WAYNE, Pa., Aug. 31 /PRNewswire/ -- Escalon Medical Corp. (Nasdaq: ESMC)
today announced record results for its fiscal fourth quarter ended
June 30, 1999.
    For the fourth quarter of fiscal 1999, Escalon Medical reported net income
of $71,550, or $0.022 per diluted share, compared to net income of $92,326, or
$0.022 per diluted share, in the fourth quarter of fiscal 1998.
    Revenues in the fourth quarter of fiscal 1999 increased 30% to $2,032,905
from $1,565,063 in the fourth quarter of fiscal 1998.  This revenue growth
reflects an increase in unit sales of Adatosil(R)5000 Silicone Oil, ISPAN(TM)
Intraocular Gases, contract manufacturing, as well as the addition of sales
from the January acquisition of the vascular access product line.
    The composition of Escalon's sales in the current quarter changed as a
result of the Company's strategy to focus on niche products that it owns,
rather than products that it distributes.  In the fourth quarter of 1998, the
Company reported sales of $269,100 for Betadine(R)5% Sterile Ophthalmic Prep
Solution.  Having subsequently sold the license for Betadine(R)5% in March
1999, there were no sales reported in the current quarter.  However, the
addition of the vascular access product line, acquired in January 1999, more
than compensated for the absence of Betadine(R)5% sales, contributing $444,600
to the top line during the quarter.  On August 13, 1999, Escalon sold the
license and distribution rights for Adatosil(R)5000 Silicone Oil, which
represented 55% of the Company's sales in the fourth quarter.  Under its
agreement with Bausch & Lomb Surgical, Inc., the Company will continue to
receive additional financial consideration based on future sales of
Adatosil(R)5000 Silicone Oil.
    The gross margin improved to 58.1% of sales in the quarter from 57.7% in
the year ago period despite the slight increase in costs related to currency
fluctuations in purchasing Adatosil(R)5000 Silicone Oil and the addition of
costs associated with the vascular access business.  Costs associated with the
vascular access business also contributed to the increase in marketing,
general and administrative expenses, which rose to 48.3% of sales compared to
44.3% of sales in the comparable quarter last year.
    Research and development costs increased 3% in the current quarter from
the comparable quarter of fiscal 1998 but, as a percent of sales, declined
from 9.6% to 7.6%.  Declines in spending for ophthalmic research and
development were offset by spending in the vascular access area.

    Year-to-date Results
    For fiscal 1999, Escalon Medical reported net income of $1,193,787
compared to net income of $171,472 in fiscal 1998.  Due to the recognition of
an $841,893, or $0.267 per share, non-cash dividend resulting from the
retirement of convertible preferred stock in the third quarter of fiscal 1999,
the Company's reported net income per share was reduced to $0.103 per diluted
share for fiscal 1999.  In fiscal 1998 the Company reported a net loss of
$0.039 per diluted share.  The 1998 loss included the recognition of a
$243,000, or $0.091 per share, non-cash dividend from the original issuance of
the convertible preferred stock.  The issuance of the convertible preferred
stock was a form of bridge loan that, in effect, positioned the Company to be
a credible participant in the acquisition marketplace.  These non-cash
transactions reflect provisions of the Emerging Issues Task Force (ETIF)
Topic No. D-60, "Accounting for issuance of Convertible Preferred Stock and
Debt Securities with a Nondetachable Conversion Feature" as well as FASB's
Statement of Financial Accounting Standards No. 128, Earnings Per Share
(SFAS No. 128) and Staff Accounting Bulletin Topic 3.C which dictate the
method of computation, presentation and disclosure of earnings per share.
Due to the retirement of the convertible preferred stock, there will be no
additional non-cash charges to the Company's earning per share in future
quarters for this issue of convertible preferred stock.
    Revenues for fiscal 1999 were $7,559,011 compared to $5,942,004 in fiscal
1998, an increase of 27%.
    "This has been a very exciting year at Escalon Medical," said
Richard J. DePiano, Chairman and Chief Executive Officer.  "The recent sale of
the license and distribution rights for Adatosil(R)5000 Silicone Oil and
Betadine(R)5% Sterile Ophthalmic Prep Solution puts the Company firmly in
control of its destiny.  Our focus on products that we own, in niche markets
where Escalon can be a leader, is a strategy that we intend to expand upon.
The acquisition of the vascular access business unit from Radiance Medical
Systems is an excellent example of the execution of this strategy."
    Mr. DePiano added, "We have also made significant progress in our research
and development programs during the year.  We began human clinical trials for
Ocufit SR(R) in May and progress continues to be made at IntraLase, the
ultrafast laser business for vision correction, for which we have an equity
stake.  Povidone-iodine 2.5% also continues to offer significant opportunities
for the Company in the future."
    Mr. DePiano concluded, "Our financial condition continued to strengthen in
1999.  During the year we obtained a new $2.0 million credit facility and
completed the repurchase of the Series A 6% Convertible Preferred Stock.  Our
working capital grew to $3.8 million at June 30, 1999 from $3.5 million a year
ago.  Management remains committed to a 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."
    Founded in 1987, Escalon develops, markets and distributes ophthalmic
surgical and pharmaceutical products as well as vascular access devices that
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.

                     ESCALON MEDICAL CORP. and SUBSIDIARY
               CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (Unaudited)

                            Three Months Ended          Twelve Months Ended
                                  June 30,                     June 30,
                              1999          1998         1999         1998

    Product revenues    $2,032,905    $1,565,063   $7,559,011   $5,942,004

    Costs and expenses:
    Cost of goods sold     851,006       662,757    3,282,177    2,588,500
    Research and
     development           154,623       150,697      738,124      494,895
    Marketing, general
     and administrative    981,744       693,599    3,331,562    2,805,454
    Total costs and
     expenses            1,987,373     1,507,053    7,351,863    5,888,849
    Income from operations  45,532        58,010      207,148       53,155

    Other income and expenses:
    Sale of Betadine
     product line               --            --      879,159           --
    Interest income         43,613        34,321      144,877      118,471
    Interest expense       (17,595)           (5)     (37,397)        (154)
    Total other income
     and expense            26,018        34,316      986,639      118,317
    Net income             $71,550       $92,326   $1,193,787     $171,472
    Basic net income
     per share *            $0.022        $0.028       $0.104*     $(0.039)*
    Diluted net income
     per share *            $0.022        $0.022       $0.103*     $(0.039)*

    Weighted average
     shares - basic      3,242,184     2,804,729    3,114,823    2,673,093
    Weighted average
     shares - diluted    3,278,082     4,118,017    3,150,721    2,673,093

    *Earnings per share (basic and diluted) reflect reductions for deemed
     dividend on issuance/retirement of convertible preferred stock as a
     result of EITF Topic No. D-60, SFAS No. 128 and SAB Topic 3.C.

    SELECTED BALANCE SHEET DATA:          June 30, 1999      June 30, 1998
                                            (Unaudited)
    Cash, cash equivalents and investments
    (restricted and unrestricted)            $4,854,240         $2,593,983
    Total current assets                      7,246,569          4,150,491
    Total assets                             10,402,774          6,734,128
    Current liabilities                       3,391,740            685,476
    Long-term debt                              733,332                 --
    Total shareholders' equity                6,277,702          6,048,652

Link to this page: