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 March 31, 2001.

[ ]  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
incorporation or organization)                 Identification No.)

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: 34,665,840
                               AS OF MAY 11, 2001

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



                               Page 1 of 25 pages
                       Exhibit Index is on Page 19 hereof
<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        12



PART II: OTHER INFORMATION                                                   16

     Item 2    Changes in Securities and Use of Proceeds                     17


     Item 6    Exhibits and Reports on Form 8-K                              17


SIGNATURES                                                                   18

EXHIBIT INDEX                                                                19

<PAGE>






                          PART I FINANCIAL INFORMATION


<PAGE>

Item 1.     FINANCIAL STATEMENTS

                          Avitar, Inc. and Subsidiaries
                           Consolidated Balance Sheet
                                   (Unaudited)
                                 March 31, 2001
--------------------------------------------------------------------------------

                                     ASSETS
CURRENT ASSETS:
     Cash and cash equivalents                                        $ 312,200
     Accounts receivable, net                                           899,837
     Inventories                                                        315,356
     Prepaid expenses and other current assets                          226,559
                                                                    ------------
          Total current assets                                        1,753,952

PROPERTY AND EQUIPMENT, net                                             391,922
GOODWILL, net                                                         2,603,899
OTHER ASSETS                                                            158,450
                                                                    ------------
          Total                                                     $ 4,908,223
                                                                    ============

                      LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
     Notes payable                                                    $ 403,716
     Accounts payable                                                 1,315,201
     Accrued expenses                                                   495,958
     Current portion of long-term debt                                   94,275
                                                                   -------------
          Total current liabilities                                   2,309,150

LONG TERM DEBT, LESS CURRENT PORTION                                     25,942

                                                                   -------------
          Total liabilities                                           2,335,092

COMMITMENTS

STOCKHOLDERS' EQUITY:
     Series A, B, C and D convertible preferred stock,
      $.01 par value; authorized 5,000,000 shares;
      2,162,036 shares issued and outstanding                            21,620
     Common Stock, $.01 par value; authorized
      75,000,000 shares; 33,210,805 shares issued
      and outstanding                                                   332,108
     Additional paid-in capital                                      36,659,607
     Accumulated deficit                                            (34,379,563)
                                                                  --------------
                                                                      2,633,772
     Less preferred stock subscription receivable                       (60,641)
                                                                  --------------
         Total stockholders' equity                                   2,573,131
                                                                  --------------
         Total                                                      $ 4,908,223
                                                                  ==============




          See accompanying notes to consolidated financial statements.
<PAGE>

                          Avitar, Inc. and Subsidiaries
                      Consolidated Statements of Operations
                                   (Unaudited)
<TABLE>
<CAPTION>


                                                           THREE MONTHS ENDED MARCH 31,        SIX MONTHS ENDED MARCH 31,
                                                           ----------------------------------------------------------------
                                                              2001              2000              2001            2000
                                                           -----------      -------------      -----------    -------------

<S>                                                        <C>                 <C>             <C>             <C>
SALES                                                      $ 1,229,578         $ 812,545       $ 2,398,914     $ 1,620,209

OPERATING EXPENSES
     Cost of sales                                            803,993            719,526        1,688,211        1,344,976
     Selling, general and administrative expenses           1,433,364          1,492,196        2,813,363        2,484,123
     Research and development expenses                        510,170            316,999          944,883          643,208
     Amortization of goodwill                                  73,424             70,424          143,848          140,848
                                                           -----------                         -----------    -------------
                                                                            -------------
          Total operating expenses                          2,820,951          2,599,145        5,590,305        4,613,155
                                                           -----------      -------------      -----------    -------------

LOSS FROM OPERATIONS                                       (1,591,373)        (1,786,600)      (3,191,391)      (2,992,946)
                                                           -----------      -------------      -----------    -------------

OTHER INCOME (EXPENSE)
     Interest income                                              587              1,669              733            8,399
     Interest expense and financing costs                     (15,642)           (13,693)         (25,575)         (42,425)
     Other exppense, net                                       (1,212)             9,516           (1,924)          27,516
                                                           -----------                         -----------    -------------
                                                                            -------------
          Total other expense, net                            (16,267)            (2,508)         (26,766)          (6,510)
                                                           -----------      -------------      -----------    -------------

