<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: SEPTEMBER 30, 2003

                                       OR

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

            For the Transition Period From __________ to __________.


                         Commission File Number: 0-27120


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


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


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


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


         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X   No
                                             ---    ---

         Indicate by check mark whether the registrant is an accelerated filer
(as defined in rule 12b-2 of the Exchange Act ). Yes X   No
                                                    ---    ---

         As of October 31, 2003, there were 11,465,125 outstanding shares of
Common Stock, par value $.001, of the registrant.

<PAGE>

                             KENSEY NASH CORPORATION
                        QUARTER ENDED SEPTEMBER 30, 2003


                                      INDEX

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

         ITEM 1.   FINANCIAL STATEMENTS
                           Consolidated Balance Sheets
                             as of September 30, 2003 (Unaudited) and June 30, 2003........................      3

                           Consolidated Statements of Operations
                             for the three months ended September 30, 2003
                             and 2002 (Unaudited)..........................................................      4

                           Consolidated Statements of Stockholders' Equity as of
                             September 30, 2003 (Unaudited) and June 30, 2003..............................      5

                           Consolidated Statements of Cash Flows
                             for the three months ended September 30, 2003 and 2002 (Unaudited)............      6

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

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

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

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


PART II - OTHER INFORMATION

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


SIGNATURES ................................................................................................     19

EXHIBITS ..................................................................................................     20
</TABLE>



                                       2
<PAGE>


PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

KENSEY NASH CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
                                                                                  September 30,
                                                                                      2003            JUNE 30,
                                                                                   (UNAUDITED)          2003
                                                                                  ------------      ------------
<S>                                                                               <C>               <C>
ASSETS
CURRENT ASSETS:
  Cash and cash equivalents                                                       $ 18,031,364      $ 15,040,857
  Investments                                                                       35,758,101        33,370,540
  Trade receivables, net of allowance for doubtful accounts of $104,200
     and $131,582 at September 30, 2003 and June 30, 2003, respectively              2,295,119         3,760,286
  Royalties receivable                                                               4,818,925         4,571,006
  Other receivables (including approximately $34,000 and $41,000 at
     September 30, 2003 and June 30, 2003, respectively, due from employees)           396,683           578,491
  Inventory                                                                          3,794,969         3,481,322
  Deferred tax asset, current portion                                                2,524,452         2,097,147
  Prepaid expenses and other                                                         1,870,376         2,564,179
                                                                                  ------------      ------------

         Total current assets                                                       69,489,989        65,463,828
                                                                                  ------------      ------------

PROPERTY, PLANT AND EQUIPMENT, AT COST:
  Leasehold improvements                                                             8,288,436         6,737,363
  Machinery, furniture and equipment                                                15,589,372        14,492,068
  Construction in progress                                                           1,712,843         2,927,955
                                                                                  ------------      ------------

         Total property, plant and equipment                                        25,590,651        24,157,386
  Accumulated depreciation                                                         (11,559,564)      (10,757,669)
                                                                                  ------------      ------------

         Net property, plant and equipment                                          14,031,087        13,399,717
                                                                                  ------------      ------------

OTHER ASSETS:
  Deferred tax asset, non-current portion                                            1,017,513         1,017,513
  Acquired patents, net of accumulated amortization of $1,488,474 and
     $1,422,718 at September 30, 2003 and June 30, 2003, respectively                2,607,892         2,673,648
  Goodwill, net of accumulated amortization of $100,037 at September 30, 2003
     and June 30, 2003                                                               3,284,303         3,284,303
                                                                                  ------------      ------------

         Total other assets                                                          6,909,708         6,975,464
                                                                                  ------------      ------------

TOTAL                                                                             $ 90,430,784      $ 85,839,009
                                                                                  ============      ============

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Accounts payable                                                                $  1,254,831      $  2,111,421
  Accrued expenses                                                                   4,443,836         2,926,604
  Current portion of debt                                                              852,683           836,989
  Deferred revenue                                                                     226,067           195,060
                                                                                  ------------      ------------

         Total current liabilities                                                   6,777,417         6,070,074
                                                                                  ------------      ------------

LONG TERM PORTION OF DEBT                                                                                219,147
                                                                                  ------------      ------------

         Total liabilities                                                           6,777,417         6,289,221
                                                                                  ------------      ------------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
  Preferred stock, $.001 par value, 100,000 shares authorized,
     no shares issued or outstanding at September 30, 2003 and June 30, 2003                 -                 -
  Common stock, $.001 par value, 25,000,000 shares authorized,
     11,455,825 and 11,366,975 shares issued and outstanding at
     September 30, 2003 and June 30, 2003,  respectively                                11,456            11,367
  Capital in excess of par value                                                    77,974,051        76,356,345
  Retained Earnings                                                                  5,707,692         3,200,450
  Accumulated other comprehensive loss                                                 (39,832)          (18,374)
                                                                                  ------------      ------------

         Total stockholders' equity                                                 83,653,367        79,549,788
                                                                                  ------------      ------------

TOTAL                                                                             $ 90,430,784      $ 85,839,009
                                                                                  ============      ============
</TABLE>

See notes to consolidated financial statements.


                                       3
<PAGE>


KENSEY NASH CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
------------------------------------------------------------------------------


                                                        THREE MONTHS ENDED
                                                           SEPTEMBER 30,
                                                  ----------------------------
                                                       2003            2002

REVENUES:
  Net sales                                       $  7,311,950    $  5,112,518
  Research and development                             235,301         156,692
  Royalty income                                     4,839,595       3,619,310
                                                  ------------    ------------
           Total revenues                           12,386,846       8,888,520
                                                  ------------    ------------

OPERATING COSTS AND EXPENSES:
  Cost of products sold                              3,342,131       2,388,454
  Research and development                           4,077,981       3,090,755
  Selling, general and administrative                1,960,090       1,570,473
                                                  ------------    ------------
           Total operating costs and expenses        9,380,202       7,049,682
                                                  ------------    ------------

INCOME FROM OPERATIONS                               3,006,644       1,838,838
                                                  ------------    ------------

OTHER INCOME:
  Interest income                                      290,200         420,884
  Interest expense                                     (20,170)        (43,301)
  Other  income (expense)                                2,323            (109)
                                                  ------------    ------------
           Total other income - net                    272,353         377,474
                                                  ------------    ------------
INCOME BEFORE INCOME TAXES                           3,278,997       2,216,312
Income tax expense                                    (771,755)       (766,280)
                                                  ------------    ------------
NET INCOME                                        $  2,507,242    $  1,450,032
                                                  ============    ============

BASIC EARNINGS PER SHARE                          $       0.22    $       0.13
                                                  ============    ============
DILUTED EARNINGS PER SHARE                        $       0.20    $       0.13
                                                  ============    ============

WEIGHTED AVERAGE COMMON
  SHARES OUTSTANDING                                11,430,624      10,749,475
                                                  ============    ============

DILUTED WEIGHTED AVERAGE COMMON
  SHARES OUTSTANDING                                12,312,776      11,254,700
                                                  ============    ============


See notes to consolidated financial statements.



