Audiotech Healthcare Corporation (AUD:TSX-V)
Current Price: $0.155 (Feb. 1/10)

Coverage Initiated: $0.14 (Nov. 8/04)

QUICK FACTS SHEET

HIGHLIGHTS:

• strong gross margins expected to continue for the foreseeable future
• return to profitability in fiscal 2009 with stronger 2010 anticipated
• recently expanded or relocated several clinics in western Canada
• plans to expand with the opening of additional satellite clinics, particularly in B.C.
• potential takeover candidate

DISCUSSION:

Audiotech was founded in April 1998 as a growth corporation in a highly-fragmented hearing healthcare industry in North America. The company operates and manages a growing network of 16 hearing clinics in British Columbia, Alberta, and Idaho. Audiotech targets growth by establishing and opening new clinics in strategic locations as well as by identifying quality acquisition candidates that meet firm consolidation criteria and can achieve ongoing operating efficiencies. The company is becoming a regional industry leader by targeting primary hearing care providers in each major market. As North America's "baby-boomer" generation ages, the demand for hearing care services is expected to increase considerably. Audiotech’s goal is to establish a geographically diverse base of hearing clinics throughout North America upon completing the consolidation of profitable clinics in the Pacific Northwest.

The number of audiologists graduating from schools is lower than the number of audiologists retiring. This decreasing workforce combined with the increasing demand for hearing care as the population ages has placed unique pressures on hearing care companies to find qualified professional staff. Management believes that today's audiologists prefer autonomous working environments with the professional support and administrative infrastructure that Audiotech provides.

In August 2008, Audiotech opened a new clinic in Penticton, B.C. A lot of the equipment for this clinic opening was derived from a clinic that was closed in Victoria, B.C. after it failed to meet expectations. During the summer of 2009 some staffing changes were implemented at the company’s Kelowna clinic, which is expected to begin reporting improved operating cash flow. In January 2010, Audiotech closed its Southwest Calgary clinic and merged its operations with the Northwest Calgary clinic due to lower than expected results. While estimated annual revenue loss of $100,000 to $130,000 will occur, the company is also expected to be able to save approximately $75,000 annually in operating costs. Ongoing initiatives to improve efficiencies and to capitalize upon growth opportunities within these clinics will also be emphasized in fiscal 2010. The company also intends to continue to open additional satellite clinics in B.C.

During the fiscal year ended September 30, 2009, Audiotech achieved record annual sales of $4.98 million, up 12% from revenues of $4.43 million during fiscal 2008. Contributions from some of the company’s newer clinics, internal clinic growth, and a stronger U.S. dollar have all contributed to higher revenue. Audiotech recorded a gross margin of 69.3% during 2009, and management anticipates continued strength in its margins for the foreseeable future.

The company’s outlook for fiscal 2010 is very positive. Management is anticipating further improvements in profitability while generating strong operating cash flow for fiscal 2010. Audiotech is currently planning further initiatives to strengthen its position as a dominant regional hearing care provider particularly in the interior of B.C. Management remains confident that these investments to secure Audiotech’s market position will result in a higher corporate valuation in the event that Audiotech is acquired by another entity in the current market consolidation cycle.

Due to the increasingly competitive and expensive nature of completing clinic acquisitions within the hearing industry, Audiotech has shifted its focus from actively seeking out accretive acquisitions to considering ways to grow organically through new clinic openings, existing clinic expansions and the opening of satellite clinics. Management may continue to review potential acquisition opportunities, but this will be a secondary growth strategy going forward.

Management continues to work aggressively to structure the company for further growth by reducing overhead costs, refinancing debt obligations under favorable terms, opening clinics in new markets, increasing service capacity at existing clinics by securing additional qualified labor, and re-negotiating bulk purchase and marketing agreements with major hearing aid manufacturers. The company will continue to build upon its close relationships with hearing aid manufacturers and its financial partners to fund organic growth. In addition, Audiotech will continue to re-invest its positive cash flow in new growth initiatives.

MANAGEMENT & DIRECTORS:

Osvaldo “Ozzie” Iadarola, President, CEO & Director
Darryl Walker, CFO & Corporate Secretary
Daniel Allen, Director & Chief Operations Manager
Dr. Gerald Mill, Director
Grant Robertson, Director
Glen Martin, Director

CONTACT INFORMATION:

Head Office: #760 - 175 Second Avenue, Kamloops, BC V2C 5W1
Telephone: (250) 372-5847 or 1-888-590-3555
Fax: (250) 372-3859
Email: ozzie@audiotech.org
Website: www.audiotech.org
Contact Person: Ozzie Iadarola

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