SECURITIES AND EXCHANGE COMMISSION
                   WASHINGTON, D.C. 20549

                          FORM 10-K

    Annual Report Pursuant to Section 13 or 15(d) of the
                         Securities
                    Exchange Act of 1934

 For the Fiscal Year Ended 09/30/2005 Commission File Number
                           0-26504

                       Diasense, Inc.
   (Exact name of registrant as specified in its charter)

       Pennsylvania                         25-1605848
  (State or other jurisdiction of          (I.R.S. Employer
  incorporation or organization)            Identification
                                                 Number)

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

Registrant's telephone number, including area code
                      (412) 279-1059

 Securities registered pursuant to Section 12(b) of the Act:
                            None

 Securities registered pursuant to Section 12(g) of the Act:
                Common Stock, $.01 par value

Indicate  by check mark whether the registrant (1) has filed
all reports  required  to be filed by Section  13  or  15(d)
of  the Securities  Exchange Act of 1934 during the
preceding  12  months and (2) has been subject to such
filing requirements for the past
90 days.   Yes          No  X

Indicate  by  check  mark  if  disclosure  of  delinquent
filers pursuant  to Item 405 of Regulation S-K is not
contained  herein, and will not 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-K, or any amendment to
this Form 10-K. [ ]

The   aggregate  market  value  of  the  voting  stock  held
by nonaffiliates of the registrant as of September 30, 2005:

          Common Stock, $.01 par value --  $__________*

*The  market  value  cannot be determined  because  there
is  no established trading market for the stock.

As  of September 30, 2005, 22,980,051 shares of Common
Stock,  par value  $.01 per share were outstanding.  As of
September 30, 2005, no shares of Preferred Stock were
outstanding.

Exhibit index is located on page __.


                             PART I


Item 1. Business

General Development of Business

Diasense, Inc. was incorporated in the Commonwealth of
Pennsylvania on July 5, 1989 as Diasense, Inc., ("Diasense"
or the "Company") a wholly owned subsidiary of Biocontrol
Technology, Inc., which later changed its name to BICO Inc.
(BICO).  BICO owned approximately 52% of Diasense until July
23, 2004 when BICO sold its entire ownership interest,
11,975,000 shares of common stock, to Dominion Assets, LLC.
The focus of our business since our inception has been the
research and development of our noninvasive glucose sensor
for use by diabetics.  As of November 2002 we were dependent
solely on BICO to provide the funding for our ongoing
operations and BICO stopped funding us due to its own
financial difficulties.  Without funding, between November
2002 and July 2004, we had to suspend operations and stop
further development of our noninvasive glucose sensor.  We
resumed limited operations in July 2004 and subsequently
resumed development of the next generation of our
noninvasive glucose sensor in April 2005.   Until we are
able to raise additional funds on our own, completion of a
prototype device and clinical trials will be delayed.
Pursuant to a purchase agreement between us and BICO, we own
the intellectual property and patents to the noninvasive
glucose sensor and have the exclusive marketing and
distribution rights.

During 2000 and 2001, we made investments in two different
diabetes-related  companies: MicroIslet, Inc.
("MicroIslet"), a California company working with Duke
University to develop encapsulated insulin for human use;
and Diabecore Medical, Inc. ("Diabecore"), a Canadian
company working on a new type of insulin.  We've sold our
interest in both MicroIslet and Diabecore and no longer have
investments in any other company.
Financial Information About Industry Segments
We operate in a single industry segment consisting of the
research, development, marketing and sale of biomedical
products and devices.

Forward-Looking Statements

From time to time, we may publish forward-looking statements
relating to such matters as anticipated financial
performance, business prospects, technological developments,
new products, research and development activities, the
regulatory approval process, specifically in connection with
the FDA marketing approval process, and similar matters.
You need to know that a variety of factors could cause our
actual results to differ materially from the anticipated
results or other expectations we have or may express in our
forward-looking statements.  The risks and uncertainties
that may affect our operations, performance, research and
development and results include the following:  the
possibility that our creditors could force us into
bankruptcy, delays or complications in starting our clinical
trials, additional delays in obtaining FDA marketing
approval of our noninvasive glucose sensor; our difficulty
in raising funds to continue our projects; delays in the
manufacture or marketing of our products and medical
devices; our uncertainty of obtaining additional funding;
competition and the risk that our noninvasive glucose sensor
or our other products may become obsolete; our continued
operating losses, negative net worth and uncertainty of
future profitability; potential conflicts of interest; the
status and risk to our patents, trademarks and licenses; the
uncertainty of third-party payor reimbursement for our
noninvasive glucose sensor, and the general uncertainty of
the health care industry; our limited sales, marketing and
manufacturing experience; the amount of time or funds
required to complete or continue any of our various products
or projects; the attraction and retention of key employees;
the risk of product liability; the uncertain outcome and
consequences of potential lawsuits against us; our inability
to establish a trading market for our common stock; and the
dilution of our common stock.

Description of Business

History and Development of the Noninvasive Glucose Sensor
From inception through November 2002, we worked with BICO to
develop a noninvasive glucose sensor for diabetics that is
able to measure blood glucose levels without a blood sample.
Most currently available glucose monitors require a blood
sample that is obtained by piercing the skin with a lancet
or needle.

Our non-invasive glucose sensor, the Diasensorr, directs a
beam of near infra-red light into the skin where some of the
light is absorbed and some of the light is reflected back
into the unit.  The reflected light spectrum is analyzed and
converted into a digital reading of glucose concentration by
using mathematical calculations and customized embedded
software.

As of November 2002, a total of 14 U.S. patents covering the
Diasensor technology  had been issued and assigned to
Diasense pursuant to a purchase agreement with BICO.  In
June 2005, we filed another patent with the U.S. Patent and
Trademark Office covering what we believe is new technology
unique to the next generation of the Diasensor.  This
patent is pending but we cannot be certain the patent will
ever be issued.   Pursuant to other agreements between
Diasense and BICO, BICO has the right to develop and
manufacture the sensors, however we are in the process of
terminating these agreements with BICO. If we obtain FDA
approval to sell the Diasensor we will consider
manufacturing the device in house or using contract
manufacturers.

On January 6, 1994, BICO submitted the initial 510(k)
Notification to the Food and Drug Administration for
approval to market the production model, the Diasensor
1000.  A 510(k) Notification is a premarketing submission
made to FDA to demonstrate that the device to be marketed is
as safe and effective, that is, substantially equivalent, to
a legally marketed device that is not subject to premarket
approval (PMA).  Applicants must compare their 510(k) device
to one or more similar devices currently on the U.S. market
and make and support their substantial equivalency claims.
In February 1996, the FDA convened a panel of advisors to
make a recommendation regarding our 510(k) Notification.
The majority of the panel members recommended that we
conduct additional testing and clinical trials of a
production model prior to marketing the Diasensor 1000.  We
announced that we would remain committed to the Diasensor
1000, and that additional research, development and testing
would continue.

After discussions with the FDA, we submitted a revised
510(k) Notification in October 1996, which was followed by
continued discussions with the FDA.  During 1997 and 1998,
we continued to meet with the FDA and established a protocol
for in-home testing of the Diasensor 1000.  Due to our cash
flow problems beginning in 1998, testing did not proceed at
the pace originally anticipated.

In 1998 we submitted a technical file including clinical
data on the Diasensor 1000 to TUV Rheinland of Cologne,
Germany, an organization recognized by the European Union as
a Notified Body for Product Certification, in order to apply
the Conformite Europeene (CE) Mark to the Diasensor .  We
were granted approval to apply the CE Mark to the Diasensor
on June 23, 1998, which permitted us to sell the device in
Europe.  In 1999, we focused additional effort on the
European market but because no material sales occurred, we
discontinued our European marketing efforts.

The second model of the Diasensor was named the Diasensor
2000.  Based on advice from the FDA, we decided it was in
our best interest to submit a PreMarket Approval Application
to the FDA, rather than continue with the 510(k)
Notification process, in order to seek FDA approval for the
Diasensor 2000.  In 1999 the FDA implemented a new PMA
system. Under the new system, individual modules - or parts
- of a PMA submission could be made, as they were ready.
In February 1999 we submitted a PMA shell to the FDA for the
Diasensor.  In May 1999, we submitted the first module,
which covered manufacturing methods and procedures for the
Diasensor 2000.  The FDA asked for additional information
in September 1999, and we responded.  We filed the second
module in May 2000.  The second module contained information
regarding electrical and mechanical standards for the FDA's
requirements on safety and effectiveness, and a description
of how our noninvasive glucose sensor will be used by
patients.  Future modules must include raw data, laboratory
study methods and test results.

The Clinical Trials

In August 1999, we hired Joslin Diabetes Center to help us
with our FDA submission.  Joslin Diabetes Center designed
and began to conduct the clinical trials the FDA requires
before they will consider giving us approval to market the
sensor.  Clinical trials began in October 2000 but due to
our continuing financial difficulties we suspended the
trials in the second quarter of 2002 to focus our remaining
financial resources on the next generation Diasensor.  This
project continued until November 2002 when development was
halted due to BICO's inability to continue funding our
operations.

Current Status of the Noninvasive Glucose Sensor

After BICO discontinued funding our operations in 2002 there
was no activity in Diasense and consequently there was no
further research and development of the Diasensor until
BICO sold its entire interest in Diasense to Dominion
Assets, LLC in July 2004.  With loans from Dominion and the
proceeds from the sale of our interest in Diabecore,
development of the next generation of our non-invasive
glucose sensor, the Diasensor Delta-2, resumed in April of
2005 and is continuing.  If we are unable to raise
substantially more money, we will not be able to complete
the project.

The Delta-2 derives from applicable earlier Diasensor
patents and we believe the new design will be able to
achieve a performance superior to the earlier models in a
unit that has the advantages of small size, battery
operation, portability and can provide continuous monitoring
with greater accuracy than currently available invasive
meters.  If and when we are able to complete development and
produce a prototype of the Delta-2, there is no guarantee
the device will actually perform better than  the earlier
models or if it will be more accuarate than invasive meters
but because we believe the Delta-2 model will outperform the
earlier models, we have no plans to resume clinical trials
on the Diasensor 2000.

The Delta-2 will require further development and testing
before a prototype of the device can be produced, if ever.
We cannot be certain the engineering and design
modifications to the original Diasensor models to produce a
cell phone size device will work effectively in practice.
If we are able to get FDA approval, we plan to market the
Delta-2 to diabetics through recommendations or
prescriptions of physicians.  We cannot be certain that
physicians will recommend or prescribe the Delta-2
immediately after FDA approval or when, if ever, the medical
community will accept non-invasive blood glucose monitoring.
The retail price of the Delta-2 may be high compared to the
price of currently available devices and the disposable test
strips needed to use those devices.  The relative cost of
the Delta-2 to invasive devices depends on how often a
patient monitors; a patient may not monitor frequently
enough to justify the price of the Delta-2.  If we are able
to get FDA approval but the Delta-2 is not accepted by
physicians and patients to a degree necessary to achieve
adequate sales revenue, we will continue to incur losses.
If we are able to get FDA approval to market the Delta-2 and
if the device is accepted by patients and physicians, our
sales will be adversely affected if insurance coverage and
reimbursement for the Delta-2 is not available.   The cost
of invasive devices and the disposable test strips needed
are reimbursed by Medicare and other third party payors but
it is uncertain whether third party payors will provide
adequate coverage for our device.  To reduce healthcare
costs, third party payors may deny coverage or limit the
level of reimbursement for our device making it more
expensive for patients to use.   Without insurance coverage
and reimbursement, patients may not purchase the Delta-2
preferring instead, to use invasive devices that are covered
by Medicare and third party payors.

Invasive Glucose Sensors

Currently, the majority of diabetics measure their blood
glucose levels by using invasive glucose meters.  The
devices require the user to draw a blood sample and place
the blood on a chemically-treated test strip. The user
places the test strip in the glucose meter which will
display a readout of the blood glucose level.  Invasive
glucose meters require a disposable test strip each time a
blood glucose measurement is taken.

Adequate control of blood glucose levels generally requires
several measurements each day and drawing blood can be an
unpleasant experience for the user, particularly for
children.  The ongoing cost of repeated testing can be
significant to the average user because of the cost of test
strips, lancets, swabs, antiseptics, test solutions and
other supplies that may be needed.  The Delta-2 is not
expected to require any disposable supplies with the
exception of periodic battery replacement.  If the Delta-2
is successfully developed, manufactured and marketed,
diabetic patients using the Delta-2 will not have to draw
blood samples each time they monitor their blood glucose and
if Delta-2 is priced low enough, the expense of monitoring
over three to five years will be significantly lower than
the cost of test strips and other disposable supplies needed
for invasive glucose meters.

