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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
 
 For the fiscal year ended June 30, 2008
Commission File Number 0-20127
 Escalon Medical Corp.
 (Exact name of registrant as specified in its charter)
 
 Pennsylvania
    
    33-0272839(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 435 Devon Park Drive, Building 100, Wayne, PA 19087
(Address of principal executive offices, including zip code)
 (610) 688-6830
(Registrants telephone number, including area code)
 
 Securities Registered Pursuant to Section 12(b) of the Act:
 Common Stock, par value $0.001
    
    NASDAQ Capital Market(Title of class)
    
    (Name of each exchange
on which registered)
 Securities Registered Pursuant to Section 12(g) of the Act: NONE
 o þ
 o þ
 þ o
 o þ
  Large accelerated filer oAccelerated filer oNon-accelerated filer o(Do not check if a smaller reporting company)Smaller reporting company þ o þ
   Documents Incorporated by Reference:




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##### 



Escalon Medical Corp.
Annual Report on Form 10-K
For the Fiscal Year Ended June 30, 2008
 TABLE OF CONTENTS
 PagePART IItem 1.
    
    Business
    
    
    1Item 1A.
    
    Risk Factors
    
    
    7Item 1B.
    
    Unresolved Staff Comments
    
    
    15Item 2.
    
    Properties
    
    
    15Item 3.
    
    Legal Proceedings
    
    
    15Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    17PART IIItem 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
    
    
    17Item 6.
    
    Selected Financial Data
    
    
    18Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    19Item 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    36Item 8.
    
    Financial Statements and Supplementary Data
    
    
    37Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    68Item 9A.
    
    Controls and Procedures
    
    
    68Item 9B.
    
    Other Information
    
    
    70PART IIIItem 10.
    
    Directors, Executive Officers and Corporate Governance
    
    
    70Item 11.
    
    Executive Compensation
    
    
    70Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
    
    
    71Item 13.
    
    Certain Relationships and Related Transactions, and Director Independence
    
    
    71Item 14.
    
    Principal Accounting Fees and Services
    
    
    71PART IVItem 15.
    
    Exhibits, Financial Statement Schedules
    
    
    71EX-10.15Consent of Independent Registered Public Accounting FirmCertification of Principal Executive OfficerCertification of Principal Financial OfficerCertification of Chief Executive Officer pursuant to Section 906Certification of Chief Executive Officer pursuant to Section 906
  ii




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PART 1
 
 ITEM 1.
    
    BUSINESS
 Company Overview
 www.escalonmed.com
 Drew Business
  Diabetes Testing
 in vitro
 Hematology
  Sonomed Business
  A-Scans
  1




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B-Scans
  UBM
  Pachymeters
  Vascular Business
  PD Access and SmartNeedle Monitors, Needles and Catheter Products
  VascuView
Visual Ultrasound System
  EMI Business
  2




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Medical/Trek Business
  Ispan Intraocular Gases
  Viscous Fluid Transfer Systems
 ®
 Fiber Optic Light Sources
  Research and Development
  Manufacturing and Distribution
   3




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Governmental Regulations
     4




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Marketing and Sales
     Service and Support
  Third Party Reimbursement
  Patents, Trademarks and Licenses
   5




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
    
    The Escalon trademark is due for renewal on January 19, 2013, and the Company intends
to renew the trademark. The Sonomed trademark was renewed on November 25, 2006.
    
    In the Vascular business unit, the Company has two patents that are of material
importance. The first patent is an apparatus for the cannulation of blood vessels. This
patent will expire on February 23, 2011. The second patent is also an apparatus for the
cannulation of blood vessels. This patent will expire on January 11, 2009. The Vascular
unit has also one patent application pending for the cannulation of blood vessels with a
hypodermic needle.
 Competition
    6




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Human Resources
  
 ITEM 1A. RISK FACTORS
 Cautionary Factors That May Affect Future Results
  7




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Any acquisitions, strategic alliances, joint ventures and divestitures that the Company
effects could result in financial results that differ from market expectations.
   8




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The Companys results fluctuate from quarter to quarter.
  
    
    Acquisitions, such as Drew and JAS, and subsequent integration of the acquired company,
although such acquisitions may not occur;
    
    The timing and expense of new product introductions by the Company or its competitors,
although the Company might not successfully develop new products and any such new products
may not gain market acceptance;
    
    The cancellation or delays in the purchase of the Companys products;
    
    Fluctuations in customer demand for the Companys products;
    
    Fluctuations in royalty income;
    
    The gain or loss of significant customers;
    
    Changes in the mix of products sold by the Company;
    
    Competitive pressures on prices at which the Company can sell its products;
    
    Announcements of new strategic relationships by the Company or its competitors;
    
    Litigation costs and settlements; and
    
    General economic conditions and other external factors such as energy costs.
  The Companys Cost Saving Initiatives may not be effective.
 .
 Failure of the market to accept the Companys products could adversely impact the
Companys business and financial condition.
  
    
    The price of the products;
    
    The continued receipt of regulatory approvals for multiple indications;
    
    The establishment and demonstration of the clinical safety and efficacy of the
Companys products; and
    
    The advantages of the Companys products over those marketed by the Companys
competitors.
  The Companys products are subject to stringent ongoing regulation by the FDA and similar
health care regulatory authorities, and if the FDAs approvals or clearances of the Companys
products are restricted or revoked, the Company could face delays that would impair the Companys
ability to generate funds from operations.
  9




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The success of competitive products could have an adverse impact on the Companys business.
  
    
    Properly identify customer needs;
    
    Innovate and develop new technologies, services and applications;
    
    Establish adequate product distribution coverage;
    
    Obtain and maintain required regulatory approvals from the FDA and other regulatory
agencies;
    
    Protect the Companys intellectual property;
 10




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
    
    Successfully commercialize new technologies in a timely manner;
    
    Manufacture and deliver the Companys products in sufficient volumes on time;
    
    Differentiate the Companys offerings from the offerings of the Companys competitors;
    
    Price the Companys products competitively;
    
    Anticipate competitors announcements of new products, services or technological
innovations; and
    
    Anticipate general market and economic conditions.
  The Companys products employ proprietary technology, and this technology may infringe on the
intellectual property rights of third parties.
   Lack of availability of key system components could result in delays, increased costs or
costly redesign of the Companys products.
  The Companys ability to market or sell the Companys products may be adversely impacted by
limitations on reimbursements by government programs, private insurance plans and other third party
payors.
  11




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Future legislation or changes in government programs may adversely impact the market for the
Companys products.
  The Company may become involved in product liability litigation, which may subject the Company
to liability and divert management attention.
  The Companys international operations could be adversely impacted by changes in laws or
policies of foreign governmental agencies and social and economic conditions in the countries in
which the Company operates.
  The Company is dependent on its management and key personnel to succeed.
  12




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The market price of the Companys stock has historically been volatile, and the Company has
not paid cash dividends.
  
    
    Any acquisitions, strategic alliances, joint ventures and divestitures that the Company
effects, if any;
    
    Announcements of technological innovations;
    
    Changes in marketing, product pricing and sales strategies or new products by the
Companys competitors;
    
    Changes in domestic or foreign governmental regulations or regulatory requirements; and
    
    Developments or disputes relating to patent or proprietary rights and public concern as
to the safety and efficacy of the procedures for which the Companys products are used.
   The impact of terrorism or acts of war could have a material adverse impact on the Companys
business.
  The Companys charter documents and Pennsylvania law may inhibit a takeover.
  There are inherent uncertainties involved in estimates, judgments and assumptions used in the
preparation of financial statements in accordance with United States GAAP. Any changes in
estimates, judgments and assumptions used could have a material adverse effect on the Companys
business, financial position and operating results.
  13




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Goodwill and
Other Intangible Assets Accounting for the Impairment or Disposal of Long-Lived
Assets
  
    
    product returns;
    
    allowances for doubtful accounts;
    
    inventories and related reserves;
    
    intangible assets and goodwill;
    
    income and other tax accruals;
    
    deferred tax asset valuation allowances;
    
    discounts and allowances;
    
    warranty obligations; and
    
    contingencies and litigation.
  The Company will be exposed to risks relating to evaluations of internal control over
financial reporting required by Section 404 of the Sarbanes-Oxley Act of 2002.
   14




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Substantially all of our cash and cash equivalents and marketable securities are held at a single
financial institution.
  
 ITEM 1B.
    
    UNRESOLVED STAFF COMMENTS:
  
 ITEM 2.
    
    PROPERTIES
  
 ITEM 3.
    
    LEGAL PROCEEDINGS
 PointCare Technologies, Inc.
 Drew Scientific, Inc. v. PointCare Technologies,
Inc
 15




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TM TM
       16




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Other Legal Proceedings
  
 ITEM 4.
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 PART II.
 
 ITEM 5.
    
    MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
  High
    
    LowFiscal year ended June 30, 2008Quarter ended September 30, 2007
    
    $
    8.60
    
    
    $
    3.95Quarter ended December 31, 2007
    
    $
    5.72
    
    
    $
    2.99Quarter ended March 31, 2008
    
    $
    4.39
    
    
    $
    2.78Quarter ended June 30, 2008
    
    $
    3.40
    
    
    $
    2.86Fiscal year ended June 30, 2007Quarter ended September 30, 2006
    
    $
    5.19
    
    
    $
    4.06Quarter ended December 31, 2006
    
    $
    4.19
    
    
    $
    2.35Quarter ended March 31, 2007
    
    $
    4.38
    
    
    $
    2.55Quarter ended June 30, 2007
    
    $
    4.53
    
    
    $
    3.75
   17




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##### Table of Contents



ITEM 6.
    
