Audiotech Healthcare has released its financial and operating results for the year ended Sept. 30, 2002.

The corporation generated record revenues of $2,989,160 and earnings before interest, taxes, depreciation and amortization of $147,193 for the year ended Sept. 30, 2002. This represents an improvement in operating earnings of $573,129, or almost five cents per share over fiscal 2001.

At the end of fiscal 2001, management established a number of objectives for fiscal 2002, most notably, the reduction of general, administrative and operating costs through the elimination of duplicated services at the head office level, and a renewed focus on the profitability and efficiency at individual clinics. Management is pleased to report that the cost-cutting measures undertaken during late fiscal 2001 and early fiscal 2002 have had a considerable positive impact on profitability as anticipated.

It is important to note that despite the operating cost reductions, the company was able to maintain revenues at or above the record levels achieved in fiscal 2001. Revenues derived from the company's Canadian operations of $1,855,175 were on par with those achieved during fiscal 2001, as management focused on expense reduction and creating operating efficiencies at existing clinics, as opposed to acquiring or developing new operations. South of the border, Audiotech continues to generate growth and record revenues. The company's Idaho operations contributed revenues of $1,133,985 during the 12-month period ended Sept. 30, 2002, an increase of 23 per cent over the prior fiscal year. This growth resulted from the increased use of the Rexburg clinic, made possible by the hiring of an additional audiologist to meet local demand, and improved effectiveness of the clinic's marketing program.

          STATEMENT OF INCOME
          Year ended Sept. 30

                  2002           2001
Canadian 
revenues       $1,855,175    $1,887,114

U.S. revenues   1,133,985       923,399

Total 
revenues        2,989,160     2,810,513

Gross 
profit          1,925,644     1,654,079

EBITDA            147,193      (425,936)

Net (loss)        (47,428)     (575,268)

Earnings 
per share          (0.004)       (0.044)

As a result of improved efficiencies, cost of sales as a percentage of revenues declined very significantly, resulting in a substantial increase in gross margins to 64.4 per cent, from only 58.9 per cent during fiscal 2001.

As noted above, management was successful in sustaining the cost-reduction program originally initiated in late fiscal 2001. General and administrative expenses totalled $1,862,668 during the 12-month period ended Sept. 30, 2002, a decrease of 9 per cent from the $2,028,338 during the same period in fiscal 2001, despite significantly higher interest costs related to its long-term debt financing. Major cost reductions were achieved in a number of categories, including corporate development, professional and filing fees, advertising, and wages. Audiotech was also successful in turning around its e-commerce subsidiary, HearingDepot.com, by both increasing revenues and dramatically reducing expenses. HearingDepot.com currently generates an operating profit and is experiencing significant revenue growth. As noted previously, all cost reductions were accomplished without affecting service levels at the company's clinics.

As a result of the revenue growth in fiscal 2002, significantly improved operating margins, and reduced general and administrative expenses, Audiotech reported a net loss after non-cash amortization expenses of only of $47,428, or 0.4 cent per share for the year ended Sept. 30, 2002, compared with a loss of $575,268, or 4.4 cents per share during fiscal 2001, an impressive turnaround of $527,840. Audiotech achieved positive cash flow from operations (earnings before amortization, disposal of assets, and taxes) of $62,976 during the period. Management is confident that the trend toward increasing profitability will continue. Further cost reductions are anticipated in several key expense categories, including corporate development and interest on long-term debt. Furthermore, Audiotech will be adopting a new accounting policy for the recognition and recording of good will amortization pursuant to a new disclosure policy recently pronounced by the Canadian Institute of Chartered Accountants. Under this new policy, which will take effect in fiscal 2003, good will is only expensed in the event of an impairment in value rather than on the basis of a subjective percentage per accounting period. It is management's opinion that at present, there are no impairments in the value of Audiotech's good will that would result in a charge against earnings under the new policy during fiscal 2003. As a result, amortization or expensing of good will is not anticipated during fiscal 2003, resulting in an overall expense savings of more than $25,000.

As at Sept. 30, 2002, Audiotech had a cash balance of $613,817, including term deposits in the amount of $320,000, compared with $303,102 as at the beginning of fiscal 2002. During the first nine months of fiscal 2002, the corporation raised a total of $847,586 in new borrowings and repaid a total of $342,039 in existing debt, resulting in a net increase in debt financing of $505,547. An additional $9,000 was raised through the issuance of common shares upon the exercise of stock options. Capital purchases of clinical equipment totalling $46,624 were made during the fiscal year.

Approximately $200,000 of Audiotech's long-term debt comprises interest-free loans from a major North American hearing-aid supplier. The remaining debt consists primarily of convertible debentures and loans bearing interest at an average interest rate of slightly more than 10 per cent. Management has set an objective for fiscal 2003 to substantially reduce, or if market conditions are amenable, to eliminate the company's long-term debt. This will have a positive impact on profitability by reducing interest costs. Since Oct. 1, 2002, more than $200,000 in long-term debt has already been retired. The repayment of this debt was financed internally through the company's term deposits and cash flow.

No acquisitions were undertaken during fiscal 2002; however, management continues to advance negotiations with a number of parties in accordance with its acquisition/consolidation strategy. Management is also examining other transactions and initiatives to maximize shareholder value.

Audiotech is also aggressively seeking new audiologists to join its clinical staff to further enhance its service capacity at its busiest Canadian clinics and its Idaho operations. There is currently a shortage of newly graduated audiologists across North America; however, based on its favourable industry reputation, competitive compensation package, and its strong financial footing, management believes Audiotech is better positioned than the majority of its competitors to attract qualified applicants.