U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   FORM 10-QSB/A-1

(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, 2005.

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

Commission File Number:    1-15695
                        ------------

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

        Delaware                                             06-1174053
(State or other jurisdiction                (I.R.S. Employer Identification No.)
of 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: 156,531,335
                               AS OF MAY 10, 2005

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



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

                               Page 1 of 25 pages
                           Exhibit Index is on Page 25
<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' Deficit                             6
               Statements of Cash Flows                                       7
               Notes to Consolidated Financial Statements                     8


    Item 2   Management's Discussion and Analysis or Plan of Operation       14


    Item 3   Controls and Procedures                                         20

PART II: OTHER INFORMATION                                                   21

    Item 2   Unregistered Sales of Equity Securities and Use of Proceeds     22


    Item 6   Exhibits and Reports on Form 8-K                                22


SIGNATURES                                                                   25

EXHIBIT INDEX                                                                26
CERTIFICATIONS                                                               27


<PAGE>
                          Avitar, Inc. and Subsidiaries
                           Consolidated Balance Sheet
                                 March 31, 2005
                                   (Unaudited)
                                 (As restated)

<TABLE>
<CAPTION>

-------------------------------------------------------------------------------------------------
                                     ASSETS
<S>                                                                                 <C>
CURRENT ASSETS:
     Cash and cash equivalents                                                      $     69,626
     Accounts receivable, net                                                            481,981
     Inventories                                                                         551,010
     Prepaid expenses and other current assets                                           171,721
                                                                                     ------------
          Total current assets                                                         1,274,338

PROPERTY AND EQUIPMENT, net                                                              244,270
GOODWILL, net                                                                            238,120
OTHER ASSETS                                                                             193,632
                                                                                     ------------
          Total Assets                                                              $  1,950,360
                                                                                     ============

                      LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
     Notes payable                                                                  $    392,542
     Accounts payable                                                                    885,996
     Accrued expenses                                                                    720,273
     Deferred income                                                                     178,550
     Fair value of warrants (Note 12)                                                    426,300
     Fair value of embedded derivatives (Note 12)                                        675,600

                                                                                     ------------
          Total current liabilities                                                    3,279,262
                                                                                     ------------
REDEEMABLE CONVERTIBLE AND CONVERTIBLE PREFERRED
      STOCK (Note 6)                                                                   3,480,000
                                                                                     ------------

COMMITMENTS

STOCKHOLDERS' DEFICIT:
     Series B convertible preferred stock, $.01 par value; authorized
          5,000,000 shares; 5,689 shares issued and outstanding                               58
     Common Stock, $.01 par value; authorized 300,000,000 shares;
          155,207,442 shares issued and outstanding                                    1,552,074
     Additional paid-in capital                                                       46,316,629
     Accumulated deficit                                                             (52,677,663)
                                                                                     ------------
         Total stockholders' deficit                                                  (4,808,902)
                                                                                     ------------
         Total Liabilities and Stockholders' Deficit                                 $ 1,950,360
                                                                                     ============


</TABLE>


     See accompanying notes to consolidated financial statements.
<PAGE>



                          Avitar, Inc. and Subsidiaries
                      Consolidated Statements of Operations
                                   (Unaudited)
                                 (As restated)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
                                                        THREE MONTHS ENDED MARCH 31,  SIX MONTHS ENDED MARCH 31,
                                                        ---------------------------------------------------------
                                                           2005           2004           2005           2004
                                                        ------------   ------------   ------------   ------------
<S>                                                       <C>          <C>            <C>            <C>
SALES                                                     $ 955,223    $ 1,017,190    $ 1,991,263    $ 1,837,390
                                                        ------------   ------------   ------------   ------------

OPERATING EXPENSES
     Cost of sales                                          714,610        755,623      1,430,619      1,321,342
     Selling, general and administrative expenses         1,031,620        677,248      1,964,282      1,392,172
     Research and development expenses                      183,306        119,512        379,749        227,667
                                                        ------------   ------------   ------------   ------------
          Total operating expenses                        1,929,536      1,552,383      3,774,650      2,941,181
                                                        ------------   ------------   ------------   ------------

LOSS FROM OPERATIONS                                       (974,313)      (535,193)    (1,783,387)    (1,103,791)
                                                        ------------   ------------   ------------   ------------

OTHER INCOME (EXPENSE)
     Interest expense and financing costs                   (23,183)       (72,414)       (36,369)      (141,682)
     Other income (expense), net                            711,321        179,741        190,691       (107,602)
                                                         ------------   ------------   ------------   -------------
          Total other income (expense), net                 688,138        107,327        154,322       (249,284)
                                                         ------------   ------------   ------------   -------------

LOSS FROM CONTINUING OPERATIONS                            (286,175)      (427,866)    (1,629,065)    (1,353,075)
                                                         ------------   ------------   ------------   -------------

DISCONTINUED OPERATIONS
   Income from operations of USDTL                                -              -              -          4,447
   Loss from the disposal of USDTL                                -              -              -        (17,235)
                                                         ------------   ------------   ------------   -------------
   Loss from discontinued operations                              -              -              -        (12,788)
                                                         ------------   ------------   ------------   -------------

                                                         ------------   ------------   ------------  -------------
NET LOSS                                                 $ (286,175)    $ (427,866)   $(1,629,065)   $(1,365,863)
                                                         ============   ============   ============  =============

BASIC AND DILUTED LOSS PER SHARE FROM CONTINUING
   OPERATIONS (Note 9)                                          $ -        $ (0.01)       $ (0.02)       $ (0.02)
                                                         ============   ============   ============   =============

BASIC AND DILUTED LOSS PER SHARE (Note 9)                       $ -        $ (0.01)       $ (0.02)       $ (0.02)
                                                         ============   ============   ============   =============

WEIGHTED AVERAGE
     NUMBER OF COMMON SHARES OUTSTANDING                148,207,442    102,438,882    139,041,290     99,248,955
                                                        ============   ============   ============   =============
</TABLE>


     See accompanying notes to consolidated financial statements.

