UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                     Washington, D.C. 20549

                            FORM 10-KSB


       ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
                      EXCHANGE ACT OF 1934


           For the fiscal year ended June 30, 2002

                                    Commission File number: 0-24974




                      DiaSys Corporation
 (Exact name of small business issuer as specified in its charter)



Incorporated in Delaware                        IRS Employer ID #)
81 West Main Street                                06-1339248
Waterbury, CT 06702
(203) 755-5083



Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the 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 ____

Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will
be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB.  _____

Registrant's revenues for the most recent fiscal year were $ 1,968,597.

As of September 30, 2002, the aggregate market value of the registrant's
voting stock held by non-affiliates was $4,171,852 based upon an average
closing price of $0.62 for the five trading days immediately prior thereto.

As of September 30, 2002, the Registrant had 10,674,971 shares of common
stock.

<page>
                              PART I

ITEM 1.  DESCRIPTION OF BUSINESS

This Annual Report on Form 10-KSB and the documents incorporated herein by
reference contain forward-looking statements based on current expectations,
estimates and projections about the Company's industry, management's
beliefs and certain assumptions made by management.  All statements,
trends, analyses, and other information contained in this report relative
to trends in net sales, gross margin, anticipated expense levels and
liquidity and capital resources, as well as other statements including, but
not limited to words such as "anticipate", "believe", "plan", "estimate",
"expect", "seek", "intend", and other similar expressions, constitute
forward looking statements.  These forward-looking statements are not
guarantees of future performance and are subject to certain risks and
uncertainties that are difficult to predict.  Accordingly, actual results
may differ materially from those anticipated or expressed in such
statements.  Potential risks and uncertainties include, among others, those
set forth herein under "Additional Factors That May Affect Future Results",
as well as "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Liquidity and Capital Resources".  Particular
attention should be paid to the cautionary statements involving the
Company's limited operating history, the unpredictability of its future
revenues, the unpredictable and evolving nature of its business model, the
intensely competitive online commerce and retail book environments and the
risks associated with capacity constraints, systems development, management
of growth and business expansion.  Except as required by law, whether as a
result of new information, future events or otherwise, readers, however,
should carefully review the factors set forth in other reports or documents
that the company files from time to time with the Securities and Exchange
Commission ("SEC").

OVERVIEW

DiaSys Corporation ("Company") designs, develops, manufactures and
distributes propriety workstation-instruments, consumables, reagents and
specialized test kits to hospital, clinical and private physician
laboratories worldwide.  The Company's workstation-instruments standardize,
increase the accuracy of, and reduce the cost to perform laboratory
analysis of urine sediment, fecal concentrates, cerebral spinal fluid
(CSF), fine needle aspirations (FNA), and other cell suspensions compared
to traditional laboratory testing methods.  The Company's consumable
products are in some cases combined with the Company's workstation
instruments to create practical, affordable system-solutions, while other
consumables provide cost-effective alternatives to similar products offered
by other companies.  The Company has also developed a quick, inexpensive
method for diagnosing Multiple Myeloma cancer; America's second most
prevalent blood cancer. The Multiple Myeloma test is sold in Europe for
research purposes and is in the process of being tested for human
applications worldwide.

DiaSys was organized in March 1992 in the State of Connecticut and effected
a statutory merger into a Delaware Corporation of the same name in December
1993.  The Company completed its initial public offering ("Offering") in
January 1995 and traded its common shares on NASDAQ under the symbol
"DIYS".  In December of 2000, the Company moved its listing from NASDAQ to
the American Stock Exchange (AMEX) and trades under the symbol "DYX".

Effective September 29, 2000, the Company purchased all of the outstanding
stock of Intersep Limited, a privately owned company based in Wokingham,
England.  Intersep, renamed to DiaSys Europe Limited, was purchased in
order to provide the Company with (a) profitable revenue; (b) new,
proprietary consumable products and test kits; and, (c) a direct presence
in the European community. The cost of acquisition and operating results
are reflected in the accompanying financial statement (See Note 2).

The Company sells and services its products in North America both directly
and through strategic distribution relationships with Bayer Corporation
(NYSE:BAY), Bayer Incorporated (Canada), Allegiance Healthcare, a
subsidiary of Cardinal Heath (NYSE:CAL), and Fisher Healthcare, a division
of Fisher Scientific International Inc (NYSE:FSH).  The Company also
markets its products through numerous relationships with group purchasing
organizations (GPO's) including Broadlane Inc, HealthTrust Purchasing
Group, and Premier Inc.

The Company directly sells and services its products in the United Kingdom
through its wholly owned subsidiary based in Wokingham, England.  Sales and
service throughout Europe, Asia and South America is conducted through
independent, third party distributors or strategic trading partners such as
Hua Sin Science Co. Limited in China.  All distributors and strategic
partners are managed by the Company through either of its offices in the
United States or United Kingdom.

Since inception, the Company has: (i) developed, acquired and patented
several new proprietary technologies; (ii) erected the infrastructure
needed to support global manufacturing and distribution operations; (iii)
established market and technical acceptance of its initial products among
the medical laboratory community; (iv) attracted significant strategic
selling partners in major markets; and, (v) implemented a plan for long
term market penetration.  As such, the Company has operated at a loss.  The
Company believes that it has successfully completed its developmental
stage.

BUSINESS STRATEGY

Since its inception, the Company has adhered to the following business
strategy: (a) identify gaps in the product offerings of leading medical
diagnostic manufacturers; (b) fill the gaps with proprietary, practical and
cost-effective solutions; (c) protect the intellectual property with broad-
based patents and trademarks; (d) turn the technology into affordable
products; (e) secure market acceptance of the products; (f) create
strategic sales and distribution alliances with industry and/or territorial
leaders (see: STRATEGIC RELATIONSHIPS below); and, (g) proceed to global
sales and distribution.   The Company currently has products at each stage
of its business strategy.

PRODUCTS

The Company's products can be broadly classified into two categories, (i)
workstation-systems which increase the accuracy and reduce the cost to
perform routine laboratory analysis of various body fluids; and, (ii)
consumable diagnostic products, reagents and test kits which facilitate
accurate diagnosis of certain medical conditions.  Each category can be
further described as follows:

Workstation-Systems

The Company's workstation-systems are composed of the "R/S",  "FE" and
"CytoSys" series of products.

R/S Series: The "R/S" series workstations standardize, automate, and reduce
the cost to perform routine microscopic analysis of urine sediment.  Users
of the "R/S" series workstations include: (i) large scale clinical
laboratory chains performing in excess of 20,000 urine tests per night;
(ii) major medical centers performing hundreds of urine tests per day; and,
(iii) local hospital laboratories performing as few as 100 tests per week.
The "R/S" series workstations have also been the subject of numerous
favorable evaluations and publications including those in the Journal of
Laboratory Medicine, Clinical Lab Products magazine, American Clinical
Laboratory magazine, European Clinical Laboratory magazine, College Of
American Pathology Today, and Urinalysis News.

The "R/S" series workstations are the preferred practice of major
laboratory networks, health maintenance organizations (HMO's) and core
medical facilities such as Quest/SmithKline Beecham and Kaiser Permanente.
The Company has also entered into strategic distribution agreements
regarding the promotion and sale of its "R/S" series workstations with and
by Bayer Corporation in the United States, Bayer Incorporated in Canada,
Allegiance Healthcare, a subsidiary of Cardinal Health (NYSE:CAH), Fisher
Healthcare, a division of Fisher Scientific International Inc (NYSE:FSH),
and Hua Sin Science Co. LTD, the exclusive distributor of Bayer's
urinalysis instruments in China (See: STRATEGIC RELATIONSHIPS below).

F/E Series:  The "FE" series workstation-systems are composed of the FE-2,
FE-2i, and Parasep collection tubes and fecal concentrators.  These
workstation-systems automate and reduce the cost of microscopic analysis of
fecal concentrates; a procedure performed by thousands of hospital, public
health and private commercial laboratories worldwide in order to detect the
presence of ova (eggs), cysts, and parasites in the lower intestinal tract
of humans and animals.  The presence of such organisms is critical to the
proper care of the patient.  The test is non-invasive, can be performed on
an outpatient basis, and quickly provides confirmatory results.

CytoSys Series: The CytoSys 1 is the first of a family of workstation-
systems, which automate and reduce the cost to perform microscopic analysis
of multiple body fluids including cerebral spinal fluid (CSF), fine needle
aspirations (FNA), serous, amniotic and other cell suspensions.  The
CytoSys will be released to market following completion of third-party
correlation studies, ranges and other required documentation, currently
underway.

Disposable Consumables, Diagnostic Test Products and Kits
Consumables:  The Company manufactures and distributes numerous consumable
diagnostic products, reagents and test kits.  The markets for these
products are hospital and commercial laboratories, biotech's, and
pharmaceuticals.
"Dip Stick" Test Kits: The Company recently announced a new, inexpensive
method for diagnosing multiple myeloma cancer at or near the patient.
Multiple Myeloma is America's most prevalent blood cancer behind leukemia,
and accounts for 2% of all known cancer deaths.  The Company is currently
selling the test in Europe for research applications, and has announced its
intention to market the product in the United States, China and other
markets if and as regulatory approvals are secured.

Additional Products

The Company is in the continuous process of developing new products for the
global healthcare marketplace.   The Company's current product development
plan extends into 2005.
SALES, MARKETING AND DISTRIBUTION
North America
The Company sells and services its workstation-systems and consumable
products through its headquarter offices in Waterbury, Connecticut.  North
America is organized into six distinct sales regions.  A manager staffs
each region and is responsible for sales and service of the Company's
products in his/her region.  North American sales efforts are supported by
a Director of Sales, a Manager of National Sales Support and a Customer
Service specialist, each located at the Company's headquarter office.  Each
sales manager earns a base salary and commissions based upon achievement of
quarterly and yearly objectives.  Sales in North America are facilitated by
strategic marketing and distribution alliances with Bayer Corporation,
Allegiance Healthcare, Fisher Healthcare, Broadlane, HPG, and Premier  in
the United States and Bayer Incorporated in Canada (see: Strategic
Relationships below).  Additionally, sales in North America are supported
by telemarketing, direct mail campaigns, advertising in key trade journals,
participation in technical workshops, and exhibitions at national trade
shows.
South and Central America
The Company has commenced distribution operations in parts of South and
Central America.  Distribution is conducted by independent, third party
distributors and monitored by the Company's Director of Sales, Marketing
and Service, Rest of World (ROW) based in Waterbury, Connecticut.
Distributors are exclusive to their assigned territory and are required to
meet certain minimum revenue commitments within the terms of the Company's
distribution plan and agreement.
Europe, the Middle East, India and Africa
The Company sells and services its workstation-systems and consumable
products in Europe, the Middle East, India, and Africa through its
subsidiary based in the United Kingdom.  DiaSys Europe, Ltd. sells and
services the Company's products directly in the United Kingdom and through
independent third party distributors in the balance of the territory.
Distributors are generally exclusive to their assigned territory and are
required to meet certain minimum revenue commitments within the terms of
the Company's distribution plan and agreement.

