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, 2003.

[ ]  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: 101,727,635
                             AS OF FEBRUARY 12, 2004

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  Changes in 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

Item 1.     FINANCIAL STATEMENTS

                          Avitar, Inc. and Subsidiaries
                           Consolidated Balance Sheet
                                December 31, 2003
                                   (Unaudited)
<TABLE>
<CAPTION>

<S>                                                                  <C>
      ASSETS
CURRENT ASSETS:
Cash and cash equivalents                                            $    451,260
Accounts receivable,, less allowance for doubtful
   accounts of $25,000                                                    390,471
Inventories                                                               417,007
Prepaid expenses and other current assets                                 166,318
                                                                     ------------
Total current assets                                                    1,425,056

PROPERTY AND EQUIPMENT, net                                               211,566
GOODWILL, net                                                             238,120
 OTHER ASSETS                                                             353,414
                                                                     ------------
        Total                                                        $  2,228,156
                                                                     ============

     LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Notes payable                                                        $    208,334
Accounts payable                                                          906,047
Accrued expenses                                                        1,238,209
Deferred revenue                                                          211,550
Current portion of long-term debt                                           8,098
                                                                     ------------
Total current liabilities                                               2,572,238

LONG TERM DEBT, LESS CURRENT PORTION                                    1,225,798
                                                                     ------------
Total liabilities                                                       3,798,036
                                                                     ------------

  COMMITMENTS

STOCKHOLDERS' DEFICIT
Series B, C, D and 6% convertible preferred stock, $.01 par value;
 authorized 5,000,000 shares; 137,202 shares issued and
  outstanding                                                               1,372
Common Stock, $.01 par value; authorized 200,000,000 shares;
101,727,635 shares issued and outstanding                               1,017,276
Additional paid-in capital                                             46,634,876
Accumulated deficit                                                   (49,223,404)
                                                                     ------------
Total stockholders' deficit                                            (1,569,880)
                                                                     ------------
        Total                                                        $  2,228,156
                                                                     ============
</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,
                                                          2003            2002
                                                     -----------------------------
<S>                                                  <C>             <C>
        SALES                                        $    820,200    $  1,497,656
                                                     ------------    ------------
OPERATING EXPENSES
Cost of sales                                             533,907         991,397
Selling, general and administrative                       746,736       1,157,036
Research and development                                  108,155         273,128
                                                     ------------    ------------
Total operating expenses                                1,388,798       2,421,561
                                                     ------------    ------------

LOSS FROM OPERATIONS                                     (568,598)       (923,905)
                                                     ------------    ------------

OTHER INCOME (EXPENSE)
Interest expense and financing costs                      (69,268)        (75,553)
Other income (expense)                                      8,245             595
                                                     ------------    ------------
Total other expense                                       (61,023)        (74,958)
                                                     ------------    ------------


LOSS FROM CONTINUING OPERATIONS BEFORE
DISCONTINUED OPERATIONS                                  (629,621)       (998,863)
                                                     -------------   -------------
DISCONTINUED OPERATIONS:
 Income (loss) from operations of USDTL                     4,447          (9,909)
Loss from the disposal of USDTL                           (17,235)              -
                                                     ------------    ------------
Loss from discontinued operations                         (12,788)         (9,909)
                                                     ------------    ------------

     NET LOSS                                        $   (642,409)   $ (1,008,772)
                                                     ============    ============

BASIC AND DILUTED LOSS PER SHARE FROM CONTINUING
OPERATIONS BEFORE DISCONTINUED OPERATIONS (Note 7)   $      (0.01)   $      (0.02)
                                                     ============    ============

BASIC AND DILUTED NET LOSS PER SHARE (Note 7):       $      (0.01)   $      (0.02)
                                                     ============    ============

WEIGHTED AVERAGE
NUMBER OF COMMON SHARES OUTSTANDING                    96,093,701      49,959,035
                                                     ============    ============
</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>
                          Avitar, Inc. and Subsidiaries
                 Consolidated Statement of Stockholders' Deficit
                      Three Months Ended December 31, 2003
                                   (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, 2003                 137,202       $  1,372     88,868,196     $  888,682   $ 46,093,947    ($48,564,885)

Issuance of common stock for exercise
  of warrants                                       -              -      7,496,436         74,964        (74,964)              -

