8-K

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): February 27, 2007

Escalon Medical Corp.
__________________________________________
(Exact name of registrant as specified in its charter)

Pennsylvania	000-20127	330272839
_____________________ (State or other jurisdiction	_____________ (Commission	______________ (I.R.S. Employer
of incorporation)	File Number)	Identification No.)
565 East Swedesford Road, Suite 200, Wayne, Pennsylvania		19087
_________________________________ (Address of principal executive offices)		___________ (Zip Code)

Registrant’s telephone number, including area code: 610-688-6830

Not Applicable
______________________________________________
Former name or former address, if changed since last report

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[  ]  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[  ]  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[  ]  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[  ]  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01 Entry into a Material Definitive Agreement.

On February 27, 2007 Escalon Medical Corp. entered into an agreement with IntraLase Corp. to settle all outstanding disputes and litigation between the parties.

Under the settlement agreement, IntraLase will make a lump sum payment to Escalon of $9,600,000 in exchange for which all pending litigation between the parties will be dismissed, the parties will exchange general releases, Escalon's ownership of all patents and intellectual property formerly licensed to IntraLase from Escalon will be obtained by IntraLase, and the license agreement will terminate. In addition, the payment from IntraLase satisfies all outstanding past, current and future royalties owed or alleged to be owed by IntraLase to Escalon.

Item 1.02 Termination of a Material Definitive Agreement.

In 1997, IntraLase Corp and Escalon Medical Corp entered into an agreement under which IntraLase became the exclusive licensee of certain patents, technology and intellectual property owned by Escalon Medical. This agreement was amended and restated in October 2000. The original and amended license agreement are collectively referred to as the "License Agreement." Disputes arose between the parties culiminating in litigation between the parties.

On February 27, 2007 Escalon Medical Corp. entered into an agreement with IntraLase Corp. to settle all outstanding disputes and litigation between the parties. Under the settlement agreement, IntraLase will make a lump sum payment to Escalon of $9,600,000 in exchange for which all pending litigation between the parties will be dismissed, the parties will exchange general releases, Escalon's ownership of all patents and intellectual property formerly licensed to IntraLase from Escalon will be obtained by IntraLase, and the license agreement will terminate.

Item 8.01 Other Events.

On February 28, 2007 Escalon Medical Corp. issued a press release announcing that it entered into an agreement with IntraLase Corp. to settle all outstanding disputes and litigation between the parties.

Item 9.01 Financial Statements and Exhibits.

Exhibit No. Description
99.1 Press Release dated February 28, 2007

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	Escalon Medical Corp.
March 2, 2007	By:	Richard J DePiano
		Name: Richard J DePiano
		Title: Chairman & CEO

Exhibit Index

Exhibit No.	Description
99.1	Press release date February 28, 2007

EX-99.1

ESCALON MEDICAL CORP.

565 East Swedesford Road, Suite 200

Wayne, PA 19087

(Nasdaq Capital Market: ESMC)

AT THE COMPANY	AT FINANCIAL RELATIONS BOARD
Richard J. DePiano Chairman and CEO	Joseph Calabrese 212/827-3772

610/688-6830

ESCALON® TO RECEIVE $9.6 MILLION
IN SETTLEMENT AGREEMENT WITH INTRALASE CORP.

Wayne, PA – February 28, 2007 – Escalon Medical Corp. (Nasdaq Capital Market: ESMC) today announced that it has entered into an agreement with IntraLase Corp. (NASDAQ: ILSE) to settle all outstanding disputes and litigation between the parties.

Under the settlement agreement, IntraLase will make a lump sum payment to Escalon of $9.6 million, in exchange for which all pending litigation between the parties will be dismissed, the parties will exchange general releases, full ownership of all patents and intellectual property formerly licensed to IntraLase from Escalon will be obtained by IntraLase, and all obligations under the parties’ license agreement will terminate. In addition, the payment from IntraLase satisfies all outstanding past, current and future royalties owed or alleged to be owed by IntraLase to Escalon.

“We are pleased to have settled this dispute and, through the terms of the agreement, we’ve enhanced the value of our business by strengthening our balance sheet and providing additional liquidity that solidifies our current portfolio of businesses,” said Richard J. DePiano, Chairman and CEO of Escalon. “We believe the $9.6 million payment will enhance our ability to strategically expand our businesses and also provide the means to selectively pursue opportunities for synergistic growth.”

The settlement is expected to have a material effect on Escalon’s third quarter financial statements because the entire $9.6 million will be recorded as a gain on sale in the current period. The settlement also marks the end of any future royalty payments to be received under the License Agreement which is expected to have a material effect on earnings in subsequent periods. This effect will be partially offset by the elimination of legal fees related to this matter.

Founded in 1987, Escalon develops markets and distributes ophthalmic diagnostic, surgical and pharmaceutical products as well as vascular access devices. Drew, which operates as a separate business unit, provides instrumentation and consumables for the diagnosis and monitoring of medical disorders in the areas of diabetes, cardiovascular diseases and hematology, as well as veterinary hematology and blood chemistry. 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 Escalon’s distribution capabilities. Escalon has headquarters in Wayne, Pennsylvania and manufacturing operations in Long Island, New York, New Berlin, Wisconsin, Dallas, Texas, Oxford, Connecticut and Barrow-in-Furness, U.K.

Note: This press release contains statements that are considered forward-looking under the Private Securities Litigation Reform Act of 1995, including statements about 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 implement its growth and marketing strategies, improve upon the operations of the Company’s business units, including the integration of Drew’s and MRP’s operations and any acquisitions it may undertake, if any, of which there can be no assurance, implement cost reductions, generate cash and identify, finance and enter into business relationships and acquisitions, uncertainties and risks related to new product development, commercialization, manufacturing and market acceptance of new products, marketing acceptance of existing products in new markets, the continuity of royalty revenue, litigation and non-recurring expenses, research and development activities, including failure to demonstrate clinical efficacy, delays by regulatory authorities, scientific and technical advances by Escalon or third parties, introduction of competitive products, third party reimbursement and physician training as well as general economic conditions. Further information about these and other relevant risks and uncertainties may be found in 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.