China and Pacific Asia

Sales and service of the Company's products in China, Hong Kong, Indo-
China, Indonesia, Malaysia and the Philippines is conducted by the
Company's strategic trading partner, Hua Sin Science Company, under the
direction and guidance of the Company's President and the Director of
Sales, Marketing and Service (ROW) (see: Strategic Relationships below).

Japan and Korea

The Company is in the process of qualifying suitable distributors in Japan
and Korea and has not commenced distribution operations there.

STRATEGIC RELATIONSHIPS

Allegiance HealthCare:

The Company has entered into a multiple-year distribution agreement with
Allegiance Healthcare Corp., a subsidiary of Cardinal Health, Inc.
(NYSE:CAH).  Allegiance is a leading provider of health-care products and
cost-management services to hospitals, laboratories and others in health
care.  Allegiance is also the primary distributor of urine chemistry
analyzers manufactured and sold by Bayer (see Bayer above).  Under the
terms of the agreement, Allegiance promotes and distributes the Company's
urine workstation-systems through its numerous sales reps and supply
relationships.
Bayer Corporation:
The Company has entered into a Strategic Cooperation Agreement with the
Diagnostics Division of Bayer Corporation, the United States subsidiary of
the international chemical and health care conglomerate, Bayer AG
headquartered in Germany.  Under the Cooperation Agreement, Bayer and
DiaSys recommend and refer each other's urinalysis instruments to hospital
and commercial laboratory customers in the United States.  The companies
also confer on account strategy and provide unified network standardization
plans through Bayer, Allegiance, Fisher, and Premier (see below) depending
upon the customer.  Bayer and DiaSys exhibit their urinalysis instruments
together at national and international trade shows, and DiaSys compensates
each Bayer sales representative who assists in the sale or cost-per-test
placement of an R/S 2000 or R/S 2003.  Each company installs and services
its own equipment.  There are numerous known customers using one or more
Bayer/DiaSys systems in North America.

Bayer Incorporated:

The Company has entered into a strategic distribution agreement with Bayer
Inc., the Canadian subsidiary of the international chemical and health care
giant, Bayer AG (Germany).  Under the agreement, Bayer's Health Care
Division promotes and sells the Company's urinalysis workstations to
hospitals and clinical reference laboratories in Canada.  Bayer has sold
numerous DiaSys workstations to Canadian customers under this relationship.

Broadlane Inc:

On April 2, 2002, the Company announced that was awarded a five-year supply
contract by Broadlane Inc., one of the nations foremost group purchasing
organizations (GPO).  Under the award, DiaSys will provide its R/S Series
Urine Sediment Analysis Workstations, FE Series Ova & Parasite Analysis
Workstations and its proprietary line of Parasep Filter-Concentrator Tubes
to Broadlane's healthcare customers nationwide.  Broadlane customers
include leading healthcare providers such as Kaiser Permanente, Tenet
Healthcare Corporation, Universal Health Services, Continuum Health
Partners, The Health Alliance of Greater Cincinnati, Kindred Healthcare,
Community Health Systems, U.S. Oncology, and Alliance Imaging Inc.  The
Company is in the process of implementing a product launch-plan with
Broadlane and Fisher (see above) to Broadlane's customers.

Fisher HealthCare:

On April 29, 2002, the Company announced that it had entered into a
multiple-year distribution agreement with Fisher Healthcare., a division of
Fisher Scientific International Inc. (NYSE:FSH).  Fisher is a leading
provider of health-care products and cost-management services to hospitals,
laboratories and others in health care.  Fisher is also a distributor of
urine chemistry analyzers manufactured and sold by Bayer (see Bayer above).
Under the terms of the agreement, Fisher will promote and distribute all of
the Company's products to customers in the United States through its
numerous sales reps and supply relationships.  The Company and Fisher are
in the process of developing a joint launch plan under this agreement.

HealthTrust Purchasing Partners:

The Company has entered into a two-year supply agreement with HealthTrust
Purchasing Group L.P. (HPG).  HPG is one of the nation's top healthcare
purchasing groups having in excess of 800 member facilities and a
contracting volume of approximately $5 billion.  Under the agreement,
DiaSys and Allegiance (see above) will jointly distribute the Company's
urinalysis workstations to HPG member facilities nationally through
Allegiance's sales force.


Hua Sin Science Co. LTD:

The Company has entered into a multi-year sales and service agreement with
Hua Sin Science Co. LTD, located in Guangzhou China.  Hua Sin manufactures
and distributes instruments and reagents to China's 60,000 hospital and
medical laboratories.  Hua Sin is also the exclusive distributor of Bayer's
CLINITEK series urine chemistry analyzers in China (see Bayer above).  The
Company officially commenced joint operations with Hua Sin in April, 1999,
and on May 4, 2000, announced that China's Health Ministry, the equivalent
of the United States' Food and Drug Administration (FDA), certified the
Company's urinalysis and fecal concentrate workstations for use by all of
China's 67,000 medical laboratories.  In 2002, the Company and Hua Sin
expanded their relationship to include sales and service operations in Hong
Kong, Indo-China, Indonesia, Malaysia and the Philippines.  The Company has
sold hundreds of workstation-systems to China through Hua Sin, and is in
the process of expanding Hua Sin's success to all of the Company's
products.

Premier Inc:

On May 8, 2002, the Company announced that had entered into a two-year
agreement with Premier Inc.  Premier is a strategic alliance in US
healthcare, entirely owned by more than 200 of the nation's leading
hospital and healthcare systems.  Under the agreement, the Company will
provide its urinalysis workstations to Premier's approximately 1,600
hospital affiliates located throughout the United States.  The Company and
Premier launched their joint plan to Premier's customers in June, and are
now in the process of implementation.

Government Contracts:

The Company has been awarded two Federal supply contracts: (i) one by the
General Services Administration (GSA), and (ii) one by the Department of
Veteran's Affairs (FSS). The GSA contract allows government agencies to
purchase workstations, and the FSS allows the network of veteran and
military hospitals to install workstations on a "cost-per-test" basis.  The
Company has installed numerous workstations under these awards.

Other Significant Relationships:

The Company has established a number of other important relationships with
large-scale national laboratory networks and buying groups. The Company's
products are used in multiple sites in each of the five largest commercial
laboratory networks in the nation.

COMPETITION

The "R/S" Series:

The Company knows of no other product, which competes directly with the
"R/S" series workstations.  There are however five competing technologies
for the "R/S" series: (i) traditional use of a microscope to examine a
glass slide of urine sediment; (ii) traditional use of a microscope to
examine urine sediments introduced into a pre-formed plastic slide
assembly; (iii) a video imaging system which automatically "recognizes" and
"counts" pre-stored images of "common shapes" found in urine sediment; (iv)
a laser based system which detects "abnormal" urines thereby reducing the
number which must be manually analyzed; and, (v) pre-screening using
chemically treated reagent or "dip" strips.

The oldest technology is the use of a microscope to examine a glass slide
of urine sediment.  However, as described elsewhere, the use of microscope
slides and cover slips is time consuming, prone to inconsistencies, and
expensive.  Pre-formed plastic slides are easier to handle than glass and
provide more standardization. However, the optical quality seen through
plastic slides tends to be significantly inferior to that of glass and the
cost is generally higher.  The video imaging system on the market provides
a "standard procedure" for urinalysis, dispenses with the need for costly
consumable items such as glass or plastic slides, and, sharply reduces
exposure to potentially infectious materials carried in urine.  However,
since the instrument requires expensive proprietary reagents to operate and
costs between $85,000 and $200,000 to acquire, the Company believes that
only the largest laboratories with the most liberal budgets can justify the
purchase and/or use of such a system.  The laser-based system screens-out
"normal" urines thereby reducing the number of "abnormal" urines requiring
manual analysis.  However, in addition to still requiring manual analysis
of some samples, the laser-based system has a list price of approximately
$120,000 and requires comparatively expensive proprietary reagents to
operate, making the system somewhat expensive for normal laboratory
implementation. Lastly, reagent strips are very efficient for determining
chemical compositions, but they do not detect the existence of many types
of particulate matter otherwise having clinical significance.

The "FE" Series:

The Company knows of no other workstation-system, which standardizes,
automates and reduces the cost to collect process, and analyze fecal
concentrates from parasites, eggs and cysts.

CytoSys:

The Company knows of no other workstation-system, which automates the
microscopic analysis of multiple body fluids for under $50,000.

The Company expects to encounter competition in the laboratory equipment
industry.  While the Company believes that the "R/S", "FE" and CytoSys
series workstations are currently the only products of their type in the
market, many of the Company's competitors and potential competitors have
substantially greater resources, including capital, research and
development, personnel and manufacturing and marketing capabilities, and
also may offer well established, broad product lines and ancillary
services.  Some of the Company's competitors have long-term or preferential
supply arrangements with hospitals.  Such arrangements may act as a barrier
to market entry to the Company's products.  Competing companies may succeed
in developing products that are more efficacious or less costly and such
companies may also be more successful than the Company in production and
marketing.  Rapid technological development by others may result in the
Company's products becoming obsolete before the Company recovers a
significant portion of the research, development and commercialization
expenses incurred with respect to those products. There can be no assurance
that the Company will be able to compete successfully.

Disposable Diagnostic Products and Test Kits:

The disposable diagnostic product and test kit market is a multi-billion
dollar industry made up of numerous companies, many of whom have more
financial resources, research and development, marketing, and distribution
capabilities than the Company.  The Company therefore believes that the
commercial success of these products will depend upon their continued high
quality, competitive advantages (including price) and the distribution
efforts of the Company's strategic trading partners.