NET LOSS                                                   $(1,607,640)      $(1,789,108)      $(3,218,157)    $(2,999,456)
                                                           ===========      =============      ===========    =============

BASIC AND DILUTED NET LOSS PER SHARE (Note 6)                 $ (0.09)            ($0.08)         $ (0.18)         $ (0.13)
                                                           ===========      =============      ===========    =============

WEIGHTED AVERAGE
     NUMBER OF COMMON SHARES OUTSTANDING                   32,266,751         26,423,839       31,543,808       25,581,927
                                                           ===========      =============      ===========    =============
</TABLE>

          See accompanying notes to consolidated financial statements.


<PAGE>
                          Avitar, Inc. and Subsidiaries
                 Consolidated Statement of Stockholders' Equity
                         Six Months Ended March 31, 2001
                                   (Unaudited)
<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------------------------------------------

                                                                                                                        Preferred
                                             Preferred Stock           Common Stock                                       Stock
                                            -----------------      -------------------      Additional    Accumulated   Subscription
                                            Shares     Amount      Shares        Amount   paid-in capital  deficit       Receivable
-----------------------------------       ---------  ---------  ------------  -----------  -------------- ---------- ------------

<S>                  <C> <C>               <C>         <C>        <C>           <C>         <C>           <C>             <C>
Balance at September 30, 2000              2,062,143   $20,621    30,695,692    $ 306,957   $31,213,838   ($28,993,409)   ($60,641)

Exercise of warrants and stock options                                70,000          700        16,925

Sales of common stock and warrants                                 1,783,888       17,839     1,958,460

Sales of Series D preferred
 stock and  warrants                         141,333     1,413                                1,058,585

Conversion of Series B preferred
 stock into common stock                     (44,067)     (441)      440,670        4,407        (3,966)

Payment of preferred stock
 dividend, Series B preferred stock            2,627        27                                   29,765        (29,792)

Acquisiion of BJR Security, Inc.                                     220,555        2,205       247,795

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

Original discount on Series D preferred
  stock sales                                                                                   485,000       (485,000)

Cummulative effect of accounting changes
  for remeasurement of original discount
  on preferred stock issuances (Note 6 )                                                      1,078,205     (1,078,205)

Net loss                                                                                                    (3,218,157)
                                           ---------  ---------  ------------  -----------  ------------   ------------ ------------

Balance at March 31, 2001                  2,162,036   $21,620    33,210,805    $ 332,108   $36,659,607   ($34,379,563)   ($60,641)
                                           =========  =========  ============  ===========  ============   ============ ============
</TABLE>

          See accompanying notes to consolidated financial statements.


<PAGE>

                          Avitar, Inc. and Subsidiaries
                 Condensed Consolidated Statements of Cash Flows
                                   (Unaudited)
<TABLE>
<CAPTION>

-------------------------------------------------------------------------------------------------------------------------
                                                                                         SIX MONTHS ENDED MARCH 31,
                                                                                     ------------------------------------
                                                                                          2001                2000
                                                                                     ----------------    ----------------
<S>                                                                                      <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES:

     Net loss                                                                            $(3,218,157)        $(2,999,456)
     Adjustments to reconcile net loss to
          net cash used by operating activities:
               Depreciation and amortization                                                  74,947              83,367
               Amortization of goodwill                                                      143,848             140,848
               Provision for losses on accounts receivable                                   (62,875)             55,000
               Changes in operating assets and liabilities:
                  Accounts receivable                                                        (89,079)           (312,826)
                  Inventories                                                                192,522
                  Prepaid expenses and other current assets                                  (21,487)             75,629
                  Other assets                                                               101,256              72,406
                  Accounts payable and accrued expenses                                       65,351            (231,650)
                                                                                     ----------------    ----------------
                       Net cash used in operating activities                              (2,813,674)         (3,116,682)
                                                                                     ----------------    ----------------

CASH FLOWS FROM INVESTING ACTIVITIES:

     Purchases of property and equipment                                                      (31,599)          (114,498)
     Acquisition of BJR Security, Inc.                                                        (50,000)                 -
                                                                                     ----------------    ----------------
                       Net cash used in investing activities                                  (81,599)          (114,498)
                                                                                     ----------------    ----------------

