CHAD Therapeutics Reports Fourth Quarter and Fiscal 2006 Financial Results and Provides Update on Evaluation of Strategic Oppor

CHAD Therapeutics, Inc. (AMEX:CTU) today reported
financial results for the fourth quarter and fiscal 2006, and provided
an update on the Company's evaluation of strategic alternatives to
maximize shareholder value.

   Fourth Quarter and Fiscal 2006 Results

   For the three months ended March 31, 2006, revenue declined to
$5,177,000 from $5,435,000 for the fourth quarter of fiscal 2005. The
net loss for the fourth quarter of fiscal 2006 was $460,000, or $0.05
per diluted share, which included an inventory reserve of $739,000
reflected in cost of goods sold for the Company's SAGE Oxygen
Therapeutic Device, whose sales have not met expectations. For the
fourth quarter of fiscal 2005, net earnings were $589,000, or $0.06
per diluted share.
   For the twelve months ended March 31, 2006, revenue declined to
$22,354,000 from $24,287,000 for fiscal 2005. The net loss for fiscal
2006 was $673,000, or $0.07 per diluted share, which included the
inventory reserve mentioned above. This compares to net earnings for
fiscal 2005 of $1,811,000, or $0.17 per diluted share.
   Revenue from sales of oxygen conservers and therapeutic devices
declined 11% for fiscal 2006 compared to fiscal 2005, reflecting a 29%
decline in sales to domestic customers and a 331% increase in
international sales. The decline in domestic sales was primarily due
to pricing pressure and the reduction in sales to a major customer
reported previously. Sales of CHAD's proprietary TOTAL O(2)(R) home
oxygen filing system increased 3% for fiscal 2006 compared to fiscal
2005.
   President and CEO Earl Yager said, "Effective January 1, 2006,
Medicare reimbursement procedures were modified to provide that title
for equipment used by an oxygen patient transfers to the patient after
36 months. This new policy has intensified pressure on homecare
providers to reduce operating and equipment costs. Over time, we
believe this will stimulate demand for CHAD's TOTAL O(2) home oxygen
filling system, which is a cost-effective solution to the changing
economics of the home oxygen market. However, the immediate impact
among our customers has been a 'wait and see' approach until important
questions are answered regarding equipment repair and the provision of
oxygen to patients after the transfer of title. We have taken
appropriate steps to adjust our operating model and inventory posture
in light of these developments. We also are continuing our efforts to
expand our product offerings, and are pleased by our progress in the
development of proprietary diagnostic and therapeutic products for the
sleep disorder market."
   Working capital was approximately $9.8 million at March 31, 2006,
including cash and cash equivalents of $935,000 versus $177,000 at
March 31, 2005. Yager noted that the Company's cash position has
increased further during the first quarter of the new fiscal year.
CHAD has no debt.

   Update on Evaluation of Strategic Opportunities

   As previously reported, CHAD is in discussions with several
parties concerning the distribution of both the Company's TOTAL O(2)
home oxygen filling system and the products it is developing for the
sleep disorder market. During the course of these discussions, the
Board of Directors decided to broaden the scope of its consideration
of various strategic alternatives for the Company, and engaged an
investment banking firm to assist the Board in evaluating strategic
opportunities to maximize value for CHAD's shareholders.
   "While we cannot assure shareholders that we will be successful in
these efforts, and no final determination will be made until all of
our alternatives have been carefully analyzed in concert with our
investment banker, we are pleased to report that this process is
nearing its conclusion. We will report publicly as soon as new
information is available," Yager said.

   About CHAD Therapeutics

   CHAD Therapeutics, Inc. is in the business of developing,
producing and marketing respiratory care devices designed to improve
the efficiency of oxygen delivery systems for home health care and
hospital treatment of patients suffering from pulmonary diseases. For
more information, visit www.CHADtherapeutics.com.

   Safe Harbor Statements under the Private Securities Litigation
Reform Act of 1995.