<PAGE>

                                     Avitar, Inc. and Subsidiaries
                            Consolidated Statement of Stockholders' Deficit
                                    Six Months Ended March 31, 2005
                                              (Unaudited)
                                            (As restated)
<TABLE>
<CAPTION>


--------------------------------------------------------------------------------------------------------------------------
                                            Preferred Stock      Common Stock
                                           .................. ...................                                          Total
                                                                                        Additional        Accumulated   Stockholders
                                           Shares   Amount    Shares       Amount      paid-in capital      deficit        Deficit
---------------------------------------------------- -------- ---------    --------     ---------------     --------------
<S>                                          <C>      <C>     <C>          <C>           <C>              <C>           <C>
Balance at September 30, 2004                46,130   $ 462   123,118,165  $ 1,231,182   $49,657,819      $(51,556,850) $  (667,387)
Adjustment                                  (38,941)   (389)            -            -    (3,231,322)          556,862   (2,674,849)
                                            --------  ------  -----------   ----------    -----------      ------------  ----------
Balance at September 30, 2004
 (As restated)                               (7,189)     73   123,118,165    1,231,182    46,426,497       (50,999,988)  (3,342,236)
                                            --------  ------  -----------   ----------    -----------      ------------  -----------

Sale of common stock                                               23,479          235         2,565

Conversion of Series A convertible
 preferred stock into common stock           (1,500)    (15)   17,173,239      171,732      (171,717)                -

Conversion of Series A redeemable
 convertible preferred stock into
 common stock                                     -       -    13,205,882      132,059       825,989                 -

Payment of convertible preferred stock
 dividend for Series A preferred stock            -       -       610,945        6,109        42,501           (48,609)

Accretion of mandatory redeemable
 preferred stock                                                                            (992,100)                      (992,100)

Common stock issued in connection
 with estblishing equity credit line                            1,075,732       10,757       114,243                        125,000

Net loss                                          -       -             -            -             -        (1,629,065)  (1,629,065)
                                            --------  ------  -----------   ----------    -----------      ------------  -----------

Balance at March 31, 2005                     5,689    $ 58   155,207,442  $ 1,552,074   $46,316,629      $(52,677,663) $(4,808,902)
----------------------------------------------------  ------  -----------   ----------    -----------      ------------  -----------


</TABLE>


     See accompanying notes to consolidated financial statements.
<PAGE>


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

------------------------------------------------------------------------------------------------------------
                                                                                SIX MONTHS ENDED MARCH 31,
                                                                                 ----------------------
                                                                                  2005           2004
                                                                               ----------      ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                          <C>            <C>
     Net loss                                                                $(1,629,065)   $(1,365,863)
     Adjustments to reconcile net loss to
          net cash used in operating activities:
               Loss from disposal of discontinued operation                            -         17,235
               Depreciation and amortization                                      77,538         58,412
               Amortization of debt discount and deferred financing               11,506         28,968
               Amortization of deferred rent expense                              62,384         41,589
               Common stock for interest on long-term debt                             -         87,500
               (Income) expense from changes in value of embedded
                derivatives and warrants                                        (189,546)       116,709

               Changes in operating assets and liabilities:
                             Accounts receivable                                 153,756        (11,320)
                             Inventories                                        (202,157)      (106,885)
                             Prepaid expenses and other current assets             2,759          7,786
                             Other assets                                            698         24,705
                             Accounts payable and accrued expenses               (60,529)      (943,899)
                             Deferred revenue                                    (13,950)        (1,200)
                                                                             -----------    -----------
                                  Net cash used in operating activities       (1,786,606)    (2,046,263)
                                                                             -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES:

     Purchases of property and equipment                                         (21,725)        (1,239)
     Proceeds from sale of USDTL                                                       -        500,000
                                                                             -----------    -----------

                     Net cash provided by (used in) investing activities         (21,725        498,761
                                                                             -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES:

     Sales of common stock, redeemable preferred stock and warrants            1,162,575        922,310
     Proceeds from (repayment of) notes payable and long-term debt               206,506       (108,505)
     Payment of cash dividend on 8% redeemable convertible preferred stock             -        (16,110)
                                                                             -----------    -----------
                              Net cash provided by financing activities        1,369,081        797,695
                                                                             -----------    -----------

NET DECREASE IN CASH AND CASH EQUIVALENTS                                       (439,250)      (749,807)

CASH AND CASH EQUIVALENTS, beginning of the period                               508,876      1,130,919
                                                                             -----------    -----------

CASH AND CASH EQUIVALENTS, end of the period                                 $    69,626    $   381,112
                                                                             ===========    ===========


SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during period:
          Income taxes                                                       $         -    $         -
          Interest                                                           $    16,986    $     8,049


SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
    FINANCING ACTIVITIES:

    During the six months ended March 31, 2005, 958 shares of Series A
       redeemable convertible preferred stock were converted into
       13,205,882 shares of common stock.

    During the six months ended March 31, 2005, 1500 shares of Series A
       convertible preferred stock were converted into 17,173,239 shares
       of common stock.

    During the six months ended March 31, 2005, 610,945 shares of common
       were issued as payment of dividends for Series A convertible and
       redeemable convertible preferred stock.

    During the six months ended March 31, 2005, warrants to purchase         $ 12,673                 -
       250,000 shares of common stock were issued in connection with
       the issuance of notes payable.

    During the six months ended March 31, 2005, 1,075,732 shares             $ 125,000                -
       of common stock were issued as payment of investor and placement
       agent fees in connection with SEDA financing.


    During the six months ended March 31, 2004, 926,599 shares of common
       stock were issued for interest on long-term debt.

    During the six months ended March 31, 2004, 700 shares of 8%
       redeemable convertible preferred stock were converted into
       4,666,667 shares of common stock.

    During the six months ended March 31, 2004, 10,399,214 shares of
       common stock were issued for the exercise of warrants.

    During the six months ended March 31, 2004, 239 shares of Series B
       convertible preferred stock were converted into 2,390 shares of
       common stock.
</TABLE>


     See accompanying notes to consolidated financial statements.

<PAGE>

                          PART I FINANCIAL INFORMATION

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

1.   BASIS OF PRESENTATION

     Avitar,   Inc.  (the  "Company"  or  "Avitar")   through  its  wholly-owned
     subsidiary  Avitar  Technologies,  Inc.  ("ATI")  develops,   manufactures,
     markets and sells  diagnostic  test  products and  proprietary  hydrophilic
     polyurethane foam disposables fabricated for medical,  diagnostics,  dental
     and consumer use.  During the first half of FY2005,  the Company  continued
     the development and marketing of innovative  point of care oral fluid drugs
     of abuse tests,  which use the Company's  foam as the means for  collecting
     the oral fluid sample.  Through its wholly owned subsidiary,  BJR Security,
     Inc. (`BJR"),  the Company provides  specialized  contraband  detection and
     education services.

          On December  16,  2003,  the Company sold the business and net assets,
     excluding cash, of its wholly owned subsidiary,  United States Drug Testing
     Laboratories,  Inc.  ("USDTL"),  which operated a certified  laboratory and
     provided  specialized  drug testing services  primarily  utilizing hair and
     meconium as the samples.  Therefore,  USDTL is  considered  a  discontinued
     operation and this report reflects the continued operations of the Company.


