<PAGE>
                     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 December 31, 1998.

[ ] 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: 18,051,154
                             AS OF FEBRUARY 10, 1999

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



                               Page 1 of 18 pages
                      Exhibit Index: is on page 16 hereof.


                                       1

<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     10


PART II:   OTHER INFORMATION                                                13

     Item 2   Changes in Securities and Use of Proceeds                     14


     Item 6   Exhibits and Reports on Form 8-K                              14


SIGNATURES                                                                  15


EXHIBIT INDEX                                                               16










                                       2

<PAGE>









                          PART I FINANCIAL INFORMATION
















                                       3

<PAGE>

Item 1.     FINANCIAL STATEMENTS

                          Avitar, Inc. and Subsidiaries
                           Consolidated Balance Sheet
                                December 31 1998
                                   (Unaudited)
--------------------------------------------------------------------------------
                                     ASSETS
                                     ------

<TABLE>
<S>                                                                              <C>
CURRENT ASSETS:
     Cash and cash equivalents                                                   $     11,996
     Accounts receivable                                                              139,999
     Notes receivable                                                                   9,100
     Inventories                                                                       99,312
     Prepaid expenses and other                                                        65,636
                                                                                 ------------
          Total current assets                                                        326,043

PROPERTY AND EQUIPMENT, net                                                           173,478
OTHER ASSETS                                                                           16,048
                                                                                 ------------
          Total                                                                  $    515,569
                                                                                 ============

                      LIABILITIES AND STOCKHOLDERS' EQUITY
                      ------------------------------------
CURRENT LIABILITIES:
     Notes payable                                                               $    322,341
     Accounts payable                                                               1,006,570
     Accrued expenses                                                                 646,363
     Current portion of long-term debt                                                 92,801
                                                                                 ------------
          Total current liabilities                                                 2,068,075

LONG TERM DEBT, LESS CURRENT PORTION                                                   48,800
                                                                                 ------------
          Total liabilities                                                         2,116,875
                                                                                 ------------

COMMITMENTS

STOCKHOLDERS' EQUITY:
     Series A and B convertible preferred stock, $.01 par value; authorized
          5,000,000 shares; 973,630 shares issued and outstanding 9,736 Common
     Stock, $.01 par value; authorized 25,000,000 shares;
          17,530,855 shares issued and outstanding                                    175,309
     Additional paid-in capital                                                    15,790,363
     Accumulated deficit                                                          (17,576,714)
                                                                                 ------------
          Total stockholders' equity                                               (1,601,306)
                                                                                 ------------

         Total                                                                   $    515,569
                                                                                 ============
</TABLE>



          See accompanying notes to consolidated financial statements.


                                        4



<PAGE>


                          Avitar, Inc. and Subsidiaries
                      Consolidated Statements of Operations
                                   (Unaudited)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                    THREE MONTHS ENDED DECEMBER 31,
                                                    -------------------------------
                                                         1998            1997
                                                     ------------    ------------
<S>                                                  <C>             <C>         
SALES                                                $    484,097    $    432,214

OPERATING EXPENSES
     Direct cost of sales                                 468,269         421,402
     Selling, general and administrative expenses         340,740         318,229
     Research and development expenses                    124,730         124,688
                                                     ------------    ------------
          Total operating expenses                        933,739         864,319
                                                     ------------    ------------

INCOME (LOSS) FROM OPERATIONS                            (449,642)       (432,105)
                                                     ------------    ------------

OTHER INCOME (EXPENSE)
     Interest income                                         --             4,150
     Interest expense and financing costs                 (41,863)        (40,436)
     Other Income                                          24,000            --
                                                     ------------    ------------
          Total other income (expense)                    (17,863)        (36,286)
                                                     ------------    ------------

LOSS FROM CONTINUING OPERATIONS                          (467,505)       (468,391)

DISCONTINUED OPERATIONS:
     Gain from the sale of MHB                               --         1,208,084
     Income (loss) from the operations of MHB                --           (71,914)
                                                     ------------    ------------

NET INCOME (LOSS)                                    $   (467,505)        667,779
                                                     ============    ============

INCOME (LOSS) PER SHARE:
     Loss per share from continuing operations       $      (0.03)   $      (0.03)
     Income per share from discontinued operations           --              0.07
                                                     ------------    ------------
     Net income (loss) per share                     $      (0.03)   $       0.04
                                                     ============    ============

WEIGHTED AVERAGE
     NUMBER OF COMMON SHARES OUTSTANDING               17,481,720      15,365,691
                                                     ============    ============
</TABLE>



          See accompanying notes to consolidated financial statements.


