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, 2006.

[ ]  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 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

Indicate by check mark whether the  registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act) [ ] Yes [x] 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: 4,419,344
                               AS OF MAY 10, 2006

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

                               Page 1 of 25 pages
                           Exhibit Index is on Page 30
<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      18


  Item 3   Controls and Procedures                                        25

PART II: OTHER INFORMATION                                                26

  Item 2   Unregistered Sales of Equity Securities and Use of Proceeds    27

  Item 4   Submission of Matters to a Vote of Security Holders            27


SIGNATURES                                                                29

EXHIBIT INDEX                                                             30
CERTIFICATIONS                                                            31
<PAGE>

                          PART I FINANCIAL INFORMATION

<PAGE>
Item 1.     FINANCIAL STATEMENTS

                          Avitar, Inc. and Subsidiaries
                           Consolidated Balance Sheet
                                 March 31, 2006
                                   (Unaudited)

<TABLE>
<CAPTION>

                                              ASSETS
CURRENT ASSETS:
<S>                                                                                    <C>
     Cash and cash equivalents                                                         $     42,633
     Accounts receivable, net of reserve of $9,000                                          509,434
     Inventories                                                                            424,883
     Prepaid expenses and other current assets                                              129,226
                                                                                         -----------
          Total current assets                                                            1,106,176

PROPERTY AND EQUIPMENT, net                                                                 314,331
GOODWILL                                                                                    138,120
OTHER ASSETS                                                                                528,477
                                                                                        ------------
          Total Assets                                                                 $  2,087,104
                                                                                        ============

                      LIABILITIES, PREFERRED STOCK AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
     Notes payable (Note 5)                                                            $    167,007
     Convertible notes payable (Note 5)                                                     650,000
     Accounts payable                                                                       555,901
     Accrued expenses                                                                       955,150
     Deferred income                                                                         16,100
     Current portion of long-term capital leases                                             15,598
     Current portion of deferred lessor incentive                                            13,400
     Fair value of warrants (Note 11)                                                        89,435
     Fair value of embedded derivatives (Note 11)                                         1,055,941
                                                                                        ------------
          Total current liabilities                                                       3,518,532
                                                                                        ------------

LONG-TERM DEBT, LESS CURRENT PORTION (Note 5)                                             1,848,309
LONG-TERM CAPITAL LEASES, LESS CURRENT PORTION                                                6,971
DEFERRED LESSOR INCENTIVE, LESS CURRENT PORTION                                              43,550
                                                                                        ------------
          Total liabilities                                                               5,417,362
                                                                                        ------------
REDEEMABLE CONVERTIBLE AND CONVERTIBLE PREFERRED
      STOCK (Note 6)                                                                      2,920,649
                                                                                        ------------

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 100,000,000 shares;
          4,419,344 shares issued and outstanding                                            44,193
     Additional paid-in capital                                                          49,141,698
     Accumulated deficit                                                                (55,436,856)
                                                                                        ------------
         Total stockholders' deficit                                                     (6,250,907)
                                                                                        ------------
         Total Liabilities, Preferred Stock and Stockholders' Deficit                  $  2,087,104
                                                                                        ============
</TABLE>


                   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,
                                                        ---------------------------------------------------------
                                                           2006           2005           2006           2005
                                                        ------------   ------------   ------------   ------------
                                                                       (As Restated)                 (As Restated)
<S>                                                     <C>              <C>          <C>            <C>
SALES                                                   $ 1,297,266      $ 955,223    $ 2,204,536    $ 1,991,263
                                                        ------------   ------------   ------------   ------------

OPERATING EXPENSES
     Cost of sales                                          900,121        714,610      1,559,114      1,430,619
     Selling, general and administrative expenses         1,018,392      1,031,620      2,056,999      1,964,282
     Research and development expenses                      109,248        183,306        238,954        379,749
                                                        ------------   ------------   ------------   ------------
          Total operating expenses                        2,027,761      1,929,536      3,855,067      3,774,650
                                                        ------------   ------------   ------------   ------------

LOSS FROM OPERATIONS                                       (730,495)      (974,313)    (1,650,531)    (1,783,387)
                                                        ------------   ------------   ------------   ------------

OTHER INCOME (EXPENSE)
     Interest expense and financing costs                  (175,851)       (23,183)      (389,086)       (36,369)
     Other income (expense), net                           (128,640)       711,321         (7,298)       190,691
                                                        ------------   ------------   ------------   ------------
          Total other income (expense), net                (304,491)       688,138       (396,384)       154,322
                                                        ------------   ------------   ------------   ------------

LOSS FROM CONTINUING OPERATIONS                          (1,034,986)      (286,175)    (2,046,915)    (1,629,065)
                                                        ------------   ------------   ------------   ------------

DISCONTINUED OPERATIONS
   Income from the disposal of USDTL                              -              -        120,000              -
                                                        ------------   ------------   ------------   ------------
   Income from discontinued operations                            -              -        120,000              -
                                                        ------------   ------------   ------------   ------------

                                                        ------------   ------------   ------------   ------------
NET LOSS                                                $(1,034,986)    $ (286,175)   $(1,926,915)   $(1,629,065)
                                                        ============   ============   ============   ============

BASIC AND DILUTED LOSS PER SHARE FROM CONTINUING
   OPERATIONS (Note 9)                                      $ (0.25)       $ (0.11)       $ (0.51)       $ (1.00)

BASIC AND DILUTED INCOME PER SHARE FROM DISCONTINUED
   OPERATIONS (Note 9)                                            -              -           0.03              -
                                                        ------------   ------------   ------------   ------------

BASIC AND DILUTED LOSS PER SHARE (Note 9)                   $ (0.25)       $ (0.11)       $ (0.48)       $ (1.00)
                                                        ============   ============   ============   ============

WEIGHTED AVERAGE
     NUMBER OF COMMON SHARES OUTSTANDING                  4,381,414      2,964,149      4,211,563      2,780,826
                                                        ============   ============   ============   ============
</TABLE>


