WAYNE, Pa., Nov. 14 /PRNewswire-FirstCall/ -- Escalon Medical Corp.
(Nasdaq Small Cap: ESMC) today announced results for its fiscal first
quarter ended September 30, 2006.
    For the first quarter of fiscal 2007, the Company reported net revenue
of $7,168,160, compared with net revenue of $7,793,534 for the first
quarter of fiscal 2006. The Company experienced strong sales growth in the
Company's Sonomed and Medical/Trek/EMI business units, realizing
year-over-year growth of 28% and 100%, respectively. These increases were
offset by decreases in the Drew and Vascular business units which decreased
32% and 12%, respectively, year-over-year.
    For the first quarter of fiscal 2007, the Company reported a net loss
of $(714,117) or $(0.11) per diluted share, compared with net income of
$714,347, or $0.12 per diluted share, in the first quarter of fiscal 2006.
Fiscal 2007 first quarter income was negatively impacted by a $735,000 loss
at the Company's Drew business. Additionally, first quarter 2007 operating
expenses increased approximately 5.5% from the 2006 first quarter arising
primarily from a high amount of legal and accounting fees related to
IntraLase litigation costs. While the Company expects that legal and
accounting expenses will continue to impact earnings in the near term, it
does not believe that these expenses will continue in the future at such
high levels.
    The Company is continuing to implement previously announced initiatives
designed to stabilize and increase Drew's revenue base while reducing
operating costs, rationalizing facilities and expanding operating margins
at this unit.
    "This quarter reflects initial efforts to revamp the Drew business,
which is a key component in our efforts to return the Company to
profitability and enhance the overall value of our organization. We are
well underway in this process and expect to see tangible results over the
coming quarters," said Richard J. DePiano, Chairman and Chief Executive
Officer. "Our ultimate target for cost reductions announced last quarter
remains annualized savings of $1,900,000, with approximately $700,000 of
these cost reductions to be realized in fiscal 2007. Additionally, we also
anticipate increased profits in legacy Escalon entities and the continued
growth of our IntraLase royalty revenue stream to continue our growth and
enhance value for our shareholders."
    Recap of Fiscal First Quarter 2007
    Mr. DePiano added, "Turning to our operating performance for the first
quarter of fiscal 2007, product revenue decreased approximately $584,000,
or 8%, to $6,543,000 during the three-month period ended September 30, 2006
as compared with the same period last fiscal year. In the Drew business
unit, product revenue decreased $1,280,000, or 32%, as compared with the
same period in 2006. This decrease was primarily due to the aging of Drew's
product line and delays in bringing its new products to market. However,
several new product introductions are underway, and we expect to release
new products for sale at Drew in both the second and third quarter of our
2007 fiscal year
    "Our Sonomed business unit achieved product revenues of $2,293,000, an
increase of $495,000, or 28%, compared with the same period last fiscal
year. Growth at Sonomed was driven by an increase in sales of the Company's
new Vumax II ultrasound systems and an increase in export sales, which were
partially offset by a decrease in domestic sales and in demand for the
Company's pachymeter product. Product revenue at our Vascular unit
decreased $114,000, or 12%, to $817,000, primarily due to a decrease in
direct sales to end users in Europe, delays in launching sales efforts in
Latin America and decreased sales by the Company's remaining domestic
distributor network."
    "In our Medical/Trek/EMI unit, product revenue increased $321,000, or
100%, to $648,000 as compared with last year, primarily attributable to an
increase in sales of digital imaging systems. Additionally, the previously
announced acquisition of MRP Group, Inc., a privately held ophthalmic
technology solutions provider, has integrated MRP's retinal imaging systems
with EMI's existing ophthalmic photography product portfolio. This
integration has strengthened our position in the ophthalmic marketplace,
and we are beginning to see the full benefits of this strategic
acquisition."
    Mr. DePiano concluded, "While we are pleased with the progress we have
made in our legacy businesses, we continue to work towards improving our
operational performance at Drew while maximizing our assets and generating
greater cost efficiencies throughout all of our business segments. We
remain optimistic about our prospects and look forward to continuing to
report our progress in fiscal 2007."
    Founded in 1987, Escalon develops markets and distributes ophthalmic
diagnostic, surgical and pharmaceutical products as well as vascular access
devices. Drew, which operates as a separate business unit, 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. Escalon 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 Escalon'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-in-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 Escalon's future prospects. These
statements are based on the Escalon'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 Escalon is able to
implement its growth and marketing strategies, improve upon the operations
of Escalon's business units, including the integration of Drew's operations
and any acquisitions it may undertake, if any, of which there can be no
assurance, generate cash and identify, finance and enter into business
relationships and acquisitions, uncertainties and risks related to new
product development and releases, commercialization, manufacturing and
market acceptance of new products, marketing acceptance of existing
products in new markets, the continuity of royalty revenue, litigation and
non- recurring expenses, research and development activities, including
failure to demonstrate clinical efficacy, delays by regulatory authorities,
scientific and technical advances by Escalon 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 Escalon's report on
Form 10- KSB for the year ended June 30, 2006, and its other filings with
the Securities and Exchange Commission, all of which are available from the
Commission as well as from other sources.
                    ESCALON MEDICAL CORP. and SUBSIDIARIES
               CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                                                            (Unaudited)
                                                        Three Months Ended
                                                           September 30,
                                                        2006           2005

    Product revenue                                 $6,543,586     $7,123,354
    Other revenue                                      624,574        670,180
    Revenues, net                                    7,168,160      7,793,534

    Costs and expenses:
      Cost of goods sold                             3,630,380      4,105,653
      Research and development                         713,605        756,160
      Marketing, general and administrative          3,555,900      3,284,051
        Total costs and expenses                     7,899,885      8,145,864

    Loss from operations                              (731,725)      (352,330)

    Other income and (expenses):
      Gain on Sale of available for sale securities          0      1,157,336
      Equity in Ocular Telehealth Management           (18,543)       (18,429)
      Interest income                                   45,436          4,847
      Interest expense                                  (9,285)       (10,677)
        Total other income and (expense)               (17,608)     1,133,077

    (Loss) income before income taxes                 (714,117)       780,747

    Income taxes                                             0         66,400

    Net (loss) income                                $(714,117)      $714,347

    Basic net income per share                          $(0.11)         $0.12

    Diluted net income per share                        $(0.11)         $0.11

      Weighted average shares - basic                6,344,657      5,964,292
      Weighted average shares - diluted              6,344,657      6,372,742




    SELECTED BALANCE SHEET DATA:                 September 30,     June 30,
                                                     2006           2006
                                                  (unaudited)     (audited)

    Cash, cash equivalents and investments        $2,149,040     $3,379,710
    Total current assets                          14,519,573     14,911,249
    Total assets                                  38,371,674     38,644,767
    Current liabilities                            4,569,889      4,295,109
    Long-term debt                                 1,182,239      1,249,551
    Total shareholders' equity                    32,619,546     33,100,107

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