Avatech Solutions Reports Fiscal 2009 Second Quarter Results

BALTIMORE—(BUSINESS WIRE)—February 17, 2009— Avatech Solutions, Inc. (OTCBB: AVSO), the nationwide technology experts for design, engineering, and facilities management, announced financial results for its second fiscal quarter ended December 31, 2008.

George Davis, President and Chief Executive Officer of Avatech, commented, “Our business continues to be negatively affected by the downturn of the national economy. The design engineering markets and enterprises that we service remain fiscally challenged resulting in delays and interim reductions in the flow of the purchasing of technology and services that we provide. We remain committed to supporting our customers through these challenging times and are working diligently to bridge the gaps that currently exist with creative value added services that support the unique problems that our customers face. We intend to march side by side with our customers as we navigate through these unprecedented economic times to ensure that we are both uniquely positioned when the economy does turn more favorable.”

“The aggressive cost cutting measures that we implemented throughout the past fiscal year have helped us to offset the severity of the economic impacts on our current business. Additionally, we continue to maintain a healthy balance sheet and our liquidity remains strong supported by our cash balances and our recently-renewed $5 million credit facility.”

“Though we continue to be challenged by the decrease in sales, we believe that once the economy recovers our customers’ demand for our traditional technology solutions and services will rebound.”

“While our business has suffered in the short-term, we are looking at the long-term opportunities that this difficult economy offers from a competitive standpoint. At current demand levels many of our competitors are struggling to compete and don’t possess the same resources we have at our disposal that allows us to weather this difficult period and effectively serve the needs of our customers. As such, we believe there is an opportunity for us to build up our share of the existing market and emerge from this difficult period as an even stronger company,” concluded Mr. Davis.

For the second quarter of fiscal 2009 the Company reported revenues of $9.5 million, compared to $12.9 million in the prior-year quarter. Selling, general & administrative (SG&A) expenses decreased to $4.3 million in the three months ended December 31, 2008, compared to $4.7 million in the same period of the prior fiscal year.

The Company incurred a net loss of $223,000, or $(0.03) per fully diluted share, for the three months ended December 31, 2008, compared to net income of $855,000, or $0.04 per fully diluted share, in the same period in the prior year. Adjusted EBITDA (as defined) decreased to a loss of $67,000 in the second quarter of fiscal 2009, from adjusted EBITDA of $1,388,000 in the prior year period.

For the six months ended December 31, 2008 the Company reported revenues of $20.3 million, compared to $25.3 million in the prior-year period. Selling, general & administrative (SG&A) expenses decreased to $8.7 million in the first half of Fiscal 2009, compared to $9.3 million in the same period of the prior fiscal year.

For the six months ended December 31, 2008, Avatech reported a net loss of $70,000, or $(0.02) per fully diluted share, compared to net income of $1.3 million, or $0.07 per fully diluted share, for the same period in the prior year. Adjusted EBITDA (as defined) decreased to $380,000 in the first half of fiscal 2009 from adjusted EBITDA of $2,347,000 in the prior year period.

Conference Call Information

Avatech Solutions will hold a conference call to discuss its first quarter results at 11:00 a.m. ET on February 17, 2009. The dial-in numbers for the conference call are 888-679-8033 (domestic) or 617-213-4846 (international), and enter the passcode (25849409). A replay of the call will also be available through February 24, 2009, and can be accessed by dialing 888-286-8010 (domestic) or 617-801-6888, and dialing the passcode (16962474).

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.

A live webcast of the call will be broadcast in the Investor Relations section of the Company’s website, http://www.avatech.com. For those who cannot listen to the live broadcast, an audio replay of the call will also be available on the 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.

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