WAYNE, Pa., May 9 /PRNewswire/ -- Escalon Medical Corp. (Nasdaq: ESMC)
today announced results for its fiscal third quarter ended March 31, 2001.
For the third quarter of fiscal 2001, Escalon Medical reported net income of
$115,617, or $0.035 per diluted share.  In the third quarter of 2000, the
Company reported a net loss of $633,241, or $0.195 per diluted share.
Sonomed, a subsidiary of Escalon Medical, announced the introduction of its
new PacScan 300 Digital Biometric Ruler, a sophisticated device for measuring
both the corneal thickness and axial eye length.

    Third Quarter Results
    Revenue in the third quarter of fiscal 2001 increased 33.9% to $2,824,555
from $2,109,521 in the third quarter of fiscal 2000.  Sonomed, the Company's
subsidiary that manufactures and markets ophthalmic ultrasound diagnostic
devices and was acquired in mid-January 2000, contributed $1,398,000 to
revenue in the quarter, an increase over the $1,161,000 contributed in the
two-and-one-half month period of 2000.  The vascular access business
contributed $524,000 to revenue in the quarter, a decline of $97,000.  Revenue
for the Company's medical instrument business decreased by $48,000 to $279,000
in the quarter.  In addition, Escalon Medical received a $623,000 quarterly
payment earned in connection with the divestment of the Adatosil(R) 5000
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 its cost structure,
Escalon has achieved its third successive quarter of profitability.  The gross
margin as a percent of sales was 65.3% in the current quarter from 61.1% in
the year ago period.  Benefiting the gross margin is the acquisition of
Sonomed as well as the revenue related to Silicone Oil, which has no
associated costs.  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 45.9% and 5.7% respectively.

    PacScan 300
    The Company's Sonomed division recently introduced the PacScan 300 Digital
Biometric Ruler at the American Society of Cataract & Refractive Surgery
Symposium and Congress, which was held April 28 to May 2, 2001 in San Diego,
California.  The product, which was well received, was developed internally
and combines a pachymeter with an A-Scan to measure both the thickness of the
cornea as well as the axial eye length.  This ophthalmic ultrasound device,
now available for sale through the Company's distributors, was particularly
noted for its increased functionality with two devices in one, its small size
and portability, as well as its touch screen operation.
    "We continue to focus on operating 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,
which represents approximately half of our revenue, is expected to be a strong
contributor to our growth in the quarters ahead.  In addition to the new
PacScan 300, we have several other new products in the pipeline and continue
to see opportunities to expand this business into Europe and the Far East."
    Mr. DePiano continued, "Other recent products introductions include our
CFA digital camera system for ophthalmologists, jointly developed with
MegaVision, Inc.  After a brief delay, the camera was released for sale in
late March.  Sales of these two new products are expected to accelerate over
the next few quarters.  Longer term, we also continue to explore opportunities
for the vascular access business.  While revenue has been declining over the
last few quarters partially due to distributors' inventory adjustments, we are
working diligently to revamp the product line and expect to see the results of
these changes in the quarters ahead.  In addition, we recently brought on Mike
O'Donnell as Vice President of Sales for Vascular Access.  Mike has over seven
years of experience in sales of healthcare and medical products at companies
that include Beckett HealthCare and Infu-tech, Inc."
    Mr. DePiano added, "We remain on track for a record year in terms of
revenues and operating profit in fiscal 2001.  With one eye on our cost
structure and a goal of maintaining our profitability, we will continue to
upgrade and expand our product line through new and improved products.  We
also expect to take advantage of any opportunities for corporate partnering,
licensing and other financing options to increase the rate of growth of our
products, or to acquire new unique niche products."
    For the first nine months of fiscal 2001, Escalon Medical reported net
income of $421,919, or $0.126 per diluted share, compared to a net loss of
$465,564, or $0.144 per diluted share, in the first nine 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 $432,859 non-cash charge related to Ocufit SR(R).
    Revenues for the first nine months of fiscal 2001 nearly doubled to
$8,721,915 compared to $4,419,733 in fiscal 2000.  The increase reflects the
changing composition of the Company's revenue and is primarily due to the
acquisition of Sonomed, which contributed only two-and-one half months of
revenue to the prior year period, as well as revenue earned in connection with
Silicone Oil.  For the nine-month period, revenue from Sonomed increased from
$1,161,000 to $4,481,000.  Revenue earned in connection with the sale of the
license and distribution rights of Silicon Oil was $1,528,000 in the period
compared to revenue of $574,000 in the year ago period, which was prior to the
sale of the rights.
    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,
uncertainties and risks related to new product development, manufacturing and
market acceptance of new products, 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         Nine Months Ended
                                 March 31,                 March 31,
                            2001          2000         2001          2000
                        (unaudited)   (unaudited)   (unaudited)   (unaudited)

    Product revenues,
     net                $2,824,555    $2,109,521   $8,721,915    $4,419,733

    Costs and expenses:
      Cost of goods
       sold                979,007       820,866    3,007,098     1,975,064
      Research and
       development         160,586       296,930      361,190       764,313
      Marketing,
       general and
       administrative    1,297,754     1,383,349    4,017,034     3,361,419
        Total costs
         and expenses    2,437,347     2,501,145    7,385,322     6,100,796
    Income (loss)
     from operations       387,208      (391,624)   1,336,593    (1,681,063)

    Other income and
     (expenses):
      Gain on sale
       of Silicone
       Oil product line         --            --           --     1,848,215
      Write-off of
       Ocufit                   --        22,253           --      (432,859)
      Equity in income
       (loss) of
       unconsolidated
       joint venture        14,565            --      (15,404)           --
      Interest income           --        32,561        2,929       126,348
      Interest expense    (264,990)     (252,573)    (824,008)     (282,345)
        Total other
         income and
         (expense)        (250,425)     (197,759)    (836,483)    1,259,359
        Income (loss)
         before income
         taxes             136,783      (589,383)     500,110      (421,704)
      Income taxes          21,166        43,860       78,191        43,860
    Net income (loss)      115,617      (633,243)     421,919    $ (465,564)
    Basic net income
     (loss) per share       $0.035       $(0.195)      $0.128       $(0.144)
    Diluted net income
     (loss) per share       $0.035      $(0.195)       $0.126       $(0.144)

    Weighted average
     shares - basic      3,292,184     3,242,184    3,292,184     3,242,184
    Weighted average
     shares - diluted    3,334,727     3,242,184    3,340,713     3,242,184




    SELECTED BALANCE SHEET DATA:                March 31, 2001  June 30, 2000
                                                  (unaudited)     (audited)

    Cash, cash equivalents and investments
     (restricted and unrestricted)                  $205,366       $177,106
    Total current assets                           4,077,887      3,319,297
    Total assets                                  18,238,816     16,845,290
    Current liabilities                            7,384,290      6,530,241
    Long-term debt                                 4,917,558      4,900,000
    Total shareholders' equity                     5,936,968      5,415,049

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