WAYNE, Pa., Nov. 23 /PRNewswire-FirstCall/ -- Escalon Medical Corp.
(Nasdaq: ESMC) today announced results for its fiscal first quarter ended
September 30, 2004.  For the first quarter of fiscal 2005, Escalon Medical
reported net revenue of $5,292,161 compared to $3,411,642 in the prior year
period, a 55.1% gain.  Product revenue increased by 63.2% during the quarter
to $4,636,457 from $2,841,127 in the prior year period attributable to the
July 2004 acquisition of Drew Scientific Group, Plc.  However, net income in
the first quarter was $115,899, or $0.019 per diluted share, compared to net
income of $623,156, or $0.154 per diluted share, in the first quarter of
fiscal 2004, which included a $304,000 net loss attributable to Drew.  Diluted
shares outstanding increased by 52% quarter over quarter due to the issuance
of 841,686 shares of an eventual 900,000 shares expected to be issued in
connection with the acquisition of Drew, 800,000 common shares in the March
2004 private equity financing and the exercise of stock options.
    For the first quarter, Drew had revenue of $1,904,000.  Excluding the
impact of the acquisition, however, product sales were down 3.8%.  Sonomed
revenue decreased 3.6% to $1,644,000 compared to $1,705,000 in the prior year
period.  Sales of the Company's pachymeter, after strong sales in the year ago
period, declined, partially offset by increased sales of the new E-Z Scan(TM).
Revenue in the Vascular business declined 5.3% to $695,000 in the first
quarter of fiscal 2005 compared to $734,000 in the year ago period.  The
decline was related to lower stocking orders.  Product revenue in the
Company's Medical / Trek / EMI business unit decreased 2.2% to $393,000 in the
quarter from $402,000 in the first quarter of fiscal 2005.  Other revenue
increased 14.9% to $656,000 in the quarter compared to $571,000 in the year
ago period.  The increase relates to an increase in royalty payments from
Intralase under a license of our intellectual properties.  Partially
offsetting the increase in other revenue was a decline in royalty revenue
related to annual step-downs in the Company's contract for Silicone Oil with
Bausch & Lomb.  Receipt of royalty revenue from future sales of Silicone Oil
is expected to continue through contract termination in August 2005.
    The gross margin as a percent of product revenue was 42.4% in the current
quarter compared to 57.3% in the year ago period primarily due to the
operations of Drew.  Excluding the impact of the acquisition, gross margin was
48.0%.  Negatively impacting the gross margin in the quarter was product mix,
including lower pachymeter sales and increased international sales at Sonomed.
Marketing, general and administrative expenses were 40.6% of net revenues in
the first quarter compared to 35.6% of net revenues in the year ago period and
included additional expenses related to the operations of Drew.  Research and
development spending was $315,762 in the quarter compared to $207,130 in the
year ago quarter, also related to the acquisition.
    "Escalon Medical has truly been transformed in our first quarter of fiscal
2005," commented Richard J. DePiano, Chairman and Chief Executive Officer.
"In July we added an important third leg to our business portfolio with the
acquisition of approximately 94% of the outstanding shares of Drew Scientific
Group, Plc, a diagnostics company specializing in analytical systems for
laboratory testing worldwide.  The remaining outstanding Drew shares are
expected to be acquired over the remainder of fiscal 2005.  From a balance
sheet standpoint, we also paid off all of the Escalon Medical term debt as
well as our outstanding line of credit that existed prior to the acquisition,
reducing total debt by $2.3 million.  In addition, as of September 30, 2004,
we have $5.9 million in cash, which puts us in a strong position to integrate
the acquisition of Drew. Prior to acquisition, Drew's ability to obtain raw
materials and components was severely restricted due to prolonged liquidity
constraints.  These constraints were pervasive through all of Drew's locations
and affected all aspects of Drew's operations.  Escalon's immediate
operational priorities with respect to Drew have been to stabilize and
increase Drew's revenue base and to infuse Drew with working capital in the
areas of manufacturing, sales and marketing and product development in order
to remove the pre-acquisition liquidity constraints."
    "While revenue was soft at Sonomed, with sales of our pachymeter down
after strong demand last year, we were pleased with the increased sales of our
new B-Scan, the E-Z Scan(TM).  We remain committed to enhancing our products
through targeted research and development and to expanding our markets beyond
the U.S.  In our Vascular segment, revenue was primarily impacted by changes
within our distribution channel, including providing relief from minimum
purchase requirements to several of our distributors."
    "Looking ahead to the remainder of fiscal 2005, we are focused on
integrating Drew.  While Drew lost money in the quarter, we have been
pleasantly surprised with our progress towards stabilizing the revenue base,
and we are currently investing in its products to support growth and reduce
costs where possible," concluded Mr. DePiano.
    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 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-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 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, including Drew, generate cash
and identify, finance, integrate operations of Drew and enter into business
relationships and acquisitions, 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
                                                        September 30,

                                                     2004           2003

    Product revenue                              $4,636,457     $2,841,127
    Other revenue                                   655,704        570,515
    Revenues, net                                 5,292,161      3,411,642

    Costs and expenses:
     Cost of goods sold                           2,671,348      1,212,799
     Research and development                       315,762        207,130
     Marketing, general and administrative        2,182,487      1,214,196
       Total costs and expenses                   5,169,597      2,634,125
    Income from operations                          122,564        777,517

    Other income and (expenses):
     Equity in Ocular Telehealth Management, LLC    (29,201)             0
     Interest income                                 32,092            679
     Interest expense                                 3,413       (118,559)
      Total other income and (expense)                6,304       (117,880)

    Income before income taxes                      128,868        659,637

    Income taxes                                     12,969         36,481

    Net income                                     $115,899       $623,156

    Basic net income per share                       $0.021         $0.185

    Diluted net income per share                     $0.019         $0.154

    Weighted average shares - basic               5,564,469      3,365,359
    Weighted average shares - diluted             6,141,958      4,049,298


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

    Cash, cash equivalents and investments       $5,862,212    $12,601,971
    Total current assets                         16,301,161     17,565,760
    Total assets                                 38,139,172     29,457,115
    Current liabilities                           7,117,523      3,600,427
    Long-term debt                                  594,214      2,396,019
    Total shareholders' equity                   30,427,435     23,460,669

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