U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   FORM 10-QSB

(Mark One)

[x] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of
1934 for the quarterly period ended June 30, 2002.

[  ]  Transition report pursuant to Section 13 or 15(d) of the Exchange act for
the transition period from                 to
                           ---------------     -------------------------

Commission File Number:    0-20316
                        ------------

                                  Avitar, Inc.
-------------------------------------------------------------------------------
       (Exact name of small business issuer as specified in its charter)

Delaware                                                     06-1174053
--------------------------------------------------------------------------------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)

65 Dan Road, Canton, Massachusetts                              02021
----------------------------------------------------------------------------
(Address of principal executive offices)                      (Zip Code)

                                 (781) 821-2440
 -------------------------------------------------------------------------------
                          (Issuer's telephone number)


(Former  name,  former  address and former  fiscal year,  if changed  since last
report)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. [x]Yes [ ]No

                      APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:

                            COMMON STOCK: 44,674,215
                               AS OF AUGUST 9, 2002

Transitional Small Business Disclosure Format
(Check One):               [  ] Yes ;       [x] No



                               Page 1 of 17 pages
<PAGE>

                                Table of Contents


                                                                         Page


Part I:           Financial Information                                     3


   Item 1   Consolidated Financial Statements
              Balance Sheet                                                 4
              Statements of Operations                                      5
              Statement of Stockholders' Equity                             6
              Statements of Cash Flows                                      7
              Notes to Consolidated Financial Statements                    8


   Item 2   Management's Discussion and Analysis or Plan of Operation      11



Part II: Other Information                                                 15

   Item 4   Submission of Matters to a Vote of Security Holders            16

   Item 6   Exhibits and Reports on Form 8-K                               16


Signatures                                                                 17

<PAGE>


                          Part I Financial Information

<PAGE>
Item 1.     CONSOLIDATED FINANCIAL STATEMENTS

                          Avitar, Inc. and Subsidiaries
                           Consolidated Balance Sheet
                                  June 30, 2002
                                   (Unaudited)
-------------------------------------------------------------------------------

                                 ASSETS (Note 4)
CURRENT ASSETS:
Cash and cash equivalents                                             $250,320
Accounts receivable, net                                             1,405,736
  Inventories                                                          511,905
Preferred stock subscription receivable                                 60,641
Prepaid expenses and other current assets                               75,743
                                                                ---------------
Total current assets                                                 2,304,345

PROPERTY AND EQUIPMENT, net                                            406,978
GOODWILL, net                                                        2,217,053
 OTHER ASSETS                                                          130,487
                                                                ---------------
        Total                                                       $5,058,863
                                                                ===============

                      LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable                                                         $434,678
Accounts payable                                                     1,819,009
Accrued expenses                                                       802,918
Current portion of long-term debt                                       19,999
                                                                 --------------
Total current liabilities                                            3,076,604

LONG TERM DEBT, LESS CURRENT PORTION                                    34,822

                                                                 --------------
Total liabilities                                                    3,111,426
                                                                 --------------

COMMITMENTS AND CONTINGENCIES (Note 5)

STOCKHOLDERS' EQUITY:
Series A, B, C and D convertible preferred stock,
 $.01 par value; authorized 5,000,000 shares;
 1,758,535 shares issued and outstanding                                17,585
Common stock, $.01 par value; authorized
 100,000,000 shares; 44,609,237 shares issued
 and outstanding                                                       446,092
Additional paid-in capital                                          42,159,200
Accumulated deficit                                                (40,675,440)
                                                                 --------------
                                                                 --------------
Total stockholders' equity                                           1,947,437
                                                                 --------------
        Total                                                       $5,058,863
                                                                 ==============