          During the audit for  Fiscal  2005,  the  Company  was  advised by its
     independent  registered  public  accounting  firm that the  method  used to
     account for sales of certain  convertible  preferred  stock and convertible
     notes was not in accordance  with the  requirements of Emerging Issues Task
     Force  ("EITF")  Issue  No.  00-19  "Accounting  for  Derivative  Financial
     Instruments  Indexed To and Potentially  Settled In a Company's Own Stock".
     The  statements of  stockholders'  deficit as of September 30, 2004 and for
     the six months  ended March 31,  2005,  the  balance  sheet as of March 31,
     2005,  the  statements of  operations  for the quarter and six months ended
     March 31, 2005 and 2004 and the  statements of cash flow for the six months
     ended March 31, 2005 and 2004 included herein have been restated to correct
     the error in  accounting  for the  issuance of various  securities  and the
     derivative  features embedded  therein.  These  restatements  resulted in a
     stockholders'  deficit of  $3,342,236 at September 30, 2004 (an increase of
     $2,674,849),  a  stockholders'  deficit of $4,808,902 at March 31, 2005 (an
     increase of $3,296,901), a net loss of $286,175 for the quarter ended March
     31, 2005 (a decrease of $710,613 or $.01 per share), a net loss of $427,866
     for the  quarter  ended March 31,  2004(a  decrease of $175,081 or $.01 per
     share),  a net loss of $1,629,065 for the six months ended March 31, 2005 (
     a decrease of $189,546 or $.00 per share) and a net loss of $1,365,863  for
     the six months  ended March 31,  2004 (an  increase of $116,709 or $.00 per
     share).


          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 and six months  ended March 31,
     2005 are not necessarily indicative of the results that may be expected for
     the  full  fiscal  year  ending   September  30,  2005.  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, 2004. 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 had a working  capital  deficit  as of March  31,  2005 and
     September  30, 2004 of $914,607  and  $388,972,  respectively.  The Company
     raised net proceeds aggregating  approximately $2,800,000 during the fiscal
     year  ended  September  30,  2004 from the sale of stock and  warrants.  In
     addition, the Company converted $1,250,000 of long-term debt into preferred
     stock.  During the six months ended March 31, 2005,  the Company raised net
     proceeds of  approximately  $1,160,000 from the sale of preferred stock and
     warrants and $250,000 from  short-term  notes.  The Company is working with
     placement  agents and investment fund mangers to obtain  additional  equity
     financing.  In April 2005,  the Company  raised gross  proceeds of $750,000
     from the sale of Series E  Convertible  Preferred  Stock and  Warrants,  of
     which  $375,000  was paid in the  first  closing  and a second  tranche  of
     $375,000 was paid on May 9, 2005 . The $750,000 of Series E Preferred Stock
     are convertible into Common Stock at the lesser of $.08 per share or 80% of
     the average of the three lowest closing bid prices for the ten trading days
     immediately  prior to the notice of conversion,  subject to adjustments and
     limitations,  and the  Warrants  are  exercisable  at $.084 per share for a
     period of three  years.  Prior to  entering  into the  Securities  Purchase
     Agreement for the sale of the Series E Preferred Stock, the Company entered
     into a Termination  Agreement  terminating the Standby Equity  Distribution
     Agreement  (`SEDA")  made as of  February  1,  2005  with  Cornell  Capital
     Partners,  L.P. ("Cornell Capital").  The terms of this SEDA were discussed
     in  detail  in  Notes  1 and  10 to  the  Financial  Statements  and in the
     Financial  and Liquidity  Section of the Company's  Report on Form 10-QSB/A
     filed for the quarter ended December 31, 2004. If Cornell  Capital does not
     enter into a SEDA on  identical  terms  within  ninety  (90) days after all
     amounts  payable under the  Securities  Purchase  Agreement are  satisfied,
     Cornell  Capital has agreed to return to the  Company all fees  pursuant to
     the February 2005 SEDA. The fees  (1,075,732  shares of common stock with a
     value of  $125,000)  paid to Cornell  Capital  and its  placement  agent in
     connection with this transaction were recorded as deferred  financing costs
     in the quarter ended March 31, 2005 and will be amortized over the 24 month
     term of the SEDA.

2.   INVENTORIES

          At March 31, 2005, inventories consist of the following:

            Raw Materials                                          $393,379
            Work-in-Process                                          55,635
            Finished Goods                                          101,996
                                                                   ---------
                     Total                                         $551,010
                                                                   ========

3.   DISCONTINUED OPERATIONS

          On December  16,  2003,  the Company  consummated  the sale of USDTL's
     business and net assets,  excluding cash. The Company received  $500,000 in
     cash upon the closing of the sale and is entitled to receive an  additional
     $500,000 as the buyer of USDTL achieves  specified  revenue targets.  Under
     the terms of the sale, the buyer must pay the Company 10% of certain annual
     revenues in excess of $1,500,000, less any amounts due from the Company for
     the purchase of services from the buyer.  The Company recorded the $500,000
     received in the first quarter of FY2004.  Due to the  contingent  nature of
     the  additional  $500,000,  the  payments  will be  recorded  as  they  are
     received.   The  accompanying  financial  statements  reflect  USDTL  as  a
     discontinued  operation.  The  following  is a summary  of the  results  of
     operations  for USDTL for the three and six months ended March 31, 2005 and
     2004:
<TABLE>
<CAPTION>

                                                              Three Months                   Six Months
                                                              Ended March 31,              Ended March 31,

                                                       2005             2004             2005           2004
                                                   ------------     ------------     -------------   -----------
<S>                                                 <C>             <C>              <C>              <C>
         Sales                                      $       -       $       -        $       -        $289,501
         Operating expenses                                 -               -                -         284,223
         Other income (expense)                             -               -                -         (18,066)
                                                    -----------     -------------    ------------     ----------
         Loss from discontinued operations          $       -       $       -        $       -        $(12,788)
                                                    ===========     =============    ============     ==========
</TABLE>



          Other  income  (expense)  for the six  months  ended  March  31,  2004
     includes the loss from the disposal of USDTL of $17,235.


4.   MAJOR CUSTOMERS


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

                                           Three Months Ended March 31,                 Six Months Ended March 31,
                                          -----------------------------                 -----------------------------
                                          2005                     2004                  2005                   2004
                                    ----------------          --------------       ---------------        ----------------
<S>                                    <C>                      <C>                    <C>                 <C>
                  Customer A           $308,375                 $  269,088             $562,161            $  402,223

</TABLE>


          At March 31, 2005,  accounts  receivable from major customers  totaled
     approximately $166,835.