Issuance of common stock for interest on
long-term debt                                      -              -        696,336          6,963         81,560               -

Conversion of 8% redeemable convertible
preferred stock into common stock                   -              -      4,666,667         46,667        534,333               -

Payment of preferred stock dividend for
 8% redeemable convertible preferred stock          -              -              -              -              -         (16,110)

     Net loss                                       -              -              -              -              -        (642,409)
                                            ---------   ------------   ------------   ------------   ------------    ------------

Balance at December 31, 2003                  137,202       $  1,372    101,727,635     $1,017,276   $ 46,634,876    ($49,223,404)
                                            ---------   ------------   ------------   ------------   ------------    ------------
</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,
                                                                                             2003                2002
<S>                                                                                      <C>                 <C>
 CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss                                                                                 ($642,409)          ($1,008,772)
Adjustments to reconcile net loss to net cash used in operating activities:
  Loss from disposal of discontinued operation                                              17,235                     -
  Depreciation and amortization                                                             29,481                40,689
  Amortization of debt discount and deferred financing                                      14,484                13,507
  Amortization of deferred rent expense                                                     10,397                     -
  Common stock for services                                                                      -                50,000
  Common stock for interest on long-term debt                                               43,750                43,750

  Changes in operating assets and liabilities:
    Accounts receivable                                                                    127,090               192,485
    Inventories                                                                           (167,079)             (227,772)
    Prepaid expenses and other current assets                                              (38,037)               94,951
    Other assets                                                                            26,205                14,560
    Accounts payable and accrued expenses                                                 (452,024)              387,597
    Deferred revenue                                                                        (1,200)               34,100
                                                                                       ------------         -------------
      Net cash used in operating activities                                             (1,032,107)             (364,905)
                                                                                       ------------         -------------

CASH FLOWS FROM INVESTING ACTIVITIES:

  Purchases of property and equipment                                                         (835)               (3,360)
  Proceeds from sale of USDTL                                                              500,000                     -
                                                                                       ------------         -------------

      Net cash provided by (used in) investing activities                                  499,165                (3,360)
                                                                                       ------------         -------------

CASH FLOWS FROM FINANCING ACTIVITIES:

  Repayment of notes payable and long-term debt                                           (130,607)              (44,480)
  Sales of common stock, preferred stock and warrants                                            -               125,000
  Payment of cash dividend on 8% redeemable convertible preferred stock                    (16,110)                    -
                                                                                       ------------         -------------

      Net cash provided by (used in) financing activities                                 (146,717)               80,520
                                                                                       ------------         -------------

NET DECREASE IN CASH AND CASH EQUIVALENTS                                                 (679,659)             (287,745)

CASH AND CASH EQUIVALENTS, beginning of the period                                       1,130,919               503,204
                                                                                       ------------         -------------

CASH AND CASH EQUIVALENTS, end of the period                                              $451,260              $215,459
                                                                                       ============         =============

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
  Cash paid during period:
   Income taxes                                                                         $       -               $      -
   Interest                                                                             $   7,899               $ 12,058
</TABLE>
<PAGE>


<TABLE>
<CAPTION>

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:

<S>                                                                                                             <C>
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.

During the three months ended December 31, 2002, 198,864 shares of common stock
were issued for interest on long-term debt.

During the three months ended December 31, 2002, 1,639,133 shares of Series A, B
and C convertible preferred stock were converted into 17,701,101 shares of
common stock.

During the three months ended December 31, 2003, 5 shares of Series B preferred
stock were issued as payment of a preferred stock dividend of $14.

Fair value of equity instrument recorded in connection with financial
advisors Settlement Agreement                                                                                   $520,000
</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 quarter of FY2004, 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,
     2003 are not necessarily indicative of the results that may be expected for
     the  full  fiscal  year  ending   September  30,  2004.  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, 2003.