See accompanying notes to consolidated financial statements.
<PAGE>
                          Avitar, Inc. and Subsidiaries
                 Consolidated Statement of Stockholders' Deficit
                         Six Months Ended March 31, 2006
                                   (Unaudited)
<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>           <C>          <C>
Balance at September 30, 2005           5,689    $ 58.00    3,813,189    $ 38,132  $ 48,860,657  $(53,504,524)$(4,605,677)

Conversion of Series E preferred stock      -          -      509,162       5,091      229,171             -      234,262

Payment of convertible preferred stock
    dividend for Series A preferred stock   -          -            -           -            -        (5,417)      (5,417)

Sale of common stock                        -          -        6,083          61        2,779                      2,840

Conversion of Series C preferred stock      -          -       90,910         909       49,091                     50,000

Net loss                                    -          -            -           -            -    (1,926,915)  (1,926,915)
----------------------------------------------  --------- ------------  ---------- ------------  ------------ ------------

Balance at March 31, 2006               5,689       $ 58    4,419,344    $ 44,193  $ 49,141,698  $(55,436,856)$(6,250,907)
--------------------------------------------------------------------------------------------------------------------------
</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,
                                                                                     -----------------------
                                                                                        2006         2005
                                                                                     ----------   ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                                <C>            <C>
Net loss                                                                           $(1,926,915)   $(1,629,065)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization                                                           81,151         77,538
Amortization of debt discount and deferred financing                                   259,398         11,506
Amortization of deferred rent expense                                                        -         62,384
Amortization of deferred lessor incentive                                                6,700              -
(Income) expense from changes in value of embedded derivatives
and warrants                                                                             8,524       (189,546)
Changes in operating assets and liabilities:
Accounts receivable                                                                     68,697        153,756
Inventories                                                                            (49,967)      (202,157)
Prepaid expenses and other current assets                                               74,164          2,759
Other assets                                                                            (4,858)           698
Accounts payable and accrued expenses                                                  103,497        (60,529)
Deferred revenue                                                                          (150)       (13,950)
                                                                                    -----------    -----------
Net cash used in operating activities                                               (1,379,759)    (1,786,606)
                                                                                    -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of property and equipment                                                    (85,957)       (21,725)
                                                                                    -----------    -----------
Net cash used in investing activities                                                  (85,957)       (21,725)
                                                                                    -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds (repayment) of notes payable and long-term debt                              (119,437)       206,506
Sales of redeemable preferred stock, common stock and warrants                           2,840      1,162,575
Net proceeds from issuance of convertible long-term debt                             1,380,000              -
Redemption of Series A redeemable convertible preferred stock                         (150,000)
Payment of cash dividend on Seires A redeemable convertible preferred stock             (5,417)             -
                                                                                    -----------    -----------
Net cash provided by financing activities1,107,986                                   1,369,081
                                                                                    -----------    -----------

NET DECREASE IN CASH AND CASH EQUIVALENTS                                             (357,730)      (439,250)

CASH AND CASH EQUIVALENTS, beginning of the period                                     400,363        508,876
                                                                                    -----------    -----------

CASH AND CASH EQUIVALENTS, end of the period                                       $    42,633    $    69,626
                                                                                    ===========    ===========


SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during period:
Income taxes                                                                       $         -    $         -
Interest                                                                           $    23,317    $    16,986

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
    FINANCING ACTIVITIES:

           During the six months ended March 31, 2006, 224,712 shares of Series
              E redeemable convertible preferred stock were converted into
              509,162 shares of common stock.

           During the six months ended March 31, 2006, 8,333 shares of Series C
              convertible preferred stock were converted into 90,910 shares of
              common stock.

           During the six months ended March 31, 2005, 958 shares of Series A
              redeemable convertible preferred stock were converted into 264,118
              shares of common stock.

           During the six months ended March 31, 2005, 1500 shares of Series A
              convertible preferred stock were converted into 343,464 shares of
              common stock.

           During the six months ended March 31, 2005, 11,749 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
              5,000 shares of common stock were issued in connection with
              the issuance of notes payable.

           During the six months ended March 31, 2005, 21,515 shares                                $ 125,000
              of common stock were issued as payment of investor and placement
              agent fees in connection with SEDA financing.
</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.  (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 FY2006,  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.

          The  Company's  one for fifty (1 for 50)  reverse  split of its common
     stock that was  authorized  by the Company's  shareholders  at their annual
     meeting  held on January 18, 2006 became  effective  at 5:00 PM on February
     17,  2006.  Accordingly,  the  numbers of common  stock  shares and related
     calculations  presented herein reflect the results of the reverse split for
     current and prior reporting periods.

          In  December  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.  In November  2005,  the  Company  negotiated  an
     agreement  with the new owners of USDTL to settle all  outstanding  matters
     related to the sale of USDTL (see Note 3). Therefore, USDTL is considered a
     discontinued operation and this report reflects the continued operations of
     the Company.  Due to the current financial condition at Avitar, the Company
     may consider selling assets and/or operations,  including BJR. However,  at
     the present  time,  there can be no  assurances  that the Company  would be
     successful in these efforts.

          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".
     As a result, management determined that certain previously issued financial
     statements should not be relied upon. The consolidated financial statements
     included  herein  reflect the correct method to account for the issuance of
     various securities and the derivative features embedded therein.