    SELECTED FINANCIAL DATA
  For the Years Ended June 30,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004(Amounts in thousands, except per share amounts)Statement of Operations Data:Net revenues:Product revenue
    
    $
    29,988
    
    
    $
    27,893
    
    
    $
    27,544
    
    
    $
    23,864
    
    
    $
    12,348Other revenue
    
    
    222
    
    
    
    10,945
    
    
    
    2,247
    
    
    
    3,060
    
    
    
    2,373Revenues, net
    
    
    30,210
    
    
    
    38,838
    
    
    
    29,791
    
    
    
    26,924
    
    
    
    14,721Costs and expenses:Cost of goods sold
    
    
    17,310
    
    
    
    15,771
    
    
    
    16,004
    
    
    
    13,158
    
    
    
    5,476Marketing, general and administrative
    
    
    14,392
    
    
    
    13,806
    
    
    
    13,995
    
    
    
    12,556
    
    
    
    5,206Research and development
    
    
    4,058
    
    
    
    3,461
    
    
    
    2,828
    
    
    
    1,893
    
    
    
    776Total costs and expenses
    
    
    35,760
    
    
    
    33,038
    
    
    
    32,827
    
    
    
    27,607
    
    
    
    11,458(Loss) income from operations
    
    
    (5,550
    )
    
    
    5,800
    
    
    
    (3,036
    )
    
    
    (683
    )
    
    
    3,263Other (expense) and income:Gain on sale
of available for sale securities
    
    
    0
    
    
    
    75
    
    
    
    1,157
    
    
    
    3,412
    
    
    
    0Equity in Ocular Telehealth Management, LLC
    
    
    (88
    )
    
    
    (88
    )
    
    
    (174
    )
    
    
    (64
    )
    
    
    0Goodwill Impairment
    
    
    (9,575
    )
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Interest income
    
    
    300
    
    
    
    208
    
    
    
    162
    
    
    
    69
    
    
    
    59Interest expense
    
    
    (12
    )
    
    
    (29
    )
    
    
    (64
    )
    
    
    (55
    )
    
    
    (407
    )Total other (expense) and income
    
    
    (9,375
    )
    
    
    166
    
    
    
    1,081
    
    
    
    3,362
    
    
    
    (348
    )Net (loss) income before taxes
    
    
    (14,925
    )
    
    
    5,966
    
    
    
    (1,955
    )
    
    
    2,679
    
    
    
    2,915Provision for income taxes
    
    
    135
    
    
    
    51
    
    
    
    31
    
    
    
    232
    
    
    
    173Net (loss) income
    
    $
    (15,060
    )
    
    $
    5,915
    
    
    $
    (1,986
    )
    
    $
    2,447
    
    
    $
    2,742Basic net (loss) income per share
    
    $
    (2.36
    )
    
    $
    0.93
    
    
    $
    (0.32
    )
    
    $
    0.42
    
    
    $
    0.70Diluted net (loss) income per share
    
    $
    (2.36
    )
    
    $
    0.92
    
    
    $
    (0.32
    )
    
    $
    0.39
    
    
    $
    0.64Weighted average shares  basic used
in per share calculation
    
    
    6,389
    
    
    
    6,375
    
    
    
    6,152
    
    
    
    5,832
    
    
    
    3,897Weighted average shares  diluted
used in per share calculation
    
    
    6,389
    
    
    
    6,434
    
    
    
    6,152
    
    
    
    6,231
    
    
    
    4,304
 18




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At June 30,2008
    
    2007
    
    2006
    
    2005
    
    2004(Amounts in thousands)Balance Sheet Data:Cash and cash equivalents
    
    $
    3,708
    
    
    $
    8,879
    
    
    $
    3,380
    
    
    $
    5,116
    
    
    $
    12,602Working capital
    
    
    10,547
    
    
    
    17,238
    
    
    
    10,616
    
    
    
    13,613
    
    
    
    13,966Total assets
    
    
    31,896
    
    
    
    45,017
    
    
    
    38,645
    
    
    
    40,049
    
    
    
    29,457Short Term Debt
    
    
    501,752
    
    
    
    150,200
    
    
    
    232,837
    
    
    
    2,396
    
    
    
    0Long-term debt, net of current portion
    
    
    250,871
    
    
    
    0
    
    
    
    163
    
    
    
    392
    
    
    
    2,396Total liabilities
    
    
    7,364
    
    
    
    5,612
    
    
    
    5,545
    
    
    
    5,530
    
    
    
    5,996Accumulated deficit
    
    
    (43,267
    )
    
    
    (28,208
    )
    
    
    (34,122
    )
    
    
    (32,136
    )
    
    
    (34,585
    )
  
 ITEM 7.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
        Executive Overview  Fiscal Years Ended June 30, 2008 and 2007
  
    
    Product revenue increased approximately 7.5% during fiscal year ended June 30, 2008 as
compared to the prior fiscal year. The increase is primarily related to strong sales in
the Companys Drew, Vascular, and EMI business units which increased approximately 14.7%,
18.8%, and 18.7%, respectively, offset by sales decreases in the Sonomed and Trek business
units of 4.6% and 5.5%, respectively.
 19




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
    
    Other revenue decreased approximately $10,723,000 or 98.0% during the fiscal year ended
June 30, 2008 as compared to the prior fiscal year. The decrease is due primarily to the
$9,600,000 settlement payment received from Intralase on February 27, 2007.
    
    Cost of goods sold as a percentage of product revenue increased to approximately 57.7%
of revenues during the fiscal year ended June 30, 2008, as compared to approximately 56.5%
of product revenue for the prior fiscal year. Gross margins in the Drew business unit have
historically been lower than those in the Companys other business units. Cost of goods sold in the Drew
business unit was approximately 67.0% of product revenue during the fiscal year ended June
30, 2008 as compared to approximately 66.1% in the prior fiscal year. The aggregate cost
of goods sold as a percentage of product revenue of the Sonomed, Vascular, EMI and
Medical/Trek business units during fiscal year ended June 30, 2008 increased to
approximately 52.0% of product revenue from approximately 51.6% in the prior fiscal year.
    
    Operating expenses increased approximately 6.9% during the fiscal year ended June 30,
2008 as compared to the prior fiscal year. This was due to increased consulting expenses
related to the implementation of an ERP System during the current period and increased
research and development at the Drew, Sonomed and Vascular divisions.
    
    The Company concluded that $9,574,655 of the goodwill recorded at Drew was impaired.
As a result, the Company recorded a non-cash goodwill impairment charge to operations
totaling $9,574,655 for the year ended June 30, 2008 (see footnote 3 for additional
information).
 Results of Operations
 Fiscal Years Ended June 30, 2008 and 2007
  Fiscal Years Ended June 30,2008
    
    
    2007
    
    
    % ChangeProduct Revenue:Drew
    
    $
    13,332
    
    
    $
    11,627
    
    
    
    14.7
    %Sonomed
    
    
    9,367
    
    
    
    9,823
    
    
    
    -4.6
    %Vascular
    
    
    4,119
    
    
    
    3,467
    
    
    
    18.8
    %EMI
    
    
    1,762
    
    
    
    1,484
    
    
    
    18.7
    %Medical/Trek
    
    
    1,410
    
    
    
    1,492
    
    
    
    -5.5
    %Total
    
    $
    29,990
    
    
    $
    27,893
    
    
    
    7.5
    %
   20




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Fiscal Years Ended June 30,2008
    
    
    2007
    
    
    % ChangeOther Revenue:Drew
    
    $
    222
    
    
    $
    243
    
    
    
    -8.6
    %Sonomed
    
    
    0
    
    
    
    0
    
    
    
    0.0
    %Vascular
    
    
    0
    
    
    
    0
    
    
    
    0.0
    %EMI
    
    
    0
    
    
    
    0
    
    
    
    0.0
    %Medical/Trek
    
    
    0
    
    
    
    10,702
    
    
    
    -100.0
    %Total
    
    $
    222
    
    
    $
    10,945
    
    
    
    -98.0
    %
   21




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##### Table of Contents



Fiscal Years Ended June 30,2008
    
    
    %
    
    
    2007
    
    
    %Cost of Goods Sold:Drew
    
    $
    8,928
    
    
    
    67.0
    %
    
    $
    7,681
    
    
    
    66.1
    %Sonomed
    
    
    5,029
    
    
    
    53.7
    %
    
    
    4,976
    
    
    
    50.7
    %Vascular
    
    
    1,538
    
    
    
    37.3
    %
    
    
    1,393
    
    
    
    40.2
    %EMI
    
    
    820
    
    
    
    46.5
    %
    
    
    711
    
    
    
    47.9
    %Medical/Trek
    
    
    995
    
    
    
    70.6
    %
    
    
    1,011
    
    
    
    67.8
    %Total
    
    $
    17,310
    
    
    
    57.7
    %
    
    $
    15,772
    
    
    
    56.5
    %
        22




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Fiscal Years Ended June 30,2008
    
    
    2007
    
    
    % ChangeMarketing, General and Administrative:Drew
    
    $
    5,287
    
    
    $
    5,475
    
    
    
    -3.4
    %Sonomed
    
    
    2,219
    
    
    
    1,931
    
    
    
    14.9
    %Vascular
    
    
    1,576
    
    
    
    1,598
    
    
    
    -1.4
    %EMI
    
    
    605
    
    
    
    480
    
    
    
    26.0
    %Medical/Trek
    
    
    4,705
    
    
    
    4,323
    
    
    
    8.8
    %Total
    
    $
    14,392
    
    
    $
    13,807
    
    
    
    4.2
    %
        23




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Fiscal Years Ended June 30,2008
    
    
    2007
    
    
    % ChangeResearch and Development:Drew
    
    $
    2,745
    
    
    $
    2,355
    
    
    
    16.6
    %Sonomed
    
    
    779
    
    
    