CASH FLOWS FROM FINANCING ACTIVITIES:

     Sales of common stock, preferred stock and warrants                                   3,036,297           2,772,000
     Exercise of warrants and stock options                                                   17,625           1,868,184
     Preferred stock subscription receivable                                                  42,228                   -
     Proceeds from (repayment of) notes payable and long-term debt                            29,010            (201,549)

                                                                                     ----------------    ----------------
                  Net cash provided by financing activities                                3,125,160           4,438,635
                                                                                     ----------------    ----------------

NET INCREASE IN CASH AND CASH EQUIVALENTS                                                    229,887           1,207,455

CASH AND CASH EQUIVALENTS, beginning of the period                                            82,313             280,758
                                                                                     ----------------    ----------------

CASH AND CASH EQUIVALENTS, end of the period                                               $ 312,200         $ 1,488,213
                                                                                     ================    ================

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
     Cash paid during period:
          Income taxes                                                                           $ -                 $ -
          Interest                                                                          $ 21,331            $ 63,851
</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 diagnostic test products and services as
     well as drug detection and education services.  Avitar sells these products
     and  services to large  medical  supply  companies,  employers,  diagnostic
     distributors,  schools and governmental agencies.  During Fiscal Years 2000
     and  2001,  the  Company   continued  the   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 six month periods ended March
     31, 2001 are not necessarily indicative of the results that may be expected
     for the full  fiscal year  ending  September  30,  2001.  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, 2000.

          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 as of March 31, 2001 of  $555,198.  The Company
     raised net proceeds aggregating  approximately $5,914,000 during the fiscal
     year ended  September  30, 2000 from the sale of stock and the  exercise of
     options  and  warrants.  During the six months  ended March 31,  2001,  the
     Company  raised  approximately  $3,054,000  from the sale of preferred  and
     common stock and the exercise of options. Based upon cash flow projections,
     the Company believes the anticipated cash flow from operations and 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 March 31, 2001, inventories consist of the following:

       Raw Materials                                          $177,374
       Work-in-Process                                          37,569
       Finished Goods                                          100,413
                                                              ---------
                Total                                         $315,356
                                                               ========

3.   ACQUISITION

          As of March 1,  2001,  the  Company  acquired  all of the  outstanding
     capital stock of BJR Security, Inc. ("BJR") in exchange for cash of $50,000
     and approximately  221,000  restricted shares of the Company's common stock
     which were valued at fair value at the date of  acquisition.  The amount of
     consideration  was determined by arm's length  negotiations  between Avitar
     and the sole  stockholder  of BJR,  taking into  account the  revenues  and
     prospects for BJR. The  acquisition  was recorded using the purchase method
     of accounting and resulted in goodwill of  approximately  $283,000.  BJR is
     engaged  in the  business  of  providing  specialized  drug  detection  and
     education services.


4.   MAJOR CUSTOMERS

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

                           Three Months Ended March 31,        Six Months Ended March 31,
                           --------------------------------   -----------------------------------
                                 2001          2000    `           2001           2000
                           --------------- -----------------  --------------  ----------------

         <S>                  <C>            <C>                <C>             <C>
         Customer A           $184,051       $253,346           $309,999        $253,346
         Customer B            200,290              *                  *               *
         Customer C             *                   *                  *         112,500
         Customer D             *                   *                  *         106,310
</TABLE>


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


5.   COMMON STOCK, PREFERRED STOCK AND WARRANTS

     In March 2001,  the Company sold 141,333 of shares of Series D  convertible
     preferred  stock and  received  proceeds of  approximately  $1,060,000.  In
     connection with the sale of the preferred  stock, the Company issued to the
     holders of the preferred stock warrants to purchase 1,413,330 shares of the
     Company's  common stock at exercise prices of $1.13 per share for a term of
     three years.  The value of the warrants  issued  amounted to  approximately
     $575,000.  The  holders of the  Series D  convertible  preferred  stock may
     convert their investment at any time into 10 shares of the Company's common
     stock.  The  preferred  stock was issued with a conversion  price below the
     common  stock  market  value  and as a result,  an  original  discount  was
     recorded and included in the earnings per share calculation.

