WAYNE, Pa., Nov. 14 /PRNewswire/ -- Escalon Medical Corp. (Nasdaq: ESMC)
today announced results for its fiscal first quarter ended September 30, 2001.
For the first quarter of fiscal 2002, Escalon Medical reported net income of
$75,981, or $0.023 per diluted share.  This compares to net income of
$193,528, or $0.058 per diluted share, in the first quarter of fiscal 2001
after adjusting for FASB Statement No. 142, Accounting for Goodwill and Other
Intangible Assets.
    Revenues for the first quarter of fiscal 2002 decreased 1.5% to $2,916,000
compared to $2,960,000 in the first quarter of fiscal 2001.  For the first
quarter, revenue from Sonomed was relatively flat at $1,527,000 compared to
$1,536,000 in the prior year period.  A higher percentage of sales to
distributors hurt the average selling price due to distributor discounts, but
was partially offset by improved product mix.  Product revenue in the Vascular
business increased 32.7% to $658,000 in the first quarter of fiscal 2002
compared to $495,000 in the year ago period.  The improvement resulted from
unit sales gains as well as improved pricing due to a shift away from
underperforming distributors.  Revenue in the Company's Medical / Trek
business declined by 21.3% to $731,000 in the quarter from $929,000 in the
first quarter of fiscal 2001.  The decline was the result of strong sales in
the year-ago period due to the fulfillment of customer backorders.  Included
in this figure is revenue earned in connection with the sale of the license
and distribution rights of Silicone Oil.  Revenue from Silicone Oil was
$444,000 in the quarter compared to $346,000 in the year ago period, but
declined from $726,000 in the fourth quarter of 2001.  Additional
consideration, which is based upon future sales of Silicone Oil by Bausch &
Lomb, is expected to continue through fiscal 2005.
    The gross margin as a percent of sales was 57.9% in the current quarter
compared to 64.7% in the year ago period.  Impacting the gross margin in the
quarter was an increase in raw material costs in the Vascular Access and
Sonomed businesses.  Marketing, general and administrative expenses, which
improved to 43.7% of sales, continued to be well controlled and benefited from
an $88,000 decline in amortization expenses as a result of the implementation
of FAS 142.
    "We continue to strive for sustainable growth, but given the current
economic conditions we are not unhappy with the revenue performance in the
quarter," commented Richard J. DePiano, Chairman and Chief Executive Officer.
"We had a very strong quarter in the way of cash flow, generating nearly
$625,000 of cash from operations.  Accounts receivable improved by $212,000
and we reduced inventory by approximately $133,000 in the quarter.  We also
recovered $186,000 from our Escalon Medical Imaging joint venture.  This
enabled us to pay down approximately $676,000 in debt, further improving our
balance sheet."
    Mr. DePiano continued, "At Sonomed, our focus is on global expansion,
particularly in Latin America, Europe and the Far East.  Our PacScan 300
Series A-scans, B-scans, Pachymeters and combination devices were recently
certified in Europe and we are building a distributor system across Europe to
expand our sales coverage.  Part of our strategy involves a new commission
system, offering greater discounts to help promote our products.  While this
negatively impacted operating margins in the first quarter and may continue to
have a short-term impact, longer term we hope to get back to more historic
margin levels.  We also recently brought on board Thomas Soulos as a new
Director of Engineering.  Tom has 20 years of experience as an engineer and
product manager in the medical ultrasound field with companies such as Johnson
& Johnson and Ultrasound Technologies, a division of U.S. Surgical.  We are
extremely excited to have Tom on board and we believe he will be instrumental
as we continue to bring quality and innovation to our product line."
    "We had a record quarter in the Vascular Access business," added Mr.
DePiano.  "Having worked off the inventory in the distributor pipeline, sales
have begun to rebound.  We are also working to strengthen our product
portfolio with several prototypes under evaluation at medical institutions.
Our goal here is to penetrate new markets such as hematology, oncology and
I.V. therapy markets to expand our ultimate market potential."
    "Our Escalon Medical Imaging division continues to move ahead, with a new
version of EyePhoto software just released.  We continue to make enhancements
to our CFA digital imaging system and consistent with our strategy, we are
looking for additional partners to expand distribution and enhance our
competitive positioning in this market," said Mr. DePiano.
    Mr. DePiano concluded, "While we begin fiscal 2002 in a more challenging
business environment, Escalon has never been stronger or better positioned to
succeed.  We continue to selectively add to our management team and remain
focused on improving our product portfolio and marketing it globally.  While
new products continue to offer potential, we see even greater opportunities
for sales gains in 2002 from geographic expansion."
    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, the vascular access business and Escalon Medical
Imaging, 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, marketing
acceptance of existing products in new markets, 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

                                                     First Quarter Ended
                                                        September 30,
                                                     2001            2000

    Product revenues, net                         $2,915,715     $2,959,966

    Costs and expenses:
      Cost of goods sold                           1,228,262      1,044,671
      Research and development                       122,786        111,065
      Marketing, general and administrative        1,273,932      1,356,305
        Total costs and expenses                   2,624,980      2,512,041
    Income (loss) from operations                    290,735        447,925

    Other income and (expenses):
      Equity in income (loss) of unconsolidated
       joint venture                                  (8,601)       (54,822)
      Interest income                                    889          2,918
      Interest expense                              (207,042)      (288,630)
        Total other income and (expense)            (214,754)      (340,534)

    Net income (loss):
      Reported net income                             75,981        107,391
      Add: FAS 142 adjustment                             --         86,137
      Adjusted net income                             75,981        193,528

    Basic net income (loss) per share:
      Reported net income                             $0.023         $0.033
      Add: FAS 142 adjustment                             --          0.027
      Adjusted net income                             $0.023         $0.060

    Diluted net income (loss) per share:
      Reported net income                             $0.023         $0.032
      Add: FAS 142 adjustment                             --         $0.026
      Adjusted net income                             $0.023         $0.058

    Weighted average shares - basic                3,292,184      3,242,184
    Weighted average shares - diluted              3,302,379      3,309,033


    SELECTED BALANCE SHEET DATA:    September 30, 2001     June 30, 2001
                                       (unaudited)           (audited)
    Cash, cash equivalents and
     investments (restricted and
     unrestricted)                        $193,940             $80,830
    Total current assets                 3,936,795           4,185,152
    Total assets                        17,118,564          17,798,422
    Current liabilities                  4,048,242           7,188,848
    Long-term debt                       6,887,092           4,502,325
    Total shareholders' equity           6,183,230           6,107,249

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