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, 1998
                                             -----------------
             Commission file number          33-56574
                                             -------------

                             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 June 30, 1998, 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                      1998          1997
                                        (Unaudited)      (Note)
                                        -----------    -----------
Current assets
  Cash and cash equivalents             $       130    $ 1,871,070
  Due from BICO                           1,388,072         -
  Notes receivable - related parties        125,000         -
  Interest receivable - related parties       3,225         -
  Prepaid expenses                            2,064         13,698
                                        -----------    -----------
               Total current assets       1,518,491      1,884,768

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              66,125         55,938
                                        ------------   -----------
                                            213,288        223,475
                                        -----------    -----------
Other assets
  Deposit on inventory                    1,000,000      1,000,000
                                        -----------    ----------- 

               TOTAL ASSETS             $ 2,731,779    $ 3,108,243
                                        ===========    ===========

               LIABILITIES and STOCKHOLDERS' EQUITY

Current liabilities
  Accounts payable                      $    18,467    $     9,433
  Other accrued liabilities                  54,916         12,986
                                        -----------    -----------
           Total current liabilities         73,383         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 Jun. 30, 1998 and
  22,979,051 at Sep. 30, 1997               229,801        229,791
  Additional paid-in capital             26,892,071     26,888,581
  Warrants                               19,823,223     17,928,223
  Deficit accumulated during the
  development stage                     (44,286,699)   (41,960,771)
                                        -----------    -----------
                                          2,658,396      3,085,824
               TOTAL LIABILITIES AND    -----------    -----------
                  STOCKHOLDERS' EQUITY  $ 2,731,779    $ 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)

<TABLE>
                  Consolidated Statement of Operations
                              (Unaudited)
<CAPTION>
                                            For the six months ended         For the three months ended   From July 5, 1989
                                                     June 30,                          June 30,         (inception) through
                                              1998             1997              1998             1997       June 30, 1998
                                            -------------------------        --------------------------  -------------------
</CAPTION>
<S>                                      <C>              <C>              <C>              <C>            <C>
Research and development expenses        $        -       $      -       $        -        $      -       $ 10,556,405

General and administrative expenses            464,152        846,417          160,206         212,775      11,712,453

Warrant extensions                           1,895,000      5,586,375        1,870,000         299,375      19,782,908

Technology and patent rights acquired           13,080            -                -              -          2,663,080

Interest expense                                  -               -                -              -             10,529

Other income                                   (46,304)       (40,019)         (10,631)       (10,684)       (506,081)

Other expense                                     -               -                -              -             37,405
					    --------------------------	    --------------------------   -------------------
         Net loss                         $ (2,325,928)  $ (6,392,773)    $ (2,019,575)  $   (501,466)   $(44,256,699)
                                            ===========    ===========      ===========    ===========   ===================
Net loss per common share                   $    (0.10)  $      (0.28)    $      (0.09)  $      (0.02)   $      (2.39)
                                            ===========    ===========      ===========    ===========   ===================

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
                                                        1998          1997            1998          1997        June 30, 1998
                                                       ------------------------   --------------------------  ----------------
 <S>                                             <C>             <C>            <C>           <C>           <C>
 Cash flows from operating activities
  Net Loss                                        $  (2,325,928)  $(6,392,773)  $  (2,019,575) $   (501,466)   $  (44,256,699)
  Adjustments to reconcile net loss to net
   cash used by operating activites:
    Depreciation                                         10,187        10,218          3,396         3,395            66,125
    Stock in exchange for services                          -              -             -            -              138,950
    Stock issued for License and Marketing Agreement        -              -             -            -               80,000
    Warrent extensions                                1,895,000     5,586,375      1,870,000       299,375        19,782,908
    Inventory Deposit-BICO                                  -              -             -            -           (1,000,000)
    Decrease (Increase) in prepaid expenses              11,634          (546)         2,954        (9,051)           (2,064)
    Increase in payable due to BICO                         -              -             -            -           10,500,000
    Increase (Decrease) in accounts payable               9,034        10,007        (13,405)       (7,773)           18,467
    Decrease in accrued liabilities                      41,930        24,913         41,950        24,933            54,916
                                                      ------------ ------------  ------------  ------------  ----------------  
    Net cash (used) in operating activities            (358,143)     (761,806)      (114,680)     (190,587)      (14,617,397)

Cash flows from investing activities:
Purchase of property and equipment                           -             -             -             -            (279,413)
 Note Receivable			               (125,000)           -	         -             -            (125,000)
 Interest Receivable                                     (3,225)           -             -             -              (3,225)    
                                                      ------------ ------------  ------------  -------------  ---------------
    Net cash (used) in investing activities            (128,225)           -             -             -            (407,638)

Cash flows from financing activities:
 Advances to BICO                                    (2,780,531)    (1,625,646)      (55,628)     (104,095)       (6,890,392)
 Repayment of advances to BICO                        1,392,459      1,348,240       145,452       228,779         6,068,906
 Proceeds from issuance of common stock                   3,500        (94,500)          -             -          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          (1,384,572)      (371,906)       89,824      124,684        15,025,165
                                                   --------------  -------------- ------------- ------------  ---------------
   Net increase (decrease) in cash and cash equiv.    (1,870,940)    (1,133,712)      (24,856)     (65,903)              130
   Cash and cash equivalents at beginning of period    1,871,070      1,143,312        24,986       75,503                 -
                                                   --------------  -------------- ------------- ------------  ---------------
   Cash and cash equivalents at end of period         $      130   $      9,600   $       130   $    9,600   $           130
                                                   ==============  ============== ============= ============  ===============

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
June 30, 1998.   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  22,981,773 and 22,979,150 for the periods ended June 30,
1998  and  June 30, 1997, 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, 1998, 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 18,508,961 for the period from July
5, 1989 (inception) to June 30, 1998.

<PAGE> 5                              
                       DIASENSE, INC.
   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

NOTE D - Legal Proceedings

     During April 1998, the Company  and its  affiliates were
served with  subpoenas by  the  U.S. Attorneys'office for the 
U.S. District Court for the Western District of Pennsylvania.
The  subpoenas  requested certain  corporate,  financial  and 
scientific  documents and the Company  has provided documents
for such requests.  The class  action lawsuit which names the
Company and certain  officers and  directors as defendants is 
pending in  the U.S. District  Court for the Western District 
of  Pennsylvania.  The action  has been  certified as a class
action, and remains in the pre-trial  pleading stage pursuant
to consent of all the parties.
                              


 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  $130  at  June  30, 1998.  This decrease  was  primarily
attributable to the Company's $358,143 net cash flow used by
operations and $1,388,072 net advances to BICO.

Results of Operations

      There were no research and development expenses during
the  nine month period ended June 30, 1998 and 1997  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 $212,775 for the three month  period
ended  June 30, 1997 to $160,206 for the three month  period
ended June 30, 1998 and decreased from $846,417 for the nine
month  period ended June 30, 1997 to $464,152 for  the  nine
month  period  ended  June  30,  1998.    The  decrease  was
primarily  due  to  continued reductions  in  administrative
staff along with administrative overhead.

      Other  income during the third quarter decreased  from
$10,684  for the three month period ended June 30,  1997  to
$10,631  for the three month period ended June 30, 1998  and
increased from $40,019 for the nine month period ended  June
30, 1997 to $46,304 for the nine month period ended June 30,
1998.    Other  income is primarily rental  income  received
from leasing office space to BICO.  The fluctuations are the
results  of  interest  earned from investments  during  each
period.

<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 14th day of August, 1998.


                              DIASENSE, INC.

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