          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 month periods ended March
     31, 2006 are not necessarily indicative of the results that may be expected
     for the full  fiscal year  ending  September  30,  2006.  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, 2005. 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  stockholders'  deficit  as of  March  31,  2006  of
     $6,250,907.  The  Company  raised net  proceeds  aggregating  approximately
     $2,498,000  during the year ended September 30, 2005 from the sale of stock
     and warrants.  In addition,  the Company  raised gross proceeds of $900,000
     from short-term convertible notes and $1,000,000 from long-term convertible
     notes.  During the first half of FY2006,  the Company raised gross proceeds
     of $1,500,000 from long-term  convertible  notes and received $120,000 from
     the settlement  agreement  related to the sale of USDTL described above and
     in Note 3.  Subsequent to March 31, 2006, the Company raised gross proceeds
     of $500,000 from the final  installment of the long-term  convertible  note
     financing agreement executed in September 2005. The Company is working with
     placement  agents and investment fund mangers to obtain  additional  equity
     financing.  Based upon cash flow  projections,  the  Company  believes  the
     anticipated  cash flow from operations and most  importantly,  the expected
     net proceeds  from future equity  financings  will be sufficient to finance
     the Company's  operating needs until the operations achieve  profitability.
     There can be no assurances that forecasted results will be achieved or that
     additional  financing  will be obtained.  The  financial  statements do not
     include any adjustments  relating to the  recoverability and classification
     of asset  amounts or the amounts and  classification  of  liabilities  that
     might be  necessary  should the  Company be unable to  continue  as a going
     concern.

2.   INVENTORIES

          At March 31, 2006, inventories consist of the following:

                           Raw Materials                    $244,419
                           Work-in-Process                    80,223
                           Finished Goods                    100,241
                                    Total                   $424,883

3.   DISCONTINUED OPERATIONS

          On  December  16,  2003,  the  Company  consummated  a sale of USDTL's
     business and net assets,  excluding cash. Under the terms of that 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.  In  November  2005,  the Company  negotiated  an
     agreement  with the new owners of USDTL to settle all  outstanding  matters
     related  to the sale of  USDTL.  Under the  terms of this  settlement,  the
     Company  received an  immediate  lump sum  payment of $120,000  rather than
     waiting for the 10 to 14 years that the  Company  believed it would take to
     collect the entire $500,000 from uncertain  future  revenues of USDTL.  The
     accompanying   financial   statements   reflect  USDTL  as  a  discontinued
     operation.  The following is a summary of the results of its operations for
     the three months and six months ended March 31, 2006 and 2005:
<TABLE>
<CAPTION>

                                                                    Three Months               Six Months
                                                                    Ended March 31,           Ended March 31,
                                                                   --------------------------------------------
                                                                    2006        2005         2006           2005
                                                                    ----        ----         ----           ----
<S>                                                            <C>          <C>         <C>           <C>
         Sales                                                 $       -    $      -    $       -     $        -
         Operating expenses                                            -           -            -              -
         Other income (expense)                                        -           -      120,000              -
                                                               ---------    --------    ---------     ----------
         Income from discontinued operations$                  $       -           -    $ 120,000     $        -
                                                               =========    ========    =========     ==========
</TABLE>


4.   MAJOR CUSTOMERS

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

                                      Three Months Ended March 31,           Six Months Ended March 31,
                                       2006                 2005               2006                2005
                                    ---------            ----------         ----------         -----------
<S>                                 <C>                  <C>                <C>                <C>
                  Customer A        $ 310,756            $  308,375         $  532,586         $   562,161
</TABLE>


          At March  31,  2006,  accounts  receivable  from this  major  customer
     totaled approximately $163,579.

5.   NOTES PAYABLE AND SHORT AND LONG-TERM CONVERTIBLE NOTES PAYABLE

          In  September  2005,  October  2005 and  February  2006,  the  Company
     executed  notes payable with AJW Partners,  LLC, AJW  Offshore,  Ltd.,  AJW
     Qualified Partners,  LLC and New Millennium Capital Partners II, LLC in the
     total  principal  amount of  $2,500,000  which are  payable at  maturity in
     September 2008, October 2008 and February 2009,  respectively.  Interest on
     these  notes is at 8% per annum  and is  payable  quarterly  in cash or the
     Company's  common  stock at the option of the Company.  The Company  issued
     warrants to purchase 100,000 shares of common stock at $12.50 per share for
     five  years in  connection  with  these  notes.  In  addition,  the  entire
     principal plus any accrued and unpaid interest  associated with these notes
     is convertible,  at the holder's option, into the Company's common stock at
     a  conversion  price of 65% of the  average  of the three  lowest  intraday
     trading  prices of the common stock for the twenty  trading days  preceding
     the date that the  holders  elect to convert.  A discount to debt  totaling
     $765,756  ($708,750 for the fair value of the  conversion  feature of these
     notes and $57,006 for the fair value of the warrants  issued in  connection
     with these notes) was recorded  during  FY2005 and the first half of FY2006
     and is being amortized over the term of the notes. The unamortized discount
     was $651,691 as of March 31, 2006. Fees of approximately  $340,000 incurred
     in  connection  with  securing  these  loans  were  recorded  as a deferred
     financing  charge.  The  collateral  pledged by the Company to secure these
     notes  includes  all assets of the Company.  A liability  of  approximately
     $765,800  was  recorded  for the  fair  value  of the  warrants  issued  in
     connection with the $2,500,000 of notes and the conversion  feature,  which
     was  increased to its market value of  approximately  $918,000 at March 31,
     2006.

          From April to August 2005, the Company executed convertible notes with
     an  individual in the total  principal  amount of $650,000 with interest at
     10%.  Each note has a maturity date of six months from the date of the note
     and is payable in ten monthly installments plus accrued interest commencing
     on the maturity date of the note. The Company  issued  warrants to purchase
     13,000  shares  of  common  stock at $1.65 to $4.95 per share for three (3)
     years in connection  with these notes.  In addition,  the entire  principal
     plus accrued  interest  associated with these notes is convertible into the
     Company's  common stock at a conversion  price of the lesser of the closing
     price of the  common  stock  on the date of the loan or 85% of the  average
     closing  price of the common stock for the five (5) trading days  preceding
     the notice of conversion.  In no event shall the conversion  price be lower
     than 50% of the closing  price of the common stock on the date of the loan.
     A  discount  to debt  totaling  $172,930  ($156,800  for the  value  of the
     conversion feature of these notes and $16,130 for the value of the warrants
     issued in  connection  with these notes) was recorded  during FY2005 and is
     being  amortized  over the term of the  notes.  The  discount  was  totally
     amortized as of March 31, 2006. A liability of  approximately  $173,000 was
     recorded for the fair value of the warrants  issued in connection  with the
     $650,000  of notes and the  conversion  feature  which was  reduced  to its
     market value of $4,248 at March 31, 2006.