                                        5

<PAGE>


                          Avitar, Inc. and Subsidiaries
                 Consolidated Statement of Stockholders' Equity
                      Three Months Ended December 31, 1998
                                   (Unaudited)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                 Preferred Stock           Common Stock
                                             ----------------------   ----------------------
                                                                                                 Additional        Accumulated
                                                Shares     Amount       Shares      Amount     paid-in capital       deficit
------------------------------------------------------------------------------------------------------------------------------------
<S>                                             <C>        <C>        <C>          <C>           <C>              <C>
Balance at September 30, 1998                   792,588    $7,926     17,469,768   $174,698      $15,496,788      ($17,109,209)

Issuance of common stock for services                                     61,087        611           10,385

Sale of preferred stock, net of expenses        181,042     1,810                                    283,190

Net income (loss)                                                                                                     (467,505)
------------------------------------------------------------------------------------------------------------------------------------

Balance at December 31, 1998                    973,630    $9,736     17,530,855   $175,309      $15,790,363      ($17,576,714)
====================================================================================================================================
</TABLE>




          See accompanying notes to consolidated financial statements.


                                        6


<PAGE>

                          Avitar, Inc. and Subsidiaries
                 Condensed Consolidated Statements of Cash Flows
                                   (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                   THREE MONTHS ENDED DECEMBER 31,
                                                                                   -------------------------------
                                                                                         1998           1997
                                                                                      ----------    -----------
<S>                                                                                   <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:

     Net income (loss)                                                                ($ 467,505)   $   667,779
     Adjustments to reconcile net income (loss) to
          net cash provided by operating activities:
               Depreciation and amortization                                              31,895         36,393
               Non cash charges for consulting services                                   10,996         14,540
               Non cash recovery from settlement of note payable                            --          (58,126)
               Gain from sale of MHB                                                        --       (1,208,084)
               Changes in operating assets and liabilities:
                   (Increase) decrease in accounts receivable                             31,909        (87,948)
                   (Increase) decrease in prepaid expenses and other current assets       66,595        (35,321)
                   Decrease in other assets                                                 --              723
                   Increase (Decrease) in accounts payable and accrued expenses           80,373       (204,314)
                   Other                                                                    --          (77,916)
                                                                                      ----------    -----------

                        Net cash provided by (used in) operating activities             (245,737)      (952,274)
                                                                                      ----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES:

     Proceeds from the sale of MHB                                                          --        1,286,000
                                                                                      ----------    -----------

                        Net cash provided by (used in) investing activities                 --        1,286,000
                                                                                      ----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES:

     Proceeds from notes payable                                                            --          150,514
     Sales of preferred stock and warrants                                               285,000           --
     Repayment of long-term debt                                                         (23,734)      (135,139)
     Repayment of notes payable                                                          (16,016)       (60,000)
                                                                                      ----------    -----------

                   Net cash provided by (used in) financing activities                   245,250        (44,625)
                                                                                      ----------    -----------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                        (487)       289,101

CASH AND CASH EQUIVALENTS, beginning of the period                                        12,483         65,512
                                                                                      ----------    -----------

CASH AND CASH EQUIVALENTS, end of the period                                          $   11,996    $   354,613
                                                                                      ==========    ===========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION 
   Cash paid during period:
          Income taxes                                                                $    2,456    $      --
          Interest                                                                        41,681         21,380
</TABLE>



          See accompanying notes to consolidated financial statements.


                                       7

<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
     subsidiary, Avitar Technologies Inc. ("ATI") develops, manufactures,
     markets and sells proprietary hydrophilic polyurethane foam disposables
     fabricated for medical, diagnostics, dental and consumer use. The Company
     is a leading independent fabricator of disposable medical and dental
     products from medical grade hydrophilic polyurethane foam.

         On October 27, 1997, the Company sold the business and assets of its
     wholly-owned subsidiary, Managed Health Benefits Corporation ("MHB"), which
     provided health care cost containment services. Therefore, MHB is
     considered a discontinued operation and this report primarily reflects the
     continuing operation of the Company.

         The accompanying consolidated financial statements of the Company have
     been prepared in accordance with generally accepted accounting principles
     for interim financial information, 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 month period ended December 31,
     1998 are not necessarily indicative of the results that may be expected for
     the full fiscal year ending September 30, 1999. 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, 1998.

         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 and stockholders' deficit as of December 31, 1998
     of $1,742,032 and $1,601,306, respectively. The Company raised net proceeds
     aggregating approximately $200,000 and $1,100,000 during the fiscal years
     ended September 30, 1998 and 1997, respectively, from the sale of stock. 
     During the three months ended December 31, 1998, the Company raised
     net proceeds of $285,000 from the sale of preferred stock. The Company is
     attempting to obtain additional equity and/or debt financing. Based upon
     cash flow projections, the Company believes the anticipated cash flow from
     operations and expected net 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.



