Net Income Rose 60% on 10% Increase in Revenues

    WAYNE, Pa., Sept. 28 /PRNewswire-FirstCall/ -- Escalon Medical Corp.
(Nasdaq: ESMC) today announced results for its fiscal fourth quarter and year
ended June 30, 2004.  For fiscal 2004, Escalon Medical reported a 60.1% gain
in net income to $2,741,730, or $0.637 per diluted share, from net income of
$1,712,377, or $0.479 per diluted share, in fiscal 2003.  Net revenue for the
year was $14,720,767 compared to $13,366,030 in the prior year, a 10.1% gain.
Product revenue increased by 10.3% during fiscal 2004 to $12,347,922 from
$11,191,493 in fiscal 2003.
    For the fourth quarter of fiscal 2004, Escalon Medical reported net income
of $558,439, or $0.103 per diluted share, compared to net income of $650,414,
or $0.182 per diluted share, in the fourth quarter of fiscal 2003.  Diluted
shares outstanding increased by 52% quarter over quarter due to the issuance
of 800,000 common shares in the March 2004 private equity financing and the
exercise of stock options.  Net revenue was $3,938,422 in the quarter compared
to $3,703,622 in the prior year period, a 6.3% gain.  Product revenue was
$3,343,226 compared to $3,152,192, a 6.1% gain.
    In the fourth quarter, Sonomed revenue increased 5.0% to $1,948,000
compared to $1,855,000 in the prior year period.  Sales returned to more
historic levels at Sonomed in the quarter after several quarters of strong
pachymeter sales.  Revenue in the Vascular business increased 18.4% to
$864,000 in the fourth quarter of fiscal 2004 compared to $730,000 in the year
ago period.  Product revenue in the Company's Medical / Trek business
increased 4.0% to $463,000 in the quarter from $445,000 in the fourth quarter
of fiscal 2003.  Revenue in the EMI business unit was $68,000 for the quarter.
This compares to $121,000 in the fourth quarter of 2003.  Royalty revenue was
$595,000 in the quarter compared to $552,000 in the year ago period, primarily
related to improved market demand offset by annual step-downs in the Company's
contract for Silicone Oil with Bausch & Lomb.  Receipt of royalty revenue from
future sales of Silicone Oil by Bausch & Lomb is expected to continue through
contract termination in August 2005.  In addition to Silicone Oil, the Company
also receives royalty payments related to the licensing of its intellectual
laser properties.  The Company's two royalty revenue streams will fluctuate
depending on the demand of the underlying products.
    The gross margin as a percent of product revenue was 50.7% in the current
quarter compared to 56.9% in the year ago period primarily due to increased
international sales at Sonomed and higher cost of goods for Vascular's new
Doppler Guided Peripheral IV needle.  For the year, the gross margin was 55.7%
of product revenues down slightly from 56.3% in fiscal 2003.  Marketing,
general and administrative expenses were 36.0% of net revenues in the fourth
quarter compared to 33.7% of net revenues in the year ago period.  For the
year, marketing general and administrative expenses improved to 35.3% of net
sales from 37.7% in fiscal 2003.  Research and development spending was
$176,251 in the quarter compared to $201,996 in the year ago quarter,
primarily due to reduced headcount.  For the year, research and development
declined slightly to $776,496 from $780,333 in fiscal 2003.
    "This has been an exciting year for Escalon, operationally, financially
and strategically," commented Richard J. DePiano, Chairman and Chief Executive
Officer.  "Operationally, we had our best performance ever, driven by a 17.0%
sales increase at Sonomed and a solid 10.7% gain at Vascular.  At Sonomed, we
continue to strengthen our leadership position in ophthalmic ultrasound
devices through new products and product enhancements, as well the continued
development of markets outside the U.S.  While we saw demand for our
pachymeter return to historic levels in the fourth quarter, we are optimistic
about future growth for our new B-Scan, the E-Z Scan(TM) and the recently
trademarked VuMAX, a new ultrasound bio-microscope.
    "In our Vascular segment, while our revenue gain in 2004 was primarily
driven by our domestic business, we have yet to fully benefit from the
increased sales coverage that was put in place in Europe.  On the product
front, we continue to hear positive feedback on our Doppler Guided Peripheral
IV Needle as we selectively introduce the product to institutions in
Philadelphia and Chicago.  This product has significant potential in the
markets of oncology and hematology."
    Mr. DePiano continued, "Financially, we made substantial improvements to
our balance sheet in 2004.  We generated over $3.1 million of cash from
operations during the year and netted an additional $9.8 million from our
private equity financing in March.  As a result, we ended the year with $12.6
million in cash and working capital of nearly $14.0 million, up from $888,000
at June 30, 2003.  We also paid down over $2.3 million in debt and increased
shareholder equity by 162%, or $14.5 million.
    "Our operational and financial improvements have given us significant
flexibility to move forward with our strategic initiatives.  During the year
we reinvested in our businesses, including key sales initiatives, both in the
U.S. and abroad.  In July, we succeeded in acquiring approximately 94% of the
outstanding shares of Drew Scientific Group PLC, a diagnostics company that
specializes in analytical systems for laboratory testing worldwide.  This
acquisition adds an important third leg to our business portfolio, provides
expansion opportunities and makes Escalon a more significant player in the
market for diagnostic products.  While Drew has historically lost money and is
expected to negatively impact our results in the short term, we believe that
there are significant long-term opportunities to reestablish Drew's market
position and grow its revenue base.  While we do anticipate there will be some
cost savings achieved through the combination of the two public entities, it
is too early for predictions.  We expect to have more detailed information to
share after our fiscal first quarter," concluded Mr. DePiano.