Diabecore Medical, Inc.

During fiscal 2000 and 2001, we invested in Diabecore
Medical, Inc., a Canadian company that is conducting
research and working with other research institutions to
develop a new type of insulin to treat diabetes.  We
invested approximately $987,500 in Diabecore in return for
1,470,000 shares of common stock or approximately 24% of
Diabecore's stock.  In May 2005, we sold our entire interest
in Diabecore back to Diabecore at a price of $0.05 Canadian
per share or $73,500 Canadian.  After conversion, the total
proceeds to the Company were $57,242.  $42,355 was received
on May 5, 2005 and $14,887 was received on October 6, 2005

MicroIslet, Inc.

During fiscal 2000 and 2001, we also invested in MicroIslet,
Inc.  MicroIslet is a California company that is developing
several diabetes research technologies with Duke University
that focus on optimizing microencapsulated islets for
transplantation.  We invested a total of approximately $1.6
million in MicroIslet.  During calendar year 2002, we sold
all of our MicroIslet stock for a total of $2,070,726.

Net Sales

We have not sold any noninvasive glucose sensors to date.

Research and Development

On May 19, 2005 we entered into consulting agreements with
Jeremy Grata and Michael Pitsakis.  Both Grata and Pitsakis
were employees at BICO prior to November 2002 in the
positions of Research Department Manager & Senior Physicist,
and Manager of Product Development, respectively.  Grata and
Pitsakis were involved with the ongoing research and
development of the Diasensor and the technical leads on
several aspects of the Delta project.

Pursuant to the terms of the consulting agreement, the
consultants are contracted to complete the development of
the Delta-2 in return for hourly compensation and warrants
to purchase 1,227,000 shares of Diasense common stock.  The
original consulting agreements dated May 19, 2005 provided
that the warrants vest as certain milestones are achieved in
the development of the prototype Delta-2 with 727,000
warrants vesting upon completion of the prototype.  The
consulting agreements were amended on November 11, 2005 to
extend the term of the agreement to four years through May
19, 2009 and increase the number of warrants to purchase up
to 4,000,000 shares of Diasense common stock.  The
additional 2,273,000 warrants vest upon FDA approval to
market the Delta-2.

On June 14, 2005 we filed a patent application entitled
"Method and Apparatus for the Non-Invasive Sensing of
Glucose in a Human subject" with the U.S. Patent and Trade
Office.  This patent application bears Application Number
60/690,418 and was filed to protect the new invention
specific to the Delta-2.

Diasense entered into a consulting agreement with Stuart D.
Fine, MD. on November 14, 2005.  Dr. Fine held the position
of Chief Endocrinologist with Diasense in 1996 and 1997.
Pursuant to the consulting agreement Dr. Fine is contracted
to assist in the development of the Delta-2 in return for
warrants to purchase 150,000 shares of Diasense common
stock.  The warrants vest as certain milestones are achieved
in the development of the prototype Delta-2 with 80,000
warrants vesting upon FDA approval to market the Delta-2.
We are in discussions with several individuals that may be
able to provide certain expertise that could benefit our
efforts to complete the Delta-2 and it is likely we will
enter into at least one more consulting agreement that will
entail hourly compensation and warrants to purchase Diasense
common stock.

Certain components critical to the new engineering and
design of the Delta-2 will be contracted to companies that
specialize in those particular areas.  The development of
these components would require significant investment in
equipment and personnel to produce internally and we believe
it is cost effective to contract the development under the
supervision of our consultants.  With the completion of
these components, we may need to hire two to four engineers
to complete the prototype.

Continued development of the Delta-2 will require additional
funding to pay for the development of the components and
salaries for the engineers in addition to the compensation
due to the consultants for their work.  If we are not able
to raise additional funds we will not be able to progress
toward completion of the Delta-2.

Product Development

We are in development of the Diasensor Delta-2 exclusively.
There are no immediate plans to begin development of any
other medical devices or products.

Manufacturing

We currently have no facilities to manufacture any products.
We plan to contract the manufacturing of the prototype Delta-
2 and the units needed for clinical trials.  If we receive
FDA approval to market the Delta-2 we will continue to
contract the manufacturing until sales reach a level that
would warrant consideration of investing in a manufacturing
facility.

Marketing and Distribution

Without FDA approval, we are unable to begin marketing or
distribution of the Diasensor.

Patents, Trademarks and Licenses

We own 14 U.S. patents which cover certain aspects of our
intellectual property and technology to measure blood
glucose non-invasively.  The patents will expire, if all
maintenance fees are paid and they are successfully revived,
between 2008 and 2018.  Prior to July 2004, ten of our
patents expired for failure to pay maintenance fees and two
more expired during 2005.  Since July 2004, we have filed
petitions to revive seven of the twelve patents that
expired.  Two of the patents are revived.  We intend to file
petitions to revive the remaining five patents and fully
expect the U.S. Patent and Trademark Office will grant our
petition to revive all of our patents but that cannot be
predicted with certainty.  We estimate it will cost
approximately $15,000 to revive the remaining five patents
and if we are unable to raise additional funding before the
patents are considered abandoned we may not be able to
revive them and we will lose the protection provided by the
patents to certain aspects of our technology.
On June 14, 2005 we filed a patent application entitled
"Method and Apparatus for the Non-Invasive Sensing of
Glucose in a Human Subject" with the U.S. Patent and Trade
Office.  This patent application bears Application Number
60/690,418 and was filed to protect the new invention
specific to the Delta-2.

We may file applications in the United States and other
countries, as appropriate, for additional patents directed
to other features of the noninvasive glucose sensor and
related processes.

We know that competitors currently developing non-invasive
glucose sensors own patents directed to various devices and
processes related to the non-invasive monitoring of
concentrations of glucose and other blood constituents.  It
is possible that those patents may require us to alter any
model of our noninvasive glucose sensor or the underlying
processes relating to our noninvasive glucose sensor, to
obtain licenses, or to cease certain activities.

We rely upon trade secret protection for our confidential
and proprietary information.  Although we take all
reasonable steps to protect such information, including the
use of confidentiality agreements and similar provisions,
there is no guarantee that a third party will not
independently develop substantially equivalent proprietary
information or techniques, otherwise gain unauthorized
access to, or obtain some unauthorized disclosure our trade
secrets or disclose such technology.

We have registered our trademark "Diasensor", which is
intended for use in connection with the Diasensor models.
We intend to apply, at the appropriate time, for
registrations of other trademarks as to any future products.
Warranties and Product Liability

We do not currently have any product liability insurance
coverage.

Source of Supply

If we begin to manufacture the noninvasive glucose sensor,
we will be dependent upon suppliers for some of the
components required to manufacture the device.  These
components will not be generally available, and we may
become dependent upon those suppliers that can provide such
specialized products.

Competition

With the rapid progress of medical technology, and in spite
of continuing research and development programs, our
developmental products are always subject to the risk of
obsolescence if some other company introduces a better
product or technique.  Competitive success in the medical
device field is dependent upon product characteristics
including performance, reliability, and design innovations.
We are aware that other research groups are trying to
develop noninvasive glucose sensors, but we have limited
knowledge about the actual technology or the stage of
development for most of our competitors.  We face the risk
that some other group will complete the development of their
device and penetrate the market before we do.  If another
company successfully develops a noninvasive glucose sensor,
obtains FDA approval, and reaches the market before we do,
it would have a negative affect on our efforts to generate
sales and there is a significant chance that even if we
receive FDA approval, our sensor will not be successful
because marketing efforts will start too late.  We are not
aware of any other company currently producing and marketing
a noninvasive sensor for the measurement of blood glucose
that uses the same technology as we do.

If we are able to bring our Diasensor to the market, it
will compete with existing invasive glucose meters.
Although we believe that the features of our noninvasive
glucose sensor, particularly its convenience and that no
blood samples or disposable supplies are required, will
compete favorably with existing invasive glucose sensors, we
cannot assure that it will succeed.  Other companies have
established marketing and sales forces, and represent
established entities in the industry.  Certain competitors,
including their corporate or joint venture partners or
affiliates, currently marketing invasive glucose sensors
have substantially greater financial, technical, marketing
and other resources and expertise than we do, and may have
other competitive advantages over us, based on any one or
more competitive factors such as accuracy, convenience,
features, price or brand loyalty.  Additionally, competitors
marketing existing invasive glucose sensors may from time to
time improve or refine their products, or otherwise make
them more price competitive, so as to enhance their
marketing competitiveness over our noninvasive glucose
sensor.  As a result, we can't make any guarantees that our
sensor will be able to compete successfully.

Certain organizations are also researching and developing
technologies that may regulate the use or production of
insulin or otherwise affect or cure the underlying causes of
diabetes.  We are not aware of any new or anticipated
technology that would effectively render our noninvasive
glucose sensor obsolete.  However, future technological
developments or products could make our noninvasive glucose
sensor significantly less competitive or, in the case of the
discovery of a cure for diabetes, eliminate the need for
blood glucose monitoring.

Government Regulations

Since our noninvasive glucose sensor is a medical device as
defined by the Federal Food, Drug and Cosmetic Act, as
amended, it is subject to the regulatory authority of the
FDA.  The FDA regulates the testing, marketing and
registration of new medical devices in addition to
regulating manufacturing practices, labeling and record
keeping procedures.  The FDA's Quality System Regulation
specifies various requirements for our manufacturing
processes and the way we must maintain certain records.  The
FDA has authority to inspect our manufacturing facilities
and operations and may also audit our record keeping
procedures at any time.

Because the FDA regulates our noninvasive glucose sensor, we
have to meet all FDA requirements before we can market and
sell our device in the United States.  These requirements
include clinical testing, which must be supervised by the
chosen hospitals.

Any changes in FDA procedures or requirements will require
corresponding changes in our obligations in order to
maintain compliance with those standards.  Those changes may
result in additional delays or increased expenses. Also, if
we decide to market to other countries, our products may
also be subject to additional foreign regulatory approval
before we can sell our devices.

Human Resources

Anthony Paterra, the CEO of Diasense as of September 30,
2005 is our only full time employee.

Financial Information About Foreign and Domestic Operations
and Export Sales

Our operations are located in the United States of America.

Item 2. Properties

We sold our office condominium in 1999, and we leased the
same space for our administrative offices. On May 19, 2005
we entered into an agreement with our landlord to terminate
our lease and release any claim for unpaid rent for a
settlement fee of $5,000.

We do not currently have any research and development and
manufacturing facilities. We have a month to month lease for
limited administrative space.  To complete the prototype of
the Delta-2 we will require additional space to conduct the
development and we believe such space will be available at
reasonable commercial rates, however we will not be able to
maintain our existing space or acquire additional space
unless we can raise additional funding.

Item 3. Legal Proceedings

In May 1996, Diasense, along with BICO and BICO's individual
directors, including David Purdy, Fred Cooper, and Anthony
J. Feola, who were also our officers and directors, were
served with a federal class action lawsuit based on alleged
misrepresentations and violations of federal securities
laws.  In 2000, even though we don't believe any violations
of the securities laws occurred, we agreed to settle the
lawsuit.  The parties reached a settlement, and BICO paid an
aggregate of $3,475,000.  The final payments were made in
2002, and we consider the case to be closed.

In April 1998, we, along with our corporate affiliates, were
served with subpoenas requesting documents in connection
with an investigation by the U.S. Attorneys' office for the
U.S. District Court for the Western District of
Pennsylvania.  In July 2002, we received notice that the
investigation was concluded with no charges brought against
us, BICO or its other subsidiaries.

Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.

                            PART II

Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters

We were incorporated in the Commonwealth of Pennsylvania on
July 5, 1989.  We have the authority to issue 40,000,000
shares of common stock at a par value of $.01, and 1,000,000
shares of preferred stock.  As of September 30, 2005,
22,980,051 shares of common stock were outstanding.  No
shares of preferred stock are outstanding.  As of September
30, 2005, there were currently exercisable warrants
outstanding to purchase 700,000 shares of our common stock
at exercise prices ranging from $0.01 to $0.50.  Of the
700,000 warrants outstanding, 500,000 warrants to purchase
shares of our common stock at an exercise price of $0.50
will expire on April 23, 2006 and 200,000 warrants, issued
in May 2005, to purchase shares of our common stock at an
exercise price of $0.01 will expire on May 19, 2010.

