Net Income Rose 136% on 15% Increase in Revenues

    WAYNE, Pa., Feb. 11 /PRNewswire-FirstCall/ -- Escalon Medical Corp.
(Nasdaq: ESMC) today announced results for its fiscal second quarter and six
months ended December 31, 2003.  For the second quarter of fiscal 2004,
Escalon Medical reported a 136.1% gain in net income to $820,961, or $0.196
per diluted share, from net income of $347,672, or $0.103 per diluted share,
in the second quarter of fiscal 2003.  Net revenue for the quarter was
$3,757,925 compared to $3,267,178 in the prior year period, a 15.0% gain.
Product revenue increased by 14.4% during the quarter to $3,144,034.
    For the second quarter, revenue from Sonomed increased 20.6% to $1,965,000
compared to $1,629,000 in the prior year period.  Solid gains in the domestic
market and Europe as well as improved conditions in Latin America more than
offset declines in Asia and the Pacific Rim.  Revenue in the Vascular business
increased 8.0% to $729,000 in the second quarter of fiscal 2004 compared to
$675,000 in the year ago period.  Product revenue in the Company's Medical /
Trek business increased 4.6% to $320,000 in the quarter from $306,000 in the
second quarter of fiscal 2003.  Revenue in the EMI business unit was $130,000
for the quarter compared to $139,000 in the second quarter of 2003.  Royalty
revenue was $614,000 in the quarter compared to $518,000 in the year ago
period, largely driven by sales of Silicone Oil by Bausch & Lomb.  Receipt of
royalty revenue from future sales of Silicone Oil by Bausch & Lomb is expected
to continue through fiscal 2005.  In addition to Silicone Oil, the Company
also receives royalty payments related to the licensing of its intellectual
laser properties.  The Company's two royalty revenue streams will fluctuate
depending on the demand of the underlying products.
    The gross margin as a percent of product revenue was 60.3% in the current
quarter compared to 53.5% in the year ago period driven by product mix and
higher productivity due to increased volumes.  Marketing, general and
administrative expenses declined to 35.2% of net revenues in the second
quarter from 39.1% of net revenues in the year ago period.  Research and
development spending, primarily related to product development, increased to
$225,992 from $183,736 in the year ago quarter.
    For the first six months of fiscal 2004, Escalon Medical reported a 138.0%
gain in net income to $1,444,117, or $0.357 per diluted share, from net income
of $606,831, or $0.178 per diluted share, in the first six months of fiscal
2003.  Net revenue for the first six months of fiscal 2004 was $7,169,567
compared to $6,275,518 in the prior year period, a 14.2% gain.  Product
revenue was $5,985,160 compared to $5,262,887, a 13.7% gain.
    "Our Sonomed and Vascular businesses as well as royalties from Silicone
Oil continued to drive our solid results.  Income from operations increased to
a record $960,000 in the second quarter and was targeted at additional debt
repayment.  During the quarter we repaid an additional $225,000 of our credit
line as well as over $365,000 on our term debt.  Continued strengthening of
our balance sheet led to a 40.0% decline in our interest expense in the
quarter and will provide us with added flexibility to reinvest in our
businesses," commented Richard J. DePiano, Chairman and Chief Executive
Officer.
    Mr. DePiano continued, "At Sonomed, our domestic business continued to be
led by solid demand for our pachymeter, used by optometrists in glaucoma
screening.  We are currently planning to submit a 510 (k) to the FDA to
receive marketing clearance for our new B-Scan, the E-Z Scan(TM), which was
well received at the American Academy of Ophthalmology Annual Meeting in
November.  We hope to launch this new product by the end of our fiscal year
2004.  Internationally, our European business continued to benefit from recent
management changes, and revenue in the three-month period was up by $107,000
to $228,000 and up $173,000 for the six-month period to $357,000."
    "Revenues in our Vascular segment grew a solid 8.0% in the quarter with
continued growth in usage of our PD Access(TM) and Smart Needle(TM) products.
During the quarter we recruited a new consultant to work for us in Europe and
also signed a distributor contract in Italy to increase our coverage in key
European markets.  We have also recently made enhancements to our Doppler
Guided Peripheral IV Needle and plan to test market the improved device in the
oncology and anesthesia markets over the next few months."
    Mr. DePiano concluded, "Revenue growth across our businesses has allowed
us to generate cash and continue to pay down debt.  This in turn has given us
the ability to further invest in our products and in key sales initiatives,
both here and abroad, further benefiting shareholder value.  Shareholders'
equity is up over $1.5 million in the first six months of fiscal 2004, or
nearly 17%.  While we are pleased with our performance, we will continue to
strive to further improve our balance sheet in the quarters ahead, balancing
debt reduction with investment with targeted growth opportunities."
    Founded in 1987, Escalon develops, markets and distributes ophthalmic
diagnostic, surgical and pharmaceutical products as well as vascular access
devices.  The Company seeks to utilize 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 considered forward-
looking under the Private Securities Litigation Reform Act of 1995, 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 Company's business units, generate cash and identify, finance and enter
into business relationships and acquisitions, uncertainties and risks related
to new product development, commercialization, manufacturing and market
acceptance of new products, marketing acceptance of existing products in new
markets, 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.

                    ESCALON MEDICAL CORP. and SUBSIDIARIES
               CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                              Three Months Ended        Six Months Ended
                              December 31, 2003           December 31,
                              2003         2002        2003        2002

    Product revenue        $3,144,034  $2,749,368  $5,985,160   $5,262,887
    Other revenue             613,891     517,810   1,184,407    1,012,631
    Revenues, net           3,757,925   3,267,178   7,169,567    6,275,518

    Costs and expenses:
      Cost of goods sold    1,249,660   1,279,044   2,462,459    2,357,963
      Research and
       development            225,992     183,736     433,122      374,053
      Marketing, general
       and administrative   1,321,653   1,278,014   2,535,285    2,566,142
          Total costs and
           expenses         2,797,305   2,740,794   5,430,866    5,298,158

    Income from operations    960,620     526,384   1,738,701      977,360

    Other income and (expenses):
      Interest income             282         828         961        1,478
      Interest expense       (107,880)   (179,540)   (226,439)   (372,007)
        Total other income
         and (expense)       (107,598)   (178,712)   (225,478)   (370,529)

    Income before income
     taxes                    853,022     347,672   1,513,223      606,831

    Income taxes               32,061          --      69,106           --

    Net income               $820,961    $347,672  $1,444,117     $606,831

    Basic net income
     per share                 $0.243      $0.104      $0.429       $0.181

    Diluted net income
     per share                 $0.196      $0.103      $0.357       $0.178

    Weighted average shares
     - basic                3,371,920   3,345,851   3,368,643    3,345,851
    Weighted average shares
     - diluted              4,187,117   3,390,122   4,046,118    3,409,933


    SELECTED BALANCE SHEET DATA:
                                                     December 31,   June 30,
                                                         2003         2003
                                                     (unaudited)   (audited)

    Cash, cash equivalents and investments             $422,600     $298,390
    Total current assets                              4,466,339    4,758,660
    Total assets                                     16,517,532   16,890,231
    Current liabilities                               2,878,518    3,870,322
    Long-term debt                                    3,196,019    4,080,461
    Total shareholders' equity                       10,442,995    8,939,448

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