                                       4
<PAGE>

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, 2002                                     10,748,455     $ 10,748    $ 67,289,436       $ (5,585,885)
   Exercise of stock options                                  618,520          619       6,091,865
   Tax benefit from exercise of stock options                                            2,599,494
   Stock options granted to non-employee                                                   375,550
   Net income                                                                                               8,786,335
   Foreign currency translation adjustment
   Change in unrealized gain on investments (net of tax)

   Comprehensive income
                                                          -----------     --------    ------------       ------------
BALANCE, JUNE 30, 2003                                     11,366,975       11,367      76,356,345          3,200,450
                                                          -----------     --------    ------------       ------------
   Exercise of stock options                                   88,850           89       1,196,009
   Tax benefit from exercise of stock options                                              410,319
   Stock options granted to non-employee                                                    11,378
   Net income                                                                                               2,507,242
   Foreign currency translation adjustment
   Change in unrealized gain on investments (net of tax)

   Comprehensive income
                                                          -----------     --------    ------------       ------------
BALANCE, SEPTEMBER 30, 2003  (Unaudited)                  11,455,825      $ 11,456    $ 77,974,051       $  5,707,692
                                                          ==========      ========    ============       ============

<CAPTION>
                                                           ACCUMULATED
                                                              OTHER
                                                          COMPREHENSIVE    COMPREHENSIVE
                                                          (LOSS)/INCOME       INCOME            TOTAL
                                                          -------------    -------------     ------------
<S>                                                       <C>              <C>               <C>
BALANCE, JUNE 30, 2002                                      $ (147,258)                      $ 61,567,041
   Exercise of stock options                                                                    6,092,484
   Tax benefit from exercise of stock options                                                   2,599,494
   Stock options granted to non-employee                                                          375,550
   Net income                                                               $ 8,786,335         8,786,335
   Foreign currency translation adjustment                      (3,257)          (3,257)           (3,257)
   Change in unrealized gain on investments (net of tax)       132,141          132,141           132,141
                                                                            -----------
   Comprehensive income                                                     $ 8,915,219
                                                            ----------      ===========      ------------
BALANCE, JUNE 30, 2003                                         (18,374)                        79,549,788
                                                            ----------                       ------------
   Exercise of stock options                                                                    1,196,098
   Tax benefit from exercise of stock options                                                     410,319
   Stock options granted to non-employee                                                           11,378
   Net income                                                               $ 2,507,242         2,507,242
   Foreign currency translation adjustment                      11,513           11,513            11,513
   Change in unrealized gain on investments (net of tax)       (32,971)         (32,971)          (32,971)
                                                                            -----------
   Comprehensive income                                                     $ 2,485,784
                                                            ----------      ===========      ------------
BALANCE, SEPTEMBER 30, 2003  (Unaudited)                    $  (39,832)                      $ 83,653,367
                                                            ==========                       ============
</TABLE>

See notes to consolidated financial statements.


                                       5

<PAGE>

KENSEY NASH CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------

                                                                           THREE MONTHS ENDED
                                                                              SEPTEMBER 30,
                                                                    ------------------------------
                                                                         2003              2002
<S>                                                                 <C>               <C>
OPERATING ACTIVITIES:
  Net income                                                        $  2,507,242      $  1,450,032
  Adjustments to reconcile net income to net cash provided by
       operating activities:
       Depreciation and amortization                                     983,402           648,563
       Tax benefit from exercise of stock options                        410,319             6,743
  Changes in assets and liabilities which provided (used) cash:
       Accounts receivable                                             1,399,056          (508,072)
       Deferred tax asset                                               (427,305)          871,313
       Prepaid expenses and other current assets                         684,981            12,789
       Inventory                                                        (313,647)         (357,394)
       Accounts payable and accrued expenses                             660,642           139,385
       Deferred revenue                                                   31,007               829
                                                                    ------------      ------------
        Net cash provided by operating activities                      5,935,697         2,264,188
                                                                    ------------      ------------

INVESTING ACTIVITIES:
  Additions to property, plant and equipment                          (1,433,265)         (498,688)
  Sale of investments                                                                   14,000,000
  Purchase of investments                                             (2,516,083)         (148,291)
                                                                    ------------      ------------
        Net cash (used in) provided by investing activities           (3,949,348)       13,353,021
                                                                    ------------      ------------

FINANCING ACTIVITIES:
  Repayments of long term debt                                          (203,453)         (237,949)
  Proceeds from exercise of stock options                              1,196,098            32,247
                                                                    ------------      ------------
        Net cash provided by (used in) financing activities              992,645          (205,702)
                                                                    ------------      ------------

EFFECT OF EXCHANGE RATE ON CASH                                           11,513               282
INCREASE IN CASH AND CASH EQUIVALENTS                                  2,978,994        15,411,507
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                        15,040,857         3,632,395
                                                                    ------------      ------------

CASH AND CASH EQUIVALENTS, END OF PERIOD                            $ 18,031,364      $ 19,043,902
                                                                    ============      ============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  Cash paid for interest                                            $     20,171      $     43,301
                                                                    ============      ============
  Cash paid for income taxes                                        $                 $
                                                                    ============      ============

SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITY:
  Increase in prepaid expense related to
        non-employee stock options (See Note 4)                     $     11,378                 $
                                                                    ============      ============
</TABLE>


See notes to consolidated financial statements.



                                       6

<PAGE>
                             KENSEY NASH CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

NOTE 1  -- CONSOLIDATED FINANCIAL STATEMENTS

    BASIS OF PRESENTATION

    The consolidated balance sheet as of September 30, 2003, consolidated
    statements of operations for the three months ended September 30, 2003 and
    2002, consolidated statement of stockholders' equity for the three months
    ended September 30, 2003 and consolidated statements of cash flows for the
    three months ended September 30, 2003 and 2002 of Kensey Nash Corporation
    (the Company) have not been audited by the Company's independent auditors.
    In the opinion of management, all adjustments (which include only normal
    recurring adjustments) necessary to present fairly the financial position at
    September 30, 2003 and June 30, 2003, results of operations for the three
    months ended September 30, 2003 and 2002, stockholders' equity for the three
    months ended September 30, 2003 and for the year ended June 30, 2003 and
    cash flows for the three months ended September 30, 2003 and 2002 have been
    made.

