WAYNE, Pa., Feb. 9 /PRNewswire/ -- Escalon Medical Corp. (Nasdaq: ESMC)
today announced results for its fiscal second quarter ended December 31, 2000.
For the second quarter of fiscal 2001, Escalon Medical reported net income of
$198,910, or $0.060 per diluted share, up 85% from net income of $107,391, or
$0.032 per diluted share, in the first quarter of fiscal 2001.  In the second
quarter of 2000, the Company reported a net loss of $1,231,242, or $0.380 per
diluted share, which included a $455,112 non-cash charge related to Ocufit
SR(R).
    Revenue in the second quarter of fiscal 2001 increased 231% to
$2,937,395 from $886,534 in the second quarter of fiscal 2000.  The
composition of the Company's revenue has changed significantly as a result of
its strategy to focus on niche products that it owns, rather than products
that it distributes.  Sonomed, the Company's subsidiary that manufactures and
markets ophthalmic ultrasound diagnostic devices and was acquired in January
2000, contributed $1,547,000 to revenue in the quarter.  The vascular access
business, acquired in January 1999, contributed $490,000 to revenue in the
quarter.  This represents a marginal decrease when compared to the second
quarter of 2000 as a result of a restructuring of distribution channels, with
the expectation of making them more effective in the future.  Revenue for the
Company's original ophthalmic equipment business increased nominally to
$341,000 in the quarter.  In addition, Escalon Medical received a
$559,000 quarterly payment earned in connection with the divestment of the
Adatosil(R) 5000 Silicone Oil ("Silicone Oil") product line.  Additional
consideration based upon future sales of Silicone Oil are expected to continue
through fiscal 2005.
    Having strategically repositioned the business and boosted sales levels,
Escalon's cost structure has improved.  The gross margin as a percent of sales
improved to 66.5% in the current quarter from 52.5% in the year ago period and
64.7% in the first quarter of 2001.  Benefiting the gross margin is the
acquisition on Sonomed as well as the revenue related to Silicone Oil, which
has no costs associated with it.  Marketing, general and administrative
expenses and research and development costs also continue to be a focus of
management and remain well below year ago levels at 47.2% and 3.0%
respectively.  This led to the Company's improved profitability in the second
quarter of fiscal 2001.
    "We continue to strive to maintain our profitability while we look for
opportunities to increase the growth in our current portfolio of businesses,"
said Richard J. DePiano, Chairman and Chief Executive Officer.  "Sonomed
continues to play an important part in our improved financial performance and
we see opportunities to expand this business into Europe and the Far East.  We
also see opportunities ahead for the vascular access business by expanding our
marketing focus beyond cardiac catherization labs and into hematology,
oncology and I.V. therapies."
    Mr. DePiano continued, "Our joint venture with MegaVision, Inc. to develop
a high-end digital camera system for ophthalmologists is also moving ahead,
with initial sales of the camera system in December 2000.  We continue to
fine-tune the product and expect sales to accelerate later in fiscal 2001.  We
are also starting to take orders on our new surgical knife with its
revolutionary retractable MVR blade, which is designed to eliminate accidental
sticks during surgery."
    Mr. DePiano added, "While opportunities remain to improve our cost
structure, we are focusing our efforts on growing the business.  Internally
generated cash, cash from the Silicone Oil divestment, and funds from our line
of credit are sufficient to fund our current operations.  However, we continue
to seek corporate partnering, licensing and other financing options to take
advantage of opportunities to increase the rate of growth of our products, as
well as acquire unique niche products to further enhance our product
portfolio."
    For the first six months of fiscal 2001, Escalon Medical reported net
income of $306,301, or $0.094 per diluted share, compared to net income of
$167,679, or $0.052 per diluted share, in the first six months of fiscal 2000.
Included in net income in the prior year period was a gain of $1,848,215 for
the August 1999 sale of the license and distribution rights of Silicone Oil as
well as the $455,112 non-cash charge related to Ocufit SR(R).
    Revenues for the first six months of fiscal 2000 were $5,897,360 compared
to $2,310,212 in fiscal 1999.  The increase reflects the changing composition
of the Company's revenue and is primarily due to the acquisition of Sonomed,
which accounted for approximately 52% of revenue in the current six-month
period.
    Founded in 1987, Escalon develops, markets and distributes ophthalmic
diagnostic, surgical and pharmaceutical products as well as vascular access
devices.  The Company utilizes strategic partnerships to help finance its
development programs and is also seeking acquisitions to further diversify its
product line to achieve critical mass in sales and take better advantage of
the Company's distribution capabilities.  Escalon has headquarters in Wayne,
Pennsylvania and manufacturing operations in Long Island, New York and New
Berlin, Wisconsin.

