UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                   Form 10-KSB
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(Mark one)

[X] Annual Report Under Section 13 or 15(d) of The Securities Exchange
    Act of 1934

    For the fiscal year ended September 30, 2006

[ ] Transition Report Under Section 13 or 15(d) of The Securities Exchange
    Act of 1934

    For the transition period from ______________ to _____________
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                         Commission File Number: 026504


                                 Diasense, Inc.
        (Exact name of small business issuer as specified in its charter)

      Pennsylvania                                             25-1605848
(State of incorporation)                                (IRS Employer ID Number)

                       211 West Wall, Midland, Texas 79701
                    (Address of principal executive offices)

                                 (432) 682-1761
                           (Issuer's telephone number)

              (Former name, former address and former fiscal year,
                         if changed since last report)
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      Securities registered under Section 12 (b) of the Exchange Act - None

        Securities registered under Section 12(g) of the Exchange Act: -
                         Common Stock - $.01 par value
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Check  whether  the issuer  has (1) filed all  reports  required  to be files by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period the Company was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure  will be contained,  to
the best of Company's knowledge,  in definitive proxy or information  statements
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB. [X]

Indicate by check mark whether the  registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act): Yes [X] No [ ]

The issuer's  revenues for the fiscal year ended  September  30, 2006 were $-0-.
The aggregate market value of voting common equity held by  non-affiliates as of
December 31, 2006, 2006 was  approximately  $-0-. As of December 31, 2006, there
were 22,105,051 shares of Common Stock issued and outstanding.

Transitional Small Business Disclosure Format : Yes [ ] No [X]
<PAGE>
                                 DIASENSE, INC.

                                INDEX TO CONTENTS

                                                                           Page
                                                                          Number
                                                                          ------
PART I

Item 1   Description of Business                                               3
Item 2   Description of Property                                              14
Item 3   Legal Proceedings                                                    14
Item 4   Submission of Matters to a Vote of Security Holders                  14

PART II

Item 5   Market for Company's Common Stock and Related Stockholders Matters   14
Item 6   Management's Discussion and Analysis or Plan of Operation            15
Item 7   Financial Statements                                                 17
Item 8   Changes in and Disagreements with Accountants on Accounting and
          Financial Disclosures                                               17
Item 8A  Controls and Procedures                                              18

PART III

Item 9   Directors, Executive Officers, Promoters and Control Persons;
          Compliance with Section 16(a) of the Exchange Act                   19
Item 10  Executive Compensation                                               19
Item 11  Security Ownership of Certain Beneficial Owners and Management
          and Related Stockholder Matters                                     20
Item 12  Certain Relationships and Related Transactions                       20
Item 13  Exhibits and Reports on 8-K                                          20
Item 14  Principal Accountant Fees and Services                               20

SIGNATURES                                                                    21

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CAUTION REGARDING FORWARD-LOOKING INFORMATION

Certain  statements  contained  in  this  annual  filing,   including,   without
limitation, statements containing the words "believes", "anticipates", "expects"
and  words  of  similar  import,  constitute  forward-looking  statements.  Such
forward-looking  statements  involve known and unknown risks,  uncertainties and
other factors that may cause the actual results,  performance or achievements of
the Company,  or industry  results,  to be materially  different from any future
results,   performance   or   achievements   expressed   or   implied   by  such
forward-looking statements.

Such factors include, among others, the following:  international,  national and
local general economic and market conditions:  demographic  changes; the ability
of the Company to sustain,  manage or  forecast  its growth;  the ability of the
Company to successfully make and integrate acquisitions;  raw material costs and
availability;  new product  development and  introduction;  existing  government
regulations  and  changes  in,  or  the  failure  to  comply  with,   government
regulations;  adverse publicity;  competition; the loss of significant customers
or suppliers;  fluctuations  and  difficulty in forecasting  operating  results;
changes in business strategy or development  plans;  business  disruptions;  the
ability  to attract  and  retain  qualified  personnel;  the  ability to protect
technology; and other factors referenced in this and previous filings.

Given  these  uncertainties,  readers  of this Form  10-KSB  and  investors  are
cautioned not to place undue reliance on such  forward-looking  statements.  The
Company  disclaims  any  obligation  to update any such  factors or to  publicly
announce the result of any  revisions to any of the  forward-looking  statements
contained herein to reflect future events or developments.

                                     PART I

ITEM 1 - DESCRIPTION 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 the business was the research and development
of a noninvasive  glucose sensor.  As of November 2002 the Company was dependent
solely on BICO to provide the funding for ongoing  operations  and BICO  stopped
funding due to its own financial difficulties. Without funding, between November
2002 and July 2004,  the  Company  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.

On August 16, 2006,  Diasense  received two letters from  Dominion  Assets,  LLC
("Dominion"),  demanding  immediate  payment of principal  and  interest  under,
respectively,  (i) that certain Demand Note, dated July 23, 2004, in a principal
amount of $1,954,936,  issued by the Company to BICO, Inc. ("BICO") and assigned
by BICO to  Dominion,  as amended  effective  September  28,  2004 (the  "Demand
Note"),  and (ii) the  additional  loans  totaling  $50,700 in principal  amount
extended  by  Dominion  to the  Company  under that  certain  Note and  Security
Agreement,  dated October 29, 2004, by and between the Company and Dominion,  as
amended.

On August 29, 2006,  Diasense entered into a Voluntary  Surrender Agreement (the
"Voluntary  Surrender  Agreement")  with  Dominion  whereby all of the Company's
assets,  pledged as collateral to secure loan agreements under which the Company
is in default,  were  repossessed.  Dominion is the majority  shareholder of the
Company.  Keith R.  Keeling who owns a majority 75% interest in Dominion and was
also a former member of the  Company's  Board of Directors and the former CEO of
the Company until  resigning from both such positions with the Company on August
4, 2006.

On September 18, 2006, the Company  entered into a unit purchase  agreement (the
"Unit Purchase  Agreement") with Glenn A. Little ("Little")  whereby the Company
sold and Mr. Little purchased 1000 units;  each unit consisting of 11,100 shares
of common stock and 500 common stock  purchase  warrants  offered by the Company

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(the "Units"). The common stock purchase warrants can be exercised from the date
the warrants are issued until the expiration  date to purchase common stock at a
price of $0.10 per share and expire five (5) years from the date of issuance.

The  aggregate  offering  price  was  $125,000.  There  were no  commissions  or
underwriting discounts.

On September  18, 2006,  the Company  entered  into a share  purchase  agreement
whereby the Company  purchased  and Dominion  sold  11,975,000  shares of common
stock of the Company for a purchase price of $1.00.  The shares were returned to
the Treasury of the Company as unissued.  Dominion was the majority  shareholder
of the Company prior to the transaction.

Pursuant to the provisions of the Unit Purchase Agreement on September 18, 2006,
the Board of Directors  appointed Glenn A. Little 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  and as Chief  Executive  Officer.  Mr.
Little was appointed as a Director and Chief Executive Officer of

Effective  September 18, 2006, Anthony Patera resigned from his positions as (i)
the Executive  Vice President and (ii) a member of the Board of Directors of the
Company.  Notification  of such  resignation  was  received  from Mr.  Patera on
September 18, 2006 via a letter addressed to Glenn Little, a member of the Board
of Directors of the Company.

As a result of these transactions Mr. Little became the majority  stockholder of
the Company and acts as Management.

None of the Company's business endeavors since inception have been successful.

The  Company  may  be  referred  to  as a  reporting  shell  corporation.  Shell
corporations  have zero or nominal  assets and typically no stated or contingent
liabilities.  Private  companies  wishing to become publicly trading may wish to
merge  with a shell (a  reverse  merger  or  reverse  acquisition)  whereby  the
shareholders of the private  company become the majority of the  shareholders of
the combined company. The private company may purchase for cash all or a portion
of the  common  shares of the  shell  corporation  from its major  stockholders.
Typically,  the Board and officers of the private  company  become the new Board
and officers of the combined  Company and often the name of the private  company
becomes the name of the combined entity.

The Company has very limited  capital,  and it is unlikely that the Company will
be able to take  advantage  of more  than one  such  business  opportunity.  The
Company intends to seek  opportunities  demonstrating the potential of long-term
growth as opposed to short-term  earnings.  However,  at the present  time,  the
Company has not identified any business opportunity that it plans to pursue, nor
has the Company  reached any  agreement  or  definitive  understanding  with any
person concerning an acquisition.

It is  anticipated  that the  Company's  officers  and  directors  will  contact
broker-dealers  and other persons with whom they are acquainted who are involved
with corporate finance matters to advise them of the Company's  existence and to
determine if any  companies or  businesses  that they  represent  have a general
interest in considering a merger or acquisition with a blind pool or blank check
or shell  entity.  No assurance can be given that the Company will be successful
in finding or  acquiring a  desirable  business  opportunity,  given the limited
funds that are  expected  to be  available  for  acquisitions.  Furthermore,  no
assurance can be given that any acquisition,  which does occur, will be on terms
that are favorable to the Company or its current stockholders.

The Company's search will be directed toward small and medium-sized enterprises,
which have a desire to become public corporations. In addition these enterprises
may wish to satisfy,  either  currently or in the  reasonably  near future,  the
minimum  tangible  asset  requirement  in order to qualify shares for trading on
NASDAQ or on an exchange such as the American Stock Exchange. (See Investigation
and  Selection  of Business  Opportunities).  The Company  anticipates  that the
business  opportunities  presented  to it will (I)  either be in the  process of
formation,  or be recently organized with limited operating history or a history
of  losses  attributable  to   under-capitalization   or  other  factors;   (ii)
experiencing financial or operating  difficulties;  (iii) be in need of funds to

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develop new  products or services or to expand into a new market,  or have plans
for rapid expansion through acquisition of competing  businesses;  (iv) or other
similar  characteristics.  The Company  intends to concentrate  its  acquisition
efforts on properties or businesses  that it believes to be  undervalued or that
it believes may realize a substantial  benefit from being publicly owned.  Given
the above factors,  investors  should expect that any acquisition  candidate may
have  little  or  no  operating   history,   or  a  history  of  losses  or  low
profitability.

The Company does not propose to restrict its search for investment opportunities
to any particular  geographical area or industry, and may, therefore,  engage in
essentially any business,  to the extent of its limited resources.  This include
industries such as service,  finance,  natural  resources,  manufacturing,  high
technology,  product  development,   medical,  communications  and  others.  The
Company's discretion in the selection of business opportunities is unrestricted,
subject to the  availability of such  opportunities,  economic  conditions,  and
other factors.

As a consequence of this registration of its securities,  any entity,  which has
an interest in being acquired by, or merging into the Company, is expected to be
an entity that desires to become a public Company and establish a public trading
market for its securities.  In connection with such a merger or acquisition,  it
is highly  likely  that an amount of stock  constituting  control of the Company
would either be issued by the Company or be purchased from the current principal
stockholders of the Company by the acquiring entity or its affiliates.  If stock
is purchased from the current principal stockholders,  the transaction is likely
to result in substantial gains to the current principal stockholders relative to
their  purchase  price for such stock.  In the Company's  judgment,  none of the
officers and directors would thereby become an underwriter within the meaning of
the  Section  2(11) of the  Securities  Act of 1933,  as  amended as long as the
transaction  is a  private  transaction  rather  than a public  distribution  of
securities. The sale of a controlling interest by certain principal shareholders
of the Company  would occur at a time when minority  stockholders  are unable to
sell their shares because of the lack of a public market for such shares.

Depending upon the nature of the transaction, the current officers and directors
of the Company may resign their  management and board positions with the Company
in connection with a change of control or acquisition of a business  opportunity
(See  Form of  Acquisition,  below,  and  Risk  Factors,  The  Company,  Lack of
Continuity of  Management).  In the event of such a  resignation,  the Company's
current  management  would  thereafter  have no control  over the conduct of the
Company's business.

It is  anticipated  that  business  opportunities  will  come  to the  Company's
attention from various sources,  including its officers and directors, its other
stockholders,   professional   advisors  such  as  attorneys  and   accountants,
securities  broker-dealers,   venture  capitalists,  members  of  the  financial
community,  and others who may present unsolicited proposals. The Company has no
plan,  understandings,  agreements,  or commitments with any individual for such
person to act as a finder of opportunities for the Company.

INVESTIGATION AND SELECTION OF BUSINESS OPPORTUNITIES

To a large extent, a decision to participate in a specific business  opportunity
may be made upon  management's  analysis of the  quality of the other  Company's
management  and  personnel,  the  anticipated  acceptability  of new products or
marketing concepts,  the merit of technological  changes,  the perceived benefit
the business  opportunity will derive from becoming a publicly held entity,  and
numerous  other  factors  which are  difficult,  if not  impossible,  to analyze
through the  application of any objective  criteria.  In many  instances,  it is
anticipated that the historical  operations of a specific  business  opportunity
may not  necessarily  be indicative of the potential for the future because of a
variety of factors,  including,  but not limited to, the possible need to expand
substantially,  shift marketing approaches,  change product emphasis,  change or
substantially augment management, raise capital and the like.

It is  anticipated  that the  Company  will not be able to  diversify,  but will
essentially be limited to the acquisition of one business opportunity because of
the Company's limited financing.  This lack of  diversification  will not permit
the Company to offset  potential  losses from one business  opportunity  against
profits from another,  and should be considered an adverse factor  affecting any
decision to purchase the Company's securities.

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<PAGE>
Certain types of business acquisition  transactions may be completed without any
requirement  that the Company first submit the  transaction to the  stockholders
for their approval.  In the event the proposed transaction is structured in such
a fashion that  stockholder  approval is not required,  holders of the Company's
securities (other than principal  stockholders  holding a controlling  interest)
should not anticipate  that they will be provided with  financial  statements or
any other documentation prior to the completion of the transaction.  Other types
of transactions require prior approval of the stockholders.

In the event a proposed business combination or business acquisition transaction
is  structured in such a fashion that prior  stockholder  approval is necessary,
the  Company  will be  required  to  prepare  a Proxy or  Information  Statement
describing  the proposed  transaction,  file it with the Securities and Exchange
Commission  for  review  and  approval,  and  mail a copy  of it to all  Company
stockholders  prior to holding a stockholders  meeting for purposes of voting on
the  proposal.  Minority  shareholders  that do not vote in favor of a  proposed
transaction  will then have the right,  in the event the transaction is approved
by the required number of stockholders, to exercise statutory dissenter's rights
and elect to be paid the fair value of their shares.

