WAYNE, Pa., Feb. 11 /PRNewswire/ -- Escalon Medical Corp. (Nasdaq: ESMC)
today announced results for its fiscal second quarter ended December 31, 1999.
    For the second quarter of fiscal 2000, Escalon Medical reported a net loss
of $1,231,242, or $0.380 per diluted share, compared to net income of
$113,368, or $0.027 per diluted share, in the second quarter of fiscal 1999.
Included in the net loss was the previously announced $455,112 non-cash charge
to write-off of certain capitalized costs and goodwill related to
discontinuing the development of Ocufit SR(R).
    Revenues in the second quarter of fiscal 2000 declined 50% to $886,534
from $1,774,675 in the second quarter of fiscal 1999.  This decline reflects
the changing composition of the Company's revenue as a result of its strategy
to focus on niche products that it owns, rather than products that it
distributes.  Revenue declined by $1,366,200 over the second quarter of 1999
as a result of the sale of the license and distribution rights of
Adatosil(R)5000 Silicone Oil and Betadine(R)5% Sterile Ophthalmic Prep
Solution.  Partially offsetting this decline was the addition of $562,600 in
revenue from the vascular access product line, which was acquired in January
1999.  Revenue from the Company's capital equipment, disposables, OEM and
ISPAN(TM) gas products also declined in the quarter.  Contract manufacturing
revenue can vary quarter to quarter depending on timing of orders and
lead-time needed to produce such products.
    Costs associated with the vascular access business contributed to the 45%
increase in marketing, general and administrative expenses in the quarter from
$715,010 in the year ago period to $1,030,468.  Research and development costs
also increased, rising 25% in the current quarter to $231,950 from $185,813 in
the comparable quarter of fiscal 1999 due to pre-clinical and clinical trials
for povidone-iodine 2.5% and Ocufit SR(R), as well as spending in the vascular
access area.
    "We are actively putting the cash we received from the sale of the license
and distribution rights for Adatosil(R)5000 Silicone Oil and Betadine(R)5%
Sterile Ophthalmic Prep Solution to work to further the Company's strategy to
better control our destiny," said Richard J. DePiano, Chairman and Chief
Executive Officer.  "The January 2000 acquisition of Sonomed, Inc., a
privately-held manufacturer and marketer of ophthalmic ultrasound diagnostic
devices, better focuses the Company on profitable niche products where we can
be a leader.  As a recognized expert in diagnostic devices to the ophthalmic
industry, Sonomed will create synergies with Escalon's own ophthalmic product
offerings and will help create a stronger presence in the marketplace."
    Mr. DePiano added, "Our financial condition remains strong, with working
capital of $4.7 million at December 31, 1999 up from $3.8 million at June 30,
1999.  While the decision to discontinue our development of Ocufit SR(R) was a
difficult one, it will give us the ability to target our R&D budget where we
have the best chance of success, currently povidone iodine 2.5%, which is set
to enter clinical trials.  We remain committed to our strategy of using the
profits from a diversified portfolio of niche businesses to fund our promising
R&D programs in order to create value for our shareholders."
    For the first six months of fiscal 2000, Escalon Medical reported net
income of $167,679, or $0.052 per diluted share, compared to net income of
$280,437, or $0.068 per diluted share, in the first six months of fiscal 1999.
Included in net income in the current period was a gain of $1,848,215 for the
August 1999 sale of the license and distribution rights of Adatosil(R)5000
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 $2,310,212 compared
to $3,460,097 in fiscal 1999.
    Founded in 1987, Escalon develops, markets and distributes ophthalmic
surgical and pharmaceutical products as well as vascular access devices to
help fund a targeted research and development effort.  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 near Milwaukee, 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 the vascular access business, continue to make gains in its
research and development programs 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
                                 (Unaudited)

                               Three Months Ended       Six Months Ended
                                  December 31,            December 31,
                               1999         1998        1999         1998

    Product revenues       $886,534     $1,774,675   $2,310,212  $3,460,097

    Costs and expenses:
      Cost of goods sold    421,358        792,148    1,154,198   1,509,004
      Research and
       development          231,950        185,813      467,383     341,250
      Marketing, general
       and administrative 1,039,468        715,010    1,978,070   1,397,973
        Total costs and
         expenses         1,692,776      1,692,971    3,599,651   3,248,227

    Income (loss) from
      operations           (806,242)        81,704   (1,289,439)    211,870

    Other income and expenses:
      Sale of Silicone
       Oil product line          --             --    1,848,215          --
      Write-off of
       Ocufit              (455,112)            --     (455,112)         --
      Interest income        44,903         33,090       93,787      70,018
      Interest expense      (14,791)        (1,426)     (29,772)     (1,451)
        Total other
         income and
         expense           (425,000)        31,664    1,457,118      68,567

    Net income (loss)   $(1,231,242)      $113,368     $167,679    $280,437

    Basic net income
      (loss) per share      $(0.380)        $0.034       $0.052      $0.084

    Diluted net income
      (loss) per share      $(0.380)       $ 0.027       $0.052      $0.068

      Weighted average
       shares - basic     3,242,184      3,017,184    3,242,184   3,028,668
      Weighted average
       shares - diluted   3,242,184      4,181,743    3,254,250   4,116,861

                                                       Dec. 31,    June 30,
    SELECTED BALANCE SHEET DATA:                         1999        1999
     (Unaudited)
    Cash, cash equivalents
      and investments
      (restricted and
      unrestricted)                                  $4,039,913  $4,854,240
    Total current assets                              6,732,127   7,192,512
    Total assets                                      9,129,937  10,402,773
    Current liabilities                               2,051,227   3,391,740
    Long-term debt                                      633,330     733,332
    Total shareholders'
      equity                                          6,445,380   6,277,701

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