5.   NOTES PAYABLE

          During  March  2005,  the  Company  issued  short-term  notes  payable
     totaling $250,000 to an acredited investor.  These notes have a term of six
     months and bear interest at the rate of 1% per month.  In  connection  with
     the notes payable,  the holder  received  warrants to purchase one share of
     the  Company's  common  stock for each  dollar  loaned to the Company for a
     period of three  years at  exercise  prices  ranging  from $.09 to $.10 per
     share. During the quarter ended March 31, 2005,  $12,673,  representing the
     value for the warrants  issued to purchase  250,000  shares of common stock
     associated with the $250,000 of borrowings during the period,  was recorded
     as a discount to debt and is being amortized over the term of the notes.

6.   REDEEMABLE CONVERTIBLE PREFERRED STOCK

          In December 2004, the Company sold 1,285 shares of Series A Redeemable
     Convertible  Preferred  Stock and  Warrants to purchase  600,000  shares of
     common  stock  for  which  it  received   net  proceeds  of   approximately
     $1,160,000.  The Series A Redeemable  Convertible  Preferred Stock,  with a
     face value of $1,285,000, is convertible into common stock at the lesser of
     $.12 per  share or 85% of the  average  of the  three  lowest  closing  bid
     prices,  as reported by  Bloomberg,  for the ten trading  days  immediately
     prior to the notice of conversion  subject to adjustments and floor prices.
     The Warrants are  exercisable  at $.126 per share.  The warrants  issued in
     connection  with the sale of 1,285  shares of  preferred  stock and the put
     right  and  the  conversion  feature  resulted  in  a  deemed  dividend  of
     $1,058,260   being   recorded  and  included  in  the  earnings  per  share
     calculation  for the  quarter  and six  months  ended  March  31,  2005.  A
     liability of  approximately  $1,058,260  was recorded for the original fair
     value of the  warrants  issued  in  connection  with the sale of the  1,285
     shares of preferred stock and the conversion  feature which was $723,240 at
     March 31, 2005. Upon the occurrence of specific events,  the holders of the
     Series A  Redeemable  Convertible  Preferred  Stock are  entitled to redeem
     these  shares  under  certain  provisions  of the  agreement  covering  the
     purchase  of the  preferred  stock.  Accordingly,  this  security  was  not
     classified as permanent equity.

          36,941 shares of the Series C convertible  preferred stock with a face
     value of $195,000 and 2,000 shares of the 6%  Convertible  preferred  stock
     with a face value of  $2,000,000  are  carried at face value on the balance
     sheet  outside  permanent  equity  as the  Company  cannot  be  sure it has
     adequate authorized shares for their conversion as of March 31, 2005.


7.   COMMON AND PREFERRED STOCK

          During  the six  months  ended  March 31,  2005,  the  Company  issued
     30,379,121  shares of common stock to holders who converted  1500 shares of
     Series A Convertible  Preferred Stock and 958 shares of Series A Redeemable
     Convertible  Preferred  Stock.  As payment of $48,610 of dividends on these
     converted shares, the Company issued 610,945 shares of the Company's common
     stock.  Dividends for all preferred  stock  amounted to $81,679 for the six
     months ended March 31, 2005 and the total  amount of unpaid and  undeclared
     dividends was $181,559.  As part of the SEDA Agreement  which was described
     in detail in Note 1of the Company's Report on Form 10Q-SB/A for the quarter
     ended December 31, 2004 and discussed in Note 1of this Report,  the Company
     paid  commitment  fees  totaling  1,075,732  shares of common stock (with a
     value of $125,000) to the  investor and the  placement  agent being used by
     the investor for this  financing  transaction.  These fees were recorded as
     deferred  financing  costs in the quarter  ended March 31, 2005 and will be
     amortized over the 24 month term of the SEDA.

8.   GOODWILL

          As of  September  30,  2004,  the  Company's  goodwill was composed of
     $238,120 associated with the acquisition of BJR in 2001. In accordance with
     SFAS No.  142,  the  Company  evaluated  the  goodwill  related  to the BJR
     acquisition  and determined  that no adjustment to the goodwill  balance of
     $238,120 was deemed necessary at March 31, 2005.

9.   LOSS PER SHARE

          The  following  data show the amounts used in  computing  earnings per
     share:
<TABLE>
<CAPTION>
                                                                 Three Months                     Six Months
                                                                 Ended March 31,                 Ended March 31,
                                                          2005               2004            2005             2004
                                                        ----------        ----------     ------------    ------------
<S>                                                     <C>               <C>            <C>             <C>
         Loss from continuing operations                $(286,175)        $(427,866)     $(1,629,065)    $(1,365,863)

         Less:
              Preferred Stock Dividends                   (31,415)          (19,183)         (81,679)        (43,510)
              Deemed dividends in connection
                 with Series A and 6% preferred
                 stock sales                                    -        (1,000,000)      (1,058,260)     (1,000,000)
         Loss attributable to common
                 stockholders from
                 continuing operations                   (317,590)       (1,447,049)      (2,769,004)     (2,409,373)
         Add:
              Income (loss) from discontinued
                 operation                                      -                 -                -         (12,788)
                                                        ----------       -----------      -----------     -----------
         Net loss attributable to common
              stockholders used in basic and
                diluted EPS                             $(317,590)      $(1,447,049)     $(2,769,004)    $(2,422,161)
                                                        ==========       ===========      ===========     ===========
         Weighted average number of
                 common shares outstanding            148,207,442       102,438,882      139,041,290      99,248,955
                                                      ============      ============     ============     ===========
         Loss per share applicable to common
                 stockholders before discontinued
                 operations                                $(0.00)           $(0.01)          $(0.02)         $(0.02)
         Impact of discontinued operations                      -                 -                -               -
                                                        ----------       -----------      -----------      ----------
              Basic and diluted loss per share
                  applicable to common
                  stockholders                             $(0.00)           $(0.01)          $(0.02)         $(0.02)
                                                        ==========       ===========      ===========      ==========
</TABLE>



10.  STOCK OPTIONS

          The Company accounts for its stock-based  compensation plans using the
     intrinsic value method in accordance with the provisions of APB Opinion No.
     25,  Accounting  for  Stock  Issued to  Employees,  and  complies  with the
     disclosure  provisions  of  SFAS  No.  123,  Accounting  for  Stock-  Based
     Compensation,  and SFAS No. 148,  Accounting for Stock-Based  Compensation-
     Transition and Disclosure.  No stock-based  employee  compensation cost was
     reflected  in net loss for the quarter and six months  ended March 31, 2005
     or 2004,  as all options  granted  under those plans had an exercise  price
     equal to the fair market value of the  underlying  common stock on the date
     of grant.