6.   CONVERTIBLE AND REDEEMABLE CONVERTIBLE PREFERRED STOCK

          In  April  and  June  2005,   the  Company   raised  net  proceeds  of
     approximately  $1,335,000  from the sale of  1,500,000  shares  of Series E
     Redeemable  Convertible Preferred Stock with a face value of $1,500,000 and
     Warrants  to purchase  3,000  shares of the  Company's  common  stock.  The
     $1,500,000 of Series E Preferred Stock are convertible into Common Stock at
     the  lesser of $4.00 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 $4.20 per share for a period of three  years.  The warrants
     issued in connection  with the sale of 1,500,000  shares of preferred stock
     and the  conversion  feature  resulted in a deemed  dividend of  $1,087,000
     being recorded and included in the earnings per share  calculation  for the
     year ended September 30, 2005. A liability of approximately  $1,087,000 was
     recorded for the original  fair value of the warrants  issued in connection
     with the sale of the 1,500,000 shares of preferred stock and the conversion
     feature which was reduced to its market value of approximately  $167,000 at
     March 31, 2006.  As of March 31,  2006,  724,351  shares of this  preferred
     stock had been  converted  into 735,556  shares of common stock and 775,649
     were  outstanding.  Upon the occurrence of specific events,  the holders of
     the Series E 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.

          In December 2004, the Company sold 1,285 shares of Series A Redeemable
     Convertible  Preferred  Stock and  Warrants  to purchase  12,000  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
     $6.00  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 $6.30 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  year  ended  September  30,  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 $3,830 at March 31,
     2006. As of March 31, 2006,  1,135 shares of this preferred  stock had been
     converted  into 452,156 shares of common stock and the remaining 150 shares
     of Series A redeemable  convertible  preferred stock,  with a face value of
     $150,000,  were redeemed by the Company in October 2005 for $155,415  which
     included accrued dividends of $5,417.

          28,608 shares of the Series C convertible  preferred stock with a face
     value of $145,000 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, 2006.

7.   COMMON AND PREFERRED STOCK

          During the six months ended March 31, 2006, the Company issued 509,162
     shares of common stock to holders who converted  224,351 shares of Series E
     redeemable  convertible preferred stock, 90,910 shares of common stock to a
     holder who converted  8,333 shares of Series C convertible  preferred stock
     and 6,083 shares of common stock to employees who purchased  shares through
     the Company's  Employee Stock  Purchase  Plan.  Dividends for all preferred
     stock  amounted to $82,153 for the six months  ended March 31, 2006 and the
     total amount of unpaid and undeclared dividends was $324,039.

8.   GOODWILL

          As of  September  30,  2005,  the  Company's  goodwill was composed of
     $138,120 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
     $138,120 was deemed necessary since September 30, 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,
                                                            2006            2005             2006             2005
                                                        ------------   -----------       ------------    ------------
<S>                                                     <C>            <C>               <C>             <C>
         Loss from continuing operations                $(1,034,986)   $ (286,175)       $(2,046,915)    $(1,629,065)
         Less:
                Preferred Stock Dividends                    39,718)      (31,415)           (82,153)        (81,679)
              Deemed dividends in connection
                 with Series A preferred
                 stock sales                                      -            (-)                (-)     (1,058,260)
                                                         -----------     ---------        -----------     -----------
          Loss attributable to common
                 stockholders from
                 continuing operations                   (1,074,704)      (17,590)        (2,129,068)     (2,769,004)
             Add:
             Income (loss) from discontinued
                  operation                                       -             -            120,000              (-)
                                                         -----------     ---------        -----------     -----------

         Net loss attributable to common
              stockholders used in basic and
                diluted EPS                             $(1,074,704)   $ (317,590)       $(2,009,068)    $(2,769,004)
                                                         ===========     =========        ===========     ===========
          Weighted average number of
                 common shares outstanding                4,381,414     2,964,149          4,211,563       2,780,826
                                                         ===========     =========        ===========     ===========
           Loss per share applicable to common
                 stockholders before discontinued
                 operations                                  $(0.25)       $(0.11)            $(0.51)         $(1.00)
           Impact of discontinued operations                      -             -                .03               -
                                                         -----------     ---------        -----------     -----------
              Basic and diluted loss per share
                  applicable to common
                  stockholders                               $(0.25)       $(0.11)            $(0.48)         $(1.00)
                                                         ===========     =========        ===========     ===========
</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
quarters  and six months  ended March 31, 2006 or 2005,  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,
                                                      2006           2005            2006                2005
                                                   -----------   -----------      ------------       ------------
<S>                                               <C>           <C>              <C>                <C>
Net loss                                          $(1,034,986)  $  (286,175)     $ (1,926,915)      $ (1,629,065)
 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                           (30,742)      (37,450)          (61,337)           (67,145)
                                                   -----------   -----------      ------------        -----------
Pro forma net loss                                $(1,065,728)  $  (323,625)     $ (1,988,252)       $(1,696,210)
                                                   ===========   ===========      ============        ===========
Loss per share:
Basic and diluted - as reported                   $      (.24)  $      (.11)     $       (.47)       $      (.61)
Basic and diluted - pro forma                            (.24)         (.11)             (.47)              (.61)
</TABLE>

In determining the pro forma amounts above, the Company estimated the fair value
of each option  granted using the  Black-Scholes  option  pricing model with the
following weighted-average assumptions:


        March 31                             2006                   2005
        Risk free interest rate              4.3%                   3.8%
        Expected dividend yield                -                      -
        Expected lives                       5-9 years              5-9 years
        Expected volatility                  80%                    80%

Options  granted  during the quarter and six months ended March 31, 2006 totaled
7,000  while the options  granted  for the three and six months  ended March 31,
2005  amounted to 42,274.  The weighted  average  fair value of options  granted
during  the six  months  ended  March  31,  2006 and  2005  was $.42 and  $3.50,
respectively.

