<PAGE>   1
                                      
                                      
                                UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549
                                      
                                  FORM 10-Q
                                      
             [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934
                                      
              For the Quarterly Period Ended: DECEMBER 31, 1997
                                      
                                      OR
                                      
            [  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934
                                      
           For the Transition Period From __________ to __________.
                                      
                                      
                       Commission File Number:  0-27120
                                      
                                      
                           KENSEY NASH CORPORATION
            (Exact name of registrant as specified in its charter)
                                      
                                      
          DELAWARE                                      36-3316412
(State or other jurisdiction                (IRS Employer Identification No.)
of incorporation or organization)


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


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


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

     As of January 31, 1998, there were outstanding 7,427,024 shares of Common
Stock, par value $.001, of the registrant.



                                      1
                                      



<PAGE>   2
                                      
                                      
                           KENSEY NASH CORPORATION
                                      
                       QUARTER ENDED DECEMBER 31, 1997



                                     INDEX

<TABLE>
<CAPTION>
                                                                                   PAGE
                                                                                   ----
<S>                                                                                <C>

PART I - FINANCIAL INFORMATION


     ITEM 1. FINANCIAL STATEMENTS

                Condensed Consolidated Balance Sheets
                 as of December 31, 1997  (Unaudited) and June 30, 1997............    3

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

                Condensed Consolidated Statements of Stockholders' Equity as of
                 December 31, 1997 (Unaudited) and June 30, 1997...................    5

                Condensed Consolidated Statements of Cash Flows
                 for the six months ended December 31, 1997 and 1996 (Unaudited)...    6

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

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

PART II - OTHER INFORMATION

     ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K......................................   16

SIGNATURES.........................................................................   17
</TABLE>

                                       
                                       2
                                       
                                       

<PAGE>   3

PART I - FINANCIAL INFORMATION
Item 1. Financial Statements

KENSEY NASH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                               December 31,     June 30,
                                                                                  1997           1997
                                                                            ---------------------------------
ASSETS                                                                                        (Unaudited)               
<S>                                                                              <C>            <C>        
CURRENT ASSETS:                                                                                            
  Cash and cash equivalents                                                       2,202,708        868,180 
  Short-term investments                                                          4,713,825      6,482,624 
  Trade receivables, net                                                          1,111,213      1,252,110 
  Other receivables (including approximately $79,500 and $30,000                                           
     at December 31, 1997 and June 30, 1997, respectively, due from                                        
     employees)                                                                     740,153        431,668 
  Inventory (Note 3)                                                              1,036,474        735,922 
  Prepaid expenses and other assets                                                 200,189        295,232 
                                                                                -----------    ----------- 
         Total current assets                                                    10,004,562     10,065,736 
                                                                                -----------    ----------- 
PROPERTY, PLANT AND EQUIPMENT, AT COST                                                                     
  Leasehold improvements                                                          3,276,000      3,207,005 
  Machinery, furniture and equipment                                              3,041,892      2,719,543 
  Construction in progress                                                          445,054         57,614 
                                                                                -----------    ----------- 
         Total property, plant and equipment                                      6,762,946      5,984,162 
  Accumulated depreciation                                                       (2,372,945)    (1,978,405)
                                                                                -----------    ----------- 
Net property, plant and equipment                                                 4,390,001      4,005,757 
                                                                                -----------    ----------- 
                                                                                                           
OTHER ASSETS:                                                                                              
  Acquired patents (Note 7)                                                       3,992,409                
  Restricted investments (Note 5)                                                 2,464,725      2,419,965 
  Leased property under capital leases, less accumulated                                                   
     amortization of $109,091 and $115,550 at December 31, 1997                                            
     and June 30, 1997, respectively                                                 79,675        101,974 
                                                                                -----------    ----------- 
     Total other assets                                                           6,536,809      2,521,939 
                                                                                -----------    ----------- 
TOTAL                                                                           $20,931,372    $16,593,432 
                                                                                ===========    =========== 
LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Accounts payable                                                              $   820,096    $   522,311
  Accrued expenses                                                                  463,654        323,850
  Current portion of line of credit and capital lease obligations (Note 4)          205,610         42,702
  Obligation under Patent Acquisition Agreement (Note 7)                            420,934                
  Deferred revenue                                                                   30,000          5,000 
                                                                                -----------    ----------- 
         Total current liabilities                                                1,940,294        893,863 
                                                                                -----------    ----------- 
DEFERRED REVENUE - ROYALTIES (Note 2)                                             2,823,845      3,000,000 
OBLIGATION UNDER PATENT ACQUISITION AGREEMENT                                                              
  - long-term portion (Note 7)                                                      664,336                
LINE OF CREDIT AND OBLIGATIONS UNDER  CAPITAL                                                              
     LEASES, long-term portion (Note 4)                                             961,654        572,623 
                                                                                -----------    ----------- 
         Total liabilities                                                        6,390,129      4,466,486 
                                                                                -----------    ----------- 

COMMITMENTS AND CONTINGENCIES (Note 5)

STOCKHOLDERS' EQUITY:
  Preferred stock, $.001 par value, 100,000 shares authorized,
     no shares issued or outstanding at December 31, 1997 and 
     June 30, 1997 

  Common stock, $.001 par value, 25,000,000 shares 
     authorized, 7,426,624 and 7,198,251 shares issued and 
     outstanding at December 31, 1997 and June 30, 1997,  
     respectively                                                                     7,426          7,198
  Capital in excess of par value                                                 37,297,064     34,203,807
  Accumulated deficit                                                           (22,763,247)   (22,084,059)
                                                                                -----------    -----------
     Total stockholders' equity                                                  14,541,243     12,126,946
                                                                                ===========    -----------
TOTAL                                                                           $20,931,372    $16,593,432
                                                                                ===========    ===========
</TABLE>


See notes to condensed consolidated financial statements.



                                       3


<PAGE>   4


KENSEY NASH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                          THREE MONTHS ENDED          SIX MONTHS ENDED
                                              DECEMBER 31,               DECEMBER 31,
                                          ---------------------      -------------------------
                                             1997         1996         1997         1996
<S>                                        <C>         <C>            <C>           <C>
REVENUES (Notes 1 and 2):
  Net sales                                $1,202,295  $  888,409     $1,736,356   $1,492,155
  Research and development                  1,028,639     742,109      1,761,970    1,361,472
  Milestone fees                                                                    1,050,000
  Royalty income                              531,147      81,864        829,045      136,864
                                           ----------  ----------     ----------   -----------
     Total revenues                         2,762,081   1,712,382      4,327,371    4,040,491
                                           ----------  ----------     ----------   -----------
OPERATING COSTS AND EXPENSES:                           
  Cost of products sold                     1,040,629     711,515      1,856,719    1,278,756
  Research and development                  1,394,275   1,110,596      2,579,660    2,201,281
  Selling, general and administrative         443,833     517,242        808,050      973,775
                                           ----------  ----------     ----------   -----------
     Total operating costs and expenses     2,878,737   2,339,353      5,244,429    4,453,812
                                           ----------  ----------     ----------   -----------
LOSS FROM OPERATIONS                         (116,656)   (626,971)      (917,058)    (413,321)
                                           ----------  ----------     ----------   -----------
OTHER INCOME (EXPENSE):
  Insurance settlement                                    968,761                     968,761
  Interest income                             135,519     149,179        269,184      327,336
  Interest expense                            (20,923)     (1,099)       (35,507)    (172,851)
  Other                                         2,552       7,359          4,193        8,017
                                           ----------  ----------     ----------   -----------
     Total other income - net                 117,148   1,124,200        237,870    1,131,263
                                           ----------  ----------     ----------   -----------
NET INCOME (LOSS)                          $      492  $  497,229     $ (679,188)  $  717,942
                                           ==========  ==========     ==========   ===========

EARNINGS (LOSS) PER COMMON SHARE and
  EARNINGS PER COMMON SHARE -
  assuming dilution (Note 1)               $     0.00  $     0.07     $    (0.09)  $     0.10
                                           ==========  ==========     ==========   ===========
</TABLE>


See notes to condensed consolidated financial statements.


