KAMLOOPS, B.C. - Audiotech Healthcare Corporation (AUD-TSX Venture Exchange) is pleased to report that the cost cutting measures undertaken during late fiscal 2001 and the first quarter of fiscal 2002 have had a considerable positive impact on profitability.

The corporation reported revenues of $1,448,906 and an operating profit for the first 6 months of fiscal 2002. Revenues for the quarter ended March 31, 2002 reached a record $728,677 as a result of further organic growth at existing clinics, particularly at the company's Idaho operations.

Geographic Breakdown of Revenues in Canadian Dollars (6 Months Ended March 31):

As a result of improved cost efficiencies, cost of sales as a percentage of revenues declined significantly, resulting in a considerable increase in gross margins to 64.6% from only 57.4% during the same period last year. Gross margins were also up slightly from those during the first quarter as a result of further efficiencies.

Management was successful in sustaining the cost reduction program initiated in late fiscal 2001 and the first quarter of fiscal 2002. General and administrative expenses totaled $927,171 during the first two quarters of fiscal 2002, a decrease of 11.4% from the $1,046,312 during the same period in fiscal 2001. The reduction equates to an annual savings of approximately $250,000. Major cost reductions were achieved in a number of categories including corporate development (includes start-up costs associated with e-commerce operations in fiscal 2001), professional and filing fees, travel, and wages. These cost reductions were accomplished without affecting service levels at our clinics.

As a result of the revenue growth to date in fiscal 2002, significantly improved operating margins, and reduced general and administrative expenses, Audiotech reported a net profit of $9,545 or approximately $0.001 per share for the 6 months ended March 31, 2002, compared to a loss of $266,129 or $0.027 per share during the first half of fiscal 2001, an improvement of $275,674. Audiotech achieved positive operating cash flow from operations of $61,505 for the 6 months ended March 31, 2002.

Management is confident that the trend towards increasing profitability will continue.

Liquidity and Financial Resources

As at March 31, 2002, Audiotech had a cash balance of $324,691 with which to pursue acquisitions and to fund further growth initiatives. During the first half of fiscal 2002, the corporation raised a total of $442,586 in new borrowings and repaid a total of $276,446 in existing debt, resulting in a net increase in debt financing of $166,140. An additional $9,000 was raised through the issuance of common shares upon the exercise of stock options by management and directors. Capital purchases of clinical equipment totaling $34,943 were made during the latest quarter.

As a result of the positive operating cash flow to date in fiscal 2002, and new financing obtained since the beginning of the fiscal year, the company's working capital position at the end of the second quarter improved significantly as compared to the end of fiscal 2001 (September 30, 2001). Working capital stood at $233,201 at the end of the reporting period, a further improvement over the end of the prior quarter, and up from a deficit of $45,628 only six months earlier. The corporation anticipates the completion of additional equity or debt financing or refinancing of certain shorter-term debt in fiscal 2002 to further bolster working capital in preparation for additional acquisitions.

Approximately $250,000 of Audiotech's long-term debt is comprised of interest-free loans from major North American hearing aid suppliers. These loans are reduced over time by the application of the company's bulk purchasing discounts.

Future Outlook