11.  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,  2006,  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.


12.  SUBSEQUENT EVENTS

     Subsequent to March 31, 2006, the Company executed additional notes payable
with AJW Partners, LLC, AJW Offshore,  Ltd., AJW Qualified Partners, LLC and New
Millennium  Capital  Partners II, LLC in the total principal amount of $500,000.
The gross  proceeds of $500,000  received  from these notes  represent the final
installments of the $3,000,000  long-term  convertible note financing  agreement
executed  by the  Company in  September  2005.  The prior  installments  of this
financing  are  described  in  Note  5. As  part  of the  final  closing  of the
$3,000,000  long-term  convertible  note  financing,  the Company  received  the
remainder of the gross  proceeds  although  there was no effective  registration
statement  for the  resale of the common  stock  into  which the notes  could be
converted.  An effective registration statement was a condition to such funding.
In consideration for such funding without the effective registration  statement,
on May 4, 2006 the Company agreed to cancel all warrants  theretofore  issued to
AJW Partners,  LLC, AJW Offshore,  Ltd.,  AJW  Qualified  Partners,  LLC and New
Millennium  Capital  Partners  II,  LLC and in lieu  thereof  issued  3  million
warrants  in the  aggregate  to the same  parties in the same  proportions,  but
exercisable  for 7 years at $1.25 per  share  instead  of 5 years at $12.50  per
share. The reduced exercise price still substantially  exceeded the market price
of the common stock, which had closed at $0.30 on May 3, 2004.

13.  RECENT ACCOUNTING PRONOUNCEMENTS

     In December  2004,  the FASB issued SFAS No.  123R,  "Share-Based  Payment"
("SFAS  123R"),   which   replaces  SFAS  123,   "Accounting   for   Stock-Based
Compensation,"  and supersedes APB Opinion no. 25,  "Accounting for Stock Issued
to  Employees."  SFAS 123R  requires  all  share-based  payments  to  employees,
including  grants of employee stock  options,  to be recognized in the financial
statements based on their fair values. The effective date for entities that file
as a small business issuer is as of the beginning of the first annual  reporting
period that begins on or after  December 15, 2005  Therefore,  under the current
rules,  the Company will be required to adopt SFAS 123R in the first  quarter of
fiscal 2007.

     Under SFAS 123R, pro forma disclosures  previously permitted will no longer
be an alternative to financial statement recognition. The Company must determine
the appropriate fair value model to be used for valuing share-based  payments to
employees,  the  amortization  method for  compensation  cost and the transition
method  to be used at the  date of  adoption.  The  transition  methods  include
modified prospective and retrospective adoption options. Additionally, SFAS 123R
clarifies the timing for recognizing  compensation expense for awards subject to
acceleration of vesting on retirement and also specifies the treatment of excess
tax benefits associated with stock compensation.

     In March 2005, the SEC issued Staff Accounting Bulletin No. 107 ("SAB 107")
regarding the SEC's interpretation of SFAS 123R and the valuation of share-based
payments for public  companies.  Avitar is evaluating the  requirements  of SFAS
123R and SAB 107 and expects that the adoption of SFAS 123R will have a material
impact on Avitar's  consolidated  results of operations  and earnings per share.
The  Company  has not yet  determined  the method of  adoption  or the effect of
adopting SFAS 123R, and it has not  determined  whether the adoption will result
in amounts that are similar to the current pro forma disclosures under SFAS 123.

     In November  2004, the FASB issued SFAS No. 151,  "Inventory  Costs" ("SFAS
151"), an amendment of Accounting  Research  Bulletin ("ARB") No. 43, Chapter 4,
"Inventory  Pricing".  SFAS 151 amends previous guidance regarding  treatment of
abnormal  amounts  of  idle  facility  expense,  freight,  handling  costs,  and
spoilage.  This  statement  requires  that those items be  recognized as current
period  charges  regardless  of whether they meet the criterion of "so abnormal"
which was the  criterion  specified in ARB No. 43. In addition,  this  Statement
requires  that  allocation  of  fixed  production  overheads  to the cost of the
production  be based on  normal  capacity  of the  production  facilities.  This
pronouncement  was  effective  for the Company  beginning  October 1, 2005.  The
adoption  of SFAS 151 by the  Company  did not  have a  material  impact  on its
consolidated results of operations and financial condition.

     In May 2005,  the FASB issued SFAS No. 154,  "Accounting  Changes and Error
Corrections"  ("SFAS  154")  which  replaces  APB  Opinions  No. 20  "Accounting
Changes"  and SFAS No. 3,  "Reporting  Accounting  Changes in Interim  Financial
Statements"  An Amendment  of APB Opinion No. 28. SFAS 154 provides  guidance on
the accounting for and reporting of accounting changes and error corrections. It
establishes  retrospective  application,  or the latest practicable date, as the
required method for reporting a change in accounting principle and the reporting
of a correction of an error.  SFAS 154 is effective for  accounting  changes and
corrections of errors made in fiscal years beginning after December 15, 2005 and
is required  to be adopted by Avitar in the first  quarter of fiscal  2007.  The
Company is  currently  evaluating  the effect that the adoption of SFAS 154 will
have on its consolidated results of operations and financial condition, but does
not expect it will have a material impact.
<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.

ONE FOR FIFTY (1 FOR 50) REVERSE SPLIT OF COMMON STOCK

     The  Company's  one for fifty (1 for 50) reverse  split of its common stock
that was authorized by the Company's  shareholders  at their annual meeting held
on  January  18,  2006  became  effective  at  5:00  PM on  February  17,  2006.
Accordingly,  the  numbers  of common  stock  shares  and  related  calculations
presented  herein reflect the results of the reverse split for current and prior
reporting periods.

RESULTS OF OPERATIONS

Revenues

     Sales for the three  months  ended March 31, 2006  increased  $324,043,  or
approximately  36%, to $1,297,266 from $955,223 for the corresponding  period of
the prior  year.  For the six  months  ended  March 31,  2006,  sales  increased
$213,273,  or approximately  11%, to $2,204,536 from $1,991,263.  The change for
the three  months  ended  March 31, 2006  primarily  reflects an increase in the
volume of sales for its OralScreen(R)  and Foam Products of $340,000,  offset in
part by a decrease of $16,000 in revenue from contraband detection services. The
change for the six months ended March 31, 2006 primarily reflects an increase in
the volume of sales for its OralScreen(R) and Foam products of $215,000,  offset
in part by a decrease of $2,000 in revenue from contraband detection services.

Operating Expenses

     Cost of sales for the three months ended March 31, 2006 were  approximately
69% of sales compared to the cost of sales of approximately 75% of sales for the
three months ended March 31, 2005.  For the six months ended March 31, 2006, the
cost of sales was 71%  compared  to 72% of sales  for the same  period of Fiscal
2005.  The  improvement  for Fiscal 2006 resulted  from the overall  increase in
sales described above.

     Selling,  general and  administrative  expenses  for the three months ended
March 31, 2006  decreased  $13,228,  or  approximately  1%, to  $1,018,392  from
$1,031,620  for the  corresponding  period of the prior year. For the six months
ended March 31, 2006,  selling,  general and  administrative  expenses increased
$92,717 or  approximately  5%, to $2,056,999  from $1,964,282 for the six months
ended March 31, 2005.  The change for the six-month  period ended March 31, 2006
primarily resulted from the addition of sales and marketing resources.  In order
to achieve  revenue  growth,  the  Company  will most  likely  continue to incur
increased  expenses to hire additional  direct sales staff and expand  marketing
programs during the remainder of FY2006 and beyond.

     Expenses for research and  development for the three months ended March 31,
2006 amounted to $109,248 compared to $183,306 for the  corresponding  period of
the prior year, a decrease of $74,058.  For the six months ended March 31, 2006,
expenses for research and development  were $238,954 versus $379,749 for the six
months  ended March 31,  2005,  a decrease of  $140,795.  The  decrease  for the
quarter ended March 31, 2006 was primarily attributable to a reduction in salary
expense of  $16,000,  consulting  expense of $23,000  and  material  and various
development  related  expenses of $27,000.  The change for the six months  ended
March 31,  2006  resulted  primarily  from  reduced  salary and  fringe  benefit
expenses  of  $39,000,  consulting  expense of  $55,000,  material  and  various
development  related  expenses of $35,000.  Although  research  and  development
expenses were lower for the first half of Fiscal 2006, the Company must continue
developing and enhancing its ORALscreen products and therefore, will most likely
incur increased  expenses for research and  development  during the remainder of
FY2006 and beyond.

     Other Income and Expense

     Interest  expense and  financing  costs were  $175,851 for the three months
ended March 31, 2006 compared to $23,183  incurred during the three months ended
March 31, 2005.  For the six months ended March 31, 2006,  interest  expense and
financing costs amounted to $389,086 versus $36,369 for the corresponding period
of Fiscal 2005.  The increase for the three months ended March 31, 2006 resulted
primarily from interest  expense of  approximately  $43,000 and  amortization of
deferred financing costs and debt discount of approximately  $107,000 associated
with the short-term  notes and  convertible  short and long-term  notes totaling
approximately  $3,500,000  that were  executed  by the Company in FY2005 and the
first  half of FY2006.  For the six  months  ended  March 31,  2006,  the change
primarily   resulted  from  interest  expense  of   approximately   $93,000  and
amortization  of deferred  financing  costs and debt  discount of  approximately
$259,000  associated  with  the  short-term  notes  and  convertible  short  and
long-term  notes  totaling  approximately  $3,500,000  that were executed by the
Company in FY2005 and the first half of FY2006

     For the three  months  ended  March 31,  2006,  other  expense  amounted to
$128,640  compared to other  income of $711,321 for the three months ended March
31,  2005.  Other  expense  for the six months  ended  March 31, 2006 was $7,298
compared to other  income of $190,691  for the six months  ended March 31, 2005.
The  change  for the  quarter  and six  months  ended  March  31,  2006 from the
corresponding  periods of fiscal 2005 occured primarily from the changes in fair
market  values 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 six months ended
March 31, 2006,  other income  amounted to $120,000  compared to no activity for
the  corresponding  period of the prior  year.  The income for the first half of
Fiscal 2006 resulted from the settlement described in 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 $1,034,986 for the three months ended March 31, 2006, as compared to net
loss of $286,175 for the three  months ended March 31, 2005.  For the six months
ended March 31, 2006, the Company had a net loss of $1,926,915 versus $1,629,065
for the  corresponding  period of Fiscal  2005.  The loss per share was $.25 per
basic and diluted  share for the three months ended March 31, 2006 compared to a
loss per share of $.11 per basic and diluted  share for the three  months  ended
March 31, 2005.  For the six months ended March 31, 2006, the loss per share was
$.48 per basic and diluted  share versus a loss per share of $1.00 per basic and
diluted share for the six months ended March 31, 2005.


FINANCIAL CONDITION AND LIQUIDITY

     At March 31, 2006, the Company had a stockholders'deficit of $6,250,907 and
cash and cash equivalents of $42,633.  Our cash flows from financing  activities
provided  the primary  source of funding  during the six months  ended March 31,
2006  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, 2006:

                                                               March 31,
         Sources (use) of cash flows                              2006
         Operating activities                               $(1,379,759)
         Investing activities                                   (85,957)
         Financing activities                                 1,107,986
         Net decrease in cash and equivalents               $  (357,730)

     Operating  Activities.  The net loss of  $1,926,915  (comprised of expenses
     totaling  $4,251,451 less revenues and income from discontinued  operations
     of $2,324,536)  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
     changes in the fair market value of derivative securities and warrants, the
     cash  needed  to  finance  the net loss  was  $1,571,142.  Working  capital
     requirements  necessitated the use of $49,967 to increase  inventory levels
     to meet anticipated demand for our products during the next several months.
     A decrease in accounts receivable of $68,697, decreases in prepaid expenses
     of $74,164  and an increase  in  accounts  payable and accrued  expenses of
     $103,497 lessened working capital needs by $246,358. The addition of $4,858
     of other  assets and the  reduction  of $150 in  deferred  revenue  further
     increased the operating cash needs.

