Avitar Reports 50% Increase in Second Quarter 2001 Revenues Over Comparable 2000 Quarter

May 15, 2001

CANTON, Mass., May 15 /PRNewswire/ -- Avitar, Inc. (Amex: - news) today reported financial results for its second fiscal quarter ended March 31, 2001.

Revenues for the quarter increased approximately 50% to $1.2 million, compared with $812,545 for the second fiscal quarter of 2000. The net loss for the quarter ended March 31, 2001 was $1.6 million, or $0.09 per share, including cumulative effect of accounting charges, compared with a net loss of $1.8 million, or $0.08 per share, for the same period last year. Regarding this quarter's $0.09 loss per share, $0.03 per share is attributable to accounting charges for warrant valuations and original discounts related to preferred stock issuances.

For the six months ended March 31, 2001, revenues were $2.4 million, compared with revenues of $1.6 million for the same period last year. The net loss for the six months ended March 31, 2001 was $3.2 million, or $0.18 per share, including cumulative effect of accounting charges, compared with a net loss of $3.0 million, or $0.13 per share, for the comparable period last year. Regarding the six months $0.18 loss per share, $0.07 per share is attributable to accounting charges for warrant valuations and original discounts related to preferred stock issuances.

``We are pleased with our second quarter results, particularly our revenue increase primarily due to the continued acceptance in the worldwide marketplace of our ORALscreen(TM) rapid test,'' said Peter P. Phildius, Avitar's Chairman and Chief Executive Officer. ``We also began a partnership with Pinkerton this quarter, where both their in-house use of ORALscreen, as well as our joint efforts in offering customers a complete drug testing program should provide significant revenue opportunities in the future.''

Phildius added, ``We were also pleased with our approximate 10% loss reduction from last year's comparable quarter, a direct reflection of additional sales achieved with the infrastructure already in place, in addition to a more profitable product mix and ongoing productivity improvements.''

Phildius closed, ``We are optimistic that we can build upon these results, and that through new product introductions, strategic alliances, and increased demand, we are positioned to continue our strong momentum in the second half of this fiscal year. We still hold the lead market position as the only company offering the total package with our range of products in both oral fluid and hair as an alternative to uncomfortable and costly urine and blood alternatives.''

Conference Call Today

Avitar, Inc. will hold its quarterly results conference call for the second quarter ending March 31, 2001, at 11:00 a.m. (Eastern Time) today. During the call, Chairman and Chief Executive Officer Peter P. Phildius and Chief Financial Officer J.C. Leatherman, Jr. will discuss quarterly financial results and be available to answer questions about other topics related to Avitar's strategy and opportunities. At 10:50 a.m. E.T., interested participants should call in the U.S. or internationally. There will also be a live Webcast of the call on the Investor Relations section of Avitar's Web site at avitarinc.com.

ABOUT AVITAR

Avitar, Inc. (Amex: - news) headquartered in Canton, Massachusetts, develops, manufactures and markets innovative medical devices based on proprietary core technologies for two distinctive markets: oral fluid diagnostics and customized polyurethane applications used in the wound dressing industry. Oral fluid diagnostics includes both the drugs-of-abuse testing market estimated to be worth $1.5 billion encompassing the corporate workplace and criminal justice markets and the $20 billion clinical diagnostics market. Avitar's products include ORALscreen(TM), the world's first non-invasive, rapid, onsite oral fluid test for drugs-of-abuse, and HAIRscreen(TM) a laboratory based hair test for detecting long-term drug abuse. Additionally, the company manufactures and markets HYDRASORB(TM), an absorbent topical dressing for moderate to heavy exudating wounds. In 2001, the company formed strategic partnerships with DIPRO Diagnostic Products GmbH, Pinkerton Security Group, and also acquired Texas-based BJR Security Service, a provider of canines trained to detect narcotics, explosives and firearms for markets that include education and the oil and petroleum industry.

For more information, see Avitar's website at avitarinc.com.

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.

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

                           Quarter Ended March 31,  Six Months Ended March 31,
                             2001          2000         2001          2000
    Sales                   $1,230         $ 812       $2,399        $1,620

    Operating Expenses:
     Cost of Sales             804           720        1,688         1,345
     Selling, General
      and Administrative     1,434         1,492        2,813         2,484
     Research and Development  510           317          945           643
     Amortization of Goodwill   73            70          144           141

     Total Operating
      Expenses               2,821         2,599        5,590         4,613

    Operating Loss          (1,591)       (1,787)      (3,191)       (2,993)

    Other Income(Expenses)     (16)           (2)         (27)           (6)

    Net Loss               $(1,607)      $(1,789)     $(3,218)      $(2,999)

    Basic and Diluted Loss Per Share:
     Before accounting charges
      for warrant valuations
      and original discounts
      related to preferred
      stock issuances       $(0.06)       $(0.08)      $(0.11)      $ (0.13)

     Accounting charges for
      warrant valuations and
      original discounts
      related to preferred
      stock issuances        (0.03)            -        (0.07)            -

     Total Basic and
      Diluted Loss
      Per Share             $(0.09)       $(0.08)      $(0.18)      $ (0.13)

    Weighted Average
     Number of Shares
     and Common
     Equivalent Shares
     Outstanding        32,266,751    26,423,839   31,543,808    25,581,927


    Selected Balance Sheet Items:
                                                     3/31/01        9/30/00


    Cash                                                 312             82
    Total Assets                                       4,908          4,686
    Total Liabilities                                  2,335          2,199
    Shareholders' Equity                               2,573          2,487

    Total Current Assets                               1,753          1,585
    Total Current Liabilities                          2,309          2,128