See accompanying notes to consolidated financial statements.
<PAGE>
                          Avitar, Inc. and Subsidiaries
                      Consolidated Statements of Operations
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                      THREE MONTHS ENDED JUNE 30,                 NINE MONTHS ENDED JUNE 30,
                                                  ---------------------------------------------------------------------------------
                                                         2002                 2001                2002                2001
                                                  -----------------------------------------------------------------------------
<S>                                                   <C>                  <C>                  <C>                 <C>
SALES                                                 $2,233,320           $1,869,441           $7,706,853          $4,268,355
                                                  ---------------       --------------     ----------------     ---------------
OPERATING EXPENSES
Cost of sales                                          1,274,229            1,073,250            4,421,119           2,761,461
Selling, general and administrative expenses           1,691,567            1,580,676            4,799,525           4,394,039
Research and development expenses                        333,930              457,020            1,001,120           1,401,903
Amortization of goodwill                                  77,498               76,854              232,494             220,702
                                                  ---------------       --------------     ----------------     ---------------

Total operating expenses                               3,377,224            3,187,800           10,454,258           8,778,105
                                                  ---------------       --------------     ----------------     ---------------

LOSS FROM OPERATIONS                                  (1,143,904)          (1,318,359)          (2,747,405)         (4,509,750)
                                                  ---------------       --------------     ----------------     ---------------

OTHER INCOME (EXPENSE)
Interest income                                                -                  361                    -               1,094
Interest expense and financing costs                      (9,481)             (10,129)             (49,274)            (35,704)
Other income (expense), net                                   85                 (963)              19,788              (2,887)
                                                  ---------------                          ----------------     ---------------
                                                                        --------------
Total other expense, net                                  (9,396)             (10,731)             (29,486)            (37,497)
                                                  ---------------       --------------     ----------------     ---------------

     NET LOSS                                        $(1,153,300)         $(1,329,090)         $(2,776,891)        $(4,547,247)
                                                  ===============       ==============     ================     ===============

BASIC AND DILUTED NET LOSS PER SHARE (Note 7)             $(0.03)              ($0.04)              $(0.07)             $(0.22)
                                                  ===============       ==============     ================     ===============

WEIGHTED AVERAGE
NUMBER OF COMMON SHARES OUTSTANDING                   44,605,933           33,459,667           42,006,575          31,768,656
                                                  ===============       ==============     ================     ===============
</TABLE>

          See accompanying notes to consolidated financial statements.

<PAGE>
                          Avitar, Inc. and Subsidiaries
                 Consolidated Statement of Stockholders' Equity
                         Nine Months Ended June 30, 2002
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                             Preferred Stock                    Common Stock

                                                         Shares          Amount            Shares         Amount
------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>                <C>            <C>              <C>
Balance at September 30, 2001                         2,203,690          $22,036        36,564,342       $365,643

Issuance of common stock for services                         -                -            42,169            422

Sale of common stock and warrants                             -                -         1,909,684         19,097

Exercise of stock options and warrants                        -                -         2,319,734         23,197

Conversion of Series B, C and Series D
preferred stock into common stock                      (496,418)          (4,964)        3,773,308         37,733

Payment of preferred stock dividend, Series
B preferred stock                                        51,263              513                 -              -

Reclass of preferred stock subscription
   receivable                                                 -                -                 -              -

     Net loss                                                 -                -                 -              -
----------------------------------------------------------------   --------------  ----------------  -------------

Balance at June 30, 2002                              1,758,535          $17,585        44,609,237       $446,092
----------------------------------------------------------------   --------------  ----------------  -------------
</TABLE>

(continued on next page)
<PAGE>
                          Avitar, Inc. and Subsidiaries
                 Consolidated Statement of Stockholders' Equity
                         Nine Months Ended June 30, 2002
                                   (Unaudited)
                                  (continued)
<TABLE>
<CAPTION>

                                                                                             Preferred
                                                                                               Stock
                                                       Additional       Accumulated        Subscription
                                                    paid-in capital      deficit             Receivable
-------------------------------------------------------------------------------------------------------
<S>                                                  <C>                <C>                   <C>
Balance at September 30, 2001                        $39,338,443        $(37,592,117)         $(60,641)

Issuance of common stock for services                     26,478                   -                 -

Sale of common stock and warrants                      1,286,903                   -                 -