    Certain information and note disclosures normally included in the Company's
    annual financial statements, prepared in accordance with accounting
    principles generally accepted in the United States of America, have been
    condensed or omitted. These consolidated financial statements should be read
    in conjunction with the financial statements and notes thereto included in
    the Company's consolidated financial statements filed with the Securities
    and Exchange Commission (SEC) in the Company's Annual Report on Form 10-K
    for the fiscal year ended June 30, 2003. The results of operations for the
    three month period ended September 30, 2003 are not necessarily indicative
    of operating results for the full year.

    Certain reclassifications have been made to prior period balances to
    conform to the current period presentation.

    PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
    The consolidated financial statements include the accounts of Kensey Nash
    Corporation, Kensey Nash Holding Company and Kensey Nash GmbH. All
    intercompany transactions and balances have been eliminated. The Company was
    incorporated in Delaware on August 6, 1984. Kensey Nash Holding Company,
    incorporated in Delaware in January 1992, was formed to hold title to
    certain Company patents and has no operations. Kensey Nash GmbH,
    incorporated in Germany in January 2002, was formed for the purpose of
    European sales and marketing of the TriActiv(R) Balloon Protected Flush
    Extraction System (the TriActiv), which was commercially launched in Europe
    in May 2002.

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

    CASH, CASH EQUIVALENTS AND INVESTMENTS
    Cash and cash equivalents represent cash in banks and short-term investments
    having an original maturity of less than three months. The Company's
    investment portfolio consists primarily of high quality U.S. government,
    municipal and corporate obligations with maturities ranging from 3-14 years.
    Also, the portfolio includes certain municipal variable rate demand
    obligations that have maturities ranging from 20 to 30 years. These
    municipal variable-rate demand obligations are putable weekly and callable
    on a monthly basis. The portfolio includes only available for sale
    marketable securities with secondary or resale markets. See Comprehensive
    Income below for the treatment of unrealized holding gains and losses.

    EXPORT SALES
    There were $157,194 and $166,556 in export sales from the Company's U.S.
    operations to unaffiliated customers in Europe in the three months ended
    September 30, 2003 and 2002, respectively.



                                       7
<PAGE>


    REVENUE RECOGNITION
    The Company recognizes revenue under the provisions of Staff Accounting
    Bulletin (SAB) No. 101, Revenue Recognition in Financial Statements (SAB
    101). Accordingly, sales revenue is recognized when the related product is
    shipped. All product is shipped free on board shipping point. Revenue under
    research and development contracts is recognized as the related expenses are
    incurred. Royalty revenue is recognized as the related product is sold.
    Advance payments received for products or services are recorded as deferred
    revenue and are recognized when the product is shipped or services are
    performed.

    The Company receives a 9% royalty on every Angio-Seal(TM) unit sold by St.
    Jude Medical, its licensee. The original rate of 12% was contractually
    reduced from 12% to 9%, in accordance with our licensing agreements during
    the quarter ended December 31, 2000, when a cumulative one million
    Angio-Seal units had been sold. There will be one further decrease in the
    royalty rate, to 6%, upon reaching four million cumulative units sold. The
    Company anticipates that this final rate reduction will occur in the fourth
    quarter of our fiscal 2004. As of September 30, 2003, approximately 3.3
    million Angio-Seal units had been sold. The Company recognizes the royalty
    revenue, in accordance with the Licensing Agreement between the Company and
    St. Jude Medical, at the end of each month when St. Jude Medical advises the
    Company of their total Angio-Seal sales dollars for the month. Royalty
    payments are received within 45 days of the end of each calendar quarter.

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

    STOCK-BASED COMPENSATION
    Stock-based compensation cost is accounted for under SFAS No. 123,
    Accounting for Stock-Based Compensation (SFAS 123), which permits (i)
    recognition of the fair value of stock-based awards as an expense, or (ii)
    continued application of the intrinsic value method of Accounting Principles
    Board Opinion No. 25, Accounting for Stock Issued to Employees (APB 25). The
    Company accounts for its stock-based employee and director compensation
    plans under the recognition and measurement principles of APB 25. Under the
    intrinsic value method, compensation cost represents the excess, if any, of
    the quoted market price of the Company's common stock at the grant date over
    the amount the grantee must pay for the stock. The Company's policy is to
    grant stock options with an exercise price equal to the fair market value of
    the Company's common stock at the date of grant. Options granted to
    non-employees, as defined under SFAS No. 123, are recorded as compensation
    expense. The Company did not grant any options to non-employees for the
    three months ended September 30, 2002. See Note 4 for options granted to
    non-employees in July 2003 and October 2002.

    In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
    Compensation - Transition and Disclosure - an amendment to FASB Statement
    No. 123, Accounting for Stock-Based Compensation (SFAS 148). The Company
    implemented the "disclosure only" provisions of SFAS No. 148 in the quarter
    ended December 31, 2002. Accordingly, no compensation cost has been
    recognized for the Company's two stock option plans. Had compensation cost
    for the plans been determined based on the fair market value of the options
    at the grant date, consistent with the provisions of SFAS No. 123, as
    amended by SFAS No. 148, the Company's net income and earnings per share for
    the three months ended September 30, 2003 and 2002 would have been reduced
    to the pro forma amounts below:

                                       8
<PAGE>


<TABLE>
<CAPTION>

                                                                                     THREE MONTHS ENDED
                                                                                        SEPTEMBER 30,
                                                                                 -----------------------------
                                                                                    2003             2002
<S>                                                                              <C>             <C>
Net income, as reported                                                          $2,507,242      $   1,450,032
   Deduct: Total stock-based employee compensation expense determined
   under fair value based method for all awards, net of related tax effects        (350,666)          (439,841)
                                                                                 ----------      -------------
Pro forma net income                                                             $2,156,576      $   1,010,191
                                                                                 ==========      =============

Earnings per share:
   Basic - as reported                                                           $     0.22      $        0.13
                                                                                 ==========      =============
   Basic - pro forma                                                             $     0.19      $        0.09
                                                                                 ==========      =============
   Diluted - as reported                                                         $     0.20      $        0.13
                                                                                 ==========      =============
   Diluted - pro forma                                                           $     0.18      $        0.09
                                                                                 ==========      =============
</TABLE>


    COMPREHENSIVE INCOME
    The Company accounts for comprehensive income under the provisions of SFAS
    No. 130, Reporting Comprehensive Income (SFAS 130). Accordingly, accumulated
    other comprehensive income (loss) is shown in the consolidated statements of
    stockholders' equity at September 30, 2003 and June 30, 2003, and is
    comprised of unrealized gains and losses on the Company's available-for-sale
    securities and foreign currency translation adjustments. The tax effect of
    other comprehensive income for the three months ended September 30, 2003 and
    for the fiscal year ended June 30, 2003 was $16,985, and $68,073,
    respectively.