     The following table illustrates,  in accordance with the provisions of SFAS
     No.  148,   Accounting  for  Stock-Based   Compensation  -  Transition  and
     Disclosure,  the effect on net loss and loss per share if the  Company  had
     applied the fair value recognition  provisions of SFAS No. 123,  Accounting
     for Stock-Based Compensation, to stock-based employee compensation.
<TABLE>
<CAPTION>

                                                 Three Months Ended March 31,              Six Months Ended March 31,
                                                      2005             2004                 2005                2004
                                                ---------------- -----------------  ------------------   -----------------
<S>                                               <C>              <C>                <C>                 <C>
Net loss                                          $  (286,175)     $  (427,866)       $ (1,629,065)       $ (1,365,863)

Add: stock based employee
 compensation expense included in reported net
 loss, net of tax                                           -                -                   -                   -
Deduct: total stock based employee
 compensation expense determined
 under the fair value based method for
 all awards, net of tax                               (37,450)         (67,803)            (67,145)           (117,606)
                                                  -------------    -------------       ------------        -----------
Pro forma net loss                                $  (323,625)     $  (495,669)        $(1,696,210)        $(1,483,469)
                                                  =============    =============       ============        ============
Loss per share:
Basic and diluted - as reported                   $      (.00)     $      (.01)        $      (.01)        $      (.02)
Basic and diluted - pro forma                            (.00)            (.01)               (.01)               (.02)
</TABLE>


     The fair value of the Company's  stock-based option awards to employees was
     estimated assuming no expected dividends and the following weighted-average
     assumptions:

                                          March 31,               March 31,
                                           2005                     2004
                                      ------------------       --------------
Risk free interest rate                    3.8 %                    2.5%
Expected dividend yield                      -                        -
Expected lives                             5-9 years                5-9 years
Expected volatility                         80%                      80%

     The weighted  average  fair value of options  granted for the three and six
     months ended March 31, 2005 was $0.07.  The weighted  average fair value of
     options  granted  for the three and six  months  ended  March 31,  2004 was
     $0.24.



11.  SUBSEQUENT EVENTS

          Since March 31, 2005, holders of Series A convertible  preferred stock
     converted  100 shares of  preferred  stock and accrued  dividends  for such
     shares into  1,323,893  shares of common stock.  In April 2005, the Company
     raised  gross  proceeds of $750,000  from the sale of Series E  Convertible
     Preferred  Stock  and  Warrants,  of which  $375,000  was paid in the first
     closing  and a second  tranche of  $375,000  was paid on May 9,  2005.  The
     $750,000 of Series E Preferred Stock are  convertible  into Common Stock at
     the  lesser of $.08 per  share or 80% of the  average  of the three  lowest
     closing bid prices for the ten trading days immediately prior to the notice
     of conversion, subject to adjustments and limitations, and the Warrants are
     exercisable at $.084 per share for a period of three (3) years.


12.  DERIVATIVES


The Company has issued and outstanding  convertible debt and certain convertible
equity instruments with embedded derivative features. The Company analyzes these
financial  instruments in accordance with SFAS No. 133 and EITF Issue Nos. 00-19
and 05-02 to determine if these hybrid contracts have embedded derivatives which
must be  bifurcated.  In addition,  free-standing  warrants are accounted for as
equity or liabilities in accordance with the provisions of EITF Issue No. 00-19.
As of March 31, 2005,  the Company could not be sure it had adequate  authorized
shares  for  the  conversion  of all  outstanding  instruments  due  to  certain
conversion  rates which vary with the fair value of the  Company's  common stock
and therefore all embedded derivatives and freestanding warrants are recorded at
fair  value,  marked-to-market  at each  reporting  period,  and are  carried on
separate  lines of the  accompanying  balance  sheet.  If there is more than one
embedded derivative, their value is considered in the aggregate.

<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.

RESTATEMENT


     As  indicated  in  Note 1 of the  Consolidated  Financial  Statements,  the
statements  of  stockholders'  deficit as of September  30, 2004 and for the six
months  ended  March 31,  2005,  the  balance  sheet as of March 31,  2005,  the
statements of operations for the quarter and six months ended March 31, 2005 and
2004 and the statements of cash flow for the six months ended March 31, 2005 and
2004 included  herein have been restated to correct the error in accounting  for
the issuance of various securities and the derivative features embedded therein.
The effects of these  restatements  are described in Note 1 of the  Consolidated
Financial   Statements  and  the   discussions   below  are  based  on  restated
information.


RESULTS OF OPERATIONS

Revenues

     Sales for the three  months  ended  March 31,  2005  decreased  $61,967  to
$955,223 from $1,017,190 for the corresponding period of the prior year. For the
six months ended March 31, 2005,  sales  increased  $153,873 to $1,991,263  from
$1,837,390.  The change for the three  months  ended  March 31,  2005  primarily
reflects decreases in volume of sales of $27,000 for its ORALscreen(R)  products
and  $20,000 for its Foam  Products  along with a decrease of $15,000 in revenue
from contraband  detection  services.  The change for the six months ended March
31,  2005  primarily  reflects  increases  in volume of sales of $95,000 for its
ORALscreen(R)  products and $101,000 for its Foam Products;  offset in part by a
decrease of $42,000 in revenue from contraband detection services.

Operating Expenses

     Cost of sales for the three months  ended March 31, 2005 was  approximately
75% of sales compared to the cost of sales of approximately 74% of sales for the
three months ended March 31, 2004.  For the six months ended March 31, 2005, the
cost of sales was 72%  compared  to 72% of sales  for the same  period of Fiscal
2004. The change for Fiscal 2005 resulted  primarily from a shift in the product
mix (46% in Fiscal  2005  versus 44% in Fiscal  2004) to the lower  margin  foam
products and a change in customer mix for the ORALscreen  products;  offset by a
reduction in warranty  expense of  approximately  $71,000 for the quarter  ended
March 31, 2005 and $101,000 for the six months ended March 31, 2005.