                                       4
<PAGE>   5



KENSEY NASH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                       CAPITAL                               
                                                COMMON STOCK          IN EXCESS    
                                             -------------------        OF PAR     ACCUMULATED               
                                                SHARES   AMOUNT         VALUE        DEFICIT       TOTAL     
<S>                                           <C>        <C>          <C>         <C>            <C>               
BALANCE, JUNE 30, 1996                        7,156,493  $7,156      $33,815,216  $(21,821,583) $12,000,789  
                                                                                                             
   Exercise of stock options                     41,758      42          388,591                    388,633  
                                                                                                             
   Net loss                                                                           (262,476)    (262,476)  
                                             ----------  ------      -----------  ------------  -----------   

BALANCE, JUNE 30, 1997                        7,198,251   7,198       34,203,807   (22,084,059)  12,126,946  
                                                                                                             
   Exercise of stock options                     28,373      28          255,857                    255,885  
                                                                                                     
   Shares issued under Patent Acquisition                                                            
     Agreement (Note 7)                         200,000     200        2,837,400                  2,837,600 
                                                                                                     
   Net loss                                                                           (679,188)    (679,188) 
                                             ----------  ------      -----------  ------------  -----------   

BALANCE, DECEMBER 31, 1997 (Unaudited)        7,426,624  $7,426      $37,297,064  $(22,763,247) $14,541,243 
                                             ==========  ======      ===========  ============  ===========
</TABLE>

See notes to condensed consolidated financial statements.




















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

<TABLE>
<CAPTION>
                                                                             SIX MONTHS ENDED  
                                                                                DECEMBER 31,    
                                                                       ------------------------------
                                                                          1997               1996 
<S>                                                                    <C>               <C>
OPERATING ACTIVITIES:
  Net (loss) income                                                    $ (679,188)       $   717,942   
  Adjustments to reconcile net (loss) income to net cash used in                                       
       operating activities:                                                                           
       Depreciation and amortization                                      416,839            335,698   
       Interest expense not requiring cash                                                             
  Changes in assets and liabilities which provided (used) cash:                                        
       Accounts receivable                                               (167,588)           598,684   
       Prepaid expenses and other current assets                           95,043           (125,020)  
       Inventory                                                         (300,552)          (229,066)  
       Accounts payable and accrued expenses                              437,589           (668,736)  
       Deferred revenue                                                  (151,155)         2,942,818   
                                                                       ----------        -----------                                
        Net cash (used in) provided by operating activities              (349,012)         3,572,320   
                                                                       ----------        -----------                                
INVESTING ACTIVITIES:                                                                                  
  Patent costs capitalized                                                (69,539)                     
  Additions to property, plant and equipment                             (778,784)          (898,189)  
  Sale of investments                                                   1,724,039                      
                                                                       ----------        -----------                                
        Net cash provided by (used in) investing activities               875,716           (898,189)  
                                                                       ----------        -----------                                
FINANCING ACTIVITIES:                                                                                  
  Principal payments under capital leases                                 (23,061)           (24,818)  
  Repayments of long term debt                                                            (6,356,824)  
  Proceeds from long term debt                                            575,000            100,000   
  Exercise of stock options                                               255,885            374,466   
                                                                       ----------        -----------                                
        Net cash provided by (used in) financing activities               807,824         (5,907,176)  
                                                                       ----------        -----------                                
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                        1,334,528         (3,233,045)  
                                                                                                       
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                            868,180         14,651,490   
                                                                       ----------        -----------                                
CASH AND CASH EQUIVALENTS, END OF PERIOD                               $2,202,708        $11,418,445   
                                                                       ==========        ===========
                                                                                                       
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                                                      
  Cash paid for interest                                               $   35,926        $     5,239  
                                                                       ----------        -----------
  Cash paid for income taxes                                           $                 $            
                                                                       ==========        ===========

SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:
During the quarter ended December 31, 1997, the Company issued 200,000 shares of common stock in conjunction with the Patent
  Acquisition Agreement (Note 7).
</TABLE>


See notes to condensed consolidated financial statements.


















                                       6
<PAGE>   7
                                      
                                      
                           KENSEY NASH CORPORATION
                                      
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                      
                                 (UNAUDITED)

NOTE 1 -- CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

     BASIS OF PRESENTATION

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

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

     NET INCOME (LOSS) PER SHARE
     The Financial Accounting Standards Board ("FASB") has issued Statement
     of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share",
     which changes the computation and presentation of earnings per share.  The
     Company was required to adopt this standard during its quarter ended
     December 31, 1997.  For the three and six months ended December 31, 1997
     and 1996, basic and diluted EPS are computed using the weighted average
     number of shares of common stock outstanding.  Common equivalent shares
     from options are included in the diluted computation when their effect is
     dilutive.