Exercise of stock options and warrants                 1,234,226                   -                 -

Conversion of Series B, C and Series D
preferred stock into common stock                        (32,769)                  -                 -

Payment of preferred stock dividend, Series
B preferred stock                                        305,919            (306,432)                -

Reclass of preferred stock subscription
   receivable                                                  -                   -            60,641

     Net loss                                                  -          (2,776,891)                -
-----------------------------------------------------------------  ------------------   ---------------

Balance at June 30, 2002                             $42,159,200        $(40,675,440)         $      -
-----------------------------------------------------------------  ------------------   ---------------
</TABLE>



See accompanying notes to consolidated financial statements.

<PAGE>
                          Avitar, Inc. and Subsidiaries
                 Condensed Consolidated Statements of Cash Flows
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                           NINE MONTHS ENDED JUNE 30,
                                                                      -------------------------------------
                                                                           2002                2001
                                                                      -------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                     <C>                    <C>
Net Loss                                                                $(2,776,891)           $(4,547,247)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation and amortization                                               190,339                127,213
Amortization of goodwill                                                    232,494                220,702
Gain from sale of equity investment and equipment                           (18,943)                     0
Payment of common stock for services                                         26,900                      0
Provision for losses on accounts receivable                                 (12,658)               (61,692)
Changes in operating assets and liabilities excluding effects
of business acquisition:
             Accounts receivable                                            (88,978)              (147,281)
              Inventories                                                  (267,547)               205,307
             Prepaid expenses and other current assets                       84,579                (60,432)
             Other assets                                                    18,069                 97,021
             Accounts payable and accrued expenses                          355,709                379,157
             Deferred revenue                                              (385,000)                     -
                                                                      --------------     ------------------
             Net cash used by operating activities                       (2,641,927)            (3,787,252)
                                                                      --------------     ------------------

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of property and equipment                                        (142,853)               (79,013)
Acquisition of BJR Security, Inc.                                                 -                (50,000)
Proceeds from sale of equity investment                                      24,391                      -
Proceeds from sale of equipment                                               7,500                      -
                                                                      -------------------------------------
             Net cash used by investing activities                         (110,962)              (129,013)
                                                                      -------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES:

Sales of common stock, preferred stock and warrants                       1,306,000              4,104,298
Exercise of warrants and stock options                                    1,257,423                 39,453
Preferred stock subscription receivable                                      35,000                 42,228
Proceeds from (repayment of) notes payable and long-term debt               159,377               (112,295)

                                                                      --------------     ------------------
             Net cash provided by financing activities                    2,757,800              4,073,684
                                                                      --------------     ------------------

NET INCREASE IN CASH AND CASH EQUIVALENTS                                     4,911                157,419

CASH AND CASH EQUIVALENTS, beginning of the period                          245,409                 82,313
                                                                      --------------     ------------------

CASH AND CASH EQUIVALENTS, end of the period                               $250,320               $239,732
                                                                      ==============     ==================

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during period:
 Income taxes                                                               $     -                $     -
     Interest                                                               $15,101                $30,843

</TABLE>

See accompanying notes to consolidated financial statements.


<PAGE>


                         AVITAR, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
================================================================================

1.   BASIS OF PRESENTATION

          Avitar,  Inc.  ("Avitar" or the "Company"),  through its  wholly-owned
     subsidiaries, Avitar Technologies, Inc. ("ATI"), United States Drug Testing
     Laboratories,  Inc.  ("USDTL") and BJR Security,  Inc.  designs,  develops,
     manufactures,  markets and provides  medical  products and diagnostic  test
     products  and  services  as  well as  contraband  detection  and  education
     services.  Avitar sells these products and services to large medical supply
     companies,  employers,  diagnostic  distributors,  schools and governmental
     agencies.  During  Fiscal  Year 2001 and Fiscal  Year 2002,  the  Company's
     primary  focus  has been on the  continued  development  and  marketing  of
     ORALscreen(TM),  innovative  point of care oral fluid  drugs of abuse tests
     that use the  Company's  foam as the means for  collecting  the oral  fluid
     sample.

