SECURITIES AND EXCHANGE COMMISSION

                   Washington, D.C.  20549


                          FORM 10-Q


     QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
               SECURITIES EXCHANGE ACT OF 1934

For Quarter Ended                  June 30, 2001

Commission file number             33-56574


                       DIASENSE, INC.
   (Exact name of registrant as specified in its charter)



Pennsylvania                                25-1605848
(State or other jurisdiction               (IRS Employer
of incorporation or organization)        Identification no.)


  2275 Swallow Hill Road, Bldg. 2500; Pittsburgh, PA 15220
(Address of principal executive offices)       ( Zip Code)

                       (412) 279-9740
     Registrant's telephone number, including area code

     Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 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.
                                   Yes   X        No

     As of June 30, 2001, 22,980,051 shares of Diasense,
Inc. common stock, par value $.01 were outstanding.




<PAGE>1

                               DIASENSE, INC.
                         (A Development Stage Company)
                          Consolidated Balance Sheets

                                         June 30,     September 30,
 ASSETS                                    2001           2000
                                        (Unaudited)
                                        -----------    -----------
Current assets
  Cash and cash equivalents (note A)    $      -    $     113,098
  Prepaid expenses                            6,703          -
                                        -----------    -----------
               Total current assets           6,703       113,098

Property and equipment - at cost (note A)
  Furniture and fixtures                     42,750        42,750
  Less accumulated depreciation              38,718        34,438
                                        -----------    -----------
                                              4,032         8,312
                                        -----------    -----------


Other assets
  Due from subsidiaries of BICO               8,624        19,838
  Investment in unconsolidated
       subsidiaries (note E)              1,761,453     1,141,112
  Security Deposit                           17,250        17,250
                                        -----------    -----------
                                          1,787,327     1,178,200
                                        -----------    -----------
 TOTAL ASSETS                       $     1,798,062    $1,299,610
                                        ===========    ===========

               LIABILITIES and STOCKHOLDERS' EQUITY

Current liabilities
  Accounts payable                      $     7,702    $     -
  Due to BICO                             3,595,674     1,725,920
  Accrued payroll and withholdings           45,771        91,840
                                        -----------    -----------
           Total current liabilities      3,649,147     1,817,760


Commitments and Contingencies (notes A and D)

Stockholders' equity (deficiency)
  Preferred stock, 1,000,000 shares authorized, none issued
  Common stock, 40,000,000 shares of $.01 par value
   authorized; issued and outstanding 22,980,051 at
   Jun. 30, 2001 and 22,980,051 at
   Sep. 30, 2000                            229,801       229,801
  Additional paid-in capital             29,960,946    29,960,946
  Warrants                               15,320,832    15,320,832
  Deficit accumulated during the
        development stage               (47,362,664)  (46,029,729)
                                        -----------    -----------
                                         (1,851,085)     (518,150)
               TOTAL LIABILITIES AND    -----------    -----------
                  STOCKHOLDERS' EQUITY  $ 1,798,062   $ 1,299,610
                                        ===========    ===========
<FN>
The accompanying notes are an integral part of this statement.

<PAGE>2
                             DIASENSE, INC.
                     (A Development Stage Company)

<Table>
                  Consolidated Statement of Operations
                              (Unaudited)
<Caption>
                                          For the nine months ended     For the three months ended   From July 5, 1989
                                                  June 30,                      June 30,            (inception) through
                                             2001             2000         2001            2000        June 30, 2001
                                          -------------------------    --------------------------  -------------------
</Caption>
<S>                                      <C>              <C>              <C>              <C>            <C>
Research and development expenses       $       -       $     -       $     -        $      -     $      10,556,405

General and administrative expenses           886,214     1,557,974       246,692         657,959        16,115,020

Provision for (recovery of) doubtful            -        (1,458,809)        -               -                 -
  accounts

Warrant extensions                              -             -             -               -            17,890,676

Technology and patent rights acquired          26,006        12,791        14,996           3,332         2,676,006

Interest expense                                1,006         -             -               -                11,535

Loss on unconsolidated subsidiaries           196,866         -            79,230           -               302,291

Amortization of Goodwill                      269,477        45,833       104,738          25,000           423,724

Other income                                  (46,634)        -           (15,584)          -              (680,398)

Other expense                                   -             -             -               -                37,405
					  -------------------------    --------------------------  -------------------
         Net loss                       $  (1,332,935)  $  (157,789)  $  (430,072)    $  (686,291)  $   (47,332,664)
                                          ===========    ===========   ===========    ===========   ===================
Net income (loss) per common share      $      (0.06)   $     (0.01)  $     (0.02)    $     (0.03)  $         (2.37)
                                          ===========    ===========   ===========    ===========   ===================

See notes to the financial statements.
</TABLE>
<PAGE>3
<TABLE>
                            DIASENSE, INC.
                     (A Development Stage Company)

                        Statement of Cash Flows
                              (Unaudited)


<CAPTION>

                                                For the nine months ended  For the three months ended  From July 5,1989
                                                          June 30,                    June 30,         (Inception) thru
                                                    2001            2000        2001          2000       June 30, 2001
                                                 ------------------------   -------------------------- ----------------
 <S>                                             <C>             <C>            <C>           <C>           <C>
Cash flows from operating activities
 Net Income (Loss)                             $  (1,332,935)  $ (157,789)   $  (430,072)    $(686,291)  $ (47,332,664)
 Adjustments to reconcile net loss to net
  cash used by operating activites:
   Depreciation                                        4,280        4,580          1,413         1,527          86,014
   Amortization of goodwill                          269,477       45,833        104,738        25,000         423,724
   Provision for (recovery of) doubtful                -       (1,458,809)         -             -               -
     accounts
   Impairment loss                                     -            -              -             -              14,367
   Loss on unconsolidated subsidiaries               196,866        -             79,229         -             302,291
   Stock in exchange for services                      -            -              -             -             138,950
   Stock issued for License and Marketing Agreement    -            -              -             -              80,000
   Warrants issued for services                        -          230,178          -           229,074         458,716
   Warrent extensions                                  -            -              -             -          17,890,676
   Inventory deposit-BICO                              -            -              -             -          (1,000,000)
   (Increase) Decrease in prepaid expenses            (6,703)         130          5,454         2,638          (6,703)
   Increase (Decrease) in payable due to BICO        828,728        -            (11,086)        -          13,092,042
   (Decrease) Increase in receivable due from
      BICO subsidiaries                               11,214        -             (4,312)        -              (8,624)
   Increase (Decrease) in accounts payable             7,702        -              7,392       (12,500)          7,702
   Increase (Decrease)in accrued payroll and
     withholdings                                    (46,069)         626           (496)            1          45,771
   (Increase) in other assets                          -             (250)         -             -             (17,250)
                                                 ------------    -----------  ------------  -------------  ------------
   Net cash used in operating activities             (67,440)  (1,335,501)      (247,740)     (440,551)    (15,824,988)

Cash flows from investing activities:
 Disposal of property and equipment                   -              -             -             -             175,000
 Purchase of property and equipment                   -              -             -             -            (279,413)
 Investment - MicroIslet, Inc.                     (600,000)      (500,000)     (150,000)        -          (1,500,000)
 Investment - Diabecore                            (486,684)      (500,784)        -             -            (987,468)
 (Increase) in notes receivable
    -related parties			              -              -             -             -            (125,000)
 (Increase) in interest receivable
    -related parties                                  -              -             -             -             (13,538)
                                               -------------  -------------  ------------ ------------   -------------
   Net cash used in investing activities         (1,086,684)    (1,000,784)     (150,000)        -          (2,730,419)

