Audiotech Healthcare Corp. is confirming its 11th consecutive quarter of profitability. In almost all material respects, the company's financial results for the third quarter of fiscal 2006 mirrored those of the previous quarter where Audiotech reported strong margins and a solid operating profit. During the past two quarters, the company has achieved earnings totalling $204,153 or 1.54 cents per share.

Overall revenues reached $966,212 for the third quarter of fiscal 2006, up from $928,511 during the same quarter in the prior fiscal year. Revenues from the company's Canadian operations totalled $699,611, while the U.S. operations contributed revenues of $266,601. The reported revenues from Audiotech's U.S. operations continued to be hampered by the strength of the Canadian dollar. Total sales for the nine months ended June 30, 2006, were $2,740,219.

As projected, the company continued to benefit from strong operating margins due to increased sales of higher-end hearing aids, particularly in Canada. Gross margins (sales less materials and freight costs) were well in excess of historical averages for the fourth consecutive quarter, reaching 69.7 per cent for the latest quarter. Year-to-date gross margins were 68.9 per cent compared with only 64.4 per cent during the first three quarters of fiscal 2005. Management is confident that the positive sales mix that has contributed to these margins will continue into the foreseeable future.

Once again, other direct clinic costs (direct costs excluding materials and freight) during the quarter remained below the levels reported for the corresponding period last year. Direct clinic costs of $437,945 during the quarter compare with $482,195 during the quarter ended June 30, 2005, a reduction of 9.1 per cent, and were roughly on par with the $443,090 reported during the second quarter. For the nine months ended June 30, 2006, other direct clinic costs totalled $1,306,370, a 7.5-per-cent reduction over the comparable period last year. Cost reductions were experienced in several areas including clinic overheads, salaries and selling expenses.

General and administrative expenses were held in line with the comparative quarter in fiscal 2005, totalling $126,887, a change of less than 1 per cent. Similarly, for the first three quarters of fiscal 2006, general and administrative expenses increased less than 1 per cent over those recorded during the same period a year earlier. Minor increases in administrative salaries and general expenses were offset by a roughly commensurate decrease in interest costs.

As a result of the strong margin performance and reductions in overall costs, Audiotech is pleased to report income from operations (income before the amortization of the debenture discount) of $108,559, operating cash flow of $136,066, and net earnings of $102,184 (0.77 cent per share) for the third quarter of fiscal 2006.

For the nine months ended June 30, 2006, operating cash flow totalled $305,824, an increase of 78.6 per cent over the cash flow reported during the same period in fiscal 2005. Net earnings were $208,300 or 1.55 cents per share, an increase of 215.6 per cent. Both the Canadian and U.S. operations were profitable for the period.

During the quarter, a total of $6,375 in amortization related to the debenture discount was recorded on the statement of income, thereby reducing net earnings by the same amount ($10,845 for the same quarter in fiscal 2005). For the nine months ended June 30, 2006, a total of $19,125 in amortization of the debenture discount has been recorded versus $39,650 during the first three quarters of fiscal 2005.

Management's profit outlook for the remainder of fiscal 2006 and beyond remains favourable. Management is also optimistic that it will be able to close one or more material acquisitions during the coming quarters to stimulate additional sales, cash flow and earnings growth.

Details of all expenses can be found in the unaudited interim consolidated financial statements for the nine-month period ended June 30, 2006.

Statement of Income - (Unaudited)

There were no material extraordinary or unusual items, gains or losses on discontinued operations for any of the reporting periods.

As at June 30, 2006, Audiotech had a cash balance of $373,892 and positive working capital of $124,185. The reduction in working capital (current assets minus current liabilities) during the latest quarter is related to the classification of certain long-term liabilities as short term (current liabilities) as the repayment of these liabilities is scheduled within the next 12 months. This includes convertible debentures totalling $243,995, which bear interest of 10 per cent annually and mature in April, 2007, as well as the 10-per-cent promissory notes which mature in June, 2007. Management has been in discussions with its financial partners and fully expects that these instruments will be refinanced under long-term arrangements at more favourable interest rates when they come due. Accordingly, management is very confident that the company's working capital position is sufficient to meet its needs. Investments have and will continue to be made in new and additional equipment as new clinics are opened or upgraded. Such expenditures will be financed from existing working capital, capital leases or through funding arrangements with key hearing aid suppliers as appropriate under the circumstances. It is the company's intention to undertake an equity financing in the near future to accelerate the company's debt retirement goals and to reduce future interest costs.

A total of $43,553 in long-term debt obligations were repaid during the quarter ended June 30, 2006, bringing the total repaid to date in fiscal 2006 to $145,714.

A total of $27,014 in capital purchases were made during the third quarter of fiscal 2006 ($71,961 for the nine months ended June 30, 2006). These purchased were financed from cash flow and working capital.

Additional information

Additional information relating to the company is on SEDAR at www.sedar.com.

The company's shares are listed and posted for trading on Tier 1 of the TSX Venture exchange under the symbol "AUD." For more information on the company, contact Osvaldo (Ozzie) Iadarola, President & CEO, at (250) 372-5847, or Doren Quinton of QIS Capital, investor relations, at (250) 376-8989, or visit the company's website at www.audiotech.org.

AUDIOTECH HEALTHCARE CORPORATION
First Bank Building
760-175 Second Avenue
Kamloops, B.C. V2C 5W1
Phone: (250) 372-5847
Fax: (250) 372-3859
Email: info@audiotech.org

Except for historical information contained herein this document contains forward-looking statements. These statements contain known and unknown risks and uncertainties that may cause the company's actual results or outcomes to be materially different from those anticipated and discussed herein.