          The accompanying consolidated financial statements of the Company have
     been prepared in accordance with generally accepted  accounting  principles
     for  interim  financial  reporting,  the  instructions  to Form  10-QSB and
     Regulation S-B (including Item 310(b)  thereof).  Accordingly,  they do not
     include all of the information and footnotes required by generally accepted
     accounting principles for complete financial statements.  In the opinion of
     the  Company's  management,  all  adjustments  (consisting  only of  normal
     recurring accruals)  considered necessary for a fair presentation have been
     included. Operating results for the three and nine month periods ended June
     30, 2002 are not necessarily indicative of the results that may be expected
     for the full  fiscal year  ending  September  30,  2002.  The  accompanying
     consolidated  financial  statements  should be read in conjunction with the
     audited  financial  statements  of the  Company  for the fiscal  year ended
     September 30, 2001.

          The Company's consolidated financial statements have been presented on
     the basis that it is a going concern, which contemplates the realization of
     assets  and  the  satisfaction  of  liabilities  in the  normal  course  of
     business. The Company has suffered recurring losses from operations and has
     a working  capital  deficit of  $772,259 as of June 30,  2002.  The Company
     raised net proceeds aggregating  approximately $5,288,000 during the fiscal
     year ended  September  30, 2001 from the sale of stock and the  exercise of
     options and  warrants.  During the nine  months  ended June 30,  2002,  the
     Company  raised  approximately  $2,563,000  from the sale of stock  and the
     exercise of options and  warrants.  Based upon cash flow  projections,  the
     Company  believes  the  anticipated  cash  flow  from  operations  and most
     importantly,  proceeds from future equity  financings will be sufficient to
     finance  the  Company's   operating  needs  until  the  operations  achieve
     profitability.  There can be no assurances that forecasted  results will be
     achieved or that  additional  financing  will be  obtained.  The  financial
     statements do not include any  adjustments  relating to the  recoverability
     and  classification  of asset amounts or the amounts and  classification of
     liabilities  that  might be  necessary  should  the  Company  be  unable to
     continue as a going concern.





2.   INVENTORIES

     At June 30, 2002, inventories consist of the following:

           Raw Materials                                        $209,094
           Work-in-Process                                        79,017
           Finished Goods                                        223,794
                                                                ---------
                    Total                                       $511,905
                                                                ========

3.   MAJOR CUSTOMERS

     Customers in excess of 10% of total sales are:
<TABLE>
<CAPTION>

                         Three Months Ended June 30,                      Nine Months Ended June 30,
                        -----------------------------                   ----------------------------
                              2002                      2001                 2002             2001
                        ----------------           --------------      --------------      -----------

      <S>                  <C>                       <C>                                     <C>
      Customer A           $339,630                  $189,459                 *              $499,458
      Customer B            500,000                   305,500            $2,477,910           505,790
</TABLE>

* Customer was not in excess of 10% of total sales.

4.   NOTES PAYABLE

     In June 2002, the Company  received  $250,000 from the Connecticut  Bank of
     Commerce as proceeds from a note payable to the bank maturing on August 23,
     2002  with   interest  at  the  prime  rate  plus   2.00%.   This  loan  is
     collateralized by a lien on the assets of the Company.

5.   COMMITMENTS AND CONTINGENCIES

     The  Company  is  currently   negotiating   a  Settlement   Agreement   for
     compensation  to the Estate  and  successors  of a  financial  advisor  who
     provided  services to the Company  from 1998 to 2001  through  issuances of
     equity instruments.  No liability has been recorded since the terms of this
     Settlement  Agreement  are  uncertain  at this time.  However,  the Company
     anticipates  that it may be  necessary to issue  approximately  2.0 million
     shares (subject to various  lock-up periods  extending in some cases to the
     end of calendar  2003) and warrants for the purchase of  approximately  1.2
     million shares at exercise prices ranging from $0.23 per share to $0.35 per
     share, exercisable through June and August 2003, respectively. When a final
     settlement  has been  reached in this  matter,  the Company will record the
     cost of such  settlement as a charge  against  stockholders'  equity and an
     offsetting  increase  to  stockholders'  equity  for the fair  value of the
     shares and warrants.  In the event that the Company had to issue the shares
     described  above as part of the  settlement,  the fair  value of the equity
     instruments would be approximately $600,000.