     Selling,  general and  administrative  expenses  for the three months ended
March 31, 2005 increased $ 354,372,  or  approximately  52%, to $1,031,620  from
$677,248  for the  corresponding  period of the prior  year.  For the six months
ended March 31, 2005,  selling,  general and  administrative  expenses increased
$572,110 or approximately  41%, to $1,964,282 from $1,392,172 for the six months
ended March 31, 2004. The change for the three-month period ended March 31, 2005
primarily reflects the cost of approximately  $171,000 for the addition of sales
and marketing  resources and increased public  relations and investor  relations
consulting expenses of approximately  $62,000;  offset in part by a reduction in
legal  expenses  related to special  shareholder  meetings and SEC  registration
statements of approximately  $88,000 and a decrease of approximately  $33,000 in
various  other  administrative  expenses.  The increase for the six months ended
March  31,  2005,  included  approximately  $399,000  for  additional  sales and
marketing resources and approximately  $73,000 for public and investor relations
consulting  expense;  offset in part by a reduction of approximately  $37,000 in
various  other  administrative  expenses.  The three and six month periods ended
March 31, 2004 included a reduction for accrued royalty expense of approximately
$242,000 as a result of  management's  revision of estimates of amounts due to a
former  supplier  under a product  development  agreement.  With  respect to the
revision in accrued  royalty  expenses in Fiscal 2004,  the Company,  during the
term of a product  development  agreement  with the  supplier,  had  accrued the
royalties due under this  agreement  with  expectation  that the supplier  would
fulfill the terms of the agreement.  However,  in 2002, the Company notified the
supplier  that  the  supplier  had  failed  to meet  the  terms  of the  product
development  agreement  and  therefore,  under the terms of this  agreement,  no
royalties would be payable.  Since being notified, the supplier had done nothing
to cure  this  default.  In view of this  lapse in time and that  other  product
undertakings  by the supplier would prevent the supplier from ever curing any of
its defaults under the  agreement,  there was no longer any need to maintain the
royalty  reserve for this  supplier.  In order to achieve  revenue  growth,  the
Company will  continue to incur  increased  expenses to hire  additional  direct
sales staff and expand  marketing  programs  during the  remainder of FY2005 and
beyond.

     Expenses for research and  development for the three months ended March 31,
2005 amounted to $183,306 compared to $119,512 for the  corresponding  period of
the prior year, an increase of $63,794. For the six months ended March 31, 2005,
expenses for research and development  were $379,749 versus $227,667 for the six
months ended March 31, 2004, an increase of $152,082. The change for the quarter
ended March 31, 2005 was primarily  attributable to additional personnel expense
of  approximately  $48,000 and contracted  development  expense of approximately
$11,000  associated with  ORALscreen  product  enhancements.  For the six months
ended March 31, 2005, the increase was mainly the result of additional personnel
expense  of  approximately  $96,000  and  contracted   development  expenses  of
approximately  $34,000 for  ORALscreen  product  enhancements  that included the
Drugometer(TM),  a single step drug test device introduced in November 2004. The
Company plans to continue improving and enhancing its ORALscreen  products,  and
therefore will most likely incur increased expenses for research and development
during the remainder of FY2005 and beyond.

     Other Income and Expense

     Interest  expense and  financing  costs were  $23,183 for the three  months
ended March 31, 2005 compared to $72,414  incurred during the three months ended
March 31, 2004.  For the six months ended March 31, 2005,  interest  expense and
financing costs amounted to $36,369 versus $141,682 for the corresponding period
of Fiscal 2004.  The decrease for the three months ended March 31, 2005 resulted
primarily from interest expense and amortization of deferred  financing costs of
approximately  $53,000 associated with the long-term debt of $1,250,000 that was
converted  into preferred  stock in May 2004;  offset in part by the interest of
approximately $4,000 associated with notes payable issued in March 2005. For the
six months ended March 31, 2005, the change primarily reflected the reduction of
approximately  $106,000 in interest  expense and financing costs associated with
the long-term debt of $1,250,000  that was converted into preferred stock in May
2004.


     For the three  months  ended  March 31,  2005,  other  income  amounted  to
$711,321  compared to $179,741 for the three months ended March 31, 2004.  Other
income for the six months  ended March 31, 2005 was  $190,691  compared to other
expense of $107,602 for the six months ended March 31, 2004.  The amount for the
quarter  ended March 31, 2005  reflected an increase in income of  approximately
$536,000  from changes in the fair market  value of  derivative  securities  and
warrants.  The amount for the six months  ended  March 31,  2005,  reflected  an
increase in income of  approximately  $306,000  from  changes in the fair market
value of derivative securities and warrants.



     Discontinued Operations

     On December 16, 2003, the Company  consummated the sale of the business and
net  assets,  excluding  cash,  of its USDTL  subsidiary.  For the three and six
months  ended March 31, 2005,  no activity was recorded for USDTL  compared to a
loss of $12,788 for the six months  ended March 31,  2004.  The loss for the six
months  ended March 31, 2004  resulted  from a loss on the  disposal of USDTL of
$17,235 which was offset in part by income from operations of $4,447 (see Note 3
of the consolidated financial statements).

         Net Loss


     Primarily as a result of the factors described above, the Company had a net
loss of $286,175 for the three  months ended March 31, 2005,  as compared to net
loss of $427,866 for the three  months ended March 31, 2004.  For the six months
ended March 31, 2005, the Company had a net loss of $1,629,065 versus $1,365,863
for the  corresponding  period of Fiscal  2004.  The loss per share was $.00 per
basic and diluted  share for the three months ended March 31, 2005 compared to a
loss per share of $.01 per basic and diluted  share for the three  months  ended
March 31, 2004.  For the six months ended March 31, 2005, the loss per share was
$.02 per basic and diluted  share  versus a loss per share of $.02 per basic and
diluted share for the six months ended March 31, 2004.



FINANCIAL CONDITION AND LIQUIDITY

     At March 31, 2005, the Company had a working  capital deficit of $2,004,924
and cash and cash equivalents of $69,626.  Cash flows from financing  activities
provided  the primary  source of funding  during the six months  ended March 31,
2005  and the  Company  will  continue  to rely on this  type of  funding  until
profitability  is reached.  The following is a summary of cash flows for the six
month period ended March 31, 2005:

                                                           Six Months Ended
                                                               March 31,
         Sources (uses) of cash flows                              2005
         ----------------------------                        ------------------
         Operating activities                                $(1,786,606)
         Investing activities                                    (21,725)
         Financing activities                                  1,369,081
                                                             -------------
         Net decrease in cash and equivalents                $  (439,250)
                                                             ==============


          Operating Activities. The net loss of $1,629,065 (composed of expenses
          totaling  $3,811,019 less revenues and other income of $2,181,954) was
          the major use of cash by operations. When the net loss is adjusted for
          non-cash expenses such as depreciation and amortization,  amortization
          of debt discounts,  deferred financing costs, deferred rent and income
          from the changes in the fair market value of derivative securities and
          warrants,  the cash  needed to  finance  the net loss was  $1,667,183.
          Working capital  requirements  necessitated  the use of $60,529 to pay
          aging  accounts  payable and reduce  accrued  expenses and $202,157 to
          increase  inventory  levels to meet  anticipated  demand for  products
          during the next  quarter.  In  addition,  changes  netting  $10,493 in
          various other assets and liabilities  further  increased the operating
          cash needs.  A decrease in accounts  receivable  due to cash  receipts
          exceeding  billings for ORALscreen  products during the second quarter
          lessened working capital needs by $153,756.


