of the TriActiv and our expanding base of biomaterials products
and to continue to expand research and development activities, particularly for
the TriActiv system 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
fiscal 2003. 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 record profits 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 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 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 under the caption "Risks Related to Our Business " as well as in our
annual report on form 10-K generally.

ACQUISITION OF THM BIOMEDICAL, INC. AND IN-PROCESS RESEARCH AND DEVELOPMENT
CHARGE

On September 1, 2000 we acquired THM Biomedical, Inc. (THM), a developer of
porous, biodegradable, tissue-engineering products for the repair and
replacement of muskuloskeletal 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



                                       14
<PAGE>

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 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
$2.8 million at December 31, 2001.

The $7.6 million IPR&D charge represented the estimated fair value of purchased
in-process technology which had not yet reached technological feasibility and
had no alternative future use and was comprised of the following projects:
Articular Cartilage ($5.4 million), Bone Fusion ($389,000), Other Bone
Applications ($261,000), and Drug Delivery ($1.5 million). Each of the four
projects utilizes the core open-cell poly lactic acid (OPLA) technology, a
porous tissue matrix (PTM) technology developed by THM. PTM technology
facilitates wound healing in both bone and soft tissue and is bioabsorbable at
controlled rates for specific functions and tissues. Each of the IPR&D projects
utilizes these properties of the PTM technology to address its respective
market. For example, the articular cartilage project uses the PTM technology as
the foundation for an articular cartilage repair and regrowth product. The total
IPR&D value was determined by estimating the stage of completion of each IPR&D
project at the date of the acquisition, estimating the costs to develop each
IPR&D project into commercially viable products, estimating the resulting net
cash flows from such projects, and discounting the net cash flows back to their
present values. The discount rate in each project takes into account the
uncertainty surrounding the successful development and commercialization of the
purchased in-process technology.

The stage of completion for all projects ranged from 48% to 72% as of the
acquisition date with the weighted average completion rate approximately 56%. As
of that date, the estimated costs to bring the projects under development to
technological feasibility and through clinical trials were approximately $7.3
million.

Since the date of the acquisition, as planned, we have primarily devoted our
development efforts of PTM technology to the articular cartilage application and
have expended $545,000 on such efforts through December 31, 2001. In addition,
in October 2001 we received regulatory approval for a proprietary PTM based
product, Improvise, which is a cement flow restrictor, with applications in the
orthopedics market. We are also seeking regulatory approval on a second
proprietary PTM based orthopedic product.

The net cash flows from IPR&D projects were based on management's best estimates
of revenue, cost of sales, research and development costs, general and
administrative costs, and income taxes from such projects. These estimates were
determined considering our historical experience and industry trends and
averages. The cash flow estimates from sales of products incorporating these
technologies are expected to commence between the fiscal years 2003 and 2005,
depending on the project, with revenue growth rates in the 50% range in the
immediate years following worldwide market launch, declining to the 5% range as
each market nears maturity. These projections were based on our best estimates
of market size and growth, expected trends in technology and the nature and
expected timing of new product introductions by us and our competitors. The cash
flows from revenues in each period are reduced by related expenses, capital
expenditures, the cost of working capital and an assigned contribution to the
core technology serving as a foundation for the research and development.

The discount rates used in discounting the net cash flows from purchased
in-process technology were 80% for articular cartilage, 85% for bone fusion, 78%
for other bone applications and 83% for drug delivery. These discount rates for
each project were determined upon consideration of the stage of completion of
the project, the assumptions, nature and timing of the remaining efforts for
completion and risks and uncertainties of the project.

Substantial further research and development, pre-clinical testing and clinical
trials will be required to determine the technical feasibility and commercial
viability of the products under development. There can be no assurance such
efforts will be successful. If these projects are not successfully developed,
our revenue and profitability may be adversely affected in future periods. We
are continuously monitoring our development projects and believe that the
assumptions used in the valuation of purchased in-process technology reasonably
estimate the future benefits attributable to such purchased in-process
technology. No assurance can be given that actual results will not deviate from
those assumptions in future periods.



                                       15
<PAGE>

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 as well as interest paid on
our debt.

Our investment portfolio consists primarily of high quality U.S. government
securities and certificates of deposit with an average maturity of eight 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, 2001, our total portfolio consisted of
approximately $25.8 million of investments, with maturities ranging from one to
fifteen years. Additionally, we generally hold securities until the earlier of
their call 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 have $2.8 million in outstanding debt at December 31, 2001
related to the acquisition of THM.

FORWARD-LOOKING STATEMENTS AND FACTORS THAT MAY AFFECT FUTURE RESULTS

This document and other documents we have filed with the Securities and Exchange
Commission (SEC) have forward-looking statements. In addition, our senior
management may make forward-looking statements orally to analysts, investors,
the media and others. Forward-looking statements might include one or more of
the following:

-  Projections of revenues, income earnings per share, capital expenditures,
   capital structure or other financial items;
-  Descriptions of plans or objectives of management for future operations,
   products or services, including future acquisition objectives;
-  Forecasts of future economic performance; and
-  Descriptions of assumptions underlying or relating to any of the foregoing

Forward-looking statements can be identified by the fact that they do not relate
strictly to historical or current facts. They often include words such as
"believe", "expect", "anticipate", "intend", "plan", "estimate", or words of
similar meaning, or future conditional verbs such as "will", "would", "should",
"could" or "may". Such statements give our expectations or predictions of future
conditions, events or results. They are not guarantees of future performance. By
their nature, forward-looking statements are subject to risks and uncertainties.
There are a number of factors, many of which are beyond our control, that could
cause actual conditions, events or results to differ significantly from those
described in the forward-looking statements. Some of these factors are described
as "Risks Related to our Business" below. Factors relating to the regulation and
supervision of our company are also described or incorporated in our Annual
Report on Form 10-K filed with the SEC. There are other factors besides those
described or incorporated in this report or in the Form 10-K that could cause
actual conditions, events or results to differ from those in the forward-looking
statements.

Forward-looking statements speak only as of the day they are made. We do not
undertake to publicly update or revise forward-looking statements to reflect
circumstances or events that occur after the date the forward-looking statements
are made.

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:

-  the continued growth and success of our biomaterials products;
-  our dependence on our biomaterials customers for marketing and obtaining
   regulatory approval for their products;
-  successful commercialization of the Tri-Activ system in the European
   community;



                                       16
<PAGE>

-  our ability to obtain regulatory approval for the TriActiv system in the
   United States;
-  subsequent to regulatory approval, the successful commercialization of 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 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 failure to expand our management systems and controls to support
   anticipated growth;
-  the ownership of our stockholders may be diluted 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.

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. We caution that a
number of important factors could cause our actual results for fiscal year 2002
and beyond to differ materially from those in any forward-looking statements
made by us or on our behalf. These important factors include, without
limitation, the success of our biomaterials products, our ability to obtain the
necessary regulatory approvals for, fund and commercialize the TriActiv system,
the success of St. Jude Medical in manufacturing, marketing and distributing the
Angio-Seal product line, the ability of our customers to market and obtain
regulatory approvals for their biomaterials products, the acceptance of our
products by the medical community, our ability to maintain key vendors and
personnel, competition in our markets, general business conditions in the
healthcare industry and general economic conditions. 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>


PART II - OTHER INFORMATION

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

A. Exhibits.

   10.15 Form of Executive Officer Employment Agreement

B. Reports on Form 8-K.

   None




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<PAGE>


                                   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, 2002                By:  /s/ Wendy F. DiCicco
                                              ----------------------------------

Wendy F. DiCicco
Chief Financial Officer







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