    495
    
    
    
    57.4
    %Vascular
    
    
    260
    
    
    
    172
    
    
    
    51.2
    %EMI
    
    
    268
    
    
    
    350
    
    
    
    -23.4
    %Medical/Trek
    
    
    6
    
    
    
    89
    
    
    
    -93.3
    %Total
    
    $
    4,058
    
    
    $
    3,461
    
    
    
    17.3
    %
       Goodwill Impairment
    24




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Other Income and Expenses
     Results of Operations
 Fiscal Years Ended June 30, 2007 and 2006
  Fiscal Years Ended June 30,2007
    
    
    2006
    
    
    % ChangeProduct Revenue:Drew
    
    $
    11,627
    
    
    $
    14,253
    
    
    
    -18.4
    %Sonomed
    
    
    9,823
    
    
    
    7,737
    
    
    
    27.0
    %Vascular
    
    
    3,467
    
    
    
    3,640
    
    
    
    -4.8
    %EMI
    
    
    1,484
    
    
    
    434
    
    
    
    241.9
    %Medical/Trek
    
    
    1,492
    
    
    
    1,480
    
    
    
    0.8
    %Total
    
    $
    27,893
    
    
    $
    27,544
    
    
    
    1.3
    %
  25




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##### Table of Contents



Fiscal Years Ended June 30,2007
    
    
    2006
    
    
    % ChangeOther Revenue:Drew
    
    $
    243
    
    
    $
    283
    
    
    
    (14.1
    )%Sonomed
    
    
    0
    
    
    
    0
    
    
    
    0.0
    %Vascular
    
    
    0
    
    
    
    0
    
    
    
    0.0
    %EMI
    
    
    0
    
    
    
    0
    
    
    
    0.0
    %Medical/Trek
    
    
    10,702
    
    
    
    1,964
    
    
    
    444.9
    %Total
    
    $
    10,945
    
    
    $
    2,247
    
    
    
    387.1
    %
  26




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##### Table of Contents



Fiscal Years Ended June 30,2007
    
    
    %
    
    
    2006
    
    
    %Cost of Goods Sold:Drew
    
    $
    7,681
    
    
    
    66.1
    %
    
    $
    9,225
    
    
    
    64.7
    %Sonomed
    
    
    4,976
    
    
    
    50.7
    %
    
    
    3,962
    
    
    
    51.2
    %Vascular
    
    
    1,393
    
    
    
    40.2
    %
    
    
    1,535
    
    
    
    42.2
    %EMI
    
    
    711
    
    
    
    47.9
    %
    
    
    290
    
    
    
    66.8
    %Medical/Trek
    
    
    1,011
    
    
    
    67.8
    %
    
    
    992
    
    
    
    67.0
    %Total
    
    $
    15,772
    
    
    
    56.5
    %
    
    $
    16,004
    
    
    
    58.1
    %
       27




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##### Table of Contents



Fiscal Years Ended June 30,2007
    
    
    2006
    
    
    % ChangeMarketing, General and Administrative:Drew
    
    $
    5,475
    
    
    $
    6,006
    
    
    
    -8.9
    %Sonomed
    
    
    1,931
    
    
    
    2,098
    
    
    
    -8.0
    %Vascular
    
    
    1,598
    
    
    
    1,682
    
    
    
    -5.0
    %EMI
    
    
    480
    
    
    
    550
    
    
    
    -12.7
    %Medical/Trek
    
    
    4,323
    
    
    
    3,659
    
    
    
    18.2
    %Total
    
    $
    13,807
    
    
    $
    13,995
    
    
    
    -1.4
    %
       28




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##### Table of Contents



Fiscal Years Ended June 30,2007
    
    
    2006
    
    
    % ChangeResearch and Development:Drew
    
    $
    2,355
    
    
    $
    1,734
    
    
    
    35.8
    %Sonomed
    
    
    495
    
    
    
    511
    
    
    
    -3.1
    %Vascular
    
    
    172
    
    
    
    164
    
    
    
    4.9
    %EMI
    
    
    350
    
    
    
    85
    
    
    
    311.8
    %Medical/Trek
    
    
    89
    
    
    
    334
    
    
    
    -73.4
    %Total
    
    $
    3,461
    
    
    $
    2,828
    
    
    
    22.4
    %
         29




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##### Table of Contents



Liquidity and Capital Resources
  June 30,2008
    
    
    2007Current Ratio:Current assets
    
    $
    16,573
    
    
    $
    21,763Less: Current liabilities
    
    
    6,026
    
    
    
    4,525Working capital
    
    $
    10,547
    
    
    $
    17,238Current ratio
    
    2.8 to 1
    
    
    4.8 to 1Debt to Total Capital Ratio:Notes payable and current maturities
    
    $
    502
    
    
    $
    150Long-term debt
    
    $
    251
    
    
    
    0Total debt
    
    $
    753
    
    
    $
    150Total equity
    
    
    24,532
    
    
    
    39,406Total capital
    
    $
    25,285
    
    
    $
    39,556Total debt to total capital
    
    
    3.0
    %
    
    
    0.4
    %
 Working Capital Position
   Cash Used In or Provided By Operating Activities
  30




---



##### Table of Contents



Cash Flows Used In Investing and Financing Activities
      Debt History
   Off-Balance Sheet Arrangements and Contractual Obligations
  31




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##### Table of Contents



Less than
    
    
    
    
    
    
    3-5
    
    
    More thanTotal
    
    
    1 Year
    
    
    1-3 Years
    
    
    Years
    
    
    5 YearsLong-term debt
    
    $
    752,623
    
    
    $
    501,752
    
    
    $
    250,871
    
    
    $
    0
    
    
    $
    0Operating lease agreements
    
    
    3,445,258
    
    
    
    704,501
    
    
    
    1,314,637
    
    
    
    1,122,846
    
    
    
    303,274Total
    
    $
    4,197,881
    
    
    $
    1,206,253
    
    
    $
    1,565,508
    
    
    $
    1,122,846
    
    
    $
    303,274
 Forward-Looking Statement About Significant Items Likely To Impact Liquidity
  Common Stock
  
    
    Shareholders equity of $2,500,000 or market value of listed securities of $35,000,000
or net income from continuing operations (in the latest fiscal year or two of the last
three fiscal years) of $500,000;
    
    500,000 publicly held shares;
    
    $1,000,000 market value of publicly held shares;
    
    A minimum bid price of $1;
    
    300 round lot shareholders;
    
    Two market makers; and
    
    Compliance with corporate governance standards.
  Critical Accounting Policies
  32




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##### Table of Contents



Revenue Recognition
   
    
    Persuasive evidence that an arrangement (purchase order and sales invoice) exists
between a willing buyer (distributor) and the Company that outlines the terms of the sale
(company information, quantity of goods, purchase price and payment terms). The buyer
(distributor) does not have a right of return.
    
    Shipping terms are ex-factory shipping point. At this point the buyer (distributor)
takes title to the goods and is responsible for all risks and rewards of ownership,
including insuring the goods as necessary.
    
    The Companys price to the buyer (distributor) is fixed and determinable as
specifically outlined on the sales invoice. The sales arrangement does not have customer
cancellation or termination clauses.
    
    The buyer (distributor) places a purchase order with the Company; the terms of the sale
are cash, COD or credit. Customer credit is determined based on the Companys policies
and procedures related to the buyers (distributors) creditworthiness. Based on this
determination, the Company believes that collectibility is reasonably assured.
  Valuation of Intangible Assets
  Income/(Loss) Per Share
  33




---



##### Table of Contents



Taxes
     Stock-Based Compensation
   34




---



##### Table of Contents



.
 Recently Issued Accounting Standards
 Business Combinations
 Noncontrolling Interests in Consolidated
Financial Statements
 The Fair Value Option for Financial Assets and
Financial Liabilities Including an Amendment of FASB Statement No. 115
 Accounting for Advance
Payments for Goods or Services to Be Used in Future Research and Development Activities
 Accounting for Uncertainty in Income
Taxesan interpretation of FASB Statement No. 109
 35




---



##### Table of Contents



Fair Value Measurements
 
 ITEM 7A.
    
    QUANTITATIVE AND QUALIITATIVE DISCLOSURE ABOUT MARKET RISK
  Interest Rate Risk
  2008
    
    
    TotalNotes Payable  Former JAS Shareholders
    
    $
    752,623
    
    
    $
    752,623Interest Rate
    
    
    5.0
    %
 Currency Fluctuations
   36




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##### Table of Contents



June 30,
    
    June 30,2008
    
    2007Total Foreign Sales
    
    
    12,661,554
    
    
    
    11,255,394Total Net Revenues
    
    
    29,988,386
    
    
    
    27,892,738International Percentage
    
    
    42.2
    %
    
    
    40.4
    %
 
 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 Escalon Medical Corp.
Index to Consolidated Financial Statements
 PageReport of Independent Registered Public Accounting Firm
    
    
    38Consolidated Balance Sheets at June 30, 2008 and 2007
    
    
    39Consolidated Statements of Operations for the Years Ended June 30, 2008, 2007 and 2006
    
    
    40Consolidated Statements of Shareholders Equity for the Years Ended June 30, 2008, 2007 and 2006
    
    
    41Consolidated Statements of Cash Flows for the Years Ended June 30, 2008, 2007 and 2006
    
    
    42Notes to Consolidated Financial Statements
    
    
    43
 37




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##### Table of Contents



38




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##### Table of Contents



ESCALON MEDICAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
 June 30,
    
    
    June 30,2008
    
    
    2007ASSETSCurrent assets:Cash and cash equivalents
    
    $
    3,708,456
    
    
    $
    8,879,462Accounts receivable, net
    
    
    3,896,297
    
    
    
    4,653,073Inventory, net
    
    
    8,670,160
    
    
    
