U.S. Securities and Exchange Commission
                           Washington, D.C.  20549
                                 Form 10-QSB

(Mark One)

[x]  Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended December 31, 2004.

[  ]  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 Identification No.)
incorporation or organization)


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

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

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

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

                     Applicable Only to Corporate Issuers

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

                          Common Stock:  150,991,344
                            As of February 11, 2005

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

                              Page 1 of 25 pages
                         Exhibit Index is on Page 21


<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        13


   Item 3   Controls and Procedures                                          17

PART II: OTHER INFORMATION                                                   18

   Item 2   Unregistered Sales of Equity Securities and
                Use of Proceeds                                              19


  Item 6   Exhibits and Reports on Form 8-K                                  19


SIGNATURES                                                                   20

EXHIBIT INDEX                                                                21
CERTIFICATIONS                                                               22
<PAGE>

                          PART I FINANCIAL INFORMATION
<PAGE>
Item 1.     FINANCIAL STATEMENTS

                          Avitar, Inc. and Subsidiaries
                           Consolidated Balance Sheet
                               December 31, 2004
                                   (Unaudited)
<TABLE>
<CAPTION>

-------------------------------------------------------------------------------------
<S>                                                                      <C>
                                          ASSETS
CURRENT ASSETS:
     Cash and cash equivalents                                           $   626,351
     Accounts receivable                                                     488,914
     Inventories                                                             501,131
     Prepaid expenses and other                                              144,960
                                                                           ----------
          Total current assets                                             1,761,356

PROPERTY AND EQUIPMENT, net                                                  278,541
GOODWILL, net                                                                238,120
OTHER ASSETS                                                                 113,494
                                                                           ----------
          Total                                                          $ 2,391,511
                                                                           ==========

                          LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
     Notes payable                                                       $   134,348
     Accounts payable                                                        620,542
     Accrued expenses                                                        814,808
     Deferred revenue                                                        192,500
                                                                           ----------
           Total current liabilities                                       1,762,198
                                                                           ----------

REDEEMABLE CONVERTIBLE PREFERRED STOCK                                     1,285,000
                                                                           ----------

COMMITMENTS

STOCKHOLDERS' DEFICIT
     Series A, B, C and 6% convertible preferred stock, $.01 par value;
         authorized 5,000,000 shares; 45,880 shares issued and
         outstanding                                                             459
     Common Stock, $.01 par value; authorized 300,000,000 shares;
          139,155,798 shares issued and outstanding                        1,391,558
     Additional paid-in capital                                           50,354,244
     Accumulated deficit                                                 (52,401,948)
                                                                          -----------
          Total stockholders' deficit                                       (655,687)
                                                                          -----------
          Total                                                          $ 2,391,511
                                                                          ===========
</TABLE>

               See accompanying notes to consolidated financial statements.
<PAGE>
                          Avitar, Inc. and Subsidiaries
                      Consolidated Statements of Operations
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                THREE MONTHS ENDED DECEMBER 31,
                                                                            --------------------------------------
                                                                                2004                        2003
                                                                            ----------                   ---------
<S>                                                                         <C>                         <C>
SALES                                                                       $ 1,036,040                 $  820,200
                                                                             -----------                  ---------

OPERATING EXPENSES
     Cost of sales                                                              716,009                    533,907
     Selling, general and administrative                                        932,662                    746,736
     Research and development                                                   196,443                    108,155
                                                                             -----------                 ----------
          Total operating expenses                                            1,845,114                  1,388,798
                                                                             -----------                 ----------

LOSS FROM OPERATIONS                                                           (809,074)                  (568,598)
                                                                             -----------                 ----------

OTHER INCOME (EXPENSE)
     Interest expense and financing costs                                       (13,186)                   (69,268)
     Other income, net                                                              437                      8,245
                                                                             -----------                 ----------
          Total other expense, net                                              (12,749)                   (61,023)
                                                                             -----------                 ----------


LOSS FROM CONTINUING OPERATIONS                                                (821,823)                  (629,621)
                                                                             -----------                 ----------

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

NET LOSS                                                                    $  (821,823)                $ (642,409)
                                                                             ===========                 ==========

