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               December 31, 1997
                                             -----------------
             Commission file number                0-26504
                                             -------------

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


     Pennsylvania                                                25-1605848
     ----------------------------------------------------------------------
     (State of 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 December 31, 1997, 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

                                        December 31,  September 30,
               ASSETS                       1997          1997
                                        (Unaudited)      (Note)
                                        -----------    -----------
Current assets
  Cash and cash equivalents             $ 1,087,606    $ 1,871,070
  Due from BICO                             521,981         -
  Notes receivable - related parties        125,000         -
  Interest receivable - related parties       1,558         -
  Inventory deposit - BICO                1,000,000      1,000,000
  Prepaid expenses                            7,940         13,698
                                        -----------    -----------
               Total current assets       2,744,085      2,884,768

Property and equipment - at cost
  Building and improvements                 236,663        236,663
  Furniture and fixtures                     42,750         42,750
                                        -----------    -----------
                                            279,413        279,413
  Less accumulated depreciation              59,334         55,938
                                        ------------   -----------
                                            220,079        223,475
                                        -----------    -----------
               TOTAL ASSETS             $ 2,964,164    $ 3,108,243
                                        ===========    ===========

               LIABILITIES and STOCKHOLDERS' EQUITY

Current liabilities
  Accounts payable                      $     8,313    $     9,433
  Other accrued liabilities                  12,956         12,986
                                        -----------    -----------
               Total current liabilities     21,269         22,419


Stockholders' equity
  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 Dec. 31, 1997 and
  22,979,051 at Sep. 30, 1997               229,801        229,791
  Additional paid-in capital             26,892,071     26,888,581
  Warrants                               17,953,223     17,928,223
  Deficit accumulated during the
  development stage                     (42,132,200)   (41,960,771)
                                        -----------    -----------
                                          2,942,895      3,085,824
               TOTAL LIABILITIES AND    -----------    -----------
                  STOCKHOLDERS' EQUITY  $ 2,964,164    $ 3,108,243
                                        ===========    ===========
[FN]
Note: The Balance Sheet at September 30, 1997 has been derived from audited
financial statement at that date.

See notes to the financial statement.
<PAGE>2
                             DIASENSE, INC.
                     (A Development Stage Company)

                  Consolidated Statement of Operations
                              (Unaudited)
<TABLE>
<CAPTION>

                                      For the                 For the               From July 5, 1989
                                      three months ended      three months ended    (inception) through
                                      December 31, 1997       December 31, 1996     December 31, 1997
                                     --------------------     ------------------    -----------------
<S>                                  <C>                      <C>                  <C>
Research and development expenses    $        -               $       -            $  10,556,405

General and administrative expenses         168,212                 316,726           11,416,513

Warrant extensions                           25,000               1,572,000           17,912,908

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

Interest expense                              _                       -                   10,529

Other income                                (21,783)                (16,325)            (481,560)

Other expense                                -                        -                   37,405
                                      --------------          -------------        --------------
  Net loss                            $    (171,429)          $  (1,872,401)       $ (42,102,200)
                                      ==============          ==============       ==============
Net loss per common share             $       (0.01)          $       (0.08)       $       (2.43)
                                     ===============          ==============       ==============

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

                  Consolidated Statement of Cash Flows
                              (Unaudited)
<CAPTION>
                                                         For the                 For the            From July 5, 1989
                                                     three months ended      three months ended     (Inception) through
                                                     December 31, 1997       December 31, 1996      December 31, 1997
                                                     ------------------      ------------------     ----------------
<S>                                                  <C>                     <C>                    <C>
Cash flows from operating activities:
Net loss                                             $      (171,429)        $     (1,872,401)      $    (42,102,200)
   Adjustments to reconcile net loss to net
     cash used by operating activities:
        Depreciation                                           3,396                    3,427                 59,334
        Stock issued in exchange for services                  -                        -                    138,950
        Stock issued for License and Marketing Agreement       -                        -                     80,000
        Warrant extensions                                    25,000                1,572,000             17,912,908
        Inventory Deposit - BICO                               -                        -                 (1,000,000)
        (Increase) decrease in prepaid expenses                5,758                    4,079                 (7,940)
        Increase in payable due to BICO                        -                        -                 10,500,000
        Increase (decrease) in accounts payable               (1,120)                  (1,409)                 8,313
        Increase (decrease) in accrued liabilites                (30)                      54                 12,956
                                                     ------------------      ------------------     ------------------
             Net cash used in operating activities          (138,425)                (294,250)           (14,397,679)

 Cash flows from investing activities:
   Purchase of property and equipment                          -                        -                   (279,413)
   Increase in Notes Receivable                             (125,000)                   -                   (125,000)
   Increase in Interest Receivable                            (1,558)                   -                     (1,558)
                                                     ------------------      ------------------     ------------------
      Net cash used in investing activities                 (126,558)                   -                   (405,971)

Cash flows from financing activities:
   Advances to BICO                                       (1,649,070)                (698,798)            (5,758,931)
   Repayment of advances to BICO                           1,127,089                  726,164              5,803,536
   Proceeds from issuance of common stock                      -                      (94,500)            10,968,334
   Proceeds from issuance of common stock to BICO              3,500                    -                  4,203,500
   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             (518,481)                 (67,134)             15,891,256
                                                     ------------------      ------------------     ------------------  
      Net increase (decrease) in cash & equivalents         (783,464)                (361,384)              1,087,606
      Cash and cash equivalents at beg. of period          1,871,070                1,143,312                  -
                                                     ------------------      ------------------     ------------------

      Cash and cash equivalents at end of period     $     1,087,606         $        781,928       $       1,087,606
                                                     ==================      ==================     ==================

See notes to the financial statements.
</TABLE>
<PAGE>4
                     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,
1997.

NOTE B - Organization

      The  Company  was incorporated on July 5,  1989  as  a
wholly  owned  subsidiary  of  Biocontrol  Technology,  Inc.
(BICO).   BICO  owns 52% of the stock of the Company  as  of
December   31,  1997.   Diasense is currently  developing  a
noninvasive glucose sensor (Sensor).  The sensor  would  use
electromagnetic   technology  to   measure   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  22,979,150 and 22,974,349 for the periods ended December
31,  1997 and December 31, 1996, respectively. The loss  per
share  does not include common stock equivalents  since  the
effect would be anti-dilutive.

          From July 5, 1989 (inception) to December 31, 1997,
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 18,170,753 for the period from July
5, 1989 (inception) to December 31, 1997.
      
<PAGE>5  
                  DIASENSE, INC.
                              
   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued


NOTE D - Stockholders' Equity

      During  the three months ended December 31, 1997,  the
company  sold 1,000 shares of its common stock  pursuant  to
its registration statement dated July 19, 1993 as amended.

       In  addition,  the exercise date was  extended  on  a
warrant  to  purchase 10,000 shares of  common  stock  to  a
former consultant.  The warrant was originally granted at an
exercise  price of $1.00 per share and extended at the  same
price.   The  fair  market  value  of  the  stock  when  the
extension  was granted was $3.50.  Diasense Inc. recorded  a
$25,000  expense for the difference between the fair  market
value and the warrant price times the number of shares.
                              
                              
 Management's Discussion and Analysis of Financial Condition
                       and Cash Flows


Liquidity and Capital Resources

      Cash  decreased from $1,871,070 at September 30, 1997,
to  $1,087,606  at  December 31, 1997.   This  decrease  was
primarily  attributable to the Company's $138,425  net  cash
flow used by operations and $521,981 net advances to BICO.

Results of Operations

           There  were no research and development  expenses
during  the three month period ended December 31,  1997  and
1996  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  first quarter from $316,726 for the three month  period
ended  December  31, 1996 to $168,212 for  the  three  month
period  ended December 31, 1997.  The decrease was primarily
due to reductions in administrative overhead.

      Other  income during the first quarter increased  from
$16,325  for the three month period ended December 31,  1996
to  $21,783  for the three month period ended  December  31,
1997.   This  increase was due to the Company having  higher
cash  reserves to invest for the period ending December  31,
1997 than during the period ending December 31, 1996.
       
<PAGE>6
         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.

<PAGE>7

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 13th day of February, 1998.


                              DIASENSE, INC.

                              By /s/ Fred E. Cooper
					   -------------------------
                                 Fred E. Cooper
                                 President and Director(principal
                                 executive officer, principal financial
                                 officer and principal accounting
                                 officer)

<PAGE>8