   The foregoing statements regarding prospects for future earnings
and revenues, future sales trends and the introduction of products
under development are forward-looking statements that involve certain
risks and uncertainties. A number of important factors could cause
actual results to differ materially from those contemplated by such
forward-looking statements. These include the potential loss of one of
our major customers upon whom we depend for a material portion of our
business, increased competition and continuing downward pressure on
prices for certain of our products, the potential introduction of new
products with perceived competitive advantages over the Company's
products, changes or proposed changes in health care reimbursement
which affect home care providers, the terms of any distribution
agreement which may be negotiated with respect to our TOTAL O(2)
system or our sleep products, and CHAD's ability to anticipate and
respond to technological and economic changes in the home oxygen
market. Moreover, the success of the Company's products and products
under development will depend on their efficacy, reliability and the
health care community's perception of the products' capabilities and
benefits, the degree of acceptance the products achieve among homecare
providers and, with respect to products under development, obtaining
timely regulatory approval. Additional factors that could cause actual
results to differ materially from those contemplated in this press
release can be found in the Company's annual and quarterly reports
filed with the Securities and Exchange Commission under the caption
"Outlook: Issues and Risks."
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                        CHAD THERAPEUTICS, INC.
                  CONDENSED STATEMENTS OF OPERATIONS
                              (Unaudited)



                     Twelve Months Ended        Three Months Ended
                          March 31,                  March 31,
                  ----------------------------------------------------
                      2006         2005          2006         2005
                  ------------ ------------  ------------ ------------

Net sales         $22,354,000  $24,287,000   $ 5,177,000  $ 5,435,000
Cost of sales      15,113,000   14,581,000     3,919,000    3,465,000
                  ------------ ------------  ------------ ------------
    Gross profit    7,241,000    9,706,000     1,258,000    1,970,000

  Selling, general
   and
   administrative   6,788,000    6,947,000     1,687,000    1,641,000
  Research and
   development      1,574,000    1,473,000       372,000      266,000
                  ------------ ------------  ------------ ------------
    Total costs
     and expenses   8,362,000    8,420,000     2,059,000    1,907,000
                  ------------ ------------  ------------ ------------
Operating income
 (loss)            (1,121,000)   1,286,000      (801,000)      63,000

Other income, net      17,000       41,000        (6,000)      13,000
                  ------------ ------------  ------------ ------------
Earnings (loss)
 before income
 taxes             (1,104,000)   1,327,000      (807,000)      76,000

Income tax
 (benefit)           (431,000)    (484,000)     (347,000)    (513,000)
                  ------------ ------------  ------------ ------------
    Net earnings
     (loss)       $  (673,000) $ 1,811,000   $  (460,000) $   589,000
                  ============ ============  ============ ============

Earnings (loss)
 per share:
    Basic         $     (0.07) $      0.18   $     (0.05) $      0.06
    Diluted       $     (0.07) $      0.17   $     (0.05) $      0.06
                  ============ ============  ============ ============

Weighted shares
 outstanding:
    Basic          10,146,000   10,122,000    10,158,000   10,131,000
    Diluted        10,146,000   10,625,000    10,158,000   10,636,000



                        CHAD THERAPEUTICS, INC.
                       CONDENSED BALANCE SHEETS
                              (Unaudited)


                                                    March 31,
                  Assets                       2006           2005
                                           ------------   ------------

Current assets:
  Cash                                     $   935,000    $   177,000
  Accounts receivable, net                   3,220,000      3,745,000
  Income taxes refundable                      383,000             --
  Inventories, net                           6,381,000      8,512,000
  Prepaid expenses and other assets            178,000        264,000
  Deferred income taxes                        666,000        461,000
                                           ------------   ------------
    Total current assets                    11,763,000     13,159,000
                                           ------------   ------------

Property, plant and equipment, net             950,000      1,191,000
Intangible assets, net                         972,000        802,000
Deferred income taxes                          600,000        568,000
Other assets                                    71,000         70,000
                                           ------------   ------------
    Total Assets                           $14,356,000    $15,790,000
                                           ============   ============


   Liabilities and Shareholders' Equity

Current liabilities:
  Accounts payable                         $   522,000    $ 1,196,000
  Accrued expenses                           1,435,000      1,370,000
  Income taxes payable                              --        200,000
                                           ------------   ------------
    Total current liabilities                1,957,000      2,766,000

Other long-term liabilities                      4,000             --
                                           ------------   ------------
    Total liabilities                        1,786,000      2,766,000
                                           ------------   ------------
Shareholders' equity:
  Common shares, $.01 par value, authorized
   40,000,000 shares, 10,158,000 and
   10,134,000 issued and outstanding        13,413,000     13,369,000
  Accumulated deficit                       (1,018,000)      (345,000)
                                           ------------   ------------
    Shareholders' equity                    12,395,000     13,024,000
                                           ------------   ------------
    Total Liabilities and Shareholders'
     Equity                                $14,356,000    $15,790,000
                                           ============   ============
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