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Avitar Reports Fourth Quarter and Fiscal Year 2007 Financial Results
Date:12/28/2007

CANTON, Mass., Dec. 28 /PRNewswire-FirstCall/ -- Avitar, Inc. (OTC Bulletin Board: AVTI) today announced financial results for the three and 12 months ended September 30, 2007.

For the year ended September 30, 2007, Avitar reported revenues of $3,106,000 from continuing operations compared to $4,519,000 from continuing operations for the year ended September 30, 2006. The operating loss from continuing operations amounted to $2,733,000 versus $2,893,000. The net loss was $2,260,000, or $0.09 per basic and diluted share, for the year ending September 30, 2007 compared with a net loss of $3,703,000, or $0.80 per basic and diluted share, for the year ended September 30, 2006. The changes in net loss for Fiscal 2007 occurred primarily from an increase in non-cash income from the change in the fair value of derivative securities and warrants of $1,090,000, a decrease in operating expenses of $1,573,000 resulting from the reduced sales volume and an expense reduction program implemented in April 2007, lower interest and financing costs related to short-term and long-term borrowings of $96,000 and a decrease in the loss from discontinued operations of $97,000, offset in part by a reduction in sales of $1,413,000 due mainly to the transition to a new distributor for the Hydrasorb(R) wound dressing products.

Revenues from continuing operations for the fourth quarter of fiscal 2007 were $666,000 compared to $1,357,000 from continuing operations in the prior year's fourth fiscal quarter ended September 30, 2006. The operating loss from continuing operations amounted to $596,000 versus $600,000. The net loss was $718,000, or $0.02 per basic and diluted share, for the quarter ended September 30, 2007 compared with net loss of $447,000, or $0.08 per basic and diluted share, for the quarter ended September 30, 2006. The net loss for the quarter ended September 30, 2007 reflected a reduction in sales of $691,000 due mainly to the transition to a new distributor for the Hydrasorb(R) wound dressing products, increases in interest and financing costs of $109,000 related to the long-term debt borrowings undertaken during fiscal 2007, a reduction in non-cash income of $360,000 resulting from changes in fair market value of derivative securities and warrants, offset in part by lower operating expenses of $696,000 resulting from the reduced sales volume and an expense reduction program implemented in April 2007 and a decrease in the loss from discontinued operations of $194,000.

Peter P. Phildius, Chairman and CEO commented, "Despite our capital constraints we continue our efforts to grow the Company. As previously reported, we are positioning our oral fluid, drugs of abuse product line, Oralscreen, to address the needs of larger employers across several industry sectors. Particularly in the construction vertical market where the incidence of drug abuse has reached as high as 20%, we are beginning to see traction from our sales and marketing efforts."

Mr. Phildius continued, "As we have previously noted, our foam business continues to be negatively impacted by the lack of sales by the new distributor of our Hydrasorb product line. We are working to develop new distribution channels for Hydrasorb and, in addition, we are expanding our customer base in the foam product area to reduce our dependence in the future on our branded Hydrasorb product line."

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

Avitar, Inc.

Summary of Financial Results

(in thousands, except per share amounts)

Quarter Year

Ended September 30, Ended September 30,

2007 2006 2007 2006

Sales $666 $1,357 $3,106 $4,519

Operating Expenses:

Cost of Sales 466 899 2,269 3,144

Selling, General and

Administrative 732 913 3,260 3,774

Research and

Development 64 145 310 494

Total Operating

Expenses 1,262 1,957 5,839 7,412

Operating Loss (596) (600) (2,733) (2,893)

Other Income (Expenses) (121) 348 530 (656)

Loss from Continuing

Operations (717) (252) (2,203) (3,549)

Discontinued Operations:

Loss from the

operations of BJR (1) (195) (57) (274)

Income from the

Disposal of USDTL - - - 120

Loss from

Discontinued

Operations (1) (195) (57) (154)

Net Loss $(718) $(447) $(2,260) $ (3,703)

Basic and Diluted Loss

Per Share From

Continuing Operations $(0.02) $(0.05) $(0.09) $(0.77)

Basic and Diluted Net

Loss Per Share $(0.02) $(0.08) $(0.09) $(0.80)

Weighted Average

Number of Shares and

Common Equivalent

Shares Outstanding 37,341,177 6,482,942 26,479,234 4,850,608

Selected Balance Sheet

Items-9/30/07:

Cash $94

Total Assets 1,748

Total Liabilities 8,377

Redeemable

Convertible

Preferred Stock 3,216

Shareholders' Deficit (9,846)


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SOURCE Avitar, Inc.
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