     During the  six-month  period  ended March 31, 2001,  the Company  received
     approximately $17,625 from the exercise of stock options to purchase 70,000
     shares of the Company's common stock.

     During the six months  ended March 31,  2001,  the Company  sold  1,783,888
     shares of the Company's common stock and received proceeds of approximately
     $1,976,000.  In connection  with the sale of the common stock,  the Company
     issued to the holders of the common  stock  warrants to purchase  3,883,888
     shares of the Company's  common stock at exercise  prices of $1.02 to $1.50
     per share for terms of three to five years.

     For the six months ended March 31, 2001 holders of the Series B convertible
     preferred  stock  converted  44,067  shares of their  preferred  stock into
     440,670 shares of the Company's  common stock.  Preferred  stock  dividends
     related  to the  Series B  convertible  preferred  stock for the six months
     ended March 31, 2001 amounted to $185,760.  As of March 31, 2001, the total
     amount of unpaid and undeclared dividends was $412,104.

6.  EARNINGS PER SHARE

     The following data show the amounts used in computing earnings per share:
<TABLE>
<CAPTION>

                                              Three Months Ended March 31,           Six Months Ended March 31,
                                                 2001               2000               2001               2000
                                             ------------       ------------       ------------       ------------
   <S>                                       <C>                <C>                <C>                <C>
   Net loss                                  $(1,607,640)       $(1,789,108)       $(3,218,157)       $(2,999,456)
   Less:
   Preferred Stock Dividends                 (    90,716)       (   198,367)       (   185,760)          (264,662)

   Value of warrants issued in
         connection with Series C and
      Series D preferred stock sales         (   575,000)      (     30,638)      (    575,000)       (    42,638)

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

   Loss available to common
      stockholders  used in basic and
      diluted EPS before cumulative
      accounting change                       (2,758,356)        (2,018,113)        (4,463,917)        (3,306,756)

   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                         $(2,758,356)       $(2,018,113)       $(5,542,122)       $(3,306,756)


   Weighted average number of
         common shares outstanding            32,266,751         26,423,839         31,543,808         25,581,927
                                             ===========        ============       ============       ============
</TABLE>

     In November 2000, the FASB Emerging Task Force ("ETIF")  issued a consensus
     that requires the  remeasurement  of original  issue  discount on preferred
     stock with characteristics similar to convertible preferred stock issued by
     the Company  during Fiscal Years 2000 and 1999. The impact of adopting this
     ETIF  amounting to  $1,078,205  was recorded in the first quarter of Fiscal
     2001 and has been included in the computation of earnings per share for the
     six months ended March 31, 2001 as a cumulative change in accounting.

7.   SUBSEQUENT EVENTS

     Since March 31, 2001 the Company  sold  1,570,590  shares of the  Company's
     common  stock  and  received  proceeds  of  approximately   $1,068,000.  In
     connection  with the sale of the common  stock,  the Company  issued to the
     holders of the common stock  warrants to purchase  1,570,590  shares of the
     Company's  common stock at an exercise  price of $1.13 per share for a term
     of 3 years.

<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.  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 March 31, 2001  increased  $417,033,  or
approximately  51%, to $1,229,578 from $812,545 for the corresponding  period of
the prior  year.  For the six  months  ended  March 31,  2001,  sales  increased
$778,705,  or approximately  48%, to $2,398,914 from $1,620,209.  The change for
the three and six months ended March 31, 2001 primarily reflects the increase in
sales of its ORALscreen(TM) and BJR revenue of $40,693.

Operating Expenses

     Cost of sales for the three months ended March 31, 2001 were  approximately
65% of sales  which  compares  to the cost of sales of 89% for the three  months
ended March 31, 2000. For the six months ended March 31, 2001, the cost of sales
were 70%  compared to 83% of sales for the same period of Fiscal  2000.  For the
three and six months ended March 31, 2001, the  improvement in the ratio of cost
to sales was  primarily  due to the  increase in sales  described  above and the
shift in the product mix to ORALscreen.