As of September 30, 2005 we had approximately 600 holders of
record for our common stock and no holders of record for our
preferred stock.

Our stock is not currently listed on any stock exchange or
market.  We currently act as our own registrar and transfer
agent for our common stock and warrants.  There has never
been an established public trading market for our common
stock.

Common Stock

The holders of our common stock are entitled to one vote per
share on all matters to be voted on by shareholders and are
entitled to cumulative voting rights in the election of
directors.  In cumulative voting, the holders of common
stock are entitled to cast, for each share held, the number
of votes equal to the number of directors to be elected.  A
holder may cast all of his or her votes for one nominee or
distribute them among any number of nominees for election.
Subject to any preferences that may be granted to any
holders of preferred stock, the holders of common stock are
entitled to receive, on a pro rata basis, dividends out of
funds legally available for distribution, when and if
declared by the board of directors, and to share ratably in
our assets legally available for distribution to our
shareholders in the event of liquidation, dissolution or
winding-up.  The holders of common stock have no preemptive,
redemption or conversion rights. The shares of our common
stock currently outstanding are fully paid and non-
assessable.

Preferred Stock

Our Articles of Incorporation permit the issuance of up to
1,000,000 shares of preferred stock.  No shares of preferred
stock are currently issued or outstanding.  We have no
present intention to issue any such shares; although there
can be no assurance that we won't issue preferred stock in
the future.

Dividends

We have not paid cash dividends on our common stock or our
preferred stock since our inception and cash dividends are
not presently contemplated at any time in the foreseeable
future.  In accordance with our Articles of Incorporation,
cash dividends are restricted under certain circumstances.

Warrants

As of September 30, 2005 there were outstanding warrants,
all of which are currently exercisable, to purchase 700,000
shares of our common stock at exercise prices ranging from
$0.01 to $0.50 per share and having expiration dates through
May 19, 2010.  The warrants were issued to our former
directors, officers and employees and to certain other
persons for certain goods and services transferred or
rendered to us and, in the case of certain former officers,
in consideration of meritorious service.  The number of
shares of common stock issuable upon the exercise of the
warrants and the exercise prices relating thereto are
subject to adjustment upon the occurrence of certain events,
including stock dividends, stock splits, mergers,
consolidations and reorganizations.  We may not redeem the
warrants prior to their expiration.

Employment Agreement Provisions Related to Changes in
Control

We no longer have any employment agreements.

Item 6. Selected Financial Data

The selected financial data presented herein has been
derived from our audited financial statements.  These
financial statements have been audited by Goff Backa Alfera
& Company, LLC, for the twelve-month periods ended September
30, 2005, 2004, 2003, 2002, and 2001; the reports of all of
which include explanatory paragraphs as to "going concern"
considerations.  The selected financial data should be read
in conjunction with "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS" and our
financial statements and related notes thereto included
elsewhere in this report.

<TABLE>

                FISCAL YEARS ENDED SEPTEMBER 30th

                   2005        2004        2003        2002       2001

<S>            <C>          <C>         <C>         <C>         <C>
 Total
 Assets        $   16,432   $        0  $        0  $  161,608  $1,727,940

 Total
 Liabilities   $2,181,348   $1,959,936  $1,959,936  $2,841,225  $3,946,454

 Working
 Capital
 (Deficit)    ($2,164,916) ($1,959,936)($1,959,936)($2,679,617)($3,945,204)


 Total
 Revenues      $        0   $        0  $        0  $        0  $        0

 General and
 Administrative
 Expenses      $   98,889   $        0  $   96,173  $  356,230  $1,195,550


 Warrant
 Extensions    $        0   $        0  $        0  $        0  $        0

 Benefit
 (Provision)
 for Income
 Taxes         $        0   $        0  $        0  $        0  $        0


 Net Income
 (Loss)       ($  206,580)  $        0  $  719,681 ($  461,103)($1,755,563)

 Net Income (Loss)
 per Common
 Share:
   Basic            ($.01)       $0.00        $.03       ($.02)      ($.08)
   Diluted          ($.01)       $0.00        $.03       ($.02)      ($.08)

 Cash Dividends
 per share:
  Preferred            $0          $ 0        $  0         $ 0         $ 0
  Common               $0          $ 0        $  0         $ 0         $ 0

</TABLE>

Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.

We operate on a fiscal year ended September 30th.
Therefore, years are referred to as fiscal years; for
example, the year from October 1, 2004 through September 30,
2005 is referred to as fiscal 2005.

Forward-Looking Statements

In addition to Part I of this Form 10-K, this Management's
Discussion and Analysis section also contains the type of
forward-looking statements we discussed on page 2.  Please
refer to such discussion in connection with the information
presented here.

Liquidity and Capital Resources

Our funding for the fiscal year 2005 came from the sale of
our shares of Diabecore Medical, Inc. for $57,242 and
$72,000 in loans from Dominion Assets, LLC.

We had no operations throughout the fiscal year 2004 and
accordingly had no activity for the year.

Our entire funding for the fiscal year 2003 of $691,340 came
from the sale of our remaining shares of MicroIslet stock.
We used $675,248 to repay advances previously received from
BICO. The remaining cash was used to pay accounts payable.

During the year ended September 30, 2002 funds were
transferred to Diasense from BICO to provide working
capital.  These funds were used in operating activities.  In
January 2001, BICO adopted a centralized cash management
policy whereby funds were transferred to Diasense on a daily
basis to meet Diasense's actual cash needs.  As a result of
this change in policy, Diasense had a cash balance of zero
at September 30, 2002 and 2001.  The net effect of these
transactions was to decrease cash to zero at September 30,
2001, and 2002.

We entered into employment agreements with Fred E. Cooper
and David L. Purdy effective November 1, 1994.  In November
2000 Mr. Purdy resigned from Diasense and BICO effective as
of February 2001.  In July 2002, Mr. Cooper resigned from
Diasense, and he gave up all of his rights under that
employment contract, along with all other claims against
Diasense, which includes any claims for accrued payroll.

Because we have no sources of revenue, we will have to find
additional funding to complete the development of our
noninvasive glucose sensor, obtain FDA approval, manufacture
the device and begin marketing.  In prior years, we were
dependent upon BICO to support our operations, but BICO
stopped funding Diasense in 2002.  We had no operations from
November 2002 through September 2004. In April 2005 we
resumed development of our noninvasive glucose sensor, the
Diasensor Delta-2 with the proceeds from the sale of our
stock in Diabecore and loans from Dominion Assets, LLC, our
largest shareholder.

Our financial statements contain a going concern opinion
from our auditors.  Our auditors issued that opinion because
we have a history of losses and no revenue to support our
operations.  Beginning in 1997, we became dependent on BICO
to fund our operations, but beginning in late 2001, BICO
began to have difficulty raising cash, stopped funding our
operations in 2002, filed bankruptcy in March 2003 and sold
its interest in Diasense in May 2004.  We no longer receive
funding from BICO and otherwise have no affiliation with
them.  Because it is uncertain whether we can continue to
raise additional funding, our financial statements include
the auditor's opinion that we may not be able to continue
operating as a going concern.

If we are not able to obtain additional financing of
approximately $6,000,000 or if that additional financing is
insufficient, we will not be able to complete the prototype
of the Delta-2 and begin clinical trials.

Results of Operations

We had no revenue from operations and a one time gain of
$57,242 from the sale of our stock in Diabecore in the
fiscal year 2005. General and administrative expenses
totaled $98,889 and accrued interest expense totaled
$164,933 resulting in a net loss of $206,580 as compared to
no activity during fiscal 2004.

We had no operations during the fiscal year 2004 and
therefore had no income or expenses for that year.

General and administrative expenses totaled $96,173 during
fiscal 2003 as compared to $356,230 during fiscal 2002. The
decrease resulted primarily from the cessation of our
operations due to cash shortages.

In fiscal 2003 and 2002, we recognized gains of $330,880 and
$752,972 respectively when we sold some of our MicroIslet
stock.  Those funds were used primarily to offset the
amounts we owed to BICO.

Other income for the year ended September 30, 2003 includes
$269,449 in forgiveness of debt and $15,225 of rental
income.  Other income for the year ending September 30, 2002
consists of $62,100 of rental income. The rental income for
both periods was
from BICO and its subsidiaries for office space.

We had losses of $229,821 from our unconsolidated
subsidiaries, during fiscal 2002 because we absorbed part of
the losses incurred by Diabecore and MicroIslet.  Our share
of the loss is determined by applying our ownership
percentage to the total loss incurred, and we get to deduct
the portion of the loss allocated to the unrelated investors
from our total net loss.

Income Taxes

As of September 30, 2005, we had approximately $26 million
in net operating losses available for federal tax purposes.
Subject to certain limitations, these losses will be
available as carry forwards to offset future taxable income
through the years 2005-
2021.  We also have federal research and development credit
carry forwards available to offset federal income taxes of
approximately $700,000, subject to limitations and expiring
in the years 2005 through 2013. Our ability to utilize these
carryforwards are significantly limited or eliminated due to
the change of ownership when BICO sold its 52% interest in
May 2004.

Item 8.  Financial Statements and Supplementary Data.

Our financial statements appear on pages F-1 through F-23.

Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure

Not applicable.

Item 9A. Controls and Procedures

The Chief Executive Officer of the Company conducted an
evaluation of the effectiveness of the design and operation
of the Company's disclosure controls and procedures as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e) as of
the end of the period covered by this report. Based on that
evaluation, the Chief Executive Officer concluded that the
Company's disclosure controls and procedures were effective
as of the end of the period covered by this report. There
were no significant changes in internal controls over
financial reporting that occurred during the year ended
September 30, 2005  that have materially affected, or are
reasonably likely to materially affect, the Company's
internal controls over financial reporting.


PART III

Item 10. Directors and Executive Officers

As of September 30, 2005, our directors and executive
officers were as follows:

Director
Name             Age  Since  Positions Held

Anthony Paterra  55   2003   Chief Executive Officer/Director


ANTHONY PATERRA, age 55, joined BICO in 1999 as Director of
Public Affairs. He then began to consult on BICO and
Diasense corporate insurance issues. In April 2003 he was
appointed to our board of directors and was made CEO.  On
October 25, 2005 Mr. Paterra resigned as CEO of Diasense and
accepted the position of Executive Vice President of
Diasense.  Prior to joining us, he worked as an Insurance
Agent. He also served as a director and CEO of BICO, Inc.
until November 8, 2004.

On October 25, 2005 pursuant to the terms of an agreement to
convert our debt owed to Dominion Assets, LLC, Keith R.
Keeling was appointed to the position of CEO and appointed
to the Board of Directors.

Keith R. Keeling, age 49, has been the President and a
principal of Dominion Asset Finance Corporation since 2003.
Dominion Asset Finance Corporation purchased and liquidated
certain assets of BICO.  Since 2004, Mr. Keeling has been
the Managing Member of Dominion Assets LLC.   Dominion
Assets, LLC purchased 11,975,000 shares of Diasense and
other assets of BICO.  Dominion Assets, LLC is a majority
stockholder of Diasense and has made several loans to the
Company to fund operations.  From 1994 to 2003, Mr. Keeling
was a principal and the Executive Vice President of Dynamics
Commercial Funding Corporation, an equipment leasing and
finance company he founded in 1994.

Item 11. Executive Compensation

Normally, the following table would set forth information
concerning the annual and long-term compensation for
services in all capacities for the Fiscal Years ended
September 30, 2005, 2004, and 2003 of those persons who
were, at September 30, 2005: (i) the Chief Executive
Officer, and (ii) the other most highly compensated
executive officers whose remuneration exceeded $100,000.

Anthony Paterra received $5,000 in total compensation from
Diasense in fiscal 2005.


             SUMMARY COMPENSATION TABLE

Annual Compensation            Long-Term         All Other
                             Compensation (1)   Compensation
                                                  ($)(2)
------------------------------------------------------------
Name and   Year Salary ($) Bonus (2)Other Awards
Principal                   ($)     ($)   Warrants
Position                                 (number of
                                          shares)(#)
------------------------------------------------------------
Anthony D. 2005 $5,000   $ 0       $ 0        0       $ 0
Paterra,
CEO
------------------------------------------------------------

(1)  We do not currently have a Long-Term Incentive Plan or
LTIP, and no payouts were made under any LTIP during the
years 2005, 2004 or 2003.  We have no retirement, pension or
profit-sharing programs for the benefit of our directors,
officers or other employees.

(2)  We did not pay any other compensation to the named
executives during Fiscal 2005, 2004, or 2003..

