Audiotech Healthcare has released its financial and operating results for the three months ended Dec. 31, 2003, and year ended Sept. 30, 2003.

Revenues for the first quarter of fiscal 2004 were $777,069, roughly on par with the $790,947 reported during the same period a year earlier.

Revenues from Audiotech's Canadian operations increased from $422,369 during the three months ended Dec. 31, 2002, to $442,832 during the first quarter of fiscal 2004. This represents an internal growth rate of 5 per cent.

As anticipated, revenues reported by the company's United States operations were negatively affected by the severe depreciation in the U.S. dollar during 2003. U.S. revenues for the quarter were $334,237, compared with $368,578 during the same quarter of fiscal 2003. Management estimates that the slide in the value of the U.S. dollar (compared with the Canadian dollar), reduced reported revenues from the company's U.S. clinics by about $60,000 during the quarter. As a result, the revenues, as reported in Canadian dollars, do not adequately reflect the robust organic growth that was achieved by the U.S. clinic operations during the period.

          STATEMENT OF INCOME
       Three months ended Dec. 31

                       2003        2002 

Canadian revenues $ 442,832   $ 422,369 
U.S. revenues       334,237     368,578
                  ---------   ---------
Total revenues    $ 777,069   $ 790,947 
                  =========   =========
Net earnings 
(loss)            $   8,673   $ (20,929)

Earnings per 
share -- basic    $  0.0007   $ (0.0016)

Earnings per 
share 
-- fully diluted  $  0.0006   $ (0.0014)

Earnings before interest, taxes, depreciation, and amortization for the first quarter of fiscal 2004 was $47,368, or 0.04 cent per share.

Materials and freight costs (cost of sales) as a percentage of sales were, comparable with the fourth quarter of fiscal 2003, but significantly higher than the long-term average. The increase over historical levels is related to a change in the ratio of business billed through third party insurers, compared with directly to the consumer, and the effect of exchange rate factors on the company's U.S. operations. Management has taken steps to improve margins and expects to see some reductions in materials and freight costs as a percentage of sales during the latter half of fiscal 2004.

Total expenses were $417,179, a substantial decrease of 18 per cent over the $508,871 in expenses reported during the same quarter in fiscal 2003. Cost reductions were again achieved in virtually every expense category with the exception of insurance, professional filing fees and travel, which saw small increases. Rent, utilities and general overhead costs decreased as a result of both cost-reduction measures employed by clinic operators and at the corporate level, and due to lower expenses reported from U.S. operations due to the strong Canadian dollar.

Interest on long-term debt decreased from $24,139 to $20,858 as a result of debt repayments made in fiscal 2003. Management expects that interest costs associated with long-term debt will decrease as a result of further debt reductions expected in fiscal 2004.

Despite the unfavourable exchange rates which hampered earnings growth from the U.S. clinic operations, Audiotech is pleased to report a small profit of $8,673, or 0.07 cent per share, for the first quarter of fiscal 2004, compared with a loss of $20,929, or 0.17 cent per share during the same period in fiscal 2003. The significant improvement is due in large part to a major turnaround in the profitability of the company's Canadian clinics. Both the Canadian and U.S. operations produced positive operating cash flow during the quarter (earnings before amortization).

In accordance with the corporation's good will valuation policies, management has evaluated the carrying value of the good will of each of its operating business units as at Dec. 31, 2003, and found that no impairments requiring amortization or write-off of good will exist and, accordingly, none were recorded during the period.

Fiscal 2003

Revenues for the fourth quarter of fiscal 2003 were $848,143, up roughly 20 per cent over the $709,718 reported during the comparable period a year earlier, despite the negative affect of the stronger Canadian dollar, which reduced the amount of revenues reported from the company's U.S. operations. Audiotech achieved revenues of $3,167,466 for the year ended Sept. 30, 2003, an increase of 6 per cent, compared with the $2,989,160 reported during fiscal 2002.

Despite the continuing industrywide shortage of audiologists in Canada, which has stalled clinic network expansion initiatives, revenues from the Audiotech's Canadian clinics showed a marked improvement during the fourth quarter, rising 21 per cent to $484,678, as compared with the same quarter a year earlier, and up 11 per cent from revenues of $436,184 reported during the prior quarter. Management is pleased to report that additional audiologists have recently been recruited and announcements with respect to new hirings and the opening of new clinic locations are expected shortly as employment agreements and leases are consummated. Continued operational improvements at the British Columbia and Alberta clinics also contributed to the growth. Over all, revenues derived from the Canadian operations declined 6 per cent during the fiscal year to $1,737,167.

Revenues from the company's U.S. operations continued to show strength during the fourth quarter of fiscal 2003, growing 18 per cent to reach $363,465 (fourth quarter of fiscal 2002 -- $308,939). This growth was achieved despite the significant strength of the Canadian dollar during 2003, which resulted in substantially reduced revenues from the U.S. clinics when U.S. clinics sales were converted into Canadian dollars for reporting purposes. Management anticipates this robust growth to continue in 2004, as a result of the projected opening of a new clinic in Idaho in fiscal 2004. The adverse shift in the exchange rate will continue to dampen revenue and earnings growth from the U.S. operations to some degree, particularly during the first quarter of 2004, however, actions by the Bank of Canada to curb the strength of the Canadian dollar against the U.S. greenback, are expected to improve exchange rates during the latter half of 2004. As previously disclosed, Audiotech has been successful in bolstering its clinic staff in the U.S. to facilitate the anticipated rise in patient volume.