    GOODWILL
    Goodwill represents the excess of cost over the fair value of the
    identifiable net assets of THM Biomedical, Inc. (THM), a company acquired in
    September 2000. Effective July 1, 2001, the Company adopted SFAS No. 141,
    Business Combinations (SFAS 141) and SFAS No. 142, Goodwill and Other
    Intangible Assets (SFAS 142). SFAS 141 requires that the purchase method of
    accounting be used for all business combinations subsequent to June 30, 2001
    and specifies criteria for recognizing intangible assets acquired in a
    business combination. Under SFAS 142, goodwill and intangible assets with
    indefinite useful lives are no longer amortized, but are subject to annual
    impairment tests. The most recent annual impairment test for the fiscal year
    ended June 30, 2003 indicated that goodwill was not impaired. Intangible
    assets with definite useful lives continue to be amortized over their
    respective useful lives.

    NEW ACCOUNTING PRONOUNCEMENTS
    In January 2003, the FASB issued Financial Interpretation No. 46 (FIN 46),
    Consolidation of Variable Interest Entities, an interpretation of Accounting
    Research Bulletin 51, Consolidated Financial Statements. FIN 46 requires
    that unconsolidated variable interest entities be consolidated with their
    primary beneficiaries and applies immediately to variable interest entities
    created after January 31, 2003 and to existing entities in periods after
    December 15, 2003. The Company is not affiliated with a variable interest
    entity and will adopt the provisions of FIN 46 at such time as they become
    applicable to the Company.

    In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
    Derivative Instruments and Hedging Activities, which amends and clarifies
    financial accounting and reporting for derivative instruments, including
    certain derivative instruments embedded in other contracts (collectively
    referred to as derivatives) and for hedging activities under FASB Statement
    No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS
    No. 149 is effective for contracts entered into or modified, and for hedging
    relationships designated, after June 30, 2003. Other provisions of SFAS No.
    149 that relate to SFAS No. 133 implementation issues should continue to be
    applied in accordance with their respective dates. The Company's adoption of
    SFAS No. 149 did not have a material impact on the Company's financial
    position or results of operations.

    In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
    Instruments with Characteristics of both Liabilities and Equity (SFAS 150),
    which establishes standards for how an issuer classifies and measures
    certain financial instruments with characteristics of both liabilities and
    equity. It requires that an issuer classify a financial instrument that is
    within its scope as a liability (or an asset in some circumstances). SFAS
    150 is effective for financial instruments entered into or modified after
    May 31, 2003, and otherwise is effective at the



                                       9
<PAGE>


    beginning of the first interim period beginning after June 15, 2003. The
    Company's adoption of SFAS No. 150 did not have a material impact on the
    Company's financial position or results of operations.


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 materials utilized in the processing of the
    Company's products and is as follows:


<TABLE>
<CAPTION>
                                            SEPTEMBER 30,         JUNE 30,
                                                2003                2003
                                            -------------       -----------
          <S>                                 <C>               <C>
          Raw materials                       $2,737,236        $ 2,109,149
          Work in process                        526,609            765,388
          Finished goods                         531,124            606,785
                                              ----------        -----------

          Total                               $3,794,969        $ 3,481,322
                                              ==========        ===========
</TABLE>



NOTE 3 -- THM ACQUISITION

    On September 1, 2000, the Company acquired THM, a developer of porous,
    biodegradable, tissue-engineering devices for the repair and replacement of
    musculoskeletal tissues, for approximately $10.5 million plus acquisition
    costs of approximately $239,000. The transaction was financed with $6.6
    million of the Company's cash and a note payable to the former shareholders
    of THM in the amount of $4.5 million (the Acquisition Obligation). The
    Acquisition Obligation was due in equal quarterly installments of $281,250
    beginning on December 31, 2000 and ending on September 30, 2004.
    Accordingly, the present value of the cash payments (discounted based upon
    the Company's then available borrowing rate of 7.5%) of $3,833,970 was
    recorded as a liability on the Company's consolidated financial statements,
    with a remaining balance of $852,683 as of September 30, 2003, of which the
    entire amount was current at September 30, 2003. During the quarter ended
    March 31, 2003, the Company repaid certain debt holders, thereby reducing
    the Company's remaining quarterly installments to $223,256 through September
    30, 2004.

NOTE 4 -- CONSULTING CONTRACTS

    In October 2002, the Company granted options to purchase 50,000 shares of
    common stock to a physician pursuant to a five-year consulting agreement
    related to the development of a carotid artery application for the TriActiv.

    In July 2003, the Company granted options to purchase 1,500 shares of common
    stock to a physician pursuant to a two-year consulting agreement related to
    the development of orthopaedic applications for the Company's porous and
    non-porous tissue fixation and regeneration devices and drug delivery
    devices.

    The Company has calculated the fair value of these non-employee options in
    accordance with SFAS No.123, as $375,550 and $11,378 for the October 2002
    and July 2003 grants, respectively, using the Black-Scholes option-pricing
    model. These amounts were recorded as prepaid consulting expense and
    increases to additional paid in capital at December 31, 2002 and September
    30, 2003, respectively. The prepaid expense is being amortized to research
    and development expense over the terms of the agreements. Accordingly,
    $20,200 was recorded as a component of research and development expense for
    the three months ended September 30, 2003.

NOTE 5 -- STOCK REPURCHASE PROGRAM

    On October 23, 2003, the Company announced that its board of directors had
    approved a program to repurchase up to 400,000 of its issued and outstanding
    shares of Common Stock over the next six months. The Company intends to
    finance the repurchases using its available cash.

    The Company plans to repurchase its shares for cash, from time to time in
    the open market, through block trades or otherwise. The repurchase program
    does not require the Company to purchase any specific dollar value or



                                       10
<PAGE>


    number of shares. Any purchases under the program will depend on market
    conditions and may be commenced or suspended at any time or from time to
    time without prior notice.

NOTE 6 -- INCOME TAXES

    As of June 30, 2003, the company had net operating loss (NOL) carryforwards
    for state tax purposes totaling $20.0 million, which will expire through
    2013. In addition, the Company had a foreign NOL of $0.3 million as of June
    30, 2003, which will not expire.