BASIC AND DILUTED LOSS PER SHARE FROM CONTINUING
    OPERATIONS BEFORE DISCONTINUED OPERATIONS (Note 8)                      $     (0.01)                $    (0.01)
                                                                             ===========                 ==========

BASIC AND DILUTED NET LOSS PER SHARE (Note 8):                              $     (0.01)                $    (0.01)
                                                                             ===========                 ==========

WEIGHTED AVERAGE
     NUMBER OF COMMON SHARES OUTSTANDING                                    130,174,135                 96,093,701
                                                                            ============                ===========
</TABLE>


See accompanying notes to consolidated financial statements.

<PAGE>

                          Avitar, Inc. and Subsidiaries
                 Consolidated Statement of Stockholders' Deficit
                      Three Months Ended December 31, 2004
                                   (Unaudited)
<TABLE>
<CAPTION>
                                         Preferred Stock          Common Stock
                                       ..................      ..................
                                                                                           Additional       Accumulated
                                        Shares      Amount     Shares         Amount      paid-in capital     deficit
----------------------------------------------     ------     -----------    ---------     -----------       ---------------
<S>                                     <C>         <C>       <C>           <C>            <C>              <C>
Balance at September 30, 2004           46,130      $ 462     123,118,165   $1,231,182     $49,657,819      ($51,556,850)

Conversion of Series A convertible
    preferred stock into common stock    (250)         (3)      2,520,251       25,202         (25,199)                -

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

Payment of preferred stock dividend for
    Series A preferred stock                -           -         311,500        3,115          20,160           (23,275)

Financing costs associated with issuance
    Series A redeemable convertible
    preferred stock                                                                           (124,525)

Net loss                                    -          -                -            -               -          (821,823)
----------------------------------------------     ------     -----------   ----------     ------------      ------------

Balance at December 31, 2004           45,880       $459      139,155,798   $1,391,558     $50,354,244      ($52,401,948)
----------------------------------------------     ------     -----------   ----------     ------------      ------------
</TABLE>


               See accompanying notes to consolidated financial statements.
<PAGE>
                          Avitar, Inc. and Subsidiaries
                      Consolidated Statements of Cash Flows
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                                  THREE MONTHS ENDED DECEMBER 31,
                                                                                                  ------------------------------
                                                                                                     2004              2003
                                                                                                  ---------         ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                                              <C>               <C>
     Net loss                                                                                    ($821,823)        ($642,409)
     Adjustments to reconcile net loss to net cash used in operating activities:
         Loss from disposal of discontinued operation                                                    -            17,235
         Depreciation and amortization                                                              39,669            29,481
         Amortization of debt discount and deferred financing                                            -            14,484
         Amortization of deferred rent expense                                                      31,192            10,397
         Common stock for interest on long-term debt                                                     -            43,750

         Changes in operating assets and liabilities:
            Accounts receivable                                                                    146,823           127,090
            Inventories                                                                           (152,278)         (167,079)
            Prepaid expenses and other current assets                                               29,520           (38,037)
            Other assets                                                                              (201)           26,205
            Accounts payable and accrued expenses                                                 (231,448)         (452,024)
            Deferred revenue                                                                             -            (1,200)
                                                                                                 ----------        ----------
                 Net cash used in operating activities                                            (958,546)       (1,032,107)
                                                                                                 ----------        ----------

CASH FLOWS FROM INVESTING ACTIVITIES:

    Purchases of property and equipment                                                            (20,482)             (835)
    Proceeds from sale of USDTL                                                                          -           500,000
                                                                                                 ----------          --------

                    Net cash provided by (used in) investing activities                            (20,482)          499,165
                                                                                                 ----------          --------

CASH FLOWS FROM FINANCING ACTIVITIES:

     Repayment of notes payable and long-term debt                                                 (63,272)         (130,607)
     Sales of common stock, preferred stock and warrants                                         1,159,775                 -
     Payment of cash dividend on 8% redeemable convertible preferred stock                               -           (16,110)
                                                                                                 ----------         ---------

               Net cash provided by (used in) financing activities                               1,096,503          (146,717)
                                                                                                 ----------         ---------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                               117,475          (679,659)

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

CASH AND CASH EQUIVALENTS, end of the period                                                      $626,351          $451,260
                                                                                                 ==========        ==========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during period:
          Income taxes                                                                            $      -          $      -
          Interest                                                                                $  8,291          $  7,899
</TABLE>

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
    FINANCING ACTIVITIES:

           During the three months ended December 31, 2004, 958 shares of Series
              A redeemable convertible preferred stock were converted 13,205,882
              shares of common stock.