     Investing and  Financing  Activities.  Cash used in investing  consisted of
     cash paid of $85,957 for  additions to property,  plant and  equipment.  To
     finance the business,  long-term  notes (as described  below) were executed
     and  approximated  $1,380,000;  of which $119,437 was used to repay various
     short and long-term debt and $155,417 was used to redeem  remaining  shares
     of the Series A  redeemable  convertible  preferred  stock and the  accrued
     dividends for these shares.

     During FY 2006,  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
September  2005 and the first half of Fiscal 2006,  the Company  executed  notes
payable with AJW Partners, LLC, AJW Offshore,  Ltd., AJW Qualified Partners, LLC
and New Millennium  Capital  Partners II, LLC in the total  principal  amount of
$2,500,000  which is payable at maturity in  September  2008,  October  2008 and
February 2009. Interest on these notes is 8% and is payable quarterly in cash or
the  Company's  common  stock at the option of the Company.  The Company  issued
warrants to purchase 100,000 shares of common stock at $12.50 per share for five
years in connection  with these notes,  which as discussed  below were cancelled
and replaced on May 4, 2006 In addition,  the entire  principal plus any accrued
and unpaid interest associated with these notes is convertible,  at the holder's
option,  into the  Company's  common stock at a  conversion  price of 65% of the
average of the three lowest intraday  trading prices of the common stock for the
twenty trading days  preceding the date that the holders elect to convert.  Fees
of approximately  $340,000 incurred in connection with securing these loans were
recorded as a deferred  financing charge.  The collateral pledged by the Company
to secure these notes  includes all assets of the Company.  Subsequent  to March
31,  2006,  the  Company  received  the last  installment  of  $500,000  of this
$3,000,000 long-term  convertible note financing.  The outstanding warrants were
cancelled on May 4, 2006 and replaced by 3 million  warrants  exercisable  for 7
years at $1.25 per share.


     From April to August 2005, the Company executed  convertible  notes with an
individual in the total principal  amount of $650,000 with interest at 10%. Each
note has a maturity  date of six months from the date of the note and is payable
in ten monthly  installments  plus accrued  interest  commencing on the maturity
date of the note.  The Company  issued  warrants to  purchase  13,000  shares of
common stock at $1.65 to $4.95 per share for three (3) years in connection  with
these notes. In addition,  the entire principal plus accrued interest associated
with these notes is convertible  into the Company's common stock at a conversion
price of the lesser of the closing  price of the common stock on the date of the
loan or 85% of the average  closing  price of the common  stock for the five (5)
trading  days  preceding  the  notice  of  conversion.  In no  event  shall  the
conversion  price be lower than 50% of the closing  price of the common stock on
the date of the loan.

     In April and June 2005,  the Company  raised net proceeds of  approximately
$1,335,000 from the sale of 1,500,000 shares of Series E Redeemable  Convertible
Preferred  Stock with a face value of $1,500,000  and Warrants to purchase 3,000
shares of the Company's common stock. The $1,500,000 of Series E Preferred Stock
are convertible into Common Stock at the lesser of $4.00 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 $4.20 per share for a period of
three years.  As of March 31, 2006,  724,351 shares of this preferred  stock had
been converted into 735,556 shares of common stock and 775,649 were outstanding.
Upon the occurrence of specific  events,  the holders of the Series E Redeemable
Convertible  Preferred  Stock are entitled to redeem these shares under  certain
provisions of the agreement covering the purchase of the preferred stock.

     In December  2004,  the Company  sold 1,285  shares of Series A  Redeemable
Convertible  Preferred  Stock and Warrants to purchase  12,000  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 $6.00 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.  As of March  31,  2006,  1,135  shares of this
preferred  stock had been  converted into 452,156 shares of common stock and the
remaining 150 shares of Series A redeemable  convertible preferred stock, with a
face value of  $150,000,  were  redeemed  by the  Company  in  October  2005 for
$155,415 which included accrued dividends of $5,417.

     The cash  available  at March 31, 2006,  the proceeds of $500,000  from the
last  installment  of  the  $3,000,000  convertible  note  financing,   and  the
anticipated  customer  receipts  are  expected  to be  sufficient  to  fund  the
operations of the Company through June 2006.  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 FY2006 from
the sales of equity  and/or  debt  securities.  The  investors  involved  in the
September  2005,  October 2005 and February  2006  convertible  note  financings
described above have expressed their intent to provide an additional  $2,000,000
of financing on terms to be  negotiated.  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.  In addition,  the Company may
consider  selling  assets and/or  operations,  including  BJR.  However,  at the
present time, there can be no assurances that the Company would be successful in
these efforts.

     Operating  revenues are expected to grow during  Fiscal 2006 as  increasing
     number of  employers  in the United  States and  overseas  convert to using
     ORALscreen,  Avitar's oral fluid drug testing products. In order to achieve
     the revenue  growth,  the Company  will need to 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
     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  financings,  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 2005  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 the date of such report  (January  20,  2006).  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 FASB issued SFAS No.  123R,  "Share-Based  Payment"
("SFAS  123R"),   which   replaces  SFAS  123,   "Accounting   for   Stock-Based
Compensation,"  and supersedes APB Opinion no. 25,  "Accounting for Stock Issued
to  Employees."  SFAS 123R  requires  all  share-based  payments  to  employees,
including  grants of employee stock  options,  to be recognized in the financial
statements based on their fair values. The effective date for entities that file
as a small business issuer is as of the beginning of the first annual  reporting
period that begins on or after  December 15, 2005  Therefore,  under the current
rules,  the Company will be required to adopt SFAS 123R in the first  quarter of
fiscal 2007.