     The following table shows the reconciliation between the numerators and
     denominators for the basic and diluted EPS calculations, where income is
     the numerator and the weighted average number of shares is the
     denominator.  The reconciliation is not shown for the six months ended
     December 31, 1997, as any common share equivalents are antidilutive.

<TABLE>
<CAPTION>
                                                    THREE MONTHS ENDED DECEMBER 31,
                               -------------------------------------  -----------------------------------
                                                 1997                                1996
                               -------------------------------------  -----------------------------------
                                                              PER                                PER
                                                             SHARE                              SHARE
                                   INCOME       SHARES       AMOUNT      INCOME     SHARES      AMOUNT
                               -------------------------------------  -----------------------------------
<S>                            <C>             <C>          <C>         <C>           <C>         <C>
BASIC EPS
Income available to
 common shareholders           $    492         7,419,841   $   0.00    $   497,229   7,173,916   $  0.07
                                                            ========                              =======
EFFECT OF DILUTIVE SECURITIES
Options                              -            198,156                      -        186,107
                               --------         =========               -----------   ---------
DILUTED EPS
Income available to common
 shareholders including
 assumed conversions           $    492         7,617,997   $   0.00    $   497,229   7,360,023   $  0.07
                               ========        ==========   ========    ===========   =========   =======
</TABLE>

                                       
                                       7
                                       
                                       


<PAGE>   8

<TABLE>
<CAPTION>
          
                                         SIX MONTHS ENDED
                                  ------------------------------
                                         DECEMBER 31, 1996
                                  ------------------------------
                                                           PER
                                                          SHARE
                                  INCOME     SHARES      AMOUNT
                                  ------------------------------
     <S>                          <C>        <C>        <C>
     BASIC EPS
     Income available to
      common shareholders         $717,942   7,166,440  $   0.10
                                                        ========
     EFFECT OF DILUTIVE
     SECURITIES
     Options                          -        163,293
                                   --------   ---------
     DILUTED EPS
     Income available to common
      shareholders including
      assumed conversions         $717,942   7,329,733  $   0.10
                                  ========   =========  ========
</TABLE>

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

     INVESTMENTS
     Investments at December 31, 1997 and June 30, 1997 consist of short-term
     Certificates of Deposit, Government Bonds and U.S. Treasury Bills.  In 
     accordance with SFAS No. 115, Accounting for Certain Investments in Debt 
     and Equity Securities, the Company has classified its entire investment 
     portfolio as available-for-sale securities except for those pledged as 
     collateral which are included in restricted investments (see Note 5). 
     Available-for-sale securities are reported at fair value with unrealized 
     gains and losses included in stockholders' equity (at December 31, 1997, 
     amortized cost approximates fair market value).  Realized gains and losses 
     are included in interest income.

     EXPORT SALES
     Export sales from the Company's U.S. operations to unaffiliated
     customers in Europe totaled $22,485 and $126,195 for the three months
     ended December 31, 1997 and 1996, respectively and $57,035 and $524,580
     for the six months ended December 31, 1997 and 1996, respectively.

     PATENTS
     Due to the long development cycle for patents, the Company is unable to
     measure the recoverability of costs when incurred; therefore, such costs
     are expensed  as incurred.  However, the patents acquired in November 1997
     under the Patent  Acquisition Agreement (Note 7) are being amortized over
     their remaining period  of economic benefit.


NOTE 2 -- DEFERRED REVENUE - ROYALTIES

     Upon receipt of pre-market approval for the 8 French ("F") size
     Angio-Seal device (the "Angio-Seal") from the Food and Drug Administration
     (the "FDA") on September 30, 1996, the Company received a $3.0 million
     advance on future royalties under the Company's licensing agreement  (the
     "Licensing Agreement") with Sherwood-Davis & Geck ("SD&G").  Such advance
     has been recorded as deferred revenue.  The Licensing Agreement provides
     for certain minimum royalty payments ("Minimum Royalty") during the first
     five years after receiving FDA approval (each royalty year begins on
     October 1 and ends on September 30).  As stipulated in the Licensing
     Agreement, the $3.0 million advance will be reduced in each period by 50%
     of royalties earned in excess of the Minimum Royalty in any royalty year. 
     The remainder of royalties earned will be received as cash proceeds by the
     Company.


