CTU Chad Therapeutics,

CHAD Therapeutics, Inc. (AMEX:CTU) today reported financial results for the fourth quarter and fiscal year ended March 31, 2007, and provided an update on its strategic direction and new product development programs. Oxygen Product Update "We have undertaken a comprehensive effort to reduce costs of existing products through international outsourcing and have developed new products with improved margin potential. We expect these initiatives to contribute to improved margins beginning in the current fiscal year. Examples of new products with higher margin potential include our BONSAITM pneumatic conserver, an important addition to CHAD's extensive line of oxygen conserving devices, and our OMNI line, our next-generation oxygen transfilling system. A significant upgrade to CHAD's pioneering TOTAL O2� Home Oxygen Delivery System, our OMNI line meets the needs of a broader range of oxygen patients than ever before and gives homecare providers a powerful tool to reduce operating costs. "While the new Medicare rule establishing a separate payment class for portable oxygen transfilling equipment has stimulated interest in our products, the impact of the latest change in home oxygen reimbursement - competitive bidding - is still uncertain. The good news is that competitive bidding is now underway in ten major cities. The winning bids will be announced later this year and go into effect on April 1, 2008. This should go a long way toward improving visibility on reimbursement rates and, we believe, stimulating demand for our products. We strongly believe that the most cost-effective products will prevail in the long run, and that CHAD's transfilling systems are the most cost-effective means to provide both stationary and portable oxygen to home oxygen patients," said President and CEO Earl Yager. Sleep Product Update "We currently expect to submit the first 510(k) application to the FDA this summer and receive marketing clearance this fall for our initial proprietary diagnostic product for the sleep disorder market, and plan to launch our first commercial sleep product immediately thereafter. More than 10 million people in the U.S. alone are estimated to have a sleep disorder, and we believe our unique products will position CHAD to succeed in this large and rapidly growing market. "As described in detail in our press release on November 14, 2006, our sleep products offer many innovative, patentable features and capabilities that distinguish them from the competition. For example, our diagnostic device for performing unattended sleep studies, including at-home studies, is intended to enable ear, nose & throat specialists, pediatricians and primary care physicians to diagnose sleep disorders for the first time. Our therapeutic device will monitor and control the left and right nasal airflows individually for improved comfort throughout respiration, which we believe should lead to better compliance by patients with our device as compared to devices currently on the market," Yager said. "We currently are negotiating and hope soon to close a financing to provide additional funding for the sleep product roll-out and to enhance our working capital," Yager said. Fourth Quarter Results For the three months ended March 31, 2007, revenue declined to $4,215,000 from $5,177,000 for the fourth quarter of fiscal 2006, reflecting continued price pressure and lower domestic and international sales of oxygen conservers and transfilling systems. The net loss for the fourth quarter of fiscal 2007 was $2,556,000, or $0.26 per diluted share, which included an increase in inventory reserve of $185,000 and an income tax charge of $1,445,000 for the establishment of a full valuation reserve for the Company's deferred tax assets. This compares to a net loss for the fourth quarter of fiscal 2006 of $460,000, or $0.05 per diluted share. Working capital was approximately $7.3 million at March 31, 2007, including cash and cash equivalents of $375,000. This compares to working capital of approximately $9.8 million and cash and cash equivalents of $935,000 at March 31, 2006. The Company had no debt at March 31, 2007. Fiscal Year Results For the fiscal year ended March 31, 2007, revenue declined to $18,981,000 from $22,354,000 for fiscal 2006, largely for the reasons described above. The net loss for fiscal 2007 was $3,414,000, or $0.34 per diluted share, compared to a net loss for fiscal 2006 of $673,000 or $0.07 per diluted share. About CHAD Therapeutics CHAD Therapeutics, Inc. develops, produces and markets respiratory care devices designed to improve the efficiency of oxygen delivery systems for home health care and hospital treatment of patients suffering from pulmonary diseases. For more information, visit www.chadtherapeutics.com. Safe Harbor Statements under the Private Securities Litigation Reform Act of 1995. The foregoing statements regarding prospects for future earnings and revenues, future sales trends and the introduction of products under development are forward-looking