Avitar Reports Record Revenues in Fourth Quarter 2001 With 97% Increase Over Previous Year's Quarter

-- Revenues Increased 60% Over Previous Year --

December 31, 2001

CANTON, Mass., Dec. 28 /PRNewswire/ -- Avitar, Inc. (AMEX: - ) today reported financial results for its fourth quarter and fiscal year ended September 30, 2001.

Revenues for the fourth quarter increased 97% to $2.3 million, compared with revenues of $1.2 million for the fourth quarter ended September 30, 2000. The fourth quarter 2001 net loss of $1.5 million, or $0.04 per share, was approximately 7% lower compared with a loss of $1.7 million, or $0.05 per share, for the same period last year.

For the year ended September 30, 2001, revenues increased approximately 60% to $6.5 million, compared with revenues of $4.1 million for the previous year ended September 30, 2000. The net loss for the year ended September 30, 2001 was $6.1 million, or $0.26 per share, compared with a net loss of $6.4 million, or $0.26 per share, for the previous year. Of this year's $0.26 loss per share, $0.08 per share is attributable to accounting charges for warrant valuations and original discounts related to preferred stock issuances, compared to the previous fiscal year in which the effect for the same charges was $0.03 per share.

``The revenue records set for quarterly and annual sales reflect Avitar's ongoing growth in most segments of our business,'' said Peter P. Phildius, Avitar's Chairman and Chief Executive Officer. ``More importantly, we expect our strong revenue growth to continue in this quarter ended December 31, 2001 and beyond as we begin to realize the significant revenue impact from new partners added in 2001.''

Phildius added, ``We began to realize increased revenues in the fourth quarter from our new partner, ChoicePoint (NYSE: - ). Moreover, we added hundreds of new direct customers during the year as our ORALscreen(TM) drugs- of-abuse products gained broad market acceptance.''

Phildius continued, ``Our gross profit margin for Fiscal 2001 improved to 35% from 24% which reflects volume leverage as well as a shift in product line mix to higher margin products such as ORALscreen. Our moderate increase in Research & Development was due to our continued development of our drugs-of- abuse product line. Our rise in Selling, General and Administrative expenses reflected our continued building of infrastructure to accommodate heightened revenues, as well as the addition of BJR.''

Phildius concluded, ``Our continued growth in the fourth quarter performance sets the stage for a promising 2002. Our plans for 2002 include several new product launches, product improvements, and full implementation of programs with our strategic partners. We are optimistic that our drugs-of- abuse products will continue to sustain our significant growth in the $1.5 billion Substance Abuse market. Lastly, although we do not project any contribution to revenues for the In-Vitro Diagnostics business in 2002, we are optimistic that our investment in this business will produce exciting opportunities for the future of Avitar in 2002 and beyond.''

About Avitar

Avitar, Inc. (AMEX: - ) headquartered in Canton, Massachusetts, is a diagnostics company that develops, manufactures and markets innovative and proprietary medical devices in two major areas: the oral fluid drugs-of-abuse market and the disease & clinical testing market. Oral fluid diagnostics includes the drugs-of-abuse testing market estimated to be worth $1.5 billion encompassing 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, and HAIRscreen(TM), a laboratory-based hair test for detecting long-term drug abuse. In the $20 billion disease & clinical testing market, Avitar is currently developing products that will address the conditions of Lyme disease, influenza and diabetes, as well as pregnancy. For more information, see Avitar's website at 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.

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

                             Quarter Ended Sept. 30,     Year Ended Sept. 30,
                              2001          2000         2001          2000
    Sales                   $2,274        $1,153       $6,542        $4,079

    Operating Expenses:
     Cost of Sales           1,502           733        4,263         3,095
     Selling, General and
      Administrative         1,670         1,535        6,064         5,491
     Research and Development  557           473        1,959         1,566
     Amortization of Goodwill   77            71          298           282

     Total Operating
      Expenses               3,806         2,812       12,584        10,434

    Operating Loss         (1,532)       (1,659)      (6,042)       (6,355)

    Other Income (Expenses)   (10)           (1)         (47)           (6)

    Net Loss              $(1,542)      $(1,660)     $(6,089)      $(6,361)

    Basic and Diluted Loss Per Share:
     Before accounting charges
      for warrant valuations and
      original discounts related
      to preferred stock
      issuances            $(0.04)       $(0.05)      $(0.18)       $(0.23)

    Accounting charges for warrant valuations
     and original discounts
     related to preferred
     stock issuances             -             -       (0.08)        (0.03)

    Total Basic and Diluted
     Loss Per Share        $(0.04)       $(0.05)      $(0.26)       $(0.26)


    Weighted Average Number of Shares and
     Common Equivalent
      Shares
      Outstanding       35,125,300    31,028,037   32,553,839    27,565,388



    Selected Balance Sheet Items:
                                         9/30/01      9/30/00
    Cash                                     245           82
    Total Assets                           5,055        4,686
    Total Liabilities                      2,981        2,199
    Shareholders' Equity                   2,073        2,487