    7,761,370Other current assets
    
    
    297,807
    
    
    
    469,107Total current assets
    
    
    16,572,720
    
    
    
    21,763,012Furniture and equipment, net
    
    
    1,078,839
    
    
    
    873,191Goodwill
    
    
    11,590,786
    
    
    
    21,072,260Trademarks and trade names
    
    
    694,006
    
    
    
    620,106Patents, net
    
    
    157,883
    
    
    
    216,228Covenant not to compete and customer list, net
    
    
    1,691,610
    
    
    
    326,860Other assets
    
    
    110,176
    
    
    
    145,556Total assets
    
    $
    31,896,020
    
    
    $
    45,017,213LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current portion of long-term debt
    
    $
    501,752
    
    
    $
    150,200Accounts payable
    
    
    2,628,004
    
    
    
    1,626,274Accrued expenses
    
    
    2,895,920
    
    
    
    2,748,133Total current liabilities
    
    
    6,025,676
    
    
    
    4,524,607Long-term debt, net of current portion
    
    
    250,871
    
    
    
    0Accrued post-retirement benefits
    
    
    1,087,000
    
    
    
    1,087,000Total long-term liabilities
    
    
    1,337,871
    
    
    
    1,087,000Total liabilities
    
    
    7,363,547
    
    
    
    5,611,607Shareholders equity:Preferred stock, $0.001 par value; 2,000,000 shares authorized;
no shares issuedCommon stock, $0.001 par value; 35,000,000 share authorized;
6,413,930 and
6,386,857 issued and outstanding at June 30, 2008 and
June 30, 2007, respectively
    
    
    6,414
    
    
    
    6,387Common stock warrants
    
    
    1,601,346
    
    
    
    1,601,346Additional paid-in capital
    
    
    66,299,242
    
    
    
    66,045,050Accumulated deficit
    
    
    (43,267,466
    )
    
    
    (28,207,824
    )Accumulated other comprehensive (loss)
    
    
    (107,063
    )
    
    
    (39,353
    )Total shareholders equity
    
    
    24,532,473
    
    
    
    39,405,606Total liabilities and shareholders equity
    
    $
    31,896,020
    
    
    $
    45,017,213
  39




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##### Table of Contents



ESCALON MEDICAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
 For the Years Ended June 30,
    
    2008
    
    
    2007
    
    
    2006Net revenues:Product revenue
    
    $
    29,988,386
    
    
    $
    27,892,738
    
    
    $
    27,543,785Other revenue
    
    
    222,075
    
    
    
    10,945,042
    
    
    
    2,246,913Revenues, net
    
    
    30,210,461
    
    
    
    38,837,780
    
    
    
    29,790,698Costs and expenses:Cost of goods sold
    
    
    17,309,671
    
    
    
    15,771,254
    
    
    
    16,003,904Marketing, general and administrative
    
    
    14,392,004
    
    
    
    13,806,399
    
    
    
    13,994,788Research and development
    
    
    4,058,289
    
    
    
    3,461,322
    
    
    
    2,828,196Goodwill impairment
    
    
    9,574,655
    
    
    
    0
    
    
    
    0Total costs and expenses
    
    
    45,334,619
    
    
    
    33,038,975
    
    
    
    32,826,888(Loss) income from operations
    
    
    (15,124,158
    )
    
    
    5,798,805
    
    
    
    (3,036,190
    )Other (expense) and income:Gain on sale of available for sale securities
    
    
    0
    
    
    
    75,000
    
    
    
    1,157,336Equity in Ocular Telehealth Management, LLC
    
    
    (88,206
    )
    
    
    (87,852
    )
    
    
    (173,844
    )Interest income
    
    
    299,538
    
    
    
    208,457
    
    
    
    161,588Interest expense
    
    
    (11,827
    )
    
    
    (28,753
    )
    
    
    (63,521
    )Total other (expense) income
    
    
    199,505
    
    
    
    166,852
    
    
    
    1,081,559Net (loss) income before taxes
    
    
    (14,924,653
    )
    
    
    5,965,657
    
    
    
    (1,954,631
    )Provision for income taxes
    
    
    134,990
    
    
    
    51,054
    
    
    
    31,309Net (loss) income
    
    $
    (15,059,643
    )
    
    $
    5,914,603
    
    
    $
    (1,985,940
    )Basic net (loss) income per share
    
    $
    (2.36
    )
    
    $
    0.93
    
    
    $
    (0.32
    )Diluted net (loss) income per share
    
    $
    (2.36
    )
    
    $
    0.92
    
    
    $
    (0.32
    )Weighted average shares  basic
    
    
    6,389,008
    
    
    
    6,374,929
    
    
    
    6,152,455Weighted average shares  diluted
    
    
    6,389,008
    
    
    
    6,434,275
    
    
    
    6,152,455
  40




---



##### Table of Contents



ESCALON MEDICAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
FOR THE YEARS ENDED JUNE 30, 2008, 2007 and 2006
 AccumulatedCommon
    
    
    Additional
    
    
    
    
    
    
    Other
    
    
    TotalCommon Stock
    
    
    Stock
    
    
    Paid-in
    
    
    Accumulated
    
    
    Comprehensive
    
    
    ShareholdersShares
    
    
    Amount
    
    
    Warrants
    
    
    Capital
    
    
    Deficit
    
    
    Income (Loss)
    
    
    EquityBALANCE AT JUNE 30, 2006
    
    
    6,344,657
    
    
    $
    6,345
    
    
    $
    1,601,346
    
    
    $
    65,699,370
    
    
    $
    (34,122,427
    )
    
    $
    (84,527
    )
    
    $
    33,100,107Comprehensive Income (Loss):Net income
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    5,914,603
    
    
    
    0
    
    
    
    5,914,603Change in unrealized gains on
available for sale securities
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    (50,220
    )
    
    
    (50,220
    )Foreign currency translation
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    95,394
    
    
    
    95,394Total comprehensive income
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    5,914,603
    
    
    
    45,174
    
    
    
    5,959,777Exercise of stock options
    
    
    42,200
    
    
    
    42
    
    
    
    0
    
    
    
    84,692
    
    
    
    0
    
    
    
    0
    
    
    
    84,734Compensation expense
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    162,576
    
    
    
    0
    
    
    
    0
    
    
    
    162,576Income tax benefit from exercise
of stock options
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    98,412
    
    
    
    0
    
    
    
    0
    
    
    
    98,412BALANCE AT JUNE 30, 2007
    
    
    6,386,857
    
    
    
    6,387
    
    
    
    1,601,346
    
    
    
    66,045,050
    
    
    
    (28,207,824
    )
    
    
    (39,353
    )
    
    
    39,405,606Comprehensive Income (Loss):Net (loss)
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    (15,059,643
    )
    
    
    0
    
    
    
    (15,059,643
    )Foreign currency translation
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    (67,710
    )
    
    
    (67,710
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (15,059,643
    )
    
    
    (67,710
    )
    
    
    (15,127,353
    )Exercise of stock options
    
    
    27,073
    
    
    
    27
    
    
    
    0
    
    
    
    7,435
    
    
    
    0
    
    
    
    0
    
    
    
    7,462Compensation expense
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    246,757
    
    
    
    0
    
    
    
    0
    
    
    
    246,757BALANCE AT JUNE 30, 2008
    
    
    6,413,930
    
    
    $
    6,414
    
    
    $
    1,601,346
    
    
    $
    66,299,242
    
    
    $
    (43,267,467
    )
    
    $
    (107,063
    )
    
    $
    24,532,472
 41




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##### Table of Contents



ESCALON MEDICAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
 Years Ended June 30,
    
    2008
    
    
    2007
    
    
    2006Cash Flows from Operating Activities:Net (loss) income
    
    $
    (15,059,643
    )
    
    $
    5,914,603
    
    
    $
    (1,985,940
    )Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:Depreciation and amortization
    
    
    582,511
    
    
    
    590,846
    
    
    
    440,952Goodwill Impairment
    
    
    9,574,655
    
    
    
    0
    
    
    
    0Compensation expense related to stock options
    
    
    246,757
    
    
    
    162,576
    
    
    
    0Gain on sale of available for sale securities
    
    
    0
    
    
    
    (75,000
    )
    
    
    (1,157,336
    )Reserve on notes receivable
    
    
    0
    
    
    
    0
    
    
    
    100,000Loss on sale of assets
    
    
    28,421
    
    
    
    0
    
    
    
    0Loss on Ocular Telehealth Management, LLC
    
    
    88,206
    
    
    
    87,852
    
    
    
    173,844Change in operating assets and liabilities:Accounts receivable, net
    
    
    939,655
    
    
    
    (656,830
    )
    
    
    761,834Inventory, net
    
    
    (694,250
    )
    
    
    (638,454
    )
    
    
    (1,189,207
    )Other current and long-term assets
    
    
    207,680
    
    
    
    84,917
    
    
    
    19,880Accounts payable, accrued expenses and other liabilities
    
    
    1,149,517
    
    
    
    312,135
    
    
    
    230,643Net cash (used in) provided by operating activities
    
    
    (2,936,491
    )
    
    
    5,782,645
    
    
    
    (2,605,330
    )Cash Flows from Investing Activities:Proceeds from the sale of available for sale securities
    
    
    0
    
    
    
    75,000
    
    
    
    1,157,336Investment in Ocular Telehealth Management, LLC
    
    
    (69,000
    )
    
    
    (31,000
    )
    
    
    0Purchase of fixed assets
    
    
    (613,158
    )
    
    
    (259,705
    )
    
    
    (327,340
    )Purchase of MRP, net of cash acquired
    
    
    0
    
    
    
    0
    
    
    
