WAYNE, Pa., Feb. 14 /PRNewswire-FirstCall/ -- Escalon Medical Corp.
(Nasdaq: ESMC) today announced results for its fiscal second quarter and six
months ended December 31, 2005.
    For the second quarter of fiscal 2006, Escalon reported net revenue of
$7,310,000 compared to $6,338,000 in the prior year period, a 15.3% gain.
Product revenue increased 19.2%, to $6,846,000 in the second quarter of fiscal
2006 as compared to $5,743,000 in the second quarter of fiscal 2005. The
increase in both net revenue and product revenue is primarily attributable to
strong sales in the Company's Drew, Sonomed and Vascular business units. For
the six month period ended December 31, 2005, Escalon reported net revenue of
$14,743,000 compared to $11,640,000 in the prior period, a 26.6% gain, and
product revenue of $13,609,000 compared to $10,389,000 in the prior period, a
31.0% increase.
    For the second quarter of fiscal 2006, Escalon reported a net loss of
$982,000, or $0.162 per diluted share, compared with a net loss of $423,000,
or $0.072 per diluted share, in the second quarter of fiscal 2005.  For the
six month period ended December 31, 2005, the Company reported a net loss of
$267,000, or $0.044 per diluted share, compared with a net loss of $309,000,
or $0.054 per diluted share in the prior year period.
    "Focused on solidifying Escalon's competitive position in the marketplace
and leveraging our business segments for future growth opportunities, we
remain committed to investing in key growth initiatives," Richard J. DePiano,
Chairman and Chief Executive Officer commented.  "During the first six months
of 2006, these efforts included expanding our sales team and increasing trade
show and marketing activity, beginning the integration of the MRP Group
product line with the Escalon Medical Imaging (EMI) business line,
accelerating efforts in new product development for a number of our business
units, including the introduction in our Sonomed business unit of its new
Ultrasound Biomicrosope instrument ('UBM") which was introduced at the
American Academy of Ophthalmology meeting in October 2005. As a result of
these and other investments, Escalon's operating expenses during the first six
months of fiscal 2006 increased by approximately 44.7%. While the benefits of
these investments are not fully demonstrated in our second quarter financial
performance, we are pleased with the progress the Escalon team made during the
quarter to accelerate our growth strategy and deliver value to our customers."
    Mr. DePiano added. "Second quarter sales for our Drew business unit
totaled $3,490,000, a 22.8% increase over 2005 second quarter sales of
$2,841,000. Growth at Drew was driven by an increase in sales of hematology
and diabetics instruments in the US market. Our Sonomed business unit realized
7% product revenue growth, year-over-year, driven by sales of its EZ AB
ultrasound systems.   Product revenue at our Vascular business unit increased
22.9% during the second quarter of fiscal 2006, primarily attributable to an
increase in sales to end users in the US market which resulted from the
Company's fiscal 2004 investment in an expanded domestic sales force."
    "We are also extremely pleased to have completed our previously announced
acquisition of substantially all of the assets of MRP Group, Inc., a privately
held ophthalmic technology solutions provider. MRP Group is a terrific
complement to our organization and by integrating our respective products
lines and sales and marketing teams we are positioned to provide clinical
practices with a full range of technologically innovative products, superior
image quality, enhanced customer support and improved quality of care."
    Mr. DePiano concluded, "We are executing our strategic growth plan on
schedule and, looking ahead, remain steadfast in our commitment to enhance
shareholder value through long term growth and diversification. We remain
responsive to our customers' needs and focused on maximizing the long-term
value of our key products and building our presence worldwide."
    Founded in 1987, Escalon develops markets and distributes ophthalmic
diagnostic, surgical and pharmaceutical products as well as vascular access
devices.  Drew, which operates as a separate division, provides
instrumentation and consumables for the diagnosis and monitoring of medical
disorders in the areas of diabetes, cardiovascular diseases and hematology, as
well as veterinary hematology and blood chemistry.  Escalon 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 Escalon's distribution
capabilities.  Escalon has headquarters in Wayne, Pennsylvania and
manufacturing operations in Long Island, New York, New Berlin, Wisconsin,
Dallas, Texas, Oxford, Connecticut and Barrow-in-Furness, U.K.

    Note:  This press release contains statements that are considered
forward-looking under the Private Securities Litigation Reform Act of 1995,
including statements about Escalon's future prospects.  They are based on the
Escalon'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 Escalon is able to implement its growth and marketing
strategies, improve upon the operations of Escalon's business units, including
the integration of Drew's operations and any acquisitions it may undertake, if
any, of which there can be no assurance, 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, the continuity of royalty revenue, litigation and non-
recurring expenses, research and development activities, including failure to
demonstrate clinical efficacy, delays by regulatory authorities, scientific
and technical advances by Escalon 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 Escalon'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 INCOME
                                 (Unaudited)

                                 Three Months Ended        Six Months Ended
                                    December 31,             December 31,
                                 2005        2004         2005         2004

    Net revenues:
    Product revenue          $6,846,159  $5,742,848  $13,608,849  $10,388,801
    Other revenue               464,131     595,296    1,134,311    1,251,000
    Revenues, net             7,310,290   6,338,144   14,743,160   11,639,801

    Costs and expenses:
     Cost of goods sold       3,883,395   3,337,468    7,628,384    6,013,333
     Research and development   661,870     474,779    1,418,030      791,478
     Marketing, general and
      administrative          3,827,839   2,916,770    7,111,890    5,105,729
       Total costs and
        expenses              8,373,104   6,729,017   16,158,304   11,910,540
    (Loss) from operations   (1,062,814)   (390,873)  (1,415,144)    (270,739)

    Other income and (expense):
     Gain on sale of available
      for sale securities             0           0    1,157,336            0
     Equity in Ocular Telehealth
      Management, LLC           (33,035)     (7,109)     (51,464)     (36,310)
     Interest income             72,877      12,349       77,724       44,441
     Interest expense            (9,229)    (29,934)     (19,906)     (26,521)
      Total other income and
       (expense)                 30,613     (24,694)   1,163,690      (18,390)
    Net (loss) before taxes  (1,032,201)   (415,567)    (251,454)    (289,129)
    Provision for income taxes  (50,400)      7,058       16,000       20,027
    Net (loss)                $(981,801)  $(422,625)   $(267,454)   $(309,156)


    Basic net (loss) per share  $(0.162)    $(0.072)     $(0.044)     $(0.054)

    Diluted net (loss) per
     share                      $(0.162)    $(0.072)     $(0.044)     $(0.054)

    Weighted average shares -
     basic                    6,070,477   5,869,028    6,017,384    5,716,748

    Weighted average shares -
     diluted                  6,070,477   5,869,028    6,017,384    5,716,748



                    ESCALON MEDICAL CORP. AND SUBSIDIARIES
                           SELECTED BALANCE SHEETS

                                                  December 31,     June 30,
                                                      2005           2005

                                                  (Unaudited)

    Cash and cash equivalents                     $4,579,431     $5,115,772
    Total current assets                          16,398,514     17,664,898
    Total assets                                  38,943,201     40,049,336
    Total current liabilities                      4,314,753      4,051,694
    Long-term debt                                   267,260        391,793
    Accrued post-retirement benefits               1,087,000      1,087,000
      Total shareholders' equity                  33,274,188     34,518,849

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