                                       8

<PAGE>


2.   DISCONTINUED OPERATIONS

     On October 27, 1997, the Company sold MHB's net assets and business and
     received $1,286,000. For the period of October 1, 1997 through the date of
     the sale on October 27, MHB incurred an operating loss of $71,914.

3.   INVENTORIES

     At December 31, 1998, inventories consist of the following::

              Raw Materials                         $57,365
              Work-in-Process                        31,159
              Finished Goods                         10,788
                                                    -------
                       Total                        $99,312
                                                    =======


4.   MAJOR CUSTOMERS

     Customers in excess of 10% of total sales are:

                                            Three Months Ended December 31,
                                            -------------------------------
                                                  1998            1997
                                                  ----            ----

            Customer A                          $134,534        $219,741
            Customer B                           115,354          55,363
            Customer C                            56,026               *

           *Customer was not in excess of 10% of total sales in 1997.

5.   PREFERRED STOCK

     During the quarter that ended December 31, 1998, the Company sold 181,042
     shares of Series B Convertible Preferred Stock and received net proceeds of
     approximately $285,000. In connection with the sale of the preferred stock,
     the Company issued to the holders of the preferred stock warrants to
     purchase 640,000 shares of the Company's common stock for $.225 to $.24 per
     share. Each share of Series B Convertible Preferred Stock entitles its
     holder to convert it, at any time, into 10 shares of the Company's common
     stock and to receive dividends amounting to an annual 8% cash dividend or
     10% sock dividend computed on the amount invested, at the discretion of the
     Company.






                                       9

<PAGE>


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.

RESULTS OF OPERATIONS

Revenues

         Sales for the three months ended December 31, 1998 increased $51,883,
or approximately 12 %, to $484,097 from $432,214 for the corresponding period of
the prior year. The results for the three months ended December 31, 1998
primarily reflect the increase in sales of wound dressing products.

Operating Expenses

         Direct costs of sales for the three months ended December 31, 1998 were
approximately 97% of sales which represented no change from the direct cost of
sales for the three months ended December 31, 1997.

         Selling, general and administrative expenses for the three months ended
December 31, 1998 increased $22,511, or approximately 7%, to $340,740 from
$318,229 for the corresponding period of the prior year. The increase for the
three month period ended December 31, 1998 reflected the impact of the reduction
included in three months ended December 31, 1997of approximately $58,000 which
was related to the settlement with the Company's former attorneys; partially
offset by a reduction in overall administrative expenses of approximately
$35,000.

         Expenses for research and development for the three months ended
December 31, 1998 amounted to $124,730 compared to $124,688 for the
corresponding period of the prior year. Similar research and development
activity took place during both periods which resulted in only a slight increase
for the quarter ended December 31, 1998.

  Other Income and Expense

         For the three months ended December 31, 1998, other expenses (net of
other income) amounted to $17,863 as compared to other expenses (net of other
income) of $36,286 for the three months ended December 31, 1997. This change is
mainly a result of rental income from the lease of excess square feet in the
Company's facility.

  Discontinued Operations

         On October 27, 1997, the Company sold MHB's net assets and business and
received $1,286,000. No income or expenses were incurred during the quarter
ended December 31, 1998 compared to income from the operations and sale of MHB
of $1,136,170 for the three months ended December 31, 1997.



                                       10

<PAGE>

  Net Loss

         Primarily as a result of the factors described above, the Company had a
net loss of $467,505, $ .03 per share, for the three months ended December 31,
1998, as compared to net income of $667,779, $ .04 per share, for the three
months ended December 31, 1997.

FINANCIAL CONDITION AND LIQUIDITY

         At December 31, 1998 and September 30, 1998 the Company had working
capital deficiencies of ($1,742,032) and ($1,569,085), respectively, and cash
and cash equivalents of $11,996 and $12,483 respectively. Net cash used in
operating activities during the three months ended December 31, 1998 amounted to
$245,737 resulting primarily from a net loss of $467,505; partially offset by
depreciation and amortization of 31,895, a non-cash charge for services of
$10,996, a decrease in accounts receivable of $31,909, decreases in prepaid
expenses and other current assets of $66,595 and increases in accounts payable
and accrued expenses of $80,373. Net cash provided by financing and investing
activities during the three months ended December 31, 1998 amounted to $245,250
which included proceeds from the sale of preferred stock and warrants of
$285,000; offset in part by the repayment of long term debt of $23,734 and the
repayment of notes payable of $16,016.