6.   COMMON STOCK, PREFERRED STOCK AND WARRANTS

     During the  nine-month  period  ended June 30, 2002,  the Company  received
     approximately $1,257,000 from the exercise of stock options and warrants to
     purchase 2,319,734 shares of the Company's common stock. In connection with
     the  exercise  of  certain  warrants,  the  Company  issued to the  holders
     warrants to purchase  1,750,070  shares of the Company's common stock at an
     exercise  price of $.68 for a term of three  years.  Also  during  the nine
     months  ended June 30,  2002,  the  Company  sold  1,909,684  shares of the
     Company's common stock and received  proceeds of approximately  $1,306,000.
     In connection with the sale of the common stock,  the Company issued to the
     holders of the common stock  warrants to purchase  1,909,684  shares of the
     Company's  common  stock at exercise  prices of $.68 to $1.60 per share for
     terms of three to five years.

     For the nine months  ended June 30,  2002  holders of the Series B, C and D
     convertible  preferred  stock  converted  496,418 shares of their preferred
     stock into 3,773,308 shares of the Company's common stock.  Preferred stock
     dividends related to the Series B convertible  preferred stock for the nine
     months ended June 30, 2002 amounted to $283,126.  As of June 30, 2002,  the
     total amount of unpaid and undeclared dividends was $222,018.

7.  EARNINGS PER SHARE

   The following data show the amounts used in computing earnings per share:
<TABLE>
<CAPTION>
                                              Three Months Ended June 30,                 Nine Months Ended June 30,
                                             -----------------------------               ---------------------------
                                              2002                   2001                 2002               2001
                                     --------------------- -------------------     -------------------  ---------------
  <S>                                  <C>                     <C>                    <C>               <C>
  Net loss                             $(1,153,300)            $(1,329,090)           $(2,776,891)      $(4,547,247)
  Less:
  Preferred stock dividends              (  97,035)             (  136,032)           (   283,126)      (   332,592)

  Value of warrants issued in
        connection with Series C and
     Series D preferred stock sales              -                       -                      -        (  575,000)

  Original discount related to
     Series D preferred stock sales              -                       -                      -         ( 485,000)
                                    ------------------         ----------------     ---------------    --------------


  Loss available to common
   stockholders  used in basic and
   diluted EPS before cumulative
   accounting change                    (1,250,335)            ( 1,465,122)             (3,060,017)      (5,939,839)

  Cumulative effect of change in
   accounting for original discount
   related to prior years' preferred
   stock issuances                               -                       -                       -       (1,078,205)
                                     -------------------       ----------------     ----------------    -------------


  Net loss available to common
   stockholders used in basic and
   diluted EPS                         $(1,250,335)           $ (1,465,122)            $(3,060,017)     $(7,018,044)
                                      =============          ===============           ============     ============


  Weighted average number of
   common shares outstanding            44,605,933              33,459,667              42,006,575       31,768,656
                                     ==================      ===============         ================   ============

</TABLE>



ITEM 2.           MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
---------------------------------------------------------------------------

The following  discussion and analysis  should be read in  conjunction  with the
Company's  consolidated  financial  statements  and the notes thereto  appearing
elsewhere in this report.  This report may contain  forward-looking  statements.
For a description of risks and  uncertainties  relating to such  forward-looking
statements,  see the  Forward-Looking  Statements and  Associated  Risks section
later in this Item.


