CHAD THERAPEUTICS REPORTS 4TH QTR NET LOSS OF $460,000.

CHAD Therapeutics, Inc. (AMEX:CTU), Chatsworth, Calif., has reported financial results for the fourth quarter and fiscal 2006, and provided an update on the company's evaluation of strategic alternatives to maximize shareholder value.

Fourth Quarter and Fiscal 2006

Results For the three months ended March 31, 2006, revenue declined to $5,177,000 from $5,435,000 for the fourth quarter of fiscal 2005. The net loss for the fourth quarter of fiscal 2006 was $460,000, or $0.05 per diluted share, which included an inventory reserve of $739,000 reflected in cost of goods sold for the company's SAGE Oxygen Therapeutic Device, whose sales have not met expectations. For the fourth quarter of fiscal 2005, net earnings were $589,000, or $0.06 per diluted share.

For the twelve months ended March 31, 2006, revenue declined to $22,354,000 from $24,287,000 for fiscal 2005. The net loss for fiscal 2006 was $673,000, or $0.07 per diluted share, which included the inventory reserve mentioned above. This compares to net earnings for fiscal 2005 of $1,811,000, or $0.17 per diluted share. Revenue from sales of oxygen conservers and therapeutic devices declined 11% for fiscal 2006 compared to fiscal 2005, reflecting a 29% decline in sales to domestic customers and a 331% increase in international sales. The decline in domestic sales was primarily due to pricing pressure and the reduction in sales to a major customer reported previously. Sales of CHAD's proprietary TOTAL O(2)(R) home oxygen filing system increased 3% for fiscal 2006 compared to fiscal 2005.

President and CEO Earl Yager said, "Effective January 1, 2006, Medicare reimbursement procedures were modified to provide that title for equipment used by an oxygen patient transfers to the patient after 36 months. This new policy has intensified pressure on homecare providers to reduce operating and equipment costs. Over time, we believe this will stimulate demand for CHAD's TOTAL O(2) home oxygen filling system, which is a cost-effective solution to the changing economics of the home oxygen market. However, the immediate impact among our customers has been a 'wait and see' approach until important questions are answered regarding equipment repair and the provision of oxygen to patients after the transfer of title. We have taken appropriate steps to adjust our operating model and inventory posture in light of these developments. We also are continuing our efforts to expand our product offerings, and are pleased by our progress in the development of proprietary diagnostic and therapeutic products for the sleep disorder market."

Working capital was approximately $9.8 million at March 31, 2006, including cash and cash equivalents of $935,000 versus $177,000 at March 31, 2005. Yager noted that the company's cash position has increased further during the first quarter of the new fiscal year. CHAD has no debt.

Update on Evaluation of Strategic Opportunities

As previously reported, CHAD is in discussions with several parties concerning the distribution of both the company's TOTAL O(2) home oxygen filling system and the products it is developing for the sleep disorder market. During the course of these discussions, the board of directors decided to broaden the scope of its consideration of various strategic alternatives for the company, and engaged an investment banking firm to assist the board in evaluating strategic opportunities to maximize value for CHAD's shareholders.

"While we cannot assure shareholders that we will be successful in these efforts, and no final determination will be made until all of our alternatives have been carefully analyzed in concert with our investment banker, we are pleased to report that this process is nearing its conclusion. We will report publicly as soon as new information is available," Yager said.

About CHAD Therapeutics

CHAD Therapeutics, Inc. is in the business of developing, producing and marketing 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 http://www.CHADtherapeutics.com or call 818/882-0883.