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Avitar Reports Fourth Quarter and Fiscal Year 2007 Financial Results

Saturday, December 29, 2007 General News J E 4
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CANTON, Mass., Dec. 28 Avitar, Inc.(OTC Bulletin Board: AVTI) today announced financial results for the three and12 months ended September 30, 2007.

For the year ended September 30, 2007, Avitar reported revenues of$3,106,000 from continuing operations compared to $4,519,000 from continuingoperations for the year ended September 30, 2006. The operating loss fromcontinuing operations amounted to $2,733,000 versus $2,893,000. The net losswas $2,260,000, or $0.09 per basic and diluted share, for the year endingSeptember 30, 2007 compared with a net loss of $3,703,000, or $0.80 per basicand diluted share, for the year ended September 30, 2006. The changes in netloss for Fiscal 2007 occurred primarily from an increase in non-cash incomefrom the change in the fair value of derivative securities and warrants of$1,090,000, a decrease in operating expenses of $1,573,000 resulting from thereduced sales volume and an expense reduction program implemented in April2007, lower interest and financing costs related to short-term and long-termborrowings of $96,000 and a decrease in the loss from discontinued operationsof $97,000, offset in part by a reduction in sales of $1,413,000 due mainly tothe transition to a new distributor for the Hydrasorb(R) wound dressingproducts.

Revenues from continuing operations for the fourth quarter of fiscal 2007were $666,000 compared to $1,357,000 from continuing operations in the prioryear's fourth fiscal quarter ended September 30, 2006. The operating lossfrom continuing operations amounted to $596,000 versus $600,000. The net losswas $718,000, or $0.02 per basic and diluted share, for the quarter endedSeptember 30, 2007 compared with net loss of $447,000, or $0.08 per basic anddiluted share, for the quarter ended September 30, 2006. The net loss for thequarter ended September 30, 2007 reflected a reduction in sales of $691,000due mainly to the transition to a new distributor for the Hydrasorb(R) wounddressing products, increases in interest and financing costs of $109,000related to the long-term debt borrowings undertaken during fiscal 2007, areduction in non-cash income of $360,000 resulting from changes in fair marketvalue of derivative securities and warrants, offset in part by lower operatingexpenses of $696,000 resulting from the reduced sales volume and an expensereduction program implemented in April 2007 and a decrease in the loss fromdiscontinued operations of $194,000.

Peter P. Phildius, Chairman and CEO commented, "Despite our capitalconstraints we continue our efforts to grow the Company. As previouslyreported, we are positioning our oral fluid, drugs of abuse product line,Oralscreen, to address the needs of larger employers across several industrysectors. Particularly in the construction vertical market where the incidenceof drug abuse has reached as high as 20%, we are beginning to see tractionfrom our sales and marketing efforts."

Mr. Phildius continued, "As we have previously noted, our foam businesscontinues to be negatively impacted by the lack of sales by the newdistributor of our Hydrasorb product line. We are working to develop newdistribution channels for Hydrasorb and, in addition, we are expanding ourcustomer base in the foam product area to reduce our dependence in the futureon our branded Hydrasorb product line."

ABOUT AVITAR

Avitar, Inc. develops, manufactures and markets innovative and proprietaryproducts in the oral fluid diagnostic market, disease and clinical testingmarket, and customized polyurethane applications used in the wound dressingindustry. Oral fluid diagnostics includes the estimated $1.5 billion drugs-of-abuse testing market, which encompasses the corporate workplace and criminaljustice markets. Avitar's products include ORALscreen(TM), the world's firstnon-invasive, rapid, onsite oral fluid test for drugs-of-abuse. Additionally,Avitar manufacture
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