Avitar, Inc. (AVTI)

[liable]

Here are some facts:

From September 2005 through December 2007 the Company executed notes payable with AJW Partners, LLC, AJW Offshore, Ltd., AJW Qualified Partners, LLC, New Millennium Capital Partners II, LLC and AJW Master Fund in the total principal amount of $6,815,000 which are payable at maturity dates from September 2008 to December 2010. Interest on these notes is at 8% per annum and is payable quarterly in cash or the Company’s common stock at the option of the Company. In addition, as of November 16, 2007, the entire unpaid and unconverted principal plus any accrued and unpaid interest associated with these notes is convertible, at the holder’s option, into the Company’s common stock at a conversion price of 40% of the average of the three lowest intraday trading prices of the common stock for the twenty trading days preceding the date that the holders elect to convert.
Fees of approximately $1,202,000 incurred in connection with securing these loans were recorded as a deferred financing charge. On December 31, 2007, the Company executed notes payable with AJW Partners, LLC, New Millennium Capital Partners II, LLC and AJW Master Fund in the total principal amount of $632,417 to cover the accrued interest through October 31, 2007 on all of the above notes. These interest notes are payable on December 31, 2010 with interest on these notes at 2% per annum that is payable quarterly in cash or the Company’s common stock at the option of the Company. The entire unpaid and unconverted principal plus any accrued and unpaid interest associated with these interest notes is convertible, at the holder’s option, into the Company’s common stock at a conversion price of 40% of the average of the three lowest intraday trading prices of the common stock for the twenty trading days preceding the date that the holders elect to convert. A discount to debt totaling $2,648,864 ($1,708,258 for the fair value of the conversion feature of these notes and $940,606 for the incremental fair value of the warrants issued in connection with these notes) was recorded during fiscal 2005, 2006, 2007 and 2008 and is being amortized over the terms of the notes.

Financial Condition and Liquidity

At December 31, 2007, the Company had a stockholders’ deficit of $11,098,938 and cash and cash equivalents of $3,268. Cash flows from financing activities provided the primary source of funding during the quarter ended December 31, 2007 and the Company will continue to rely on this type of funding until profitability is reached.

http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=5732301

AVTI actually borrowed from the same lender to pay the interest on the original debt. How crazy is that???