    (47,060
    )Purchase of JAS Diagnostics , net of cash acquired
    
    
    (1,324,706
    )
    
    
    0
    
    
    
    0Net cash (used in) provided by investing activities
    
    
    (2,006,864
    )
    
    
    (215,705
    )
    
    
    782,936Cash Flows from Financing Activities:Principal payments on term loans
    
    
    (150,200
    )
    
    
    (245,188
    )
    
    
    (226,749
    )Issuance of common stock  stock options
    
    
    7,462
    
    
    
    183,146
    
    
    
    374,061Net cash provided by (used in) financing activities
    
    
    (142,738
    )
    
    
    (62,042
    )
    
    
    147,312Effect of exchange rate changes on cash and cash equivalents
    
    
    (84,913
    )
    
    
    (5,146
    )
    
    
    (60,980
    )Net (decrease) increase in cash and cash equivalents
    
    
    (5,171,006
    )
    
    
    5,499,752
    
    
    
    (1,736,062
    )Cash and cash equivalents, beginning of period
    
    
    8,879,462
    
    
    
    3,379,710
    
    
    
    5,115,772Cash and cash equivalents, end of period
    
    $
    3,708,456
    
    
    $
    8,879,462
    
    
    $
    3,379,710Supplemental Schedule of Cash Flow Information:Interest paid
    
    $
    11,827
    
    
    $
    25,217
    
    
    $
    37,586Income taxes refund (paid)
    
    $
    (114,174
    )
    
    $
    98,412
    
    
    $
    (1,133
    )Issuance of long-term for Jas Diagnostics acquisition
    
    $
    752,623
    
    
    
    0
    
    
    
    0Issuance of common stock for MRP acquisition
    
    $
    0
    
    
    $
    0
    
    
    $
    1,427,500(Decrease) in unrealized appreciation on available for sale securities
    
    $
    0
    
    
    $
    (50,220
    )
    
    $
    (1,157,097
    )
  42




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##### Table of Contents



Escalon Medical Corp. and Subsidiaries
Notes to Consolidated Financial Statements
 1. Organization and Description of Business and Business Conditions
  www.escalonmed.com
   2. Significant Accounting Policies
 Principles of Consolidation
  Use of Estimates
  Cash and Cash Equivalents
  43




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##### Table of Contents



Fair Value of Financial Instruments
  Marketable Securities
  Revenue Recognition
   
    
    Persuasive evidence that an arrangement (purchase order and sales invoice) exists
between a willing buyer (distributor) and the Company that outlines the terms of the sale
(company information, quantity of goods, purchase price and payment terms). The buyer
(distributor) does not have a right of return.
    
    Shipping terms are ex-factory shipping point. At this point the buyer (distributor)
takes title to the goods and is responsible for all risks and rewards of ownership,
including insuring the goods as necessary.
    
    The Companys price to the buyer (distributor) is fixed and determinable as
specifically outlined on the sales invoice. The sales arrangement does not have customer
cancellation or termination clauses.
    
    The buyer (distributor) places a purchase order with the Company; the terms of the sale
are cash, COD or credit. Customer credit is determined based on the Companys policy and
procedures related to the buyers (distributors) creditworthiness. Based on this
determination, the Company believes that collectibility is reasonably assured.
   44




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##### Table of Contents



Shipping and Handling Revenues and Costs
  Inventories
  June 30,2008
    
    
    2007Raw materials
    
    $
    6,024,784
    
    
    $
    4,825,018Work in process
    
    
    759,619
    
    
    
    680,994Finished goods
    
    
    2,353,581
    
    
    
    2,556,9139,137,984
    
    
    
    8,062,925Valuation allowance
    
    
    (467,824
    )
    
    
    (301,555
    )Total inventory
    
    $
    8,670,160
    
    
    $
    7,761,370
  June 30,2008
    
    
    2007Balance, July 1
    
    $
    301,555
    
    
    $
    252,712Provision for valuation allowance
    
    
    172,670
    
    
    
    65,221Write-offs
    
    
    (6,401
    )
    
    
    (16,378
    )Balance, June 30
    
    $
    467,824
    
    
    $
    301,555
 Accounts Receivable
  June 30,2008
    
    
    2007Balance, July 1
    
    $
    566,878
    
    
    $
    649,577Provision for bad debts
    
    
    153,168
    
    
    
    96,000Write-offs
    
    
    (246,859
    )
    
    
    (178,699
    )Balance, June 30
    
    $
    473,187
    
    
    $
    566,878
 Property and Equipment
  45




---



##### Table of Contents



June 30,2008
    
    
    2007Equipment
    
    $
    2,788,606
    
    
    $
    2,157,562Furniture and Fixtures
    
    
    62,846
    
    
    
    62,846Leasehold Improvements
    
    
    121,702
    
    
    
    135,8952,973,154
    
    
    
    2,356,303Less: Accumulated depreciation and amortization
    
    
    (1,894,315
    )
    
    
    (1,483,112
    )$
    1,078,839
    
    
    $
    873,191
 Long-lived Assets
  Intangible Assets
  Accrued Warranties
  Business Combinations
  Stock-Based Compensation
 46




---



##### Table of Contents



Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring, or in
Conjunction with elling, Goods or Services
   47




---



##### Table of Contents



2006Net (loss), as reported
    
    $
    (1,985,940
    )Deduct: Total stock-based employee compensation
expense determined under fair value based method
for all awards, net of related tax effects
    
    
    (288,848
    )Pro forma net (loss)
    
    $
    (2,274,788
    )(Loss) per share:Basic  as reported
    
    $
    (0.323
    )Basic  pro forma
    
    $
    (0.370
    )Diluted  as reported
    
    $
    (0.323
    )Diluted  pro forma
    
    $
    (0.370
    )
  Research and Development
  Advertising Costs
  Net Income (loss) Per Share
   48




---



##### Table of Contents



2008
    
    2007
    
    2006Basic Weighted average shares outstanding
    
    
    6,389,008
    
    
    
    6,374,929
    
    
    
    6,152,455Effect of dilutive securities  Stock options and warrants
    
    
    0
    
    
    
    59,346
    
    
    
    0Diluted weighted average shares outstanding
    
    
    6,389,008
    
    
    
    6,434,275
    
    
    
    6,152,455
  Income Taxes
  Comprehensive Income
  Foreign Currency Translation
  New Accounting Pronouncements
 Business Combinations
 49




---



##### Table of Contents



Noncontrolling Interests in Consolidated
Financial Statements
 The Fair Value Option for Financial Assets and
Financial Liabilities Including an Amendment of FASB Statement No. 115
 Accounting for Advance
Payments for Goods or Services to Be Used in Future Research and Development Activities
 Accounting for Uncertainty in Income
Taxesan interpretation of FASB Statement No. 109
  Fair Value Measurements
 50




---



##### Table of Contents



3.  Intangible Assets
 Goodwill, Trademarks and Trade Names
    Disclosures About Segments of
an Enterprise and Related Information
      51




---



##### Table of Contents



2008
    
    
    2007Net
    
    
    NetCarrying
    
    
    CarryingAmount
    
    
    AmountGoodwillSonomed
    
    $
    9,525,550
    
    
    $
    9,525,550Drew
    
    
    0
    
    
    
    9,574,655JAS-subsidiary of Drew
    
    
    93,181
    
    
    
    0Vascular
    
    
    941,218
    
    
    
    941,218Medical/Trek/EMI
    
    
    1,030,837
    
    
    
    1,030,837Total
    
    $
    11,590,786
    
    
    $
    21,072,260
 2008
    
    
    2007Net
    
    
    NetCarrying
    
    
    CarryingAmount
    
    
    AmountTrademarks and tradenamesSonomed
    
    $
    601,806
    
    
    $
    616,906JAS-subsidiary of Drew
    
    
    89,000
    
    
    
    0Medical/Trek/EMI
    
    
    3,200
    
    
    
    3,200Total
    
    $
    694,006
    
    
    $
    620,106
 Patents
   Covenant Not to Compete and Customer List
    52




---



##### Table of Contents



AdjustedGross
    
    
    
    
    
    
    GrossCarrying
    
    
    
    
    
    
    Carrying
    
    
    Accumulated
    
    
    Net CarryingAmount
    
    
    Impairment
    
    
    Amount
    
    
    Amortization
    
    
    ValueAmortized Intangible Assets PatentsDrew
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0Vascular
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Medical/Trek/EMI
    
    
    215,050
    
    
    
    0
    
    
    
    215,050
    
    
    
    (57,167
    )
    
    
    157,883Total
    
    $
    215,050
    
    
    $
    0
    
    
    $
    215,050
    
    
    $
    (57,167
    )
    
    $
    157,883Covenant Not To Compete/Customer ListJAS
    
    $
    1,461,397
    
    
    $
    0
    
    
    $
    1,461,397
    
    
    $
    0
    
    
    $
    1,461,397EMI
    
    
    442,969
    
    
    
    0
    
    
    
    442,969
    
    
    
    (212,756
    )
    
    
    230,213Total
    
    $
    1,904,366
    
    
    $
    0
    
    
    $
    1,904,366
    
    
    $
    (212,756
    )
    
    $
    1,691,610
  AdjustedGross
    
    
    
    
    
    
    GrossCarrying
    
    
    
    
    
    
    Carrying
    
    
    Accumulated
    
    
    Net CarryingAmount
    
    
    Impairment
    
    
    Amount
    
    
    Amortization
    
    
    ValueAmortized Intangible
Assets PatentsDrew
    
    $
    279,740
    
    
    $
    0
    
    
    $
    279,740
    
    
    $
    (154,474
    )
    
    $
    125,266Vascular
    
    
    36,916
    
    
    
    0
    
    
    
    36,916
    
    
    
    (36,916
    )
    