          STATEMENT OF INCOME
      Three months ended Sept. 30

                       2003        2002 

Canadian 
revenues         $  484,678  $  400,779

U.S. revenues       363,465     308,939

Total revenues   $  848,143  $  709,718
                 ----------  ----------
Net earnings 
(loss)           $ (114,745) $  (58,710)
                 ==========  ==========
Earnings per 
share -- basic   $   (0.009) $   (0.004)

          STATEMENT OF INCOME
          Year ended Sept. 30

                       2003        2002 

Canadian 
revenues         $1,737,167  $1,855,175

U.S. revenues     1,430,299   1,133,985

Total revenues   $3,167,466  $2,989,160
                 ----------  ----------
Net earnings 
(loss)           $ (105,366) $  (47,438)
                 ==========  ==========
Earnings per 
share -- basic   $   (0.008) $   (0.004)

Earnings before interest, taxes, depreciation, and amortization for the fourth quarter of fiscal 2004 was $60,084.

At the advice of its audit committee and new auditors, Audiotech has adopted a revised format for the presentation of expense items on its annual income statement. Expenses related to clinic operations, and the corporate head office and other administrative items, are now segregated.

Direct clinic costs

Materials and freight costs as a percentage of sales rose from 35.6 per cent in fiscal 2002 to 41.6 per cent during fiscal 2003. The increase is related to an unfavourable product sales mix, the effects of currency exchange rates on its U.S. operating margins and a change in the ratio of business billed through third party insurers compared with directly to the consumer. Management has taken steps to improve margins and expects to see significant reductions in materials and freight costs as a percentage of sales during the latter half of fiscal 2004.

Rent, utilities, and clinic overhead costs decreased by about 8 per cent, as a result of cost-reduction measures employed clinic operators and due to lower expenses reported from U.S. operations due to the strong Canadian dollar.

Salaries and benefits at the clinic level faced some upward pressure in fiscal 2003, rising 5.5 per cent due to additional staff secured to facilitate additional patient volumes in Idaho, and due to industrywide salary increases resulting from the high demand and limited supply of audiologists.

Selling expenses and amortization remained very similar to levels reported in fiscal 2003.

Corporate expenses

General and administrative expenses were reduced to only $134,899 for the year ended Sept. 30, 2003, a decrease of 16 per cent over the prior fiscal year. Expenses have declined every quarter since management initiated its aggressive cost-reduction program during the latter half of fiscal 2002. Cost reductions have been achieved in virtually every major cost category. Management anticipates that general and administrative expenses will stabilize near current levels for the foreseeable future.

Due to the strength in the Canadian dollar, a foreign currency translation loss in the amount of more than $15,000 was recorded during fiscal 2003. As noted above, continued weakness in the Canadian dollar during the first quarter of fiscal 2004 is expected to have an adverse affect the company's reported revenues from its U.S. operations and may result in further minor foreign currency translation losses. However, there is strong evidence that the Bank of Canada will lower interest rates or take other steps to curb the rise in the dollar. During January, 2004, and February, 2004, the exchange rate shifted more positively.

Interest on long-term debt increased from $84,437 to $89,437. Management expects that interest costs associated with long-term debt will decrease as a result of further debt reductions expected in fiscal 2004.

Salaries and benefits at a corporate administration level decreased slightly from $220,209 to $205,565.

Audiotech recorded a small loss of $105,366 or less than 1 cent per share after amortization of $85,392 for the fiscal year.

It should be noted that as outlined in its fiscal 2002 year-end management discussion and analysis report, that 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. In conjunction with its new auditors, KPMG, a detailed review of good will for each business unit was carried out. No impairments in value of the good will assets were found, and accordingly, none were recorded during the 2003 fiscal year.

Future outlook

In light of the success of the company's cost-reduction program and continued growth, management continues to examine acquisitions and other transactions and initiatives to maximize shareholder value. It is management's opinion that Audiotech's share price does not reflect the underlying value of its operations. Accordingly, the board of directors is currently reviewing various alternatives to create increased awareness in the financial community of the company's assets and growth plans.

Management is optimistic that the addition of further professional staff in Canada and the planned expansion of its U.S. clinic base in fiscal 2004 will continue to fuel revenue growth. While the state of the U.S.-to-Canadian dollar exchange rate places some constraints on revenue growth from the company's Idaho clinics, which have been performing very well, U.S.-based capital investments including the opening of new clinic operations or the acquisition of existing clinics have become substantially more affordable. Accordingly, the company anticipates the announcement of the opening of a new U.S. clinic very shortly.

In Canada, the addition of new audiological staff is expected to permit the company to resume opening new clinics and expanding the patient base of existing clinics. In addition, a renewed focus on improving Audiotech's product sales mix is expected to increase operating margins. An announcement with respect to the opening of a new clinic and the expansion of capacity at existing clinics is eminent.