         Investing and Financing Activities. Cash used in investing consisted of
         cash paid of $21,725 for additions to property, plant and equipment. To
         finance the business, preferred stock and warrants (as described below)
         were sold and raised approximatly $1,163,000. In addition, short term
         borrowings generated approximately $206,000 after repayment of certain
         short-term notes payable.

     During FY 2005,  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.

     In April 2005,  the Company raised gross proceeds of $750,000 from the sale
of Series E Convertible Preferred Stock and Warrants, of which $375,000 was paid
in the first  closing  and a second  tranche  of  $375,000  is to be paid at the
second closing within 30 days or less. The $750,000 of Series E Preferred  Stock
are convertible  into Common Stock at the lesser of $.08 per share or 80% of the
average of the three (3) lowest closing bid prices for the ten (10) trading days
immediately  prior to the  notice of  conversion,  subject  to  adjustments  and
limitations, and the warrants are exercisable at $.084 per share for a period of
five (5) years. Prior to entering into the Securities Purchase Agreement for the
sale of the Series E Preferred  Stock,  the Company  entered into a  Termination
Agreement terminating the Standby Equity Distribution Agreement (`SEDA") made as
of February 1, 2005 with Cornell Capital Partners, L.P. ("Cornell Capital"). The
terms of this SEDA  were  discussed  detail  in Notes 1 and 10 to the  Financial
Statements and in the Financial and Liquidity Section of the Company's Report on
Form 10-QSB/A filed for the quarter ended December 31, 2004. If Cornell  Capital
does not enter into a SEDA on identical  terms within ninety (90) days after all
amount  payable  under  the  Securities  Purchase  Agreement  for the  Series  E
Preferred  Stock are  satisfied,  Cornell  Capital has agreed to return all fees
pursuant to the February 2005 SEDA.  Since March 2005,  the Company has received
$500,000  (of which  $250,000 was  received  during the quarter  ended March 31,
2005) from short-term  notes issued to a private party.  These notes have a term
of six (6) months and bear  interest at the rate of one percent  (1%) per month.
In connection with the notes payable,  the holder received  warrants to purchase
one (1)  share of the  Company's  common  stock  for each  dollar  loaned to the
Company for a period of three (3) years at exercise  prices ranging from $.08 to
$.10 per share. During the quarter ended March 31, 2005,  $12,673,  representing
the value of the warrants issued to purchase  250,000 shares of common stock for
the $250,000 of borrowings during the period,  was recorded as a discount to the
debt and is being amortized over the term of the notes.


     During  December 2004, the Company sold 1,285 shares of Series A Redeemable
Convertible  Preferred  Stock and Warrants to purchase  600,000 shares of common
stock for which it received net proceeds of approximately $1,160,000. The Series
A Redeemable  Convertible  Preferred Stock, with a face value of $1,285,000,  is
convertible  into  common  stock at the  lesser  of $.12 per share or 85% of the
average of the three lowest  closing bid prices,  as reported by Bloomberg,  for
the ten trading days  immediately  prior to the notice of conversion  subject to
adjustments  and floor prices.  The Warrants are exercisable at $.126 per share.
The  warrants  issued in  connection  with the sale of 1,285 shares of preferred
stock and the put right and the conversion feature resulted in a deemed dividend
of $1,058,260 being recorded and included in the earnings per share  calculation
for six months ended March 31, 2005. A liability of approximately $1,058,260 was
recorded for the original fair value of the warrants  issued in connection  with
the sale of the 1,285 shares of preferred stock and the conversion feature which
was $723,240 at March 31, 2005.  Upon the  occurrence  of specific  events,  the
holders of the Series A Redeemable  Convertible  Preferred Stock are entitled to
redeem these shares  under  certain  provisions  of the  agreement  covering the
purchase of the preferred stock.  Accordingly,  this security was not classified
as equity.


     The cash  available at March 31, 2005,  the  proceeds  from the  financings
completed since March 31, 2005 and anticipated customer receipts are expected to
be sufficient to fund the  operations of the Company  through June 2005.  Beyond
that time,  the Company  will  require  significant  additional  financing  from
outside  sources to fund its operations.  The Company plans to continue  working
with  placement  agents  and/or  investment  fund  managers  in  order  to raise
additional  capital  during the  remainder of fiscal year 2005 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 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.

     The Company has accumulated losses that have reduced  shareholders'  equity
to a deficit. As a result, as previously reported, the Company received a letter
dated  January  30,  2004  from  The  American  Stock  Exchange  ("AMEX"  or the
"Exchange")  noting  that  the  Company's  2003  Annual  Report  on Form  10-KSB
indicates that the Company is not in compliance  with all the continued  listing
standards of AMEX.  In its letter,  the  Exchange  indicated  that,  in order to
maintain  its AMEX  listing,  the  Company  must  submit a plan by March 3, 2004
advising  the  Exchange of the action that it takes or will take that will bring
it into compliance with the continued  listing  standards within 18 months.  The
Company submitted its plan. On March 17, 2004, the Exchange notified the Company
that it had accepted  Avitar's plan, which permitted the Company to maintain its
listing on the American Stock Exchange. More specifically,  the Exchange granted
the Company an extension  through  July 2005 subject to periodic  reviews by the
Exchange to assure that Avitar is making progress  consistent with the plan. The
Company has provided AMEX with quarterly updates on its performance  against the
plan.  Although the major  milestones  of the plan were not achieved as of March
31, 2005, the Company is working towards  meeting the overall  objectives of the
plan.  Failure to meet the overall  objectives  of the plan or to make  adequate
progress towards meeting these objectives could result in the Company losing its
listing on AMEX.

     Management  continues to expect operating  revenues will grow during Fiscal
2005 as  employment  begins to rise in the United States and the Company is able
to convert  employers  to using  ORALscreen,  Avitar's  oral fluid drug  testing
products.  In order to achieve  the  revenue  growth,  the  Company has begun to
significantly  increase  its  direct  sales  force and  implement  an  expanded,
targeted marketing program.  ORALscreen,  as an instant on-site diagnostic test,
is  part  of  the  fastest  growing  segment  of  the  diagnostic  test  market.
Inventories are currently at appropriate  levels for  anticipated  sales volumes
and the Company,  with its  production  capacity and the  arrangements  with its
current  contract  manufacturing  sources,   expects  to  be  able  to  maintain
inventories at optimal  levels.  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 future  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.  Furthermore, there can
be no assurance that the Company will have  sufficient  resources to achieve the
anticipated  growth.  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 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 registered public accounting firm
relating to the financial  statements  for Fiscal 2004  contains an  explanatory
paragraph  expressing  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 of the date of such report  (December 8, 2004 except
for Note 17 which is as of December 17, 2004).  The  Company's  plans to address
the situation are presented above.  However,  there are no assurances that these
endeavors will be successful or sufficient.