MANUFACTURING AND WARRANTY OBLIGATIONS

The Company internally designs and manufactures its workstations in
Waterbury, Connecticut.  The Company internally develops its consumable
products in both its United States and United Kingdom offices, but
manufactures them through a network of molders, machine shops and other
third party subcontractors.  All sub-assemblies, parts, consumables and
kits manufactured by sub-contractors are made according to Company
specifications.  All final assembles and final tests are conducted by the
Company in one of its two facilities.   The Company has developed alternate
qualified vendors for its critical raw material and supplies that could
fulfill its requirements if needed.  Implementation of the plan has
resulted in higher manufacturing quality, reduced lead-time-to-delivery and
reduced costs in manufacturing.

The Company provides its customers with a one year "swap out" warranty
against defects in parts or workmanship on all new or refurbished
workstations from the date of delivery, generally defined as FOB, DiaSys.
This means that in the event a unit fails due to a defect in parts and/or
workmanship during the warranty period, the Company will replace the unit
with a new or refurbished unit at the Company's option.  For service after
the initial year of warranty, the Company offers an optional extended
warranty protection plan, a service plan, and also provides repair and
service at an hourly rate plus parts.  The Company experiences minimal
additional costs associated with its warranty obligations.

PATENTS AND TRADEMARKS

The Company's continued success rests in part on the uniqueness of
intellectual property.  The Company therefore continues to build and
maintain a worldwide network of patents and trademarks.

Patents:

The Company has been granted numerous patents on its R/S, FE, CytoSys and
Parasep technologies.  Four such patents have been issued by the United
States Department of Commerce both on the concept and specific architecture
of the Company's workstation-systems.  The Company has also been granted
similar patent protection in Austria, Belgium, Brazil, Canada, China,
Denmark, England, France, Germany, Greece, Ireland, Italy, Japan,
Liechtenstein, Luxembourg, Monaco, the Netherlands, Portugal, Singapore,
and Taiwan.  The Company has additional applications for patents pending,
both domestic and abroad.

Trade Names:

The Company has been granted trade name protection for "DiaSys" and
numerous product names, both domestically and abroad.  The Company has
additional applications pending for trade names in the United States,
Europe and Pacific Asia.

There can be no assurance that any future applications by the Company for
patent protection will result in patents being issued, or, if issued, that
such patents will provide a competitive advantage or will afford protection
against competitors, with similar technology, or that competitors of the
Company will not circumvent, or challenge the validity of any patents
issued or licensed by the Company.  Moreover, there can be no assurance
that the Company's non-disclosure agreements and other safeguards will
protect its proprietary information and trade secrets or provide adequate
remedies for the Company in the event of unauthorized use or disclosure of
such information, or that others will not be able to independently develop
such information.

GOVERNMENT REGULATIONS

The Company has obtained all necessary safety certifications for its
products.  The Company's UK-based operations are ISO 9001 certified, and
the Company is in the process of qualifying its headquarter facility for
ISO certification as well.

On May 23, 1995, the Company received clearance from the Food and Drug
Administration (FDA) to release the R/S 2003 and related products to
market.  In the same letter, the FDA stated that any of the Company's
future products, which are substantially equivalent to the new
workstations, might be marketed directly without first submitting pre-
market notification.

Although the "R/S", "FE" and "Cytosys" series workstations are exempt from
FDA 510(k) pre-market notification requirements, the development, testing,
manufacturing and marketing of the Company's products in the United States
are regulated by the FDA, which generally requires clearance of such
products before marketing.  Moreover, regulatory approval, if granted, may
include significant limitations on the indicated uses for which a product
may be marketed.  Failure to comply with applicable regulatory requirements
can result in, among other things, fines, suspensions of approvals, product
seizures, injunctions, recalls of products, operating restrictions and
criminal prosecutions.  There can be no assurance that the Company will be
able to obtain the necessary regulatory clearance for the manufacturing and
marketing of other products, which are currently in the development stage,
either in the United States, or in foreign markets on a timely basis or at
all.  Certain of the Company's future diagnostic products may require
submission to the FDA of an application for Pre-market Approval.  Delays in
receipt of or failure to receive clearances to commence clinical studies or
to market products, or loss of previously received clearances, would
adversely affect the marketing of the Company's proposed products and the
results of future operations.

None of the Company's rapid tests, including the one for multiple myeloma,
have been FDA approved.

Commercial distribution in most foreign countries is also subject to
varying government regulations.  In addition, federal, state and
international government regulations regarding the manufacture and sale of
diagnostic devices are subject to future change, and additional regulations
may be adopted which may prevent the Company from obtaining, or affect the
timing of, future regulatory clearances and may adversely affect the
Company.

The Company's manufacturing process is subject to stringent federal, state
and local regulations governing the use, generation, manufacture, storage,
handling and disposal of certain materials and wastes, and regarding the
manufacture, testing, labeling, record keeping, and storage of diagnostic
devices, including current Good Manufacturing Practices regulations and
similar foreign regulations.  Although the Company believes that it and its
subcontractors have complied in all material respects with such laws and
regulations, there can be no assurance that the Company will not be
required to incur significant costs in the future in complying with
manufacturing and environmental regulations.

LABORATORY REGULATIONS

Regulations issued under the Clinical Laboratory Improvement Amendments of
1988 ("CLIA") became effective September 1, 1992. CLIA is intended to
increase the quality of laboratory services and extends these requirements
to physician office laboratories.  CLIA requires laboratory licensing and
written operational and quality control procedures for tests that are
carried out in the laboratory.  It establishes personnel standards
regarding qualification and training of individuals who carry out the
tests.  It also mandates periodic inspection and proficiency evaluation of
the performance of these procedures and individuals.  CLIA requires the
more complex procedures such as clinical microscopy to be performed by more
skilled medical technologists.  The CLIA requirements have caused more
physicians offices to transfer their laboratory testing to local hospital
or reference laboratories and have also resulted in consolidation of many
smaller reference laboratories.

The Company believes that its workstation-systems and consumables improve
the accuracy and reproducibility of laboratory procedures, and therefore
believes that CLIA regulations are likely to help rather than hinder its
sales efforts in the longer term.

BIOHAZARD CONTAINMENT

OSHA mandates that all necessary precautions be taken to ensure the safety
of clinical laboratory personnel handling biohazard materials including
body fluids that may contain life-threatening, blood-borne infectious
pathogens such as tuberculosis, hepatitis B and human immunologic viruses.

The Company believes OSHA regulations are likely to help rather than hinder
sales of the Company's products since the Company's workstation-systems and
consumables diminish or eliminate the inherent risks of handling body
fluids by providing a sealed and/or quick method of analysis.

THE INDUSTRY

The health care industry has experienced fundamental changes over the past
several years.   Specifically, laboratories were generally considered to be
cost-centers (i.e. operating profitably was not a priority).   Through
global health care reform, however, the "cost-center" mentality has
substantially fallen out of favor in most major markets throughout the
world, and laboratory managers are increasingly concerned about ways to
conserve resources and increase cost-efficiency without reducing test
accuracy or quality of medicine.  Moreover, the quest for greater
laboratory efficiency has put immense pressure on leading manufacturers to
develop or find new, appropriate technologies for market.

Laboratories world-wide have become significantly more cost-conscious, many
imposing more intense reviews of capital acquisitions, particularly for new
systems like the Company's workstation-systems, which address areas
traditionally not requiring significant capital investments.

However, laboratories must contend with the aforementioned new OSHA and
CLIA regulations.  Since the Company's products are designed to reduce the
amount of labor required to perform laboratory tests and the specimen
biohazard exposure, as well as to standardize and improve the analytical
quality of the test procedure, the Company believes these factors could
enhance its competitive position in the market.  There can be no assurance,
however, that continued reductions in reimbursements would not have a
material adverse affect on sales and Company operations.

At the present time, the Company is unable to predict what affect, if any,
a change in the health care system could have on the Company.  While the
Company believes that the cost-effectiveness of its workstation-systems and
consumables should benefit medical and clinical laboratories, medical and
clinical laboratories may elect to postpone important decisions regarding
capital expenditures until any changes in the health care system are
completed and their full scope and effect known.

PRODUCT LIABILITY

The Company faces potential liability in connection with the use of its
products.  The Company has purchased product liability insurance in the
amount of $2,000,000.  The Company believes that its present insurance is
sufficient for its current level of business operations.  There can be no
assurance however that such insurance will be sufficient to cover potential
claims or that the present level of coverage will be available in the
future at a reasonable cost.

ENVIRONMENTAL COMPLIANCE

The Company believes that its manufacturing process conforms to all
federal, state and local environmental regulations.  There can be no
assurances, however, that the Company will not be required to incur
significant costs in the future in complying with environmental
regulations.

EMPLOYEES

As of June 30, 2002 the Company employed 29 persons, 10 of whom were
engaged in sales and marketing, 4 in research and development, 7 in
manufacturing, and 8 in administrative, finance and other clerical support
activities.

ITEM 2.  PROPERTIES

The Company leases 12,000 square feet of space at 81 West Main Street,
Waterbury, Connecticut for its headquarters, research and development and
assembly operations.  The lease rate includes all management fees, real
estates taxes, common area charges, heat, air-conditioning, electricity,
janitorial services, limited parking and such other expenses normally
incurred by the Tenant.  The lease expires on January 31, 2006 but may be
earlier terminated by the Company upon six (6) months written notice at any
time after August 1, 2003.   The lease provides for the lease payment
schedule:


ANNUAL PERIOD                 MONTHLY LEASE RATE    ANNUAL LEASE RATE

Feb 1 2002 to Jan 31, 2003             $9,115.50          $109,386.00
Feb 1 2003 to Jan 31, 2004             $9,115.50          $109,386.00
Feb 1 2004 to Jan 31, 2005             $9,388.96          $112,667.58
Feb 1 2005 to Jan 31, 2006             $9,388.96          $112,667.58

The Company's wholly owned subsidiary leases approximately 4,300 square
feet of office, final assembly and warehousing space in Wokingham, England.
The lease rate is approximately $36,050 per year, on a triple net basis.
The lease commenced May 1, 2002 and expires April 30, 2012.

