Filed Pursuant to Rule 424(b)(3)
Registration No. 333-134302
Prospectus Supplement No. 1
to Prospectus dated June 14, 2006
AVITAR, INC.
28,000,000 Shares
Common Stock
We are supplementing the prospectus dated June 14, 2005 to provide
information contained in our Current Report on Form 8-K filed with the
Securities and Exchange Commission on July 11, 2006 including the following:
On July 6, 2006, Avitar, Inc. ("Avitar" or the "Company"), entered into a
Securities Purchase Agreement and related agreements as part of a $750,000
private placement with AJW Partners, LLC, AJW Offshore, Ltd., AJW Qualified
Partners, LLC, and New Millennium Capital Partners II, LLC (collectively,
the "Purchasers").
The securities issued in the private placement are $750,000 of Secured
Convertible Notes (the "Notes") and 1,500,000 seven-year warrants (the
"Warrants").
The Notes bear interest at 8%, mature three years from the date of
issuance, and are convertible into the Company's common stock at any time,
at the Purchasers' option, at 65% of the average of the three lowest
intraday trading prices for the Common Stock for the 20 trading days ending
the day before the date that the investors elect to convert.
The full principal amount of the Notes, plus a default interest rate of
15%, is due upon a default under the terms of the Notes. The Company has a
right to prepay the Notes under certain circumstances at a premium ranging
from 20% to 35% depending on the timing of such prepayment
In addition, the Company granted the Purchasers a security interest in
substantially all of our assets. The Company is further required to file a
Registration Statement with the Securities and Exchange Commission within
30 days of receipt of demand from the Purchasers. If the Registration
Statement is not filed on time or not declared effective within 120 days
from the date of receipt of such demand, the Company is required to pay to
the Purchasers damages in Common Stock or cash, at the election of the
Company, in an amount equal to two percent of the outstanding principal
amount of the Notes per month plus accrued and unpaid interest.
The Warrants are exercisable until seven years from the date of issuance at
a purchase price of $0.22 per share. The Purchasers may exercise the
Warrants on a cashless basis if the shares of Common Stock underlying the
Warrants are not then registered pursuant to an effective registration
statement. In the event the Purchasers exercise the Warrants on a cashless
basis, we will not receive any proceeds. In addition, the Warrants are
subject to standard anti-dilution provisions.
The Purchasers have agreed to restrict their ability to convert their Notes
or exercise their Warrants and receive shares of our common stock such that
the number of shares of common stock held by them and their affiliates in
the aggregate after such conversion or exercise does not exceed 4.9% of the
then issued and outstanding shares of Common Stock.
Under the Securities Purchase Agreement, the Purchasers are entitled to
reimbursement for expenses up to $20,000, which was deducted at the
closing.
This Prospectus Supplement is not complete without, and may not be
delivered or utilized except in connection with, the Prospectus dated June 14,
2006, with respect to the resale of the 28,000,000 shares of common stock,
including any amendments or supplements thereto.
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD
READ CAREFULLY THIS ENTIRE PROSPECTUS, INCLUDING THE SECTION CAPTIONED "RISK
FACTORS" BEGINNING ON PAGE 3, BEFORE MAKING A DECISION TO PURCHASE OUR STOCK.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Supplement is July 11, 2006