Option/Warrant/SAR Grants in Last Fiscal Year

We did not grant any options, warrants or SARs to any of the
named executives during fiscal 2005.

Employment Agreements. We no longer have any employment
agreements.

Item  12.  Security  Ownership of Certain Beneficial  Owners
and Management

<TABLE>
                                                                 Percent of
                    Amount & Nature             Ownership with   Class with
Name and Address    of Beneficial   Percent of  Warrants and    Warrants and
of Beneficial Owner  Ownership(1)    Class (2)   Options(3)      Options (4)

<S>                  <C>             <C>         <C>             <C>
Dominion Assets, LLC  11,975,000      52.1%      11,975,000         52.1%
21155 Whitfield Place
Suite 206
Potomac Falls, VA  20165

All directors and              0        *           0(6)
executive officers
as a group

* Less than one percent
</TABLE>
________________________

(1)  Excludes currently exercisable warrants set forth in
the third column and detailed in the footnotes below.

(2)  Represents current common stock owned by each person,
as set forth in the first column, excluding currently
exercisable warrants, as a percentage of the total number
of shares of common stock outstanding as of September 30,
2005, which was 22,980,051.

(3)  Includes ownership of all shares of common stock which
each named person or group has the right to acquire, through
the exercise of warrants or options, within sixty (60) days,
together with the common stock currently owned.

(4)  Represents total number of shares of common stock owned
by each person, as set forth in the third column, which each
named person or group has the right to acquire, through the
exercise of warrants or options within sixty (60) days,
together with common stock currently owned, as a percentage
of the total number of shares of common stock outstanding as
of September 30, 2005.  For individual computation purposes,
the total number of shares of common stock outstanding as of
September 30, 2005 has been increased by the number of
additional shares which would be outstanding if the person
or group owned the number of shares set forth in the third
column.

Item 13. Certain Relationships and Related Transactions

Non Circumvention and Consulting Fee Agreement

On September 29, 2004 Diasense entered into a Non
Circumvention and Consulting Fee Agreement with Keith R.
Keeling, President of Dominion Assets, LLC (Diasense's
majority shareholder). We entered this agreement in order to
raise cash to help finance future operations. Under the
terms of the agreement Mr. Keeling was to assist in the sale
of Diasense assets including our patents and Diabecore stock
and would have received upon funding of any such sale a fee
equal to 5% of the sale proceeds. This agreement was
terminated by mutual agreement in April, 2005 and no
compensation was paid to Mr. Keeling pursuant to the
agreement.

Employment Relationships

Anthony Paterra, who was our CEO until October 25, 2005 and
is currently our Executive Vice President and a member of
our board of directors, was also the CEO and chairman of the
board for BICO.

Keith Keeling, who was appointed our CEO on October 25, 2005
is also the Managing Member of Dominion Assets, LLC, our
largest shareholder.

Investments and Loans

In connection with the purchase of the 52% ownership of
Diasense by Dominion Assets, LLC. from BICO, the $1,954,936
intercompany payable from Diasense to BICO was assigned to
Dominion Assets, LLC.  This liability was documented by a
note payable on demand without interest.

After demand for payment was made by Dominion Assets, LLC,
the demand note was amended effective September 28, 2004.
Under the terms of the amended demand note Diasense now owes
a principle amount of $1,954,936 with interest calculated at
a rate of 8% per annum. The indebtedness is collateralized
by all of Diasense's assets. Dominion Assets, LLC agreed not
to demand payment for a period of 180 days following the
effective date of the amendment.

On October 24, 2005, Diasense entered into a Note Conversion
Agreement with Dominion Assets, LLC (the "Conversion
Agreement") which provides that the entire principal amount
of the Note, including all accrued and unpaid interest
through the date of conversion, will convert into shares of
Common Stock of Diasense at a conversion price of $.04 per
share (the "Conversion Shares") if Diasense raises a minimum
of $3,000,000 in gross proceeds from a private offering of
its equity securities on or before March 31, 2006, at a
price per share of at least $.10 (the "Qualified Offering").
If the Qualified Offering takes place, Dominion will accept
these Conversion Shares as full satisfaction of any and all
obligations of Diasense under the Note.  Assuming the
Qualified Offering had already taken place and the
Conversion Shares had been issued on October 1, 2005, this
conversion would result in the acquisition by Dominion of
52,965,154 shares of Diasense Common Stock.  In the event
the Qualified Offering does not take place by March 31,
2006, the Note will remain outstanding and Diasense's assets
will continue to be subject to Dominion's security interest
in the Note.

 PART IV

Item 14. Principal Accountant Fees and Services

Fees for professional services rendered by Goff Backa Alfera
& Company, LLC for the audits of year end financial
statements and reviews of quarterly interim financial
statements were $13,000 for fiscal year 2005. There were no
tax, or other fees during fiscal 2005, and there were no
audit, audit related, tax, or other fees during fiscal years
2004 and 2003.

Item 15. Exhibits, Financial Statements and Reports on Form
8-K

1.    Financial Statements

The  financial statements, together with the  report thereon
of the Company's independent accountants, are included in
this report on the pages listed below.


(a)   Financial Statements                                 Page

      Report of Independent Accountants Goff Backa
      Alfera & Company, LLC.                               F-1

      Balance Sheets as of September 30, 2005;
      September 30, 2004.                                  F-3

      Statements of Operations For the Fiscal
      Years Ended September 30, 2005, 2004, 2003; and
      July 5, 1989 (inception) through September 30, 2002. F-4

      Statements of Changes in Stockholders'
      Equity for the period and from July 5, 1989
      (inception)through September 30, 2005.               F-5

      Statements of Cash Flows for the Fiscal
      Years Ended September 30, 2005, 2004, 2003; and
      July 5, 1989 (inception) through September 30, 2002. F-6

      Notes to Financial Statements for the
      Fiscal Year Ended September 30, 2005.                F-7

2.   Exhibits

(a)   Reports on Form 8-K

      Diasense filed a Form 8-K on December 20, 2002 for
      the event dated December 19, 2002.

(b)   Exhibits Required by Item 601 of Regulation S-K

      The following Exhibits required by Item 601 of
      Regulation S-K  are  filed  as part of this report.
      Except as  otherwise noted,  all  exhibits  are
      incorporated  by  reference  from Exhibits to Form S-
      1 (Registration #33-56574) filed December 31, 1992 or
      from exhibits to Form 10-K filings subsequent to that
      date.

3.1   Articles of Incorporation of Diasense, Inc., as amended

3.2   Amended and Restated Bylaws of Diasense, Inc.

4.1   Form of Specimen Common Stock Certificate of
      Diasense, Inc.

10.1  Purchase Agreement dated as of November 18,
      1991 between Diasense, Inc. and Biocontrol
      Technology, Inc.

10.2  Manufacturing Agreement dated as of  January
      20, 1992, between Diasense, Inc. and Biocontrol
      Technology, Inc.

10.3  Research and Development Agreement dated  as  of
      January  20, 1992 between Diasense, Inc. and
      Biocontrol Technology, Inc.

10.4  Lease  dated as of May 1, 1992 between
      Diasense, Inc. and Biocontrol Technology, Inc.

10.5  First Amendment to Purchase Agreement dated as
      of December  8, 1992 between Diasense, Inc. and
      Biocontrol Technology, Inc.

10.6(1)Amendment to Manufacturing Agreement dated as
       of June  7,  1994  between Diasense, Inc.  and
       Biocontrol Technology, Inc.

10.7(1)Deferral  Agreement, dated as of  July  1,
       1994, between Diasense, Inc. and Biocontrol
       Technology, Inc.

10.8   Deferral Agreement dated as of September 30, 1994
       between Diasense, Inc. and Biocontrol Technology,
       Inc.

10.9   Employment Agreement dated as of November 1, 1994
       between Diasense, Inc. and Fred E. Cooper

10.10  Employment Agreement dated as of November 1, 1994
       between Diasense, Inc. and David L. Purdy

10.11(2)  Letter of Resignation of director C. Terry Adkins

10.12(3)  Letter of Resignation of director Patrick H.
          O'Neill

10.13(4)  Letter of Resignation of director David L. Purdy

10.14     Amendment to Employment Agreement between
          Diasense, Inc. and Fred E. Cooper

10.15(5)  Letter of Resignation of director Anthony J.
          DelVicario

10.16(6)  Letter of Resignation of director John F. Steel,IV

10.17(7)  Letters of Resignation of directors Fred E. Cooper
          and Anthony J. Feola

10.18(8)  Letter of Resignation of director Paul W. Stagg

(1)     Incorporated by reference from Exhibit with this
        title filed with  the  Company's Form S-1 filed August
        17, 1994  at  33-82796.
(2)     Incorporated by reference from Exhibit with this
        title filed with the Company's Form 8-K dated August 29,
        1997.
(3)     Incorporated by reference from Exhibit with this
        title filed with the Company's Form 8-K dated November
        14, 2000.
(4)     Incorporated by reference from Exhibit with this
        title filed with the Company's Form 8-K dated November
        14, 2000.
(5)     Incorporated by reference from Exhibit with this
        title filed with the Company's Form 8-K dated February
        11, 2002
(6)     Incorporated by reference from Exhibit with this
        title filed with the Company's Form 8-K dated April 29,
        2002
(7)     Incorporated by reference from Exhibit with this
        title filed with the Company's Form 8-K filed July 29,
        2002
(8)     Incorporated by reference from Exhibit with this
        title filed with the Company's Form 8-K filed December
        20, 2002
(9)     Incorporated by reference from Exhibit with this
        title filed with the Company's Form 8-K filed September
        28, 2004
(10)    Incorporated by reference from Exhibit with this
        title filed with the Company's Form 8-K filed May 24,
        2005
(11)    Incorporated by reference from Exhibit with this
        title filed with the Company's Form 8-K filed October
        31, 2005
(12)    Incorporated by reference from Exhibit with this
        title filed with the Company's Form 8-K filed November
        16, 2005



                           SIGNATURES

Based  on  the  requirements  of  Section  13  or  15(d)  of
the Securities  Exchange Act of 1934, the Registrant has duly
caused this  report  to  be  signed on its behalf  by  the
undersigned,thereunto duly authorized, on the 28th day of December,
2005.

                                   DIASENSE, INC.

                                   By:    /s/ Keith R.Keeling
                                              Keith R.Keeling, CEO,
                                              principal executive
                                              officer,principal
                                              accounting officer and
                                              principalfinancial
                                              officer

Based on the requirements of the 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
datesindicated.

     Signature                Title               Date


 /s/Keith R. Keeling           CEO             December 28, 2005
    Keith R. Keeling




                Goff, Backa, Alfera & Company, LLC
                   CERTIFIED PUBLIC ACCOUNTANTS
                     ________________________

                      3325 Saw Mill Run Blvd.
                          Pittsburgh, Pa

        Report of Independent Registered Public Accountants


Board of Directors
Diasense, Inc.

We  have audited the accompanying balance sheets  of
Diasense, Inc. (a development stage company) as of September  30,
2005  and 2004, and the related statements of operations, changes
in  stockholder's  equity and cash flows for each  of  the  three
years  in the period ended September 30, 2005, and for the period
from  July 5, 1989 (inception) through September 30, 2005.  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.   The   financial
statements of Diasense, Inc. (a development stage company) as  of
September  30,  1997,  and  for the  period  from  July  5,  1989
(inception)  through September 30, 1997, were  audited  by  other
auditors  whose  report  dated December 30,  1997,  expressed  an
unqualified opinion on these statements.

We  conducted  our  audits  in  accordance  with  the Standardsof
the Public Company Accounting Oversight Board (United States).
Those standards  require  that  we plan  and perform the audit to
obtain   reasonable  assurance   about  whether   the   financial
statements  are   free   of   material misstatements.    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, such financial statements present fairly, in all
material  respects,  the  financial  position of Diasense, Inc. as
of September 30, 2005 and 2004, and the results
of  its operations and its cash flows for each of the three years
in  the period ended September 30, 2005, and for the period  from
July   5,  1989  (inception)  through  September  30,  2005,   in
conformity with accounting principles generally accepted in the
United States of America.


The  accompanying   financial  statements  have  been
prepared  assuming  that the Company will  continue  as  a  going
concern.  As discussed in note B to the financial statements, the
Company is in the development stage and has incurred losses  from
operations  and negative cash flows from operations for the year
September 30, 2005 and  from July  5,  1989  (inception) through
September  30, 2005 raising substantial doubt  about its ability
to continue  as a going concern.  Management's plans in regard to
these matters are   also  described  in  note  B.  The  financial
statements do not include any adjustments that might result from
the  outcome of this uncertainty, including adjustments relating
to the recoverability and classification of recorded assets that
might be necessary  in the  event the Company cannot continue to
meet  its  financing requirements and achieve productive
operations.