    
    0Medical/Trek/EMI
    
    
    265,301
    
    
    
    0
    
    
    
    265,301
    
    
    
    (174,339
    )
    
    
    90,962Total
    
    $
    581,957
    
    
    $
    0
    
    
    $
    581,957
    
    
    $
    (365,729
    )
    
    $
    216,228Covenant Not To
Compete/ Customer
ListEMI
    
    $
    442,969
    
    
    $
    0
    
    
    $
    442,969
    
    
    $
    (116,109
    )
    
    $
    326,860Total
    
    $
    442,969
    
    
    $
    0
    
    
    $
    442,969
    
    
    $
    (116,109
    )
    
    $
    326,860
 53




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##### Table of Contents



4. Accrued Expenses
  June 30, 2008
    
    
    June 30, 2007Accrued compensation
    
    $
    1,531,886
    
    
    $
    1,694,394Warranty accruals
    
    
    255,740
    
    
    
    255,740Legal accruals
    
    
    464,338
    
    
    
    0Other accruals
    
    
    643,956
    
    
    
    797,999Total accrued expenses
    
    $
    2,895,920
    
    
    $
    2,748,133
   5. Long-Term Debt
   54




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##### Table of Contents



Twelve MonthsEnding
    
    Former JASJune 30,
    
    Shareholders
    
    Total2009
    
    $
    501,752
    
    
    $
    501,7522010
    
    
    250,871
    
    
    
    250,871Total
    
    $
    752,623
    
    
    
    752,623Current portion of long-term debt
    
    
    
    
    
    
    501,752Long-term portion
    
    
    
    
    
    $
    250,871
 6. Capital Stock Transactions
 Stock Option Plans
 .
    55




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##### Table of Contents



2008
    
    2007
    
    2006Common
    
    Weighted
    
    Common
    
    Weighted
    
    Common
    
    WeightedStock
    
    Average
    
    Stock
    
    Average
    
    Stock
    
    AverageOptions
    
    Exercise Price
    
    Options
    
    Exercise Price
    
    Options
    
    Exercise PriceOutstanding at the beginning
of the year
    
    
    865,035
    
    
    $
    5.53
    
    
    
    920,685
    
    
    $
    5.73
    
    
    
    847,210
    
    
    $
    4.20Granted
    
    
    135,500
    
    
    $
    3.05
    
    
    
    117,000
    
    
    $
    2.65
    
    
    
    318,400
    
    
    $
    6.63Exercised
    
    
    (2,458
    )
    
    $
    3.02
    
    
    
    (42,000
    )
    
    $
    2.00
    
    
    
    (121,183
    )
    
    $
    2.22Forfeited
    
    
    (1,000
    )
    
    $
    3.05
    
    
    
    (130,650
    )
    
    $
    5.52
    
    
    
    (123,742
    )
    
    $
    1.00Outstanding at the end of the year
    
    
    997,077
    
    
    $
    5.27
    
    
    
    865,035
    
    
    $
    5.53
    
    
    
    920,685
    
    
    $
    5.73Exercisable at the end of the year
    
    
    892,019
    
    
    
    
    
    
    
    810,227
    
    
    
    
    
    
    
    920,685Weighted average fair value of
options
granted during the year
    
    
    
    
    
    $
    3.05
    
    
    
    
    
    
    $
    2.65
    
    
    
    
    
    
    $
    6.63
  WeightedNumber
    
    AverageOutstanding
    
    Remaining
    
    Weighted
    
    Number
    
    Weightedat
    
    Contractual
    
    Average
    
    Exercisable
    
    AverageJune, 30
    
    Life
    
    Exercise
    
    at June 30,
    
    Exercise2008
    
    (Years)
    
    Price
    
    2008
    
    PriceRange of Exercise Prices$1.45 to $2.12
    
    
    119,756
    
    
    
    2.23
    
    
    $
    1.88
    
    
    
    119,756
    
    
    $
    1.88$2.37 to $2.77
    
    
    377,942
    
    
    
    6.95
    
    
    $
    2.77
    
    
    
    272,884
    
    
    $
    2.71$4.97 to $5.59
    
    
    73,000
    
    
    
    7.28
    
    
    $
    5.05
    
    
    
    73,000
    
    
    $
    5.05$6.19 to $6.19
    
    
    168,250
    
    
    
    6.08
    
    
    $
    6.19
    
    
    
    168,250
    
    
    $
    6.19$6.94 to $8.06
    
    
    258,129
    
    
    
    6.47
    
    
    $
    7.41
    
    
    
    258,129
    
    
    $
    7.41Total
    
    
    997,077
    
    
    
    
    
    
    
    
    
    
    
    892,019
 56




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##### Table of Contents



Sale of Common Stock and Warrants
   7. Income Taxes
  2008
    
    2007
    
    2006Current income tax provisionFederal
    
    $
    
    
    
    $
    
    
    
    $
    State
    
    $
    134,990
    
    
    
    51,054
    
    
    
    31,309134,990
    
    
    
    51,054
    
    
    
    31,309Deferred income tax provisionFederal
    
    
    130,565
    
    
    
    1,704,463
    
    
    
    (1,962,685
    )State
    
    
    30,626
    
    
    
    399,812
    
    
    
    (460,383
    )Change in valuation allowance
    
    
    (161,191
    )
    
    
    (2,104,275
    )
    
    
    2,423,068—
    
    
    
    —
    
    
    
    —Income tax expense
    
    $
    134,990
    
    
    $
    51,054
    
    
    $
    31,309
  57




---



##### Table of Contents



2008
    
    2007
    
    2006Statutory federal income tax rate
    
    
    -34.0
    %
    
    
    34.0
    %
    
    
    -34.0
    %Change in valuation allowance
    
    
    34.0
    %
    
    
    -34.0
    %
    
    
    34.0
    %State income taxes, net of federal tax impact
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    
    
    
    
    Effective income tax rate
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %
   2008
    
    2007Deferred income tax assets:Net operating loss carryforward
    
    $
    10,964,351
    
    
    $
    11,063,841Accrued bonus
    
    
    188,411
    
    
    
    62,560Executive post retirement costs
    
    
    369,580
    
    
    
    369,580General business credit
    
    
    450,199
    
    
    
    450,199Allowance for doubtful accounts
    
    
    160,884
    
    
    
    90,734Accrued vacation
    
    
    174,003
    
    
    
    158,885Inventory reserve
    
    
    159,060
    
    
    
    83,318Accelerated depreciation
    
    
    3,782
    
    
    
    41,967Warranty reserve
    
    
    26,432
    
    
    
    26,432Total deferred income tax assets
    
    
    12,496,702
    
    
    
    12,347,516Valuation allowance
    
    
    (10,446,340
    )
    
    
    (10,607,531
    )2,050,362
    
    
    
    1,739,985Deferred income tax liabilities:Accelerated amortization
    
    
    (2,050,362
    )
    
    
    (1,739,985
    )Total deferred income tax liabilities
    
    
    (2,050,362
    )
    
    
    (1,739,985
    )$
    
    
    
    $
    
  58




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##### Table of Contents



8. Commitments and Contingencies
 Commitments
  LeaseTwelve Months Ending
    
    Obligations2009
    
    $
    682,2312010
    
    
    656,0142011
    
    
    654,1342012
    
    
    633,2672013
    
    
    489,579Thereafter
    
    
    303,274Total
    
    $
    3,418,499
 59




---



##### Table of Contents



Contingencies
 Royalty Agreement: Clinical Diagnostics Solutions
  PointCare Technologies, Inc. Legal Proceedings
 Drew Scientific, Inc. v. PointCare Technologies,
Inc
 TM TM
    60




---



##### Table of Contents



Intralase Corp. Legal Proceedings
   Other Legal Proceedings
  61




---



##### Table of Contents



9. Retirement and Post-Retirement Plans
     
    
    If the covered executive retires at age 65 or older, the Company would be obligated to
pay the executive $8,000 per month for life, with payments commencing the month after
retirement. If the covered executive were to die within a period of three years after such
retirement, the Company would be obligated to continue making such payments until a
minimum of 36 monthly payments have been made to the covered executive and his
beneficiaries in the aggregate.
    
    If the covered executive dies before his retirement while employed by the Company, the
Company would be obligated to make 36 monthly payments to his beneficiaries of $8,000 per
month commencing in the month after his death.
    
    If the covered executive were to become disabled while employed by the Company, the
Company would be obligated to pay the executive $8,000 per month for life, with payments
commencing the month after he suffers such disability. If the covered executive were to
die within three years after suffering such disability, the Company would be obligated to
continue making such payments until a minimum of 36 monthly payments have been made to the
covered executive and his beneficiaries in the aggregate.
    