    Note:  This press release contains statements that are forward-looking,
including statements about the Company's future prospects.  They are based on
the Company's current expectations and are subject to a number of
uncertainties and risks, and actual results may differ materially.  The
uncertainties and risks include whether the Company is able to improve upon
the operations of Sonomed and the vascular access business, generate cash and
identify, finance and enter into business relationships and acquisitions, file
and receive approval with the FDA to market its NB2000(TM) Needle,
successfully market its new surgical knife, risks and uncertainties related to
the marketing of the Company's CFA Digital Imaging System, uncertainties and
risks related to new product development, manufacturing and market acceptance,
research and development activities, including failure to demonstrate clinical
efficacy, delays by regulatory authorities, scientific and technical advances
by the Company or third parties, introduction of competitive products, third
party reimbursement and physician training as well as general economic
conditions.  Further information about these and other relevant risks and
uncertainties may be found in the Company's report on Form 10-K, and its other
filings with the Securities and Exchange Commission, all of which are
available from the Commission as well as other sources.

    To receive additional information on Escalon Medical Corp., via fax, at no
charge, dial 1-800-PRO-INFO and enter code ESMC.

                    ESCALON MEDICAL CORP. and SUBSIDIARIES
               CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                                Three Months Ended        Six Months Ended
                                   December 31,             December 31,
                                2000         1999         2000        1999
                             (unaudited) (unaudited) (unaudited)(unaudited)

    Product revenues, net     $2,937,395    $886,534 $5,897,360  $2,310,212

    Costs and expenses:
    Cost of goods sold          983,384     421,358   2,028,055   1,154,198
    Research and development     87,577     231,950     198,641     467,383
    Marketing, general and
     administrative           1,386,999   1,039,468   2,721,279   1,976,195
    Total costs and expenses  2,457,960   1,692,776   4,947,975   3,597,776
    Income (loss) from
     operations                 479,435    (806,242)    949,385  (1,287,564)

    Other income and
     (expenses):
    Gain on sale of Silicone
     Oil product line                --          --          --   1,848,215
    Write-off of Ocufit              --    (455,112)         --    (455,112)
    Equity in income (loss)
     of unconsolidated
      joint venture              24,854          --     (29,968)         --
    Interest income                  10      44,903       2,929      93,787
    Interest expense           (270,389)    (14,791)   (559,020)    (29,772)
    Total other income and
     (expense)                 (245,525)   (425,000)   (586,059)  1,457,118
    Earnings before income
     taxes                      233,910  (1,231,242)    363,326     169,554
    Income taxes                 35,000          --      57,025       1,875
    Net income (loss)           198,910  (1,231,242)    306,301   $ 167,679
    Basic net income (loss)
     per share                   $0.061     $(0.380)     $0.094      $0.052
    Diluted net income (loss)
     per share                   $0.060     $(0.380)     $0.094      $0.052

    Weighted average shares
     - basic                  3,242,184   3,242,184   3,242,184   3,242,184
    Weighted average shares
     - diluted                3,302,017   3,242,184   3,268,384   3,254,250


    SELECTED BALANCE SHEET DATA:           Dec. 31, 2000     June 30, 2000
                                            (unaudited)        (audited)
    Cash, cash equivalents and investments
     (restricted and unrestricted)            $292,681         $177,106
    Total current assets                     4,008,725        3,319,297
    Total assets                            17,358,931       16,845,290
    Current liabilities                      7,087,581        6,530,241
    Long-term debt                           4,550,000        4,900,000
    Total shareholders' equity               5,721,350        5,415,049

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