Avatech Solutions Reports Fiscal 2009 Third Quarter Results

BALTIMORE — (BUSINESS WIRE) — May 15, 2009 Avatech Solutions, Inc. (OTCBB: AVSO), the nationwide technology experts for design, engineering, and facilities management, announced financial results for its third fiscal quarter and nine months ended March 31, 2009.

“The building and manufacturing markets continue to be adversely affected by the recession, forcing our customers to reduce costs and postpone investments in new software and services. While at this time we cannot predict when our business will return to traditional levels, we can commit that we will continue to monitor the cost containment plans we have put in motion and will take any additional actions that we believe to be necessary. As an example of just how effective these measures can be, our previously established cost containment initiatives and on going business management controls resulted in a return to positive adjusted EBITDA and a small net loss for the third quarter,” commented George Davis, President and Chief Executive Officer of Avatech.

“As part of our effort to drive revenue in this tough market, we are working more closely than ever with our customers in an attempt to bring them improved solutions that add value through enhanced productivity, reduced costs and improved competitiveness. Our core focus right now is trying to balance providing premier service to our large customer base and capturing incremental new business, while ensuring that we manage our day to day operations in the spirit of protecting our cash and liquidity,” continued Mr. Davis.

“I am confident in the business we have built at Avatech and remain committed to maintaining its position of strength through this period so we will be well positioned when the market returns to traditional levels,” concluded Mr. Davis.

For the third quarter of fiscal 2009, the Company reported revenues of $8.0 million, compared to $12.8 million in the prior-year quarter. Selling, general & administrative expenses decreased to $3.9 million in the three months ended March 31, 2009, compared to $4.7 million in the same period of the prior fiscal year.

The Company incurred a net loss of $146,000, or $(0.01) per fully diluted share, for the three months ended March 31, 2009, compared to net income of $1.0 million, or $0.05 per fully diluted share, in the same period in the prior year. Adjusted EBITDA (as defined) was $106,000 in the third quarter of fiscal 2009, from adjusted EBITDA of $1.7 million in the prior year period.

For the nine months ended March 31, 2009, the Company reported revenues of $28.2 million, compared to $38.1 million in the prior-year period. Selling, general & administrative expenses decreased to $12.6 million in the first nine months of Fiscal 2009, when compared to $14.1 million in the same period of the prior fiscal year.

For the nine months ended March 31, 2009, Avatech reported a net loss of $216,000, or $(0.03) per fully diluted share, compared to net income of $2.3 million, or $0.12 per fully diluted share, for the same period in the prior year. Adjusted EBITDA (as defined) was $401,000 in the first nine of fiscal 2009 from adjusted EBITDA of $3.9 million in the prior year period.

Conference Call Information

Avatech Solutions will hold a conference call to discuss its third quarter results at 11 a.m. ET on May 15, 2009. The dial-in numbers for the conference call are (888) 713-4214 (domestic) or (617) 213-4866 (international), and enter the passcode (19034599). A replay of the call will also be available through May 22, 2009, and can be accessed by dialing (888) 286-8010 (domestic) or (617) 801-6888, and dialing the passcode (64478089).

A live webcast of the conference call will be available to all investors in the Investor Relations section of the Company's website, www.avatech.com. For those who cannot listen to the live broadcast, an audio replay of the call will also be available on the Company’s site for a limited time.

Note Regarding Use of Non-GAAP Financial Measure

This news release contains the non-GAAP measure Adjusted EBITDA. Adjusted EBITDA represents earnings (or losses) before interest, income taxes, depreciation and amortization, and stock-based compensation expense.

Adjusted EBITDA is used by management, analysts, investors and other interested parties in evaluating our operating performance compared to that of other companies in our industry, as the calculation of EBITDA as adjusted eliminates the effect of financing, income taxes, stock-based compensation costs, the accounting effects of capital spending and certain other merger related expenses, which items may vary from different companies for reasons unrelated to overall operating performance.

Avatech believes this non-GAAP measure provides useful information to both management and investors by excluding certain expenses that may not be indicative of its core operating results. These measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results. The non-GAAP measure included in this press release has been reconciled to the GAAP results in the accompanying table.

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