Avitar Reports Second Quarter Financial Results for Fiscal 2007

CANTON, Mass., May 15  /PRNewswire-FirstCall/ -- Avitar, Inc. (OTC Bulletin Board: AVTI) today announced financial results for the three and six months ended March 31, 2007.

For the quarter ended March 31, 2007, Avitar reported revenues of $713,000 from continuing operations compared to $1,175,000 from continuing operations for the quarter ended March 31, 2006.  The loss from continuing operations amounted to $886,000 versus $1,015,000.  The net loss was $899,000 or $0.05 per share, for the quarter ended March 31, 2007 compared with net loss of $1,035,000, or $0.25 per share for the quarter ended March 31, 2006.  The reduction in net loss for the quarter ended March 31, 2007 compared to the quarter ended March 31, 2006 resulted primarily from an increase in non-cash income from the change in the fair market value of derivative securities and warrants of $400,000 and a decrease in operating expenses of $340,000, offset in part by higher interest and financing costs related to short-term and long- term borrowings of $160,000 that took place in since April 2006 and a reduction in revenue of $464,000.

Revenues from continuing operations for the first half of fiscal 2007 were $1,662,000 compared to $1,960,000 from continuing operations for the six months ended March 31, 2006.  The loss from continuing operations amounted to $1,806,000 versus $1,993,000.  The net loss was $1,842,000 or $0.12 per share, for the six months ended March 31, 2007 compared with net loss of $1,927,000, or $0.48 per share, for the six months ended March 31, 2006.   The change in net loss for the six months ended March 31, 2007 compared to the corresponding period of Fiscal 2006 resulted primarily from an increase in non-cash income from the change in the fair market value of derivative securities and warrants of $385,000 and a decrease in operating expenses of $356,000, offset in part by higher interest and financing costs related to short-term and long-term borrowings of $257,000 that took place in since April 2006, a reduction in revenue of $298,000 and a decrease in income from discontinued operations of $102,000.

Peter P. Phildius, Chairman and CEO commented, "Our revenue shortfall was almost entirely caused by a reduction in our foam products sales.  This is primarily attributed to the transition to our new distributor for the Hydrasorb product line.  It is expected that as our new distributor completes its introduction and works through the previous distributor's inventory, we will regain our volume in the foam business."

Mr. Phildius continued, "Our oral fluid diagnostics business continues to gain traction in the marketplace.  We have restructured our sales and marketing activities to more efficiently grow the business and the early results are encouraging.  There continues to be a growing excitement for oral fluid diagnostic products and services and our point-of-care, oral fluid diagnostic technology positions us well to reap significant benefits from this growing trend.

ABOUT AVITAR

Avitar, Inc. develops, manufactures and markets innovative and proprietary products in the oral fluid diagnostic market, disease and clinical testing market, and customized polyurethane applications used in the wound dressing industry. Oral fluid diagnostics includes the estimated $1.5 billion drugs-of- abuse testing market, which encompasses the corporate workplace and criminal justice markets. Avitar's products include ORALscreen(TM), the world's first non-invasive, rapid, onsite oral fluid test for drugs-of-abuse. Additionally, Avitar manufactures and markets HYDRASORB(TM) an absorbent topical dressing for moderate to heavy exudating wounds. In the estimated $25 billion in vitro diagnostics market, Avitar is developing diagnostic strategies for disease and clinical testing. Some examples include influenza, diabetes and pregnancy. For more information, see Avitar's website at http://www.avitarinc.com/.

Safe Harbor Statement. This release contains forward looking statements that are subject to risks and uncertainties including the development and marketing of new applications and other risks that are detailed from time to time in the Company's filings with the Securities and Exchange Commission. In view of such risks and uncertainties, the Company's actual results could differ materially from those anticipated in such forward looking statements

  Company Contact: Jay C. Leatherman, CFO
                   Avitar, Inc.
                   781-821-2440 x139
                   http://www.avitarinc.com/

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  Avitar, Inc.
  Summary of Financial Results
  (in thousands, except per share amounts)

                                         Quarter Ended     Six Months Ended
                                           March 31,           March 31,
                                        2007      2006       2007      2006

  Sales                                 $713    $1,175     $1,662    $1,960

  Operating Expenses:
      Cost of Sales                      574       804      1,241     1,370
      Selling, General and
       Administrative                    888       972      1,787     1,948
      Research and Development            81       109        173       239

      Total Operating Expenses         1,543     1,885      3,201     3,557

  Operating Loss                        (830)     (710)    (1,539)   (1,597)

  Other Income (Expenses)                (56)     (305)      (267)     (396)

  Loss from Continuing Operations       (886)   (1,015)    (1,806)   (1,993)

  Discontinued Operations:
      Loss from the Operations of BJR    (13)      (20)       (36)      (54)
      Income from the Disposal of USDTL    -         -          -       120
      Income (Loss) from Discontinued
       Operations                        (13)      (20)       (36)       66

  Net Loss                             $(899)  $(1,035)   $(1,842)  $(1,927)

  Basic and Diluted Loss Per Share
   from Continuing Operations         $(0.05)   $(0.24)    $(0.12)   $(0.49)
  Basis and Diluted Income Per Share
   from Discontinued Operations            -     (0.01)         -      0.01

  Basic and Diluted Loss Per Share    $(0.05)   $(0.25)    $(0.12)   $(0.48)

  Weighted Average Number of
   Shares and Common Equivalent
   Shares Outstanding             19,796,871 4,381,414 15,800,253 4,211,563

  Selected Balance Sheet
   Items:                              3/31/07
           Cash                             23
           Total Assets                  1,724
           Total Liabilities             8,246
           Redeemable Convertible and
            Convertible Preferred Stock  3,197
           Shareholders' Deficit        (9,719)


DATASOURCE: Avitar, Inc.



CONTACT:  Jay C. Leatherman, CFO of Avitar, Inc., [phone] ext.

139



Web site:  http://www.avitarinc.com/ 

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