Expects to Report Continued Profitability in Fiscal Fourth Quarter

    WAYNE, Pa., Aug. 13 /PRNewswire/ -- Escalon Medical Corporation
(Nasdaq: ESMC) today announced the transfer of its license and distribution
rights for Adatosil(R)5000 Silicone Oil, as well as all related inventory,
back to the licensor, Bausch & Lomb Surgical, Inc.
    Escalon will receive a cash payment of approximately $2.1 million for the
license, distribution rights and inventory of Adatosil(R) Silicone Oil, which
will be received in four equal payments over the next four quarters.  Escalon
will also continue to receive additional consideration based on future sales
of Adatosil(R).  Adatosil(R) Silicone Oil represented approximately 55% of
Escalon Medical's sales in fiscal 1999.
    "The divestiture of Adatosil(R) Silicone Oil furthers Escalon Medical's
strategy to focus on products that it owns, such as the recently acquired
vascular access business, or controls the rights to, such as Ocufit SR(R) and
povidone-iodine 2.5%," said Chairman and Chief Executive Officer, Richard J.
DePiano.
    Mr. DePiano continued, "Going forward, although the sale of Adatosil(R)
will initially result in a significant decline in our revenue base, at a
minimum, it should have a neutral effect on our bottom line and will produce a
stream of cash flow due to expected future cash payments from Bausch & Lomb as
well as lower inventory and receivable balances.  More importantly, we expect
to use the cash we receive in the transaction to continue to invest in
profitable niche products and markets where Escalon can become a leader.  By
diversifying our target markets and focusing less on distributed products and
more on products that we own, we should be able to continue to grow our
business and provide the necessary funding for our promising R&D programs."
    Mr. DePiano concluded, "Having recently completed our fiscal fourth
quarter on June 30, we expect to report that revenues for the full year
increased in excess of 25% to approximately $7.5 million.  In the fourth
quarter, revenues of approximately $2.0 million benefited from our recently
acquired vascular access business, which more than replaced the decline in
revenues due to the sale of Betadine(R)5% earlier in the year.  We look
forward to reporting Escalon's continued profitability in the weeks ahead."
    Founded in 1987, Escalon develops, markets and distributes ophthalmic
surgical and pharmaceutical products as well as vascular access devices, which
provide a base of positive cash flow to 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.

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