RESULTS OF OPERATIONS

Revenues

     Sales for the three  months  ended June 30,  2002  increased  $363,879,  or
approximately 19%, to $2,233,320 from $1,869,441 for the corresponding period of
the prior  year.  For the nine  months  ended  June 30,  2002,  sales  increased
$3,438,498, or approximately 81%, to $7,706,853 from $4,268,355.  The change for
the three and nine months ended June 30, 2002 primarily reflects the increase in
sales of its ORALscreen(TM)  products which included sales to one major customer
of $500,000 and $2,478,000, respectively.

Operating Expenses

     Cost of sales for the three months  ended June 30, 2002 were  approximately
57% of  sales,  which  was  identical  to the cost of sales  ratio for the three
months ended June 30, 2001. For the nine months ended June 30, 2002, the cost of
sales were 57% compared to 65% of sales for the same period of Fiscal 2001.  The
improvement  for the nine months  ended June 30, 2002 was  primarily  due to the
increase in sales  described  above and the overall  shift in the product mix to
the higher margin ORALscreen products.

     Selling,  general and  administrative  expenses  for the three months ended
June 30, 2002  increased  $110,891,  or  approximately  7%, to  $1,691,567  from
$1,580,676 for the  corresponding  period of the prior year. For the nine months
ended June 30, 2002,  selling,  general and  administrative  expenses  increased
$405,486 or approximately  9%, to $4,799,525 from $4,394,039 for the nine months
ended June 30,  2001.  The increase for the three and nine months ended June 30,
2002  reflected  the  expanded  sales,   marketing  and  administrative  efforts
associated  with the Company's  OralScreen and HairScreen  products and expenses
from BJR of approximately $80,000 and $184,000, respectively.

     Expenses for research and  development  for the three months ended June 30,
2002 amounted to $333,930 compared to $457,020 for the  corresponding  period of
the prior year.  For the nine months ended June 30, 2002,  expenses for research
and development were $1,001,120 versus $1,401,903 for the nine months ended June
30,  2001.  The change  for the three and nine  months  ended June 30,  2002 was
primarily  attributable to the decrease in development fees and expenses paid to
outside  entities  for  research  and  development  activities  related  to  the
Company's OralScreen products and oral fluid disease testing applications.

     For the three months and nine months ended June 30, 2002,  amortization  of
goodwill  which  resulted  from the Company's  acquisition  of BJR and USDTL was
$77,498  and   $232,494,   respectively,   compared  to  $76,854  and  $220,702,
respectively,  for the three and nine  months  ended June 30,  2001.  The change
reflects the goodwill  amortization  related to  acquisition  of BJR on March 1,
2001.

     Other Income and Expense

     No interest  income was earned for the three and six months  ended June 30,
2002  compared to $361 and $1,094,  respectively  for the same periods of Fiscal
2001. The decrease  resulted  primarily from the reduced interest earned on cash
management accounts.

     Interest expense and financing costs were $9,481 for the three months ended
June 30, 2002  compared to $10,129  incurred  during the three months ended June
30,  2001.  For the nine  months  ended  June 30,  2002,  interest  expense  and
financing  costs were  $49,274  versus  $35,704 for the same period in the prior
year. The change for the nine months ended June 30, 2002 primarily  reflects the
interest  expense on higher  bank  advances  related to  financing  of  accounts
receivable and loans from private parties.

     For the three months ended June 30, 2002,  other income  amounted to $85 as
compared  to other  expense of $963 for the three  months  ended June 30,  2001.
Other  income for the nine months  ended June 30, 2002 was $19,788  versus other
expense of $2,887 for the corresponding period of the prior year. The change for
the nine months ended June 30, 2002 is mainly a result of the gain from the sale
of an item of equipment and the gain from the sale of a small equity  investment
held by the Company.

     Net Loss

     Primarily as a result of the factors described above, the Company had a net
loss of  $1,153,300,  $ .03 per basic and diluted  share,  for the quarter ended
June 30,  2002,  as  compared to a net loss of  $1,329,090,  $ .04 per basic and
diluted  share,  for the quarter ended June 30, 2001.  For the nine months ended
June 30,  2002,  the  Company had a net loss of  $2,776,891,  $.07 per basic and
diluted  share,  versus a net loss of  $4,547,247,  $.22 per basic  and  diluted
share, for the nine months ended June 30, 2001.