    If the covered executives employment with the Company is terminated by the Company, or
if the executive terminates his employment with the Company for good reason, as defined in
the agreement, the Company would be obligated to pay the executive $8,000 per month for
life. If the covered executive were to die within a period of three years after such
termination, the Company would be obligated to continue making such payments until a
minimum of 36 monthly payments have been made to the covered executive and his
beneficiaries in the aggregate.
  62




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##### Table of Contents



10. Sale of Silicone Oil Product Line, Licensing of Laser Technology and Other Revenue
 Sale of Silicone Oil Product Line
   From 8/13/00 to 8/12/01
    
    
    100
    %From 8/13/01 to 8/12/02
    
    
    82
    %From 8/13/02 to 8/12/03
    
    
    72
    %From 8/13/03 to 8/12/04
    
    
    64
    %From 8/13/04 to 8/12/05
    
    
    45
    %
  Intralase: Licensing of Laser Technology
   Bio-Rad Laboratories, Inc. Royalty
   
    
    Drew receives an agreed royalty per test;
    
    Royalty payments will be made depending on the volume of tests provided by Bio-Rad. If
less than 3,750 tests per month are provided by Bio-Rad, Bio-Rad will calculate the number
of tests used on a quarterly basis in arrears and pay Drew within 45 days of the end of
the quarter. If more than 3,750 tests per month are provided by Bio-Rad, Bio-Rad will pay
an estimated monthly royalty and within 45 days of the end of the quarter will make final
settlement upon the actual number of tests.
 63




---



##### Table of Contents



Other Revenue
  (1)
    
    Bausch & Lomb in connection with the sale of the Silicone Oil product line.
This agreement expired August 12, 2005;(2)
    
    Royalty payments received from Intralase relating to the licensing of the
Companys intellectual laser technology; and the settlement payment from Intralase
described in footnote 8 of these financial statements in the amount of $9,600,000(3)
    
    Royalty payments received from Bio-Rad.
  2008
    
    
    2007
    
    
    2006Royalty Income:Bio-Rad royalty
    
    $
    222,075
    
    
    $
    242,826
    
    
    $
    283,000Baush and Lomb
    
    
    0
    
    
    
    0
    
    
    
    203,000IntraLase royalty
    
    
    0
    
    
    
    1,102,216
    
    
    
    1,761,000Settlement payment (see note 8)
    
    
    0
    
    
    
    9,600,000
    
    
    
    0Total
    
    $
    222,075
    
    
    $
    10,945,042
    
    
    $
    2,247,000
 11. Acquisition of MRP and JAS Diagnostics, Inc.
 MRP Acquisition
   64




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##### Table of Contents



Current assets
    
    $
    143,569Furniture and equipment
    
    
    50,000Patents and Trademarks
    
    
    11,200Covenant not to compete
    
    
    319,609Customer list
    
    
    123,360Goodwill
    
    
    905,807Total assets acquired
    
    
    1,553,545Current liabilities
    
    
    78,984Net assets acquired
    
    $
    1,474,561
 JAS Diagnostics, Inc. Acquisition
    Current assets
    
    $
    420,981Furniture and equipment
    
    
    35,441Trade Name
    
    
    89,000Customer list
    
    
    1,461,397Goodwill
    
    
    93,181Total assets acquired
    
    $
    2,100,000Current liabilities
    
    
    127,975Net assets acquired
    
    $
    1,972,025
 65




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##### Table of Contents



12. Segment Reporting
   Segment Statements of Operations (in thousands )  Twelve months ended June 30,
 Drew
    
    Sonomed
    
    Vascular2008
    
    2007
    
    2006
    
    2008
    
    2007
    
    2006
    
    2008
    
    2007
    
    2006Revenues, net:Product revenue
    
    $
    13,332
    
    
    
    11,627
    
    
    
    14,253
    
    
    $
    9,367
    
    
    
    9,823
    
    
    
    7,737
    
    
    $
    4,119
    
    
    
    3,467
    
    
    
    3,640Other revenue
    
    $
    222
    
    
    
    243
    
    
    
    283
    
    
    $
    0
    
    
    
    
    
    
    
    
    
    
    $
    0
    
    
    
    
    
    
    
    Total revenue, net
    
    $
    13,554
    
    
    
    11,870
    
    
    
    14,536
    
    
    $
    9,367
    
    
    
    9,823
    
    
    
    7,737
    
    
    $
    4,119
    
    
    
    3,467
    
    
    
    3,640Costs and expenses:Cost of goods sold
    
    $
    8,928
    
    
    
    7,681
    
    
    
    9,225
    
    
    $
    5,029
    
    
    
    4,976
    
    
    
    3,962
    
    
    $
    1,538
    
    
    
    1,393
    
    
    
    1,535Goodwill impairment
    
    $
    9,575
    
    
    
    
    
    
    
    
    
    
    $
    0
    
    
    
    
    
    
    
    
    
    
    $
    0
    
    
    
    
    
    
    
    Operating expenses
    
    $
    8,032
    
    
    
    7,830
    
    
    
    7,740
    
    
    $
    4,603
    
    
    
    3,779
    
    
    
    3,670
    
    
    $
    2,237
    
    
    
    2,108
    
    
    
    2,112Total costs and expenses
    
    $
    26,535
    
    
    $
    15,511
    
    
    
    16,965
    
    
    $
    9,632
    
    
    
    8,755
    
    
    
    7,632
    
    
    $
    3,775
    
    
    
    3,501
    
    
    
    3,647(Loss) income from
operations
    
    $
    (12,981
    )
    
    
    (3,641
    )
    
    
    (2,429
    )
    
    $
    (265
    )
    
    
    1,068
    
    
    
    105
    
    
    $
    344
    
    
    
    (34
    )
    
    
    (7
    )Other (expense) and
income:Equity in OTM
    
    $
    0
    
    
    
    
    
    
    
    
    
    
    $
    0
    
    
    
    
    
    
    
    
    
    
    $
    0
    
    
    
    
    
    
    
    Interest income
    
    $
    0
    
    
    
    
    
    
    
    
    
    
    $
    0
    
    
    
    
    
    
    
    
    
    
    $
    0
    
    
    
    
    
    
    
    Interest expense
    
    $
    (12
    )
    
    
    (28
    )
    
    
    (63
    )
    
    $
    0
    
    
    
    
    
    
    
    
    
    
    $
    0
    
    
    
    
    
    
    
    Total other (expense)
    
    $
    (12
    )
    
    
    (28
    )
    
    
    (63
    )
    
    $
    0
    
    
    
    0
    
    
    
    0
    
    
    $
    0
    
    
    
    0
    
    
    
    0(Loss) and income
before taxes
    
    $
    (12,993
    )
    
    
    (3,669
    )
    
    
    (2,492
    )
    
    $
    (265
    )
    
    
    1,068
    
    
    
    105
    
    
    $
    344
    
    
    
    (34
    )
    
    
    (7
    )Income taxes
    
    $
    0
    
    
    
    0
    
    
    
    0
    
    
    $
    26
    
    
    
    37
    
    
    
    21
    
    
    $
    0
    
    
    
    1
    
    
    
    0Net (loss) income
    
    $
    (12,993
    )
    
    
    (3,669
    )
    
    
    (2,492
    )
    
    $
    (291
    )
    
    
    1,031
    
    
    
    84
    
    
    $
    344
    
    
    
    (35
    )
    
    
    (7
    )
 66




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##### Table of Contents



Segment Statements of Operations (in thousands )  Twelve months ended June 30,
 EMI
    
    
    Medical/Trek
    
    
    Total2008
    
    
    2007
    
    
    2006
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2008
    
    
    2007
    
    
    2006Revenues, net:Product revenue
    
    $
    1,762
    
    
    
    1,484
    
    
    
    434
    
    
    $
    1,410
    
    
    
    1,492
    
    
    
    1,480
    
    
    $
    29,990
    
    
    
    27,893
    
    
    
    27,544Other revenue
    
    $
    0
    
    
    
    
    
    
    
    
    
    
    $
    0
    
    
    
    10,702
    
    
    
    1,964
    
    
    $
    222
    
    
    
    10,945
    
    
    
    2,247Total revenue, net
    
    $
    1,762
    
    
    
    1,484
    
    
    
    434
    
    
    $
    1,410
    
    
    
    12,194
    
    
    
    3,444
    
    
    $
    30,210
    
    
    
    38,838
    
    
    
    29,791Costs and expenses:Cost of goods sold
    
    $
    820
    
    
    
    711
    
    
    
    290
    
    
    $
    995
    
    
    
    1,011
    
    
    
    992
    
    
    $
    17,310
    
    
    
    15,772
    
    
    
    16,004Goodwill impairment
    
    $
    0
    
    
    
    
    
    
    
    
    
    
    $
    0
    
    
    
    0
    
    
    
    0
    
    
    $
    9,575
    
    
    
    75
    
    
    
    1,157Operating expenses
    
    $
    873
    
    
    
    830
    
    
    
    635
    
    
    $
    2,705
    
    
    
    2,722
    
    
    
    2,668
    
    
    $
    18,450
    
    
    
    17,269
    
    
    
    16,825Total costs and expenses
    
    $
    1,693
    
    
    
    1,541
    
    
    
    925
    
    
    $
    3,700
    
    
    
    3,733
    
    
    
    3,660
    
    
    $
    45,335
    
    
    
    33,041
    
    
    
    32,829(Loss) income from
operations
    
    $
    69
    
    
    
    (57
    )
    
    
    (491
    )
    
    $
    (2,290
    )
    
    
    8,461
    
    
    
    (216
    )
    
    $
    15,123
    
    
    
    5,797
    
    
    
    (3,038
    )Other (expense)income:Gain on sale of available
    
    $
    0
    
    
    
    
    
    
    
    
    
    
    $
    0
    
    
    
    75
    
    
    
    1,157
    
    
    $
    0
    
    
    
    75
    
    
    
    1,157Equity in OTM
    
    $
    0
    
    
    
    
    
    
    
    
    
    
    $
    (88
    )
    
    
    (88
    )
    
    
    (174
    )
    
    $
    (88
    )
    
    
    (88
    )
    
    
    (174
    )Interest income
    
    $
    0
    
    
    
    
    
    
    
    
    
    
    $
    299
    
    
    
    208
    
    
    
    162
    
    
    $
    299
    
    
    
    208
    
    
    
    162Interest expense
    
    $
    0
    
    
    
    
    
    
    
    
    
    
    $
    0
    
    
    
    
    
    
    
    
    
    
    $
    (12
    )
    
    
    (28
    )
    
    
    (63
    )Total other (expense) and
income
    
    $
    0
    
    
    
    0
    
    
    
    0
    
    
    $
    211
    
    
    
    195
    
    
    
    1,145
    
    
    $
    199
    
    
    
    167
    
    
    