    During the quarter ended September 30, 2003, the Company recorded a research
    and development tax credit of approximately $310,000. This was in addition
    to the $1.5 million tax credit recorded in the fourth quarter of fiscal 2003
    and represents the additional portion of the credit. The tax credit relates
    to qualified research and development activities of the Company. In
    connection with this tax credit project, the Company recorded an additional
    $50,500 of professional service fees as a component of selling, general and
    administrative expenses during the quarter ended September 30, 2003.


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

The following discussion and analysis should be read in conjunction with our
financial statements and the related notes included in this report and the
Company's audited consolidated financial statements as filed with the Securities
and Exchange Commission in the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 2003.

OVERVIEW

We are a leader in cardiovascular medical technology and have significant
experience and expertise in the design, development, manufacture and processing
of absorbable biomaterials for medical applications. The Angio-Seal(TM) Vascular
Closure Device (Angio-Seal), of which we were the original designer, developer
and manufacturer, is currently the leader in the arterial puncture closure
device market, estimated to be a potential $700 million to $1 billion annual
market. The Angio-Seal device is designed to seal and close femoral artery
punctures made during diagnostic and therapeutic cardiovascular
catheterizations. St. Jude Medical, Inc. (St. Jude Medical) acquired the
worldwide license to the Angio-Seal device in March of 1999. St. Jude Medical
develops, manufactures, markets and distributes the product worldwide.

Additionally, we have developed the TriActiv(R) Balloon Protected Flush
Extraction System (the TriActiv), a device designed to provide embolic
protection during diseased saphenous vein graft treatment. This market
opportunity is currently estimated at $300 million annually. The TriActiv was
commercially launched in Europe in May 2002 and is in clinical trials in the
United States. Future generations of the TriActiv currently in development and
in clinical trials, will address additional markets. These future applications
will include the treatment of diseased carotid and native coronary arteries and
acute myocardial infarction (AMI) or a heart attack. Industry estimates indicate
that the addition of these applications broadens the potential market for the
TriActiv platform to over $1 billion.

We also have significant experience in designing, developing, manufacturing and
processing proprietary biomaterials products for the orthopaedics, cardiology,
drug/biologics delivery, periodontal, general surgery and wound care markets. We
intend to continue to leverage our proprietary knowledge and expertise in all of
these markets to develop new products and technologies and to explore additional
applications for our existing products.

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

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

    Biomaterials. The biomaterials component of net sales represents the sale of
    our biomaterials products to customers for use in the following markets:
    orthopaedics, cardiology, drug/biologics delivery, periodontal, general
    surgery and wound care. In 1997, our biomaterials sales were comprised
    almost 100% of the


                                       11
<PAGE>


    absorbable collagen and polymer components of the Angio-Seal supplied to our
    strategic alliance partner. Since that time, we have experienced significant
    sales growth in our biomaterials products as we have expanded our customer
    base and marketing activities, increased sales to existing customers and
    assisted in the development of new product offerings. For fiscal 2003, the
    Angio-Seal components represented 54% of our total biomaterial sales. For
    the three months ended September 30, 2003, the Angio-Seal components
    represented 42% of our total biomaterials sales. We believe the growth in
    our overall biomaterials sales, which was 43% in the three months ended
    September 30, 2003 over the same period in 2002, will continue because of
    greater acceptance by the medical community of biomaterials and
    technological advances which have expanded the applications for our
    biomaterials products.

    TriActiv. The TriActiv was commercially launched in Europe in the fourth
    quarter of fiscal 2002. We are selling direct to the market in Germany and
    through distributors throughout the rest of Europe. We had entered into
    distribution agreements for sales in the United Kingdom, Ireland,
    Switzerland, Austria, and Italy as of September 30, 2003 and are in the
    process of identifying distributors for additional markets in the rest of
    Europe. While the TriActiv sales were less than 1% of our total sales for
    the three months ended September 30, 2003, we anticipate the TriActiv will
    become a more significant component of net sales in the upcoming quarters of
    fiscal 2004 and beyond as we gain new customers in the European markets,
    launch new versions and applications of the product and launch the product
    in the U.S. market. We currently anticipate commercial launch of the
    TriActiv in the U.S. in the first quarter of fiscal 2005.

Research and Development Revenue. Research and development revenue in the three
months ended September 30, 2002 was derived from two NIST grants. Under the
first NIST grant we were researching cartilage regeneration utilizing our porous
tissue matrix (PTM) technology. Although we continue to independently develop
this technology, we received all remaining funds under this grant in our second
quarter of fiscal 2003. In addition, in October 2001 we received a second NIST
grant, under which we are researching a synthetic vascular graft also utilizing
our PTM technology. This project is expected to continue through early fiscal
2005. In January 2003, we received an NIH grant, under which we are researching
sustained or controlled release of chemotherapeutic drugs for the treatment of
breast cancer utilizing our PTM technology. This grant is expected to continue
through early fiscal year 2004.

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, including its launch of the
Angio-Seal product line in the Japanese market, and releases future generations
of the Angio-Seal system, including its recent launch of the Self Tightening
Suture (STS) Plus version of the device in the U.S. and Europe. As a result, we
expect that royalty income will continue to be a significant source of revenue.
Our current royalty rate is 9%. The original rate of 12% was contractually
reduced from 12% to 9%, in accordance with our licensing agreements during the
fiscal 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 that this
final rate reduction will occur in the fourth quarter of our fiscal 2004. As of
September 30, 2003 approximately 3.3 million Angio-Seal units had been sold.

Cost of Products Sold. We have experienced an increase in gross margin during
the three months ended September 30, 2003 compared to the same period in 2002,
reflecting the higher volume of our biomaterials products. This increased volume
has resulted in greater manufacturing efficiencies and lower unit costs. We
anticipate the gross margin on our biomaterials products will continue to
improve with continued increased sales volume. This increase in gross margin
will be partially offset by lower gross margins associated with the TriActiv, as
we expect margins on early sales to be lower than the biomaterials margins due
to the start-up nature of the manufacturing process and low volume. As a result
of this change in product mix for fiscal 2004, we believe our total gross margin
will be only slightly improved over fiscal 2003. As volumes increase and the
manufacturing process matures for the TriActiv, we expect the gross margin on
the product to increase.