/s/Goff, Backa, Alfera & Company, LLC
Goff, Backa, Alfera & Company, LLC

Pittsburgh, Pennsylvania
January 4, 2006



<PAGE>1

                               DIASENSE,INC.
                         (A Development Stage Company)

                          Consolidated Balance Sheets

                                                  September 30,   September 30,
               ASSETS                                 2005           2004
                                                   -----------    -----------
Current assets
  Cash                                             $     1,545    $         -
  Due from Diabecore                                    14,887              -

Other Assets
  Investment                                                 -              -
                                                   -----------     ----------
                                                             -              -
                                                   -----------     ----------
               TOTAL ASSETS                        $    16,432    $         -
                                                   ===========     ==========

               LIABILITIES and STOCKHOLDERS' EQUITY (DEFICIENCY)

Current liabilities
  Accounts payable                                 $    19,479     $    5,000
  Note payable to majority shareholder               1,996,936      1,954,936
  Accrued interest payable to majority shareholder     164,933              -
                                                   -----------    -----------
               Total current liabilities             2,181,348      1,959,936

Commitment and Contingencies

Stockholders' equity (deficiency)
  Preferred stock, 1,000,000 shares authorized,
   none issued.                                              -              -
  Common stock, 40,000,000 shares
   of $.01 par value authorized; issued and
   outstanding 22,980,051 at Sept. 30, 2005 and
   Sep. 30, 2004                                       229,801        229,801
  Additional paid-in capital                        44,612,895     41,509,449
  Warrants                                             725,682      3,827,478
  Deficit accumulated during the  development stage(47,733,294)   (47,526,714)
                                                    -----------    -----------
                                                    (2,164,916)    (1,959,936)
                                                    -----------    -----------
TOTAL LIABILITIES AND
  STOCKHOLDERS'EQUITY (DEFICIENCY)                 $    16,432    $         -
                                                    ===========    ===========
<FN>

The accompanying notes are an integral part of this statement.

<PAGE>F-3
                                 Diasense, Inc.
                         (A Development Stage Company)

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                                        From July 5, 1989
                                         For the year ended    For the year ended  For the year ended  (inception) thru
                                         September 30, 2005    September 30, 2004  September 30, 2002   September 30, 2005
                                         ------------------    ------------------  ------------------   ------------------
<S>                                        <C>                  <C>                  <C>                  <C>
Research and development expenses
                                           $       -            $       -             $      -             $ 10,556,405

General and administrative expenses              98,889                 -                  96,173            16,975,648

Warrant extensions                                 -                    -                    -               17,890,676

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

Interest expense                                164,933                 -                    -                  176,658

Loss on unconsolidated subsidiaries                -                    -                    -                  575,412

Impairment Loss                                    -                    -                    -                  690,124

Amortization of Goodwill                           -                    -                    -                  535,057

Other income                                       -                    -                (284,974)           (1,042,997)

Other expense                                      -                    -                    -                   37,405

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

Gain from sale of MicroIslet Stock                 -                    -                (530,880)           (1,283,852)
                                           --------------       --------------       --------------       ---------------
Net income (loss)                          $   (206,580)        $       -             $    719,681        $  (47,703,294)
                                           ==============       ==============       ==============       ===============
Net income (loss) per common share         $      (0.01)        $       -             $       0.03        $        (2.26)
                                           ==============       ==============       ==============       ===============

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

</TABLE>
<PAGE>F-4
<TABLE>

                                 Diasense, Inc.
                         (A Development Stage Company)

  CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

     For the period July 5, 1989 (inception) through September 30, 2005


                                                                                                           Deficit     Total
                                                                                                        Accumulated    Stock-
                                                                       Common    Additional              During the    Holders'
                                                  Common    Stock      Stock      Paid-in               Development    equity
                                                  Shares    Amount   Subscribed   Capital    Warrants       Stage     (Deficit)
                                                ---------- --------- ---------- ---------- -----------  ------------ -----------
<S>                                             <C>         <C>      <C>        <C>        <C>         <C>          <C>
July 10,1989 Issuance of stock to BICO in
   connection with obtaining License and
   Marketing Agreement                           8,000,000  $ 80,000  $       -  $       -   $       -   $        -   $   80,000
 Aug. 21 through Dec. 31, 1989 (various dates)
   First Private Placement                         656,000     6,560          -    321,440           -            -      328,000
 Sep. 29, 1989 - Issuance of stk in connection
   with patent rights acquired by BICO           1,040,000    10,400          -    509,600           -            -      520,000
 Net loss                                                -         -          -          -           -      (80,000)     (80,000)
                                                ---------- --------- ---------- ---------- -----------  ------------ -----------
Balances at December 31, 1989                    9,696,000    96,960          -    831,040           -      (80,000)     848,000
 Jan. 1 to Dec. 31, 1990 (various dates)
    First private Placement                      1,240,000    12,400          -    607,600           -            -      620,000
 May 1, 1990 through Aug. 31, 1990 (various dates)
    First Private Placement
    Exchange of debt for shares of stock           136,000     1,360          -     66,640           -            -       68,000
 Warrants issued - to BICO                               -         -          -          -      27,500            -       27,500
 Net loss                                                -         -          -          -           -     (497,628)    (497,628)
                                                ---------- --------- ---------- ---------- -----------  ------------ -----------
Balances at December 31, 1990                   11,072,000   110,720          -  1,505,280      27,500     (577,628)   1,065,872
 Jan. 1 to Dec. 31, 1991 (various dates)
   First Private Placement                         768,000     7,680          -    376,320           -            -      384,000
   Second Private Placement                      3,948,250    39,482          -  3,896,468           -            -    3,935,950
 December 31, 1991 - common stock subscribed
   62,500 shares at $ 1                                  -         -        625     61,875           -            -       62,500
 Warrants issued - to BICO                               -         -          -          -      19,085            -       19,085
 Net loss                                                -         -          -          -           -   (3,650,203)  (3,650,203)
                                                ---------- --------- ---------- ----------  ----------  ------------ -----------
Balances at December 31, 1991                   15,788,250   157,882        625  5,839,943      46,585   (4,227,831)   1,817,204
 Jan. 1 to Sep. 30, 1992 (various dates)
   Second Private Placement                        986,750     9,868          -    976,883           -            -      986,751
   Third Private Placement                           7,212        72          -     25,170           -            -       25,242
   Fourth Private Placement                        120,000     1,200          -    418,800           -            -      420,000
 Jan. 1992 - Exchange of debt for share of stk     235,000     2,350          -    232,650           -            -      235,000
 Jan. 1992 - Common stk subscriptions recieved      62,500       625       (625)         -           -            -            0
 Net loss                                                -         -          -          -           -   (2,846,584)  (2,846,584)
                                                ---------- --------- ---------- ----------  ----------  ------------ -----------
Balances at September 30, 1992                  17,199,712   171,997          -  7,493,446      46,585   (7,074,415)     637,613
 Sep. 30, 1992 to Oct. 31,1992(various dates)
   Fourth Private Placement                        180,000     1,800          -    628,200           -            -      630,000
 June 1993 thru July 1993 warrants exercised        25,000       250          -     28,520      (3,770)           -       25,000
 Net loss                                                -         -          -          -           -   (3,763,101)  (3,763,101)
                                                ---------- --------- ---------- ----------  ----------  ------------ -----------
Balances at September 30, 1993                  17,404,712   174,047          -  8,150,166      42,815  (10,837,516)  (2,470,488)
 Oct. 1, 1993 to Sep. 30, 1994(various dates)
   Registered Stock                                230,961     2,309          -    783,936           -            -      786,245
 Consulting service in exchange for stock            7,200        72          -     25,128           -            -       25,200
 Treasury Stock purchase                           (10,000)     (100)         -     (4,900)          -      (30,000)     (35,000)
 Treasury Stock sale                                10,000       100          -     34,900           -            -       35,000
 Nov. 1993 thru Aug. 1994 warrants exercised       105,000     1,050          -     38,950      (2,500)           -       37,500
 June 1994 Private Placement subject to Reg. S      91,667       917          -    287,834           -            -      288,751
 Net Loss                                                -         -          -          -           -   (5,145,081)  (5,145,081)
                                                ---------- --------- ---------- ----------  ----------  ------------ -----------
Balances at September 30, 1994                  17,839,540   178,395          -  9,316,014      40,315  (16,012,597)  (6,477,873)
 Consulting service in exchange for stock           17,500       175          -     61,075           -            -       61,250
 May 1995 Exchange of debt for shrs of stk       3,000,000    30,000          - 10,470,000           -            -   10,500,000
 Oct. 1994 thru Sep. 1995 warrants exercised        29,512       295          -      9,771           -            -       10,066
 Warrant extensions                                      -         -          -      -       4,625,000            -    4,625,000
 Oct. 1, 1994 to Sep. 30, 1995(various dates)
    Registered Stock                               437,768     4,378          -  1,497,114           -            -    1,501,492
 July 12, 1995 unregistered stock to BICO        1,200,000    12,000          -  4,188,000           -            -    4,200,000
 Net Loss                                                -         -          -      -           -      (10,336,514) (10,336,514)
                                                ---------- --------- ---------- ----------  ----------  ------------ -----------
Balances at September 30, 1995                  22,524,320   225,243          - 25,541,974   4,665,315  (26,349,111)   4,083,421
 Consulting service in exchange for stock:Reg.      10,000       100          -     34,900           -            -       35,000
 Consulting service in exchange for stock:Unreg.     5,000        50          -     17,450           -            -       17,500
 Oct. 1995 thru Sep. 1996 warrants exercised        56,000       560          -     27,440           -            -       28,000
 Warrant extensions                                      -         -          -          -   7,640,468            -    7,640,468
 Oct. 1, 1995 to Sep. 30, 1996(various dates)
   Registered Stock                                410,731     4,108          -  1,361,047           -            -    1,365,155
 Net Loss                                                -         -          -          -           -   (9,018,258)  (9,018,258)
                                                ---------- --------- ---------- ----------  ----------  ------------ -----------
Balances at September 30, 1996                  23,006,051   230,061          - 26,982,811  12,305,783  (35,367,369)   4,151,286
 Warrant extensions                                      -         -          -          -   5,593,875            -    5,593,875
 Oct. 1, 1996 to Sep. 30, 1997(various dates)
   Registered Stock                                (27,000)     (270)         -    (94,230)          -            -      (94,500)
 Net Loss                                                -         -          -          -           -   (6,564,837)  (6,564,837)
                                                ---------- --------- ---------- ----------  ----------  ------------ -----------
Balances at September 30, 1997                  22,979,051   229,791          - 26,888,581  17,899,658  (41,932,206)   3,085,824
 Warrant extensions                                      -         -          -          -      25,000            -       25,000
 Warrants expired                                        -         -          -  2,400,000  (2,400,000)           -            -
 Oct. 1, 1997 to Sep. 30, 1998(various dates)
    Registered Stock                                 1,000        10          -      3,490           -            -        3,500
 Net Loss                                                -         -          -          -           -   (2,914,329)  (2,914,329)
                                                ---------- --------- ---------- ----------  ----------   ----------  -----------
Balances at September 30, 1998                  22,980,051   229,801          - 26,292,071  15,524,658  (44,846,535)     199,995
 Warrants issued for services                            -         -          -          -     228,538            -      228,538
 Warrant extensions                                      -         -          -          -       6,333            -        6,333
 Warrants expired                                        -         -          -    377,625    (377,625)           -            -
 Net Loss                                                -         -          -          -           -     (487,756)    (487,756)
                                                ---------- --------- ---------- ----------  ----------    ---------   ----------
Balances at September 30, 1999                  22,980,051  $229,801          - 29,669,696  15,381,904  (45,334,291)     (52,890)

 Warrants issued for services                            -         -          -          -           -            -            -
 Warrant extensions                                      -         -          -          -     230,178            -      230,178
 Warrant expired                                         -         -          -    291,250    (291,250)           -            -
 Net Loss                                                -         -          -          -           -     (695,438)    (695,438)
                                                ---------- --------- ---------- ----------  ----------  -----------   ----------
Balances at September 30, 2000                  22,980,051  $229,801 $        -$29,960,946 $15,320,832 $(46,029,729) $  (518,150)