FINANCIAL CONDITION AND LIQUIDITY

     At June 30, 2002 and  September  30,  2001 the Company had working  capital
deficits of $772,259 and $958,293,  respectively,  and cash and cash equivalents
of $250,320 and $245,409,  respectively.  Net cash used in operating  activities
during the nine months  ended June 30, 2002  amounted  to  $2,641,927  resulting
primarily  from a net loss of  $2,776,891,  a gain  from  the sale on an  equity
investment  and equipment of $18,943,  a decrease in the provision for losses on
accounts  receivable of $12,658,  an increase in accounts receivable of $88,978,
an increase in  inventories  of  $267,547  and a decrease in deferred  income of
$385,000;  partially  offset  by  depreciation  and  amortization  of  $190,339,
amortization of goodwill of $232,494,  a payment of common stock for services of
$26,900,  a decrease in prepaid expenses and other current assets of $84,579,  a
decrease in other  assets of $18,069  and an  increase  in accounts  payable and
accrued  expenses of  $355,709.  Net cash  provided by financing  and  investing
activities  during the nine months  ended June 30, 2002  amounted to  $2,646,838
which included  proceeds from the sale of an equity  investment and equipment of
$31,891,  proceeds  from the sale of common  stock and  warrants of  $1,306,000,
proceeds from the exercise of warrants and stock options of $1,257,423, proceeds
from the  collection  of stock  subscription  receivable of $35,000 and proceeds
from  notes  payable  and  long-term  debt of  $159,377;  offset  in part by the
purchases of property and equipment of $142,853.

     Since  October  2001,  the  Company  received   proceeds  of  approximately
$1,306,000 from the sale of 1,909,684  shares of the Company's  common stock and
warrants to purchase  1,909,684 shares of the Company's common stock at exercise
prices of $.68 -$1.60 per share for a period of three to five years. Also during
this period, the Company received approximately  $1,257,000 from the exercise of
stock options and warrants to purchase  2,319,734 shares of the Company's common
stock. In connection with the exercise of certain  warrants,  the Company issued
to the holders  warrants to purchase  1,750,070  shares of the Company's  common
stock at an exercise price of $.68 for a term of three years.  The Company plans
to raise up to $10,000,000 from the sales of equity and/or debt securities.  The
Company  plans to use the  proceeds  from these  financings  to provide  working
capital and capital  equipment  funding to operate  the  Company,  to expand the
Company's business, to further develop and enhance the ORALscreen and HAIRscreen
drug  screening  systems and to pursue the  development  of in-vitro  oral fluid
diagnostic  testing  products.  However,  there can be no  assurance  that these
financings will be achieved.

     For the balance of fiscal year 2002,  the Company's cash  requirements  are
expected to include  primarily the funding of operating  losses,  the payment of
outstanding  accounts  payable,  the  repayment of certain  notes  payable,  the
funding  of  operating  capital  to grow the  Company's  drugs of abuse  testing
products and services,  and the  continued  funding for the  development  of its
ORALscreen product line.

     The  Company is  currently  in the  process  of  negotiating  a  Settlement
Agreement for  compensation to the Estate and successors of a financial  advisor
who  provided  services  to the  Company  from  1998 to 2001.  The terms of this
Settlement  Agreement  are uncertain at this time,  but the Company  anticipates
that it may be necessary to issue  approximately  2.0 million shares (subject to
various lock-up periods extending in some cases to the end of calendar 2003) and
warrants for the  purchase up to  approximately  1.2 million  shares at exercise
prices ranging from $0.23 per share to $.35 per share,  exercisable through June
and August 2003, respectively. Upon final settlement of this matter, the Company
will record a charge to stockholders' equity for the cost of such settlement.