     Under SFAS 123R, pro forma disclosures  previously permitted will no longer
be an alternative to financial statement recognition. The Company must determine
the appropriate fair value model to be used for valuing share-based  payments to
employees,  the  amortization  method for  compensation  cost and the transition
method  to be used at the  date of  adoption.  The  transition  methods  include
modified prospective and retrospective adoption options. Additionally, SFAS 123R
clarifies the timing for recognizing  compensation expense for awards subject to
acceleration of vesting on retirement and also specifies the treatment of excess
tax benefits associated with stock compensation.

     In March 2005, the SEC issued Staff Accounting Bulletin No. 107 ("SAB 107")
regarding the SEC's interpretation of SFAS 123R and the valuation of share-based
payments for public  companies.  Avitar is evaluating the  requirements  of SFAS
123R and SAB 107 and expects that the adoption of SFAS 123R will have a material
impact on Avitar's  consolidated  results of operations  and earnings per share.
The  Company  has not yet  determined  the method of  adoption  or the effect of
adopting SFAS 123R, and it has not  determined  whether the adoption will result
in amounts that are similar to the current pro forma disclosures under SFAS 123.

     In November  2004, the FASB issued SFAS No. 151,  "Inventory  Costs" ("SFAS
151"), an amendment of Accounting  Research  Bulletin ("ARB") No. 43, Chapter 4,
"Inventory  Pricing".  SFAS 151 amends previous guidance regarding  treatment of
abnormal  amounts  of  idle  facility  expense,  freight,  handling  costs,  and
spoilage.  This  statement  requires  that those items be  recognized as current
period  charges  regardless  of whether they meet the criterion of "so abnormal"
which was the  criterion  specified in ARB No. 43. In addition,  this  Statement
requires  that  allocation  of  fixed  production  overheads  to the cost of the
production  be based on  normal  capacity  of the  production  facilities.  This
pronouncement  was  effective  for the Company  beginning  October 1, 2005.  The
adoption  of SFAS 151 by the  Company  did not  have a  material  impact  on its
consolidated results of operations and financial condition.

     In May 2005,  the FASB issued SFAS No. 154,  "Accounting  Changes and Error
Corrections"  ("SFAS  154")  which  replaces  APB  Opinions  No. 20  "Accounting
Changes"  and SFAS No. 3,  "Reporting  Accounting  Changes in Interim  Financial
Statements"  An Amendment  of APB Opinion No. 28. SFAS 154 provides  guidance on
the accounting for and reporting of accounting changes and error corrections. It
establishes  retrospective  application,  or the latest practicable date, as the
required method for reporting a change in accounting principle and the reporting
of a correction of an error.  SFAS 154 is effective for  accounting  changes and
corrections of errors made in fiscal years beginning after December 15, 2005 and
is required  to be adopted by Avitar in the first  quarter of fiscal  2007.  The
Company is  currently  evaluating  the effect that the adoption of SFAS 154 will
have on its consolidated results of operations and financial condition, but does
not expect it will have a material impact.

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
when and if applicable

     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

     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,  2006,  pursuant to Exchange Act Rules
13a-15(e)  and  15(d)-15(e).  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 are adequate and effective to ensure
material  information and other information  requiring  disclosure is identified
and communicated on a timely basis.

     (b) Changes in Internal Control Over Financial Reporting

     During the period  covered by this  report,  we have  improved our internal
control  over  financial  reporting  by  correcting  the  historical  accounting
problems  to  appropriately  account  for  equity and debt  issuances  including
freestanding  warrants and embedded  derivatives.  There have been no changes in
our other  internal  controls  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, 2006 the Company issued to holder of the
Series C preferred  stock 90,910 shares of the  Company's  common stock upon the
conversion  of  8,333  shares  of  his  preferred   stock.   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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     The annual  meeting of the  shareholders  was held on January 18, 2006. All
members  of the Board of  Directors  were  elected by more than 74% of the total
shares  outstanding  and more than 95% of the shares  voted.  In  addition,  the
reappointment of BDO Seidman, LLP as auditors was approved and the tabulation of
votes for all matters was as follows:
<TABLE>
<CAPTION>

                                                         For               Withheld       Against    Abstain
                                                         ------------    -------------  ----------   ----------
<S>                                                      <C>              <C>            <C>         <C>
Election of Directors                                    160,282,016      7,226,963         N/A        N/A
Approval of Amendment to Effect
  a 1 for 50 Reverse Split of
  Common Stock                                           150,393,128         N/A         8,999,837   230,635
Approval of Amendment to Certificate
  of Incorporation to effect a decrease
  of Authorized Shares of Common
  from 300,000,000 to 100,000,000                        150,843,672         N/A         8,236,293   443,635
Ratify BDO Seidman, LLP as
  Company's Independent
  Registered Public Firm                                 154,057,510         N/A         5,028,573   537,517
</TABLE>


ITEM 6.           EXHIBITS

(a)  Exhibits:

       Exhibit No.                              Document

       31.1           Rule 13a-14(a)/15d-14(a) Certification , as
                      Adopted Pursuant to Section 302 of the Sarbanes-Oxley
                      Act of 2002

       31.2           Rule 13a-14(a)/15d-14(a) Certification , as
                      Adopted Pursuant to Section 302 of the Sarbanes-Oxley
                      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






<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 15, 2006                           /S/ Peter P. Phildius
                                               Peter P. Phildius
                                               Chairman and Chief
                                               Executive Officer
                                               (Principal Executive Officer)




Dated:  May 15, 2006                           /S/ J.C. Leatherman, Jr.
                                               J.C. Leatherman, Jr.
                                               Chief Financial Officer
                                               (Principal Accounting and
                                               Financial Officer)




<PAGE>

                                  EXHIBIT INDEX


       Exhibit No.                                Document

       31.1             Rule 13a-14(a)/15d-14(a) Certification, as
                        Adopted Pursuant to Section 302 of the Sarbanes-Oxley
                        Act of 2002

       31.2             Rule 13a-14(a)/15d-14(a) Certification, as
                        Adopted Pursuant to Section 302 of the Sarbanes-Oxley
                        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