CANTON, Mass., May 15 /PRNewswire-FirstCall/ -- Avitar, Inc. (Amex: - ) today reported financial results for its second fiscal quarter ended March 31, 2003.

Revenues for the second quarter of fiscal 2003 were $1.4 million compared to revenues of $2.2 million for the second quarter of fiscal 2002. As indicated in the 10-QSB Report filed today by the Company for the quarter ended March 31, 2003, the Company intends to continue its efforts to expand revenues because it believes that a significant opportunity exists for its ORALscreen products in the drugs-of-abuse testing market. The second quarter 2003 net loss of $1.1 million, or $0.02 per share, before the cumulative effect of a change in accounting principle related to goodwill, was less than the loss of $1.2 million, or $0.03 per share, for the second quarter 2002. The net loss for the second quarter 2003 after the cumulative effect of a change in accounting principle for goodwill was $1.7 million, or $.03 per share.

Revenues for the six months ended March 31, 2003 were $3.3 million compared to revenues of $5.5 million for the corresponding period of fiscal 2002 (which included approximately $2.0 million of purchases my a major customer to fulfill the initial terms of its agreement with Avitar). The net loss for the six months ended March 31, 2003 was $2.1 million, or $0.04 per share before the cumulative effect of a change in accounting principle related to goodwill compared to the net loss of $1.6 million, or $0.04 per share, for the six months ended March 31, 2002. The net loss for the six months ended March 31, 2003 after the cumulative effect of a change in accounting principle for goodwill was $2.7 million, or $.05 per share.

"In light of the lower than expected revenues, we have taken steps to reduce our expense level," said Peter P. Phildius, Chairman. "Our strategy is to alter our expense mix by transforming our fixed costs to a variable basis without jeopardizing the long-term opportunities in our oral fluid drugs-of- abuse diagnostics business. The benefits of this cost reduction program were reflected partly during our Second Fiscal Quarter and will be more fully reflected during the balance of our Fiscal Year."

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. 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 financing risks and 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:
     Avitar, Inc.
     Jay Leatherman
     
     
     avitarinc.com


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


                           Quarter Ended March 31,  Six Months Ended March 31,
                                  2003        2002        2003        2002
        Sales                   $1,415      $2,231      $3,289      $5,473

        Operating Expenses:
            Cost of Sales          943       1,509       2,134       3,147
            Selling,
             General and
             Administrative      1,190       1,599       2,534       3,108
            Research and
             Development           237         275         510         667
            Amortization of
             Goodwill                -          77           -         155

            Total Operating
             Expenses            2,370       3,460       5,178       7,077

        Operating Loss            (955)     (1,229)     (1,889)     (1,604)

        Other
         Income(Expenses)         (129)        (16)       (204)        (20)

        Net Loss Before
         Cummulative Effect
         of a Change in
         Accounting
         Principal              (1,084)     (1,245)     (2,093)     (1,624)

        Cummulative Effect
         of a Change in
         Accounting
         Principal for
         Goodwill                 (650)          -        (650)          -

        Net Loss               $(1,734)    $(1,245)    $(2,743)    $(1,624)

        Basic and Diluted
         Loss Per Share
            before
             cumulative
             effect of a
             change in
            accounting
             principle          $(0.02)     $(0.03)     $(0.04)     $(0.04)

        Basic and Diluted
         Loss Per Share
            after
             cumulative
             effect of a
             change in
            accounting
             principle          $(0.03)     $(0.03)     $(0.05)     $(0.04)


        Weighted Average
         Number of Shares
         and
             Common
              Equivalent
              Shares
              Outstanding   67,938,589  42,638,768  57,721,739  40,706,019


        Selected Balance
         Sheet Items:
                            03/31/2003              09/30/2002
            Cash                    93                     503
            Total Assets         4,001                   5,142
            Total
             Liabilities         4,739                   5,012
            Shareholders'
             Equity
             (Deficit)            (738)                    131