     Operating  revenues  of the  Company  grew  significantly  during the three
quarters of Fiscal 2002 and are  expected  to continue  growing  during the last
quarter of Fiscal 2002 as the Company  expands its shipments of new and enhanced
ORALscreen  products  and grows the business of USDTL.  Based on current  sales,
expense and cash flow  projections,  the Company believes that the current level
of cash and cash  equivalents  on hand and most  importantly,  a portion  of the
anticipated net proceeds from the financing  mentioned above would be sufficient
to fund operations  until the Company  achieves  profitability.  There can be no
assurance that the Company will  consummate the  above-mentioned  financing,  or
that any or all of the net proceeds  sought  thereby will be obtained.  Once the
Company achieves profitability, the longer-term cash requirements of the Company
to fund operating  activities,  purchase capital equipment,  expand the existing
business and develop new products are expected to be met by the anticipated cash
flow from operations and proceeds from the financings described above.  However,
because there can be no assurances  that sales will  materialize  as forecasted,
management  will  continue to closely  monitor and attempt to control  costs and
will continue to actively seek the needed additional capital.

     As a result of the Company's  recurring  losses from operations and working
capital  deficit,  the report of its independent  certified  public  accountants
relating to the financial  statements  for Fiscal 2001  contains an  explanatory
paragraph stating substantial doubt about the Company's ability to continue as a
going concern. Such report states that the ultimate outcome of this matter could
not be determined as the date of such report  (November 20, 2001). The Company's
plans to address  the  situation  are  presented  above.  However,  there are no
assurances that these endeavors will be successful or sufficient.

FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS

     Except for the historical  information  contained  herein,  the matters set
forth herein are "forward-looking  statements" within the meaning of Section 27A
of the  Securities Act of 1933,  Section 21E of the  Securities  Exchange Act of
1934 and the Private  Securities  Litigation  Reform Act of 1995. We intend that
such forward-looking statements be subject to the safe harbors created thereby.

     Such   forward-looking   statements   involve  known  and  unknown   risks,
uncertainties and other factors which may cause our actual results,  performance
or achievements to be materially different from any future results,  performance
or achievement  expressed or implied by such  forward-looking  statements.  Such
factors include, but are not limited to the following: product demand and market
acceptance  risks,  the  effect of  economic  conditions,  results of pending or
future  litigation,  the impact of  competitive  products and  pricing,  product
development  and  commercialization,   technological  difficulties,   government
regulatory  environment  and  actions,  trade  environment,  capacity and supply
constraints or difficulties,  the result of financing efforts,  actual purchases
under agreements and the effect of the Company's accounting policies.
<PAGE>



                            PART II OTHER INFORMATION

ITEM 4.           SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
----------------------------------------------------------------------


     The annual meeting of the shareholders was held on June 17, 2002. All
members of the Board of Directors were elected by more than 62% of the total
shares outstanding and more than 99% of the shares voted. In addition, the
reappointment of BDO Seidman, LLP as auditors were approved and the tabulation
of votes were as follows:
<TABLE>
<CAPTION>

                                      For          Withheld       Against     Abstain
                                  ------------   -------------   ----------  ----------

 <S>                                <C>                            <C>       <C>
 Reappointment of Auditors          29,976,484        N/A          41,927    354,854
 Election of Directors              30,192,638     180,627           N/A       N/A
</TABLE>


ITEM 6.           EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits:

         None


(b)      Reports on Form 8-K:

         None

<PAGE>




                                   SIGNATURES

In accordance with the  requirements of the Exchange Act, the Registrant  caused
this  report to be  signed on its  behalf  by the  undersigned,  thereunto  duly
authorized.


                                            AVITAR, INC.
                                            (Registrant)




Dated:  August 14, 2002                     /S/ Peter P. Phildius
                                            ---------------------------
                                            Peter P. Phildius
                                            Chairman and Chief
                                            Executive Officer
                                            (Principal Executive Officer)



Dated:  August 14, 2002                     /S/ J.C. Leatherman, Jr.
                                            ---------------------------
                                            J.C. Leatherman, Jr.
                                            Chief Financial Officer
                                            (Principal Accounting and
                                            Financial Officer)