ANNUAL PERIOD               QUARTERLY LEASE RATE    ANNUAL LEASE RATE

May 1 2002 to April 30, 2003           $3,004.17           $36,050.00
May 1 2003 to April 30, 2004           $3,004.17           $36,050.00
May 1 2004 to April 30, 2005           $3,004.17           $36,050.00
May 1 2005 to April 30, 2006           $3,004.17           $36,050.00
May 1 2006 to April 30, 2007           $3,004.17           $36,050.00
May 1 2007 to April 30, 2008           $3,004.17           $36,050.00
May 1 2008 to April 30, 2009           $3,004.17           $36,050.00
May 1 2009 to April 30, 2010           $3,004.17           $36,050.00
May 1 2010 to April 30, 2011           $3,004.17           $36,050.00
May 1 2011 to April 30, 2012           $3,004.17           $36,050.00


ITEM 3.  LEGAL PROCEEDINGS

HealthTest Limited, Paul Reardon, et al.:  In September of 2001, the
Company found reason to believe that Mr. Paul Reardon, the Managing
Director of DiaSys Europe Limited, was engaging in competitive practices in
violation of his employment agreement and the Share Purchase Agreement
between the Company and the shareholders of Intersep.   Subsequently, the
Company discovered evidence which strongly suggested that Mr. Reardon was
attempting to divert the business of DiaSys Europe to HealthTest Limited, a
Company which Mr. Reardon was a Director and a participant in further
breach of contract.  The evidence further suggested that Mr. Reardon
assisted HealthTest to obtain the customer, distributor, and supplier lists
of DiaSys Europe, and permitted HealthTest to operate from the premises of
DiaSys Europe.  On November 13, 2001, following a meeting called to review
these improprieties with Mr. Reardon, Mr. Reardon was immediately
discharged from employment FOR CAUSE, and the Company served injunctive
court orders on HealthTest Limited, Mr. Reardon, and two past employees of
the DiaSys Europe Limited (the "Respondents").  The Company temporarily
installed Mr. Robert P. Carroll, a Director of the Company, in England as
interim acting Managing Director, and in January 2002, hired Mr. Reardon's
replacement.  The Company experienced an interruption in its European
business for the periods ended December 31, 2001 and March 31, 2002, and
incurred approximately $300,000 in costs for legal, consulting, accounting,
and investigative services.

On May 1, 2002, the Company entered into a settlement agreement with the
Respondents pursuant to which: (a) HealthTest would be wound-down and its
name assigned to DiaSys; (b) a combination of the Respondents would pay
DiaSys the sum of $175,000; (c) the Respondents would not compete with the
Company for stipulated periods; and, (d) the parties would exchange mutual
releases.  Proceeds from the settlement agreement have been recognized as
an offset to legal expenses for the period ended June 30, 2002.

Lenta:

In 1999, the Company and its now subsidiary entered into separate,
concurrent multiple-year sales agreements with a distributor based in
Istanbul Turkey.  The distribution agreements were made with Lenta Teshis
Orunleri Ticaret ve Sanayi Ltd. St. and its affiliates and subsidiaries
("Lenta").  Under the agreements, Lenta purchased a total of $383,781.53
worth of products over two years for which it paid the Company and its
subsidiary a total of $139,901.83.   On December 19, 2001, following
numerous discussions, the Company and Lenta executed an Agreement Of
Payment pursuant to which Lenta acknowledged its debt of US $262,042.22 and
agreed to pay the monies owed in ten equal monthly installments.  On
January 17, 2002, The Company and Lenta (together with Lenta's affiliates
and subsidiaries) entered into a new distribution agreement through which
Lenta was authorized to sell and service the Company's products in Turkey
so long as Lenta, its affiliates and subsidiaries, continued to make timely
payments under the above Agreement, the terms of which were restated in the
distribution agreement.

In January 2002, Lenta made two wire transfers to the Company totaling US
$22,000.00, which was $4,204.22 less than the first installment required
under the agreement.  Lenta made no additional wire transfers or payments
thereafter despite numerous telefaxed promises made by Ali Ipyurt, Lenta's
General Manager.  On April 9, 24, and 29, the Company informed Lenta by
telefax that if Lenta could not bring its installment obligations to date
by May 1, 2002, the Company would have no choice but to terminate the
distribution agreement for breach of contract, name a new distributor in
the territory and proceed against Lenta for collection and costs.   On May
21, the Company, having received no additional funds from Lenta, terminated
the distribution agreement and put Lenta on notice that the Company would
commence legal recourse in both the United States and Turkey under the
terms of the agreement.  The Company has taken a reserve of 50% or
$120,000.00 against the Lenta receivable as a conservative measure.
Management will review the sufficiency of the reserve on a quarterly basis
based on the progress of its collection activities.

On June 8, 2002, the Company appointed a new distributor in Turkey, Ekin
Medical, who has ordered and received US $113,500 worth of the Company's
products.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None


                            PART II

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS

The Company is authorized to issue 99,900,000 shares of Common Stock,
$0.001 par value, of which 10,674,971 shares were issued and outstanding as
of June 30, 2002.

The Company's common stock is traded on the American Stock Exchange (AMEX)
under the symbol "DYX".

As of September 30, 2002 the Company's Common Stock was held by in excess
of 1,500 beneficial holders.

The following table sets forth the high and low closing bid quotations for
the Company's Common Stock and Warrants as reported by NASDAQ for the
periods indicated.  These quotations represent bid prices between dealers,
do not include retail mark-ups, markdowns or commissions, and do not
necessarily represent actual trade transactions.

                                  Common Stock

Year Ended June 30, 2002,         High      Low

4th Quarter                       1.250    0.700
3rd Quarter                       1.610    0.750
2nd Quarter                       1.450    0.390
1st Quarter                       0.750    0.400

Year Ended June 30, 2001,         High      Low

4th Quarter                       1.250    0.650
3rd Quarter                       9.500    0.850
2nd Quarter                       9.500    7.813
1st Quarter                       9.375    8.000


<TABLE>
EQUITY COMPENSATION PLAN INFORMATION
<CAPTION>
                                Number of Securities to be
                                 issued upon exercise of         Weighted average exercise         Number of securities
                                outstanding options, warrants    price of outstanding options,     remaining available for
Plan Category                         and rights                     warrants and rights              future issuance
<S>                             <C>                              <C>                               <C>

Equity compensation plans
  approved by security holders            1,412,000                          $3.24                           1,088,000

Equity compensation plans
  not approved by security
  holders                                     -                                 -                                -

Total                                     1,412,000                          $3.24                           1,088,000

</TABLE>


ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

Certain statements contained herein are not based on historical facts, but
are forward-looking statements that are based upon numerous assumptions
about future conditions that could prove not to be accurate.  Actual
events, transactions and results may materially differ from the anticipated
events, transactions or results described in such statements.  The
Company's ability to consummate such transactions and achieve such events
or results is subject to certain risks and uncertainties.  Such risks and
uncertainties include, but are not limited to: the existence of, demand
for, and acceptance of the Company's products and services; the ability of
the Company to develop new and timely products; the ability of the Company
to maintain and expand its business relationship with its distributors and
strategic partners (see: STRATEGIC RELATIONSHIPS above); the effect of
regulatory approvals and developments, economic conditions, the impact of
competition; and, other factors affecting the Company's business that are
beyond the Company's control.  The Company undertakes no obligation and
does not intend to update, revise or otherwise publicly release the result
of any revision to these forward-looking statements that may be made to
reflect future events or circumstances.

FINANCIAL CONDITION

The Company's financial results for the period ended June 30, 2002 were
materially and adversely affected by the HealthTest matter (See: Legal
Proceedings, above ).  Management believes that the HealthTest adversity
has been isolated and that the Company has resumed its strategic growth
plan for Europe.

LIQUIDITY AND CAPITAL RESOURCES
                                                  FISCAL
                                             2002	         2001
(In dollars, except for ratios)

TOTAL CURRENT ASSETS                     $2,154,323    $2,685,346
TOTAL CURRENT LIABILITIES                   724,426       310,827
WORKING CAPITAL                           1,429,897     2,374,519

WORKING CAPITAL RATIO TO 1                      3.0           8.6

FISCAL YEAR ENDED JUNE 30, 2002 COMPARED TO FISCAL YEAR ENDED JUNE 30, 2001

FINANCIAL CONDITION

Working capital decreased by $944,622 from June 30, 2001 to June 30, 2002.
Cash and equivalents decreased by  $654,515 over the same period.  The
decrease in cash, cash equivalents and working capital was due primarily to
losses from operations, $125,000 in non reimbursed legal, investigator,
accounting, and management expenses incurred in connection with the
HealthTest matter (See: Legal Proceeding above), and $37,000 in non-
recurring legal fees incurred in connection with the Company's review of
its obligations with respect to the delinquent filings of a certain
person(s) who at one time held in excess of 10% of the Company's common
stock. (See Item 11 below)

On June 28, 2002, the Company entered into an Agreement pursuant to which
it sold 181,250 shares of its common stock and accompanying 3-year warrants
(the "Warrants") to purchase common shares, to an accredited investor, Mr.
Morris Silverman, of Chicago, Illinois for $500,000.  The Warrants allow
Mr. Silverman to purchase an additional 117,188 of commons shares at a
price of $0.64 per share at any time prior to June 28, 2005.

Inventory remained relatively unchanged at $543,083 in fiscal year 2002
compared to $511,837 in fiscal year 2001.

As of June 30, 2002 the Company had no outstanding debt other than
customary trade payables.

Management believes that it has sufficient funds and resources on hand to
discharge its obligations for at least the next twelve months.  This
determination is based on the current backlog status and anticipated ship
dates of same.

RESULTS OF OPERATIONS

REVENUES

The Company's gross revenue increased 11% or $192,294 from $1,776,303 in
fiscal year 2001 to $1,968,597 in fiscal 2002.  The increase in revenue
reflects growing customer interest in the Company's products
notwithstanding the adverse effect of the HealthTest Matter (See: Legal
Proceedings above).

GROSS PROFIT AND GROSS PROFIT MARGINS

The Company's gross profit increased by 14% or $152,041 from $1,064,121 in
fiscal year 2001 to $1,216,162 for fiscal year 2002.  The Company's gross
profit margins increased to 62% for fiscal year 2002, up from 60% for
fiscal year 2001.  The increase reflects the implementation of several
measures to increase the gross profit margins of DiaSys Europe, including
an increase in the price of some items and the elimination of several non-
proprietary products.  The Company expects gross profit to increase due to
these measures and continued growth in sales.




SELLING, GENERAL, AND ADMINISTRATIVE (SG&A)

The Company's SG&A expenses decreased 3% or $75,282 from $2,458,053 for
fiscal year 2001 to $2,382,771 for fiscal year 2002.  The decrease in SG&A
was due primarily to expense management and growing economies of scale.
SG&A would have decreased 10% or $237,282 had it not been for the $125,000
of non reimbursed expenses incurred in the HealthTest matter (See: Legal
Proceedings above) and the $37,000 in one-time legal expenses incurred in
connection with the Company's review of the delinquent filings of a certain
person(s) who at one point in time held more than 10% of the Company's
common stock.