 Warrants issued for services                            -         -          -          -      55,199            -       55,199
 Warrant extensions                                      -         -          -          -           -            -            -
 Warrant expired                                         -         -          -          -           -            -            -
 Net Loss                                                -         -          -          -           -   (1,755,563)  (1,755,563)
                                                ---------- --------- ---------- ----------  ----------  -----------   ----------
Balances at September 30, 2001                  22,980,051  $229,801 $        -$29,960,946 $15,376,031 $(47,785,292) $(2,218,514)
                                                ---------- --------- ---------- ----------  ----------  -----------   ----------
 Warrant expired                                         -         -          -     57,407     (57,407)           -            -
 Net Loss                                                -         -          -          -           -     (461,103)    (461,103)
                                                ---------- --------- ---------- ----------  ----------  -----------   ----------
Balances at September 30, 2002                  22,980,051  $229,801 $        -$30,018,353 $15,318,624 $(48,246,395) $(2,679,617)
                                                ========== ========= ========== ==========  ==========  ===========   ===========
 Warrant expired                                         -         -          -  3,309,422  (3,309,422)           -            -
 Net Income (Loss)                                       -         -          -          -           -      719,681      719,681
                                                ---------- --------- ---------- ----------  ----------  -----------   ----------
Balances at September 30, 2003                  22,980,051  $229,801 $        -$33,327,775 $12,009,202 $(47,526,714) $(1,959,936)
                                                ========== ========= ========== ==========  ==========  ===========   ===========
Warrant expired                                          -         -          -   8,181,724  (8,181,724)           -            -
 Net Income (Loss)                                       -         -          -           -           -            -            -
                                                ---------- --------- ---------- ----------  ----------  -----------   ----------
Balances at September 30, 2004                  22,980,051  $229,801 $        -$41,509,499 $ 3,827,478 $(47,526,714) $(1,959,936)
                                                ========== ========= ========== ==========  ==========  ===========   ===========
Warrants issued for services                             -         -          -          -       1,600            -        1,600
Warrant expired                                          -         -          -  3,103,396  (3,103,396)           -            -
 Net Income                                              -         -          -          -           -     (206,580)    (206,580)
                                                ---------- --------- ---------- ----------  ----------  -----------   ----------
Balances at September 30, 2005                  22,980,051  $229,801 $        -$44,612,895 $   725,682 $(47,733,294) $(2,164,916)
                                                ========== ========= ========== ==========  ==========  ===========   ===========

</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE>F-5
<TABLE>

                                 Diasense, Inc.
                         (A Development Stage Company)

                      CONSOLIDATED STATEMENT OF CASH FLOWS

<CAPTION>
                                                                                                        From July 5, 1989
                                         For the year ended    For the year ended  For the year ended   (inception) thru
                                         September 30, 2005    September 30, 2004  September 30, 2003   September 30, 2005
                                         ------------------    ------------------  ------------------   ------------------
<S>                                        <C>                   <C>                 <C>                 <C>

Cash flows from operating activities:
 Net income (loss)                          $     (206,580)       $       -            $   719,681        $  (47,703,294)
 Adjustments to reconcile net loss to net
 cash used by operating activities:
  Depreciation                                        -                   -                     41                90,047
  Amortization                                        -                   -                380,810               535,057
  Impairment loss                                     -                   -                690,124               704,491
  Gain on sale of Diabecore stock                  (57,242)               -                    -                 (57,242)
  Gain on sale of MicroIslet stock                    -                   -               (530,880)           (1,283,852)
  Loss on unconsolidated subsidiaries                 -                   -                    -                 575,412
  Stock issued in exchange for services               -                   -                    -                 138,950
  Stk issued for License & Marketing Agreement        -                   -                    -                  80,000
  Warrants issued for services                       1,600                -                    -                 515,515
  Warrant extensions                                  -                   -                    -              17,890,676
  Inventory deposit - BICO                            -                   -                    -              (1,000,000)
  (Increase) decrease in prepaid expenses             -                   -                    868                   -
  Increase (decrease)in accounts payable            14,479                -                (38,099)               19,479
  Increase (decrease) in accrued payroll
    and withholdings                                  -                   -               (167,942)                  -
  Decrease in other assets                            -                   -                    239                   -
  Increase in accrued interest                     164,933                -                    -                 164,933
                                               -------------        -------------     -------------        -------------
Net cash used in operating activities              (82,810)               -                (16,092)          (29,329,828)

Cash flows from investing activities:
  Disposal of property and equipment                  -                   -                    -               175,000
  Purchase of property and equipment                  -                   -                    -              (279,413)
  Investment - MicroIslet                             -                   -                    -            (1,600,000)
  Investment - Diabecore                              -                   -                    -              (987,468)
  Proceeds from sale of Diabecore stock             42,355                -                    -                42,355
  Proceeds from sale of MicroIslet stock              -                   -                691,340           2,070,726
  (Increase)in notes rec-related parties              -                   -                    -              (125,000)
  (Increase)in interest rec-related parties           -                   -                    -               (13,538)
                                               -------------        -------------     -------------        -------------
Net cash provided by (used in) investing
          activities                                42,355                -                691,340            (717,338)

Cash flows from financing activities:
  Proceeds from notes payable                       72,000                -                   -                 72,000
  Payments on notes payable	                   (30,000)               -                   -                (30,000)
  Advances to BICO                                    -                   -                   -             (7,498,369)
  Repayment of advances to BICO                       -                   -                   -              9,203,493
  Advances from BICO, net                             -                   -                   -             14,496,167
  Repayment of advances from BICO                     -                   -               (675,248)         (2,041,231)
  Proceeds from issuance of common stock              -                   -                   -             10,971,834
  Proceeds from issuance of common stk to BICO        -                   -                   -              4,200,000
  Proceeds from warrants exercised                    -                   -                   -                118,066
  Purchase from treasury stock                        -                   -                   -                (35,000)
  Proceeds from Regulation S                          -                   -                   -                288,751
  Proceeds from issuance of notes payable             -                   -                   -                303,000
                                               -------------       --------------     ------------         -------------
Net cash (used in)provided by fin. activities       42,000                -               (675,248)          30,048,711
                                               -------------       --------------     ------------         -------------
Net increase(decrease)in cash and cash equiv.        1,545                -                   -                   1,545
Cash and cash equivalents at beg of period            -                   -                   -                    -
                                               -------------       --------------     ------------         -------------
Cash and cash equivalents at end of period     $     1,545         $      -           $       -           $       1,545
                                               =============       ==============     ============         =============

The accompanying notes are an integral part of this statement.
F-6
</TABLE>





                          DIASENSE, INC.
                   (A Development Stage Company)

                 NOTES TO THE FINANCIAL STATEMENTS
                        September  30, 2005

NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
         POLICIES

1.   ORGANIZATION

Diasense, Inc. (Diasense) was incorporated in the Commonwealth of
Pennsylvania  on  July 5, 1989 as a wholly  owned  subsidiary  of
Biocontrol Technology, Inc., which later changed its name to BICO,
Inc. (BICO).  BICO owned approximately 52% of the stock
ofDiasense until July 23, 2004 when BICO sold  its  entire
ownership
interest to Dominion Assets, LLC.  Diasense's  activities
have been focused on developing a noninvasive glucose sensor (the
Sensor). The  Sensor  would  use  electromagnetic  technology  to
measure  the  concentration  of  glucose in  human tissue without
requiring  the user to take a blood sample.

2.   CASH AND CASH EQUIVALENTS

For  purposes  of  the  consolidated  statement  of  cash  flows,
Diasense  considers all highly liquid investments  with  original
maturities  of  three  months or less  to  be  cash  equivalents.

3.   PROPERTY AND EQUIPMENT

Property  and  equipment  are  accounted  for  at  cost  and  are
depreciated  over  their estimated useful  lives  (37  years  for
property  and  10 years for equipment) on a straight-line  basis.
The  carrying  value of property and equipment  is  reduced  for
impairment losses determined by management. Assets no longer used
in operations are written down to their fair market value.

4.   INCOME TAXES

Diasense previously adopted Financial Accounting Standards  Board
Statement  No. 109 (FAS 109), Accounting for Income Taxes,  which
requires the asset and liability method of accounting for  income
taxes.   Enacted  statutory tax rates are  applied  to  temporary
differences  arising from the differences in financial  statement
carrying  amounts  and  the  tax basis  of  existing  assets  and
liabilities.  Due to the uncertainty of the realization of income
tax   benefits,  the  adoption  of  FAS 109 had no effect  on the
financial statements of Diasense.


5.   ESTIMATES AND ASSUMPTIONS

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 could  differ  from  those
estimates.

6.   NET INCOME (LOSS) PER COMMON SHARE

Net income (loss) per common share is based on the weighted
average number  of  common  shares  outstanding,  which  amounted
to 22,980,051  for  the  years  ended  September  30,  2005   and
September 30, 2004 and September 30, 2003. The loss per  share
does  not  include common stock equivalents since  the  effect
would be anti-dilutive.

For the period from July 5, 1989 (inception) to September 30,
2005,  net  loss  per common share is based  on  the  weighted
average number of common shares outstanding and the number  of
common  shares issuable on the exercise of 1,708,000  warrants
issued  in  1992; reduced by 488,000 common shares  that  were
assumed  to  have  been purchased with the proceeds  from  the
exercise  of  the warrants at an assumed price  of  $3.50  per
share.   The inclusion of the warrants in the income (loss)per
share calculation is  required by the rules of the  Securities
and   Exchange   Commission   relative   to   the      initial
registration statement  which  included  Diasense's  financial
statements  through   the   period ended March 31, 1993.   The
registration statement  became effective  July  19, 1993.  The
weighted average  number of common shares including the effect
of the conversion of the warrants for the period from July  5,
1989 (inception) to September 30, 2005 amounted to 21,062,009.

7.   RESEARCH AND DEVELOPMENT

All research and development costs incurred by Diasense, or by
BICO  on  its  behalf, are charged to operations as  incurred.
Patent and technology rights acquired from BICO have also been
written off as a charge to operations.

8.   TREASURY STOCK

Diasense records treasury stock transactions using the par
value method.


9.   INTERCOMPANY ACTIVITY

Prior to July 23, 2004 certain expenses were allocated by
management between Diasense, BICO  and BICO's subsidiaries.
These expenses were reimbursed  to the paying entity through
the use of intercompany accounts, which accounts were also
used to account for non-interest bearing cash advances
between the companies.

10.  COMMON STOCK WARRANTS

Diasense  recognizes cost on warrants granted or  extended  based
upon  the  minimum value method.  There is currently  no  trading
market  for  Diasense's  warrants or common  stock.   Under  this
method,  the warrants are valued by reducing the assumed  current
market price of the underlying shares by the present value of the
exercise price discounted at an estimated risk-free interest rate
of  5%  and assuming no dividends.  The value of the warrants  is
recalculated when warrants are extended and any increase in value
over the value recorded at the time the warrants were granted  is
recognized at the time the warrant is extended.

11.  COMPREHENSIVE INCOME

Diasense's consolidated net income (loss) is substantially the
same  as  comprehensive  income  required  to  be  disclosed by
Financial Accounting Standards Board Statement No. 130.

NOTE B - OPERATIONS

In April 2005, Diasense resumed development of the Sensor but
has not, as yet, achieved a commercially marketable product.
The ability of Diasense to continue in existence is dependent
on its having sufficient financial resources to maintain
operations to complete the research and development necessary
to successfully bring the Sensor to market, and for marketplace
acceptance. Diasense has no other commercial products and is
dependent on the successful development of the Sensor technology.
Diasense has had no sales of its common stock over the last five
fiscal years. Until BICO's bankruptcy in March 2003, Diasense's
operations were funded by advances from BICO. Since the sale of
BICO's interest in Diasense to Dominion Assets, LLC (Dominion)
funding has been provided by $72,000 in demand loans from Dominion
and from $42,355 proceeds from the sale of Diasense's interest in
Diabecore.

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

Diasense has incurred significant losses and negative cash flows
from operations from inception through September 30, 2005 and has a
significant accumulated deficit as of September 30, 2005, raising
substantial doubt about its ability to continue as a going
concern.Since 1997, Diasense had been financially dependent upon BICO
and BICO's ability to raise money through its stock sales
to support its operations. With the curtailment of funding from
BICO due to BICO's bankruptcy in March 2003. Diasense will be
required to find other funding in order to continue as a going
concern. Limited funding has been provided by Dominion but it is
uncertain to what extent Dominion will be able and/or willing to
continue such funding.