                                      
                                      8



<PAGE>   9



     At September 30, 1997, the Company had exceeded the first royalty year
     (period ended September 30, 1997) Minimum Royalty by $352,310.  The
     deferred revenue balance was reduced by 50% of such excess, to $2,823,845. 
     As of December 31, 1997, the Minimum Royalty has not been met and
     therefore no further reductions of the deferred revenue balance on the
     financial statements have been made.  As the Company cannot reasonably
     estimate the excess, if any, of future royalty payments over the Minimum
     Royalty in each year, the entire balance has been classified as long-term
     at December 31, 1997.


NOTE 3 -- INVENTORY

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

<TABLE>
<CAPTION>
                         DECEMBER 31, 1997   JUNE 30, 1997
                         -----------------   -------------
     <S>                     <C>                 <C>
     Raw Materials           $  925,518          $649,262
     Work in Process            110,956            86,660
                             ----------          --------
     Total                   $1,036,474          $735,922
                             ==========          ========
</TABLE>

NOTE 4 -- LINE OF CREDIT

     In February 1997, the Company replaced a $100,000 revolving credit and
     term loan agreement bearing interest at a fixed rate of 8.75% with a
     $500,000 revolving credit and term loan agreement ("the Revolver") bearing
     interest at the prime rate of interest (8.5% at December 31, 1997).  The
     Revolver called for interest only payments until December 1, 1997 at which
     time it converted to a term loan due in 60 monthly installments of
     principal and interest.  In October  1997, the Revolver was increased to
     $2 million and the date on which it converts to a term loan was extended
     to August 1, 1998.  The Revolver is collateralized by the business assets
     of the Company.  At December 31, 1997, the Company had borrowed $1,075,000
     under the Revolver.


NOTE 5 -- COMMITMENTS AND CONTINGENCIES

     The Company has pledged $2,464,725 in investments as collateral to
     secure certain bank loans to employees which were used by such employees
     for the payment of taxes incurred as the result of the receipt of Common
     Stock in settlement of the employee stock rights.  In exchange for the
     Company pledging collateral for such loans, each affected employee has
     pledged their Common Stock as collateral to the Company.  The balance
     outstanding on such employee loans was $2,183,228 at December 31, 1997.

NOTE 6 -- INCOME TAXES

     As of June 30, 1997, the Company had net operating loss carryforwards
     for federal and state tax purposes totaling $18.3 and $1.2 million,
     respectively.  As such, no provision has been made for income taxes for
     the three and six months ended December 31, 1997.

NOTE 7 -- PATENT ACQUISITION

     On November 10, 1997, the Company acquired a portfolio of puncture
     closure patents and patent applications as well as the rights of the
     seller under a pre-existing licensing agreement.  As a result of the
     Company's acquisition of such rights, beginning on January 1, 1998,  the
     Company will be entitled to earn royalty fees, formerly paid to the
     seller, for each Angio-Seal device sold.  These royalties will be in
     addition to the royalties already earned by the Company under its own
     License Agreement with SD&G.

                                      
                                      9
                                      
                                      

<PAGE>   10



     Under the terms of the agreement, the Company issued 200,000 shares of
     Common Stock and will make cash payments totaling  $1.2 million for the
     transfer of ownership of the patents.  The cash portion is payable in
     eight quarterly installments (four $125,000 payments followed by four
     $175,000 payments) beginning on March 31, 1998.  Accordingly, the present
     value of the cash payments has been recorded as a liability on the
     financial statements.  The patents are valued at the share price on the
     date of the agreement (November 10, 1997) plus the present value of the
     cash payments and any legal and related costs incurred to complete the
     deal.  The asset will be amortized over the remaining period of economic
     benefit.