RECENT ACCOUNTING PRONOUNCEMENTS

     In December 2004, the Financial  Accounting Standards Board ("FASB") issued
a  Statement,   "Share-Based  Payments",   that  addresses  the  accounting  for
share-based  payment  transactions  in which  an  enterprise  receives  employee
services  in  exchange  for (a)  equity  instruments  of the  enterprise  or (b)
liabilities  that  are  based  on the  fair  value  of the  enterprise's  equity
instruments  or that may be settled by the issuance of such equity  instruments.
The statement  eliminates  the ability to account for  share-based  compensation
transactions  using  APB  Opinion  No.  25,  "Accounting  for  Stock  Issued  to
Employees", and generally requires that such transactions be accounted for using
a fair  value-based  method.  As  discussed  in Note 4,  the  Company  currently
accounts for share-based compensation transactions using APB Opinion No. 25. The
adoption  of this  statement  is  effective  for fiscal  years  beginning  after
December  15,  2005  and  will  have an  impact  on the  Company's  consolidated
financial position and results of operations,  the level of which the Company is
currently assessing.

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.


ITEM 3.           CONTROLS AND PROCEDURES

     (a) Evaluation of Disclosure Controls and Procedures

     As discussed in of our consolidated financial statements,  we have restated
our statements of stockholders' deficit as of September 30, 2004 and for the six
months  ended  March 31,  2005,  the  balance  sheet as of March 31,  2005,  the
statements of operations for the quarter and six months ended March 31, 2005 and
2004 and the statements of cash flow for the six months ended March 31, 2005 and
2004 to correctly apply GAAP related to our issuance of certain securities.


     Our management,  including our chief executive  officer and chief financial
officer,  have carried out an evaluation of the  effectiveness of our disclosure
controls and  procedures  as of March 31,  2005,  pursuant to Exchange Act Rules
13a-15(e) and 15(d)-15(e). As part of its evaluation,  management considered the
facts and circumstances  relating to the restatement described above. Based upon
that evaluation,  our chief executive  officer and chief financial  officer have
concluded that as of such date, our disclosure  controls and procedures in place
were not operating effectively.


     (b) Changes in Internal Control Over Financial

     Reporting  During the period  covered  by this  report,  there have been no
changes in our internal  control over financial  reporting that have  materially
affected or are reasonably likely to materially affect our internal control over
financial reporting.

<PAGE>
                            PART II OTHER INFORMATION



ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

     During the quarter  ended  March 31, 2005 the Company  issued to holders of
the Series A Preferred  Stock  14,652,345  shares of the Company's  common stock
upon the conversion of 1,250 shares of their  preferred  stock.  Also during the
quarter ended March 31, 2005, the Company issued 299,445 shares of the Company's
common  stock as  payment  for  dividends  on the Series A  Preferred  Stock and
1,075,732  shares of the  Company's  common  stock as  payment of  investor  and
placement  agent fees  pursuant  to a financing  agreement.  The  exemption  for
registration  of these  securities is based upon Section 4(2) of the  Securities
Act  because  the  issuances  were  made  to  accredited  investors  in  private
placements.


ITEM 6.           EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits:

Exhibit No.               Document

(A)  4.1 Securities  Purchase  Agreement  dated as of April 14, 2005 between the
     Company and Cornell  Capital  Partners,  LP


(A)  4.2  Registration  Rights  Agreement dated as of April 14, 2005 between the
     Company and Cornell Capital Partners, LP

(A)  4.3  Termination  Agreement  dated as of March 31, 2005 between the Company
     and Cornell Capital Partners, LP

(A)  4.4 Certificate of Designations of the Series E Convertible Preferred Stock

(A)  4.5 Warrant

31.1 Certification  Pursuant to 18 U.S.C.  Section 1350, as Adopted  Pursuant to
     Section 302 of the Sarbanes-Oxley Act of 2002

31.2 Adopted  Pursuant  to  Section  302  of  the  Sarbanes-Oxley  Certification
     Pursuant to 18 U.S.C. Section 1350, as Act of 2002

32.1 Certification  Pursuant to 18 U.S.C.  Section 1350, as Adopted  Pursuant to
     Section 906 of the Sarbanes-Oxley Act of 2002

32.2 Certification  Pursuant to 18 U.S.C.  Section 1350, as Adopted  Pursuant to
     Section 906 of the Sarbanes-Oxley Act of 2002

     (A)  Previously  filed with the  Securities  and Exchange  Commission as an
          Exhibit to the Report on 8-K (Commission File No.  1-51695),  as filed
          on April 19, 2005, and incorporated herein by reference.

(b) Reports on Form 8-K:


     Form 8-K,  Items 1.01 and 9.01,  dated February 2, 2005 regarding a Standby
Equity Distribution  Agreement with Cornell Capital Partners, LP for the sale of
common stock.

<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 10, 2006               /S/ Peter P. Phildius
                                        -----------------------------------
                                        Peter P. Phildius
                                        Chairman and Chief
                                        Executive Officer
                                        (Principal Executive Officer)




Dated:  February 10, 2006               /S/ J.C. Leatherman, Jr.
                                        ---------------------------
                                        J.C. Leatherman, Jr.
                                        Chief Financial Officer
                                        (Principal Accounting and
                                        Financial Officer)



<PAGE>

                                  EXHIBIT INDEX


Exhibit No.               Document

(A)  4.1 Securities  Purchase  Agreement  dated as of April 14, 2005 between the
     Company and Cornell  Capital  Partners,  LP


(A)  4.2  Registration  Rights  Agreement dated as of April 14, 2005 between the
     Company and Cornell Capital Partners, LP

(A)  4.3  Termination  Agreement  dated as of March 31, 2005 between the Company
     and Cornell Capital Partners, LP

(A)  4.4 Certificate of Designations of the Series E Convertible Preferred Stock

(A)  4.5 Warrant

31.1 Certification  Pursuant to 18 U.S.C.  Section 1350, as Adopted  Pursuant to
     Section 302 of the Sarbanes-Oxley Act of 2002

31.2 Adopted  Pursuant  to  Section  302  of  the  Sarbanes-Oxley  Certification
     Pursuant to 18 U.S.C. Section 1350, as Act of 2002

32.1 Certification  Pursuant to 18 U.S.C.  Section 1350, as Adopted  Pursuant to
     Section 906 of the Sarbanes-Oxley Act of 2002

32.2 Certification  Pursuant to 18 U.S.C.  Section 1350, as Adopted  Pursuant to
     Section 906 of the Sarbanes-Oxley Act of 2002


     (A)  Previously  filed with the  Securities  and Exchange  Commission as an
          Exhibit to the Report on 8-K (Commission File No.  1-51695),  as filed
          on April 19, 2005, and incorporated herein by reference.