Audiotech Healthcare has released its financial and operating results for the three months ended Dec. 31, 2002.

This news release should be read in conjunction with the company's consolidated financial statements for the period.

Audiotech achieved record revenues of $790,947 for the first quarter of fiscal 2003, an increase of 10 per cent from the $720,229 in revenues posted during the same quarter of fiscal 2002. Revenues from the company's U.S. operations, which were primarily responsible for this growth, surged an impressive 54 per cent. Audiotech's revenue growth in Canada was subdued due to the current need for additional audiology staff.

Despite abnormally high corporate development expenses which are not expected to recur, operating earnings (EBITDA) for the quarter were $22,834. Management is pleased that the corporation continues to generate positive cash flow from operations due in large part to cost reductions achieved during fiscal 2002 and further revenue growth.

          STATEMENT OF INCOME
       Three months ended Dec. 31

                       2002      2001

Canadian revenues   $422,369   $481,312

U.S. revenues        368,578    238,917

Total revenues       790,947    720,229

Gross profit         487,942    463,350

EBITDA                22,834     44,296

Net earnings
(loss)               (20,929)     3,933

Earnings per share   (0.0008)    0.0003

Gross margins during the three-month period ended Dec. 31, 2002, were 61.7 per cent. While down from the 64.3 per cent posted during the same quarter in fiscal 2002, the gross margin percentage compares favourably with the corporation's long-term average. Nevertheless, management anticipates cost of sales as a percentage of revenues to decline during the remaining quarters of fiscal 2003, thereby resulting in higher gross margins.

General and administrative expenses totalled $508,871 during the three-month period ended Dec. 31, 2002, an increase of 9 per cent from the $459,417 during the same period in fiscal 2002. The increase is largely attributed to a significant increase in interest costs related to the corporation's long-term debt financing, as well as certain non-recurring corporate development expenses. Wages and benefits also increased as the corporation boosted its staff levels to accommodate the growth of its Idaho operations.

The corporation reported a small loss of $20,929 during the quarter, as compared with a profit of $3,933 during the same quarter last year.

Management's outlook for profitability for the remainder of fiscal 2003 remains favourable. Audiotech repaid approximately $125,000 in long-term debt during the first quarter, thereby reducing future interest costs. Furthermore, substantial reductions in corporate development costs are anticipated during the remaining three quarters of the fiscal year.

It should be noted that as outlined in its fiscal 2002 year-end management discussion and analysis report, Audiotech has adopted 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, 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. Good will was previously amortized on a straight-line basis over 40 years. No impairments in value of the good will assets were recorded during the current quarter.

Liquidity and financial resources

As at Sept. 30, 2002, Audiotech had a cash balance of $494,856, including term deposits in the amount of $140,000, compared with $613,817 as at the beginning of fiscal 2003.

As noted above, the corporation repaid approximately $125,000 in long-term debt during the quarter. The debt repayment was financed through a corresponding reduction of the company's term deposits.

Approximately $183,000 of Audiotech's current 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 10 per cent. Management's objective for fiscal 2003 is 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.

No material capital purchases were made during the quarter.

Future outlook

Management continues to examine acquisitions and 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.

With the expected reductions to several key expense categories during the remainder of fiscal 2003, management is confident that Audiotech will have a profitable fiscal year.