Avitar Reports Second Quarter Fiscal 2002 Financial Results

- ORALscreen(TM) Sales Activity Gaining Momentum -

May 14, 2002

CANTON, Mass., May 14 /PRNewswire-FirstCall/ -- Avitar, Inc. (Amex: - ) today announced financial results for the three and six months ended March 31, 2002.

Revenues for the second quarter of fiscal 2002 were $2.2 million, an increase of 81% over revenues of $1.2 million in the prior year's second fiscal quarter ended March 31, 2001. Net loss narrowed to $1.2 million, or $0.03 per share, from a loss of $1.6 million, or $0.09 per share, which prior period included $0.03 per share attributable to accounting charges for warrant valuations and original discounts related to issuance of preferred stock.

For the six months ended March 31, 2002, Avitar reported revenues of $5.5 million, compared with $2.4 million in the same period the previous year. The Company also noted that total sales for fiscal year 2001 were $6.5 million, thus in six months of the current fiscal year, the Company has achieved 80% of what their revenues were for the entire fiscal year 2001. Net loss was $1.6 million, or $0.04 a share, compared with net loss of $3.2 million, or $0.18 a share, which prior period included an accounting charge of $0.07 a share for warrant valuations and original discounts related to preferred stock issuances in the six months ended March 31, 2001.

In commenting on the Company's financial results Peter P. Phildius, Avitar's Chairman and Chief Executive Officer said, "Despite the anticipated seasonally challenging results of this quarter, we are encouraged by the significant progress we have made laying the foundation for the future growth of ORALscreen(TM), our oral fluid-based drugs of abuse test. During the quarter we aggressively stepped up sales force training of our partners, conducting sessions for approximately 70 sales people during the quarter, the benefits of which should be evidenced in our results during the second half of our fiscal year. Our partners have added several Fortune 1,000 companies to the customer base. We feel comfortable that the conversion from urine-based testing to the more dignified oral fluid-based testing in the employment marketplace is starting to gain traction as many more important companies are moving along the sales cycle," Mr. Phildius added.

During the second quarter of fiscal 2002, the Company raised $1.2 million through the successful conversion of various warrants held by existing investors and continues to pursue activities intended to improve its balance sheet.

The Company noted that its ORALscreen OSR, a hand-held instrument capable of reading and interpreting the results of Avitar's current ORALscreen test in 2 minutes or less, will be ready for market launch in the coming weeks. This new product is designed to provide quick and accurate results using the ORALscreen POCT device and will provide capabilities to the customer for recording, reporting and managing information utilizing various communication channels and storage medium.

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, and HAIRscreen(TM), a laboratory-based hair test for detecting long-term drug 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 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 March 31,  Six Months Ended March 31,
                              2002         2001          2002          2001
    Sales                   $2,231        $1,230       $5,473        $2,399

    Operating Expenses:
      Cost of Sales          1,509           804        3,147         1,688
      Selling, General and
       Administrative        1,599         1,434        3,108         2,813
      Research and
       Development             275           510          667           945
      Amortization of
       Goodwill                 77            73          155           144

      Total Operating
       Expenses              3,460         2,821        7,077         5,590

    Operating Loss          (1,229)       (1,591)      (1,604)       (3,191)

    Other Income (Expenses)    (16)          (16)         (20)          (27)

    Net Loss               $(1,245)      $(1,607)      $1,624)      $(3,218)

    Basic and Diluted Loss
     Per Share:
      Before accounting
       charges for warrant
       valuations and
       original discounts
       related to preferred
       stock issuances      $(0.03)       $(0.06)      $(0.04)       $(0.11)

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

      Total Basic and
       Diluted Loss
       Per Share            $(0.03)       $(0.09)      $(0.04)       $(0.18)

    Weighted Average Number
     of Shares and Common
     Equivalent Shares
     Outstanding        42,638,768    32,266,751   40,706,019    31,543,808


    Selected Balance Sheet Items:
                                          3/31/2002       9/30/2001
      Cash                                    930             245
      Total Assets                          5,418           5,055
      Total Liabilities                     2,378           2,981
      Shareholders' Equity                  3,040           2,073