Research and Development Expense. Research and development expense consists of
expenses incurred for the development of our proprietary technologies, such as
the TriActiv, absorbable and nonabsorbable biomaterials products and
technologies and other development programs, including expenses under the NIST
and NIH programs. In December 2001, we began our TriActiv U.S. pivotal clinical
study, a planned 500-800 patient randomized trial at up to 75 sites around the
U.S. We anticipate completion of trial enrollment and submission to the Food and
Drug Administration (FDA) for 510(k) approval by the third quarter of fiscal
2004. In addition, we completed a six patient



                                       12
<PAGE>

pilot study, the TRACER study, on the carotid artery application in September
2003. This study was completed at one clinical site in Costa Rica. The TriActiv
carotid application device was successfully used to provide protection from
potential stroke-causing emboli by actively removing debris during carotid
stenting procedures. We plan to begin enrollment in a CE Mark study for the
TriActiv carotid application in our third fiscal quarter of fiscal 2004.

Clinical efforts in pursuit of FDA approval and continuing development of the
TriActiv, as well as our continued development of proprietary biomaterials
products and technologies, requires significant research and development
spending. We anticipate research and development expense will continue to
increase as we pursue commercialization of the TriActiv in the U.S., and explore
opportunities for other indications related to the TriActiv as well as our other
technologies, including the continued development of proprietary biomaterials
technologies. However, we believe that research and development expense will
decrease as a percentage of total revenue as our revenue continues to grow.

Selling, General and Administrative. Selling, general and administrative
expenses include general and administrative costs, as well as costs related to
the sales and marketing of our products. The costs of our patent litigation are
also included within selling, general and administrative expenses. The sales and
marketing component of selling, general and administrative expenses has
increased over the same period in 2002. This increase relates to increased sales
efforts for the TriActiv in Europe, which was commercially launched in May 2002,
and the move toward commercialization of the TriActiv in the U.S. In January
2002, we received CE Mark approval from the European regulatory authority for
the TriActiv, which allows commercial sale of the product in the European Union.
Effective January 2002, we established a subsidiary in Germany, Kensey Nash
Europe GmbH, and hired a Vice President of European sales. We have established a
European sales and marketing team and will continue to add personnel to this
team as we believe is required to meet our clinical and sales goals. This team
is selling the product direct in the German market and supports our distributor
relationships in the rest of Europe. We have entered into distribution
agreements for sales of the TriActiv in the United Kingdom, Ireland,
Switzerland, Austria and Italy as of September 30, 2003 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 prepare for U.S. commercial
launch. We also continue to evaluate opportunities for commercialization of the
TriActiv in the United States and to expand the marketing efforts for our
biomaterials business.

CRITICAL ACCOUNTING POLICIES

Our "critical accounting policies" are those that require application of
management's most difficult, subjective, or complex judgments, often as a result
of the need to make estimates about matters that are inherently uncertain and
may change in future periods. It is not intended to be a comprehensive list of
all of our significant accounting policies. In many cases, the accounting
treatment of a particular transaction is specifically dictated by accounting
principles generally accepted in the United States of America, with no need for
management's judgment in their application. There are also areas in which the
selection of an available alternative policy would not produce a materially
different result. We have identified the following as our critical accounting
policies: revenue recognition and accounting for stock-based compensation.

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

Stock-Based Compensation. We account for stock-based compensation costs under
SFAS No. 123, Accounting for Stock-Based Compensation (SFAS No. 123), as amended
by SFAS No. 148 which permits (i) recognition of the fair value of stock-based
awards as an expense, or (ii) continued application of the intrinsic value
method of Accounting Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees (APB 25). The Company accounts for its stock-based employee
and director compensation plans under the recognition and measurement principles
of APB 25. Under the intrinsic value method, compensation cost represents the
excess, if any, of the quoted market price of the Company's common stock at the
grant date over the amount the grantee must pay for the stock. Our policy is to
grant stock options at the fair market value at the date of grant. Therefore, we
have not recognized any compensation expense for options granted to employees.
We account for stock-based awards to non-employees using the fair value method
in accordance with SFAS No. 123, which requires using the Black-Scholes
option-pricing model to determine



                                       13
<PAGE>

the fair value of the option at the original grant date. Options granted to
non-employees, as defined under SFAS 123, (as amended by SFAS No. 148) and
Emerging Issues Task Force (EITF) 96-18 "Accounting for Equity Instruments that
are Other Than Employees for Acquiring or in Conjunction with Selling, Goods or
Services", are recorded as expense over the service period. The Company did not
grant any options to non-employees for the three months ended September 30,
2002. See Note 4 for options granted to non-employees in July 2003 and October
2002.

RESULTS OF OPERATIONS

COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002

Total Revenues. Total revenues increased 39% to $12.4 million in the three
months ended September 30, 2003 from $8.9 million in the three months ended
September 30, 2002. Net sales of products increased 43% to $7.3 million from
$5.1 million for the three months ended September 30, 2003 and 2002,
respectively as we continue to increase sales to existing customers and expand
sales to new customers. These increases were primarily attributable to increased
sales of our cardiology and orthopaedic products. Cardiology sales increased 8%
to $3.1 million from $2.8 million for the three months ended September 30, 2003
and 2002, respectively. Orthopaedic sales increased 55% to $3.8 million from
$1.7 million for the three months ended September 30, 2003 and 2002,
respectively. Net sales for the three months ended September 30, 2003 and
September 30, 2002 consisted almost entirely of biomaterials sales, as the
TriActiv sales were less than 1% of total sales in both periods.

Research and Development Revenues. Research and development revenues increased
50% to $235,000 from $157,000 for the three months ended September 30, 2003 and
2002, respectively. The revenues for the three months ended September 30, 2003
consist of amounts generated under our NIST vascular graft grant and our NIH
grant. The revenues for the three months ended September 30, 2002 consisted of
amounts generated under our NIST cartilage and vascular graft grants. The
increase over the prior year primarily reflected increased activity under the
synthetic vascular graft grant which generated $183,000 in revenue for the three
months ended September 30, 2003 compared to $51,000 for the three months ended
September 30, 2002. Also contributing to the increase was the start of our NIH
breast cancer drug delivery grant in January 2003, which generated $52,000 in
revenue for the three months ended September 30, 2003. This increased activity
was offset by a decrease of $106,000 in articular cartilage grant revenue over
the comparable period in the prior year, as this project concluded in October
2002.

Royalty Income. Royalty income increased 34% to $4.8 million from $3.6 million
in the three months ended September 30, 2003 and 2002, respectively. This
increase reflected a greater number of units sold as well as an increase in the
average selling price for the Angio-Seal. Royalty units increased 34% as
approximately 288,000 Angio-Seal units were sold to end-users during the three
months ended September 30, 2003 compared to approximately 214,000 units sold
during the three months ended September 30, 2002. We believe that this unit
increase was due to St. Jude Medical's continued sales and marketing efforts,
increased adoption of vascular closure devices and a growing number of
procedures in the U.S and European markets. These factors have resulted in
market share gains for the Angio-Seal product lines in both the U.S. and
European markets.

Cost of Products Sold. Cost of products sold increased 40% to $3.3 million in
the three months ended September 30, 2003 from $2.4 million in the three months
ended September 30, 2002. Despite the overall increase in cost of products sold,
gross margin increased 100 basis points, from 53% to 54%, in the three months
ended September 30, 2002 and 2003, respectively, reflecting the higher margins
on our biomaterials products, manufacturing efficiencies and greater production
volumes, resulting in a decrease in per unit costs.

Research and Development Expense. Research and development expense increased 32%
to $4.1 million in the three months ended September 30, 2003 compared to $3.1
million in the three months ended September 30, 2002. This increase was
attributable to our continued development efforts on the TriActiv, including
clinical trial expenses. While research and development expenses continued to
increase in dollars, they decreased as a percentage of total revenue to 33% from
35% for the three month periods ended September 30, 2003 and September 30, 2002,
respectively. Research and development expenses related to the TriActiv
increased $466,000, or 29%, to $2.1 million in the three months ended September
30, 2003 from $1.6 million in the three months ended September 30, 2002. We also
continued to expand our development efforts on our biomaterials products,
including our work under the NIST and NIH grants. Biomaterials-related spending
increased $440,000, or 40%, to $1.6 million in the three months ended September
30, 2003 from $1.1 million in the three months ended September 30, 2002.


                                       14
<PAGE>

Selling, General and Administrative Expense. Selling, general and administrative
expense increased 25% to $2.0 million in the three months ended September 30,
2003 from $1.6 million in the three months ended September 30, 2002. This
increase was primarily the result of increased sales and marketing expenses,
which increased $281,000 to $950,000 in the three months ended September 30,
2003 from $668,000 in the three months ended September 30, 2002. This increase
related to the TriActiv European sales and marketing efforts, as well as
pre-launch efforts in the U.S. In addition, general and administrative expenses
increased $108,000 to $1,010,000 in the three months ended September 30, 2003
from $902,000 in the three months ended September 30, 2002. This increase was
primarily attributable to an increase of $103,000 in audit and tax fees. This
was associated with an overall increase in audit fees, in addition to a $50,500
professional service fee relating to the completion of a research and
development tax credit project that began in the fourth quarter of our fiscal
year ended June 30, 2003.

Net Interest Income. Interest expense decreased 53% to $20,000 in the three
months ended September 30, 2003 from $43,000 in the three months ended September
30, 2002. This decrease was the result of a lower principal balance on the THM
Acquisition Obligation as we continued to make the required quarterly payments
and as a result of the early repayment to certain debt holders. Interest income
decreased by 31% to $290,000 in the three months ended September 30, 2003 from
$421,000 in the three months ended September 30, 2002. Although our cash and
investment balances have increased, this increase was more than offset by lower
interest rates.

Other Income (Expense). Other non-operating income/(expense) was $2,323 and
$(109) for the three months ended September 30, 2003 and 2002, respectively,
representing gains/(losses) on the disposals of fixed assets.

LIQUIDITY AND CAPITAL RESOURCES

Net cash provided by our operating activities was $5.9 million and $2.3 million
in the three months ended September 30, 2003 and 2002, respectively. In the
three months ended September 30, 2003, changes in asset and liability balances
provided $2.0 million of cash, in addition to net income of $2.5 million, a tax
benefit from exercise of stock options of $410,000 and non-cash depreciation and
amortization of $983,000. In the three months ended September 30, 2002, changes
in asset and liability balances provided $159,000 of cash, in addition to net
income of $1.5 million, a tax benefit from exercise of stock options of $7,000
and non-cash depreciation and amortization of $649,000.

Our cash, cash equivalents and investments were $53.8 million at September 30,
2003. We have an $8.0 million capital spending plan for fiscal 2004, of which
$1.4 million has been spent on machinery, equipment, furniture and fixtures and
leasehold improvements through September 30, 2003. These expenditures are
related to the continued expansion of our manufacturing capabilities for our
biomaterials and the TriActiv product lines, as well as support of overall
company growth.

We have an $853,000 obligation to the former shareholders of THM, a company we
acquired in September 2000. The obligation was due in equal quarterly
installments of $281,250, which began on December 31, 2000 and end on September
30, 2004. As of February 28, 2003 we had repaid certain former shareholders of
THM thereby reducing our remaining quarterly installments to $223,256 through
September 30, 2004.

We plan to continue to spend substantial amounts to fund clinical trials, to
gain regulatory approvals and to continue to expand research and development
activities, particularly for the TriActiv and our biomaterials products. In
addition to the potential cash requirements associated with our announced stock
repurchase plan (see below), we also anticipate the continued expansion of our
manufacturing facilities to support the continued growth of our biomaterials
business and expected commercial launch of the TriActiv. We believe our current
cash and investment balances, in addition to cash generated from operations,
will be sufficient to meet our operating, financing and capital requirements
through at least the next 12 months. 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 and costs associated with that
commercialization; 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, sales, and marketing capabilities; the cost
of filing, prosecuting, defending and enforcing patent claims and other
intellectual property rights; competing technological and market developments;
and the



                                       15
<PAGE>


development of strategic alliances for the marketing of certain of our products.
There can be no assurance that we will generate cash from operations in future
periods.

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

Our estimate of the time periods for which our cash and cash equivalents will be
adequate to fund operations is a forward looking statement within the meaning of
Private Securities Litigation Reform Act of 1995 and is subject to risks and
uncertainties. Actual results may differ materially from those contemplated in
such forward-looking statements. In addition to those described above, factors
which may cause such a difference are set forth below under the caption "Risks
Related to Our Business," as well as under the heading "Risk Factors" in our
Annual Report on Form 10-K for our fiscal year ended June 30, 2003.

RESEARCH AND DEVELOPMENT TAX CREDIT

During the quarter ended September 30, 2003, we recorded a research and
development tax credit of approximately $310,000. This was in addition to the
$1.5 million tax credit recorded in the fourth quarter of fiscal 2003 and
represents the additional portion of the credit. The tax credit relates to
qualified research and development activities of the Company. In connection with
the tax credit project, the Company recorded an additional $50,500 of
professional service fees as a component of selling, general and administrative
expenses during the quarter ended September 30, 2003, as discussed above.

