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,  2006

       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) 279-1059
                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, 2006, 22,980,051 shares of Diasense, Inc. common stock, par
value $.01 were outstanding.



                                  Table of Contents

PART I - Financial Information

Item 1.	Financial Statements
          Balance Sheets..........................	1
          Statements of Operations................	2
          Statements of Cash Flows................	3
          Notes to Financial Statements...........	4

Item 2. Management's Discussion and Analysis of
         Financial Condition and Results of Operations..8

Item 3.	Quantitative and Qualitative Disclosures
        about Market Risk.........................	9

Item 4.	Controls and Procedures...................	9


PART II - Other Information

Item 1.	Legal Proceedings.........................	10

Item 2.	Unregistered Sales of Equity Securities,
        Use or Proceeds and Issuer Purchases of
        Equity Securities.........................	10

Item 3.	Defaults Upon Senior Securities...........	10

Item 4.	Submission of Matters to a Vote of
        Security Holders..........................	10

Item 5.	Other Information.........................	10

Item 6.	Exhibits..................................	10





<PAGE>1
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements




 			        DIASENSE,INC.
                         (A Development Stage Company)

                                Balance Sheets


<TABLE>
<CAPTION>

                                                  (Unaudited)
                                                    June 30,     September 30,
               ASSETS                                 2006           2005
                                                   -----------    -----------
Current assets
   Cash						   $        80    $     1,545
   Due from Diabecore                                        -         14,887

Fixed Assets
  Equipment (net of $869 accumulated
    Depreciation)                                       23,464              -
                                                   -----------     ----------
               TOTAL ASSETS                        $    23,544    $    16,432
                                                   ===========     ==========

               LIABILITIES and STOCKHOLDERS' DEFICIT

Current liabilities
  Accounts payable                                 $   119,304     $   19,479
  Accrued compensation                                 147,500              -
  Accrued interest payable to maj. shareholder         298,222        164,933
  Demand notes payable to majority shareholder       2,005,636      1,996,936
                                                     -----------    -----------
               Total current liabilities             2,570,662      2,181,348



Commitments and Contingencies


Stockholders' deficit
  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 June 30, 2006 and
   September 30, 2005                                  229,801        229,801
  Additional paid-in capital                        45,155,955     44,612,895
  Warrants                                             186,483        725,682
  Deficit accumulated during the  development stage(48,206,943)   (47,733,294)
                                                    -----------    -----------
                                                    (2,634,704)    (2,164,916)
                                                    -----------    -----------
TOTAL LIABILITIES AND
  STOCKHOLDERS' DEFICIT                            $    23,544    $    16,432
                                                    ===========    ===========
<FN>

The accompanying notes are an integral part of this statement.

<PAGE>2
                                 Diasense, Inc.
                         (A Development Stage Company)

                            STATEMENTS OF OPERATIONS
                                  (Unaudited)

<CAPTION>

                                         For the nine months ended   For the three months ended         From July 5, 1989
                                               June 30,                     June 30,                    (inception) thru
                                          2006        2005            2006             2005              June 30, 2006
                                       ---------    ---------     -----------       -----------         ----------------
<S>                                   <C>         <C>            <C>                <C>                <C>

Research and development expenses     $    -       $     -        $      -          $      -             $ 10,556,405

General and administrative expenses     337,773        57,138         152,682            27,885            17,313,421

Warrant extensions                         -             -               -                 -               17,890,676

Technology and patent rights acquired      -             -               -                 -                2,650,000

Interest expense                        135,876       114,957          46,758            39,861               312,534

Loss on unconsolidated subsidiaries        -             -               -                 -                  575,412

Impairment Loss                            -             -               -                 -                  690,124

Amortization of Goodwill                   -             -               -                 -                  535,057

Other income                               -             -               -                 -               (1,042,997)

Other expense                              -             -               -                 -                   37,405

Gain from sale of Diabecore Stock          -          (56,473)           -              (56,473)              (57,242)

Gain from sale of MicroIslet Stock         -             -               -                 -               (1,283,852)
                                       ----------   ---------     -----------       -----------         ---------------
Net loss                              $(473,649)    $(115,622)    $  (199,440)      $   (11,273)         $(48,176,943)
                                       ==========   =========     ===========       ===========         ===============
Net loss per common share             $   (0.02)   $    (0.01)    $     (0.01)      $     (0.00)         $      (2.27)
                                       ==========   =========     ===========       ===========         ===============

<FN>
The accompanying notes are an integral part of this statement.

</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,    June 30,           June 30,  (inception) thru
                                          2006              2005        2006                2005      June 30, 2006
                                         -------------------------   ----------------------------  ------------------
<S>                                     <C>          <C>            <C>             <C>            <C>

Cash flows from operating activities:
 Net loss                                $   (473,649)  $   (115,622) $  (199,440)    $    (11,273)   $(48,176,943)
 Adjustments to reconcile net loss to net
 cash used by operating activities:
  Depreciation                                    869           -             869             -             90,916
  Amortization                                   -              -            -                -            535,057
  Impairment loss                                -              -            -                -            704,491
  Gain on sale of MicroIslet stock               -              -            -                -         (1,283,852)
  Gain on sale of Diabecore stock                -           (56,473)        -             (56,473)        (57,242)
  Loss on unconsolidated subsidiaries            -              -            -                -            575,412
  Stock issued in exchange for services          -              -            -                -            138,950
  Stk issued for License & Marketing Agreement   -              -            -                -             80,000
  Warrants issued for services                  3,861          1,600         -               1,600         519,376
  Warrant extensions                             -              -            -                -         17,890,676
  Inventory deposit - BICO                       -              -            -                -         (1,000,000)
  Increase in accrued payroll                 147,500           -          97,500             -            147,500
  Increase in accrued interest                135,876        114,957       46,758           39,861         300,809
  Increase in accounts payable                 99,825         (4,000)      33,528           (4,000)        119,304
                                            ----------     ---------     ---------      -----------  ---------------
Net cash used in operating activities         (85,718)       (59,538)     (20,785)         (30,285)    (29,415,546)

Cash flows from investing activities:
  Disposal of property and equipment             -              -            -                -            175,000
  Purchase of property and equipment          (24,334)          -            -                -           (303,747)
  Investment - MicroIslet                        -              -            -                -         (1,600,000)
  Investment - Diabecore                         -              -            -                -           (987,468)
  Proceeds from sale of Diabecore stock          -            42,355         -              42,355          57,242
  Proceeds from sale of MicroIslet stock         -              -            -                -          2,070,726
  Increase in notes rec-related parties          -              -            -                -           (125,000)
  Increase in interest rec-related parties       -              -            -                -            (13,538)
                                           ----------     ---------     ---------      -----------  ----------------
Net cash used in investing activities          (9,447)        42,355         -              42,355        (726,785)

Cash flows from financing activities:
  Proceeds from (payment on)
   demand note from maj. shareholder            8,700        (30,000)         700          (30,000)         50,700
  Proceeds from convert. notes pay.            85,000           -          20,000             -             85,000
  Proceeds from notes payable                    -            48,000         -              15,000            -
  Advances to BICO                               -              -            -                -         (7,498,369)
  Repayment of advances to BICO                  -              -            -                -          9,203,493
  Advances from BICO, net                        -              -            -                -         14,496,167
  Repayment of advances from BICO                -              -            -                -         (2,041,231)
  Proceeds from issuance of common stock         -              -            -                -         10,971,834
  Proceeds from issuance of common stk to BICO   -              -            -                -          4,200,000
  Proceeds from warrants exercised               -              -            -                -            118,066
  Purchase 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      93,700         18,000       20,700          (15,000)     30,142,411
                                           ----------     ---------     ---------      -----------  ----------------
Net increase (decrease)in cash and
    cash equiv.                                (1,465)           817          (85)          (2,930)             80
Cash and cash equivalents at beg of period      1,545           -             165            3,747            -
                                           ----------     ---------     ---------      -----------  ----------------
Cash and cash equivalents at end
    of period                             $        80    $       817    $      80      $       817  $           80
                                           ==========     =========     =========      ===========   ===============

The accompanying notes are an integral part of this statement.

</TABLE>







                                  DIASENSE, INC.

                            NOTES TO 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 10-01 of 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, 2005.