           During the three months ended December 31, 2004, 250 shares of Series
              A convertible preferred stock were converted into 2,520,251 shares
              of common stock.

           During the three months ended December 31, 2004, 311,500 shares of
              common were issued as payment of dividends for Series A
              convertible and redeemable convertible preferred stock.

           During the three months ended December 31, 2003, 696,336 shares of
              common stock were issued for interest on long-term debt.

           During the three months ended December 31, 2003, 700 shares of 8%
              redeemable convertible preferred stock were converted into
              4,666,667 shares of common stock.

           During the three months ended December 31, 2003, 7,496,436 shares of
              common stock were issued for the exercise of warrants.

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 quarter 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.

          The accompanying consolidated financial statements of the Company have
     been prepared in accordance with generally accepted  accounting  principles
     for interim  financial  information,  the  instructions  to Form 10-QSB and
     Regulation S-B (including Item 310(b)  thereof).  Accordingly,  they do not
     include all of the information and footnotes required by generally accepted
     accounting principles for complete financial statements.  In the opinion of
     the  Company's  management,  all  adjustments  (consisting  only of  normal
     recurring accruals)  considered necessary for a fair presentation have been
     included.  Operating results for the three-month  period ended December 31,
     2004 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 has a  stockholders'  deficit as of  December  31,  2004 of
     $655,687.  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 quarter ended December 31,
     2004, the Company raised net proceeds of approximately  $1,160,000 from the
     sale of preferred stock and warrants. The Company is working with placement
     agents and investment fund mangers to obtain  additional  equity financing.
     As of  February  1,  2005,  the  Company  entered  into  a  Standby  Equity
     Distribution   Agreement  with  Cornell  Capital  Partners,  LP.  ("Cornell
     Capital")  Pursuant  to the  Standby  Equity  Distribution  Agreement,  the
     Company may, at its discretion, periodically sell to Cornell Capital shares
     of common stock for a total purchase price of up to $10.0 million. For each
     share of common  stock  purchased  under the  Standby  Equity  Distribution
     Agreement,  Cornell  Capital will pay the Company 99% of the lowest  volume
     weighted  average  price  of  the  Company's  common  stock  as  quoted  by
     Bloomberg,  LP on the American Stock Exchange or other principal  market on
     which  the  Company's  common  stock is traded  for the 5 days  immediately
     following  the  notice  date.  The price paid by  Cornell  Capital  for the
     Company's  stock  shall be  determined  as of the  date of each  individual
     request for an advance  under the Standby  Equity  Distribution  Agreement.
     Cornell  Capital  will also  retain 4% of each  advance  under the  Standby
     Equity  Distribution  Agreement.  Cornell Capital's  obligation to purchase
     shares of the Company's common stock under the Standby Equity  Distribution
     Agreement is subject to certain conditions, including the Company obtaining
     an effective  registration  statement for shares of common stock sold under
     the Standby  Equity  Distribution  Agreement and is limited to $250,000 per
     weekly  advance  and   $1,000,000  per  30  days.   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 December 31, 2004, inventories consist of the following:

                           Raw Materials                     $395,309
                           Work-in-Process                     44,914
                           Finished Goods                      60,908
                                                              -------
                                    Total                    $501,131
                                                              =======

3.   DISCONTINUED OPERATIONS

          On  December  16,  2003,  the  Company  consummated  a 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 the three months ended December 31, 2004 and 2003:

             Three months ended December 31,          2004           2003
             ----------------------------------------------------------------

             Sales                               $     -        $ 289,501
             Operating expenses                        -          284,223
             Other income (expense)                    -          (18,066)
             ----------------------------------------------------------------
             Loss from discontinued operations   $     -        $ (12,788)
             ----------------------------------------------------------------

          Other income  (expense)  for the three months ended  December 31, 2003
     includes the loss from the disposal of USDTL of $17,235.

4.   MAJOR CUSTOMERS

         Customers in excess of 10% of total sales are:

                                            Three Months Ended December 31,
                                               2004                  2003
                                         ----------------      ---------------
                  Customer A              $   253,786           $   133,135
                  Customer B                  222,200                     *



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

          At December 31, 2004, accounts receivable from major customers totaled
     approximately $275,000.

5.   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 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
     sale of 1,285 shares of preferred stock and the conversion feature resulted
     in a deemed  dividend  of  $360,000  being  recorded  and  included  in the
     earnings per share  calculation  for the three  months  ended  December 31,
     2004.  Upon the  occurence of specified  events,  the holder is 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.

6.   COMMON AND PREFERRED STOCK

          During the  quarter  ended  December  31,  2004,  the  Company  issued
     15,726,133  shares of common stock to holders who  converted  250 shares of
     Series A convertible  preferred stock and 958 shares of Series A redeemable
     convertible  preferred  stock.  As payment of $23,275 of dividends on these
     converted shares, the Company issued 311,500 shares of the Company's common
     stock.  Dividends for all preferred stock amounted to $50,264 for the three
     months  ended  December  31,  2004  and the  total  amount  of  unpaid  and
     undeclared dividends was $150,251.

7.   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 since September 30, 2004.

8.   LOSS PER SHARE

          The  following  data show the amounts used in  computing  earnings per
     share:

<TABLE>
<CAPTION>

         Three Months Ended December 31,                        2004             2003
         ---------------------------------------------------------------------------------
<S>                                                          <C>                <C>
         Loss from continuing operations                     $  (821,823)       $(629,621)
         Less:
             Deemed dividends in connection with
                  Series A preferred stock sales                (360,000)               -
                Preferred stock dividends                       ( 50,264)         (24,327)
                                                              -----------        ---------

          Loss available to common stockholders
                 from continuing operations                   (1,232,087)        (653,948)

             Add:
              Loss from discontinued operations                       (-)         (12,788)
                                                              -----------        ---------

          Net loss applicable to common
              stockholders used in basic and
                diluted EPS                                  $(1,232,087)       $(666,736)
                                                              ===========        =========

          Weighted average number of
                 common shares outstanding                   130,174,135       96,093,701
                                                             ============      ===========

           Loss per share applicable to common
                 stockholders before discontinued
                 operations                                  $     (0.01)       $   (0.01)

           Impact of discontinued operations                           -                -
                                                              -----------        ----------

              Basic and diluted loss per share
                  applicable to common stockholders          $     (0.01)       $   (0.01)
                                                              ===========        =========
</TABLE>

9.  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  ended December 31, 2004 or 2003, 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.


For the Three Months Ended December 31,             2004                   2003
-------------------------------------------------------------------------------
Loss available to common shareholders         $( 1,232,087)        $ (666,736)
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                         (  32,395)           (58,803)
                                                -----------         ----------
Pro forma net loss                             $(1,264,482)        $ (725,539)
                                                ===========         ==========
Pro forma loss per share:
  Basic and diluted - as reported             $       (.01)        $     (.01)
  Basic and diluted - pro forma                       (.01)              (.01)



     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:

        December 31                          2004                   2003
        -----------                   ----------------       -------------------
        Risk free interest rate              3.8%                   2.5%
        Expected dividend yield              -                         -
        Expected lives                     5-9 years                5-9 years
        Expected volatility                 80%                     80%

     Options  granted  during the quarter  ended  December 31, 2004  amounted to
     1,663,700 while no options were granted for the three months ended December
     31, 2003.  The weighted  average fair value of options  granted  during the
     three months ended December 31, 2004 was $0.07.

10.  SUBSEQUENT EVENTS

          Since  December 31, 2004,  holders of Series A  convertible  preferred
     stock  converted  750 shares of preferred  stock and accrued  dividends for
     such shares into 8,491,666  shares of common stock. As part of an agreement
     covering a  commitment  by an investor to purchase up to $10 million of the
     Company's common stock over  twenty-four  months, a commitment fee totaling
     1,075,732 shares of common stock was paid to the investor and the placement
     agent that will be used by the investor for this financing transaction.



<PAGE>


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

     The following  discussion and analysis  should be read in conjunction  with
the Company's  consolidated financial statements and the notes thereto appearing
elsewhere in this report.

RESULTS OF OPERATIONS

Revenues

     Sales for the three months ended  December 31, 2004  increased  $215,840 or
approximately 26 %, to $1,036,040 from $820,200 for the corresponding  period of
the prior year.  The  improvement  for the three months ended  December 31, 2004
primarily  reflects  increases  of  $122,000  in the  volume  of  sales  for its
OralScreen(R)  products and $121,000 for its Foam Products;  offset in part by a
decrease of $27,000 in revenue from contraband detection services.

Operating Expenses

     Cost  of  sales  for  the  three  months  ended   December  31,  2004  were
approximately 69% of sales compared to the cost of sales of approximately 65% of
sales for the three  months ended  December  31, 2003.  The change for the first
quarter of Fiscal  2005  resulted  from a shift in the  product mix to the lower
margin foam products (44% in Fiscal 2005 versus 40% in Fiscal 2004).

     Selling,  general and  administrative  expenses  for the three months ended
December 31, 2004 increased  $185,926,  or  approximately  25%, to $932,662 from
$746,736  for the  corresponding  period of the prior  year.  The change for the
three-month  period  ended  December  31, 2004  primarily  reflects  the cost of
approximately  $166,000 for the addition of sales and  marketing  resources.  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.

     Research and  development  expenses for the three months ended December 31,
2004  amounted to  $196,443  compared to  $108,155  for the three  months  ended
December 31, 2003. The increase of $88,288,  or approximately 82%, was primarily
attributable  to  additional  personnel  expense of  approximately  $48,000  and
contracted development expense of approximately $23,000 associated with the Oral
Screen product enhancements that included the Drugometer(TM), a single step drug
test device  introduced in November 2004.  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 FY2005
and beyond.

     Other Income and Expense

     Interest  expense and  financing  costs were  $13,186 for the three  months
ended  December 31, 2004  compared to $69,268  incurred  during the three months
ended December 31, 2003. The decrease  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.


     For the three months ended December 31, 2004, other income amounted to $437
compared to other income of $8,245 for the three months ended December 31, 2003.
The quarter ended December 31, 2003 included  approximately $7,000 received from
the  Company's  life  and  disability  insurance  carrier  as a  result  of  its
conversion from a mutual insurance company to a stock insurance company.

     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 months ended
December  31, 2004,  no activity  was  recorded for USDTL  compared to a loss of
$12,788 for the corresponding period of the prior year. The loss for the quarter
ended December 31, 2003 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 $821,823 for the three months  ended  December 31, 2004,  as compared to
net loss of $642,409 for the three months ended  December 31, 2003. The loss per
share was $.01 per basic and diluted  share for the three months ended  December
31, 2004.  The loss per share was $.01 per basic and diluted share for the three
months ended December 31, 2003.

FINANCIAL CONDITION AND LIQUIDITY

     At December 31, 2004,  the Company had a  stockholders'deficit  of $655,687
and cash and cash  equivalents  of  $626,351.  Our  cash  flows  from  financing
activities  provided  the primary  source of funding  during the  quarter  ended
December 31, 2004 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
three month period ended December 31, 2004:

                                                      December 31,
         Sources (use) of cash flows                        2004
         ---------------------------                  ------------------
         Operating activities                         $   (958,546)
         Investing activities                              (20,482)
         Financing activities                            1,096,503
                                                      -------------
         Net increase in cash and equivalents         $    117,475
                                                      =============

     Operating  Activities.  The net loss of  $821,823  (comprised  of  expenses
     totaling  $1,857,863 less revenues of $1,036,040) was the major use of cash
     by  operations.  Working  capital  requirements  necessitated  the  use  of
     $231,448 to pay aging  accounts  payable and reduce  accrued  expenses  and
     $152,278 to increase  inventory levels to meet  anticipated  demand for our
     products during the next quarter. A decrease in accounts  receivable due to
     the lower  billings for  ORALscreen  products  during the last month of the
     quarter lessened working capital needs by $146,823. In addition, reductions
     netting  $29,319 in various other assets further reduced the operating cash
     needs.

