WAYNE, Pa., Sept. 18 /PRNewswire/ -- Escalon Medical Corp. (Nasdaq: ESMC)
today announced record results for its fiscal fourth quarter ended June 30,
1998.
    For the fourth quarter of fiscal 1998, Escalon Medical reported net income
of $92,326, or $0.028 per diluted share, compared to a net loss of $4,328,053,
or $1.628 per diluted share, in the fourth quarter of fiscal 1997.  The fourth
quarter of fiscal 1997 included one-time charges of approximately $3,525,000
primarily related to the write down of goodwill and license and distribution
rights.  Without the one-time charges, the net loss for the fourth quarter of
fiscal 1997 would have been $803,053, or $0.302 per share.  All share amounts
have been adjusted to reflect the one-for-four reverse stock split effective
November 24, 1997 and the conversion of preferred stock during the fourth
quarter of 1998.
    Revenues in the fourth quarter of fiscal 1998 increased 17% to $1,565,063
from $1,342,000 in the fourth quarter of fiscal 1997.  The revenue growth
reflects an increase in unit sales of Adatosil(R)5000 Silicone Oil,
Betadine(R)5% Sterile Ophthalmic Prep Solution and ISPAN(TM)Intraocular Gases,
partially offset by a decrease in unit sales of the Company's capital
equipment and related disposable product lines and contract manufacturing.
    In the fourth quarter, Escalon Medical's gross margin improved to 58% from
55% in last year's fourth quarter.  The Company has continued to experience a
favorable impact from foreign currency fluctuations related to the purchase of
its primary product, Adatosil(R) 5000 Silicone Oil and a shift in the
Company's product mix.
    Marketing, general and administrative expenses declined 39% in the quarter
from the comparable period last year.  This was due to a reduction in the
amortization expense of goodwill and license and distribution rights as a
result of the write down of these assets during the fourth quarter of fiscal
1997, as well as a decrease in commission expense due to last year's change in
the Company's commission structure.  Also contributing to the Company's
profitability in the quarter was the decline in research and development
expense from $634,740 in the fourth quarter of 1997 to $150,697 in the current
period due primarily to Escalon's decision to discontinue funding its laser
program.
    For the fiscal year ended June 30, 1998, Escalon Medical reported net
income of $171,472 compared to a net loss of $5,684,970.  Due to the
recognition of a non-cash dividend, deemed as a result of the convertible
preferred stock issued in December 1997, the Company reported a net loss of
$0.039 per diluted share, compared to a net loss of $2.162 per diluted share
in fiscal 1997.  This non-cash transaction reflects the provisions of Emerging
Issues Task Force (EITF) 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) which specifies a new
accounting standard for the computation, presentation and disclosure
requirements for earnings per share.  Revenues for fiscal 1998 were $5,942,004
compared to $5,431,282 for fiscal 1997, an increase of 9%.
    Richard J. DePiano, the Company's Chairman and Chief Executive Officer,
said, "We have made tremendous progress in fiscal 1998.  After licensing our
intellectual laser properties to InterLase Corporation in October 1997, we
have focused our attention on our core surgical and pharmaceutical product
lines.  Our program of maximizing profits and controlling costs has led to a
string of four consecutive quarters of profitability.  Going forward, we will
look to add niche product lines to our core ophthalmic products business to
take advantage of our contract manufacturing capabilities and existing
marketing channels."
    Mr. DePiano continued, "We are also proceeding with our two research and
development projects, povidone-iodine 2.5% solution, a broad spectrum
antimicrobial for the prevention of neonatal conjunctivitis, and Ocufit SR(R),
our ophthalmic drug delivery device.  We expect to file INDs on both products
in fiscal 1999.  The development of these products will be funded internally
as well as through the continuing use of strategic partnerships."
    Mr. DePiano concluded, "Today, Escalon Medical is a stronger company.  Our
balance sheet is much improved with over $3.4 million of working capital and
no long-term debt, our management team has been strengthened with our recent
organizational changes and we have succeeded in operating profitably
throughout the year.  With our core ophthalmic products business together with
our promising research and development effort, we look forward to continued
progress in fiscal 1999."
    Founded in 1987, Escalon develops, markets and distributes ophthalmic
medical devices and pharmaceuticals and is developing its ophthalmic drug
delivery system.  Escalon has headquarters in Wayne, Pennsylvania and
manufacturing operations near Milwaukee, Wisconsin.
    Note:  This news release contains certain forward looking statements that
are subject to risks and uncertainties that could cause actual results to
differ materially from those projected or forecasted.
    Such risks and uncertainties include, but are not limited to, those
disclosed in the Company's Form 10-K, as amended, for fiscal year 1997 and
Amendment No. 3 of the Registration Statement on Form S-3 (Registration
Statement No. 333-44513), which has been filed with the Securities and
Exchange Commission.

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

                         Three Months Ended       Twelve Months Ended

                                   June 30,                   June 30,
                              1998          1997         1998          1997

    Product revenues    $1,565,063    $1,342,000   $5,942,004    $5,431,282
    Cost of goods sold     662,757       601,933    2,588,500     2,650,360
    Gross margin           902,306       740,067    3,353,504     2,780,922

    Costs and Expenses:
    Marketing, general
     and administrative    693,599     1,141,774    2,780,454     3,715,727
    Research and
     development           150,697       634,740      494,895     1,570,674
    Write down of
     goodwill, license
     and distribution
     rights                    ---     3,318,888          ---     3,318,888
    Total costs and
     expenses              844,296     5,095,402    3,275,349     8,605,289

    Income (loss) from
     operations             58,010    (4,355,335)      78,155    (5,824,367)

    Other Income and Expenses:
     Other expense (net)       ---           ---      (25,000)          ---
     Interest income        34,321        27,424      118,471       140,705
     Interest expense           (5)         (142)        (154)       (1,308)
       Total other income
        and expense         34,316        27,282       93,317       139,397
    Net income (loss)      $92,326  $ (4,328,053)    $171,472   $(5,684,970)
    Basic net income
     (loss) per share       $0.028       $(1.628)      $(0.039)*    $(2.162)
    Diluted net income
     (loss) per share       $0.028       $(1.628)      $(0.039)*    $(2.162)

    Weighted average
     shares - basic      2,835,893     2,658,594    2,673,093     2,629,622
    Weighted average
     shares - diluted    2,835,893     2,658,594    2,673,093     2,629,622

    *  Negative amounts reported in basic and diluted earnings per share
       relate to a deemed dividend on convertible preferred stock as a result
       of EITF Topic No. D-60 and SFAS No. 128.


    SELECTED BALANCE SHEET DATA:
                                 June 30,                June 30,
                                     1998                    1997

    Cash, cash equivalents
     and investments           $2,593,983              $1,987,648
    Current assets              4,150,491               3,205,545
    Total assets                6,734,128               5,833,734
    Current liabilities           685,476               1,035,282
    Total shareholders'
     equity                     6,048,652               4,798,452

Link to this page: