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 June 30, 2001.

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

Commission File Number:    0-20316
                       -----------------

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

Delaware                                                  06-1174053
------------------------------------------------------------------------------
(State or other jurisdiction of             (I.R.S. Employer 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: 36,283,167
                              AS OF AUGUST 10, 2001

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

                               Page 1 of 22 pages
                       Exhibit Index is on Page 20 hereof
<PAGE>

                                TABLE OF CONTENTS


                                                                           Page

PART I:     FINANCIAL INFORMATION                                             3


  Item 1   Consolidated Financial Statements
               Balance Sheet                                                  4
               Statements of Operations                                       5
               Statement of Stockholders' Equity                              6
               Statements of Cash Flows                                       7
               Notes to Consolidated Financial Statements                     8


  Item 2   Management's Discussion and Analysis or Plan of Operation         12



PART II: OTHER INFORMATION                                                   17

  Item 2   Changes in Securities and Use of Proceeds                         18

  Item 4   Submission of Matters to a Vote of Security Holders               18

  Item 6   Exhibits and Reports on Form 8-K                                  18


SIGNATURES                                                                   19

EXHIBIT INDEX                                                                20

<PAGE>

                          PART I FINANCIAL INFORMATION
<PAGE>

                          Avitar, Inc. and Subsidiaries
                           Consolidated Balance Sheet

                                   (Unaudited)
                                                                June 30, 2001
                                                                --------------
                                     ASSETS
CURRENT ASSETS:
 Cash and cash equivalents                                          $ 239,732
 Accounts receivable, net                                             956,856
 Inventories                                                          302,571
 Prepaid expenses and other current assets                            265,504
                                                                  ------------
      Total current assets                                          1,764,663

PROPERTY AND EQUIPMENT, net                                           397,922
GOODWILL, net                                                       2,527,045
OTHER ASSETS                                                          151,833
                                                                  ------------
      Total                                                       $ 4,841,463
                                                                  ============

                      LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
 Notes payable                                                      $ 284,898
 Accounts payable                                                   1,593,554
 Accrued expenses                                                     531,411
 Current portion of long-term debt                                     88,138
                                                                  ------------
      Total current liabilities                                     2,498,001

LONG TERM DEBT, LESS CURRENT PORTION                                    9,592

                                                                  ------------
      Total liabilities                                             2,507,593

COMMITMENTS

STOCKHOLDERS' EQUITY:
 Series A, B, C and D convertible preferred stock,
    $.01 par value; authorized 5,000,000 shares;
    2,198,070 shares issued and outstanding                            21,980
 Common Stock, $.01 par value; authorized
    100,000,000 shares; 34,924,089 shares issued
    and outstanding                                                   349,241
 Additional paid-in capital                                        38,024,743
 Accumulated deficit                                              (36,001,453)
                                                                  ------------
                                                                    2,394,511
 Less preferred stock subscription receivable                         (60,641)
                                                                  ------------
         Total stockholders' equity                                 2,333,870
                                                                  ------------
         Total                                                    $ 4,841,463
                                                                  ============


See accompanying notes to consolidated financial statements.

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

<TABLE>
<CAPTION>

                                                    THREE MONTHS ENDED JUNE 30,       NINE MONTHS ENDED JUNE 30,
                                                   ----------------------------      --------------------------
                                                        2001            2000            2001            2000
                                                      --------       --------         --------        --------

<S>                                               <C>             <C>             <C>             <C>
SALES ........................................... $  1,869,441    $  1,306,039    $  4,268,355    $  2,926,248

OPERATING EXPENSES
     Cost of sales ..............................    1,073,250       1,016,864       2,761,461       2,361,840
     Selling, general and administrative expenses    1,580,676       1,471,762       4,394,039       3,955,885
     Research and development expenses ..........      457,020         449,943       1,401,903       1,093,151
     Amortization of goodwill ...................       76,854          70,423         220,702         211,271
                                                                  ------------    ------------    ------------
                                                                                                  ------------
          Total operating expenses ..............    3,187,800       3,008,992       8,778,105       7,622,147
                                                  ------------    ------------    ------------    ------------

LOSS FROM OPERATIONS ............................   (1,318,359)     (1,702,953)     (4,509,750)     (4,695,899)
                                                  ------------    ------------    ------------    ------------

OTHER INCOME (EXPENSE)
     Interest income ............................          361           6,710           1,094          15,109
     Interest expense and financing costs .......      (10,129)        (13,940)        (35,704)        (56,365)
     Other exppense, net ........................         (963)          8,319          (2,887)         35,835
                                                                  ------------    ------------    ------------
                                                                                                  ------------
          Total other expense, net ..............      (10,731)          1,089         (37,497)         (5,421)
                                                  ------------    ------------    ------------    ------------

NET LOSS ........................................ $ (1,329,090)   $ (1,701,864)   $ (4,547,247)   $ (4,701,320)
                                                  ============    ============    ============    ============

BASIC AND DILUTED NET LOSS PER SHARE (Note 6) ... $      (0.04)   ($      0.06)   $      (0.22)   $      (0.19)
                                                  ============    ============    ============    ============

WEIGHTED AVERAGE
     NUMBER OF COMMON SHARES OUTSTANDING ........   33,459,667      28,850,406      31,768,656      26,667,432
                                                  ============    ============    ============    ============
</TABLE>


See accompanying notes to consolidated financial statements.

<PAGE>
                          Avitar, Inc. and Subsidiaries
                 Consolidated Statement of Stockholders' Equity
                         Nine Months Ended June 30, 2001
                                   (Unaudited)
<TABLE>
<CAPTION>

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

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

Exercise of warrants and stock options                             177,400        1,774         37,679

Sales of common stock and warrants                               3,354,478       33,545      3,010,755

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

Conversion of Series B preferred stock
  into common stock                        (47,596)      (476)     475,964        4,760       (  4,284)

Payment of preferred stock dividend,
  Series B preferred stock                  42,190        422                                  322,170          (322,592)

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

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

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

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

Net loss                                                                                                      (4,547,247)
                                         ----------  --------- ------------  -----------  ------------       ------------  ---------

Balance at June 30, 2001                 2,198,070    $21,980   34,924,089    $ 349,241   $ 38,024,743      ($36,001,453)  ($60,641)
                                         ==========  ========= ============  ===========  ============       ============  =========
</TABLE>

See accompanying notes to consolidated financial statements.

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

                                                                                              NINE MONTHS ENDED JUNE 30,
                                                                                         ------------------------------------
                                                                                               2001                2000
                                                                                         --------------      --------------
CASH FLOWS FROM OPERATING ACTIVITIES:

     <S>                                                                                   <C>                 <C>
     Net loss                                                                              $(4,547,247)        $(4,701,320)
     Adjustments to reconcile net loss to
          net cash used by operating activities:
               Depreciation and amortization                                                   127,213             130,631
               Amortization of goodwill                                                        220,702             211,271
               Provision for losses on accounts receivable                                     (61,692)             55,000
               Changes in operating assets and liabilities
                excluding effects of business acquisition:
                  Accounts receivable                                                         (147,281)           (633,838)
                  Inventories                                                                  205,307            (176,707)
                  Prepaid expenses and other current assets                                    (60,432)            292,463
                  Other assets                                                                  97,021              82,986
                  Accounts payable and accrued expenses                                        379,157             153,961
                                                                                       ----------------    ----------------
                       Net cash used in operating activities                                (3,787,252)         (4,585,553)
                                                                                       ----------------    ----------------

CASH FLOWS FROM INVESTING ACTIVITIES:

     Purchases of property and equipment                                                        (79,013)          (183,690)
     Acquisition of BJR Security, Inc.                                                          (50,000)                 -
                                                                                       ----------------    ----------------
                       Net cash used in investing activities                                  (129,013)           (183,690)
                                                                                       ----------------    ----------------

CASH FLOWS FROM FINANCING ACTIVITIES:

     Sales of common stock, preferred stock and warrants                                     4,104,298           2,624,840
     Exercise of warrants and stock options                                                     39,453           2,610,580
     Preferred stock subscription receivable                                                    42,228             100,000
     Proceeds from (repayment of) notes payable and long-term debt                            (112,295)           (320,580)

                                                                                       ----------------    ----------------
                  Net cash provided by financing activities                                  4,073,684           5,014,840
                                                                                       ----------------    ----------------

NET INCREASE IN CASH AND CASH EQUIVALENTS                                                      157,419             245,597

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

CASH AND CASH EQUIVALENTS, end of the period                                                 $ 239,732           $ 526,355
                                                                                       ================    ================

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
     Cash paid during period:
          Income taxes                                                                         $ 3,131             $ 2,303
          Interest                                                                            $ 30,843            $ 55,835
</TABLE>


See accompanying notes to consolidated financial statements.

<PAGE>

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

1.   BASIS OF PRESENTATION

     Avitar,  Inc.  ("Avitar"  or  the  "Company"),   through  its  wholly-owned
subsidiaries,  Avitar  Technologies  Inc.  ("ATI"),  United  States Drug Testing
Laboratories,   Inc.  ("USDTL")  and  BJR  Security,  Inc.  designs,   develops,
manufactures, markets and provides diagnostic test products and services as well
as drug  detection  and  education  services.  Avitar  sells these  products and
services to large medical supply companies,  employers, diagnostic distributors,
schools  and  governmental  agencies.  During  Fiscal  Years 2000 and 2001,  the
Company  continued the development and marketing of  ORALscreen(TM),  innovative
point of care oral fluid drugs of abuse tests that use the Company's foam as the
means for collecting the oral fluid sample.

     The accompanying consolidated financial statements of the Company have been
prepared in accordance with generally accepted accounting principles for interim
financial  reporting,  the  instructions  to  Form  10-QSB  and  Regulation  S-B
(including  Item 310(b)  thereof).  Accordingly,  they do not include all of the
information and footnotes required by generally accepted  accounting  principles
for complete financial  statements.  In the opinion of the Company's management,
all  adjustments  (consisting  only of  normal  recurring  accruals)  considered
necessary for a fair presentation have been included.  Operating results for the
three and nine month periods ended June 30, 2001 are not necessarily  indicative
of the results  that may be expected  for the full fiscal year ending  September
30, 2001. The accompanying  consolidated  financial statements should be read in
conjunction with the audited financial  statements of the Company for the fiscal
year ended September 30, 2000.

     The Company's  consolidated financial statements have been presented on the
basis that it is a going concern,  which  contemplates the realization of assets
and the  satisfaction  of  liabilities  in the normal  course of  business.  The
Company has suffered  recurring losses from operations and has a working capital
deficit  as of June 30,  2001 of  $733,338.  The  Company  raised  net  proceeds
aggregating  approximately $5,914,000 during the fiscal year ended September 30,
2000 from the sale of stock and the exercise of options and warrants. During the
nine months ended June 30, 2001,  the Company  raised  approximately  $4,144,000
from the sale of preferred  and common stock and the exercise of options.  Based
upon cash flow projections,  the Company believes the anticipated cash flow from
operations  and proceeds  from future  equity  financings  will be sufficient to
finance   the   Company's   operating   needs  until  the   operations   achieve
profitability.  There  can be no  assurances  that  forecasted  results  will be
achieved or that additional financing will be obtained. The financial statements
do not include any adjustments relating to the recoverability and classification
of asset amounts or the amounts and  classification of liabilities that might be
necessary should the Company be unable to continue as a going concern.





2.   INVENTORIES

     At June 30, 2001, inventories consist of the following:

           Raw Materials                      $151,463
           Work-in-Process                      35,803
           Finished Goods                      115,305
                                              ---------
                   Total                      $302,571
                                              ========

3.   ACQUISITION

     As of March 1, 2001, the Company  acquired all of the  outstanding  capital
     stock of BJR  Security,  Inc.  ("BJR") in exchange  for cash of $50,000 and
     approximately 221,000 restricted shares of the Company's common stock which
     were  valued  at fair  value at the date of  acquisition  of  approximately
     $250,000.  The  amount of  consideration  was  determined  by arm's  length
     negotiations  between Avitar and the sole  stockholder of BJR,  taking into
     account the revenues and  prospects for BJR. The  acquisition  was recorded
     using the  purchase  method of  accounting  and  resulted  in  goodwill  of
     approximately  $283,000.  BJR is  engaged  in  the  business  of  providing
     specialized drug detection and education services.


4.   MAJOR CUSTOMERS

     Customers in excess of 10% of total sales are:


                Three Months Ended June 30,          Nine Months Ended June 30,
                ----------------------------        ----------------------------
                      2001          2000               2001            2000
                ---------------- -----------       ---------------  ------------


 Customer A     $189,459         $299,298          $499,458          $552,644
 Customer B      305,500                *           505,790                 *

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


5.   COMMON STOCK, PREFERRED STOCK AND WARRANTS

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


     During the  nine-month  period  ended June 30, 2001,  the Company  received
     approximately  $39,000  from the  exercise  of stock  options  to  purchase
     177,400 shares of the Company's common stock.

     During the nine months  ended June 30,  2001,  the Company  sold  3,354,478
     shares of the Company's common stock and received proceeds of approximately
     $3,044,300.  In connection  with the sale of the common stock,  the Company
     issued to the holders of the common  stock  warrants to purchase  5,454,478
     shares of the  Company's  common stock at exercise  prices of $.68 to $1.50
     per share for terms of three to five years.

     For the nine months ended June 30, 2001 holders of the Series B convertible
     preferred  stock  converted  47,596  shares of their  preferred  stock into
     475,964 shares of the Company's  common stock.  Preferred  stock  dividends
     related to the Series B  convertible  preferred  stock for the nine  months
     ended June 30, 2001  amounted to $322,592.  As of June 30, 2001,  the total
     amount of unpaid and undeclared dividends was $216,978.

6.  EARNINGS PER SHARE

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

                                                       Three Months Ended June 30,        Nine Months Ended June 30,
                                                       ---------------------------        --------------------------
                                                           2001             2000              2001             2000

         <S>                                          <C>                <C>             <C>              <C>
         Net loss                                     $(1,329,090)       $(1,701,864)    $(4,547,247)     $(4,701,320)
         Less:
         Preferred Stock Dividends                    (   136,032)        (   91,023)    (   322,592)     (   244,960)

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

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

         Loss available to common
            stockholders  used in basic and
            diluted EPS before cumulative
            accounting change                          (1,465,122)        (1,792,887)     (5,929,839)      (4,988,918)

         Cumulative effect of change in
            accounting for original discount
            related to prior years' preferred
            stock issuances                                     -                  -      (1,078,205)               -
                                                       -------------     -------------   -------------    ------------


         Net loss available to common
            Stockholders used in basic and
            diluted EPS                               $(1,465,122)       $(1,792,887)    $(7,008,044)     $(4,988,918)
                                                       =============     =============   =============    ============

         Weighted average number of
            common shares outstanding                  33,459,667         28,850,406      31,768,656       26,667,432
</TABLE>


     In November 2000, the FASB Emerging Task Force ("ETIF")  issued a consensus
     that requires the  remeasurement  of original  issue  discount on preferred
     stock with characteristics similar to convertible preferred stock issued by
     the Company  during Fiscal Years 2000 and 1999. The impact of adopting this
     ETIF  amounting to  $1,078,205  was recorded in the first quarter of Fiscal
     2001 and has been included in the computation of earnings per share for the
     nine months ended June 30, 2001 as a cumulative change in accounting.

7.   RECENT ACCOUNTING PRONOUNCEMENTS

     In June 2001,  the Financial  Accounting  Standards  Board  finalized  FASB
     Statements  No.  141,  Business  Combinations  ("SFAS  141")  and No.  142,
     Goodwill and Other  Intangible  Assets ("SFAS 142").  SFAS 141 requires the
     use  of  the  purchase   method   accounting   and  prohibits  the  use  of
     pooling-of-interests   method  of  accounting  for  business   combinations
     initiated  after June 30,  2001.  SFAS 141 also  requires  that the Company
     recognize  acquired  intangible  assets apart from goodwill if the acquired
     intangible assets meet certain  criteria.  SFAS 141 applies to all business
     combinations  initiated  after  July  1,  2001  and for  purchase  business
     combinations  completed on or after July 1, 2001.  It also  requires,  upon
     adoption of SFAS 142, that the Company  reclassify the carrying  amounts of
     intangible assets and goodwill based on the criteria in SFAS 141.

     SFAS 142 requires,  among other things,  that companies no longer  amortize
     goodwill,  but instead 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 the  guidelines  in SFAS 142.  SFAS 142 is
     required to be applied in fiscal years beginning after December 15, 2001 to
     all  goodwill  and  other  intangible   assets  recognized  at  that  date,
     regardless  of when  those  assets  were  initially  recognized.  SFAS  142
     requires the Company to complete a transitional  goodwill  impairment  test
     six months  from the date from the date of  adoption.  The  Company is also
     required to reassess the useful lives of other intangible assets within the
     first interim quarter after adoption of SFAS 142.

     The Company's  previous business  combinations were accounted for using the
     purchase  method.  As on June 30, 2001, the net carrying amount of goodwill
     is $2,527,045. Amortization expense during the nine-month period ended June
     30, 2001 was $220,702.  Currently, the Company is assessing but has not yet
     determined  how the  adoption  of SFAS 141 and SFAS  142  will  impact  its
     financial position and results of operation.

8.   SUBSEQUENT EVENTS

     From June 30,  2001  through  August 10, 2001 the  Company  sold  1,178,618
     shares of the Company's common stock and received proceeds of approximately
     $937,000.  In  connection  with the sale of the common  stock,  the Company
     issued to the holders of the common  stock  warrants to purchase  1,178,618
     shares of the  Company's  common stock at exercise  prices of $.68 to $1.16
     per share for a term of 3 years.




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

The following  discussion and analysis  should be read in  conjunction  with the
Company's  consolidated  financial  statements  and the notes thereto  appearing
elsewhere in this report.  This report may contain  forward-looking  statements.
For a description of risks and  uncertainties  relating to such  forward-looking
statements,  see the  Forward-Looking  Statements and  Associated  Risks section
later in this Item.

RESULTS OF OPERATIONS

Revenues

     Sales for the three  months  ended June 30,  2001  increased  $563,402,  or
approximately 43%, to $1,869,441 from $1,306,039 for the corresponding period of
the prior  year.  For the nine  months  ended  June 30,  2001,  sales  increased
$1,342,107,  or  approximately  46%, to $4,268,355  from $2,926,248 for the nine
months ended June 30, 2000.  The change for the three and nine months ended June
30, 2001 primarily  reflects the increase in sales of its ORALscreen(TM) and BJR
revenue of $105,390 and $146,083, respectively.

Operating Expenses

     Cost of sales for the three months  ended June 30, 2001 were  approximately
57% of sales  which  compares  to the cost of sales of 78% for the three  months
ended June 30, 2000.  For the nine months ended June 30, 2001, the cost of sales
were 65%  compared to 81% of sales for the same period of Fiscal  2000.  For the
three and nine months ended June 30, 2001, the  improvement in the ratio of cost
to sales was  primarily  due to the  increase in sales  described  above and the
shift in the product mix to ORALscreen.

     Selling,  general and  administrative  expenses  for the three months ended
June 30, 2001  increased  $108,914,  or  approximately  7%, to  $1,580,676  from
$1,471,762 for the  corresponding  period of the prior year. For the nine months
ended June 30, 2001,  selling,  general and  administrative  expenses  increased
$438,154 or approximately 11%, to $4,394,039 from $3,955,885 for the nine months
ended June 30,  2000.  The increase for the three and nine months ended June 30,
2001  reflected  the  expanded  sales,   marketing  and  administrative  efforts
associated  with the Company's  OralScreen  and  HairScreen  products along with
BJR's  selling,  general and  administrative  expenses  of $73,050 and  $90,119,
respectively.

     Expenses for research and  development  for the three months ended June 30,
2001 amounted to $457,020 compared to $449,943 for the  corresponding  period of
the prior year.  For the nine months ended June 30, 2001,  expenses for research
and  development  increased  $308,752 to $1,401,903 from $1,093,151 for the nine
months ended June 30, 2000.  The change for the three and nine months ended June
30, 2001 was primarily  attributable  to the increased  research and development
activities related to the Company's  OralScreen  products and oral fluid disease
testing applications.

     For the three months and nine months ended June 30, 2001,  amortization  of
goodwill  which  resulted  from the Company's  acquisition  of BJR and USDTL was
$76,854  and   $220,702,   respectively,   compared  to  $70,423  and  $211,271,
respectively,  for the three and nine months ended,  June 30, 2000.  The changes
for the three and nine months ended June 30, 2001 reflect the acquisition of BJR
on March 1, 2001.

     Other Income and Expense

     Interest  income for the three and nine months ended June 30, 2001 amounted
to $361 and $1,094,  respectively  compared to $6,710 and $15,109,  respectively
for the same periods of Fiscal 2000.  The decrease  resulted  primarily from the
reduced interest earned on cash management accounts.

     Interest  expense and  financing  costs were  $10,129 for the three  months
ended June 30, 2001 compared to $13,940  incurred  during the three months ended
June 30, 2000.  For the nine months ended June 30,  2001,  interest  expense and
financing costs decreased $20,661 to $35,704 from $56,365 for the same period in
the prior year.  The decreases for the three and nine months ended June 30, 2001
primarily reflect reduced interest expense on bank advances related to financing
of accounts receivable.

     For the three months ended June 30, 2001, other expense amounted to $963 as
compared to other  income of $8,319 for the three  months  ended June 30,  2000.
Other  expense for the nine months  ended June 30, 2001 was $2,887  versus other
income of $35,835 for the corresponding period of the prior year. The change for
the three and nine  months  ended June 30,  2001 is mainly a result of no rental
income from the lease of excess square feet in the Company's facility.

     Accounting Change

     In November 2000, the FASB Emerging Task Force ("ETIF")  issued a consensus
that requires the  remeasurement  of original issue discount on preferred  stock
with  characteristics  similar  to  convertible  preferred  stock  issued by the
Company  during  fiscal  years 2000 and 1999.  The impact of adopting  this ETIF
amounting to $1,078,205 was recorded in the first quarter of Fiscal 2001 and has
been included in the computation of earnings per share for the nine months ended
June 30, 2001 as a cumulative change in accounting.

     The effect of this accounting  change  increased the Company's net loss per
share by $.03 for the nine months ended June 30, 2001.

     Net Loss

     Primarily as a result of the factors described above, the Company had a net
loss of  $1,329,090,  $ .04 per basic and diluted  share,  for the quarter ended
June 30,  2001,  as  compared to a net loss of  $1,701,864,  $ .06 per basic and
diluted  share,  for the quarter ended June 30, 2000.  For the nine months ended
June 30,  2001,  the  Company had a net loss of  $4,547,247,  $.22 per basic and
diluted  share,  versus a net loss of  $4,701,320,  $.19 per basic  and  diluted
share, for the nine months ended June 30, 2000.




FINANCIAL CONDITION AND LIQUIDITY

     At June 30, 2001 and  September  30,  2000 the Company had working  capital
deficits of $733,338 and $543,515,  respectively,  and cash and cash equivalents
of $239,732 and  $82,313,  respectively.  Net cash used in operating  activities
during the nine months  ended June 30, 2001  amounted  to  $3,787,252  resulting
primarily from a net loss of $4,547,247,  a decrease in the provision for losses
on accounts  receivable  of $61,692,  an  increase  in  accounts  receivable  of
$147,281  and an  increase  in  prepaid  expenses  and other  current  assets of
$60,432;   partially  offset  by  depreciation  and  amortization  of  $127,213,
amortization of goodwill of $220,702,  a decrease in inventories of $205,307,  a
decrease  in other  assets of $97,021  and  increases  in  accounts  payable and
accrued  expenses of  $379,157.  Net cash  provided by financing  and  investing
activities  during the nine months  ended June 30, 2001  amounted to  $3,944,671
which  included  proceeds  from the sale of  preferred  stock,  common stock and
warrants of  $4,104,298,  proceeds from the exercise of stock options of $39,453
and a decrease in preferred stock subscription  receivable of $42,228; offset in
part by repayment of notes payable and long-term debt of $112,295,  purchases of
property  and  equipment  of  $79,013  and cash paid in the  acquisition  of BJR
Security, Inc. of $50,000.

     From  September  30, 2000  through  August 10, 2001,  the Company  received
proceeds of  approximately  $3,981,000 from the sale of 4,533,096  shares of the
Company's  common  stock  and  warrants  to  purchase  6,633,096  shares  of the
Company's  common  stock at  exercise  prices  of $.68 to $1.50  per share for a
period of three to five years. Also during the same period, the Company received
proceeds of approximately $1,060,000 from the sale of 141,333 shares of Series D
convertible  preferred  stock and warrants to purchase  1,413,330  shares of the
Company's  common stock at an exercise price of $1.13 per share for three years.
Each share of the Series D preferred  stock is  convertible at any time into ten
shares of the Company's common stock. In addition, the Company plans to raise up
to  $10,000,000  from the sales of equity  and/or debt  securities.  The Company
plans to use the proceeds from these  financings to provide  working capital and
capital  equipment  funding  to operate  the  Company,  to expand the  Company's
business,  to further  develop and enhance the ORALscreen  and  HAIRscreen  drug
screening  systems,  and to  pursue  the  development  of  oral  fluid  in-vitro
diagnostic  testing  products.  However,  there can be no  assurance  that these
financings will be achieved.

     For the balance of fiscal year 2001,  the Company's cash  requirements  are
expected to include  primarily the funding of operating  losses,  the payment of
outstanding  accounts  payable,  the  repayment of certain  notes  payable,  the
funding  of  operating  capital  to grow the  Company's  drugs of abuse  testing
products and services,  and the continued  funding for the  development  of oral
fluid in-vitro diagnostic testing products.

     Operating  revenues of the Company grew  approximately 46% during the first
nine months of Fiscal 2001 and are  expected to grow at a more rapid pace during
the remainder of Fiscal 2001 and in FY 2002 as the Company continues to increase
the  shipments of new and  enhanced  OralScreen(TM)  products.  Based on current
sales, expenses and cash flow projections, the Company believes that the current
level of cash and cash  equivalents on hand and most  importantly,  a portion of
the  anticipated  net  proceeds  from the  financing  mentioned  above  would be
sufficient to fund operations  until the Company achieves  profitability.  There
can be no  assurance  that  the  Company  will  consummate  the  above-mentioned
financing.  Once  the  Company  achieves  profitability,  the  longer-term  cash
requirements  of the  Company to fund  operating  activities,  purchase  capital
equipment, expand the existing business and develop new products are expected to
be met by the  anticipated  cash  flow from  operations  and  proceeds  from the
financing  described  above.  However,  because there can be no assurances  that
sales will  materialize  as  forecasted,  management  will  continue  to closely
monitor  and attempt to control  costs at the Company and will  continue to seek
additional capital as necessary.

     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 2000  contains an  explanatory
paragraph stating 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, 2000).  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 June 2001, the Financial Accounting Standards Board finalized FASB Statements
No. 141,  Business  Combinations  ("SFAS  141") and No. 142,  Goodwill and Other
Intangible Assets ("SFAS 142"). SFAS 141 requires the use of the purchase method
accounting  and prohibits the use of  pooling-of-interests  method of accounting
for business combinations  initiated after June 30, 2001. SFAS 141 also requires
that the Company recognize acquired intangible assets apart from goodwill if the
acquired  intangible  assets  meet  certain  criteria.  SFAS 141  applies to all
business  combinations  initiated  after July 1, 2001 and for purchase  business
combinations completed on or after July 1, 2001. It also requires, upon adoption
of SFAS 142,  that the Company  reclassify  the carrying  amounts of  intangible
assets and goodwill based on the criteria in SFAS 141.

SFAS 142  requires,  among  other  things,  that  companies  no longer  amortize
goodwill,  but instead  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 the  guidelines in SFAS 142. SFAS 142 is required to be applied
in fiscal  years  beginning  after  December  15, 2001 to all goodwill and other
intangible assets recognized at that date,  regardless of when those assets were
initially  recognized.  SFAS 142 requires the Company to complete a transitional
goodwill impairment test six months from the date from the date of adoption. The
Company is also required to reassess the useful lives of other intangible assets
within the first interim quarter after adoption of SFAS 142.

The  Company's  previous  business  combinations  were  accounted  for using the
purchase  method.  As on June 30, 2001,  the net carrying  amount of goodwill is
$2,527,045.  Amortization  expense during the  nine-month  period ended June 30,
2001  was  $220,702.  Currently,  the  Company  is  assessing  but  has  not yet
determined  how the adoption of SFAS 141 and SFAS 142 will impact its  financial
position and results of operation.

FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS

Except for the historical  information  contained herein,  the matters set forth
herein are "forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933,  Section 21E of the Securities  Exchange Act of 1934 and
the  Private  Securities  Litigation  Reform  Act of 1995.  We intend  that such
forward-looking statements be subject to the safe harbors created thereby.

Such forward-looking  statements involve known and unknown risks,  uncertainties
and  other  factors  which  may  cause  our  actual   results,   performance  or
achievements to be materially different from any future results,  performance or
achievement  expressed  or  implied  by such  forward-looking  statements.  Such
factors include, but are not limited to the following: product demand and market
acceptance  risks,  the  effect of  economic  conditions,  results of pending or
future  litigation,  the impact of  competitive  products and  pricing,  product
development  and  commercialization,   technological  difficulties,   government
regulatory  environment  and  actions,  trade  environment,  capacity and supply
constraints or difficulties,  the result of financing efforts,  actual purchases
under agreements and the effect of the Company's accounting policies.

<PAGE>

                            PART II OTHER INFORMATION


ITEM 2.           CHANGE IN SECURITIES AND USE OF PROCEEDS

     During  the  quarter  ended  June 30,  2001,  the  Company  sold to private
investors  1,570,590  shares of the  Company's  common stock and  received  cash
proceeds of approximately $1,068,000. In connection with the sale of this common
stock,  the  Company  issued to the  holders of the  common  stock  warrants  to
purchase  1,570,590 shares of the Company's common stock at an exercise price of
$.68 per share for a term of three years.  The  exemption  for  registration  of
these securities is based upon Section 4(2) of the Securities Act.




ITEM 4            SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     The  annual  meeting of the  shareholders  was held on June 27,  2001.  All
members  of the Board of  Directors  were  elected by more than 65% of the total
shares  outstanding  and more than 99% of the shares  voted.  In  addition,  the
increase in authorized shares of common stock from 75 to 100 million shares, the
establishment  and  implementation  of an employee  stock  purchase  plan with a
reserve  of one  million  shares of common  stock and the  reappointment  of BDO
Seidman,  LLP as auditors  were  approved  and the  tabulation  of votes were as
follows:

                                            For         Against      Abstain
                                         ----------   ----------   ----------

Increase in Authorized Shares ........   22,274,272    2,503,446       16,709

Employee Stock Purchase Plan .........   22,627,244    2,123,993      133,190

Reappointment of Auditors ............   24,825,325       11,771       47,331

Election of Directors ................   24,777,332         --        107,095


ITEM 6.           EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits:

  Exhibit No.             Document

  3.1                Certificate of Amendment of Certificate of Incorporation



(b)      Reports on Form 8-K:

         None

<PAGE>

                                   SIGNATURES

In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


                                       AVITAR, INC.
                                       (Registrant)




Dated:  August 13, 2001                /S/ Peter P. Phildius
                                       -----------------------------------
                                        Peter P. Phildius
                                        Chairman and Chief
                                        Executive Officer
                                        (Principal Executive Officer)



Dated:  August 13, 2001                /S/ J.C. Leatherman, Jr.
                                       ---------------------------
                                        J.C. Leatherman, Jr.
                                        Chief Financial Officer
                                        (Principal Accounting and
                                        Financial Officer)

<PAGE>


                                  EXHIBIT INDEX



Exhibit Index                 Document                                    Page

3.1             Certificate of Amendment of Certificate of Incorporation

<PAGE>

                                   EXHIBIT 3.1

                     CERTIFICATE OF AMENDMENT OF CERTIFICATE
                                OF INCORPORATION


<PAGE>

                            CERTIFICATE OF AMENDMENT
                                       OF
                          CERTIFICATE OF INCORPORATION
                                       OF
                                  AVITAR, INC.

     Avitar,  Inc., a corporation  organized and existing under and by virtue of
the General Corporation Law of the State of Delaware (the  "Corporation"),  does
hereby certify as follows:

     FIRST:  That by  unanimous  written  consent of the Board of  Directors  of
Avitar, Inc. resolutions were duly adopted setting forth a proposed amendment to
the Certificate of Incorporation of said  corporation,  declaring said amendment
to be advisable and calling a meeting of the  stockholders  of said  corporation
for consideration  thereof.  The resolution setting forth the proposed amendment
is as follows:

     RESOLVED,  that the initial  paragraph of Article Fourth of the Certificate
of  Incorporation  is hereby  amended so that said initial  paragraph of Article
Fourth shall read in its entirety as follows:

     "FOURTH:  The total number of shares of stock which the  corporation  shall
have  authority to issue is One Hundred Five Million  (105,000,000)  shares,  of
which One Hundred Million  (100,000,000) shares shall be Common Stock, par value
$.01 per share,  and Five Million  (5,000,000)  shares shall be Preferred Stock,
par value $.001 per share."

     SECOND:  That  in  accordance  with  Section  242 of the  Delaware  General
Corporation  Law, the above statement of amendment has been duly approved by the
Board of Directors of Avitar,  Inc. by  unanimous  written  consent as of May 8,
2001,  and by  the  stockholders  of  Avitar,  Inc.  at the  Annual  Meeting  of
Stockholders duly called and held on June 27, 2001. At the Annual Meeting, which
was held upon notice duly given in  accordance  with  Section 222 of the General
Corporation  Law of the State of  Delaware,  at least a  majority  of the shares
issued and  outstanding  on the record  date for the  meeting  constituting  the
requisite vote as required by statute were voted in favor of the Amendment.

     IN WITNESS  WHEREOF,  said AVITAR,  INC., has caused this Certificate to be
signed by Peter P. Phildius,  its Chairman and Chief Executive Officer, who does
make this  certificate  and declares and certifies under penalty of perjury that
this is the act and deed of the Corporation, and that the acts stated herein are
true, and accordingly have set his hand hereto this 2nd day of July, 2001.

                               AVITAR, INC.:

                           By: /s/ Peter P. Phildius
                               ------------------------------------------
                               Name: Peter P.Phildius
                               Title: Chairman and Chief Executive Officer