     Investing and  Financing  Activities.  Cash used in investing  consisted of
     cash paid of $20,482 for  additions to property,  plant and  equipment.  To
     finance the business,  preferred  stock and warrants (as  described  below)
     were sold and approximated  $1,160,000;  of which $63,272 was used to repay
     various 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. During
December 2004,  the Company sold 1,285 shares of Series A Convertible  Preferred
Stock and  Warrants  to  purchase  600,000  shares of common  stock for which it
received  net  proceeds of  approximately  $1,160,000.  These shares of Series A
Convertible Preferred Stock, with face value of $1,285,000, are 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 conversion
feature resulted in a deemed dividend of $360,000 being recorded and included in
the earnings per share calculation for the three months ended December 31, 2004.
The holder is entitled to redeem these shares under  certain  provisions  of the
agreement covering the purchase of the preferred stock.

     The cash available at December 31, 2004 and anticipated  customer  receipts
are expected to be  sufficient  to fund the  operations  of the Company  through
March 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. As part of this process, the Company, as
of February 1, 2005, entered into a Standby Equity  Distribution  Agreement with
Cornell Capital Partners, LP ("Cornell Capital"). Pursuant to the Standby Equity
Distribution Agreement, the Company may, at its discretion, periodically sell to
Cornell Capital shares of common stock for a total purchase price of up to $10.0
million.  For each share of common  stock  purchased  under the  Standby  Equity
Distribution  Agreement,  Cornell Capital will pay the Company 99% of the lowest
volume  weighted  average  price of the  Company's  common  stock as  quoted  by
Bloomberg,  LP on the American Stock Exchange or other principal market on which
the Company's  common stock is traded for the 5 days  immediately  following the
notice date. The price paid by Cornell  Capital for the Company's stock shall be
determined  as of the date of each  individual  request for an advance under the
Standby Equity  Distribution  Agreement.  Cornell Capital will also retain 4% of
each advance under the Standby Equity Distribution Agreement.  Cornell Capital's
obligation to purchase  shares of the  Company's  common stock under the Standby
Equity Distribution  Agreement is subject to certain  conditions,  including the
Company obtaining an effective registration statement for shares of common stock
sold under the Standby Equity Distribution  Agreement and is limited to $250,000
per weekly  advance and  $1,000,000  per 30 days.  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 will enable 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.  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.

     Operating  revenues are expected to 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 will need 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 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 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  periods  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

     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 December 31, 2004,  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, 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
<PAGE>

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

     During the quarter ended December 31, 2004 the Company issued to holders of
both the Series A preferred  stock and the Series A redeemable  preferred  stock
15,726,133  shares of the  Company's  common stock upon the  conversion of 1,208
shares of their  preferred  stock.  Also during the quarter  ended  December 31,
2004, the Company issued 311,500 shares of the Company's common stock as payment
for  dividends  on both the Series A  preferred  stock and  Series A  redeemable
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 6.           EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits:
                                  EXHIBIT INDEX


       Exhibit No.                      Document
       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              Certification Pursuant to 18 U.S.C. Section 1350, 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

(b) Reports on Form 8-K:


     Form 8-K,  Items 1.01,  3.02 and 9.01,  dated December 10, 2004 regarding a
private  placement  to  Global  Capital  Funding  Group,  LP  for  the  sale  of
convertible preferred stock and warrants.



<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 14, 2005               /S/ Peter P. Phildius
                                        -----------------------------------
                                        Peter P. Phildius
                                        Chairman and Chief
                                        Executive Officer
                                        (Principal Executive Officer)




Dated:  February 14, 2005               /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              Certification Pursuant to 18 U.S.C. Section 1350, as
                         Adopted Pursuant to Section 302 of the Sarbanes-Oxley
                         Act of 2002

       31.2              Certification Pursuant to 18 U.S.C. Section 1350, 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