statements that involve certain risks and uncertainties. A number of important factors could cause actual results to differ materially from those contemplated by such forward-looking statements. These include the potential loss of one of our major customers upon whom we depend for a material portion of our business, increased competition and continuing downward pressure on prices for certain of our products, the potential introduction of new products with perceived competitive advantages over the Company's products, changes or proposed changes in health care reimbursement which affect homecare providers, the terms of any distribution agreement which may be negotiated with respect to our transfill systems or our sleep products, and CHAD's ability to anticipate and respond to technological and economic changes in the home oxygen market. The projected timing for the introduction of new products may be delayed as a result of unforeseen difficulties encountered in the design, manufacture and quality testing for such products. The Company has limited design and manufacturing resources and it relies to a significant extent upon independent contractors for the development of products for the sleep disorder market. As a result, the Company may have more difficulty ensuring adherence to projected timetables for the introduction of such products. Moreover, the success of the Company's products and products under development will depend on their efficacy, reliability and the health care community's perception of the products' capabilities and benefits, the degree of acceptance the products achieve among homecare providers and, with respect to products under development, obtaining timely regulatory approval. Additional factors that could cause actual results to differ materially from those contemplated in this press release can be found in the Company's annual and quarterly reports filed with the Securities and Exchange Commission under the caption "Risk Factors." CHAD THERAPEUTICS, INC. CONDENSED STATEMENTS OF OPERATIONS (Unaudited) � � � � � Three Months Ended � Twelve Months Ended � � � March 31, � March 31, � � � 2007� � 2006� � 2007� � 2006� � � � � � � � � Net sales $ 4,215,000� � $ 5,177,000� � $ 18,981,000� � $ 22,354,000� Cost of sales � 3,401,000� � � 3,919,000� � � 13,677,000� � � 15,113,000� � � Gross profit � 814,000� � � 1,258,000� � � 5,304,000� � � 7,241,000� � � � � � � � � Costs and expenses: � � � � � � � � Selling, general and administrative 1,519,000� � 1,687,000� � 6,323,000� � 6,788,000� � Research and development � 412,000� � � 372,000� � � 1,466,000� � � 1,574,000� � � Total costs and expenses � 1,931,000� � � 2,059,000� � � 7,789,000� � � 8,362,000� � � � � � � � � � � Operating income (loss) (1,117,000) � (801,000) � (2,485,000) � (1,121,000) � � � � � � � � Other income, net � 6,000� � � (6,000) � � 63,000� � � 17,000� � � � � � � � � Earnings (loss) before income taxes (1,111,000) � (807,000) � (2,422,000) � (1,104,000) � � � � � � � � Income tax expense (benefit) � 1,445,000� � � (347,000) � � 992,000� � � (431,000) � � � � � � � � � � � � Net earnings (loss) $ (2,556,000) � $ (460,000) � $ (3,414,000) � $ (673,000) � � � � � � � � � � Earnings (loss) per share: � � � � � � � � � Basic $ (0.26) � $ (0.05) � $ (0.34) � $ (0.07) � � Diluted $ (0.26) � $ (0.05) � $ (0.34) � $ (0.07) � � � � � � � � � � Weighted shares outstanding: � � � � � � � � � Basic 10,173,000� � 10,158,000� � 10,170,000� � 10,146,000� � � Diluted 10,173,000� � 10,158,000� � 10,170,000� � 10,146,000� CHAD THERAPEUTICS, INC. CONDENSED BALANCE SHEETS (Unaudited) � � � � � March 31, � � � 2007� � 2006� Assets � � � � � � � � � Current assets: � � � � Cash $ 375,000� � $ 935,000� � Accounts receivable, net 2,376,000� � 3,220,000� � Income taxes refundable 291,000� � 383,000� � Inventories, net 6,557,000� � 6,381,000� � Prepaid expenses and other assets 321,000� � 178,000� � Deferred income taxes � --� � � 666,000� � � � � � � � � Total current assets � 9,920,000� � � 11,763,000� � � � � � � Property, plant and equipment, net 685,000� � 950,000� Intangible assets, net 1,107,000� � 972,000� Deferred income taxes --� � 600,000� Other assets � 36,000� � � 71,000� � � � � � � � � Total Assets $ 11,748,000� � $ 14,356,000� � � � � � � � � � � � � Liabilities and Shareholders' Equity � � � � � � � � � Current liabilities: � � � � Accounts payable $ 1,282,000� � $ 522,000� � Accrued expenses � 1,372,000� � � 1,435,000� � � � � � � � � Total current liabilities 2,654,000� � 1,957,000� � � � � � � Capital lease obligation, net of current portion � --� � � 4,000� � � � � � � � � Total liabilities 2,654,000� � 1,961,000� � � � � Shareholders' equity: � � � � Common shares, .01 par value, authorized 40,000,000 shares, 10,180,000 and 10,158,000 issued and outstanding � � � � 13,526,000� � 13,413,000� � Accumulated deficit � (4,432,000) � � (1,018,000) � � � � � � � � Net shareholders' equity � 9,094,000� � � 12,395,000� � � � � � � � � Total Liabilities and Shareholders' Equity $ 11,748,000� � $ 14,356,000