NOTE C - GAIN ON SALE OF INVESTMENTS

In December 2002, Diasense sold the balance of its ownership in
MicroIslet, Inc. (706,679) stock for an aggregate of $691,340
which was used to reduce its payable to BICO. The investment had
been carried at a value of $160,460 and a gain of $530,880
was recognized on the sale.

In May 2005, the Company sold its entire interest in Diabecore
back to Diabecore for a total purchase price of $57,242 ($73,500
Canadian). Diasense received $42,355 in May 2005 and the balance
in October 2005.

NOTE D - LEASE

In  December 1998 Diasense sold its building and leased  it  back
under an agreement which required monthly rent of $5,750 for five
years  beginning  on  January  1, 1999.   Minimum  rental
payments  under  this lease were $69,000 for  the  fiscal years
ending on September 30, 2003 and $17,250 for  the
final  three  months of the lease concluding December  31,  2003.
Diasense  paid  a security deposit of $17,250 upon entering  into
this  lease agreement. At September 30, 2003 the security deposit
had been used to partially offset the amount due on this  lease.
Subsequent to September 30, 2003 Diasense and the landlord agreed
to settle all obligations under this lease for a total payment
of $5,000.

NOTE E - NOTE PAYABLE TO MAJORITY SHAREHOLDER

In connection with the purchase of the 52% ownership of Diasense
by Dominion Assets, LLC. from BICO, the $1,954,936 intercompany
payable from Diasense to BICO was assigned to Dominion Assets,
LLC.This liability was documented by a note payable on demand without
interest.

After demand for payment was made by Dominion Assets, LLC, the
demand note was amended effective September 28, 2004. Under
the terms of the amended demand note Diasense now owes a
principle amount of $1,954,936 with interest calculated at a
rate of 8% per annum. The indebtedness is collateralized by
all of Diasense's assets.

During the fiscal year ended September 30, 2005, Dominion
loaned Diasense an additional $72,000 to provide funding
for general and administrative expenses and to resume the
development of the Sensor. This amount is also payable on
demand with interest accrued at a rate of 8%. Prior to
September 30, 2005, $30,000 was repaid on this note payable.

NOTE F - OTHER INCOME

Diasense had no other income for the years ended
September 30, 2004 or 2005.

Other  income  for  the  year  ended  September 30, 2003 includes
$269,449 in forgiveness of debt and  $15,525  of  rental  income.
The total rental income  for  the year ended  September 30, 2003
was from BICO  and its subsidiaries for office space.

NOTE G - INCOME TAXES

As  of  September 30, 2005, Diasense has available  approximately
$26 million  of  net  operating loss  carryforwards  for  federal
income  tax purposes.  These carryforwards are available, subject
to  limitations, to offset future taxable income, and  expire  in
the  tax years 2006 through 2022.  Diasense also has research and
development  credit  carryforwards available  to  offset  federal
income  taxes  of approximately $700,000 subject to  limitations,
expiring in the years 2005 through 2013. The ability to utilize
these carry forwards are significantly limited or eliminated due
to the change in ownership which occured in May 2004.

Diasense has temporary differences arising from different methods
of  accounting for the costs of patent and technology rights  for
financial  statement  and tax purposes. For  financial  statement
purposes,  these costs have been charged to operations.  For  tax
purposes,  the  costs  of  approximately  $2,650,000  have   been
capitalized and are being amortized over seventeen years.   Also,
the  fair  market value of warrant extensions have been  recorded
and  expensed for financial statement purposes in the  amount  of
$17,945,875  as  of  September 30, 2002, and  2003. For tax
purposes, warrants are not recorded until the  warrants  are
exercised.

Diasense  has  not reflected any future income tax  benefits  for
these  temporary differences or for net operating loss and credit
carryforwards because of the uncertainty as to their realization.
Accordingly,  the  adoption of FAS  109  had  no  effect  on  the
financial statements of Diasense.

The  following  is  a  summary of the composition  of  Diasense's
deferred   tax  asset  and  associated  valuation  allowance   at
September 30, 2005 and 2004:



                                 2005                2004

 Net Operating Loss           $ 8,961,860       $ 8,897,860
 Warrant Expense                6,111,310         6,111,310
 Patent Amortization              331,340           331,340
 Tax Credit Carry Forward         700,000           700,000
                              ----------         ----------
                              16,104,510         16,040,510
 Valuation Allowance         (16,104,510)       (16,040,510)
                              ----------         ----------
 Net Deferred Tax Asset       $        0        $         0
                              ==========         ==========

The  deferred  tax  benefit and the associated  increase  in  the
valuation allowance are summarized in the following schedule:



                                                 Increase
                                   Deferred     (Decrease)
                                     Tax       in Valuation
                                    Benefit     Allowance     Net

Year Ended September 30, 2005  $    (64,000)  $   64,000      $0
Year Ended September 30, 2004  $          0   $        0      $0
Year Ended September 30, 2003  $     88,991   $  (88,991)     $0
Year Ended September 30, 2002  $   (156,007)  $  156,007      $0
Year Ended September 30, 2001  $   (389,830)  $  389,830      $0
From July 5, 1989 (inception)
   through September 30, 2005  $(16,104,510)  $16,104,510     $0


NOTE H - RELATED PARTY TRANSACTIONS

NON CIRCUMVENTION AND CONSULTING FEE AGREEMENT

On September 29, 2004 Diasense entered into a Non circumvention
and Consulting Fee Agreement with Keith R. Keeling, President
of Dominion Assets, LLC (Diasense's majority shareholder). Under
the terms of the agreement Mr. Keeling will assist in the sale
of Diasense assets and will receive upon funding of any such sale
a fee equal to 5% of the sale proceeds. Diasense agreed to work
exclusively through Mr. Keeling in connection with its sales of
assets.
In April 2005 this Non Circumvention and Consulting Agreement
was terminated by mutual agreement.



NOTE I - STOCKHOLDERS' EQUITY

Common Stock

Diasense has had no sales of its common stock since 1997 and
there is no known market for its 22,980,051 shares outstanding.

Common Stock Warrants

At September 30, 2005, Diasense has reserved 700,000 shares of
Diasense's   unissued  common  stock  for  warrants  which   were
outstanding  and  exercisable. The fiscal years in which warrants
expire are as follows:

  Warrant Expiration Fiscal Year          Number of Shares

         2006                                500,000
         2010                                200,000
                                           ----------
                                             700,000
                                           ==========

The  following is a summary of warrant transactions during fiscal
years ended September 30,


<TABLE>
                           2005       2004       2003         2002          2001
<S>                       <C>        <C>        <C>          <C>           <C>
Outstanding beginning     2,643,000  8,292,750  10,575,800   10,635,013    10,463,013
 of year

Granted during the year     200,000          0           0            0       500,000

Canceled during the year (2,143,000)(5,649,750) (2,283,050)     (59,213)     (328,000)
                         ----------  ---------   ---------   ----------    ----------
Outstanding, and            700,000  2,643,000   8,292,750   10,575,800    10,635,013
eligible for exercise.   ==========  =========   =========   ==========    ==========

</TABLE>

In the quarter ended June 30, 2005 Diasense entered into two
Independent Consulting Agreements related to its efforts to
develop the Sensor. Upon execution of the agreements, each of the
independent consultants received warrants to purchase up to
1,227,000 shares of the Company's common stock at an exercise
price of $.01 per share. Of each 1,227,000 warrant, 100,000
warrants were immediately exerciseable with the remaining
warrants vesting upon completion of various stages of the
Sensor development.

There were no warrants issued or extended during the fiscal years
ended September 30, 2004 and 2005.


NOTE J- SUPPLEMENT CASH FLOW INFORMATION

Diasense's  financing activities included the  following  noncash
transactions.

During  1992 and 1990, notes payable aggregating $303,000  were
canceled and exchanged for 371,000 shares of Diasense's  common
stock.

On  March  31,  1995, Diasense issued 3,000,000 shares  of  its
unregistered  stock  to BICO in payment of $10,500,000  due  to
BICO.


During  the Fiscal year ended September 30, 1999, Diasense  (by
agreement  with  BICO)  converted  $125,000  of  related  party
notes receivable and $13,538  of associated interest receivable
to due from BICO.

Cash paid for interest and income taxes were as follows:


                                           From July 5, 1989
                                             (inception)
                Sept. 30 Sept.30 Sept. 30  through September
                 2005     2004     2003       30,2005

Interest Paid $   0    $   0     $   0       $11,725
               ======   ======    ======      ======
Income Taxes
       Paid   $   0    $   0     $   0       $   0
               ======   ======    ======      ======

NOTE K - SUBSEQUENT EVENTS

Note Conversion Agreement

On October 24, 2005 Diasense entered into a Note Conversion
Agreement (the "Conversion Agreement") with Dominion Assets LLC
("Dominion"), the holder of a $1,954,936 principal amount note of
Diasense (the "Note").  The material terms of the Conversion
Agreement are described in Item 1.01 of a Current Report on Form 8-
K/A filed on October 31, 2005 and are incorporated herein by
reference.  On October 1, 2005, the outstanding balance of the
Note, including interest, was $2,118,606.19.

Pursuant to the Conversion Agreement, the entire principal amount
of the Note, including all accrued and unpaid interest through the
date of conversion, will convert into shares of common stock of
Diasense at a conversion price of $.04 per share (the "Conversion
Shares") if Diasense raises a minimum of $3,000,000 in gross
proceeds from a private offering of its equity securities on or
before March 31, 2006, at a price per share of at least $.10 (the
"Qualified Offering").  If the Qualified Offering takes place,
Dominion will accept these Conversion Shares as full satisfaction
of any and all obligations of Diasense under the Note.

Pursuant to the Conversion Agreement, the Board of Directors of
Diasense appointed Keith R. Keeling as Chief Executive Officer of
Diasense on October 25, 2005 and the Board of Directors appointed
Keith R. Keeling as a Director of Diasense on October 25, 2005, to
serve until the next annual meeting of the shareholders of
Diasense or until his successor is duly elected and qualified.
Mr. Keeling was appointed as a Director of Diasense in connection
with the Conversion Agreement.

Since 2003, Mr. Keeling has been the President and a principal of
Dominion Asset Finance Corporation.  Dominion Asset Finance
Corporation purchased and liquidated certain assets of BICO.
Since 2004 Mr. Keeling has been the Managing Member of Dominion
Assets LLC.   Dominion Assets, LLC purchased 11,975,000 shares of
Diasense and other assets of BICO.  Dominion Assets, LLC is a
majority stockholder of Diasense and has made several loans to the
Company to fund operations.  From 1994 to 2003, Mr. Keeling was a
principal and the Executive Vice President of Dynamics Commercial
Funding Corporation, an equipment leasing and finance company he
founded in 1994.

In addition, pursuant to the Conversion Agreement Diasense agreed
to take all corporate action necessary to amend its Articles of
Incorporation to increase the number of shares of authorized
common stock so that there is a sufficient number of authorized
common stock available for the issuance of the Conversion Shares
in accordance with the terms of the Conversion Agreement and to
take all corporate action necessary, as soon as practicable in a
manner consistent with any required regulatory filings, to appoint
two nominees of Dominion to the Diasense Board of Directors.
These appointments to the Diasense Board of Directors will be
deemed to be effective when all required regulatory filings have
been made.

Pursuant to the Conversion Agreement, if a Qualified Offering
takes place the Note will automatically convert and Diasense will
issue the Conversion Shares to Dominion and the Note will be
canceled.   Assuming the Qualified Offering had already taken
place and the Conversion Shares had been issued on October 1,
2005, this conversion would result in the acquisition by Dominion
of 52,965,154 shares of Diasense common stock.  In the event the
Qualified Offering does not take place by March 31, 2006, the Note
will remain outstanding and Diasense's assets will continue to be
subject to Dominion's security interest in the Note.  In addition,
Dominion owns 11,975,000 shares of Common Stock acquired in a
previous acquisition.  In the aggregate, Dominion may be deemed to
beneficially own 64,940,154 shares of Common Stock, representing
85.5% of the outstanding Common Stock.

If a Qualified Offering takes place, the issuance of the
Conversion Shares as described above will be exempt from the
registration requirements under the Securities Act of 1933
pursuant to Sections 4(2) and 4(6) thereof.


Departure of Principal Officer and Director; Appointment of
Principal Officers and Director.

On October 25, 2005, Anthony Paterra, Director and Chief Executive
Officer of Diasense, voluntarily resigned as Chief Executive
Officer.

On October 25, 2005, the Board of Directors appointed Keith R.
Keeling, age 49, as Chief Executive Officer of Diasense.  Mr.
Keeling was appointed as Chief Executive Officer of Diasense in
connection with the Conversion Agreement.