    Founded in 1987, Escalon develops, markets and distributes ophthalmic
diagnostic, surgical and pharmaceutical products as well as vascular access
devices.  Drew Scientific, 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.  The Company 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 Company'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 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 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 Company's business units, generate cash and identify, finance and enter
into business relationships and acquisitions, including the exchange offer of
Drew Scientific, 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, 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.


                    ESCALON MEDICAL CORP. and SUBSIDIARIES
               CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                             Three Months Ended         Year Ended
                                  June 30,                June 30,

                             2004         2003       2004          2003

    Product revenue    $ 3,343,226  $ 3,152,192 $ 12,347,922 $ 11,191,493
    Other revenue          595,196      551,430    2,372,845    2,174,537
    Revenues, net        3,938,422    3,703,622   14,720,767   13,366,030

    Costs and expenses:
     Cost of goods sold   1,648,644    1,359,234    5,475,703    4,895,574
     Research and
      development           176,251      201,996      776,496      780,333
     Marketing, general
      and administrative  1,416,266    1,247,704    5,206,067    5,033,852
     Write-down of
      Povidone Iodine
      license and
      distribution rights        --           --           --      195,950
       Total costs and
        expenses          3,241,161    2,808,934   11,458,266   10,905,709
    Income from operations  697,261      894,688    3,262,501    2,460,321

    Other income and
     (expenses):
     Interest income         48,755          726       59,072        2,813
     Interest expense       (86,310)    (132,588)    (406,543)    (638,345)
      Total other income
       and (expense)        (37,555)    (131,862)    (347,471)    (635,532)

    Income before income
     taxes                  659,706      762,826    2,915,030    1,824,789

    Income taxes            101,267      112,412      173,300      112,412

    Net income             $558,439     $650,414   $2,741,730   $1,712,377

    Basic net income
     per share               $0.111       $0.193      $ 0.704      $ 0.509

    Diluted net income
     per share               $0.103       $0.182      $ 0.637      $ 0.479

      Weighted average
       shares - basic     5,016,380    3,365,359    3,896,951    3,365,359
      Weighted average
       shares - diluted   5,423,804    3,573,192    4,304,375    3,573,192

    SELECTED BALANCE SHEET DATA:                      June 30,     June 30,
                                                         2004         2003
                                                     (audited)    (audited)

    Cash, cash equivalents and investments        $12,601,971     $298,390
    Total current assets                           17,565,760    4,758,660
    Total assets                                   29,457,115   16,890,231
    Current liabilities                             3,600,427    3,870,322
    Long-term debt                                  2,396,019    4,080,461
    Total shareholders' equity                     23,460,669    8,939,448

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