                                      
                                      10
                                      
                                      


<PAGE>   11


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

        OVERVIEW


        The Company is a medical device company focused on the
commercialization and continuing development of a line of absorbable medical
devices for the sealing of arterial punctures created during diagnostic and
therapeutic cardiovascular procedures such as angiography, angioplasty,
atherectomy and the placement of stents.  The Company's proprietary principal
product, the 8F Angio-Seal device, has been designed to provide a safe,
effective and rapid method of sealing arterial punctures.  The Company  is
developing other sizes of the Angio-Seal, including 6F and 10F sizes (together
with Angio-Seal, the "Angio-Seal Product Line"), to address broader market
applications.  In addition to its involvement with the Angio-Seal Product Line,
the Company manufactures its proprietary collagen for use by third parties and
has expanded its design and manufacturing capabilities in absorbable polymers. 
The Company is also developing a rotary catheter for application in opening
occluded bypass grafts.


        The Company has a strategic relationship with SD&G whereby SD&G has the
worldwide marketing and manufacturing rights to the Angio-Seal Product Line.
The 8F Angio-Seal was approved for sale in Europe (CE Mark) in September 1995
and in the United States in September 1996.  The Angio-Seal is also being sold
in Canada, Australia, Saudi Arabia and Israel.


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

        Revenues for these periods consisted of net sales, research and
development revenue and royalty income.  Revenues increased 61% to $2,762,000
in the three months ended December 31, 1997 from $1,712,000 in the three months
ended December 31, 1996.  Net sales of products increased 35% to $1,202,000
from $888,000 for the three months ended December 31, 1997 and 1996,
respectively.  Research and development revenues increased 39% to $1,029,000
from $742,000 for the three months ended December 31, 1997 and 1996,
respectively.  Royalty income increased 549% to $531,000 from $82,000 in the
three months ended December 31, 1997 and 1996, respectively.  The increases in
net sales and royalty income are both directly attributable to increased
worldwide demand for the Angio-Seal in the second quarter of fiscal 1998
compared to the same period a year earlier.  Approximately 38,000 Angio-Seal
devices were sold to end-users during the quarter ended December 31, 1997
compared to approximately 6,000 in the quarter ended December 31, 1996.  The
increased demand resulted in higher Angio-Seal component sales to SD&G for the
manufacture of the device, as well as increased royalty income.  As the
Company's total royalty per unit will increase as a result of the Patent
Acquisition Agreement and as the Company and SD&G increase production and
continue to market the Angio-Seal in Europe and in the United States, the
Company expects royalty income to become an increasingly significant source of
revenue.  Royalty rates are based on volume of units sold and are comparable in
both the domestic and foreign licensing agreements with SD&G. The increase in
research and development revenues relates to increased activity in contract
research and development revenue from SD&G for the clinical trial program and
for additional sizes of and product enhancements to the Angio-Seal Product
Line.

        Cost of products sold increased 46% to $1,041,000 in the three months
ended December 31, 1997 from $712,000 in the three months ended December  31,
1996.  This increase reflects greater net sales of products although the
overall gross margin has not yet improved  due to inefficiencies realized in
the 6F and 10F Angio-Seal production start-up phase.

        Research and development expense, including regulatory and clinical
expense, increased 26% to $1,394,000 in the three months ended December 31,
1997 from $1,111,000 in the three months ended December 31, 1996.  This
increase was primarily due to  greater personnel costs and  outside expenses in
conjunction with the development of the Angio-Seal Product Line as well as
increased activity within the


                                      
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<PAGE>   12


rotary technology program.  The Company expects research and development
expense to continue at recent levels as it continues development on additional
sizes of the Angio-Seal, investigates and develops new products and
manufacturing techniques, conducts clinical trials and seeks regulatory
approval for its products.

        Selling, general and administrative expense decreased 14% to $444,000
in the three months ended December 31, 1997 from $517,000 in the three months
ended December 31, 1996.  This decrease was primarily due to a reduction in
certain outside professional fees.

        Interest expense increased to $21,000 in the three months ended
December 31, 1997 from $1,000 in the three months ended December 31, 1996. 
This increase relates to the balance outstanding under the Company's  revolving
credit and term loan agreement increasing from $100,000 at December 31, 1996 to
$1,075,000 at December 31, 1997.  Interest income decreased to $136,000 from
$149,000 in the three months ended December 31, 1997 compared to the three
months ended December 31, 1996. The decrease was due to a decline in investment
balances primarily attributable to capital expenditures and funding for the
Company's normal operating activities.