         During the period of October 1998 through January 1999, the Company
received net proceeds of approximately $869,000 from the sale of 366,132 shares
of Series B Convertible Preferred Stock (convertible at any time into 3,661,320
shares of the Company's common stock) which included warrants to purchase
1,807,000 shares of the Company's common stock at exercise prices of $.22 -$.78
per share for a period of twelve months. In addition, the Company is attempting
to raise up to an additional $2,200,000 from the sales of equity and or debt
securities. Proceeds from these proposed financings are anticipated to be used
primarily to provide the necessary working capital and capital equipment funding
to operate the Company and expand the Company's business. However, there can be
no assurance that these financings will be achieved.

         For the balance of fiscal year 1999, 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 and most
importantly, the funding of operating capital to grow the Company's rapid
diagnostic testing and other lines of business.

         Operating revenues of the Company continued to grow during the first
quarter of Fiscal 1999 and are expected to increase substantially during the
remainder of Fiscal 1999 if the sales for the wound dressing products return to
previous levels and the Company continues to expand the use of its polyurethane
foam bases technology to produce and market products for the diagnostic and
other marketplaces. Based on current sales, expense and cash flow projections,
the Company believes that the current level of cash and most significantly, 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 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 and expand the
business 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


                                       11

<PAGE>


forecasted, management will continue to closely monitor and attempt to control
costs at the Company 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 1998 contains an
explanatory paragraph stating substantial doubt about the Company's ability to
continue as a going concern. Such report also states that the ultimate outcome
of this matter could not be determined as of the date of such report (December
23, 1998). The Company's plans to address the situation are presented above.
However, there are no assurances that these endeavors will be successful or
sufficient.

Year 2000 Impact

         Many currently installed computer systems and software products are
coded to accept or recognize only two digit entries in the date code field.
These systems and software products will need to accept four digit entries to
distinguish 21st century dates from 20th century dates. As a result, computer
systems and/or software used by many companies and governmental agencies may
need to be upgraded to comply with such Year 2000 requirements or risk system
failure or miscalculations causing disruptions of normal business activities.

         The Company has undertaken a review concerning the ability of its
internal information systems, including its internal accounting systems, to
handle date information and function appropriately from and after January 1,
2000 and does not believe that the total cost to address any changes to become
Year 2000 Compliant will be material. In addition, the Company during the first
quarter of calendar 1999 will complete its evaluation as to what impact, if any,
possible Year 2000 problems encountered by its suppliers and customers will have
upon the Company. At this time, the Company does not believe that these problems
would have a material effect on the Company.

         As discussed above, the Company has not yet completed its Year 2000
evaluation and therefore, has not developed any contingency plans. The results
of the Company's evaluation will be the basis for determining the nature and
extent of any contingency plans.







                                       12

<PAGE>












                            PART II OTHER INFORMATION















                                       13

<PAGE>



ITEM 2.  CHANGE IN SECURITIES AND USE OF PROCEEDS

         During the quarter ended December 31, 1998, the Company sold to private
investors 181,042 shares of Series B Convertible Preferred Stock and received
cash proceeds of approximately $285,000. In connection with the sale this
preferred stock, the Company issued to the holders of the preferred stock
warrants to purchase 640,000 shares of the Company's common stock at an exercise
price of $.22 to $.24 per share for a period of 12 months. Each share of the
Series B Convertible Preferred Stock entitles its holders to convert it, at any
time , into 10 shares of the Company's common stock and to receive dividends
amounting to an annual 8% cash dividend or 10% stock dividend computed on the
amount invested, at the discretion of the Company. The exemption for
registration of these securities is based upon Section 4(2) of the Securities
Act.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits:

       Exhibit No.             Document
       -----------             --------
       27.2                    Financial Data Schedule



(b)  Reports on Form 8-K:

         None









                                       14

<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:  February 12, 1999                       /S/ Peter P. Phildius
                                                -----------------------------
                                                Peter P. Phildius
                                                Chairman and Chief
                                                Executive Officer
                                                (Principal Executive Officer)



Dated:  February 12, 1999                       /S/ J.C. Leatherman, Jr.
                                                -----------------------------
                                                J.C. Leatherman, Jr.
                                                Chief Financial Officer
                                                (Principal Accounting and
                                                Financial Officer)










                                       15

<PAGE>





                                  EXHIBIT INDEX
================================================================================


Exhibit No.             Document                                       Page
-----------             --------                                       ----
27.2                    Financial Data Schedule                        17



                                       16