WAYNE, Pa., May 17 /PRNewswire-FirstCall/ -- Escalon Medical Corp. (Nasdaq Small Cap: ESMC) today announced results for its fiscal third quarter and nine months ended March 31, 2004. For the third quarter of fiscal 2004, Escalon Medical reported a 62.4% gain in net income to $739,174, or $0.172 per diluted share, from net income of $455,134, or $0.133 per diluted share, in the third quarter of fiscal 2003. Net revenue for the quarter was $3,612,778 compared to $3,386,892 in the prior year period, a 6.7% gain. Product revenue increased by 8.8% during the quarter to $3,019,536.
For the third quarter, revenue from Sonomed increased 22.0% to $1,978,000 compared to $1,621,000 in the prior year period. Sales and Marketing initiatives helped to drive sales in the Middle East and Europe and improved economic conditions benefited Latin American sales. Revenue in the Vascular business increased 5.5% to $728,000 in the third quarter of fiscal 2004 compared to $690,000 in the year ago period. Product revenue in the Company's Medical / Trek business decreased 24.1% to $308,000 in the quarter from $406,000 in the third quarter of fiscal 2003 due to decreased OEM shipments. Revenue in the EMI business unit was $6,000 for the quarter, with no units shipped. This compares to $59,000 in the third quarter of 2003. Royalty revenue was $593,000 in the quarter compared to $610,000 in the year ago period, primarily 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 by Bausch & Lomb is expected to continue through fiscal 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 54.8% in the current quarter compared to 57.5% in the year ago period primarily due to increased international sales at Sonomed, which carry lower margins. Marketing, general and administrative expenses declined to 34.7% of net revenues in the third quarter from 36.0% of net revenues in the year ago period. Research and development spending was $167,123 from $204,283 in the year ago quarter, primarily due to reduced headcount.
For the first nine months of fiscal 2004, Escalon Medical reported a 105.6% gain in net income to $2,183,291, or $0.564 per diluted share, from net income of $1,061,963, or $0.309 per diluted share, in the first nine months of fiscal 2003. Net revenue for the first nine months of fiscal 2004 was $10,782,345 compared to $9,662,408 in the prior year period, an 11.6% gain. Product revenue was $9,004,696 compared to $8,039,301, a 12.0% gain.
"This was a solid quarter for Escalon, driven by strong gains at Sonomed and continued growth at Vascular," commented Richard J. DePiano, Chairman and Chief Executive Officer. "At Sonomed, we continue to benefit from solid demand for our pachymeter and additional sales and marketing resources in Europe and the Middle East. In addition, we received 510 (k) marketing clearance from the FDA for our new B-Scan, the E-Z Scan(TM). We introduced this product as well as a new ultrasound bio-microscope, the UBM/35S, at the American Society of Cataract & Refractive Surgery Symposium and Congress in May. These products round out our portfolio of diagnostic tools, enabling ophthalmologists to have access to both the front and back of the eye, which is particularly useful given the continued advances and procedures in the treatment of ophthalmic disorders."
"In our Vascular segment, revenues continued to benefit from increased sales coverage in key European markets for our PD Access(TM) and Smart Needle(TM) products. We are particularly excited about the opportunity for our recently enhanced Doppler Guided Peripheral IV Needle. The product is currently being introduced at select institutions in the Philadelphia and Chicago regions as part of a focused product launch. The growing oncology and hematology markets expand the potential for this product considerably, and feedback from select surgeons that have used the product has been encouraging."
Mr. DePiano concluded, "Importantly, we made substantial improvements to our balance sheet during the quarter. In addition to cash generated from operations, in March we completed a private equity financing, selling 800,000 common shares and warrants to purchase an additional 120,000 shares, netting approximately $9.8 million. This allowed us to significantly improve working capital, which increased to $13.7 million from $889,000 at June 30, 2003. We now have considerable flexibility to reinvest in our businesses, including key sales initiatives, both here and abroad. On the strength of our balance sheet, we will also strive to add a third leg to our business portfolio. In fact, we recently announced an exchange offer for the outstanding shares of Drew Scientific Group PLC, a diagnostics company that specializes in analytical systems for laboratory testing worldwide. We cannot predict the results of our exchange offer, however if completed, this would provide Escalon with a third vehicle for expansion while providing Drew Scientific with access to capital to grow its business."
Founded in 1987, Escalon develops, markets and distributes ophthalmic diagnostic, surgical and pharmaceutical products as well as vascular access devices. 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 and New Berlin, Wisconsin.
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 Nine Months Ended March 31, March 31, 2004 2003 2004 2003 Product revenue $ 3,019,536 $ 2,776,415 $ 9,004,696 $ 8,039,301 Other revenue 593,242 610,477 1,777,649 1,623,107 Revenues, net 3,612,778 3,386,892 10,782,345 9,662,408 Costs and expenses: Cost of goods sold 1,364,600 1,178,377 3,827,059 3,536,340 Research and development 167,123 204,283 600,245 578,337 Marketing, general and administrative 1,254,516 1,220,007 3,789,801 3,786,148 Write-down of Povidone Iodine license and distribution rights -- 195,950 -- 195,950 Total costs and expenses 2,786,239 2,798,617 8,217,105 8,096,775 Income from operations 826,539 588,275 2,565,240 1,565,633 Other income and (expenses): Interest income 9,356 609 10,317 2,087 Interest expense (93,794) (133,750) (320,233) (505,757) Total other income and (expense) (84,438) (133,141) (309,916) (503,670) Income before income taxes 742,101 455,134 2,255,324 1,061,963 Income taxes 2,927 -- 72,033 -- Net income $ 739,174 $ 455,134 $ 2,183,291 $ 1,061,963 Basic net income per share $ 0.192 $ 0.136 $ 0.619 $ 0.316 Diluted net income per share $ 0.172 $ 0.133 $ 0.564 $ 0.309 Weighted average shares - basic 3,839,937 3,355,851 3,524,603 3,355,851 Weighted average shares - diluted 4,286,761 3,420,474 3,869,901 3,441,180 SELECTED BALANCE SHEET DATA: March 31, June 30, 2004 2003 (unaudited) (audited) Cash, cash equivalents and investments $ 12,916,378 $ 298,390 Total current assets 17,033,630 4,758,660 Total assets 29,059,335 16,890,231 Current liabilities 3,319,979 3,870,322 Long-term debt 2,796,019 4,080,461 Total shareholders' equity 222,943,33 8,939,448
Escalon Medical Corp.CONTACT: Richard J. DePiano, Chairman and CEO, Escalon Medical Corp.,+1-610-688-6830; or Alison Ziegler, Financial Relations Board,+1-212-445-8432, for Escalon Medical Corp.