     Selling,  general and  administrative  expenses  for the three months ended
March 31, 2001  decreased  $58,832,  or  approximately  4%, to  $1,433,364  from
$1,492,196  for the  corresponding  period of the prior year. For the six months
ended March 31, 2001,  selling,  general and  administrative  expenses increased
$332,240 or approximately  13%, to $2,816,363 from $2,484,123 for the six months
ended  March 31,  2000.  The  increase  for the six months  ended March 31, 2001
reflected the expanded sales,  marketing and  administrative  efforts associated
with the Company's OralScreen and HairScreen products.

     Expenses for research and  development for the three months ended March 31,
2001 amounted to $510,170 compared to $316,999 for the  corresponding  period of
the prior year.  For the six months ended March 31, 2001,  expenses for research
and development were $944,883 versus $643,208 for the six months ended March 31,
2000.  The change for the three and six months ended March 31,2000 was primarily
attributable to the increased research and development activities related to the
Company's OralScreen products and oral fluid disease testing applications.

     For the three months and six months ended March 31, 2001,  amortization  of
goodwill  which  resulted  from the Company's  acquisition  of BJR and USDTL was
$73,424  and   $143,848,   respectively,   compared  to  $70,424  and  $140,848,
respectively,  for the three and six ended March 31, 2000.  The change of $3,000
reflects the acquisition of BJR on March 1, 2001.


Other Income and Expense

     Interest  income for the three and six months ended March 31, 2001 amounted
to $587 and $733,  respectively compared to $1,669 and $8,399,  respectively for
the same  periods of Fiscal  2000.  The  decrease  resulted  primarily  from the
reduced interest earned on cash management accounts.

     Interest  expense and  financing  costs were  $15,642 for the three  months
ended March 31, 2001 compared to $13,693  incurred during the three months ended
March 31, 2000.  For the six months ended March 31, 2001,  interest  expense and
financing costs  decreased  $16,850 to $25,575 from $42,425 for the same periods
in the prior year.  The increase for the quarter  ended March 31, 2001  resulted
from interest expense on additional  borrowings.  For the six months ended March
31,  2001,  the  change  primarily  reflects  reduced  interest  expense on bank
advances related to financing of accounts receivable.

     For the three months ended March 31, 2001, other expense amounted to $1,212
as compared to other income of $9,516 for the three months ended March 31, 2000.
Other  expense for the six months  ended March 31, 2001 was $1,924  versus other
income of $27,516 for the corresponding period of the prior year. The change for
the three and six months  ended  March 31,  2001 is mainly a result of no rental
income from the lease of excess square feet in the Company's facility.

Accounting Change

     In November 2000, the FASB Emerging Task Force ("ETIF")  issued a consensus
that requires the  remeasurement  of original issue discount on preferred  stock
with  characteristics  similar  to  convertible  preferred  stock  issued by the
Company  during  fiscal  years 2000 and 1999.  The impact of adopting  this ETIF
amounting to $1,078,205 was recorded in the first quarter of Fiscal 2001 and has
been included in the  computation of earnings per share for the six months ended
March 31, 2001 as a cumulative change in accounting.

     The effect of this accounting  change  increased the Company's net loss per
share by $.03 for the six months ended March 31, 2001.

Net Loss

     Primarily as a result of the factors described above, the Company had a net
loss of  $1,607,640,  $ .09 per basic and diluted  share,  for the quarter ended
March 31,  2001,  as compared to a net loss of  $1,789,108,  $ .08 per basic and
diluted  share,  for the quarter ended March 31, 2000.  For the six months ended
March 31,  2001,  the Company had a net loss of  $3,218,157,  $.18 per basic and
diluted  share,  versus a net loss of  $2,999,456,  $.13 per basic  and  diluted
share, for the six months ended March 31, 2000.