    1,082(Loss) and income before taxes
    
    $
    69
    
    
    
    (57
    )
    
    
    (491
    )
    
    $
    (2,079
    )
    
    
    8,656
    
    
    
    929
    
    
    $
    (14,924
    )
    
    
    5,964
    
    
    
    (1,956
    )Income taxes
    
    $
    0
    
    
    
    
    
    
    
    
    
    
    $
    109
    
    
    
    14
    
    
    
    10
    
    
    $
    135
    
    
    
    52
    
    
    
    31Net (loss) income
    
    $
    69
    
    
    
    (57
    )
    
    
    (491
    )
    
    $
    (2,188
    )
    
    
    8,642
    
    
    
    919
    
    
    $
    (15,059
    )
    
    
    5,912
    
    
    
    (1,987
    )
    67




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##### Table of Contents



2008
    
    
    2007
    
    
    2006Drew
    
    $
    6,587,050
    
    
    $
    5,177,708
    
    
    $
    8,471,608Sonomed
    
    
    5,858,763
    
    
    
    5,901,532
    
    
    
    4,316,856Vascular
    
    
    130,177
    
    
    
    126,854
    
    
    
    226,665EMI
    
    
    53,700
    
    
    
    8,900
    
    
    
    Medical/Trek
    
    
    31,864
    
    
    
    40,400
    
    
    
    29,671$
    12,661,554
    
    
    $
    11,255,394
    
    
    $
    13,044,800
 13. Related-Party Transactions
   14. Intralase Initial Public Offering and Sale of Intralase Common Stock
  
 ITEM 9.
    
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 9A(T).
    
    CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
 68




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##### Table of Contents



Managements Report on Internal Control over Financial Reporting
  
    
    Pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and
dispositions of our assets;
    
    Provide reasonable assurance that transactions are recorded
as necessary to permit preparation of financial statements in
accordance with GAAP, and that our receipts and expenditures
are being made only in accordance with authorizations of our
management and directors; and
    
    Provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of
our assets that could have a material affect on our financial
statements.
    69




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##### Table of Contents



Changes in Internal Control over Financial Reporting
  Requirements of Section 404
   
 ITEM 9B.
    
    OTHER INFORMATION
  
 PART III
 
 ITEM 10.
    
    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
  
 ITEM 11.
    
    EXECUTIVE COMPENSATION
  70




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##### Table of Contents



ITEM 12.
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
  
 ITEM 13.
    
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
  
 ITEM 14.
    
    PRINCIPAL ACCOUNTING FEES AND SERVICES
  
 PART IV
 
 ITEM 15.
    
    EXHIBITS, FINANCIAL STATEMENT SCHEDULES
 (a) Documents Filed as Part of This Annual Report on Form 10-K:
 (1) Financial Statements
        (2) Financial Statement Schedules
  71




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##### Table of Contents



(3) EXHIBITS
  3.1
    
    (a)
    
    Restated Articles of Incorporation of Registrant. (8)(b)
    
    Agreement and Plan of Merger dated as of September 28, 2001 between Escalon
Pennsylvania, Inc. and Escalon Medical Corp. (8)3.2
    
    
    
    Bylaws of Registrant. (8)4.1
    
    (a)
    
    Warrant Agreement between Registrant and U.S. Stock Transfer Corporation. (1)(b)
    
    Amendment to Warrant Agreement between the Registrant and U.S. Stock Transfer
Corporation. (2)(c)
    
    Amendment to Warrant Agreement between the Registrant and American Stock
Transfer Corporation. (3)4.2
    
    
    
    Securities Purchase Agreement, dated as of December 31, 1997 by and among the Registrant and
Combination. (4)4.3
    
    
    
    Registration Rights Agreement, dated as of December 31, 1997 by and among the Registrant and
Combination. (4)4.44.5
    
    
    
    Warrant to Purchase Common Stock issued December 31, 1997 to Trautman, Kramer & Company. (4)10.1
    
    
    
    Employment Agreement between the Registrant and Richard J. DePiano dated May 12, 1998. (6)**10.2
    
    
    
    Non-Exclusive Distributorship Agreement between Registrant and Scott Medical Products dated
October 12, 2000. (9)10.3
    
    
    
    Assets Sale and Purchase Agreement between the Registrant and Endologix, Inc. dated January
21, 1999. (5)10.4
    
    
    
    Registrants Amendment and Supplement Agreement and Release between the Registrant and
Endologix, Inc. dated February 28, 2001. (10)10.5
    
    
    
    2003 Amendment to Loan Agreement. (12)10.6
    
    
    
    Allonge to the Amended and Restated Term/Time Note. (12)10.7
    
    
    
    Allonge to the Amended and Restated Line of Credit Note. (12)10.8
    
    
    
    Registrants amended and restated 1999 Equity Incentive Plan. (13) **10.9
    
    
    
    Securities Purchase Agreement dated as of March 16, 2004 (the Securities Purchase
Agreement) between the Company and the Purchasers signatory thereto. (14)10.10
    
    
    
    Registration Rights Agreement dated as of March 16, 2004 between the Company and the
Purchasers signatory thereto. (14)10.11
    
    
    
    Form of Warrant to Purchase Common Stock issued to each Purchaser under the Securities
Purchase Agreement. (14)10.12
    
    
    
    Manufacturing Supply and Distribution Agreement between Sonomed, Inc. and Ophthalmic
Technologies, Inc. dated as of March 11, 2004. (15)10.13
    
    
    
    Supplemental Executive Retirement Benefit Agreement for Richard DePiano dated June 23, 2005.
(16)**10.14
    
    
    
    Settlement Agreement with Intralase Corp, dated February 27, 2007. (17)10.15
    
    
    
    Securities Purchase Agreement dated as of May 29, 2008 (the Securities Purchase Agreement)
between the Company and the Purchasers signatory thereto. (*)21
    
    
    
    Subsidiaries. (11)23.1
    
    
    
    Consent of Independent Registered Public Accounting Firm (*).
 72




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##### Table of Contents



31.1
    
    
    
    Certification of the Chief Executive Officer pursuant to Section 302
of the Sarbanes Oxley Act of 2002 (*).31.2
    
    
    
    Certification of the Chief Financial Officer Section 302 of the
Sarbanes Oxley Act of 2002 (*).32.1
    
    
    
    Certification of the Chief Executive Officer pursuant to Section 906
of the Sarbanes Oxley Act of 2002 (*).32.2
    
    
    
    Certification of the Chief Financial Officer pursuant to Section 906
of the Sarbanes Oxley Act of 2002 (*).
 
 *
    
    Filed herewith.**
    
    Management contract of compensatory plan.(1)
    
    Filed as an exhibit to Pre-Effective Amendment No. 2 to the Companys Registration Statement
on Form S-1 dated November 9, 1993 (Registration No. 33-69360).(2)
    
    Filed as an exhibit to the Companys Form 10-KSB for the year ended June 30, 1994.(3)
    
    Filed as an exhibit to the Companys Form 10-KSB for the year ended June 30, 1995.(4)
    
    Filed as an exhibit to the Companys Registration Statement on Form S-3 dated January 20,
1998 (Registration No. 333-44513).(5)
    
    Filed as an exhibit to the Companys Form 10-KSB for the year ended June 30, 1999.(6)
    
    Filed as an exhibit to the Companys Form 8-K/A, dated March 31, 2000.(7)
    
    Filed as an exhibit to the Companys Registration
Statement on Form S-8 dated February 25,
2000 (Registration No. 333-31138).(8)
    
    Filed as an exhibit to the Companys Proxy Statement on Schedule 14A, as filed by the Company
with the SEC on September 21, 2001.(9)
    
    Filed as an exhibit to the Companys Form 10-KSB for the year ended June 30, 2001.(10)
    
    Filed as an exhibit to the Companys Form 10-Q for the quarter ended March 31, 2001.(11)
    
    Filed as an exhibit to the Companys Form 10-KSB/A for the year ended June 30, 2002.(12)
    
    Filed as an exhibit to the Companys Form 10-Q for the quarter ended December 31, 2002.(13)
    
    Filed as an exhibit to the Companys Form 10-Q for the quarter ended December 31, 2003.(14)
    
    Filed as an exhibit to the Companys Registration
Statement on Form S-3 dated April 8, 2004
(Registration No. 333-114332).(15)
    
    Filed as an exhibit to the Companys Form 10-Q for the quarter ended March 31, 2004.(16)
    
    Filed as an exhibit to the Companys Form 8-K, dated June 23, 2005.(17)
    
    Filed as an exhibit to the Companys Form 10-K dated September 28, 2007. 73




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##### Table of Contents



Signatures
  Escalon Medical Corp.
(Registrant)By:
    /s/  Richard J. DePianoRichard J. DePianoChairman and Chief Executive Officer   By:
    
    /s/
    
    Richard J. DePiano
    
    Chairman and Chief Executive
    
    September 29, 2008Richard J. DePiano
    
    Officer (Principal ExecutiveOfficer) and DirectorBy:
    
    /s/
    
    Robert M. OConnor
    
    Chief Financial Officer
    
    September 29, 2008Robert M. OConnor
    
    (Principal Financial Officer)By:
    
    /s/
    
    Anthony Coppola
    
    Director
    
    September 29, 2008Anthony CoppolaBy:
    
    /s/
    
    Jay L. Federman
    
    Director
    
    September 29, 2008Jay L. FedermanBy:
    
    /s/
    
    William L.G. Kwan
    
    Director
    
    September 29, 2008William L.G. KwanBy:
    
    /s/
    
    Lisa Napolitano
    
    Director
    
    September 29, 2008Lisa NapolitanoBy:
    
    /s/
    
    Fred Choate
    
    Director
    
    September 29, 2008Fred Choate
 74