RESEARCH AND DEVELOPMENT (R&D)

R&D expenses remained essentially unchanged at $473,787 for fiscal year
2001 compared to $489,430 for fiscal year 2002.

NET (LOSS)

The Company's net loss decreased 7% or $128,687 from $1,770,065 in fiscal
year 2001 to $1,641,378 in fiscal year 2002.  The decrease in net loss was
due primarily to increased sales, expense management, and growing
efficiencies of scale.  Net loss would have decreased 16% or $290,687 had
it not been for the $125,000 of non reimbursed expenses incurred in the
HealthTest matter (See: Legal Proceedings above) and the $37,000 in one-
time legal expenses incurred in connection with the Company's review of the
delinquent filings of a certain person(s) who at one point in time held
more than 10% of the Company's common stock.

INFLATION

Although the Company believes that inflation has not had a material adverse
affect on the results of operations to date, any increases in costs of raw
materials or labor to the Company could affect the prices charged by the
Company to its clients.



ITEM 7 - FINANCIAL STATEMENTS AND SCHEDULES

See Schedules

ITEM 8 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None

                              PART III

ITEM 9 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information under the caption "Election of Directors and Officers" in
the Company's definitive Proxy Statement, to be filed pursuant to
Regulation 14A for the 2002 Annual Meeting of Shareholders, is hereby
incorporated herein by reference.

ITEM 10 - EXECUTIVE COMPENSATION

The information under the caption "Executive Compensation" in the Company's
Proxy Statement to be filed pursuant to Regulation 14A for the 2002 Annual
Meeting of Shareholders is hereby incorporated herein by reference.

ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information under the caption "Voting Securities and Principal Holders
Thereof" and the information as to beneficial ownership of the Company's
Common Stock and Warrants in the table under the caption "Election of
Directors" in the Company's definitive Proxy Statement, to be filed
pursuant to Regulation 14A for the 2001 Annual Meeting of Shareholders, is
hereby incorporated herein by reference.

In addition, on July 26, 2000, Mr. J. Virgil Waggoner reported on Form 13-D
that he had acquired 1,145,410 shares of DiaSys Corporation and therefore
owned 18.3% of the Company's outstanding common stock.  According to the
filing, the stated purpose of ownership was for investment.

In preparation of its annual meeting materials, the Company subsequently
learned and reported that Mr. Waggoner's position had been increased to
1,415,710, or 22.5%.

On January 15, 2001, Mr. Waggoner notified the Company by telefax and
Federal Express that his ownership position of 1,415,710 common shares was
reduced to 1,396,910 such shares through the unlawful and/or unauthorized
sale of 18,800 shares from his account.

On January 16, 2001, the Company, through its general counsel firm,
recommended that Mr. Waggoner update his SEC filings accordingly.

On September 17, 2001, the Company, by e-mail, asked Mr. Waggoner to
provide copies of Forms 3, 4 or 5 with regard to Mr. Waggoner's ownership
position in the Company.

On September 21, 2001, Mr. Waggoner, through his attorney, notified the
Company that Mr. Waggoner's position had been reduced to 450,000 common
shares through the unlawful and/or unauthorized sale of approximately
1,000,000 shares by persons unaffiliated with Mr. Waggoner.

On September 25, 2001, the Company, through its general counsel firm, again
recommended that Mr. Waggoner bring his SEC filings current on this matter.

On December 12, 2001, the Company, by e-mail, asked Mr. Waggoner to confirm
the correct number of shares he, directly or beneficially, owned as such
information was required to discharge the Company's reporting obligations
in its Proxy Statement and attending documents.

On January 31, 2002, Mr. Waggoner, through his attorney, reported to the
Company's general counsel firm that Mr. Waggoner was in the process of
filing an amended 13D with the Securities and Exchange Commission, but that
Mr. Waggoner would be unable to file an SEC Form 4 as he did not know the
dates his DiaSys stock was converted.

On February 22, 2002, the Company, through its general counsel firm, asked
Mr. Waggoner's counsel for proof that Waggoner's 13D was filed.

On February 28, 2002, the Company, by e-mail, again asked Mr. Waggoner to
file his 13D.

On June 10, 2002, the Company turned the matter and a copy of its
correspondence file over to the Enforcement Division of the Securities and
Exchange Commission.

The Company does not know Mr. Waggoner's actual stock position in the
Company, nor the number of late reports nor the number of transactions that
have not been reported on a timely basis.

ITEM 12  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

None

                              PART IV

ITEM 13 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8K

None

<page>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Act
of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

Dated September 30, 2002                    DiaSys Corporation

                                          By: /s/Todd M. DeMatteo
                                          -----------------------
                                          Todd M. DeMatteo, President,
                                          CEO and Director

Pursuant to the requirements of Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

/s/ Todd M. DeMatteo
---------------------
Todd M. DeMatteo
President, CEO and Director	                  Date: September 30, 2002

/s/ Diane J. Sentner
---------------------
Diane J. Sentner
Chief Financial Officer,
Assistant Secretary                          Date: September 30, 2002

/s/ Conard R. Shelnut
---------------------
Conard R. Shelnut
Secretary and Director                       Date: September 30, 2002

/s/ Robert P. Carroll
---------------------
Robert P. Carroll
Director                                     Date: September 30, 2002

/s/ Dr. Robert Engel
---------------------
Dr. Robert Engel
Director                                     Date: September 30, 2002

/s/ Anthony P. Towell
---------------------
Anthony P. Towell
Director                                     Date: September 30, 2002

/s/ Stuart Robbins
Stuart Robbins                               Date: September 30, 2002
Director

<page>
CERTIFICATION

I, Todd M. DeMatteo, certify that:

1. I have reviewed this annual report on Form 10-K, and all reports on Form
8-K containing distribution or servicing reports filed in respect of
periods included in the year covered by this annual report of DiaSys
Corporation;

2. Based on my knowledge, the information in these reports, taken as a
whole, does not contain any untrue statement of a material fact or omit to
state a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such
statements were made, not misleading as of the last day of the period
covered by this annual report;

3. I am responsible for establishing and maintaining disclosure controls
and procedures to ensure that material information is made known to me.  I
have evaluated the effectiveness of the disclosure controls and procedures
within ninety days of filing this report and have presented in the report
their conclusions about the effectiveness of the disclosure controls and
procedures based on the required evaluation as of that date;

4. I have disclosed to the registrant's certified public accountants all
significant deficiencies in the design or operation of internal controls
which could adversely affect the issuer's ability to record, process,
summarize and report financial data and have identified for the issuer's
auditors any material weaknesses in internal controls; and

5. I have indicated in the report whether or not there were significant
changes in internal controls or in other factors that could significantly
affect internal controls subsequent to the date of their evaluation,
including any corrective actions with regard to significant deficiencies
and material weaknesses.

Dated: September 30, 2002                   /s/ Todd M. DeMatteo
                                            ----------------------------
                                            Todd M. DeMatteo, President
                                              and Chief Executive Officer


CERTIFICATION

I, Diane J. Sentner, certify that:

1. I have reviewed this annual report on Form 10-K, and all reports on Form
8-K containing distribution or   servicing reports filed in respect of
periods included in the year covered by this annual report of DiaSys
Corporation;

2. Based on my knowledge, the information in these reports, taken as a
whole, does not contain any untrue statement of a material fact or omit to
state a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such
statements were made, not misleading as of the last day of the period
covered by this annual report;

3. I am responsible for establishing and maintaining disclosure controls
and procedures to ensure that material information is made known to me.  I
have evaluated the effectiveness of the disclosure controls and procedures
within ninety days of filing this report and have presented in the report
their conclusions about the effectiveness of the disclosure controls and
procedures based on the required evaluation as of that date;

4. I have disclosed to the registrant's certified public accountants all
significant deficiencies in the design or operation of internal controls
which could adversely affect the issuer's ability to record, process,
summarize and report financial data and have identified for the issuer's
auditors any material weaknesses in internal controls; and

5. I have indicated in the report whether or not there were significant
changes in internal controls or in other factors that could significantly
affect internal controls subsequent to the date of their evaluation,
including any corrective actions with regard to significant deficiencies
and material weaknesses.


Dated: September 30, 2002                   /s/ Diane J. Sentner
                                            -------------------------
                                               Diane J. Sentner
                                              Chief Financial Officer

<Page>
INDEX TO FINANCIAL STATEMENTS


                                                   Page

Independent Auditors' Report                         18

Financial Statements:

Balance sheet at June 30, 2002                       19

Statements of operations for the
years ended June 30, 2002 and 2001                   20

Statements of changes in stockholders'
equity for the years ended
June 30, 2002 and 2001                               21

Statements of cash flows for the years
ended June 30, 2002 and 2001                         22

Notes to financial statements                     23-31

<page>

                    INDEPENDENT AUDITORS' REPORT


Board of Directors
DiaSys Corporation and Subsidiary


We have audited the accompanying consolidated balance sheet of DiaSys
Corporation and subsidiary as of June 30, 2002 and the related consolidated
statements of operations, changes in stockholders' equity and cash flows
for each of the two years in the period ended June 30, 2002.  These
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America.  Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement.  An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements.  An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.  We
believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of DiaSys Corporation and subsidiary at June 30, 2002, and the
consolidated results of its operations and its cash flows for each of the
two years in the period ended June 30, 2002, in conformity with accounting
principles generally accepted in the United States of America.







                                             WISS & COMPANY, LLP

Livingston, New Jersey
September 5, 2002

<page>
<TABLE>
                       DIASYS CORPORATION and SUBSIDIARY
                          CONSOLIDATED BALANCE SHEET
                                JUNE 30, 2002
<CAPTION>
ASSETS
<S>                                                         <C>         <C>
CURRENT ASSETS:
  Cash and equivalents                                      $  544,192
  Accounts receivable, less allowance for doubtful
    accounts of $208,690                                       759,485
  Finance receivables, net                                     200,059
  Inventories                                                  543,083
  Prepaid expenses and other current assets                    107,504
         Total Current Assets                                           $2,154,323

PROPERTY AND EQUIPMENT, LESS
ACCUMULATED DEPRECIATION                                                   249,087
OTHER ASSETS:
  Computer software,
    less accumulated amortization of $56,462                     8,917
  Patents, less accumulated amortization of $581,087         2,379,530
  Deferred acquisition and offering costs                        9,668
  Other assets - non-current                                    73,885
  Long-term finance receivables, net                           106,115
         Total Other Assets                                              2,578,115

Total Assets                                                            $4,981,525
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S>                                                         <C>
CURRENT LIABILITIES:
  Accounts payable and accrued expenses                     $  724,426
         Total Current Liabilities                                      $  724,426

STOCKHOLDERS' EQUITY:
  Common stock $.001 par value:
    Authorized 99,900,000 shares, 10,674,971 issued             10,675
  Additional paid-in-capital                                15,708,306
  Accumulated deficit                                      (11,483,690)
  Accumulated other comprehensive loss                          21,808
         Total Stockholders' Equity                                      4,257,099

Total Stockholders' Equity and Liabilities                              $4,981,525
</TABLE>
See accompanying notes to consolidated financial statements.