On October 25, 2005, the Board of Directors appointed Keith R.
Keeling as a Director of Diasense, to serve until the next annual
meeting of the shareholders of Diasense or until his successor is
duly elected and qualified.  Mr. Keeling was appointed as a
Director of Diasense in connection with the Conversion Agreement.

On October 25, 2005, Anthony Paterra, Director of Diasense,
voluntarily resigned from Diasense's Board of Directors.  There
was no disagreement between Mr. Paterra and Diasense regarding any
matter relating to Diasense's operations, policies or practices.

On October 25, 2005, the Board of Directors appointed Anthony
Paterra, age 55, as Executive Vice President of Diasense.

Mr. Paterra joined BICO Inc. in 1999 as Director of Public Affairs
and also assisted with corporate insurance issues for BICO and
Diasense.  In May 2003 he was appointed to the Diasense Board of
Directors and was made Chief Executive Officer.    He also served
as a director and Chief Executive Officer of BICO, Inc. until
November 8, 2004.   Prior to joining the Company, he worked as an
Insurance Agent.

On November 10, 2005, the Diasense Board of Directors appointed
Steven L. McDonald as Secretary of Diasense.  Mr. McDonald is a
principal of Dominion.


Entry into a Material Definitive Agreement

Amendments to Existing Independent Consultant Agreements:

(a)  On  November  11,  2005, Diasense, Inc.  ("Diasense"  or  the
"Company")  and  Jeremy  Grata amended the independent  consultant
agreement into which they had entered on May 19, 2005 (the  "Grata
Consulting Agreement").  The material terms of the original  Grata
Consulting  Agreement  are described in Item  1.01  of  a  Current
Report  on  Form  8-K  filed  with  the  Securities  and  Exchange
Commission  (the  "SEC")  on May 24, 2005,  and  are  incorporated
herein  by  reference.  The Grata Consulting  Agreement  has  been
amended as follows:

      (i)  The initial term of the Grata Consulting Agreement  has
been extended two additional years and will now expire on May  19,
2009.  After the expiration date, the agreement may be extended on
a  month to month basis upon written agreement of Diasense and Mr.
Grata.

     (ii)  The five-year warrant certificate that the Company  had
issued  to  Mr. Grata as consideration under the Grata  Consulting
Agreement  has  been  amended  and restated  and  reissued  as  of
November  11, 2005.  The amended and restated warrant  certificate
grants  Mr.  Grata  the  right to acquire an additional  2,773,000
shares (4,000,000 shares in total) of the common stock of Diasense
prior   to   the  expiration  date  under  the  original   warrant
certificate  granted to him (May 19, 2010).  Descriptions  of  the
material  terms  of  the  aforementioned  warrant  (including  the
vesting  provisions  thereof) are set forth  in  Item  3.02  of  a
Current  Report  on  Form 8-K filed on November  16,  2005,  which
descriptions are incorporated by reference.

(b)  On  November 11, 2005, Diasense and Michael Pitsakis  amended
the  independent consultant agreement into which they had  entered
on  May  19,  2005  (the  "Pitsakis Consulting  Agreement").   The
material  terms of the original Pitsakis Consulting Agreement  are
described in Item 1.01 of a Current Report on Form 8-K filed  with
the SEC on May 24, 2005, and are incorporated herein by reference.
The Pitsakis Consulting Agreement has been amended as follows:

      (i)   The  initial term of the Pitsakis Consulting Agreement
has  been extended two additional years and will now expire on May
19,  2009.   After  the  expiration date,  the  agreement  may  be
extended  on  a  month  to month basis upon written  agreement  of
Diasense and Mr. Pitsakis.

      (ii)  The five-year warrant certificate that the Company had
issued  to  Mr.  Pitsakis  as  consideration  under  the  Pitsakis
Consulting Agreement has been amended and restated and reissued as
of   November   11,  2005.   The  amended  and  restated   warrant
certificate grants Mr. Pitsakis the right to acquire an additional
2,773,000  shares (4,000,000 shares in total) of the common  stock
of  Diasense  prior  to  the expiration date  under  the  original
warrant  certificate granted to him (May 19, 2010).   Descriptions
of the material terms of the aforementioned warrant (including the
vesting  provisions  thereof) are set forth  in  Item  3.02  of  a
Current  Report  on  Form  8-K  filed  November  16,  2005,  which
descriptions are incorporated by reference in this Item 1.01.

Entry into New Independent Consultant Agreement:

On  November  14,  2005,  Diasense  entered  into  an  independent
consultant agreement with Dr. Stuart A. Fine (the "Fine Consulting
Agreement").  Pursuant to the Fine Consulting Agreement, Dr.  Fine
will  perform  various  consulting services  for  the  Company  in
connection  with  the  development of the  Company's  non-invasive
glucose sensor intellectual property, including: (i) advising  the
Company  on  medical issues related to the Diasensor non-invasive
glucose sensor; (ii) assisting the Company in its efforts to  sell
or  license  its  intellectual  property  by  providing  technical
expertise  as required to interested parties; and (iii)  assisting
the Company in its efforts to complete the development of the next
generation  of  the Diasensor.  Dr. Fine shall  not  receive  any
monetary compensation or additional benefits (including health and
welfare  benefits)  under the Fine Consulting  Agreement  and  has
instead  received a stock purchase warrant certificate to purchase
up  to 150,000 shares of the Company's common stock at an exercise
price  of  $0.10 per share, exercisable for a period of  ten  (10)
years.   Descriptions of the material terms of the  aforementioned
warrant  certificate are set forth in Item 3.02 (subparagraph  (d)
thereof) of a Current Report on Form 8-K filed November 16,  2005,
which  descriptions  are incorporated by reference  in  this  Item
1.01.   The initial term of the Fine Consulting Agreement  expires
on  November  14, 2008, and may be extended on a  month  to  month
basis  upon  written agreement of the Company and Dr.  Fine.   The
agreement may be terminated by the Company or Dr. Fine at any time
upon  fifteen  (15)  days  written notice.   The  Fine  Consulting
Agreement  also  imposes (A) customary protections  regarding  the
Company's  proprietary rights in, and assigns  Dr.  Fine's  rights
with  respect  to, any work products or materials with  which  Dr.
Fine  will  work  pursuant to his duties under the agreement,  (B)
confidentiality  obligations on the part of Dr. Fine  relating  to
the  protection  of  the  Company's proprietary  and  confidential
information and (C) customary non-competition and non-solicitation
restrictions upon Dr. Fine that extend for a period of twelve (12)
months past the termination of the agreement.

Unregistered Sales of Equity Securities.

(a) On November 11, 2005, in conjunction with the amendment of the
Grata Consulting Agreement (as described in Item 1.01 of a Current
Report on Form 8-K filed November 16, 2005 and incorporated herein
by reference) and as consideration paid by the Company thereunder,
Diasense  issued  to Jeremy Grata an amended and restated  warrant
certificate,  representing  Mr.  Grata's  right  to   acquire   an
additional  2,773,000 shares (4,000,000 shares in  total)  of  the
Company's  common stock.  The warrants represented by the  amended
and restated certificate have an exercise price of $0.01 per share
and  expire  on  May  19,  2010.  The warrants  vest  (and  become
exercisable) according to the following schedule:

  (i) 100,000 warrants are exercisable immediately on or after the
issuance date;

  (ii) 150,000 warrants and an additional 250,000 warrants will be
exercisable at such times as phases 1 and 2, respectively, of  the
development of the non-invasive glucose sensor by the Company  are
completed,  provided that Mr. Grata is providing services  to  the
Company under the Grata Consulting Agreement at such time;

   (iii)  727,000 warrants will be exercisable at such time  as  a
working  prototype  of the non-invasive glucose  sensor  has  been
completed  and is functional, provided that Mr. Grata is providing
services  to  the Company under the Consulting Agreement  at  such
time; and

   (iv)  2,773,000 warrants will be exercisable at such time  that
the  non-invasive glucose sensor is approved by the U.S. Food  and
Drug Administration (the "FDA") or other regulatory body, provided
that  Mr.  Grata  is providing services to the Company  under  the
Consulting Agreement at such time.

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

(b) On November 11, 2005, in conjunction with the amendment of the
Pitsakis  Consulting Agreement (as described in  Item  1.01  of  a
Current   Report  on  Form  8-K  filed  November  16,   2005   and
incorporated herein by reference) and as consideration paid by the
Company thereunder, Diasense issued to Michael Pitsakis an amended
and restated warrant certificate, representing Mr. Pitsakis' right
to  acquire  an additional 2,773,000 shares (4,000,000  shares  in
total) of the Company's common stock.  The warrants represented by
the  amended  and restated certificate have an exercise  price  of
$0.01  per  share and expire on May 19, 2010.  The  warrants  vest
(and become exercisable) according to the following schedule:

  (i) 100,000 warrants are exercisable immediately on or after the
issuance date;

  (ii) 150,000 warrants and an additional 250,000 warrants will be
exercisable at such times as phases 1 and 2, respectively, of  the
development of the non-invasive glucose sensor by the Company  are
completed, provided that Mr. Pitsakis is providing services to the
Company under the Pitsakis Consulting Agreement at such time;

   (iii)  727,000 warrants will be exercisable at such time  as  a
working  prototype  of the non-invasive glucose  sensor  has  been
completed  and  is  functional,  provided  that  Mr.  Pitsakis  is
providing  services to the Company under the Consulting  Agreement
at such time; and

   (iv)  2,773,000 warrants will be exercisable at such time  that
the  non-invasive glucose sensor is approved by the FDA  or  other
regulatory body, provided that Mr. Pitsakis is providing  services
to the Company under the Consulting Agreement at such time.

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

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

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

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

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

(d)  On November 14, 2005, in conjunction with the Company's entry
into  an Independent Consulting Agreement with Dr. Stuart A.  Fine
(as  described in Item 1.01 of a Current Report on Form  8-K  file
November  16,  2005 and incorporated herein by reference)  and  as
consideration  paid  by  the  Company  for  Dr.  Fine's   services
thereunder, the Company issued a warrant certificate to Dr.  Fine,
representing  Dr. Fine's right to acquire 150,000  shares  of  the
Company's   common  stock.   The  warrants  represented   by   the
certificate have an exercise price of $0.10 per share  and  expire
on  November 14, 2015.  The warrants vest (and become exercisable)
according to the following schedule:

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

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

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

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

(e)    On  November  15,  2005,  the  Company  issued  6%  secured
convertible  notes ("Convertible Notes") in principal  amounts  of
$25,000  to  each  of St. Claire Capital Management  and  Lisa  A.
Paterra (each, a "Holder"), in consideration of the loans of equal
amount  made to the Company by each such Holder as of  such  date.
Each  of the Convertible Notes issued on November 15, 2005 is  due
October  31, 2010 (the "Maturity Date"), and will accrue  interest
at  a  rate of 6% per annum.  Each Convertible Note is secured  by
all  assets  of the Company and ranks pari passu in such  security
interest with (A) each of the other Convertible Notes that may  be
issued  by  the Company from time to time and (B) the demand  note
dated  July  23,  2004 issued by the Company  to  BICO,  Inc.  and
assigned  to  Dominion  Assets, LLC.   Each  Convertible  Note  is
convertible  in  whole  (not in part) into  common  stock  of  the
Company  at  a  conversion  price of $0.10  per  share  under  the
following circumstances:

  (i) Optional Conversion:  The Convertible Note is convertible at
the Holder's option upon either (A) the receipt by the Holder of a
notice  of prepayment of the principal of the Convertible Note  by
the  Company,  or (B) in the event all outstanding  principal  and
accrued interest due and owing on the Convertible Note is not paid
in full as of the Maturity Date.

   (ii) Mandatory Conversion:  The Convertible Note, including all
accrued  and  unpaid interest thereon, must be  converted  by  the
Holder  if  the  Company raises a minimum of $3,000,000  in  gross
proceeds  from  the  private  offering  and  sale  of  its  equity
securities on or before March 31, 2006 at a price per share of  at
least $0.10.

The  issuances  of (A) the warrant certificates  to  each  of  Mr.
Grata, Mr. Pitsakis, Mr. Paterra and Dr. Fine, (B) the Convertible
Notes to the Holders and (C) the shares of Diasense's common stock
that  may  be  issued upon conversion of the warrant  certificates
and/or the Convertible Notes are each exempt from the registration
requirements  of the Securities Act of 1933, as amended,  pursuant
to Sections 4(2) and 4(6) thereof.