Cash flows from financing activities:
 Advances to BICO                                     -           (437,405)        -             -          (7,498,369)
 Advances from BICO                               1,041,026        921,669       397,740       449,134       1,041,026
 Repayment of advances to BICO                        -          1,858,820         -             -           9,166,099
 Proceeds from issuance of common stock               -              -             -             -          10,971,834
 Proceeds from issuance of common stock to BICO       -              -             -             -           4,200,000
 Proceeds from warrants exercised                     -              -             -             -             118,066
 Proceeds from treasury stock                         -              -             -             -             (35,000)
 Proceeds from Regulation S                           -              -             -             -             288,751
 Proceeds from issuance of notes payable              -              -             -             -             303,000
                                               -------------- -------------- ------------- -------------  -------------
Net cash provided by financing activities         1,041,026      2,343,084       397,740       449,134      18,555,407
                                               -------------- -------------- ------------- -------------  -------------
Net increase (decrease) in cash and cash equiv.    (113,098)         6,799         -             8,583           -
Cash and cash equivalents at beginning of period    113,098          6,525         -             4,741           -
                                               -------------- -------------- ------------- -------------  -------------
Cash and cash equivalents at end of period     $      -       $     13,324    $    -       $    13,324   $       -
                                               ============== ============== ============= ============  ==============

See notes to the financial statements.
</TABLE>



                    DIASENSE, INC.
         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE A - Basis of Presentation

     The accompanying financial statements of Diasense, Inc.
(the  "Company")  have  been  prepared  in  accordance  with
generally   accepted  accounting  principles   for   interim
financial information, and with the instructions to Form 10-
Q  and  Rule 10-O Regulation S-X.  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  management,  all
adjustments   (consisting  of  normal  recurring   accruals)
considered  necessary  for  a fair  presentation  have  been
included.   For further information, refer to the  financial
statements  and  footnotes included in the Company's  annual
report on Form 10-K for the fiscal year ended September  30,
2000.

NOTE B - Organization

      The  Company  was incorporated on July 5,  1989  as  a
wholly owned subsidiary of BICO, Inc.  BICO owns 52% of  the
stock  of  the  Company as of June 30,  2001.   Diasense  is
currently  developing a noninvasive glucose sensor (Sensor).
The  Sensor would use electromagnetic technology to  measure
the   concentration  of  glucose  in  human  tissue  without
requiring the user to take a blood sample.

NOTE C - Net Loss Per Common Share

      Net  loss  per common share is based on  the  weighted
average  number of outstanding common shares, which amounted
to  22,980,051 for the periods ended June 30, 2001 and  June
30,  2000. The loss per share does not include common  stock
equivalents since the effect would be anti-dilutive.

     From July 5, 1989 (inception) to June 30, 2001, net loss
per  common share is based on the weighted average number  of
common  shares  outstanding and the number of  common  shares
issuable  on  the  exercise of 1,708,000 warrants  issued  in
1992;  reduced by 488,000 common shares that were assumed  to
have  been  purchased with the proceeds from the exercise  of
the  warrants  at an assumed price of $3.50 per  share.   The
inclusion  of the warrants in the loss per share  calculation
is  required  by  the  rules of the Securities  and  Exchange
Commission  relative  to the initial registration  statement,
which included the Company's financial statements through the
period  ended  March  31,  1993.  The registration  statement
became  effective July 19, 1993.  The weighted average number
of  common  shares including the effect of the conversion  of
the  warrants amounted to 19,942,165 for the period from July
5, 1989 (inception) to June 30, 2001.

NOTE D - Legal Proceedings

     In April 1998, the Company and its affiliates were
served with subpoenas requesting documents in connection
with an investigation by the U.S. Attorneys' office for the
District Court for the Western District of Pennsylvania. We
continue to submit various scientific, financial and
contractual documents in response to their requests.

NOTE E - Investments in Unconsolidated Subsidiaries

     During  the nine months ended June 30, 2001, the Company
invested  an  additional  $600,000 in  MicroIslet,  Inc.,  an
unconsolidated subsidiary interest initially acquired  during
2000.   With  this  additional investment,  the  Company  has
invested  $1,500,000  in  MicroIslet  and  its  ownership  is
approximately 20.0%.  Diasense holds a seat on the  board  of
directors of this unconsolidated subsidiary.  MicroIslet is a
California  company,  which  has  licensed  several  diabetes
research  technologies from Duke University with  a  specific
focus    on    optimizing   microencapsulated   islets    for
transplantation.

     During the nine months ended June 30, 2001, the Company
invested an additional $486,684 in Diabecore Medical, Inc.,
an unconsolidated subsidiary interest initially acquired
during fiscal year 2000.  With this additional investment,
the Company has invested $987,472 in Diabecore and owns
approximately 28.2% of this unconsolidated subsidiary.  The
Company also owns warrants to purchase additional shares of
Diabecore, which, if exercised, will increase the company's
ownership to 35%.  The Company holds a seat on the board of
directors of Diabecore.  Diabecore is a Toronto-based
company working to develop a new insulin for the treatment
of diabetes.

These investments are being reported on the equity basis and
differences  between the investment and the  underlying  net
assets   of   the  unconsolidated  subsidiaries  are   being
amortized  as goodwill over a 5-year period.  The  company's
investment  in  the  underlying assets and  the  unamortized
goodwill  of each unconsolidated subsidiary as of  June  30,
2001 and September 30, 2000 are as follows:


                 Investment in
Unconsolidated  Underlying Net Assets  Unamortized
  Subsidiary                            Goodwill                 Total
                Jun.30,   Sep.30,    Jun.30,    Sep.30,    Jun.30,     Sep.30,
                 2001      2000       2001       2000       2001        2000

MicroIslet,   $ 51,752   $ 89,657 $  958,189  $  635,409 $1,009,941  $  725,066
  Inc.

Diabecore      113,565     37,003    637,947     379,043    751,512     416,046
Medical, Inc.
               -------    -------   --------   ----------  ---------   --------
Total         $165,317   $126,660 $1,596,136  $1,014,452 $1,761,453  $1,141,112



NOTE F - Impact of Recently Issued Accounting Standards.

In June 2001, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting
Standards No. 141, "Business Combinations."  SFAS 141
supersedes APB Opinion No. 16 and FASB Statement No. 38
and requires that all business combinations be accounted
for using the purchase method.  The provisions of this
statement apply to all business combinations initiated
after June 30, 2001.  The Company is in the process of
assessing the impact of this pronouncement on its
financial statements.

Also in June 2001, the FASB issued Statement of Financial
Accounting Standards No. 142, "Goodwill and Other
Intangible Assets."  SFAS 142 supersedes APB Opinion No.
17 and addresses financial accounting and reporting for
acquired goodwill and other intangible assets.  Under
this provision, goodwill and certain intangible assets
will no longer be amortized.  These assets will be
evaluated on a periodic basis to determine if an
impairment loss needs to be recorded.  The provisions of
this statement will be effective for the Company's fiscal
year ending September 30, 2003.  The Company is in the
process of assessing the impact of this pronouncement on
its financial statements.


Management's Discussion and Analysis of Financial Condition
and Cash Flows


Liquidity and Capital Resources

      During the nine months ended June 30, 2001 funds  were
transferred  to  Diasense  from  BICO  to  provide   working
capital.  These funds were used in operating activities  and
for  investments in unconsolidated subsidiaries.  In January
2001,  BICO  adopted  a centralized cash  management  policy
whereby  funds are transferred to Diasense on a daily  basis
to  meet Diasense's actual cash needs.  As a result of  this
change  in  policy, Diasense had a cash balance of  zero  at
June 30, 2001.  The net effect of these transactions was  to
decrease cash from $113,098 at September 30, 2000,  to  zero
at June 30, 2001.

      Prepaid expenses increased from zero to $6,703  during
the nine months ended June 30, 2001. The increase represents
insurance premiums paid in advance of the coverage period.

      Amounts  due from subsidiaries of BICO were $8,624  at
June   30,   2001  and  $19,838  at  September   30,   2000,
representing  rental  payments due to  Diasense  for  office
space used by subsidiaries of BICO. The decrease during  the
first  nine  months  of fiscal 2001 was due  to  outstanding
amounts paid by the subsidiaries in December 2000.

     Diasense  made  additional investments  in  MicroIslet,
Inc.  and Diabecore, Inc. during the nine months ended  June
30,  2001.   As  a result, these other assets  increased  to
$1,761,453 as of June 30, 2001, as compared to $1,141,112 at
September 30, 2000.

     Amounts  due  to  BICO  from  Diasense  increased  from
$1,725,920 as of September 30, 2000 to $3,595,674 as of June
30,  2001.  This increase is due to operating expenses  paid
by  BICO  on  behalf of Diasense and intercompany  transfers
from  BICO  to  Diasense for working capital and  investment
activities.

Results of Operations

      There were no research and development expenses during
the  nine months period ended June 30, 2001 and 2000 due  to
the  agreed-upon suspension of billings by Diasense and BICO
pursuant to the research and development agreement.

      General  and Administrative expenses decreased  during
the  third quarter from $657,959 for the three month  period
ended  June 30, 2000 to $246,692 for the three month  period
ended  June 30, 2001 and decreased from $1,557,974  for  the
nine  month period ended June 30, 2000 to $886,211  for  the
nine  month  period ended June 30, 2001.  The  decrease  was
primarily  due  to  a decrease in consulting  and  marketing
expenses, reduced salaries and administrative overhead.

      Diasense  recovered  $1,458,809 in  doubtful  accounts
during  the  nine-month  period  ended  June  30,  2000,  as
compared with no similar recovery in the current year.  This
recovery  was  due  to  BICO's  repayments  of  intercompany
transfers,  which  had  been  fully  reserved  as   doubtful
accounts  as  a result of BICO's financial condition  during
the  prior years.  No similar recovery was recognized during
the  first  nine  months for fiscal year  2001  because  all
amounts  due  from BICO had been repaid as of September  30,
2000.

     Diasense    recognized   losses   from   unconsolidated
subsidiaries of $79,230 and $196,866 during the  three-month
and  nine-month  periods ended June 30, 2001,  respectively.
These  amounts  represent  the  portion  of  the  losses  of
Diabecore  Medical  and  MicroIslet  that  was  absorbed  by
Diasense.   Diasense's share of the losses is determined  by
applying   its  ownership  percentage  to  the  total   loss
incurred.  There were no similar losses in the previous year
because  Diasense  just  started  investing  in  these   two
companies  in fiscal 2000 and their operations were  minimal
at June 30, 2000.

     Amortization  of  Goodwill increased from  $25,000  and
$45,833  for  the three-month and nine-month  periods  ended
June  30, 2000 to $104,738 and $269,477 for the same periods
in  the  current  year.   The  increase  is  due  additional
investments in Diabecore Medical and MicroIslet.  A  portion
of these investments is recognized as goodwill and amortized
over a five-year period.

     Other  income  increased from zero for the  three-month
and  nine-month periods ended June 30, 2000 to  $15,584  and
$46,634  for  the three-month and nine-month  periods  ended
June  30,  2001.   This increase was due to an  increase  in
rental income, which is charged to BICO and its subsidiaries
for their share of our office space.


PART II -- OTHER INFORMATION

Item 1.        Legal Proceedings
               None.

Item 2.        Changes in Securities
               None.

Item 3.        Defaults Upon Senior Securities
               None.

Item 4.        Submission of Matters to a Vote of Security Holders
               None.

Item 5.        Other Information
               None.

Item 6.        Reports on Form 8-K
               None.


SIGNATURES


     Pursuant to the requirements of the Securities Exchange
Act  of 1934, the registrant has duly caused this report  to
be  signed  on its behalf by the undersigned thereunto  duly
authorized on this 10th day of August 2001.


                              DIASENSE, INC.

                              By /s/ Fred E. Cooper
                                     Fred E. Cooper
                                     President and Director
                                     (Principal Executive Officer)

                              By /s/ Michael P. Thompson
                                     Michael P. Thompson
                                     (Principal Financial
                                      Officer and Principal Accounting
                                      Officer)