STOCK REPURCHASE PLAN

On October 23, 2003, the Company announced that its board of directors had
approved a program to repurchase up to 400,000 of its issued and outstanding
shares of Common Stock over the next six months. The Company intends to finance
the repurchases using its available cash.

The Company plans to repurchase its shares for cash, from time to time in the
open market, through block trades or otherwise. The repurchase program does not
require the Company to purchase any specific dollar value or number of shares.
Any purchases under the program will depend on market conditions and may be
commenced or suspended at any time or from time to time without prior notice.

ACQUISITION OF THM BIOMEDICAL, INC.

On September 1, 2000, we acquired THM, a developer of porous, biodegradable,
tissue-engineering devices for the repair and replacement of musculoskeletal
tissues, for approximately $10.5 million plus acquisition costs of approximately
$228,000. The transaction was financed with $6.6 million in cash and a note
payable to the former shareholders of THM in the amount of $4.5 million (the
Acquisition Obligation). The Acquisition Obligation was due in equal quarterly
installments of $281,250, which began on December 31, 2000 and end on September
30, 2004. Accordingly, the present value of the cash payments (discounted based
upon our available borrowing rate of 7.5%) of $3.9 million was recorded as a
liability on the Company's financial statements, with a remaining balance of
$852,683 as of September 30, 2003, of which the entire amount was current at
September 30, 2003. During the quarter ended March 31, 2003, we had repaid
certain debt holders, thereby reducing our remaining quarterly installments to
$223,256 through September 2004.

Since the date of the acquisition, as planned, we have primarily devoted our
development efforts of the acquired PTM technology to an articular cartilage
application, a synthetic vascular graft, and a sustained release
chemotherapeutic drug treatment, and have expended approximately $1,073,000,
$1,291,000, and $98,000, respectively on such efforts through September 30,
2003. In addition, we received 510(k) approval for a proprietary PTM based
product, ImproVise(TM), an absorbable cement flow restrictor for use in certain
orthopaedic surgical procedures.



                                       16
<PAGE>


CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

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

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

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

          o    the impact of competition;

          o    anticipated trends in our business;

          o    existing and future regulations affecting our business;

          o    strategic alliances and acquisition opportunities; and

          o    other risk factors listed under "Risks Related to Our Business"
               below.

Except as expressly required by the federal securities laws, we undertake no
obligation to publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise after the date of
this report. Our results of operations in any past period should not be
considered indicative of the results to be expected for future periods.
Fluctuations in operating results may also result in fluctuations in the price
of our common stock.

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:

o    our ability to successfully commercialize the TriActiv in the European
     Union;
o    our ability to obtain regulatory approval for the TriActiv in the United
     States;
o    subsequent to regulatory approval in the U.S., our ability to successfully
     commercialize the TriActiv;
o    our reliance on revenues from the Angio-Seal product line;
o    the performance of St. Jude Medical as the manufacturer, marketer and
     distributor of the Angio-Seal product;
o    our dependence on the continued growth and success of our biomaterials
     products and customers;
o    our dependence on our biomaterials customers for marketing and obtaining
     regulatory approval for their products;
o    our ability to obtain any additional required funding for future
     development and marketing of the TriActiv, as well as our biomaterials
     products;
o    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;
o    the acceptance of our products by the medical community;
o    our dependence on key vendors and key personnel;
o    the use of hazardous materials which could expose us to future
     environmental liabilities;
o    our ability to expand our management systems and controls to support
     anticipated growth;
o    dilution of ownership interests of our stockholders by stock issuances in
     future acquisitions or strategic alliances;
o    risks related to our intellectual property, including patent and
     proprietary rights and trademarks; and


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o    risks related to our industry, including potential for litigation, ability
     to obtain reimbursement for our products and our products' exposure to
     extensive government regulation.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

Our investment portfolio consists primarily of high quality U.S. government,
municipal and corporate securities with maturities ranging from 3-14 years.
Also, the portfolio includes certain municipal variable rate demand obligations
that have maturities ranging from 20 to 30 years. These municipal variable-rate
demand obligations are putable weekly and callable on a monthly basis. We
mitigate default risk by investing in what we believe are safe and high credit
quality securities and by monitoring the credit rating of investment issuers.
Our portfolio includes only marketable securities with secondary or resale
markets, and we have an audit committee approved investment strategy which
currently limits the duration of our investments. These available-for-sale
securities are subject to interest rate risk and decrease in market value if
interest rates increase. At September 30, 2003, our total portfolio consisted of
approximately $35.8 million of investments. While our investments may be sold at
anytime because the portfolio includes available-for-sale marketable securities
with secondary or resale markets, we generally hold securities until the earlier
of their call date or their maturity. Therefore, we do not expect our results of
operations or cash flows to be materially impacted due to a sudden change in
interest rates. We had $852,683 in outstanding debt at September 30, 2003,
related to the acquisition of THM.

ITEM 4. CONTROLS AND PROCEDURES

We carried out an evaluation, under the supervision and with the participation
of our management, including our Chief Executive Officer and Chief Financial
Officer, of the design and operation of our disclosure controls and procedures.
Based on this evaluation, our Chief Executive Officer and Chief Financial
Officer concluded that, as of September 30, 2003, our disclosure controls and
procedures were effective to provide reasonable assurance that the information
required to be disclosed by us in the reports filed or submitted under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported
within the time periods specified in the SEC's rules and forms.

There was not any change in the Company's internal control over financial
reporting during the quarter ended September 30, 2003 that has materially
affected, or is reasonably likely to materially affect, the Company's internal
control over financial reporting.

Any control system, no matter how well designed and operated, can provide only
reasonable (not absolute) assurance that its objectives will be met.
Furthermore, no evaluation of controls can provide absolute assurance that all
control issues and instances of fraud, if any, have been detected.

PART II - OTHER INFORMATION

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

  A. Exhibits.

     31.1   Certification of Chief Executive Officer pursuant to Exchange Act
            Rule 13a-14(a).

     31.2   Certification of Chief Financial Officer pursuant to Exchange Act
            Rule 13a-14(a).

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

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



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  B.  Reports on Form 8-K.

          We filed a Form 8-K on August 13, 2003 to furnish our press release
          announcing our results of operations and financial position as of, and
          for the three month period and fiscal year ended June 30, 2003
          (pursuant to Items 7 and 12 of Form 8-K).







                                   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: November 14, 2003      By:  /s/ Wendy F. DiCicco, CPA
                                  --------------------------------------------
                                  Wendy F. DiCicco, CPA
                                  Chief Financial Officer
                                  (Principal Financial and Accounting Officer)




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