Revenues Up 36% For the Quarter CANTON, Mass., May 16 /PRNewswire-FirstCall/ -- Avitar, Inc. (OTC Bulletin Board: AVTI.OB) today announced financial results for the three and six months ended March 31, 2006. For the quarter ended March 31, 2006, Avitar reported that revenues from continuing operations increased 36% to $1,297,000 from $955,000 from continuing operations for the quarter ended March 31, 2005. The loss from operations amounted to $730,000 versus $974,000. The net loss was $1,035,000 or $0.25 per share, for the quarter ended March 31, 2006 compared with net loss of $286,000, or $0.11 per share for the quarter ended March 31, 2005. The increase in the net loss for the quarter ended March 31, 2006 compared to the quarter ended March 31, 2005 resulted primarily from higher interest and financing costs related to short-term and long-term borrowings that took place since April 2005 and non-cash expense from the reduction in the fair market value of derivative securities and warrants. Revenues from continuing operations for the first half of fiscal 2006 were $2,204,000 compared to $1,991,000 from continuing operations for the six months ended March 31, 2005. The loss from operations amounted to $1,651,000 versus $1,783,000. The net loss was $1,927,000 or $0.51 per share, for the six months ended March 31, 2006 compared with net loss of $1,629,000, or $1.00 per share, for the six months ended March 31, 2005. The increase in the net loss for the six month ended March 31, 2006 compared to the corresponding period of Fiscal 2006 resulted primarily from higher interest and financing costs related to short-term and long-term borrowings that took place since April 2005 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. Peter P. Phildius, Chairman and CEO commented, "The increased traction of our random testing value proposition is starting to be reflected in the growth of our revenue as well as our client base." Mr. Phildius continued, "Our efforts to optimize our marketing and sales resources are enabling us to communicate more effectively to the work place market the benefits of random drug testing with our point-of-care oral fluid technology. Random testing has been shown to be the most effective way to reduce the cost of drug abuse in the work place which currently costs U.S. industry more than $140 Billion annually." 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 Avitar, Inc. 781-821-2440 Ext. 139 http://www.avitarinc.com/ Avitar, Inc. Summary of Financial Results (in thousands, except per share amounts) Quarter Ended March 31, Six Months Ended March 31, 2006 2005 2006 2005 Sales $1,297 $ 955 $2,204 $1,991 Operating Expenses: Cost of Sales 900 715 1,559 1,430 Selling, General and Administrative 1,018 1,031 2,057 1,964 Research and Development 109 183 239 380 Total Operating Expenses 2,027 1,929 3,855 3,774 Operating Loss (730) (975) (1,651) (1,783) Other Income (Expenses) (305) 688 (396) 154 Loss from Continuing Operations (1,035) (286) (2,047) (1,629) Discontinued Operations: Income from the Disposal of USDTL - - 120 - Income (Loss) from Discontinued Operations - - 120 - Net Loss $(1,035) $(286) $(1,927) $(1,629) Basic and Diluted Loss Per Share from Continuing Operations $(0.25) $(0.11) $(0.51) $(1.00) Basic and Diluted Income Per Share from Discontinued Operations - - 0.03 - Basic and Diluted Loss Per Share $ (0.25) $(0.11) $(0.48) $(1.00) Weighted Average Number of Shares and Common Equivalent Shares Outstanding 4,381,414 2,964,149 4,211,563 2,780,826 Selected Balance Sheet Items: 3/31/06 Cash 43 Total Assets 2,087 Total Liabilities 5,417 Redeemable Convertible and Convertible Preferred Stock 2,921 Shareholders' Deficit (6,251) DATASOURCE: Avitar, Inc. CONTACT: Jay C. Leatherman of Avitar, Inc., +1-781-821-2440 Ext. 139, Web site: http://www.avitarinc.com/

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