<TABLE>
                 DIASYS CORPORATION and SUBSIDIARY
               CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
                                                Year Ended June 30,
                                                 2002           2001
<S>                                         <C>            <C>
NET SALES                                  $ 1,968,597    $ 1,776,303
COST OF GOODS SOLD                             752,435        712,182
GROSS PROFIT                                 1,216,162      1,064,121

OPERATING EXPENSES:
  Selling                                    1,043,084        995,108
  General and administrative                 1,339,687      1,462,945
  Research and development                     489,430        473,787

         Total Operating Expenses            2,872,201      2,931,840

LOSS FROM OPERATIONS                        (1,656,039)    (1,867,719)
OTHER INCOME:
  Interest Income                               17,806        107,856
  Gain on Sale of Property and Equipment         2,482           -
         Total Other Income                     20,288        107,856

NET LOSS BEFORE TAXES                       (1,635,751)    (1,759,863)

TAXES                                            5,627         10,202

NET LOSS                                   $(1,641,378)   $(1,770,065)

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING   7,693,888      6,458,698

BASIC AND DILUTED LOSS PER COMMON SHARE          $(.21)         $(.27)
</TABLE>
See accompanying notes to consolidated financial statements.


<TABLE>
                                                DIASYS CORPORATION and SUBSIDIARY
                                    CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<CAPTION>

                                                       Common Stock      Preferred Stock               Other
                                                   --------------------  ----------------              Compre-          Accum-
                                                                Par               Par      Paid-in     hensive          ulated
                                                   Shares       Value    Shares   Value    Capital     Loss             Deficit
<S>                                                <C>          <C>      <C>      <C>     <C>          <C>             <C>

BALANCE, JUNE 30, 2000                             6,274,768    $ 6,275   2,000       2   $11,657,434      -           $(8,072,247)

YEAR ENDED JUNE 30, 2001
  Exercise of 5,476 warrants to
    purchase common stock                              5,476          5       -       -            (5)         -                 -
  Exercise of 5,400 warrants to
    purchase common stock                              5,400          5       -       -            (5)         -                 -
  Conversion of Underwriter's warrants                60,000         60       -       -       251,940          -                 -
  Sale of preferred stock, net of offering costs           -          -   1,000       1       899,130          -                 -
  Conversion of 200 shares of preferred stock to
    41,350 shares of common Stock                     41,350         41    (200)      -           (41)         -                 -
  Conversion of 100 shares of preferred stock to
   20,780 shares of common stock                      20,780         21    (100)      -           (21)         -                 -
  Exercise of 3,500 options                            3,500          4       -       -         9,840          -                 -
  Conversion of 100 shares of preferred stock
    to 20,780 shares of common stock                  20,780         21    (100)      -          (21)          -                 -
  Conversion of 570 shares of preferred stock
    to 118,814 shares of common stock                118,814        119    (570)     (1)         (118)         -                 -
  Conversion of 140 shares of preferred stock
    to 26,598 shares of common stock                  26,598         27    (140)      -           (26)         -                 -
  Shares issued for acquisition of Intersep          297,131        297       -       -     2,431,485          -                 -
  Net Loss                                                 -          -       -       -             -          -        (1,770,065)
  Foreign Currency Translation adjustment                  -          -       -       -             -    (16,026)                -

BALANCE JUNE 30, 2001                              6,874,597    $ 6,875   1,890      $2   $15,249,592   $(16,026)      $(9,842,312)

  Conversion of 120 shares of preferred stock to
    290,312 shares of common stock                   290,312        290    (120)      -          (290)         -                 -
  Conversion of 52 shares of preferred stock to
    200,000 shares of common stock                   200,000        200     (52)      -          (200)         -                 -
  Adjustment to preferred shares                           -          -     126       -                        -                 -
  Conversion of 1,844 shares of preferred stock to
    2,528,812 shares of common stock               2,528,812      2,529  (1,844)     (2)       (2,527)         -                 -
  Private placement                                  781,250        781       -       -       459,218          -                 -
  Options issued to consultants                            -          -       -       -         2,513          -                 -
  Net Loss                                                 -          -       -       -             -          -        (1,641,378)
  Foreign Currency Translation adjustment                  -          -       -       -             -     37,834                 -

BALANCE JUNE 30, 2002                             10,674,971    $10,675       -       -   $15,708,306   $ 21,808<F1>  $(11,483,690)

<FN>
<F1>
Comprehensive loss, i.e., net loss plus other comprehensive income (loss) totals $(1,603,544) in 2002 and $(1,786,091) in 2001.
</FN>
</TABLE>
See accompanying notes to consolidated financial statements.


<TABLE>
                   DIASYS CORPORATION and SUBSIDIARY
                 CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
                                                     Year Ended June 30,
                                                    2001            2000
<S>                                           <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net loss                                     $(1,641,378)    $(1,770,065)
 Adjustments to reconcile net loss to
  net cash flows from operating activities:

   Amortization of patents and software           167,478         250,331
   Depreciation of property and equipment          82,292         106,293
   Bad debt expense                                18,890         198,358
   Issuance of options to non-employees             2,512               -
   Gain on sale of property and equipment          (2,482)              -
   Changes in operating assets and liabilities:
     Accounts receivable                          (71,374)       (272,231)
     Inventories                                  (31,246)        (53,609)
     Prepaid expenses and other current
      assets                                       11,490          41,416
     Other assets                                 (15,384)        (54,774)
     Accounts payable and accrued expenses        413,599         (98,323)

 Net cash flows from operating activities      (1,065,603)     (1,652,604)

CASH FLOWS FROM INVESTING ACTIVITIES:
 Purchases of property and equipment              (67,481)       (126,521)
 Increase in finance receivables                  (35,774)         (4,825)
 Costs of computer software                        (5,926)         (1,859)
 Costs of patents                                 (33,172)        (43,710)
 Proceeds from sale of fixed assets                55,607               -
 Purchase of Intersep, LTD.                             -        (531,980)

 Net cash flows from investing activities         (86,746)       (708,895)

CASH FLOWS FROM FINANCING ACTIVITIES:
 Proceeds from issuance of preferred stock              -         899,132
 Proceeds from issuance of common stock           460,000           9,844
 Proceeds from underwriter's warrants                   -         252,000

 Net cash flows from financing activities         460,000       1,160,976
 Effect of foreign currency translation
  on cash                                          37,834         (16,026)

NET CHANGE IN CASH AND EQUIVALENTS               (654,515)     (1,216,549)

CASH AND EQUIVALENTS, BEGINNING OF YEAR         1,198,707       2,415,256

CASH AND EQUIVALENTS, END OF YEAR             $   544,192     $ 1,198,707

SUPPLEMENTAL CASH FLOW INFORMATION:
 Interest paid                                $    12,929     $     1,725
 Income taxes paid                            $     5,627     $    10,202

NONCASH INVESTING AND FINANCING ACTIVITIES:
 Issuance of common shares in conjunction
  with business acquisition                   $         -     $ 2,431,782
Conversion of preferred stock to
  common stock                                $     3,019     $         -

The Company purchased all of the common stock
 of Intersep, Ltd for $531,980. In conjunction
 with the acquisition, liabilities were assumed
 as follows:
  Fair value of assets acquired               $         -     $   825,969
  Cash paid for the common stock              $         -     $  (531,980)

 Liabilities assumed                          $         -     $   293,989
</TABLE>
See accompanying notes to consolidated financial statements.

<page>

        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - NATURE OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES:

Nature of the Business  DiaSys Corporation ("the Company"), designs,
develops, manufactures, and distributes proprietary workstation and
consumable products for medical and clinical laboratory applications.  The
Company distributes its products primarily through sales managers employed
by the Company and through distributors in North America, Europe, Middle
East, Africa, China and Pacific Asia.

Principles of Consolidation  The consolidated financial statements include
the accounts of the Company and its wholly owned subsidiary.  All
Significant intercompany accounts and transactions have been eliminated.

Business Combinations  Business combinations, which have been accounted
for under the purchase method of accounting, include the results of
operations of the acquired business from the date of acquisition.  Net
assets of the companies acquired are recorded at their fair value to the
Company at the date of acquisition.  Amounts allocated to acquired in-
process research and development are expensed in the period of acquisition
(see Note 2).

Estimates and Uncertainties  The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period.  Actual
results, as determined at a later date, could differ from those estimates.

Financial Instruments  Financial instruments include cash and equivalents,
accounts receivable, finance receivables, accounts payable and accrued
expenses.  The amounts reported for financial instruments are considered to
be reasonable approximations of their fair values based on market
information available to management.  The use of different market
assumptions and/or estimation methodologies could have a material effect on
the estimated fair value amounts.

Revenue Recognition  Revenue from equipment sales is recognized at the
time the equipment is shipped.

Foreign Currency Translation  Assets and liabilities of the Company's
wholly owned foreign subsidiary are translated into U.S. dollars at year-
end exchange rates, and revenues and expenses are translated at average
rates prevailing during the year.  Translation adjustments are included as
a component of stockholders' equity.  Foreign currency transaction gains
and losses, which have been immaterial, are included in results of
operations.

Income Taxes  Deferred income taxes arise from temporary differences
between financial and tax reporting, principally bad debt expense and net
operating loss carryforwards.

Financing Transactions  Certain of the Company's lease and "use" based
receivables are recorded utilizing the sales-type method.  When a finance
transaction is consummated, the Company records the minimum lease payments
receivable and the unearned income arising from the lease.  The unearned
income is recognized over the term of the lease using the interest method.

Inventories  Inventories are stated at the lower of cost (firstin, first
out method) or market and consist of products manufactured by the Company,
in addition to products manufactured by subcontractors to Company
specifications.

Property and Equipment  Property and Equipment are recorded at cost and
are depreciated primarily using the straightline method over their
estimated useful lives of 3 to 10 years.

Computer Software - Computer software is recorded at cost and is amortized
over a 3-year life.

Patent Costs  The costs of obtaining patents will be amortized over their
respective useful life.