        During the three months ended December 31, 1996, the Company received
$1,310,000 in final settlement of the business interruption portion of their
insurance claim of which $969,000 was recorded as other income.

       SIX  MONTHS ENDED DECEMBER 31, 1997 COMPARED TO SIX MONTHS ENDED
                              DECEMBER  31, 1996

        Revenues for these periods consisted of net sales, research and
development revenue, milestone fees and royalty income.  Revenues increased 7%
to $4,327,000 in the six months ended December 31, 1997 from $4,040,000 in the
six months ended December 31, 1996.  Net sales of products increased 16% to
$1,736,000 from $1,492,000 for the six months ended December 31, 1997 and 1996,
respectively.  Research and development revenues increased 29% to $1,762,000
from $1,361,000 for the six months ended December 31, 1997 and 1996,
respectively.  Royalty income increased 506% to $829,000 from $137,000 in the
six months ended December 31, 1997 and 1996, respectively. The increases in net
sales and royalty income are both directly attributable to increased worldwide
demand for the Angio-Seal in the six months ended December 31, 1997 from the
same period a year earlier. There were approximarely 60,000 Angio-Seal devices
sold to end-users during the six months ended December 31, 1997 compared to
approximately 8,000 in the six months ended December 31, 1996. This increase in
worldwide product demand translates into higher Angio-Seal component sales to
SD&G for the manufacture of the device and increased royalty income. As the
Company and SD&G increase production and continue to market the Angio-Seal in
Europe and in the United States, the Company expects royalty income to become a
significant source of revenue.  Royalty rates are based on volume of units sold
and are comparable in both the domestic and foreign licensing agreements with
SD&G.  The increase in research and development revenues relates to increased
activity in contract research and development from SD&G for the clinical trial
program and for additional sizes of and product enhancements to the Angio-Seal
Product Line.  The $1.05 million milestone fee in the six months ended December
31, 1996 represents the final milestone under the License Agreement with SD&G
which was earned by the Company upon receipt of FDA premarket approval of the
Angio-Seal.

        Cost of products sold increased 45% to $1,857,000 in the six months
ended December 31, 1997 from $1,279,000 in the six months ended December 31,
1996. This increase reflects greater net sales of products offset by
manufacturing inefficiencies realized in the start-up phase of production for
the new sizes of the Angio-Seal, the 6F and 10F.

        Research and development expense, including regulatory and clinical
expense, increased 17% to $2,580,000 in the six months ended December 31, 1997
from $2,201,000 in the six months ended December 31, 1996.  This increase was
primarily due to an increase in personnel costs and outside expenses in
conjunction with the development of the Angio-Seal Product Line, rotary
technology and the



                                      12
                                      
                                      


<PAGE>   13


expanding biomaterials business.  The Company expects research and development
expense to continue at recent levels as it develops additional sizes of the
Angio-Seal, investigates and develops new products and manufacturing
techniques, conducts clinical trials and seeks regulatory approval for its
products.

        Selling, general and administrative expense decreased 17% to $808,000
in the six months ended December 31, 1997 from $974,000 in the six months ended
December 31, 1996.  This decrease was primarily due to a reduction in certain
outside professional fees.

        Interest expense decreased 79% to $36,000 in the six months ended
December 31, 1997 from $173,000 in the six months ended December 31, 1996. 
This decrease was due to the repayment of the  SD&G Credit Agreement in October
1996 in connection with receipt of FDA approval of the Angio-Seal. Interest
income decreased to $269,000 in the six months ended December 31, 1997 from
$327,000 in the six months ended December 31, 1996. The decrease was due to a
decline in investment balances primarily attributable to the repayment of the
SD&G Credit Agreement as well as capital expenditures and funding for the
Company's normal operating activities.

        During the six months ended December 31, 1996, the Company received
$1,310,000 in final settlement of the business interruption portion of their
insurance claim of which $969,000 was recorded as other income.