The  analysis  of  business  opportunities  will be  undertaken  by or under the
supervision  of  the  Company's  officers  and  directors,   none  of  whom  are
professional  business analysts (See Management).  Although there are no current
plans to do so, Company management might hire an outside consultant to assist in
the  investigation  and  selection  of business  opportunities,  and might pay a
finder's fee.  Since Company  management has no current plans to use any outside
consultants or advisors to assist in the investigation and selection of business
opportunities,  no policies have been adopted  regarding use of such consultants
or advisors,  the criteria to be used in selecting such consultants or advisors,
the  services to be provided,  the term of service,  or the total amount of fees
that may be paid.  However,  because of the limited resources of the Company, it
is likely that any such fee the Company agrees to pay would be paid in stock and
not in cash.

Otherwise,  in analyzing  potential business  opportunities,  Company management
anticipates that it will consider, among other things, the following factors:

     *    Potential for growth and  profitability  indicated by new  technology,
          anticipated market expansion, or new products;
     *    The Company's  perception of how any particular  business  opportunity
          will be  received by the  investment  community  and by the  Company's
          stockholders;
     *    Whether,  following the business combination,  the financial condition
          of the  business  opportunity  would be, or would  have a  significant
          prospect in the foreseeable  future of becoming,  sufficient to enable
          the securities of the Company to qualify for listing on an exchange or
          on a national automated  securities  quotation system, such as NASDAQ,
          so as to permit the trading of such  securities  to be exempt from the
          requirements  of Rule 15g-9  adopted by the  Securities  and  Exchange
          Commission (See Risk Factors The Company Regulations of Penny Stocks).
     *    Capital  requirements and anticipated  availability of required funds,
          to be provided by the Company or from operations,  through the sale of
          additional securities, through joint ventures or similar arrangements,
          or from other sources;
     *    The extent to which the business opportunity can be advanced;
     *    Competitive  position as compared to other  companies  of similar size
          and  experience  within  the  industry  segment  as well as within the
          industry as a whole;
     *    Strength and diversity of existing management or management  prospects
          that are scheduled for recruitment;
     *    The cost of  participation by the Company as compared to the perceived
          tangible and intangible values and potential; and
     *    The accessibility of required  management  expertise,  personnel,  raw
          materials,  services,  professional  assistance,  and  other  required
          items.

In regard to the  possibility  that the shares of the Company  would qualify for
listing on NASDAQ,  the current  standards for initial  listing  include,  among
other  requirements,  that the Company (1) have net tangible  assets of at least
$4.0 million, or a market  capitalization of $50.0 million, or net income of not
less that $0.75  million in its latest  fiscal  year or in two of the last three
fiscal  years;  (2) have a public float  (i.e.,  shares that are not held by any

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officer, director or 10% stockholder) of at least 1.0 million shares; (3) have a
minimum  bid  price  of at  least  $4.00;  (4)  have  at  least  300  round  lot
stockholders (i.e., stockholders who own not less than 100 shares); and (5) have
an operating history of at least one year or have a market  capitalization of at
least $50.0 million.  Many, and perhaps most, of the business opportunities that
might be  potential  candidates  for a  combination  with the Company  would not
satisfy the NASDAQ listing criteria.

Not one of the factors described above will be controlling in the selection of a
business  opportunity,  and  management  will  attempt  to analyze  all  factors
appropriate to each  opportunity and make a determination  based upon reasonable
investigative  measures  and  available  data.  Potentially  available  business
opportunities  may occur in many  different  industries and at various stages of
development,  all of which will make the task of comparative  investigation  and
analysis  of  such  business  opportunities  extremely  difficult  and  complex.
Potential  investors  must  recognize  that,  because of the  Company's  limited
capital  available for  investigation  and  management's  limited  experience in
business analysis,  the Company may not discover or adequately  evaluate adverse
facts about the  opportunity  to be  acquired.  The Company is unable to predict
when it may participate in a business opportunity. It expects, however, that the
analysis of specific  proposals and the selection of a business  opportunity may
take several months or more.

Prior to making a decision to participate in a business opportunity, the Company
will generally request that it be provided with written materials  regarding the
business  opportunity  containing  as much  relevant  information  as  possible,
including, but not limited to, such items as a description of products, services
and  Company  history;  management  resumes;  financial  information;  available
projections,  with related assumptions upon which they are based; an explanation
of proprietary products and services; evidence of existing patents,  trademarks,
or service marks, or rights thereto;  present and proposed forms of compensation
to  management;  a  description  of  transactions  between  such Company and its
affiliates  during the relevant  periods;  a description of present and required
facilities; an analysis of risks and competitive conditions; a financial plan of
operation and estimated capital requirements;  audited financial statements,  or
if  they  are not  available,  unaudited  financial  statements,  together  with
reasonable  assurance  that  audited  financial  statements  would be able to be
produced  within a  reasonable  period of time not to  exceed 60 days  following
completion of a merger or acquisition transaction; and the like.

As part of the Company's  investigation,  the Company's  executive  officers and
directors may meet personally  with management and key personnel,  may visit and
inspect  material  facilities,  obtain  independent  analysis or verification of
certain information provided,  check references of management and key personnel,
and take other reasonable investigative measures, to the extent of the Company's
limited financial resources and management expertise.

It is possible that the range of business  opportunities that might be available
for  consideration  by the Company  could be limited by the impact of Securities
and Exchange Commission regulations regarding purchase and sale of penny stocks.
The regulations would affect, and possibly impair, any market that might develop
in the  Company's  securities  until such time as they  qualify  for  listing on
NASDAQ or on an exchange which would make them exempt from  applicability of the
penny stock regulations. (See Risk Factors Regulation of Penny Stocks)

Company   management   believes  that  various  types  of  potential  merger  or
acquisition  candidates might find a business combination with the Company to be
attractive.  These include  acquisition  candidates  desiring to create a public
market for their shares in order to enhance liquidity for current  stockholders,
acquisition  candidates  which have long-term  plans for raising capital through
public sale of  securities  and believe that the possible  prior  existence of a
public  market  for  their  securities  would  be  beneficial,  and  acquisition
candidates  which  plan  to  acquire   additional  assets  through  issuance  of
securities rather than for cash, and believe that the possibility of development
of a public market for their  securities  will be of assistance in that process.
Acquisition  candidates,  which have a need for an immediate cash infusion,  are
not likely to find a potential  business  combination  with the Company to be an
attractive alternative.

FORM OF ACQUISITION

It is impossible to predict the manner in which the Company may participate in a
business opportunity.  Specific business  opportunities will be reviewed as well
as the  respective  needs and desires of the Company  and the  promoters  of the

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opportunity  and,  upon the basis of the  review  and the  relative  negotiating
strength of the Company and such promoters, the legal structure or method deemed
by management to be suitable will be selected.  Such structure may include,  but
is not limited to leases, purchase and sale agreements, licenses, joint ventures
and other contractual  arrangements.  The Company may act directly or indirectly
through an interest in a partnership, corporation or other form of organization.
Implementing   such   structure  may  require  the  merger,   consolidation   or
reorganization  of the  Company  with other  corporations  or forms of  business
organization.  In  addition,  the present  management  and  stockholders  of the
Company  most likely will not have  control of a majority of the voting stock of
the Company following a merger or reorganization  transaction. As part of such a
transaction,  the Company's  existing directors may resign and new directors may
be appointed without any vote by stockholders.

It is likely  that the Company  will  acquire  its  participation  in a business
opportunity  through the  issuance of Common  Stock or other  securities  of the
Company.  Although the terms of any such  transaction  cannot be  predicted,  it
should be noted that in  certain  circumstances  the  criteria  for  determining
whether or not an acquisition is a so-called B tax free reorganization under the
Internal  Revenue  Code of 1986 as  amended,  depends  upon the  issuance to the
stockholders of the acquired  Company of a controlling  interest  (i.e.,  80% or
more) of the common stock of the combined  entities  immediately  following  the
reorganization.  If a transaction  were  structured  to take  advantage of these
provisions  rather than other a tax free provisions  provided under the Internal
Revenue Code, the Company's current  stockholders  would retain in the aggregate
20% or less of the total  issued and  outstanding  shares.  This could result in
substantial  additional dilution in the equity of those who were stockholders of
the Company prior to such reorganization. Any such issuance of additional shares
might also be done simultaneously with a sale or transfer of shares representing
a  controlling  interest in the Company by the current  officers,  directors and
principal stockholders.

It is anticipated that any new securities issued in any reorganization  would be
issued  in  reliance  upon  one  or  more  exemptions  from  registration  under
applicable  federal and state securities laws to the extent that such exemptions
are available.  In some  circumstances,  however, as a negotiated element of the
transaction,  the Company may agree to register  such  securities  either at the
time the  transaction is  consummated  or under certain  conditions at specified
times thereafter.  The issuance of substantial  additional  securities and their
potential  sale into any  trading  market  that might  develop in the  Company's
securities may have a depressive effect upon such market.

The  Company  will  participate  in  a  business   opportunity  only  after  the
negotiation  and  execution of a written  agreement.  Although the terms of such
agreement  cannot  be  predicted,  generally  such an  agreement  would  require
specific  representations and warranties by all of the parties thereto,  specify
certain events of default,  detail the terms of closing and the conditions which
must be satisfied by each of the parties thereto prior to such closing,  outline
the manner of bearing costs if the transaction is not closed, set forth remedies
upon default, and include miscellaneous other terms.

As a general  matter,  the Company  anticipates  that it,  and/or its  principal
stockholders will enter into a letter of intent with the management,  principals
or owners  of a  prospective  business  opportunity  prior to  signing a binding
agreement.  Such a letter  of intent  will set  forth the terms of the  proposed
acquisition but will not bind any of the parties to consummate the  transaction.
Execution of a letter of intent will by no means indicate that  consummation  of
an acquisition is probable.  Neither the Company nor any of the other parties to
the letter of intent  will be bound to  consummate  the  acquisition  unless and
until a definitive  agreement is executed.  Even after a definitive agreement is
executed,  it is possible that the acquisition  would not be consummated  should
any party elect to exercise any right  provided in the agreement to terminate it
on specific grounds.

It is anticipated that the investigation of specific business  opportunities and
the  negotiation,  drafting  and  execution of relevant  agreements,  disclosure
documents and other  instruments  will require  substantial  management time and
attention and  substantial  costs for  accountants,  attorneys and others.  If a
decision is made not to  participate  in a specific  business  opportunity,  the
costs incurred in the related investigation would not be recoverable.  Moreover,
because many providers of goods and services require compensation at the time or
soon after the goods and services are provided,  the inability of the Company to
pay until an  indeterminate  future time may make it impossible to produce goods
and services.

                                       8
<PAGE>
INVESTMENT COMPANY ACT AND OTHER REGULATION

The Company may participate in a business opportunity by purchasing,  trading or
selling the securities of such business.  The Company does not, however,  intend
to engage  primarily in such  activities.  Specifically,  the Company intends to
conduct its activities so as to avoid being classified as an investment  Company
under the Investment  Company Act of 1940 (the Investment Act), and therefore to
avoid  application  of  the  costly  and  restrictive   registration  and  other
provisions of the Investment Act, and the regulations promulgated thereunder.

The  Company's  plan of business may involve  changes in its capital  structure,
management,   control  and   business,   especially   if  it   consummates   the
reorganization  as  discussed  above.  Each of these areas is  regulated  by the
Investment Act, in order to protect purchasers of investment Company securities.
Since the Company will not register as an investment Company,  stockholders will
not be afforded these protections.

COMPETITION

The  Company  expects to  encounter  substantial  competition  in its efforts to
locate attractive  business  combination  opportunities.  The competition may in
part come from business development companies,  venture capital partnerships and
corporations, small investment companies, brokerage firms, and the like. Some of
these  types of  organizations  are likely to be in a better  position  than the
Company to obtain access to attractive  business  acquisition  candidates either
because they have greater experience, resources and managerial capabilities than
the Company,  because they are able to offer immediate access to limited amounts
of cash,  or for a variety of other  reasons.  The Company also will  experience
competition from other public companies with similar business purposes,  some of
which may also have funds available for use by an acquisition candidate.

EMPLOYEES

The Company currently has no employees. Management of the Company expects to use
consultants,  attorneys and accountants as necessary,  and does not anticipate a
need to engage any full-time  employees so long as it is seeking and  evaluating
business  opportunities.  The need for employees and their  availability will be
addressed  in  connection  with  the  decision  whether  or  not to  acquire  or
participate in specific business opportunities.

RISK FACTORS

The  Company's  business  and plan of  operation  is  subject to  numerous  risk
factors, including, but not limited to, the following:

LIMITED OPERATING HISTORY MAKES POTENTIAL DIFFICULT TO ASSESS

All efforts from our 1989 inception through 2006 were unsuccessful.  The Company
has no assets or  financial  resources.  The Company  will,  in all  likelihood,
continue to sustain operating expenses without corresponding  revenues, at least
until the consummation of a business combination.  These will most likely result
in the Company  incurring a net operating loss which will increase  continuously
until the Company can consummate a business  combination  with a target company.
There is no assurance  that the Company can identify  such a target  company and
consummate such a business combination.

THERE IS NO AGREEMENT FOR A BUSINESS COMBINATION AND NO MINIMUM REQUIREMENTS FOR
A BUSINESS COMBINATION

The Company has no current arrangement,  agreement or understanding with respect
to engaging in a business  combination with a specific  entity.  There can be no
assurance  that the Company will be successful  in  identifying  and  evaluating
suitable  business  opportunities  or in concluding a business  combination.  No
particular  industry or specific  business  within an industry has been selected
for a target  company.  The Company  has not  established  a specific  length of
operating history or a specified level of earnings,  assets,  net worth or other

                                       9
<PAGE>
criteria  which it will require a target  company to have  achieved,  or without
which the Company would not consider a business  combination  with such business
entity.  Accordingly,  the Company may enter into a business  combination with a
business entity having no significant operating history,  losses,  limited or no
potential for immediate  earnings,  limited assets,  negative net worth or other
negative characteristics. There is no assurance that the Company will be able to
negotiate a business combination on terms favorable to the Company.

NO ASSURANCE OF SUCCESS OR PROFITABILITY

There is no  assurance  that the  Company  will  acquire  a  favorable  business
opportunity.   Even  if  the  Company  should  become  involved  in  a  business
opportunity, there is no assurance that it will generate revenues or profits, or
that the market  price of the  Company's  outstanding  shares will be  increased
thereby.

TYPE OF BUSINESS ACQUIRED

The type of business to be acquired may be one that  desires to avoid  effecting
its own public offering an the accompanying expense, delays, uncertainties,  and
federal and state requirements  which purport to protect  investors.  Because of
the Company's  limited capital,  it is more likely than not that any acquisition
by the  Company  will  involve  other  parties  whose  primary  interest  is the
acquisition  of control of a publicly  traded  Company.  Moreover,  any business
opportunity  acquired may be currently  unprofitable  or present other  negative
factors.

LACK OF DIVERSIFICATION

Because of the limited financial  resources that the Company has, it is unlikely
that the Company will be able to diversify its  acquisitions or operations.  The
Company's probable inability to diversify its activities into more than one area
will subject the Company to economic  fluctuations  within a particular business
or industry and  therefore  increase  the risks  associated  with the  Company's
operations.

DEPENDENCE UPON MANAGEMENT; LIMITED PARTICIPATION OF MANAGEMENT

The Company will be entirely  dependant  upon the experience of its officers and
directors  in seeking,  investigating,  and  acquiring a business  and in making
decisions regarding the Company's operations.  It is possible that, from time to
time,  the inability of such persons to devote their full time  attention to the
Company.  Because  investors will not be able to evaluate the merits of possible
future business  acquisitions by the Company,  they should critically assess the
information concerning the Company's officers and directors. (See Management.)

CONFLICTS OF INTEREST

Certain  conflicts  of interest  exist  between the Company and its officers and
directors.  They have other business  interests to which they  currently  devote
attention,  and are  expected to continue  to do so. As a result,  conflicts  of
interest may arise that can be resolved only through their  exercise of judgment
in a manner which is consistent with their fiduciary duties to the Company. (See
Management, Conflicts of Interest.)

It is  anticipated  that  the  Company's  principal  shareholders  may  actively
negotiate  or  otherwise  consent to the  purchase of a portion of their  common
stock as a condition to, or in connection with, a proposed merger or acquisition
transaction.  In this process, the Company's principal shareholders may consider
their own  personal  pecuniary  benefit  rather than the best  interest of other
Company  shareholders.  Depending  upon the  nature of a  proposed  transaction,
Company  shareholders other than the principal  shareholders may not be afforded
the opportunity to approve or consent to a particular transaction.

POSSIBLE NEED FOR ADDITIONAL FINANCING

The Company has very limited funds,  and such funds, may not be adequate to take
advantage  of any  available  business  opportunities.  Even  if  the  Company's
currently available funds prove to be sufficient to pay for its operations until
it is able to acquire an interest in, or complete a transaction with, a business

                                       10
<PAGE>
opportunity,  such funds will clearly not be  sufficient to enable it to exploit
the opportunity. Thus, the ultimate success of the Company will depend, in part,
upon its availability to raise additional capital. In the event that the Company
requires modest amounts of additional capital to fund its operations until it is
able to complete a business acquisition or transaction, such funds, are expected
to be  provided  by the  principal  shareholders.  However,  the Company has not
investigated  the   availability,   source,  or  terms  that  might  govern  the
acquisition of the additional  capital which is expected to be required in order
to exploit a business  opportunity,  and will not do so until it has  determined
the level of need for such  additional  financing.  There is no  assurance  that
additional  capital will be available from any source or, if available,  that it
can be  obtained on terms  acceptable  to the  Company.  If not  available,  the
Company's  operations  will be limited to those  that can be  financed  with its
modest capital.

DEPENDENCE UPON OUTSIDE ADVISORS

To supplement the business experience of its officers and directors, the Company
may be required to employ accountants, technical experts, appraisers, attorneys,
or other  consultants  or advisors.  The selection of any such advisors will, be
made by the Company's officers, without any input by shareholders.  Furthermore,
it is anticipated that such persons may be engaged on an as needed basis without
a continuing  fiduciary  or other  obligation  to the Company.  In the event the
officers of the Company consider it necessary to hire outside advisors, they may
elect  to hire  persons  who are  affiliates,  if those  affiliates  are able to
provide the required services.

REGULATION OF PENNY STOCKS

The  Commission has adopted a number of rules to regulate  "penny  stocks." Such
rules  include Rule 3a51-1 and Rules 15g-1  through  15g-9 under the  Securities
Exchange  Act of 1934,  as amended.  Because the  securities  of the Company may
constitute  "penny  stocks"  within  the  meaning  of the rules  (as any  equity
security  that  has a market  price  of less  than  $5.00  per  share or with an
exercise  price of less than $5.00 per  share,  largely  traded in the  National
Association  of  Securities  Dealers'  (NASD)  OTC  Bulletin  Board or the "Pink
Sheets",  the  rules  would  apply to the  Company  and to its  securities.  The
Commission has adopted Rule 15g-9 which established sales practice  requirements
for certain low price securities.  Unless the transaction is exempt, it shall be
unlawful  for a broker  or dealer  to sell a penny  stock  to, or to effect  the
purchase of a penny stock by, any person  unless prior to the  transaction:  (I)
the broker or dealer has approved the person's account for transactions in penny
stock  pursuant to this rule and (ii) the broker or dealer has received from the
person a written  agreement to the  transaction  setting  forth the identity and
quantity  of the penny  stock to be  purchased.  In order to  approve a person's
account for  transactions in penny stock,  the broker or dealer must: (a) obtain
from  the  person  information  concerning  the  person's  financial  situation,
investment experience,  and investment objectives; (b) reasonably determine that
transactions  in penny stock are suitable  for that person,  and that the person
has  sufficient  knowledge and  experience in financial  matters that the person
reasonably may be expected to be capable of evaluating the risks of transactions
in penny stock; (c) deliver to the person a written  statement setting forth the
basis on which the  broker or dealer  made the  determination  (I)  stating in a
highlighted  format  that it is  unlawful  for the  broker or dealer to affect a
transaction  in penny stock unless the broker or dealer has  received,  prior to
the transaction,  a written  agreement to the transaction  from the person;  and
(ii)  stating  in  a  highlighted  format  immediately  preceding  the  customer
signature line that (iii) the broker or dealer is required to provide the person
with the written  statement;  and (iv) the person should not sign and return the
written statement to the broker or dealer if it does not accurately  reflect the
person's financial situation,  investment experience, and investment objectives;
and (d) receive from the person a manually  signed and dated copy of the written
statement.  It is also  required  that  disclosure  be made as to the  risks  of
investing in penny stock and the commissions  payable to the  broker-dealer,  as
well as current price  quotations and the remedies and rights available in cases
of fraud in penny stock  transactions.  Statements,  on a monthly basis, must be
sent to the investor  listing recent prices for the Penny Stock and  information
on  the  limited  market.  Shareholders  should  be  aware  that,  according  to
Securities and Exchange  Commission  Release No. 34-29093,  the market for penny
stocks has  suffered  in recent  years from  patterns  of fraud and abuse.  Such
patterns  include  (I)  control of the market for the  security  by one or a few
broker-dealers   that  are  often  related  to  the  promoter  or  issuer;  (ii)
manipulation of prices through  prearranged  matching of purchases and sales and
false and misleading  press releases;  (iii) "boiler room"  practices  involving
high-pressure  sales tactics and unrealistic  price projections by inexperienced
sales persons;  (iv) excessive and undisclosed bid-ask  differential and markups
by selling broker-dealers;  and (v) the wholesale dumping of the same securities
by promoters and broker dealers after prices have been  manipulated to a desired
level,  along with the  resulting  inevitable  collapse of those prices and with

                                       11
<PAGE>
consequent investor losses. The Company's management is aware of the abuses that
have occurred historically in the penny stock market.  Although the Company does
not  expect to be in a  position  to dictate  the  behavior  of the market or of
broker-dealers who participate in the market,  management will strive within the
confines of practical  limitations to prevent the described  patterns from being
established with respect to the Company's securities.

THERE  MAY  BE  A  SCARCITY  OF  AND/OR  SIGNIFICANT  COMPETITION  FOR  BUSINESS
OPPORTUNITIES AND COMBINATIONS

The  Company is and will  continue  to be an  insignificant  participant  in the
business of seeking mergers with and acquisitions of business entities.  A large
number of established  and  well-financed  entities,  including  venture capital
firms,  are active in mergers and  acquisitions of companies which may be merger
or acquisition target candidates for the Company.  Nearly all such entities have
significantly  greater financial  resources,  technical expertise and managerial
capabilities  than the  Company  and,  consequently,  the  Company  will be at a
competitive  disadvantage in identifying  possible  business  opportunities  and
successfully completing a business combination.  Moreover, the Company will also
compete in seeking  merger or  acquisition  candidates  with other  public shell
companies, some of which may also have funds available for use by an acquisition
candidate.

REPORTING REQUIREMENTS MAY DELAY OR PRECLUDE ACQUISITION

Pursuant to the  requirements  of Section 13 of the Exchange Act, the Company is
required to provide certain information about significant acquisitions including
audited financial  statements of the acquired  company.  These audited financial
statements  must be furnished  within 15 days  following the effective date of a
business  combination.  Obtaining audited financial  statements are the economic
responsibility of the target company.  The additional time and costs that may be
incurred by some potential target companies to prepare such financial statements
may  significantly  delay or essentially  preclude  consummation of an otherwise
desirable acquisition by the Company.  Acquisition prospects that do not have or
are unable to obtain the required audited  statements may not be appropriate for
acquisition  so long  as the  reporting  requirements  of the  Exchange  Act are
applicable.  Notwithstanding  a target  company's  agreement  to obtain  audited
financial statements within the required time frame, such audited financials may
not be available to the Company at the time of effecting a business combination.
In cases where audited financials are unavailable, the Company will have to rely
upon  unaudited  information  that has not been verified by outside  auditors in
making its decision to engage in a transaction  with the business  entity.  This
risk  increases  the prospect that a business  combination  with such a business
entity might prove to be an unfavorable one for the Company.

LACK OF MARKET RESEARCH OR MARKETING ORGANIZATION

The Company has neither conducted,  nor have others made available to it, market
research indicating that demand exists for the transactions  contemplated by the
Company.  In the event demand exists for a transaction of the type  contemplated
by the  Company,  there  is no  assurance  the  Company  will be  successful  in
completing any such business combination.

REGULATION UNDER THE INVESTMENT COMPANY ACT OF 1940

In the event the Company  engages in business  combinations  which result in the
Company  holding  passive  investment  interests  in a number of  entities,  the
Company could be subject to regulation under the Investment Company Act of 1940.
In such  event,  the Company  would be  required  to  register as an  investment
company and could be expected to incur  significant  registration and compliance
costs. The Company has obtained no formal  determination from the Securities and
Exchange Commission as to the status of the Company under the Investment Company
Act of 1940 and,  consequently,  any  violation  of such Act could  subject  the
Company to material adverse consequences.

                                       12
<PAGE>
PROBABLE CHANGE IN CONTROL OF THE COMPANY AND/OR MANAGEMENT

In conjunction with completion of a business acquisition, it is anticipated that
the Company will issue an amount of the Company's authorized but unissued common
stock that represents the greater majority of the voting power and equity of the
Company,  which will,  in all  likelihood,  result in  shareholders  of a target
company obtaining a controlling  interest in the Company.  As a condition of the
business combination agreement, the current shareholder of the Company may agree
to sell or transfer all or a portion of the Company's common stock he owns so to
provide the target company with all or majority control. The resulting change in
control of the Company will likely result in removal of the present  officer and
director of the Company and a  corresponding  reduction in or elimination of his
participation in the future affairs of the Company.

POSSIBLE DILUTION OF VALUE OF SHARES UPON BUSINESS COMBINATION

A business  combination  normally  will  involve the  issuance of a  significant
number of additional shares.  Depending upon the value of the assets acquired in
such business combination, the per share value of the Company's common stock may
increase or decrease, perhaps significantly.

NO PUBLIC MARKET EXISTS

There is no  significant  or consistent  public market for the Company's  common
stock,  and no  assurance  can be given  that a market  will  develop  or that a
shareholder will ever be able to liquidate his investment  without  considerable
delay, if at all. If a market should develop,  the price may be highly volatile.
Factors  such as  those  discussed  in this  Risk  Factors  section  may  have a
significant impact upon the market price of the securities offered hereby. Owing
to the low price of the  securities,  many brokerage firms may not be willing to
effect  transactions  in the  securities.  Even if a  purchaser  finds a  broker
willing  to  effect a  transaction  in theses  securities,  the  combination  of
brokerage commissions, state transfer taxes, if any, and any other selling costs
may exceed the selling price. Further, many leading institutions will not permit
the use of such securities as collateral for any loans.

NO FORESEEABLE DIVIDENDS

The Company has not paid  dividends on its Common Stock and does not  anticipate
paying such dividends in the foreseeable future.

RULE 144 SALES

Of the  22,105,051  presently  issued and  outstanding  shares of the  Company's
stock,  approximately  11,100,000 shares are "restricted  securities" within the
meaning of Rule 144 under the Securities Act of 1933, as amended.  As restricted
shares,  these shares may be resold only  pursuant to an effective  registration
statement  or under  the  requirements  of Rule 144 or  other  applicable  state
securities  law.  Rule  144  provides  in  essence  that a  person  who has held
restricted  securities for a prescribed  period,  may under certain  conditions,
sell every three months, in brokerage transactions, a number of shares that does
not exceed the greater of 1.0% of a Company's  outstanding  common  stock or the
average  weekly  trading  volume during the four  calendar  weeks prior to sale.
There is no limit on the amount of restricted  securities  that may be sold by a
non-affiliate after the restricted securities have been held by the owner, for a
period of at least two years. A sale under Rule 144, or under an other exemption
from the Act, if available,  or pursuant to subsequent  registrations  of common
stock of present  shareholders,  may have a depressive  effect upon the price of
the Common Stock in may market that may develop.

BLUE SKY CONSIDERATION

Because the securities  registered hereunder have not been registered for resale
under the Blue Sky laws of any state, the holders of such shares and persons who
desire to purchase them in any trading  market that might develop in the future,
should be aware,  that there may be significant  state Blue Sky law restrictions
upon the  ability of  investors  to sell the  securities  and of  purchasers  to
purchase the securities.  Accordingly,  investors  should consider the secondary
market for the Company's securities to be a limited one.

                                       13
<PAGE>
ADDITIONAL RISKS - DOING BUSINESS IN A FOREIGN COUNTRY

The Company may  effectuate a business  combination  with a merger  target whose
business operations or even headquarters, place of formation or primary place of
business are located  outside the United States of America.  In such event,  the
Company may face the significant additional risks associated with doing business
in that country. In addition to the language barriers,  different  presentations
of financial  information,  different  business  practices,  and other  cultural
differences  and barriers  that may make it difficult to evaluate  such a merger
target,   ongoing  business  risks  result  from  the  international   political
situation,  uncertain legal systems and applications of law,  prejudice  against
foreigners,   corrupt  practices,  uncertain  economic  policies  and  potential
political and economic  instability  that may be exacerbated in various  foreign
countries.

TAXATION

Federal  and  state  tax  consequences   will,  in  all  likelihood,   be  major
considerations  in any  business  combination  that the Company  may  undertake.
Currently,  such  transactions  may be  structured  so as to result in  tax-free
treatment  to  both  companies,  pursuant  to  various  federal  and  state  tax
provisions.  The Company intends to structure any business  combination so as to
minimize  the  federal  and state tax  consequences  to both the Company and the
target entity; however, there can be no assurance that such business combination
will meet the statutory  requirements of a tax-free  reorganization  or that the
parties will obtain the intended tax-free  treatment upon a transfer of stock or
assets. A non-qualifying  reorganization  could result in the imposition of both
federal and state taxes, which may have an adverse effect on both parties to the
transaction.

ITEM 2 - DESCRIPTION OF PROPERTY

The Company  currently  maintains a mailing  address at 211 West Wall,  Midland,
Texas 79701. The Company's telephone number there is (432) 682-1761.  Other than
this mailing address,  the Company does not currently  maintain any other office
facilities,  and does not anticipate the need for maintaining  office facilities
at any time in the  foreseeable  future.  The Company pays no rent or other fees
for the use of the mailing address as these offices are used virtually full-time
by other businesses of the Company's officer.

It is  likely  that  the  Company  will not  establish  an  office  until it has
completed a business acquisition transaction,  but it is not possible to predict
what   arrangements  will  actually  be  made  with  respect  to  future  office
facilities.

ITEM 3 - LEGAL PROCEEDINGS

The  Company  is not a  party  to any  pending  legal  proceedings,  and no such
proceedings are known to be contemplated.

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

No matters were  submitted to a vote of Security  Holders during the fiscal year
ended September 30, 2006.

                                     PART II

ITEM 5 - MARKET FOR COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

TRANSFER AGENT

Our independent stock transfer agent is Securities Transfer  Corporation located
at 2591 Dallas Parkway,  Suite 102, Frisco,  Texas 75034.  Their phone number is
(469) 633-0101.

                                       14
<PAGE>
COMMON STOCK

The  Company's  Articles of  Incorporation  authorize the issuance of 40,000,000
shares of $.01 par value  Common  Stock.  Each record  holder of Common Stock is
entitled to one vote for each share held on all matters  properly  submitted  to
the stockholders for their vote. The Company's  Articles of Incorporation do not
permit for cumulative voting for the election of directors.

Holders of outstanding  shares of Common Stock are entitled to such dividends as
may be  declared  from time to time by the  Board of  Directors  out of  legally
available funds; and, in the event of liquidation,  dissolution or winding up of
the affairs of the Company,  holders are entitled to receive,  ratably,  the net
assets of the Company  available to stockholders  after  distribution is made to
the  preferred  stockholders,  if  any,  who are  given  preferred  rights  upon
liquidation.  Holders of outstanding  shares of Common Stock have no preemptive,
conversion or redemptive  rights.  All of the issued and  outstanding  shares of
Common Stock are,  and all  unissued  shares when offered and sold will be, duly
authorized,  validly issued, fully paid, and non-assessable.  To the extent that
additional  shares of the  Company's  Common  Stock  are  issued,  the  relative
interests of then existing stockholders may be diluted.

PREFERRED STOCK

The  Company's  Articles  of  Incorporation  allow  for  the  issuance  of up to
1,000,000 shares of Preferred Stock. As of the date of this filing, there are no
shares of Preferred Stock issued and outstanding.

RECENT ISSUANCES OF UNREGISTERED SECURITIES

On September 18, 2006, the Company  entered into a unit purchase  agreement (the
"Unit Purchase Agreement") with Glenn A. Little whereby the Company sold and Mr.
Little  purchased  1000 units;  each unit  consisting of 11,100 shares of common
stock and 500  common  stock  purchase  warrants  offered  by the  Company  (the
"Units").  The common stock purchase warrants can be exercised from the date the
warrants  are issued  until the  expiration  date to purchase  common stock at a
price of $0.10 per share and expire five (5) years from the date of issuance.

The  aggregate  offering  price  was  $125,000.  There  were no  commissions  or
underwriting discounts.

REPORTS TO STOCKHOLDERS

The Company  plans to furnish its  stockholders  with an annual  report for each
fiscal year ending September 30 containing  financial  statements audited by its
independent certified public accountants. In the event the Company enters into a
business  combination  with  another  Company,  it is the present  intention  of
management to continue furnishing annual reports to stockholders.  Additionally,
the Company  may, in its sole  discretion,  issue  unaudited  quarterly or other
interim  reports to its  stockholders  when it deems  appropriate.  The  Company
intends to maintain  compliance with the periodic reporting  requirements of the
Securities Exchange Act of 1934.

DIVIDEND POLICY

No dividends  have been paid to date and the Company's  Board of Directors  does
not anticipate  paying  dividends in the foreseeable  future.  It is the current
policy to retain all earnings, if any, to support future growth and expansion.

ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

RESULTS OF OPERATIONS

The Company had no revenue from  operations  for the years ended  September  30,
2005 and 2006, respectively.

                                       15
<PAGE>
General and  administrative  expenses for the years ended September 30, 2005 and
2006 were approximately $98,889 and $208,012,  respectively.  Earnings per share
for the respective years ended September,  2005 and 2006 was $(0.00) and $(0.00)
based on the  weighted-average  shares issued and outstanding at the end of each
respective year.

The  Company  does not  expect  to  generate  any  meaningful  revenue  or incur
operating  expenses for purposes  other than  fulfilling  the  obligations  of a
reporting  company  under the  Securities  Exchange Act of 1934 unless and until
such time that the Company's operating subsidiary begins meaningful operations.

At September 30, 2005 and 2006, respectively, the Company had working capital of
approximately $24,984 and $(2,164,916), respectively.

It is the belief of management  that  sufficient  working  capital  necessary to
support and preserve  the  integrity  of the  corporate  entity will be present.
However,  there is no legal  obligation  for  management  to provide  additional
future  funding.  Consequently,  there is substantial  doubt about the Company's
ability to continue as a going concern.

The Company's need for working  capital may change  dramatically  as a result of
any business acquisition or combination  transaction.  There can be no assurance
that the Company will identify any such business, product, technology or company
suitable for acquisition in the future.  Further, there can be no assurance that
the Company would be successful in  consummating  any  acquisition  on favorable
terms  or that it will be able  to  profitably  manage  the  business,  product,
technology or company it acquires.

PLAN OF BUSINESS

GENERAL

The  Company  intends to locate and  combine  with an  existing,  privately-held
company which is profitable  or, in  management's  view,  has growth  potential,
irrespective of the industry in which it is engaged.  However,  the Company does
not  intend  to  combine  with a  private  company  which may be deemed to be an
investment  company subject to the Investment Company Act of 1940. A combination
may be structured as a merger,  consolidation,  exchange of the Company's common
stock for stock or assets or any other form which  will  result in the  combined
enterprise's becoming a publicly-held corporation.

Pending  negotiation and consummation of a combination,  the Company anticipates
that it will have, aside from carrying on its search for a combination  partner,
no business  activities,  and, thus, will have no source of revenue.  Should the
Company incur any significant  liabilities prior to a combination with a private
company, it may not be able to satisfy such liabilities as are incurred.

If the Company's management pursues one or more combination opportunities beyond
the  preliminary  negotiations  stage and those  negotiations  are  subsequently
terminated,  it is  foreseeable  that such efforts  will  exhaust the  Company's
ability to continue to seek such combination opportunities before any successful
combination can be consummated.  In that event,  the Company's common stock will
become  worthless  and  holders of the  Company's  common  stock will  receive a
nominal distribution, if any, upon the Company's liquidation and dissolution.

COMBINATION SUITABILITY STANDARDS

In its pursuit for a combination  partner,  the Company's  management intends to
consider only  combination  candidates  which are profitable or, in management's
view, have growth potential.  The Company's management does not intend to pursue
any  combination  proposal  beyond the  preliminary  negotiation  stage with any
combination  candidate which does not furnish the Company with audited financial
statements  for at least its most  recent  fiscal year and  unaudited  financial
statements for interim periods  subsequent to the date of such audited financial
statements, or is in a position to provide such financial statements in a timely
manner.  The Company will, if necessary  funds are available,  engage  attorneys
and/or accountants in its efforts to investigate a combination  candidate and to
consummate a business  combination.  The Company may require  payment of fees by
such combination  candidate to fund the investigation of such candidate.  In the

                                       16
<PAGE>
event such a combination candidate is engaged in a high technology business, the
Company may also obtain  reports from  independent  organizations  of recognized
standing  covering the technology  being developed and/or used by the candidate.
The  Company's  limited  financial  resources may make the  acquisition  of such
reports  difficult  or even  impossible  to obtain  and,  thus,  there can be no
assurance  that the Company  will have  sufficient  funds to obtain such reports
when considering combination proposals or candidates.  To the extent the Company
is  unable to  obtain  the  advice or  reports  from  experts,  the risks of any
combined enterprise's being unsuccessful will be enhanced.  Furthermore,  to the
knowledge of the Company's officers and directors, neither the candidate nor any
of  its  directors,   executive  officers,  principal  shareholders  or  general
partners:

     1)   will not have been  convicted of  securities  fraud,  mail fraud,  tax
          fraud, embezzlement,  bribery, or a similar criminal offense involving
          misappropriation  or theft of funds,  or be the  subject  of a pending
          investigation or indictment involving any of those offenses;

     2)   will not have been subject to a temporary or permanent  injunction  or
          restraining  order arising from unlawful  transactions  in securities,
          whether as issuer, underwriter, broker, dealer, or investment advisor,
          may be the subject of any pending  investigation  or a defendant  in a
          pending  lawsuit  arising from or based upon  allegations  of unlawful
          transactions in securities; or

     3)   will not have been a defendant in a civil  action which  resulted in a
          final judgment  against it or him awarding damages or rescission based
          upon unlawful practices or sales of securities.

The Company's  officers and directors will make these  determinations  by asking
pertinent  questions of the  management of prospective  combination  candidates.
Such persons will also ask pertinent  questions of others who may be involved in
the combination proceedings.  However, the officers and directors of the Company
will not generally take other steps to verify independently information obtained
in this manner which is favorable.  Unless  something  comes to their  attention
which  puts  them on  notice  of a  possible  disqualification  which  is  being
concealed  from them,  such persons will rely on  information  received from the
management of the prospective  combination  candidate and from others who may be
involved in the combination proceedings.

LIQUIDITY AND CAPITAL RESOURCES

The Company has no current plans, proposals, arrangements or understandings with
respect to the sale or issuance of additional  securities  prior to the location
of a merger or  acquisition  candidate.  Accordingly,  there can be no assurance
that sufficient  funds will be available to the Company to allow it to cover the
expenses related to such activities.  The Company does not currently contemplate
making a Regulation S offering.  Regardless of whether the Company's cash assets
prove to be  inadequate  to meet the Company's  operational  needs,  the Company
might seek to compensate  providers of services by issuances of stock in lieu of
cash.  For  information  as to the  Company's  policy in regard to  payment  for
consulting services, see Certain Relationships and Transactions.

ITEM 7 - INDEX TO FINANCIAL STATEMENTS

The required financial statements begin on page F-1 of this document.

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

RESIGNATION OF GOFF, BACKA, ALFREA & Company, LLC

On  December  18,  2006,  the  Company  received  a  letter  dated  December  6,
2006,whereby the Company's Registered  Independent Public Accounting Firm, Goff,
Backa,  Alfrea & Company,  LLC of Pittsburgh,  PA (GBACO) formally  acknowledged
prior oral communication from the Company's current management that, as a result
of the September 18, 2006 change in control  transaction,  that GBACO's services
would no longer be provided.

                                       17
<PAGE>
No accountant's report on the financial statements issued by GBACO for either of
the past two (2) years  contained an adverse  opinion or a disclaimer of opinion
or was  qualified  or modified  as to  uncertainty,  audit  scope or  accounting
principles,  except for a going concern  opinion  expressing  substantial  doubt
about the ability of the Company to continue as a going concern.

During the Company's two most recent fiscal years (ended  September 30, 2006 and
2005)  and from  October  1,  2006 to the  date of this  Report,  there  were no
differences  with GBACO on any matter of  accounting  principles  or  practices,
financial disclosure,  or auditing scope or procedure.  There were no reportable
events,  as described in Item  304(a)(1)(iv)(B)  of Regulation  S-B,  during the
Company's two most recent  fiscal years (ended  September 30, 2005 and 2006) and
from October 1, 2006 to the date of this Report.

APPOINTMENT OF S W HATFIELD CPA

The Company has engaged the Registered  Independent  Certified Public Accounting
Firm of S. W. Hatfield, CPA of Dallas, Texas (SWHCPA) as the Company's auditors.

During the Company's two most recent fiscal years (ended  September 30, 2006 and
2005) and from October 1, 2006 to the date of this  Report,  the Company had not
consulted  with S. W.  Hatfield,  CPA regarding  either (I) the  application  of
accounting   principles  to  a  specified   transaction,   either  completed  or
contemplated,  or the type of  audit  opinion  that  might  be  rendered  on the
Company's financial  statements,  and either written or oral advice was provided
to the  Company  that was an  important  factor  considered  by the  Company  in
reaching a decision as to the accounting, auditing or financial reporting issue;
(ii) or any matter that was the subject of a  disagreement  or event required to
be  reported  under Item  304(a)(1)(iv)  of the  Regulation  S-B and the related
instructions thereto.

MANAGEMENT'S STATEMENT

The  accounting  and  auditing   practice  of  Thompson   Dugan,   PC  has  been
discontinued.  Accordingly,  for all  periods  subsequent  to the date of any of
Thompson Dugan, PC's issued audit reports and/or consent statements,  there have
been no subsequent event audit procedures  performed by Thompson Dugan PC on the
financial statements of Diasense, Inc. Additionally, the cessation of operations
of Thompson Dugan, PC and the discontinuance of their auditing services severely
impacts the ability of investors to sue, and  potentially,  recover damages from
Thompson  Dugan,  PC for material  misstatements  or  omissions,  if any, in any
document filed with the U. S. Securities and Exchange Commission  containing any
report  or  consent  issued by  Thompson  Dugan,  PC,  including  the  financial
statements   covered  in  Thompson   Dugan's  audit  report(s)   and/or  consent
statements."

ITEM 8A - CONTROLS AND PROCEDURES

As of the date of this filing,  an evaluation of the effectiveness of the design
and operation of the Company's  disclosure  controls and  procedures was carried
out under the supervision and with the  participation  of management,  including
our Chief Executive and Financial Officer. Based upon that evaluation, our Chief
Executive and Financial Officer concluded that the Company's disclosure controls
and  procedures are  effective.  There have been no  significant  changes in our
internal controls or in other factors that could  significantly  affect internal
controls subsequent to the date we carried out the evaluation.

                                       18
<PAGE>
                                    PART III

ITEM 9 - DIRECTORS,   EXECUTIVE  OFFICERS,   PROMOTERS  AND  CONTROL  PERSONS;
         COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

The directors and executive officer serving the Company are as follows:

Glenn A. Little, age 53, is a graduate of The University of Florida, Gainesville
(Bachelor  of Science in  Business  Administration)  and the  American  Graduate
School  of   International   Management   (Master  of  Business   Administration
International  Management)  and has been the  principal  of Little  and  Company
Investment  Securities  (LITCO),  a  Securities  Broker/Dealer  with  offices in
Midland,  Texas since 1979.  Before founding LITCO, Mr. Little was a stockbroker
with Howard,  Weil,  Labouisse  Friedrich in their New  Orleans,  Louisiana  and
Midland,  Texas  offices and also worked for First  National Bank of Commerce in
New Orleans, Louisiana.

Mr. Little was appointed an Adjudicatory Official for the State Bar of Texas and
served in that capacity from 1997 through 2003.

The director(s)  and officer(s) will devote their time to the Company's  affairs
on an as needed basis, which, depending on the circumstances, could amount to as
little as two hours per month, or more than forty hours per month, but more than
likely  encompass less than an aggregate of five (5) hours per month.  There are
no  agreements  or  understandings  for any officer or director to resign at the
request of another  person,  and none of the officers or directors are acting on
behalf of, or will act at the direction of, any other person.

INDEMNIFICATION OF OFFICERS AND DIRECTORS.

The  Company's  By-Laws  provide  for the  indemnification  of  its,  directors,
officers, employees, and agents, under certain circumstances, against attorney's
fees and other expenses  incurred by them in any litigation to which they become
a party  arising  from their  association  with or  activities  on behalf of the
Company.  The Company will also bear the expenses of such  litigation for any of
its directors,  officers,  employees,  or agents,  upon such persons  promise to
repay the Company therefore if it is ultimately  determined that any such person
shall not have been entitled to  indemnification.  This  indemnification  policy
could result in substantial  expenditures by the Company, which it may be unable
to recoup.

COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

Glenn A. Little, the sole Officer and Director and Beneficial Owner of more than
10% of the Company's  common stock was required to file an Initial  Statement of
Beneficial  Ownership  of  Securities  on  Form 3 at the  time he  acquired  his
ownership in the Company's  stock. He has represented to the Company that he all
required filings under Section 16(a) were filed on or before December 31, 2006.

ITEM 10 - EXECUTIVE COMPENSATION

Currently,  management  of the  Company  requires  less  than five (5) hours per
month.  Accordingly,  no officer or director has received any compensation  from
the  Company.   Until  the  Company  acquires  additional  capital,  it  is  not
anticipated  that any officer or director  will  receive  compensation  from the
Company other than  reimbursement for out-of-pocket  expenses incurred on behalf
of the Company. See Certain  Relationships and Related  Transactions.

                                       19
<PAGE>
ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, as of the date of this Annual Report, the number
of  shares  of  Common  Stock  owned of record  and  beneficially  by  executive
officers,  directors and persons who hold 5% or more of the  outstanding  Common
Stock  of the  Company.  Also  included  are the  shares  held by all  executive
officers and directors as a group.

                                          % of Class
Name and address                        Number of Shares      Beneficially Owned
----------------                        ----------------      ------------------
Glenn A Little*                            11,100,000               50.2%

Executive Officers and Directors
 as a group (one person)                   11,000,000               50.2%

----------
* Sole Director and Officer

ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

None

ITEM 13 - EXHIBITS

Exhibits

31.1 Certification pursuant to Section 302 of Sarbanes-Oxley Act of 2002 - Chief
     Executive Officer
32.1 Certification pursuant to Section 906 of Sarbanes-Oxley Act of 2002 - Chief
     Financial Officer.

ITEM 14 - PRINCIPAL ACCOUNTANT FEES AND SERVICES

The Company paid or accrued the  following  fees in each of the prior two fiscal
years to it's principal accountant for the respective time periods.

                                                          Years ended
                                                   2005                 2006
                                                  -------              ------

    1. Audit fees                                 $13,000               $4989
    2. Audit-related fees                              --                  --
    3. Tax fees                                        --                  --
    4. All other fees                                  --                  --
                                                  -------              ------

          Totals                                  $13,000              $4,989
                                                  =======              ======

The Company has no formal audit committee. However, as defined in Sarbanes-Oxley
Act of 2002,  the entire  Board of  Directors  is the  Company's  defacto  audit
committee.

In discharging its oversight  responsibility as to the audit process,  the Board
obtained from the independent auditors a formal written statement describing all
relationships  between  the  auditors  and the  Company  that  might bear on the
auditors'  independence as required by Independence Standards Board Standard No.
1,  "Independence  Discussions with Audit  Committees." The Board discussed with
the  auditors  any   relationships   that  may  impact  their   objectivity  and
independence,  including fees for non-audit services, and satisfied itself as to
the  auditors'  independence.  The Board also  discussed  with  management,  the
internal  auditors and the independent  auditors the quality and adequacy of the
Company's  internal controls.  The Board reviewed with the independent  auditors
their management letter on internal controls, if one was issued by the Company's
auditors.

The Board  discussed  and  reviewed  with the  independent  auditors all matters
required to be discussed by auditing standards  generally accepted in the United
States of America,  including those described in Statement on Auditing Standards
No. 61, as amended, "Communication with Audit Committees".

                                       20
<PAGE>
The Board reviewed the audited consolidated  financial statements of the Company
as of and for the year ended  September 30, 2005 and 2006,  with  management and
the independent  auditors.  Management has the sole ultimate  responsibility for
the  preparation  of the  Company's  financial  statements  and the  independent
auditors have the responsibility for their examination of those statements.

Based  on the  above-mentioned  review  and  discussions  with  the  independent
auditors and management,  the Board of Directors  approved the Company's audited
consolidated  financial  statements and recommended that they be included in its
Annual Report on Form 10-KSB for the year ended  September 30, 2006,  for filing
with the Securities and Exchange Commission.

                                   SIGNATURES

In accord with Section 13 or 15(d) of the  Securities  Act of 1933,  as amended,
the Company  caused  this report to be signed on its behalf by the  undersigned,
thereto duly authorized.

                                        DIASNESE, INC.


Dated: January 8, 2007                  By: /s/ Glenn A Little
      ----------------                     -------------------------------------
                                                                  Glenn A Little
                                              Chairman, Chief Executive Officer,
                                            Chief Financial Officer and Director

In accordance with the Securities Exchange Act of 1934, as amended,  this report
has been signed below by the  following  persons on behalf of the Company and in
the capacities and on the date as indicated.


Dated: January 8, 2007                  By: /s/ Glenn A Little
       ---------------                     -------------------------------------
                                                                  Glenn A Little
                                              Chairman, Chief Executive Officer,
                                            Chief Financial Officer and Director

                                       21
<PAGE>
                                 DIASENSE, INC.

                                    CONTENTS
                                                                            Page
                                                                            ----

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
   S. W.  Hatfield,  CPA                                                     F-2
   Goff, Backa, Alfera & Company, LLC                                        F-3
   Thompson Dugan, PC                                                        F-4

FINANCIAL STATEMENTS
   Balance Sheets
    as of September 30, 2006 and 2005                                        F-5

   Statements of Operations and Comprehensive Loss
    for the years ended September 30, 2006 and 2005
    and for the period from July 5, 1989 (date of inception)
    through September 30, 2006                                               F-6

   Statement of Changes in Stockholders' Equity
    for the period from July 5, 1989 (date of inception)
    through September 30, 2006                                               F-7

   Statements of Cash Flows
    for the years ended September 30, 2006 and 2005
    and for the period from July 5, 1989 (date of inception)
    through September 30, 2006                                              F-12

   Notes to Financial Statements                                            F-14

                                      F-1
<PAGE>
                        LETTERHEAD OF S. W. HATFIELD, CPA


             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders
Diasense, Inc.

We  have  audited  the  accompanying   balance  sheets  of  Diasense,   Inc.  (a
Pennsylvania  corporation  and a development  stage company) as of September 30,
2006 and the related statements of operations and comprehensive loss, changes in
stockholders'  equity  (deficit) and cash flows for the year ended September 30,
2006 and for the period from October 1, 2005 through  September 30, 2006.  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 audit.

The financial  statements of Diasense,  Inc. (a development stage company) as of
September 30, 2005 and for the period from October 1, 1997 through September 30,
2005 and for the period from July 5, 1989 (date of inception)  through September
30, 1997 were audited by other auditors whose reports were dated January 4, 2006
and  December  30,  1997,  respectively,  both of  which  included  a  paragraph
expressing  substantial  doubt about  Diasense,  Inc.'s ability to continue as a
going concern.

We conducted  our audit in accordance  with the standards of 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  misstatement.  The Company is not  required to
have,  nor were we engaged to perform,  an audit of its  internal  control  over
financial reporting.  Our audit included  consideration of internal control over
financial  reporting  as  a  basis  for  designing  audit  procedures  that  are
appropriate  in the  circumstances,  but not for the  purpose of  expressing  an
opinion on the  effectiveness  of the Company's  internal control over financial
reporting.  Accordingly,  we express  no such  opinion.  An audit also  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
audit provides a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the financial position of Diasense,  Inc. as of September
30, 2006 and the results of its operations and its cash flows for the year ended
September 30, 2006 and for the period from October 1, 2005 through September 30,
2006, respectively,  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 C to the
financial statements, the Company has no viable operations or significant assets
and is dependent upon  significant  stockholders to provide  sufficient  working
capital to maintain the integrity of the corporate entity.  These  circumstances
create  substantial  doubt  about the  Company's  ability to continue as a going
concern and are discussed in Note C. The financial statements do not contain any
adjustments that might result from the outcome of these uncertainties.


                                               /s/ S. W. Hatfield, CPA
                                               ---------------------------------
                                               S. W. HATFIELD, CPA
Dallas, Texas
December 27, 2006

                                      F-2
<PAGE>
                LETTERHEAD OF GOFF, BACKA, ALFERA & COMPANY, LLC


               REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS

Board of Directors
Diasense, Inc.

We have audited the accompanying balance sheet of Diasense,  Inc. (a development
stage  company)  as of  September  30,  2005 , and  the  related  statements  of
operations,  changes in  stockholder's  equity and cash flows for the year ended
September  30, 2005,  and for the period from October 1, 1997 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 Standards of 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
the results of its  operations  and its cash flows for the year then ended,  and
for the period from October 1, 1997 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 October 1, 1997 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, Alfrea & Company, LLC
--------------------------------------------
Goff, Backa, Alfera & Company, LLC

Pittsburgh, Pennsylvania
January 4, 2006

                                      F-3
<PAGE>
                        LETTERHEAD OF THOMPSON DUGAN, PC


               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors and Stockholders
Diasense, Inc.

We have audited the accompanying balance sheets of Diasense, Inc. (a development
stage company) as of September 30, 1997 and 2006, 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, 1997,  and for the period from July 5,
1989 (date of inception) through September 30, 1997. These financial  statements
are the  responsibility of the Company's  management.  Our  responsibility is to
express an opinion on these financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit  also  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 consolidated financial position of Diasense,  Inc. as of September
30, 1997 and 1996,  and the results of its operations and cash flows for each of
the three years ended  September 30, 1997,  and for the period from July 5, 1989
(date of inception)  through  September 30, 1997 in  conformity  with  generally
accepted accounting principles.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Notes B and E
to the financial  statements,  the Company is in the  development  stage and has
incurred losses from operations and negative cash flows from operations for each
of the three years in the period ended  September 30, 1997 and from July 5, 1989
(date of inception)  through September 1997 raising  substantial doubt about its
ability to continue as a going concern. Management's plans are discussed in Note
B.

The financial  statements do not contain 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  cannon  continue to meet its financing  requirements  and
achieve productive operations.

In addition,  as discussed in Note B, the Company is dependent  upon its parent,
Biocontrol  Technology,  Inc. (BICO) to continue to perform and fund contractual
arrangements  related to research,  development and manufacturing  activities of
products for the Company.  There has been and continues to be substantial  doubt
about  BICO's  ability to  continue as a going  concern  due to their  recurring
losses from operations and negative cash flow. These financial statements do not
include any adjustments that might result from the outcome of this uncertainty.


                                              /s/ Thompson Dugan PC
                                              ---------------------------
                                              THOMPSON DUGAN, PC

Pittsburgh, Pennsylvania
December 30, 1997

                             MANAGEMENT'S STATEMENT

The  accounting  and  auditing   practice  of  Thompson   Dugan,   PC  has  been
discontinued.  Accordingly,  for all  periods  subsequent  to the date of any of
Thompson Dugan, PC's issued audit reports and/or consent statements,  there have
been no subsequent event audit procedures  performed by Thompson Dugan PC on the
financial statements of Diasense, Inc. Additionally, the cessation of operations
of Thompson Dugan, PC and the discontinuance of their auditing services severely
impacts the ability of investors to sue, and  potentially,  recover damages from
Thompson  Dugan,  PC for material  misstatements  or  omissions,  if any, in any
document filed with the U.S. Securities and Exchange  Commission  containing any
report  or  consent  issued by  Thompson  Dugan,  PC,  including  the  financial
statements   covered  in  Thompson   Dugan's  audit  report(s)   and/or  consent
statements.

                                      F-4
<PAGE>
                                 Diasense, Inc.
                          (a development stage company)
                                 Balance Sheets
                               September 30, 2006

                                                                   September 30,
                                                                       2006
                                                                   ------------
                                     ASSETS
CURRENT ASSETS
   Cash on hand and in bank                                        $     24,984
                                                                   ------------

      TOTAL CURRENT ASSETS                                               24,984
                                                                   ------------

TOTAL ASSETS                                                       $     24,984
                                                                   ============

                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
LIABILITIES

CURRENT LIABILITIES
   Accounts payable - trade                                        $         --
   Accrued interest payable to current majority stockholder                   7
                                                                   ------------

      TOTAL CURRENT LIABILITIES                                               7
                                                                   ------------

LONG-TERM LIABILITIES
   Note payable to current majority stockholder                          20,000
                                                                   ------------

      TOTAL LIABILITIES                                                  20,007
                                                                   ------------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY (DEFICIT)
   Preferred stock - no par value
     1,000,000 shares authorized
     None issued and outstanding                                             --
   Common stock - $0.01 par value
     40,000,000 shares authorized
     22,105,051 shares issued and outstanding                           221,051
   Additional paid-in capital                                        47,881,633
   Common stock warrants                                                  5,000
   Deficit accumulated during the development stage                 (48,102,707)
                                                                   ------------

      TOTAL STOCKHOLDERS' EQUITY (DEFICIT)                                4,977
                                                                   ------------

      TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                   $     24,984
                                                                   ============

   The accompanying notes are an integral part of these financial statements.

                                      F-5
<PAGE>
                                 Diasense, Inc.
                          (a development stage company)
                            Statements of Operations
                   Years ended September 30, 2006 and 2005 and
     Period from July 5, 1989 (date of inception) through September 30, 2006

<TABLE>
<CAPTION>
                                                                                                     Period from
                                                                                                     July 5, 1989
                                                                                                 (date of inception)
                                                        Year ended             Year ended              through
                                                       September 30,          September 30,          September 30,
                                                           2006                   2005                   2006
                                                       ------------           ------------           ------------
<S>                                                    <C>                    <C>                    <C>
REVENUES                                               $         --           $         --           $         --
                                                       ------------           ------------           ------------
OPERATING EXPENSES
   General and administrative expenses                      208,012                 98,889             17,063,612
   Depreciation expense                                       1,448                     --                 91,495
   Research and development expense                              --                     --             10,556,405
   Technology and patent rights acquired                         --                     --              2,650,000
   Expense related to warrant extensions                         --                     --             17,890,676
   Amortization of goodwill                                      --                     --                535,057
                                                       ------------           ------------           ------------
      TOTAL OPERATING EXPENSES                              209,460                 98,889             48,787,245
                                                       ------------           ------------           ------------

LOSS FROM OPERATIONS                                       (209,460)               (98,889)           (48,787,245)

OTHER INCOME (EXPENSE)
   Interest expense                                        (159,953)              (164,933)              (336,612)
   Other income                                                  --                     --              1,042,997
   Other expense                                                 --                     --                (67,405)
   Equity in loss from unconsolidated subsidiaries               --                     --               (575,412)
   Impairment loss                                               --                     --               (690,124)
   Gain from sale of Diabecore stock                             --                 57,242                 57,242
   Gain from sale fo MicroIslet stock                            --                     --              1,283,852
                                                       ------------           ------------           ------------
      TOTAL OTHER INCOME (EXPENSE)                         (159,953)              (107,691)               714,538
                                                       ------------           ------------           ------------

LOSS BEFORE PROVISION FOR INCOME TAXES                     (369,413)              (206,580)           (48,072,707)

PROVISION FOR INCOME TAXES                                       --                     --                     --
                                                       ------------           ------------           ------------

NET LOSS                                               $   (369,413)          $   (206,580)          $(48,072,707)
                                                       ============           ============           ============
Earnings per share of common stock
 outstanding computed on net loss -
 basic and fully diluted                               $      (0.02)          $      (0.01)
                                                       ============           ============
Weighted-average number of shares
 outstanding - basic and fully diluted                   23,332,996             22,980,051
                                                       ============           ============
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                      F-6
<PAGE>
                                 Diasense, Inc.
                          (a development stage company)
                  Statement of Changes in Stockholders' Equity
     Period from July 5, 1989 (date of inception) through September 30, 2006

<TABLE>
<CAPTION>
                                                                                                        Deficit
                                                                                                      accumulated
                                               Common Stock      Common      Additional                during the
                                           ------------------     stock       paid-in                 development
                                           Shares      Amount   subscribed    capital     Warrants       stage          Total
                                           ------      ------   ----------    -------     --------       -----          -----
<S>                                       <C>         <C>         <C>        <C>           <C>        <C>            <C>
July 10, 1989 issuance of common
 stock to BICO for License and
 Marketing agreement                      8,000,000   $ 80,000    $    --    $       --    $    --    $        --    $    80,000
August 21 - December 31, 1989 sale
 of common stock pursuant to first
 Private Placement Memorandum               656,000      6,560         --       321,440         --             --        328,000
September 29, 1989 issuance of common
 stock in connection with patent rights
 acquired by BICO                         1,040,000      1,040         --       509,600         --             --        520,000
Net loss for the year                            --         --         --            --         --        (80,000)       (80,000)
                                         ----------   --------    -------    ----------    -------    -----------    -----------
Balances at December 31, 1989             9,696,000     96,960         --       831,040         --        (80,000)       848,000

January 1 - December 31, 1990 sale of
 common stock pursuant to first
 Private Placement Memorandum             1,240,000     12,400         --       607,600         --             --        620,000
May 1-August 31, 1990 issuance of
 common stock in settlement of debt         136,000      1,360         --        66,640         --             --         68,000
Warrants issued to BICO                          --         --         --            --     27,500             --         27,500
Net loss for the year                            --         --         --            --         --       (497,628)      (497,628)
                                         ----------   --------    -------    ----------    -------    -----------    -----------
Balances at December 31, 1990            11,072,000    110,720         --     1,505,280     27,500       (577,628)     1,065,872

January 1 - December 31, 1991 sale of
 common stock pursuant to
 first Private Placement Memorandum         768,000      7,680         --       376,320         --             --        384,000
 second Private Placement Memorandum      3,948,000     39,482         --     3,896,468         --             --      3,935,950
December 31, 1991 common stock
 subscription                                    --         --     62,500            --         --             --         62,500
Warrants issued to BICO                          --         --         --            --     19,085             --         19,085
Net loss for the year                            --         --         --            --         --     (3,650,203)    (3,650,203)
                                         ----------   --------    -------    ----------    -------    -----------    -----------
Balances at December 31, 1991            15,788,250   $157,882    $62,500    $5,778,068    $46,585    $(4,227,831)   $ 1,817,204
</TABLE>

                                  - Continued -

   The accompanying notes are an integral part of these financial statements.

                                      F-7
<PAGE>
                                 Diasense, Inc.
                          (a development stage company)
            Statement of Changes in Stockholders' Equity - Continued
    Period from July 5, 1989 (date of inception) through September 30, 2006

<TABLE>
<CAPTION>
                                                                                                          Deficit
                                                                                                        accumulated
                                              Common Stock         Common      Additional                during the
                                          --------------------      stock       paid-in                 development
                                          Shares        Amount    subscribed    capital     Warrants       stage           Total
                                          ------        ------    ----------    -------     --------       -----           -----
<S>                                      <C>         <C>          <C>        <C>           <C>         <C>             <C>
Balances at December 31, 1991           15,788,250    $ 157,882    $ 62,500   $ 5,778,068   $ 46,585    $ (4,227,831)   $ 1,817,204

January 1-December 31, 1992 sale of
 common stock pursuant to
   second Private Placement Memorandum     986,750        9,868          --       976,883         --              --        986,751
   third Private Placement Memorandum        7,212           72          --        25,170         --              --         25,242
   fourth Private Placement Memorandum     120,000        1,200          --       418,800         --              --        420,000
January 1992 issuance of common stock
 in settlement of debt                     235,000        2,350          --       232,650         --              --        235,000
January 1992 settlement of common
 stock subscriptions                        62,500          625     (62,500)       61,875         --              --             --
Net loss for the year                           --           --          --            --         --      (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

October 1992 sale of common stock
 pursuant to fourth Private Placement
 Memorandum                                180,000        1,800          --       628,200         --              --        630,000
June - July, 1993 warrant exercise          25,000          250          --        28,520     (3,770)             --         25,000
Net loss for the year                           --           --          --            --         --      (3,763,101)    (3,763,101)
                                       -----------    ---------    --------   -----------   --------    ------------    -----------

Balances at September 30, 1993          17,404,712      174,047          --     8,150,166     41,815     (10,837,516)    (2,470,488)

October 1993-September 1994 sale
 of Registered common stock                230,961        2,309          --       783,936         --              --        786,245
June 2003 Regulation S sale of common
 stock                                      91,667          917          --       287,834         --              --        288,751
Common stock issued for consulting
 fees                                        7,200           72          --        25,128         --              --         25,200
November 1993-August 1994 warrant
 exercise                                  105,000        1,050          --        38,950     (2,500)             --         37,500
Purchase of treasury stock                 (10,000)        (100)         --        (4,900)        --         (30,000)       (35,000)
Sale of treasury stock                      10,000          100          --        34,900         --              --         35,000
Net loss for the year                           --           --          --            --         --      (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)
</TABLE>

                                  - Continued -

   The accompanying notes are an integral part of these financial statements.

                                      F-8
<PAGE>
                                 Diasense, Inc.
                          (a development stage company)
            Statement of Changes in Stockholders' Equity - Continued
    Period from July 5, 1989 (date of inception) through September 30, 2006

<TABLE>
<CAPTION>
                                                                                                           Deficit
                                                                                                         accumulated
                                              Common Stock         Common      Additional                 during the
                                          --------------------      stock       paid-in                  development
                                          Shares        Amount    subscribed    capital      Warrants       stage          Total
                                          ------        ------    ----------    -------      --------       -----          -----
<S>                                      <C>         <C>          <C>        <C>           <C>            <C>           <C>
Balances at September 30, 1994           17,839,540  $ 178,395     $   --    $ 9,316,014   $    40,315  $(16,012,597)  $ (6,477,873)

October 1994-September 1994 sale of
 Registered common stock                    437,768      4,378         --      1,497,114            --            --      1,501,492
July 12, 1995 issuance of restricted
 common stock to BICO                     1,200,000     12,000         --      4,188,000            --            --      4,200,000
Common stock issued for consulting fees      17,500        175         --         61,075            --            --         61,250
May 1995 issuance of common stock in
 settlement of debt                       3,000,000     30,000         --     10,470,000            --            --     10,500,000
Warrant extensions                               --         --         --             --     4,625,000            --      4,625,000
October 1994-September 1995 warrant
 exercise                                    29,512        295         --          9,771            --            --         10,066
Net loss for the year                            --         --         --             --            --   (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

October 1995-September 1996 sale of
 Registered common stock                    410,731      4,108         --      1,361,047            --            --      1,365,155
Common stock issued for consulting fees
 Registered                                  10,000        100         --         34,900            --            --         35,000
 Unregistered, restricted                     5,000         50         --         17,450            --            --         17,500
Warrant extensions                               --         --         --             --     7,640,468            --      7,640,468
October 1995-September 1996 warrant
 exercise                                    56,000        560         --         27,440            --            --         28,000
Net loss for the year                            --         --         --             --            --    (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

October 1996-September 1997
 purchase of treasury stock                 (27,000)      (270)        --        (94,230)           --            --        (94,500)
Warrant extensions                               --         --         --             --     5,593,875            --      5,593,875
Net loss for the year                            --         --         --             --            --    (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
</TABLE>

                                  - Continued -

   The accompanying notes are an integral part of these financial statements.

                                      F-9
<PAGE>
                                 Diasense, Inc.
                          (a development stage company)
            Statement of Changes in Stockholders' Equity - Continued
    Period from July 5, 1989 (date of inception) through September 30, 2006

<TABLE>
<CAPTION>
                                                                                                      Deficit
                                                                                                    accumulated
                                        Common Stock       Common      Additional                    during the
                                    -------------------     stock       paid-in                     development
                                    Shares       Amount   subscribed    capital        Warrants        stage           Total
                                    ------       ------   ----------    -------        --------        -----           -----
<S>                                <C>         <C>          <C>        <C>           <C>            <C>           <C>

Balances at September 30, 1997    22,979,051    $229,791    $   --    $26,888,581    $ 17,899,658   $(41,932,206)    $ 3,085,824

October 1997-September 1998 sale
 of Registered common stock            1,000          10        --          3,490              --             --           3,500
Warrant extensions                        --          --        --             --          25,000             --          25,000
Warrant expirations                       --          --        --      2,400,000      (2,400,000)            --              --
Net loss for the year                     --          --        --             --              --     (2,914,329)     (2,914,329)
                                  ----------    --------    ------    -----------    ------------   ------------     -----------
Balances at September 30, 1998    22,980,051     229,801        --     29,292,071      15,524,658    (44,846,535)        199,995

Warrants issued for services              --          --        --             --         228,538             --         228,538
Warrant extensions                        --          --        --             --           6,333             --           6,333
Warrant expirations                       --          --        --        377,625        (377,625)            --              --
Net loss for the year                     --          --        --             --              --       (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)

Warrant extensions                        --          --        --             --         230,178             --         230,178
Warrant expirations                       --          --        --        291,250        (291,250)            --              --
Net loss for the year                     --          --        --             --              --       (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
Net loss for the year                     --          --        --             --              --     (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 expirations                       --          --        --         57,407         (57,407)            --              --
Net loss for the year                     --          --        --             --              --       (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 expirations                       --          --        --      3,309,422      (3,309,422)            --              --
Net loss for the year                     --          --        --             --              --        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)
</TABLE>

                                  - Continued -

   The accompanying notes are an integral part of these financial statements.

                                      F-10
<PAGE>
                                 Diasense, Inc.
                          (a development stage company)
            Statement of Changes in Stockholders' Equity - Continued
    Period from July 5, 1989 (date of inception) through September 30, 2006

<TABLE>
<CAPTION>
                                                                                                           Deficit
                                                                                                         accumulated
                                             Common Stock          Common     Additional                  during the
                                         --------------------       stock      paid-in                   development
                                         Shares        Amount     subscribed   capital      Warrants        stage          Total
                                         ------        ------     ----------   -------      --------        -----          -----
<S>                                     <C>         <C>          <C>        <C>           <C>           <C>             <C>
Balances at September 30, 2003          22,980,051     $ 229,801   $   --    $33,327,775   $12,009,202   $(47,526,714)  $(1,959,936)

Warrant expirations                             --            --       --      8,161,724    (8,161,724)            --            --
Net loss for the year                           --            --       --             --            --             --            --
                                       -----------     ---------   ------    -----------   -----------   ------------   -----------
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 expirations                             --            --       --      3,103,396    (3,103,396)            --            --
Net loss for the year                           --            --       --             --            --       (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)

September 13, 2006 sale of 1,000 Units
 consisting of 11,100 shares of
 restricted, unregistered common stock
 and 500 common stock warrants each     11,100,000       111,000       --          9,000         5,000             --       125,000
September 18, 2006 Warrant cancellation         --            --       --        725,682      (725,682)            --            --
September 25, 2006 purchase of
 treasury stock                        (11,975,000)     (119,750)      --        119,749            --             --            (1)
Capital contributed to support
 operations                                     --            --       --         11,677            --             --        11,677
Related party cancellation of debt              --            --       --      2,402,630            --             --     2,402,630
Net income for the year                         --            --       --             --            --       (369,413)     (369,413)
                                       -----------     ---------   ------    -----------   -----------   ------------   -----------
Balances at September 30, 2006          22,105,151     $ 221,051   $   --    $47,881,633   $     5,000   $(48,102,707)  $     4,977
                                       ===========     =========   ======    ===========   ===========   ============   ===========
</TABLE>


   The accompanying notes are an integral part of these financial statements.

                                      F-11
<PAGE>
                                 Diasense, Inc.
                          (a development stage company)
                            Statements of Cash Flows
                   Years ended September 30, 2006 and 2005 and
     Period from July 5, 1989 (date of inception) through September 30, 2006

<TABLE>
<CAPTION>
                                                                                                         Period from
                                                                                                         July 5, 1989
                                                                                                      (date of inception)
                                                                Year ended           Year ended            through
                                                               September 30,        September 30,        September 30,
                                                                   2006                 2005                 2006
                                                               ------------         ------------         ------------
<S>                                                            <C>                  <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES
   Net income (loss) for the period                            $   (369,413)        $   (206,580)        $(48,072,707)
   Adjustments to reconcile net loss to net
    cash provided by operating activities
      Depreciation and amortization                                   1,448                   --              626,552
      Gain on sale of Diabecore stock                                    --              (57,242)             (57,242)
      Warrants issued for services                                       --                1,600              515,515
      Expense related to warrant extensions                              --                   --           17,890,676
      Common stock issued for services                                   --                   --              138,950
      Common stock issued for License and Marketing agreement            --                   --               80,000
      Impairment loss                                                    --                   --              704,491
      Inventory deposit - BICO                                           --                   --           (1,000,000)
      Gain on MicroIslet stock                                           --                   --           (1,283,852)
      Equity in loss of unconsolidated subsidiaries                      --                   --              575,412
      Accrued interest contributed to equity                             --                   --              324,879
      Increase (Decrease) in
        Accounts payable                                             (1,725)               1,725                   --
        Other accrued liabilities                                   (17,754)              12,754                   --
        Accrued interest payable                                    159,953              164,933                    7
                                                               ------------         ------------         ------------
         NET CASH USED IN OPERATING ACTIVITIES                     (227,491)             (82,810)         (29,557,319)
                                                               ------------         ------------         ------------

CASH FLOWS FROM INVESTING ACTIVITIES
   Purchase of property and equipment                               (24,333)                  --             (303,746)
   Proceeds from sale of property and equipment                          --                   --              175,000
   Cash paid for investment in MicroIslet                                --                   --           (1,600,000)
   Proceeds from sale of MicroIslet stock                                --                   --            2,070,726
   Cash paid for investment in Diabecore                                 --                   --             (987,468)
   Proceeds from sale of Diabecore stock                             14,887               42,355               57,242
   Net activity on notes receivable from related parties                 --                   --             (138,538)
                                                               ------------         ------------         ------------
         NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES         (9,446)              42,355             (726,784)
                                                               ------------         ------------         ------------

CASH FLOWS FROM FINANCING ACTIVITIES
   Cash received from notes payable to
    Former majority shareholder and others                           21,200               72,000              396,200
    Current majority shareholder                                     20,000                   --               20,000
    Convertible notes                                                95,000                   --               95,000
   Cash paid on notes payable                                       (12,500)             (30,000)             (42,500)
   Cash received from sale of common stock                          125,000                   --           11,096,834
   Cash received on Regulation S sale of common stock                    --                   --              288,751
   Cash received on sale of common stock to BICO                         --                   --            4,200,000
   Cash received on warrant exercises                                    --                   --              118,066
   Net activity on cash advanced to/received from BICO                   --                   --           14,160,060
   Cash paid to acquire treasury stock                                   (1)                  --              (35,001)
   Cash contributed as capital to support operations                 11,677                   --               11,677
                                                               ------------         ------------         ------------
         NET CASH PROVIDED BY FINANCING ACTIVITIES                  260,376               42,000           30,309,086
                                                               ------------         ------------         ------------

INCREASE (DECREASE) IN CASH                                          23,439                1,545               24,984
Cash at beginning of period                                           1,545                   --                   --
                                                               ------------         ------------         ------------
CASH AT END OF PERIOD                                          $     24,984         $      1,545         $     24,984
                                                               ============         ============         ============
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                      F-12
<PAGE>
                                 Diasense, Inc.
                          (a development stage company)
                      Statements of Cash Flows - Continued
                   Years ended September 30, 2006 and 2005 and
     Period from July 5, 1989 (date of inception) through September 30, 2006

<TABLE>
<CAPTION>
                                                                                                 Period from
                                                                                                 July 5, 1989
                                                                                              (date of inception)
                                                              Year ended        Year ended         through
                                                             September 30,     September 30,     September 30,
                                                                 2006              2005              2006
                                                              ----------        ----------        -----------
<S>                                                           <C>               <C>               <C>
SUPPLEMENTAL DISCLOSURE OF INTEREST AND INCOME TAXES PAID
  Interest paid for the year                                  $       --        $       --        $    11,725
                                                              ==========        ==========        ===========
  Income taxes paid for the year                              $       --        $       --        $        --
                                                              ==========        ==========        ===========

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES
  Issuance of 371,000 shares of common stock
   to satisfy $303,000 note payable                           $       --        $       --        $   303,000
                                                              ==========        ==========        ===========
  Issuance of 3,000,000 shares of common stock
   to BICO in payment of intercompany debt                    $       --        $       --        $10,500,000
                                                              ==========        ==========        ===========
</TABLE>


   The accompanying notes are an integral part of these financial statements.

                                      F-13
<PAGE>
                                 Diasense, Inc.
                          (a development stage company)
                          Notes to Financial Statements
                           September 30, 2006 and 2005

NOTE A - ORGANIZATION AND DESCRIPTION OF BUSINESS

Diasense, Inc. (Company) was incorporated on July 5, 1989 in accordance with the
Laws of the  Commonwealth of Pennsylvania as a wholly-owned  subsidiary of BICO,
Inc. (BICO) (formerly Biocontrol Technology, Inc.).

The  Company was  approximately  52% owned by BICO until July 23, 2004 when BICO
sold its entire ownership interest to Dominion Assets, LLC (Dominion). On August
29, 2006, the Company entered into a Voluntary Surrender Agreement with Dominion
whereby  all of the  Company's  assets,  which had  previously  been  pledged as
collateral to secure loan agreements by and between the Company and Dominion and
under which the Company was then in default, were repossessed.  Dominion was, at
that time,  the majority  shareholder  of the  Company.  Keith R. Keeling owns a
majority  interest in  Dominion  and was also a former  member of the  Company's
Board of Directors and the Company's former Chief Executive Officer (CEO) of the
Company through his resignation from both positions on August 4, 2006.

Thorough the date of the Voluntary Surrender  Agreement,  the Company's business
efforts were focused on developing a noninvasive  glucose sensor  (Sensor).  The
Sensor  was  proposed  to  use   electromagnetic   technology   to  measure  the
concentration  of glucose in human tissue  without  requiring the user to take a
blood sample.

The Company's current principal  business activity is to seek a suitable reverse
acquisition  candidate  through  acquisition,  merger or other suitable business
combination method.

The Company has never fully  implemented any business plan(s) and,  accordingly,
is considered to be in the development stage.

NOTE B - PREPARATION OF FINANCIAL STATEMENTS

The  Company  follows  the  accrual  basis  of  accounting  in  accordance  with
accounting  principles  generally  accepted in the United  States of America and
originally  had a year-end of December 31. During 1992,  the Company's  Board of
Directors elected to change the Company's year-end from December 31 to September
30. All accompanying  financial  information presented for periods subsequent to
December 31, 1992 reflect the effect of this action.

The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States of America 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.

Management further acknowledges that it is solely responsible for adopting sound
accounting  practices,   establishing  and  maintaining  a  system  of  internal
accounting  control and preventing and detecting  fraud. The Company's system of
internal  accounting  control is designed to assure,  among other items, that 1)
recorded  transactions  are valid; 2) valid  transactions  are recorded;  and 3)
transactions  are  recorded in the proper  period in a timely  manner to produce
financial  statements which present fairly the financial  condition,  results of
operations  and cash  flows of the  Company  for the  respective  periods  being
presented

NOTE C - GOING CONCERN UNCERTAINTY

Diasense, Inc. (Company) was incorporated on July 5, 1989 in accordance with the
Laws  of the  Commonwealth  of  Pennsylvania  as a  wholly-owned  subsidiary  of
Biocontrol Technology,  Inc., which later changed its name to BICO, Inc. (BICO).
On August 29, 2006,  the Company  entered into a Voluntary  Surrender  Agreement
(Voluntary Surrender Agreement) with Dominion Assets, LLC (Dominion) whereby all
of the  Company's  assets,  which had  previously  been pledged as collateral to
secure  loan  agreements  under  which the  Company  was then in  default,  were
repossessed.  Dominion  was,  at that  time,  the  majority  shareholder  of the
Company.  Through the date of the Voluntary Surrender  Agreement,  the Company's
business  efforts  were  focused on  developing  a  noninvasive  glucose  sensor
(Sensor).  The Sensor was proposed to use electromagnetic  technology to measure
the  concentration of glucose in human tissue without requiring the user to take
a blood sample.

                                      F-14
<PAGE>
                                 Diasense, Inc.
                          (a development stage company)
                    Notes to Financial Statements - Continued
                           September 30, 2006 and 2005

NOTE C - GOING CONCERN UNCERTAINTY - CONTINUED

The Company's current principal  business activity is to seek a suitable reverse
acquisition  candidate  through  acquisition,  merger or other suitable business
combination method.

The  Company's  continued  existence is  dependent  upon its ability to generate
sufficient cash flows from operations to support its daily operations as well as
provide sufficient resources to retire existing liabilities and obligations on a
timely basis.

The Company  anticipates  future sales of equity securities to facilitate either
the  consummation  of a business  combination  transaction  or to raise  working
capital to support and preserve the integrity of the corporate entity.  However,
there is no assurance that the Company will be able to obtain additional funding
through the sales of additional  equity  securities  or, that such  funding,  if
available, will be obtained on terms favorable to or affordable by the Company.

If no additional  operating  capital is received  during the next twelve months,
the  Company  will be  forced  to rely on  existing  cash in the  bank  and upon
additional  funds  loaned  by  management  and/or  significant  stockholders  to
preserve the integrity of the corporate  entity at this time. In the event,  the
Company  is  unable to  acquire  advances  from  management  and/or  significant
stockholders, the Company's ongoing operations would be negatively impacted.

It  is  the  intent  of  management  and  significant  stockholders  to  provide
sufficient  working  capital  necessary to support and preserve the integrity of
the corporate entity.  However, no formal commitments or arrangements to advance
or loan funds to the Company or repay any such advances or loans exist. There is
no legal obligation for either management or significant stockholders to provide
additional future funding.

While the Company is of the opinion that good faith  estimates of the  Company's
ability to secure additional  capital in the future to reach our goals have been
made, there is no guarantee that the Company will receive  sufficient funding to
sustain operations or implement any future business plan steps.

NOTE D - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1. Cash and cash equivalents

     For  Statement of Cash Flows  purposes,  the Company  considers all cash on
     hand  and  in  banks,  certificates  of  deposit  and  other  highly-liquid
     investments with maturities of three months or less, when purchased,  to be
     cash and cash equivalents.

2. Property and Equipment

     Property and equipment were recorded at historical  cost.  These costs were
     depreciated over the estimated useful lives of the individual  assets using
     the straight-line method, generally seven to thirty-nine years.

     Gains and losses from  disposition of property and equipment are recognized
     as incurred and are included in operations.

     In accordance  with  Statement of Financial  Accounting  Standards No. 144,
     "Accounting  for the  Impairment  or Disposal of  Long-Lived  Assets",  the
     Company  follows the policy of evaluating  all property and equipment as of
     the end of each  reporting  quarter.  At  September  30,  2006,  management
     determined that no such impairments were necessary.

3. Income Taxes

     The Company uses the asset and liability  method of  accounting  for income
     taxes. At September 30, 2006 and 2005, respectively, the deferred tax asset
     and deferred  tax  liability  accounts,  as recorded  when  material to the
     financial  statements,  are entirely  the result of temporary  differences.
     Temporary  differences  represent  differences in the recognition of assets
     and  liabilities  for  tax  and  financial  reporting  purposes,  generally
     consisting of  accumulated  depreciation  and  amortization,  allowance for
     doubtful accounts and vacation accruals.

                                      F-15
<PAGE>
                                 Diasense, Inc.
                          (a development stage company)
                    Notes to Financial Statements - Continued
                           September 30, 2006 and 2005

NOTE D - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

3. Income Taxes - continued

     As of September  30, 2006 and 2005,  the deferred tax asset  related to the
     Company's net operating loss  carryforward  is fully  reserved.  Due to the
     provisions  of Internal  Revenue  Code Section 338, the Company may have no
     net operating loss carryforwards available to offset financial statement or
     tax  return  taxable  income in future  periods  as a result of a change in
     control   involving  50  percentage  points  or  more  of  the  issued  and
     outstanding securities of the Company.

4. Earnings (loss) per share

     Basic  earnings  (loss) per share is computed  by  dividing  the net income
     (loss) available to common stockholders by the  weighted-average  number of
     common shares  outstanding  during the respective  period  presented in our
     accompanying financial statements.

     Fully diluted earnings (loss) per share is computed similar to basic income
     (loss) per share  except that the  denominator  is increased to include the
     number of common  stock  equivalents  (primarily  outstanding  options  and
     warrants).

     Common  stock  equivalents  represent  the  dilutive  effect of the assumed
     exercise of the outstanding stock options and warrants,  using the treasury
     stock method, at either the beginning of the respective period presented or
     the date of  issuance,  whichever  is later,  and only if the common  stock
     equivalents  are  considered  dilutive  based upon the Company's net income
     (loss) position at the calculation date.

     At  September  30,  2006,  and  subsequent  thereto,  the  Company  had  no
     outstanding common stock equivalents.  All issued and outstanding  warrants
     as of December 31, 2005 were considered  anti-dilutive due to the Company's
     net operating loss position.

5. Treasury Stock

     The Company accounts for treasury stock  acquisitions and sales pursuant to
     the tenets of Accounting Principles Board Opinion 6, whereby treasury stock
     acquisitions  are first charged  against par value and any excess  purchase
     price is first charged to additional  paid-in  capital and then to retained
     earnings.  Any  subsequent  sale of treasury stock is first credited to par
     value and any excess is credited to additional paid-in capital.

6. Research and development costs

     Research and  development  expenses were charged to operations as incurred.
     Patents,  Licenses and  Marketing  Agreements  acquired from BICO were also
     charged to operations as acquired.

NOTE E - FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amount of cash,  accounts  receivable,  accounts  payable and notes
payable, as applicable,  approximates fair value due to the short term nature of
these items  and/or the current  interest  rates  payable in relation to current
market conditions.

Interest  rate risk is the risk  that the  Company's  earnings  are  subject  to
fluctuations  in interest  rates on either  investments  or on debt and is fully
dependent  upon  the  volatility  of  these  rates.  The  Company  does  not use
derivative instruments to moderate its exposure to interest rate risk, if any.

Financial  risk  is  the  risk  that  the  Company's  earnings  are  subject  to
fluctuations in interest rates or foreign exchange rates and are fully dependent
upon the  volatility  of  these  rates.  The  company  does  not use  derivative
instruments to moderate its exposure to financial risk, if any.