NOTE B - Organization

The Company was incorporated on July 5, 1989 as a wholly-owned subsidiary of
BICO, Inc. (parent).  BICO owned approximately 52% of the stock of the Company
until July 23, 2004 when BICO sold its entire ownership interest to Dominion
Assets, LLC.  The Company?s activities have been focused on developing a
noninvasive glucose sensor (Sensor).  The Sensor would use electromagnetic
technology to measure glucose levels in blood 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 and 22,980,051 for the periods ended
June 30,  2006 and June 30, 2005, respectively. 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, 2006, 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 21,201,219
for the period from July 5, 1989 (inception) to June 30, 2006.


NOTE D - Operations

In April 2005, Diasense resumed development of the Sensor but has not, as yet,
achieved a commercially marketable product. The ability of Diasense to continue
in existence is dependent on its having sufficient financial resources to
maintain operations, to complete the research and development necessary to
successfully bring the Sensor to market, and for marketplace acceptance.
Diasense has no other commercial products and is dependent on the successful
development of the Sensor technology. Diasense has had no sales of its common
stock over the last five fiscal years. Until BICO?s bankruptcy in March 2003,
Diasense's operations were funded by advances from BICO. Since the sale of
BICO's interest in Diasense to Dominion Assets, LLC (Dominion) funding has been
provided by demand loans from Dominion, proceeds from the sale of Diasense's
interest in Diabecore and proceeds from convertible notes payable.

Diasense is in the development stage, and accordingly, it has presented
cumulative information on results of operations, and cash flows since inception.

Diasense has incurred significant losses and negative cash flows from operations
since inception and has a significant accumulated deficit raising substantial
doubt about its ability to continue as a going concern. Since 1997, Diasense
had been financially dependent upon BICO and BICO's ability to raise money
through its stock sales to support its operations. With the curtailment of
funding from BICO due to BICO's bankruptcy in March 2003, Diasense will be
required to find other funding in order to continue as a going concern. Limited
funding has been provided by Dominion and by convertible notes payable but it
is uncertain to what extent Dominion and outside investors will be able and /or
willing to continue such funding.

NOTE E - Note Payble to Majority Shareholder

In connection with the purchase of the 52% ownership of Diasense by Dominion
Assets, LLC. from BICO, an intercompany payable of $1,954,936 from Diasense to
BICO was assigned to Dominion Assets, LLC. (Dominion). This liability was
documented by a note payable on demand without interest. After demand for
payment was made by Dominion Assets, LLC, the demand note was amended effective
September 28, 2004. Under the terms of the amended demand note Diasense now
owes a principle amount of $1,954,936 with interest calculated at a rate of 8%
per annum. The indebtedness is collateralized by all of Diasense?s assets.
Dominion has since loaned Diasense an additional net $50,700 to provide funding
for general and administrative expenses. This amount is also payable on demand
with interest accrued at a rate of 8%.

NOTE F - Accrued Compensation

Effective February 14, 2006 the Board of Directors approved annual salaries of
$300,000 and $100,000 for the Company's CEO and Executive Vice President
respectively. Until such time that the Company has sufficient funding, all
salaries earned will be accrued for future payment.

NOTE G - Convertible Notes Payable

In November, 2005, the Company issued two 6% secured convertible notes
("Convertible Note(s)") in principal amounts of $25,000 to each of St. Claire
Capital Management and Lisa A. Paterra (a related party) (each, a "Holder"),
in consideration of the loans of equal amounts made to the Company by each such
Holder.  In January 2006 an additional 6% Convertible Note was issued to
Thaddeus Paterra (a related party) for $15,000 in consideration of a loan of
equal amount.  In April 2006 the Company received $20,000 in consideration of
two additional Convertible Notesof $10,000 each from St. Claire Capital
Management and Thaddeus Paterra (a related party).  These Convetible Notes are
due March 31, 2011 and accrue interest at a rate of 6% per annum.  Each of the
Convertible Notes issued in November 2005 is due October 31, 2010 (the
"Maturity Date"), and will accrue interest at a rate of 6% per annum.  The
Convertible Note issued in January 2006 is due January 31, 2011 and will accrue
interest at a rate of 6% per annum.  Each Convertible Note is secured by all
assets of the Company and ranks pari passu in such security interest with (A)
each of the other Convertible Notes that may be issued by the Company from time
 to time and (B) the demand note dated July 23, 2004 issued by the Company to
BICO, Inc. and assigned to Dominion Assets, LLC. Each Convertible Note is
convertible in whole  (not in part) into common stock of the Company at a
conversion price of $0.10 per share at the Holder?s option upon either (A)
the receipt by the Holder of a notice of prepayment of the principal of the
Convertible Note by the Company, or (B) in the event all outstanding principal
and accrued interest due and owing on the Convertible Note is not paid in full
as of the Maturity Date.

NOTE H - Warrants

The two five-year warrant certificates that the Company had issued under
Consulting Agreements have been amended and restated and reissued as of
November 11, 2005. The amended and restated warrant certificates grant each
of the consultants rights to acquire an additional 2,773,000 shares (4,000,000
shares in total) of the common stock of Diasense prior to the expiration date
under the original warrant certificates granted, on May 19, 2010.

As detailed in the amendment, attached to Form 10-K filed on January 17, 2006,
the additional warrants granted will vest upon FDA approval of the Sensor.
Because of the nature of the Sensor development, given the possibility for
unexpected setbacks caused by any number of reasons including supplier delays
and engineering changes, there can be no certainty when the additional warrants
will vest, if ever.  For this reason, we will account for the expense of the
warrants at the time they actually vest.


On November 11, 2005, Diasense issued to Anthony Paterra a warrant certificate
representing Mr. Paterra's right to purchase 3,250,000 shares of the Company's
common stock. The certificate was issued in conjunction with, and as part of
the consideration for, Mr. Paterra?s acceptance of employment with Diasense
beginning October 25, 2005. An expense of $3,861 was recognized as a result of
these warrants. The warrants represented thereby have an expiration date of
November 11, 2010 and an exercise price of $0.01 per share. The warrants vest
(and become exercisable) according to the following schedule:

(i) 1,000,000 warrants are exercisable immediately on or after the issuance
    date; and

(ii) an additional 93,750 warrants will become exercisable on the first day
     of each month for twenty-four (24) consecutive months beginning December
     1, 2005 and ending November 1, 2007, provided that Mr. Paterra is employed
     by the Company during such period.

In addition, all warrants represented by the certificate granted to Mr. Paterra
will vest and become exercisable immediately upon either (x) a change of
control of Diasense or (y) the sale or license of the Company's non-invasive
glucose sensor intellectual property.

On November 14, 2005, in conjunction with the Company?s entry into an
Independent Consulting Agreement with Dr. Stuart A. Fine and as consideration
paid by the Company for Dr. Fine's services thereunder, the Company issued a
warrant certificate to Dr. Fine, representing Dr. Fine?s right to acquire
150,000 shares of the Company's common stock. The warrants represented by the
certificate have an exercise price of $0.10 per share and expire on November
14, 2015. The warrants vest (and become exercisable) according to the following
schedule:

(i) 35,000 warrants are exercisable immediately on or after the issuance date;

(ii) 35,000 warrants are exercisable at such time as a working prototype of the
     Company's non-invasive glucose sensor is complete and functional; and

(iii) 80,000 warrants are exercisable at such time as the Diasensor non-invasive
      glucose sensor is approved by the FDA.

In addition, all warrants represented by the certificate granted to Dr. Fine
will vest and become exercisable immediately upon either (x) a change of control
of Diasense or (y) the sale or license of the Company's non-invasive glucose
sensor intellectual property.

NOTE I - Related Party Transactions

On March 29, 2006 Diasense purchased certain used electronic and test equipment
needed for the development of the Sensor from Dominion Asset Finance Corporation
for $24,334 (included in Accounts Payable as of June 30, 2006).  Dominion Asset
Finance Corporation is engaged in equipment leasing and used equipment sales and
is owned by Keith R. Keeling, CEO of Diasense.

NOTE J - Subsequent Events

Convertible Notes

In July 2006 the Company received $10,000 in consideration of an additional
Convertible Note with terms similar to those outstanding at June 30, 2006 and
discussed in Note G.  This Convertible Note is due June 30, 2011 and will
accrue interest at a rate of 6% per annum.

Resignations of CEO, Secretary and certain Directors

Keith R. Keeling resigned from his position as Chief Executive Officer and
resigned his seat on the Board of Directors of the Company effective August
4, 2006.  Notification was received August 4, 2006 by fax in a letter addressed
to Anthony Paterra, Executive Vice President and subsequently via mail.

Daniel K. Hayes resigned his seat on the Board of Directors of the Company
effective August 4, 2006.  Notification was received August 4, 2006 by fax in a
letter addressed to Anthony Paterra, Executive Vice President and subsequently
via mail.

Steven L. McDonald resigned from his position as Secretary and resigned his
seat on the Board of Directors of the Company effective August 5, 2006.
Notification was received August 6, 2006 by fax in a letter addressed to
Anthony Paterra, Executive Vice President and subsequently via mail.


Item 2.  Management's Discussion and Analysis of Financial Condition and Results
of Operations

Liquidity and Capital Resources

     Our funding for the nine months ended June 30, 2006 came from $85,000
proceeds from Convertible Notes payable, $20,700 proceeds from an increase in
the demand note from the majority shareholder and the remaining $14,887 proceeds
from the sale of our Diabecore stock.  For the three months ended June 30, 2006
our funding came from $20,000 proceeds from a Convertible Notes and $700
proceeds from an increase in the demand note from the majority shareholder.
In July of 2006, we received an additional $10,000 from an additional
Convertible Note payable.

     Because we still don't have any revenue sources, we will have to find
additional financing that we?ll use to finance development of, and proceed to
manufacture, our noninvasive glucose sensor. In prior years, we were dependent
upon BICO to support all our sensor-related activity, but BICO discontinued our
funding in 2002, filed bankruptcy in March 2003 and sold its interest in our
Company in May 2004.  If we are not able to obtain immediate, additional
financing of approximately $400,000 we will not be able to continue operations
and we estimate we will need approximately $6,000,000 in total to complete our
prototype and enter clinical trials.  We do not know if Dominion and other
investors will continue to be willing or able to continue financing our
operations.

Results of Operations

     During the nine months ended June 30, 2006 we continued efforts to develop
the Sensor and in June, 2006 we filed a patent application on the next
generation of the Sensor.

     General and administrative expenses totaled $27,885 and $57,138 during
the three and nine month periods ended June 30, 2005 and $152,682 and $337,773
for the three and nine month periods ended June 30, 2006.  The increases
resulted from increased efforts to develop the Sensor, patent expenses,
professional services, rent and related expenses for office space in Virginia,
travel expenses and the accrual of salaries to our executive officers.

     Interest expense of $46,758 and $135,876 was recognized in the three and
nine month periods ended June 30, 2006 as a result of the accrual of interest
on our demand note obligations to our majority shareholder (Dominion Assets,
LLC.) and on our convertible notes payable.  For the same periods ended June
30, 2005,  interest expense was $39,861 and $114,957 respectively.  The
increases from the 2005 periods to the 2006 periods is due to increased
borrowing to fund operations and the increased unpaid interest due on the demand
notes due to the majority shareholder.


Item 3.  Quantitative and Qualitative Disclosures about Market Risk
         Not applicable.


Item 4.  Controls and Procedures
         Our Executive Vice President has evaluated our disclosure controls and
         procedures as of June 30, 2006 before the filing of this quarterly
         report.  Based on that evaluation, we concluded that the disclosure
         controls and procedures in place were effective to ensure that
         information required to be disclosed by us in reports that we file or
         submit is recorded, processed, summarized and reported on a timely
         basis in accordance with applicable rules and regulations.





                                DIASENSE, INC.


PART II -- OTHER INFORMATION

Item 1.		Legal Proceedings
		None.

Item 2.		Unregistered Sales of Equity Securities, Use of Proceeds
                and Issuer Purchases of Equity 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.		Exhibits

                31.1  Certification pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002 - Chief Executive Officer.

		32.1  Certification pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002 - Chief Executive Officer.


		Reports on Form 8-K

               (1)  Incorporated by reference from Exhibit with this
                    title filed with the Company's Form 8-K/A filed
                    October 31, 2005
               (2)  Incorporated by reference from Exhibit with this
                    title filed with the Company's Form 8-K filed
                    November 16, 2005
               (3)  Incorporated by reference from Exhibit with this
                    title flied with the Company?s Form 8-K filed
                    August 10, 2006






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 11th day of August 2006.



						  DIASENSE, INC.

					       By /s/ Anthony Paterra
						      Anthony Paterra
                                                      Executive Vice President