Warranty Costs  The Company assembles its finished goods, and will repair
or replace any unit which fails to operate due to defective parts or
workmanship within one year from the purchase date.  As warranty costs
remain and are expected to remain insignificant, no accrual for warranty
costs is appropriate.

Earnings (Loss) Per Share  Basic earnings (loss) per share is based upon
the weighted average of all common shares outstanding.  The computation of
diluted earnings (loss) per share does not assume the conversion, exercise
or contingent issuance of securities that would have an antidilutive effect
on earnings (loss) per share.

Cash Equivalents  The Company considers money market funds and all other
highly liquid debt instruments purchased with an original maturity of three
months or less to be cash equivalents.

Stock Options - The Company accounts for stock option grants using the
intrinsic value based method prescribed by APB Opinion No. 25.  Since the
exercise price equaled or exceeded the estimated fair value of the
underlying shares at the date of grant, no compensation was recognized in
2002 and 2001.

Had compensation cost been based upon the fair value of the option on the
date of grant, as prescribed by SFAS No. 123, the Company's proforma net
loss and net loss per share would have been approximately $(2,340,956)
$(.30) per share in 2002 and ($2,291,311) ($.35) per share in 2001, using
the Black-Scholes option pricing model.

The fair value of options granted in 2002 were estimated at the date of
grant using a Black-Scholes option pricing model with the following
weighted-average assumptions, respectively: risk-free interest rates of
4.68%, dividend yield of 0.0%, volatility factor of the expected market
price of the Company's Common Stock of 139.72% and a weighted-average
expected life of the options of 8 years.

The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options, which have no vesting
restrictions and are fully transferable.  In addition, option valuation
models require the input of highly subjective assumptions including the
expected stock price volatility.  Because the Company's employee stock
options have characteristics significantly different from those of normal
publicly traded options, and because changes in the subjective input
assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.

Advertising Expense  Advertising costs are expensed as incurred.
Advertising expense for the years ended June 30, 2002 and 2001 amounted to
approximately $82,190 and $90,157, respectively.

Recent Pronouncements -In June 2001, the FASB issued Statement No. 142,
"Goodwill and Other Intangible Assets," which addresses how Goodwill and
other intangible assets should be accounted for after they have been
initially recognized in the financial statements.  This statement is
effective for years beginning after December 15, 2001.  The Company
believes the adoption of SFAS No. 142 will not be material to the financial
position of the Company.

In June 2001, the FASB issued Statement No. 143, "Accounting for Asset
Retirement Obligations,:" which addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-
lived assets and the associated asset retirement costs of this statement is
effective for years beginning after June 15, 2002.  The Company believes
the adoption of SFAS No. 143 will not be material to the financial position
of the Company.

In August 2001, the FASB issued Statement No. 144, "Accounting for the
Impairment or Disposal of Long-lived Assets."  This statement supercedes
SFAS No. 121, "Accounting for the Impairment of Long-lived Assets and for
Long-lived Assets to be Disposed Of."  The statement retains the previously
existing accounting requirements related to the recognition and measurement
of the impairment of long-lived assets to be held and used while expanding
the measurement requirements of long-lived assets to be disposed of by sale
to include discontinued operations.  It also expands the previously
existing reporting requirements for discontinued operations to include a
component of an entity that either has been disposed of or is classified as
held for sale.  The Company believes the adoption of SFAS No. 144 will not
be material to the financial position of the Company.

In April 2002, the FASB issued Statement No. 145, "Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13 and
Technical Corrections."  This Statement rescinds FASB Statement No. 4,
Reporting Gains and Losses from Extinguishments of Debt, and an amendment
of that Statement, FASB Statement No. 64, Extinguishments of Debt Made to
Satisfy Sinking-Fund Requirements.  This Statement also rescinds FASB
Statement No. 44, Accounting for Intangible Assets of Motor Carriers.  This
Statement amends FASB Statement No. 13, Accounting for Leases, to eliminate
an inconsistency between the required accounting for sale-leaseback
transactions.  This Statement also amends other existing authoritative
pronouncements to make various technical corrections, clarify meanings, or
describe their applicability under changed conditions. The Company believes
the adoption of SFAS No. 145 will not be material to the financial position
of the Company.

In June 2002, the FASB issued Statement No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities."  This Statement addresses
financial accounting and reporting for costs associated with exit or
disposal activities and nullifies Emerging Issues Task Force (EITF) Issue
No. 94-3, "Liability Recognition for Certain Employee Termination Benefits
and Other Costs to Exit an Activity (Including Certain Costs Incurred In a
Restructuring)." The Company believes the adoption of SFAS No. 146 will not
be material to the financial position of the Company.


NOTE 2 - PURCHASE TRANSACTION

In September 2000, the Company acquired all of the capital stock of
Intersep, Ltd., a United Kingdom based manufacturer of consumable
laboratory products, reagents and test kits.  The Company paid $531,980 at
closing plus 297,131 shares of common stock at $8.1842 per share.

The acquisition was accounted for under the purchase method of accounting
and, accordingly, the results of operations are included in the financial
statements as of the date of acquisition, and the assets and liabilities
were recorded based upon the fair values at date of acquisition.  The
Company has allocated the excess purchase price over the fair value of net
tangible assets acquired to patents.  In accounting for the acquisition of
Intersep, the Company recorded approximately $2,650,000 in patents, which
are being amortized on a straight-line basis over the estimated useful life
of twenty years.

The following unaudited pro forma information has been prepared assuming
that the acquisition of Intersep, Ltd. had taken place at the beginning of
the respective periods presented.  The pro forma financial information is
not necessarily indicative of the combined results that would have occurred
had the acquisition taken place at the beginning of the period, nor is it
necessarily indicative of results that may occur in the future.

Pro forma for the years ended June 30:
                                                 2002            2001
                                              ----------      ----------
        Revenue                              $ 1,968,597     $ 2,031,038
        Loss from operations                 $(1,656,039)    $(1,700,067)
        Net Loss                             $(1,641,378)    $(1,549,915)
        Loss per share                       $      (.21)    $      (.24)


NOTE 3 - FINANCE RECEIVABLES:

Net investment in sales-type leases are summarized as follows:

        Minimum lease payments receivable     $340,988
        Unearned income                        (34,814)
                                              --------
        Net investment in sales-type leases   $306,174
                                              --------

Minimum lease payments to be received under the above lease agreements as
of June 30, 2002, are as follows:

        Year Ended June 30:
           2003                               $226,719
           2004                                 65,533
           2005                                 44,846
           2006                                  3,890
                                              --------
                                              $340,988
                                              --------

NOTE 4 - INVENTORIES:

Inventories at June 30, 2002 consist of the following:

        Raw material                          $325,662
        Finished goods                         217,421
                                              --------
                                              $543,083
                                              --------


NOTE 5 - CONCENTRATION OF CREDIT RISK:

Included in cash and equivalents is a mutual fund consisting of
investments of approximately $452,000 bearing interest between 1.4% and
3.3% per annum.

Net finance receivables due within one year total $200,059 excluding
interest, net long-term finance receivables due in more than one year
total $106,115, excluding interest.  The Company performs credit
evaluations and acquires a security interest in each finance receivable
and trade receivable pursuant to the Uniform Commercial Code.


NOTE 6 - PROPERTY AND EQUIPMENT:

Property and Equipment at June 30, 2002 are summarized as follows:

        Machinery and equipment               $685,596
        Furniture and fixtures                 121,804
        Leasehold Improvements                  43,169
                                              --------
                                               850,569
        Less accumulated depreciation          601,482
                                              --------
                                              $249,087
                                              --------


NOTE 7 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts Payable and Accrued Expenses are summarized as follows:

        Accounts Payable                      $518,042
        Accrued Payroll                         69,066
        Accrued Legal Fees                      41,554
        Accrued Finder's Fees                   40,000
        Accrued Rent                            14,823
        Accrued Inventory                       11,305
        Accrued Accounting Fees                  9,144
        Accrued Travel                           6,923
        Accrued Patent Expense                   6,589
        Accrued Professional Fees                5,052
        Miscellaneous                            1,928
                                              --------
        Total                                 $724,426
                                              --------


NOTE 8 - INCOME TAXES:

For income tax reporting purposes, the Company has a December 31 year-end.
The Company has a net operating loss carryforward of approximately
$10,100,000 at June 30, 2002 (including net losses for the six months ended
June 30, 2002), which can be used to offset future federal taxable income
through 2022.

The significant components of the Company's deferred tax assets at June 30,
2002 are summarized below:

        Allowance for doubtful accounts      $    48,000
        Net operating loss tax carry forwards  4,284,000
                                              ----------
                                               4,332,000
        Valuation allowance                   (4,332,000)
                                              ----------
                                              $        -
                                              ----------

A valuation allowance is provided when it is more likely than not that some
portion of the deferred tax asset will not be realized.  The Company has
determined, based on the Company's recent net loss, that a full valuation
allowance is appropriate at June 30, 2002.


NOTE 9 - PREFERRED STOCK:

The Board of Directors is authorized to issue 100,000 shares of Preferred
Stock, $.001 par value, in one or more series and, to the extent now or
hereafter permitted by the laws of the State of Delaware, to fix and
determine the preferences, voting powers, qualifications and special and
relative rights or privileges of each series including, but not limited to:
(i) the number of shares to constitute such series and the distinguishing
designation thereof; (ii) the dividend rate on the shares of such series
and the preferences, if any, and the special and relative rights of such
shares of such series as to dividends; (iii) whether or not the shares of
such series shall be redeemable and, if redeemable, the price, terms and
manner of redemption; (iv) the preferences, if any, and the special and
relative rights of the shares of such series upon liquidation of the
Company; (v) whether or not shares of such series shall be subject to the
operation of a sinking fund and, if so, the terms and provisions of such
fund; (vi) whether or not such series shall be convertible into shares of
any other class or other series of the same class of stock of the Company
and, if so, the conversion price or ratio and other conversion rights;
(vii) the conditions under which the shares of such series shall have
separate voting rights or no voting rights; and (viii) such other
designations, preferences and relative, participating, optional or other
special rights and qualifications, limitations or restrictions of such
series to the full extent now or hereafter permitted by the laws of the
State of Delaware.  Notwithstanding the fixing of the number of shares
constituting a particular series, the Board of Directors may at any time
authorize the issuance of additional shares of the same series.

Of the 100,000 shares of authorized but undesignated Preferred Stock, 4,000
shares are Series A Convertible Preferred Stock, with a par value of $.001
per share.  On February 7, 2000, the Company entered into an Agreement
pursuant to which it agreed to sell up to 4,000 Series "A" Convertible
Preferred Shares (the "Preferred") and accompanying 5 year warrants (the
"Warrants") to purchase common shares, to two unaffiliated accredited
investors, B.H. Capital Investments, L.P. and Excalibur Limited
Partnership, both of Toronto, Ontario, Canada.  The terms of the Preferred
are as provided for in Certificate of Designations filed with the Secretary
of the State of Delaware. Under the Agreement, the investors purchased all
of tranches as of November 17, 2000.

On April 4, 2002, a group of investors, led by the Company's officers and
directors, entered into a stock purchase agreement with BH Capital and
Excalibur Partners to retire all of the Convertible Preferred and
underlying common shares.  Under the stock purchase agreement, BH and
Excalibur agreed to exercise, in several conversions, all of the Preferred
at a stipulated price of $0.82 per share, yielding 2,528,812 commons
shares.  The purchasers agreed to buy 2,228,812 common shares from BH and
Excalibur for total consideration of $1.5 million, or $0.673 per share, so
long as BH and Excalibur would also forfeit any warrants they held in the
Company's common stock and any rights to acquire warrants in the future by
virtue of this transaction.   On April 26, 2002, all transactions under the
stock purchase agreement were completed and the Preferred was removed from
the Company's outstanding equity.


NOTE 10 - INCENTIVE STOCK OPTION PLANS:

The Company maintains two incentive stock option plans, the 1993 Incentive
Stock Option Plan and the 2000 Incentive Stock Option Plan, each under
Section 422 of the Internal Revenue Code, whereby the Company has reserved
1,000,000 and 500,000 shares of its common stock, respectively, for the
purpose of granting options to purchase such shares (the "Options")
pursuant to each Plan.  Options are granted to its officers and employees
by the Board of Directors and to members of the Board on a non-
discretionary basis, provided that the exercise price of the Options is
equal to or greater than the fair market price of the Company's common
stock on the date the Option is granted.  No Options may be granted under
the 1993 Plan after November 14, 2003, and no Options may be granted under
the 2000 Plan after January 18, 2011.  No Options may be exercised until
the twentyfourth month following the date the Option was granted.  At such
time, 50% of the shares of common stock covered by the Option may be
exercised, the remaining 50% balance are exercisable thirtysix months
after issuance of the Option.

On March 24, 2000 the Company approved a plan whereby 500,000 shares of the
Company's common stock would be held in reserve by the Company for the
purpose of granting non-qualified options to qualified executive employees
and non-employee members of the Board of Directors of the Company.  No
options may be exercised until the twenty-fourth month following the date
the Option was granted.  At such time, 50% of the shares of common stock
covered by the Option may be exercised, the remaining 50% balance are
exercisable thirty-six months after issuance of the Option.

Unless otherwise provided, no Options granted under the Plan are
transferable by the Optionee other than by will or by the law of descent
and distribution.  Options granted under the Plan terminate within a
specified period of time following termination of an Optionee's employment.

With respect to an Option granted to an employee who possesses more than
10% of the voting rights of the Company's outstanding capital stock on the
date of grant, the exercise price of the Option must be at least equal to
110% of the fair market value of the shares subject to the Option on the
date of the grant.  The aggregate fair market value of the common stock
(determined at the date of the Option grant) for which incentive stock
options granted under the Plan may become first exercisable in a calendar
year may not exceed $100,000.  No Option will be exercisable prior to two
years from the date of grant and Options may not be exercisable more than
ten years after the date of grant (five years if held by an employee
holding more than 10% of total voting rights).

An additional amendment, approved at a 2000 meeting of the Board of
Directors, increased the number of shares available for granting Options to
purchase such shares to a total of 1,000,000.

Outstanding Options at June 30, 2002 are as follows:
-----------------------------------------------------------------------
                                              Exercise
                                 Shares         Price    Expiration
        Exercise Date           Issuable      Per Share     Date
-----------------------------------------------------------------------
        February 1996            60,000         $1.25    February 2004
        February 1997             4,000          3.00    February 2005
        September 1997            6,000          3.44    September 2005
        February 1998             8,000          3.63    February 2006
        September 1998          126,000          3.06    September 2006
        November 1998            10,000          2.88    November 2006
        February 1999            66,000          3.53    February 2007
        June 1999                20,000          3.00    June 2007
        September 1999           10,000          3.50    September 2007
        February 2000            60,000          2.94    February 2008
        May 2000                  4,000          4.44    May 2008
        September 2000           20,000          4.56    September 2008
        January 2001             10,000          4.31    January 2009
        February 2001            60,000          4.38    February 2009
        May 2001                 66,000          5.00    May 2009
        October 2001             10,000          4.50    October 2009
        February 2002            30,000          6.25    February 2010
        March 2002               22,500          9.13    March 2010
        April 2002               50,000          9.19    April 2010
        October 2002             27,500          6.91    October 2010
        February 2003            70,000          3.54    February 2011
        March 2003               47,500          4.95    March 2011
        April 2003               96,000          5.38    April 2011
        September 2003           14,000          0.46    September 2011
        October 2003             17,500          8.28    October 2011
        February 2004           198,500          1.15    February 2012
        March 2004               25,000          1.20    March 2012
        April 2004               66,000          1.18    April 2012
        May 2004                  7,500          0.81    May 2012
        September 2004           14,000          0.46    September 2012
        February 2005           158,500          1.06    February 2013
        April 2005               20,000          1.03    April 2013
        May 2005                  7,500          0.81    May 2013
                              ---------
Total Options Outstanding     1,412,000    $0.46-9.19
                              ---------


Options under the Incentive Stock Option Plan are summarized as follows:
-------------------------------------------------------------------------
                                             Year Ended June 30, 2002
                                             -------------------------
                                                             Weighted-
                                                Shares        Average
                                             Under Option  Exercise Price
-------------------------------------------------------------------------
   Options outstanding at beginning of year     1,158,500      $4.14
   Options granted                                420,000       1.01
   Options expired/withdrawn                     (166,500)      3.84
                                                ---------
   Options outstanding at end of year           1,412,000       3.24
                                                ---------
   Option price per share                      $0.469.19
                                                ---------
   Options exercisable:
      Number of shares                            642,500       4.20
                                                ---------


<TABLE>
The following table summarizes option data as of June 30, 2002:
<CAPTION>
                                   Weighted-
                                    Average       Weighted-                      Weighted-
Range of                           Remaining       Average                        Average
Exercise            Number        Contractual      Exercise        Number         Exercise
Prices            Outstanding        Life           Price        Exercisable       Price
-------------     -----------     -----------     ----------     -----------     ----------

               <c>             <c>             <c>            <c>             <c>
$0.46 to  2.50      682,000           8.63           $1.13          60,000          $1.25
$2.51 to  5.00      490,000           5.38            3.70         480,000           3.69
$5.01 to  7.50       60,000           7.65            6.25          30,000           6.25
$7.51 to 10.00      180,000           7.87            9.00          72,500           9.17
                  ---------                                        -------
                  1,412,000                                        642,500
                  ---------                                        -------
</TABLE>



On April 1, 2002, the Board of Directors approved the issuance of 40,000
options under the Company's non-qualified stock option plan to two
employees of a public relations firm that performs relations work for the
Company.  These options were issued in appreciation for the work that was
performed.  At June 30, 2002, the Company recorded consulting expense of
$2,513.  Following is a schedule, which shows the expense of the option as
it is amortized over its vesting period:

        Year Ended June 30:
           2003                     $10,080
           2004                      12,593
           2005                      15,133
                                    -------
                                    $37,806
                                    -------


NOTE 11 - COMMITMENTS:

Leases  The following is the future minimum rental payment required for
all noncancelable operating leases:

        Year Ended June 30:
           2003                    $148,496
           2004                     149,863
           2005                     151,268
           2006                     101,773
           2007                      36,050
           2008 and thereafter      174,242
                                   --------
                                   $761,692
                                   --------

The rent expense for the year ended June 30, 2002 is $117,303.


Officer's And Employee Compensation  One of the Company's officers has an
employment agreement for a one year term expiring December 31, 2002 which
is renewable upon mutual consent of the parties.  For the years ended June
30, 2002, and 2001, the officer earned annual base compensation of
$250,000.


NOTE 12 - MAJOR CUSTOMERS:

Sales to one foreign customer in China as a percentage of net sales totaled
15% and 13% in 2002 and 2001, respectively.


NOTE 13 - VENDOR CONCENTRATION:

Purchases from three unaffiliated suppliers comprised approximately 15% of
the Company's net purchases in 2002.


Note 14 - LITIGATION SETTLEMENT

HealthTest Limited, Paul Reardon, et al.:  In September of 2001, the
Company found reason to believe that Mr. Paul Reardon, the Managing
Director of DiaSys Europe Limited, was engaging in competitive practices in
violation of his employment agreement and the Share Purchase Agreement
between the Company and the shareholders of Intersep.    Subsequently, the
Company discovered evidence, which strongly suggested that Mr. Reardon was
attempting to divert the business of DiaSys Europe to HealthTest Limited, a
Company which Mr. Reardon was a Director and a participant in further
breach of contract.  The evidence further suggested that Mr. Reardon
assisted HealthTest to obtain the customer, distributor, and supplier lists
of DiaSys Europe, and permitted HealthTest to operate from the premises of
DiaSys Europe.  On November 13, 2001, following a meeting called to review
these improprieties with Mr. Reardon, Mr. Reardon was immediately
discharged from employment FOR CAUSE, and the Company served injunctive
court orders on HealthTest Limited, Mr. Reardon, and two past employees of
the DiaSys Europe Limited (the "Respondents").  The Company temporarily
installed Mr. Robert P. Carroll, a Director of the Company, in England as
interim acting Managing Director, and in January 2002, hired Mr. Reardon's
replacement.  The Company experienced an interruption in its European
business for the quarters ended December 31, 2001 and March 31, 2002, and
incurred approximately $300,000 in costs for legal, consulting, accounting,
and investigative services.

On May 1, 2002, the Company entered into a settlement agreement with the
Respondents pursuant to which: (a) HealthTest would be wound-down and its
name assigned to DiaSys; (b) a combination of the Respondents would pay
DiaSys the sum of $175,000; (c) the Respondents would not compete with the
Company for stipulated periods; and, (d) the parties would exchange mutual
releases.  Proceeds from the settlement agreement have been recognized as
an offset to legal expenses for the period ended June 30, 2002.