        LIQUIDITY AND CAPITAL RESOURCES

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

        Net cash used in the Company's operating activities during the six
months ended December 31, 1997 was $349,000 compared to $3,572,000 provided by
operating activities in the six months ended December 31, 1996.  This
fluctuation was primarily due to the receipt of $3,000,000 in advance royalties
from SD&G in October 1996 as well as the shift from net income of $718,000 to a
net loss of $679,000 for the periods ended December 31, 1996 and December 31,
1997, respectively. The net loss and income  for the six months ended December
31, 1997 and 1996, respectively, was partially offset by changes in asset and
liability balances and non-cash adjustments for depreciation which resulted in
cash provided by  and cash used in operations of $330,000 and $88,000,
respectively.

        Capital expenditures were $779,000 for the six months ended December
31, 1997 related to the expansion of the Company's manufacturing and
development capabilities.

        The Company has borrowed an additional $575,000 under its $2.0 million
revolving credit and term loan agreement.  The Company has $925,000 remaining
available credit under this facility which it intends to utilize to fund
further capital expenditures and facility expansion.

        The Company's cash, cash equivalents and short-term investments were
$6,917,000 at December 31, 1997.  In addition, the Company has pledged
$2,465,000 in investments (not included in the $6,917,000) as collateral to
secure bank loans made to employees for the payment of taxes incurred by such
employees as a result of their receipt of Common Stock in settlement of the
employee stock rights at the time of the IPO.  In exchange for the Company's
pledging this collateral, the employees have pledged their Common Stock as
collateral to the Company.


                                      
                                      
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<PAGE>   14

        The Company acquired patents under a Patent Acquisition Agreement in
exchange for 200,000 shares of common stock and a series of quarterly cash
payments totaling $1.2 million.  The patents have been recorded on the balance
sheet at the value of the shares on the date of the agreement plus the present
value of the $1.2 million cash and any legal and other related costs incurred
to acquire such patents.  The present value of the cash payments ($1.1 million)
has been recorded between short and long-term liabilities at December 31, 1997.

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

        The Company plans to continue to expend substantial resources in
funding clinical trials to gain regulatory approvals, make additional marketing
claims and continue to expand research and development activities for the
Angio-Seal, rotary technology and biomaterials products.

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

        During the quarter ended December 31, 1997, American Home Products
Corporation ("AHP") announced the sale of its SD&G subsidiary, the operating
company responsible for the sales and marketing and manufacturing of the
Angio-Seal device, to Tyco International, LTD ("Tyco").  AHP has informed
Kensey Nash that it does not intend to alter its plans for the operations of
the Angio-Seal business unit pending the closing of the transaction, expected
in March 1998.  The Company does not believe the sale of SD&G to Tyco will have
a material impact on its future operations.

        Statements contained in this Form 10-Q that are not historical facts
are forward-looking statements that are made pursuant to the Safe Harbor
provisions of the Private Securities Litigation Reform Act of 1995.  The
Company cautions that a number of important factors could cause the Company's
actual results for fiscal 1998 and beyond to differ materially from those in
any forward-looking statements made by, or on behalf of, the Company.  These
important factors include, without limitation, the time, effort and priority
level that SD&G and its successors attach to the Angio-Seal and SD&G's ability
to successfully market and manufacture the Angio-Seal, the Company's ability to
manufacture Angio-Seal components, the results of ongoing clinical trials and
timing of additional regulatory approvals, announcements of technological
innovations or the introduction of new products by the Company or its
competitors, competition by rival developers of puncture closure devices,
general business conditions in the healthcare industry and general economic
conditions. Results of operations in any past period should not be considered
indicative of the results to be expected for future periods.  Fluctuations in
operating results may also result in fluctuations in the price of the Common
Stock.


                                      
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<PAGE>   15

                                      
                         PART II - OTHER INFORMATION
                                      
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

     A. Exhibits.

        None

     B. Reports on Form 8-K.

        The Company filed Form 8-K on or about December 8, 1997, to report
        the acquisition of a portfolio of puncture closure patents,
        reporting Items 5 and 7.

     C. Financial Data Schedule


                                      
                                  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 17, 1998            By: /s/ Joseph W. Kaufmann
                                       -------------------------------
                                       Joseph W. Kaufmann
                                       President, Chief Executive Officer and
                                       Chief Financial Officer




                                      
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