                                      F-16
<PAGE>
                                 Diasense, Inc.
                          (a development stage company)
                    Notes to Financial Statements - Continued
                           September 30, 2006 and 2005

NOTE F - CALCULATION OF COMPREHENSIVE INCOME (LOSS)

<TABLE>
<CAPTION>
                                                                                  Period from
                                                                                 July 5, 1989
                                                                              (date of inception)
                                         Year ended           Year ended            through
                                        September 30,        September 30,        September 30,
                                            2006                 2005                 2006
                                        ------------         ------------         ------------
<S>                                     <C>                  <C>                  <C>
Net Loss                                $   (369,413)        $   (206,580)        $(48,072,707)

Comprehensive Income items: None                  --                   --                   --
                                        ------------         ------------         ------------

Comprehensive Loss                      $   (369,413)        $   (206,580)        $(48,072,707)
                                        ============         ============         ============
</TABLE>

NOTE G - INCOME TAXES

The  components  of income tax  (benefit)  expense  for each of the years  ended
September  30,  2006 and 2005 and for the  period  from  July 5,  1989  (date of
inception) through September 30, 2006, are as follows:

                                                                 Period from
                                                                July 5, 1989
                                                             (date of inception)
                         Year ended          Year ended           through
                        September 30,       September 30,       September 30,
                            2006                2005                2006
                          -------             -------             -------
Federal:
  Current                 $    --             $    --             $    --
  Deferred                     --                  --                  --
                          -------             -------             -------
                               --                  --                  --
                          -------             -------             -------
State:
  Current                      --                  --                  --
  Deferred                     --                  --                  --
                          -------             -------             -------
                               --                  --                  --
                          -------             -------             -------

  Total                   $    --             $    --             $    --
                          =======             =======             =======

Concurrent  with a September  2006 change in control,  the Company has a nominal
net operating loss  carryforward  for future  periods.  The ultimate  amount and
availability  of any future net operating loss  carryforwards  may be subject to
limitations set forth by the Internal  Revenue Code.  Factors such as the number
of shares ultimately issued within a three year look-back period;  whether there
is a deemed more than 50 percent change in control; the applicable long-term tax
exempt bond rate;  continuity of historical  business;  and subsequent income of
the  Company  all  enter  into  the  annual   computation  of  allowable  annual
utilization of the carryforwards.


                (Remainder of this page left blank intentionally)

                                      F-17
<PAGE>
                                 Diasense, Inc.
                          (a development stage company)
                    Notes to Financial Statements - Continued
                           September 30, 2006 and 2005

NOTE G - INCOME TAXES - CONTINUED

The Company's income tax expense (benefit) for each of the years ended September
30,  2006 and 2005 and for the  period  from  July 5, 1989  (date of  inception)
through  September 30, 2006,  respectively,  differed from the statutory federal
rate of 34 percent as follows:

<TABLE>
<CAPTION>
                                                                                              Period from
                                                                                             July 5, 1989
                                                                                          (date of inception)
                                                          Year ended        Year ended          through
                                                         September 30,     September 30,      September 30,
                                                             2006              2005               2006
                                                         ------------      ------------       ------------
<S>                                                      <C>               <C>                <C>
Statutory rate applied to income before income taxes     $   (125,600)     $    (70,000)      $(16,345,000)
Increase (decrease) in income taxes resulting from:
 State income taxes                                                --                --                 --
 Other, including reserve for deferred tax asset
  and application of net operating loss carryforward          125,600            70,000         16,345,000
                                                         ------------      ------------       ------------

     Income tax expense                                  $         --      $         --       $         --
                                                         ============      ============       ============
</TABLE>

Temporary  differences,  consisting primarily of statutory deferrals of expenses
for organizational costs,  statutory differences in the  depreciable/amortizable
lives for  property and  equipment  and patents and the  recognition  of expense
charges  related to the issuance of warrants,  between the  financial  statement
carrying  amounts and tax bases of assets and liabilities  give rise to deferred
tax assets and/or liabilities.  As of September 30, 2006 and 2005, respectively,
after taking the September 2006 change in control into consideration:

                                              September 30,      September 30,
                                                  2006               2005
                                                -------            -------
Deferred tax assets
  Net operating loss carryforwards              $    --            $    --
  Less valuation allowance                           --                 --
                                                -------            -------

  Net Deferred Tax Asset                        $    --            $    --
                                                =======            =======

NOTE H - COMMON STOCK TRANSACTIONS

On September 18, 2006, the Company entered into a unit purchase  agreement (Unit
Purchase Agreement) to sell 1,000 Units to Glenn A. Little (Little) for $125,000
cash.  Each Unit consisted of 11,100 shares of common stock and 500 common stock
purchase  warrants or an  aggregate  of  11,100,000  shares of common  stock and
500,000   common  stock  purchase   warrants.   There  were  no  commissions  or
underwriting discounts paid in conjunction with this transaction and the Company
believes  that the shares and  warrants  were  exempt  from  registration  under
Section 4(2) of the Securities Act of 1933 as amended.

The common  stock  purchase  warrants  can be  exercised  at any time from their
issuance on September 18, 2006 through  September 18, 2011 at an exercise  price
of $0.10 per share.  The  Company  assigned a value of $5,000 to these  warrants
from the $125,000 aggregate purchase price, which is equivalent to the par value
of the underlying common stock supporting the warrants.

On September 18, 2006,  connected with yet separate from the aforementioned Unit
Purchase  Agreement,  the Company  entered into a Share Purchase  Agreement with
Dominion, the Company's then-majority shareholder, whereby the Company purchased
from  Dominion  11,975,000  shares of common stock of the Company for a purchase
price of $1.00.  The shares  were  cancelled  upon  receipt by the  Company  and
returned to unissued status.

                                      F-18
<PAGE>
                                 Diasense, Inc.
                          (a development stage company)
                    Notes to Financial Statements - Continued
                           September 30, 2006 and 2005

NOTE I - STOCK WARRANTS

During August 2006, the Company reached termination  agreements with all holders
of the Company's Common Stock Warrants and terminated all issued and outstanding
warrants.  As of September 30, 2006, the only outstanding warrants relate to the
aforementioned September 18, 2006 transaction with Glenn A. Little.

                                            Number of       Weighted
                                             Warrant        Average
                                              Shares         Price
                                              ------         -----

Balance at October 1, 2004                  2,643,000
  Issued                                      200,000
  Exercised                                        --            --
  Expired                                  (2,143,000)           --
                                           ----------

Balance at September 30, 2005                 700,000
  Issued                                      500,000         $0.10
  Exercised                                        --            --
  Expired                                    (700,000)
                                           ----------

Balance at September 30, 2006                 500,000         $0.10
                                           ==========

NOTE J - ASSET SURRENDER

On August 29, 2006,  the Company  entered into a Voluntary  Surrender  Agreement
(Voluntary Surrender Agreement) with Dominion Assets, LLC (Dominion) whereby all
of the Company's  assets,  pledged as collateral to secure loan agreements under
which the Company is in default, were repossessed.

At the time of the  repossession,  Dominion was the majority  shareholder of the
Company. Keith R. Keeling owns a majority 75% interest in Dominion, was a former
member the Company's  Board of Directors and the former CEO of the Company until
resigning from both such positions with the Company on August 4, 2006.

The  foreclosed  and  surrendered  assets  included the  Company's  intellectual
property  related to it non invasive glucose monitor and equipment and equipment
acquired during Fiscal 2006.

In consideration of its surrender of all of its assets to Dominion,  the Company
received  releases from  approximately  $2,415,263 of its debt obligations which
had  been  secured  by  such  assets  under  certain  agreements,  as  described
immediately below. The Company's assets had been pledged as collateral to secure
(I) that certain Demand Note in a principal amount of $1,954,936, dated July 23,
2004,  issued  by the  Company  to BICO and  assigned  by BICO to  Dominion,  as
amended,  effective  September 28, 2004,  which accrued interest at a rate of 8%
per annum (Demand Note), (ii) the additional loans totaling $50,700 in principal
amount and accruing  interest at a rate of 8% per annum which had been  extended
by Dominion to the Company under that certain Note and Security Agreement, dated
October 29, 2004, by and between the Company and Dominion,  as amended (Note and
Security  Agreement) and (iii) six secured convertible notes (Convertible Notes)
in an aggregate  principal amount of $95,000,  accruing interest at a rate of 6%
per annum,  that the Company  issued to various  creditors on various dates from
November 15, 2005 through July 1, 2006.  The sum of the  principal  and interest
due under the Demand Note, the Note and Security  Agreement and the  Convertible
Notes as of August 15,  2006 was  approximately  $2,415,263.  The Company was in
default under the Demand Note and under the Note and Security  Agreement and had
no  ability  to repay  the loans  underlying  such  obligations.  As a result of
Dominion's  demand  for  payment  under the  Demand  Note and under the Note and
Security  Agreement  and in order to avoid legal action by Dominion to repossess
the assets, which would have likely resulted in continuing financial obligations
to Dominion,  the Company  entered  into the  Voluntary  Surrender  Agreement to
convey the Company's  assets to Dominion in exchange for Dominion's  agreeing to
(I) release the Company of its  obligations  under the Demand Note and under the
Note and Security Agreement,  and (ii) assume the Company's  obligation to repay
the Convertible Notes.

                                      F-19
<PAGE>
                                 Diasense, Inc.
                          (a development stage company)
                    Notes to Financial Statements - Continued
                           September 30, 2006 and 2005

NOTE J - ASSET SURRENDER - CONTINUED

At the date of  repossession,  the  Company's  equipment had a net book value of
approximately  $$22,885  and the  Company's  intellectual  property  had no book
value.  Due to the  uncertainty of whether a marketable  product could have ever
been developed from the Company's  intellectual  property  without a significant
additional  investment  by the  Company,  if ever,  the  immediate  sale of such
intellectual  property would have been difficult or impossible,  and, therefore,
at the time of its repossession, it had little or no market value.

The Company  recognized  contributed  capital of  approximately  $2,595,000 as a
result of this net debt forgiveness from a related party.

NOTE K - COMMITMENTS AND CONTINGENCIES

INDEPENDENT CONSULTANT AGREEMENTS

On August 31, 2006, the Company and Michael Pitsakis  (Pitsakis) mutually agreed
to terminate  the  Independent  Consultant  Agreement,  dated May 19,  2005,  as
amended  November  11,  2005,  by and  between the  Company  and  Pitsakis  (the
"Pitsakis Consulting Agreement"). In connection with its entry into the Pitsakis
Consulting Agreement,  the Company had issued a warrant certificate to Pitsakis,
granting Pitsakis warrants to purchase  4,000,000 shares of the Company's common
stock. As of the termination of the Pitsakis Consulting Agreement,  only 100,000
of such warrants had vested.  Pitsakis has agreed to waive his right to exercise
the vested warrants.  In consideration  for such waiver of exercise rights,  the
Company  waived  any  restrictions  imposed  upon  Pitsakis  under the  Pitsakis
Consulting  Agreement  preventing  Pitsakis  from being engaged in a competitive
capacity with any entity  engaged in the research and  development of technology
similar to the Company's  technology.  The Company and Pitsakis  terminated  the
Pitsakis  Consulting  Agreement  due to the fact that the  Company  is no longer
developing its technology.

On August 31, 2006, the Company and Jeremy Grata (Grata) mutually  terminated an
Independent  Consultant  Agreement,  dated May 19, 2005, as amended November 11,
2005,  by and between the Company and Grata  (Grata  Consulting  Agreement).  In
connection with its entry into the Grata Consulting  Agreement,  the Company had
issued a warrant  certificate  to Grata,  granting  Grata  warrants  to purchase
4,000,000  shares of the Company's  common stock.  As of the  termination of the
Grata Consulting Agreement,  only 100,000 of such warrants had vested. Grata has
agreed to waive his right to exercise the vested warrants.  In consideration for
such waiver of exercise rights, the Company waived any restrictions imposed upon
Grata under the Grata Consulting  Agreement  preventing Grata from being engaged
in  a  competitive  capacity  with  any  entity  engaged  in  the  research  and
development of technology similar to the Company's  technology.  The Company and
Grata terminated the Grata Consulting Agreement due to the fact that the Company
is no longer developing its technology.

On August 31, 2006, the Company and Stuart Fine, MD (Fine)  mutually  terminated
an Independent Consultant Agreement, dated November 14, 2005, by and between the
Company and Fine (Fine Consulting Agreement).  In connection with its entry into
the Fine Consulting  Agreement,  the Company had issued a warrant certificate to
Fine,  granting Fine warrants to purchase 150,000 shares of the Company's common
stock. As of the termination of the Fine  Consulting  Agreement,  only 35,000 of
such  warrants  had vested.  Fine has agreed to waive his right to exercise  the
vested  warrants.  In  consideration  for such  waiver of exercise  rights,  the
Company  waived any  restrictions  imposed  upon Fine under the Fine  Consulting
Agreement  preventing Fine from being engaged in a competitive capacity with any
entity  engaged in the research and  development  of  technology  similar to the
Company's  technology.  The  Company  and Fine  terminated  the Fine  Consulting
Agreement  due  to the  fact  that  the  Company  is no  longer  developing  its
technology.

                (Remainder of this page left blank intentionally)

                                      F-20
<PAGE>
                                 Diasense, Inc.
                          (a development stage company)
                    Notes to Financial Statements - Continued
                           September 30, 2006 and 2005

NOTE L - SUBSEQUENT EVENT

On November 14, 2006, the Company filed a Definitive  Schedule 14C - Information
Statement Pursuant to Section 14C of the Securities  Exchange Act of 1934 noting
actions to be taken without a meeting upon the written consent of the holders of
a majority of the outstanding shares of the voting capital stock of the Company.

The contemplated actions include:

     1.   To reverse split the  currently  issued and  outstanding  common stock
          (Reverse  Split) of the Company on a 100,000  shares for one (1) share
          basis,  with no stockholder being reversed to less than a round lot of
          100 shares; and

     2.   To change the Company's state of  incorporation  from  Pennsylvania to
          Nevada.

In conjunction with the proposed Reverse Stock split, no stockholder  shall have
less than one round lot of 100 shares after the reverse  split  calculation  and
all fractional shares will be rounded to the next higher whole share:

       Shares prior to            Shares after
        reverse split            reverse split
        -------------            -------------
                50                    100
               100                    100
             1,000                    100
            10,000                    100
           100,000                    100
         1,000,000                    100
        10,000,000                    100
        10,000,001                    101

Only  stockholders  of  record  as of the  date of the  Reverse  Split  shall be
afforded  this  special  treatment.  The expected  date of the Reverse  Split is
January 10, 2007.  The  possibility  exists that the  reduction in the number of
outstanding  shares  will  adversely  affect the market for our Common  Stock by
reducing  the  relative  level  of  liquidity.  Consequently,  there  can  be no
assurance that the reverse split will result in a proportionate  increase in the
value of the shares.

Following the reverse split, we will have issued and  outstanding  approximately
75,900 shares of common stock,  which  includes the treatment to preserve  round
lots. Management estimates that there will be 741 stockholders.

                                      F-21