          The Company's consolidated financial statements have been presented on
     the basis that it is a going concern, which contemplates the realization of
     assets  and  the  satisfaction  of  liabilities  in the  normal  course  of
     business. The Company has suffered recurring losses from operations and has
     a working  capital  deficit as of  December  31,  2003 of  $1,147,182.  The
     Company raised net proceeds aggregating approximately $2,283,000 during the
     fiscal year ended  September  30, 2003 from the sale of stock and warrants.
     In addition,  the Company received net proceeds of  approximately  $955,000
     from the issuance and  conversion  of long-term  convertible  notes payable
     into common stock and net proceeds of $581,000  from the sale of redeemable
     convertible preferred stock. No capital was raised during the quarter ended
     December  31,  2003.  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 December 31, 2003, inventories consist of the following:

               Raw Materials                                          $307,272
               Work-in-Process                                          85,165
               Finished Goods                                           25,570
                                                                    ----------
                        Total                                         $417,007
                                                                      ========

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, 2003 and 2002:

         Three months ended December 31,              2003               2002
         -----------------------------------------------------------------------

         Sales                                   $   289,501        $   376,143
         Operating expenses                          284,223            385,982
         Other expense                             (  18,066)              ( 70)
         -----------------------------------------------------------------------
         Loss from discontinued operations       $ (  12,788)       $    (9,909)
         =======================================================================


          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,
                                        2003                      2002
                                  ----------------          ---------------
                  Customer A       $   133,135               $   330,364
                  Customer B                 *                   404,950


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

          At December 31, 2003, accounts receivable from major customers totaled
     approximately $117,000.

5.   COMMON AND PREFERRED STOCK

          During the  quarter  ended  December  31,  2003,  the  Company  issued
     7,496,436 shares of common stock to holders who exercised their warrants on
     a cashless exercise basis. In addition,  holders converted 700 shares of 8%
     convertible   preferred  stock  converted  into  4,666,667  shares  of  the
     Company's  common stock at a conversion price of $.15 per share. As payment
     of the interest due on the long-term notes to Global Capital Funding Group,
     LP and various other note holders, the Company issued 696,336 shares of the
     Company's common stock.

          Preferred  stock  dividends  related to the 8%  convertible  preferred
     stock  amounted to $16,110 for the three months ended December 31, 2003. As
     of December 31, 2003, the total amount of unpaid and  undeclared  dividends
     was $18,763.

6.  GOODWILL

          Effective  October 1, 2002, the Company adopted SFAS No. 142, Goodwill
     and  Other  Intangible  Assets.  Prior to the  adoption  of SFAS  No.  142,
     goodwill  resulting  from the  excess of cost over fair value of net assets
     acquired was amortized on a straight-line basis over 10 years. SFAS No. 142
     requires among other things,  that companies no longer  amortize  goodwill,
     but test goodwill for impairment at least annually.  In addition,  SFAS 142
     requires  that the  Company  identify  reporting  units for the  purpose of
     assessing  potential  future  impairments of goodwill,  reassess the useful
     lives  of  other  existing   recognized   intangible   assets,   and  cease
     amortization  of  intangible  assets with an  indefinite  useful  life.  An
     intangible  asset  with an  indefinite  useful  life  should be tested  for
     impairment in accordance  with guidelines in SFAS 142. SFAS 142 is required
     to be applied to all goodwill and other  intangible  assets  regardless  of
     when those assets were initially recognized.  The Company will recognize an
     impairment of goodwill if  undiscounted  estimated  future  operating  cash
     flows of the acquired  business are determined to be less than the carrying
     amount of the  goodwill.  If the Company  determines  that the goodwill has
     been  impaired,  the  measurement  of the  impairment  will be equal to the
     excess of the carrying  amount of the goodwill  over the amount of the fair
     value of the asset. If an impairment of goodwill were to occur, the Company
     would reflect the  impairment  through a reduction in the carrying value of
     goodwill.

          As of  October 1, 2002,  the  Company's  goodwill  of  $2,139,555  was
     composed of $1,901,435 associated with the acquisition of USDTL in 1999 and
     $238,120 associated with the acquisition of BJR in 2001. As a result of the
     transitional  impairment  tests for the adoption of SFAS No. 142, the USDTL
     acquisition  was  determined  to be impaired by an  independent  evaluation
     which relied on present value of future cash flows contained in an offer to
     purchase  USDTL  and  market  price  comparisons  of  sales  multiples  for
     companies  engaged in a similar  business to USDTL. The difference in value
     of $650,000 was reported as the  cumulative  effect of change in accounting
     principle  for the year ended  September  30, 2003 during the quarter ended
     March  31,  2003.  No  adjustment  to  the  $238,120  balance  of  goodwill
     associated with the BJR  acquisition was deemed  necessary as of October 1,
     2002 or September  30, 2003.  During fiscal 2003,  the Company  pursued the
     sale of its USDTL  subsidiary and this sale was consummated on December 16,
     2003.  Based  on the sale  price,  considering  only  the cash  paid at the
     closing of $500,000,  an additional impairment of goodwill was recorded for
     $895,000 as of September 30, 2003.

