Avitar Reports Third Quarter Fiscal 2002 Financial Results

Product Launch in Quarter Sets Stage for Future Growth

August 14, 2002

CANTON, Mass., Aug. 14 /PRNewswire-FirstCall/ -- Avitar, Inc. (Amex: - ) today announced financial results for the three and nine months ended June 30, 2002. Revenues for the third quarter of fiscal 2002 were $2.2 million, an increase of 19% over revenues of $1.9 million in the prior year's third fiscal quarter ended June 30, 2001. Operating loss narrowed to $1.1 million in the June quarter, from $1.3 million in the third quarter of fiscal 2001. Net loss was $1.2 million, or $0.03 per share, compared with net loss of $1.3 million, or $0.04 per share.

For the nine months ended June 30, 2002, Avitar reported revenues of $7.7 million, up approximately 81% from $4.3 million in the same period the previous year. Net loss was $2.8 million, or $0.07 a share, compared with net loss of $4.5 million, or $0.22 a share. Net loss per share for the nine months ended June 30, 2001 included an accounting charge of $0.07 a share for warrant valuations and original discounts related to preferred stock issuances.

"We are encouraged by the reception our ORALscreen(TM) OSR product has received in the marketplace, commented Peter P. Phildius, Avitar's Chairman and Chief Executive Officer. "The OSR is an instrument that automates the analysis of our ORALscreen rapid drugs-of-abuse test and has the capability of storing and transmitting test results to remote locations. Launched at the very end of the June quarter, we expect this product to stimulate sales in the coming months."

Avitar noted that the recent U.S. Supreme Court decision, which permits drugs-of-abuse testing under certain circumstances in high schools, presents a compelling opportunity for the Company. "We are developing our marketing plan to reach school districts throughout the country," Mr. Phildius continued. "There are approximately 15,000 school districts across the United States, and we can bring testing with dignity to their students. We are also aggressively seeking to raise funds in order to support Avitar's continued growth."

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.

   (Tables to follow)

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

                          Quarter Ended June 30,  Nine Months Ended June 30,
                             2002          2001          2002          2001
    Sales                   $2,233        $1,869       $7,707        $4,268

    Operating Expenses:
    Cost of Sales            1,274         1,073        4,421         2,761
    Selling, General
     and Administrative      1,692         1,580        4,800         4,394
    Research and Development   334           457        1,001         1,402
    Amortization of Goodwill    77            77          232           221

    Total Operating
     Expenses                3,377         3,187       10,454         8,778

    Operating Loss         (1,144)       (1,318)      (2,747)       (4,510)

    Other Income(Expenses)     (9)          (11)         (29)          (37)

    Net Loss              $(1,153)      $(1,329)     $(2,776)      $(4,547)

    Basic and Diluted Loss Per Share:
     Before accounting charges for warrant
      valuations and original discounts related
       to preferred stock
        issuances          $(0.03)       $(0.04)      $(0.07)      $ (0.15)

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

    Total Basic and
     Diluted Loss
      Per Share            $(0.03)       $(0.04)      $(0.07)      $ (0.22)


    Weighted Average Number of Shares
     and Common Equivalent Shares
      Outstanding       44,605,933    33,459,667   42,006,575    31,768,656



   Selected Balance Sheet Items:
                                                      6/30/02         9/30/01
    Cash                                                 250            245
    Total Assets                                       5,059          5,055
    Total Liabilities                                  3,111          2,981
    Shareholders' Equity                               1,947          2,073