Avitar Reports Third Quarter Financial Results for Fiscal 2006

CANTON, Mass., Aug. 14  /PRNewswire-FirstCall/ -- Avitar, Inc. (OTC:AVTI.OB) (BULLETIN BOARD: AVTI.OB)  has released its financial results for the three and nine months ended June 30, 2006.

For the quarter ended June 30, 2006, Avitar reported revenues of $1,309,000 from continuing operations compared to $1,233,000 from continuing operations for the quarter ended June 30, 2005.  The loss from operations amounted to $722,000 versus $1,068,000.  The net loss was $1,329,000 or $0.31 per share, for the quarter ended June 30, 2006 compared with net loss of $459,000, or $0.50 per share for the quarter ended June 30, 2005.  The increase in the net loss for the quarter ended June 30, 2006 compared to the quarter ended June 30, 2005 resulted primarily from higher interest and financing costs related to short-term and long-term borrowings that took place since April 2005, non-cash interest expense in connection with the warrant replacement that occurred in May 2006 and non-cash expense from the reduction in the fair market value of derivative securities and warrants.

Revenues from continuing operations for the first nine months of fiscal 2006 were $3,513,000 compared to $3,224,000 from continuing operations for the nine months ended June 30, 2005.  The loss from operations amounted to $2,372,000 versus $2,852,000.  The net loss was $3,256,000 or $0.79 per share, for the nine months ended June 30, 2006 compared with net loss of $2,088,000, or $1.50 per share, for the nine months ended June 30, 2005.  The increase in the net loss for the nine months ended June 30, 2006 compared to the corresponding period of Fiscal 2005 resulted primarily from higher interest and financing costs related to short-term and long-term borrowings that took place since April 2005, non-cash interest expense in connection with the warrant replacement that occurred in May 2006 and non-cash expense from the reduction in the fair market value of derivative securities and warrants, offset in part by income from discontinued operations of $120,000.

"We continue to see the benefits of our marketing strategy of communicating the value of random testing to deter drug use in the workplace," said Peter P. Phildius, Chairman and CEO.  "Informing the corporate markets about the more than $140 billion cost of drug use in the workplace is key to our growth, as evidenced by the very positive responses to our industry specific Roundtables, which we have conducted."

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

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

   The Investor Relations Group
   Investors:
   Erika Moran / Tom Caden, 212-825-3210
   
   

   Media:
   Susan Morgenbesser, 212-825-3210
   



  Avitar, Inc.
  Summary of Financial Results
  (in thousands, except per share amounts)
                                   Quarter Ended        Nine Months Ended
                                      June 30,               June 30,
                                 2006        2005        2006      2005
  Sales                        $1,309      $1,233      $3,513    $3,224

  Operating Expenses:
   Cost of Sales                  972         911       2,531     2,341
   Selling, General
    and Administrative            948       1,209       3,005     3,174
   Research and Development       110         181         349       561

   Total Operating Expenses     2,030       2.301       5,885     6,076

  Operating Loss                 (722)     (1,068)     (2,372)   (2,852)

  Other Income (Expenses)        (607)        609      (1,004)      764

  Loss from Continuing
   Operations                  (1,329)       (459)     (3,376)   (2,088)

  Discontinued Operations:
   Income from the Disposal
    of USDTL                        -           -         120         -
   Income (Loss) from
    Discontinued Operations         -           -         120         -

  Net Loss                    $(1,329)      $(459)    $(3,256)  $(2,088)

  Basic and Diluted Loss
   Per Share from
   Continuing Operations       $(0.31)     $(0.50)     $(0.81)   $(1.50)
  Basis and Diluted Income
   Per Share from
   Discontinued Operations          -           -        0.02         -

  Basic and Diluted
   Loss Per Share              $(0.31)     $(0.50)     $(0.79)   $(1.50)

  Weighted Average Number
   of Shares and Common
   Equivalent Shares
   Outstanding              4,480,981   3,211,978   4,301,369 2,924,128

  Selected Balance Sheet
   Items:                     6/30/06
     Cash                          36
     Total Assets               1,855
     Total Liabilities          6,472
     Redeemable Convertible
      and Convertible
      Preferred Stock           2,875
     Shareholders' Deficit     (7,493)


DATASOURCE: Avitar, Inc.



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

; or Investors: Erika Moran,

, or Tom Caden,

, both of The Investor Relations Group at

[phone]; or Media: Susan Morgenbesser of The Investor Relations Group,

[phone], 



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

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