FINANCIAL CONDITION AND LIQUIDITY

     At March 31, 2001 and  September  30, 2000 the Company had working  capital
deficits of $555,198 and $543,515,  respectively,  and cash and cash equivalents
of $312,200 and  $82,313,  respectively.  Net cash used in operating  activities
during the six months  ended March 31, 2001  amounted  to  $2,813,674  resulting
primarily from a net loss of $3,218,157,  a decrease in the provision for losses
on accounts receivable of $62,875, an increase in accounts receivable of $89,079
and an  increase  in  prepaid  expenses  and other  current  assets of  $21,487;
partially offset by depreciation  and  amortization of $74,947,  amortization of
goodwill of $143,848, a decrease in inventories of $192,522, a decrease in other
assets of $101,256  and  increases in accounts  payable and accrued  expenses of
$65,351.  Net cash provided by financing and investing activities during the six
months ended March 31, 2001 amounted to $3,043,561, which included proceeds from
the sale of preferred stock,  common stock and warrants of $3,036,297,  proceeds
from the exercise of stock  options of $17,625,  a decrease in  preferred  stock
subscription receivable of $42,228 and proceeds from notes payable and long-term
debt of $29,010;  offset in part by  purchases  of  property  and  equipment  of
$31,599 and cash paid in the acquisition of BJR Security, Inc. of $50,000.

     Since September 30, 2000, the Company  received  proceeds of  approximately
$3,044,000 from the sale of 3,354,478  shares of the Company's  common stock and
warrants to purchase  5,454,478 shares of the Company's common stock at exercise
prices of $1.02  -$1.50  per share  for a period  of three to five  years.  Also
during  the  same  period,   the  Company  received  proceeds  of  approximately
$1,060,000  from the sale of 141,333  shares of Series D  convertible  preferred
stock and warrants to purchase 1,413,330 shares of the Company's common stock at
an exercise price of $1.13 per share for three years. Each share of the Series D
preferred  stock is  convertible  at any time into ten  shares of the  Company's
common stock. In addition, 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,  to fund strategic
acquisitions and to pursue the development of oral fluid diagnostic  testing for
diseases.  However,  there can be no  assurance  that these  financings  will be
achieved.

     For the balance of fiscal year 2001,  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,  the continued  funding for the development of oral fluid
diagnostic  testing  products for diseases  and the  exploration  and funding of
acquisitions that will accelerate the expansion of the Company.

     Operating  revenues of the Company grew  approximately 48% during the first
half of Fiscal  2001 and are  expected  to grow at a more rapid pace  during the
remainder of Fiscal 2001 as the Company  continues to increase the  shipments of
new and enhanced  OralScreen(TM)  products and grow the business of USDTL. Based
on current sales, expenses 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.  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
financing  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 at the Company and will  continue to seek
additional capital as necessary.

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

<PAGE>

ITEM 2.           CHANGE IN SECURITIES AND USE OF PROCEEDS

     During the  quarter  ended  March 31,  2001,  the  Company  sold to private
investors  1,124,595  shares of the  Company's  common stock and  received  cash
proceeds of approximately  $941,000.  In connection with the sale of this common
stock,  the  Company  issued to the  holders of the  common  stock  warrants  to
purchase  1,124,595  shares of the Company's  common stock at exercise prices of
$1.02 to $1.38  per share for terms of three to five  years.  Also  during  this
quarter,  the  Company  sold to  private  investors  141,333  shares of Series D
convertible   preferred  stock  and  received  cash  proceeds  of  approximately
$1,060,000.  In connection  with the sale of the Series D preferred  stock,  the
Company  issued to the  holders  of the Series D  preferred  stock  warrants  to
purchase  1,413,330 shares of the Company's common stock at an exercise price of
$1.13 per share for three years.  Each share of the Series D preferred  stock is
convertible  at any time into 10  shares  of the  Company's  common  stock.  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
    ----------   -------------------------------------------------------
       4.1       Certificate of Designations, Rights and Preferences of Series D
                 Redeemable Convertible Preferred Stock



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:  May 14, 2001                   /S/ Peter P. Phildius
                                       -----------------------------------
                                        Peter P. Phildius
                                        Chairman and Chief
                                        Executive Officer
                                        (Principal Executive Officer)



Dated:  May 14, 2001                   /S/ J.C. Leatherman, Jr.
                                       ---------------------------
                                        J.C. Leatherman, Jr.
                                        Chief Financial Officer
                                        (Principal Accounting and
                                        Financial Officer)


<PAGE>

                                  EXHIBIT INDEX



Exhibit Index            Document                                          Page
-------------            -------------------------------------------------------


4.1                      Certificate of Designations, Rights, and          19
                          Preferences of Series D Redeemable
                          Convertible Preferred Stock