          Since  September  30,  2003,  no  adjustment  to  $238,120  balance of
     goodwill  associated  with the BJR  acquisition  was deemed  necessary.  No
     effect  on  reported  net loss due to the  cumulative  effect  of change in
     accounting principle and discontinuance of goodwill  amortization  occurred
     for the three months ended December 31, 2003 or 2002.

7.   LOSS PER SHARE

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

         Three Months Ended December 31,                        2003             2002
         -------------------------------------------------------------------------------
         <S>                                             <C>                    <C>
         Loss from continuing operations before
              discontinued operations                    $(   629,621)          $(   998,863)
         Less:
                Preferred Stock Dividends                 (    24,327)           (        14)
                                                          --------------         ------------

          Loss available to common stockholders
                 from continuing operations before
              discontinued operations                      (  653,948)           (   998,877)

             Add:
              Loss from discontinued operations            (   12,788)           (     9,909)
                                                         --------------          ------------

          Net loss available to common
              stockholders used in basic and
                diluted EPS                               $(  666,736)          $( 1,008,786)
                                                         ==============          ============

          Weighted average number of
                 common shares outstanding                 96,093,701             49,959,035
                                                          ============           =============

           Loss per share applicable to common
                 stockholders before discontinued
                 operations                               $(    0.01)           $(      0.02)

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

              Basic and diluted loss per share
                  applicable to common stockholders       $(    0.01)           $(      0.02)
                                                          =============          =============
</TABLE>

8.  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,  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,               2003            2002
--------------------------------------------------------------------------------
Loss available to common shareholders           $(    666,736)      $(1,008,786)
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                         (     58,803)       (  333,380)
                                                  ---------------   ------------
Pro forma net loss                               $(   725,539)      $(1,342,166)
                                                 ==============    =============
Loss per share:
  Basic - as reported                           $        (.01)   $         (.02)
  Basic - pro forma                                      (.01)             (.03)
  Diluted - as reported                                  (.01)             (.02)
  Diluted - pro forma                                    (.01)             (.03)

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                           2003                 2002
        -----------                   ----------------    ----------------------
        Risk free interest rate              2.5%                   2.5%
        Expected dividend yield              -                         -
        Expected lives                     5-9 years              5-9 years
        Expected volatility                 80%                   80%

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, 2002 was $0.16.


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, 2003  decreased  $677,456 or
approximately 45 %, to $820,200 from $1,497,656 for the corresponding  period of
the prior  year.  The  change  for the three  months  ended  December  31,  2003
primarily  reflects  the  decrease in the volume of sales of its  OralScreen(TM)
products  mainly  resulting from the low level of employee  hiring in the United
States and the impact of the  decrease in sales  staff that  occurred as part of
the expense reductions described below under operating expenses.

Operating Expenses

     Cost  of  sales  for  the  three  months  ended   December  31,  2003  were
approximately 65% of sales compared to the cost of sales of approximately 67% of
sales for the three  months ended  December  31, 2002.  The change for the first
quarter of Fiscal 2004 reflects labor and facility rent  reductions put in place
during the second half of FY2003.

     Selling,  general and  administrative  expenses  for the three months ended
December 31, 2003 decreased $ 410,300,  or  approximately  35%, to $746,736 from
$1,157,036 for the corresponding  period of the prior year. The decrease for the
three-month  period  ended  December 31, 2003  primarily  reflects the impact of
labor,  facility rent and other expense  reductions  implemented during the last
six months of FY2003. In order to achieve revenue growth, the Company will incur
increased  expenses to hire additional  direct sales staff and expand  marketing
programs during the remainder of FY2004 and beyond.

     Research and  development  expenses for the three months ended December 31,
2003  amounted to  $108,155  compared to  $273,128  for the three  months  ended
December 31, 2002. The decrease of $164,973, or approximately 60%, was primarily
attributable  to the lower staffing levels that were put in place as part of the
expense  reductions  implemented  during the second half of FY2003.  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 FY2004 and beyond.

     Other Income and Expense

     Interest  expense and  financing  costs were  $69,268 for the three  months
ended  December 31, 2003  compared to $75,553  incurred  during the three months
ended December 31, 2002. The decrease  resulted  primarily from interest expense
on short-term notes.

     For the three months ended  December  31,  2003,  other income  amounted to
$8,245  compared to other income of $595 for the three months ended December 31,
2002. 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, 2003, USDTL had a loss of $12,788 compared to a loss $9,909 for the
corresponding  period of the prior year. The change  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 $642,409 for the three months  ended  December 31, 2003,  as compared to
net loss of $1,008,772  for the three months ended  December 31, 2002.  The loss
per  share  was $.01 per basic and  diluted  share  for the three  months  ended
December 31, 2003.  The loss per share was $.02 per basic and diluted  share for
the three months ended December 31, 2002.

FINANCIAL CONDITION AND LIQUIDITY

     At  December  31,  2003,  the  Company  had a working  capital  deficit  of
$1,147,182 and cash and cash equivalents of $451,260. Net cash used in operating
activities  during  the  three  months  ended  December  31,  2003  amounted  to
$1,032,107  resulting  primarily  from a net loss of  $642,409,  an  increase in
inventories  of  $167,079,  an increase in prepaid and other  current  assets of
$38,057,  a decrease in accounts  payable and accrued expenses of $452,024 and a
decrease  in  deferred  revenue  of  $1,200;  partially  offset by the loss from
disposal of discontinued operation of $17,235,  depreciation and amortization of
$29,481,  amortization  of debt  discount  and  deferred  financing  of $14,484,
amortization  of deferred rent expense of $10,397,  common stock for interest of
$43,750,  a decrease in accounts  receivable of $127,090 and a decrease in other
assets of $26,205.  Net cash  provided by  financing  and  investing  activities
during the three  months  ended  December  31, 2003  amounted  to $352,448  from
proceeds from the sale of USDTL of $500,000;  offset in part by the repayment of
notes  payable  and  long-term  debt of  $130,607,  payment of cash  dividend on
preferred stock of $16,110 and purchases of property and equipment of $835.

     As indicated in the Results of Operations  above,  the Company sold the net
assets,  excluding  cash,  and the business of its USDTL  subsidiary in December
2003.  From this sale,  the  Company  received  net  proceeds  of  approximately
$500,000.  In  addition,  under the terms of the sale,  the  Company  expects to
receive an additional  $500,000 in the future,  less amounts for the purchase of
services  by  Avitar  under  a  services  and  consulting  agreement,  based  on
obligations of the purchaser of USDTL to pay the Company 10% of certain revenues
in excess of $1,500,000 annually.  The Company recorded the $500,000 received in
the first  quarter  of FY2004 and will  recognize  proceeds  for the  additional
$500,000 when they are received.

     During FY 2004,  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. The
cash  available  at December  31, 2003 and  anticipated  customer  receipts  are
expected to be  sufficient to fund the  operations of the Company  through early
March  2004.  As part of the  agreement  covering  the  preferred  stock sold in
September 2003, the investor agreed to purchase  additional  preferred stock for
$1,000,000 subject to certain conditions  including  shareholder  approval.  The
Company has  requested  such  shareholder  approval at a meeting  scheduled  for
February  27,  2004.  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  approximately $10 million during the remainder of Fiscal 2004
from the sales of equity  and/or debt  securities.  The Company plans to use the
proceeds from these financings to provide working capital and capital  equipment
funding to operate the Company,  to expand the  Company's  business,  to further
develop and  enhance the  ORALscreen  drug  screening  systems and to pursue the
development of in-vitro oral fluid diagnostic testing products.  However,  there
can be no assurance that these financings will be achieved.

     The Company has accumulated losses that have reduced  shareholders'  equity
to a deficit.  As a result, 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 has advised the Exchange  that it will
submit a plan.  The Company  intends to develop a plan that it believes  will be
acceptable to the Exchange  within the specified  time period  addressing  among
other things new equity raising activities,  debt/capitalization  restructuring,
operating goals and financial projections.  The proposed plan will be subject to
review by the Exchange and the Exchange will determine whether the proposed plan
is reasonable and  acceptable.  Upon acceptance of the plan by AMEX, the Company
will be subject to continued  review until it regains full  compliance  with the
continued listing standards.

     Operating  revenues  are  expected to remain at the current  levels for the
first half of FY 2004 and then begin to grow 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
growth in revenue while  maintaining the cost  reductions  implemented in Fiscal
2003. 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  certified  public  accountants
relating to the financial  statements  for Fiscal 2003  contains an  explanatory
paragraph indicating that there is 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 5, 2003
except for Note 17 which is as of December 16,  2003).  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  November  2002,  the  Emerging  Issues  Task Force  ("EITF")  reached a
consensus on Issue No. 00-21, "Revenue Arrangements with Multiple Deliverables".
EITF  00-21  addresses  certain  aspects  of  the  accounting  by a  vendor  for
arrangements  under which the vendor will perform  multiple  revenue  generating
activities.  EITF 00-21 is effective for periods  beginning after June 15, 2003.
The  adoption  of EITF  00-21 did not have a  material  impact on the  Company's
financial position and results of operations.

     In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative  Instruments  and  Hedging  Activities".  SFAS  No.  149  amends  and
clarifies  financial  accounting  and  reporting  for  derivative   instruments,
including   certain   derivative   instruments   embedded  in  other   contracts
(collectively  referred to as derivatives) and for hedging activities under SFAS
No. 133. SFAS No. 149 is effective for contracts  entered into or modified after
June 30, 2003, and hedging relations  designated after June 30, 2003, except for
those  provisions  of SFAS No. 149 which  relate to SFAS No. 133  implementation
issues that have been effective for fiscal quarters that began prior to June 15,
2003.  For those  issues,  the  provisions  that are  currently in effect should
continue to be applied in accordance with their  respective  effective dates. In
addition,  certain provisions of SFAS No. 149, which relate to forward purchases
or sales of when-issued  securities or other  securities  that do not yet exist,
should be applied to both  existing  contracts  and new  contracts  entered into
after June 30, 2003. The adoption of SFAS No. 149 did not have a material effect
on the Company's financial statements.

     In May  2003,  the  FASB  issued  SFAS No.  150,  "Accounting  for  Certain
Instruments with  Characteristics of both Liabilities and Equity".  SFAS No. 150
establishes  standards  for  how  an  issuer  classifies  and  measures  certain
financial  instruments with characteristics of both liabilities and equity. SFAS
No. 150 requires that an issuer  classify a financial  instrument that is within
the  scope  of SFAS  No.  150 as a  liability.  SFAS No.  150 is  effective  for
financial instruments entered into or modified after May 31, 2003, and otherwise
is effective beginning July 1, 2003. The adoption of SFAS No. 150 did not have a
material effect on the Company's financial statements.



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, 2003,  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 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

ITEM 2.           CHANGE IN SECURITIES AND USE OF PROCEEDS

     During the quarter  ended  December 31, 2003 the Company  issued to warrant
holders  7,496,436  shares  of the  Company's  common  stock  upon the  cashless
exercise of their warrants. In addition, the Company issued to holders of the 8%
redeemable  convertible preferred stock 4,666,667 shares of the Company's common
stock upon the conversion of 700 shares of their  preferred  stock.  Also during
the quarter ended  December 31, 2003,  the Company  issued 696,336 shares of the
Company's  common stock as payment for interest on long-term debt. The exemption
for  registration  of  these  securities  is  based  upon  Section  4(2)  of the
Securities  Act because  the  issuances  were made to  accredited  investors  in
private placements.


ITEM 6.           EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits:

       Exhibit No.                                Document
       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 5 and 7, dated October 1, 2003 regarding a private
placement to Gryphon Master Fund, LP for the sale of convertible preferred stock
and warrants.

         Form 8-K, Items 2, 5 and 7, dated December 17, 2003 and Form-8KA, Items
2 and 7 dated December 31, 2003 regarding the sale of substantially all of the
assets of USDTL, a wholly owned subsidiary of the Company.




                                   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 13, 2004             /S/ Peter P. Phildius
                                      -----------------------------------
                                      Peter P. Phildius
                                      Chairman and Chief
                                      Executive Officer
                                      (Principal Executive Officer)




Dated:  February 13, 2004             /S/ J.C. Leatherman, Jr.
                                      ---------------------------
                                      J.C. Leatherman, Jr.
                                      Chief Financial Officer
                                      (Principal Accounting and
                                      Financial Officer)



                                  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