SECURITIES AND EXCHANGE COMMISSION
                     WASHINGTON, D.C. 20549

                           FORM 10-K

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

 For the Fiscal Year Ended 09/30/2003 Commission File Number 0-26504

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

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

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

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

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

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

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

Indicate  by  check  mark  if  disclosure  of  delinquent  filers
pursuant  to Item 405 of Regulation S-K is not contained  herein,
and will not be contained, to the best of registrant's knowledge,
in  definitive  proxy or information statements  incorporated  by
reference in Part III of this Form 10-K, or any amendment to this
Form 10-K. [ ]

The   aggregate  market  value  of  the  voting  stock  held   by
nonaffiliates of the registrant as of January 7, 2005:

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

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

As  of January 7, 2005, 22,980,051 shares of Common Stock,  par
value  $.01 per share were outstanding.  As of January 7, 2005,
no shares of Preferred Stock were outstanding.
Exhibit index is located on page 22.

                             PART I


Item 1. Business

General Development of Business

Diasense, Inc. was incorporated in the Commonwealth of
Pennsylvania on July 5, 1989 as Diasense, Inc., a wholly owned
subsidiary of BICO Inc. BICO owned approximately 52% of Diasense
until July 23, 2004 when BICO sold its entire ownership interest
to Dominion Assets, LLC. The focus of our business since our
inception has been the research and development of our noninvasive
glucose sensor for use by diabetics.  Because we ran out of
funding, we had to suspend our work on the noninvasive glucose
sensor, including our clinical trials.  Until we are able to raise
funds on our own, we won't be able to re-start the project.

Based on several agreements between us and BICO, we own the
patent, marketing and distribution rights to the noninvasive
glucose sensor.

During 2000 and 2001, we made investments in two different
diabetes-related companies: MicroIslet, Inc., a California
company working with Duke University to develop encapsulated
insulin for human use; and Diabecore Medical, Inc., a Canadian
company working on a new type of insulin.  We've sold our
interest in MicroIslet, and Diabecore is continuing its research
and development project.

Financial Information About Industry Segments

We operate in a single industry segment consisting of the
research, development, marketing and sale of biomedical products
and devices.

Forward-Looking Statements

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

Description of Business

History and Development of the Noninvasive Glucose Sensor

Since we began, we've been working with BICO to develop a
noninvasive glucose sensor for diabetics that is able to measure
glucose without having to draw blood.  Most currently available
glucose monitors require the drawing of blood by means of a
finger prick.

BICO's initial research and development with insulin pumps led to
a theory by which blood glucose levels could be detected
noninvasively by correlating points on the infrared spectrum that
are reflected by electromagnetic energy through the skin.  BICO
studied this method in 1986 and 1987 using laboratory instruments
and working with consultants at Battelle Memorial Institute in
Columbus, Ohio.  The results of the studies provided information
regarding the use of infrared light in the noninvasive
measurement of glucose.  The information from the studies, along
with later additional work, led to a patent application by BICO's
research team in 1990.  A patent covering the method was granted
to BICO's research team and assigned to Diasense in December
1991.  We purchased those patent rights from BICO under a
purchase agreement.  BICO filed a second patent application in
December 1992, which was granted in January 1995.  That second
filing contained new claims, which extended the coverage of the
patent based on additional discoveries and data obtained since
the original patent was filed.  BICO assigned the rights to that
patent to us.   BICO developed additional concepts to improve the
capability of the instrument to recognize blood glucose, and, in
May 1993, filed corresponding patent applications.  As of
November 2002, a total of 14 U.S. patents and three foreign
patents have been issued, with additional patent applications
pending.  BICO has the right to develop and manufacture sensors
based on contracts with us. However we are in the process of
negotiating a termination of these contracts with BICO. If and
when we obtain FDA approval and adequate financing we will consider
manufacturing the the Sensor in house or use contract manufacturers.

The Diasensor is a spectrophotometer, which is a machine capable
of illuminating a small area of skin on a patient's arm with
infrared light, and then making measurements from the infrared
light that is reflected back into the device.  The device then
displays the measurement in a window on the top of the device for
the user to read.  The Diasensor uses internal mathematical
calculations and customized software to calculate a glucose
measurement.

On January 6, 1994, BICO submitted the initial 510(k)
Notification to the Food and Drug Administration for approval to
market the production model, the Diasensor 1000.  A 510(k)
Notification is a type of FDA filing used to ask the FDA to
approve a device for sale in the U.S.  BICO based the submission
on data obtained from the advanced research prototypes, since we
believed that the production model would be identical to the
advanced prototypes.  In February 1996, the FDA convened a panel
of advisors to make a recommendation regarding our 510(k)
Notification.  The majority of the panel members recommended that
we conduct additional testing and clinical trials of a production
model prior to marketing the Diasensor 1000.  We, along with
BICO, announced that we would remain committed to bringing the
Diasensor 1000 to diabetics, and that additional research,
development and testing would continue.

After discussions with the FDA, we submitted a revised 510(k)
Notification in October 1996, which was followed by continued
discussions with the FDA.  During 1997 and 1998, we continued to
meet with the FDA, and established a protocol for in-home testing
of the Diasensor 1000.  Due to our cash flow problems beginning
in 1998, testing did not proceed at the pace originally
anticipated, and we suspended the testing all together in the
second quarter of 2002.

This model of the Diasensor was named the Diasensor 2000 to
differentiate between the earlier models.  Based on advice from
the FDA, we decided it was in our best interest to submit a
PreMarket Approval Application to the FDA, rather than continue
with the 510(k) Notification process, in order to seek FDA
approval for the Diasensor 2000.  In 1999 the FDA implemented a
new PMA system. Under the new system, individual modules - or
parts - of a PMA submission could be made, as they were ready.

In February 1999 we submitted a PMA shell to the FDA for the
Diasensor.  In May 1999, we submitted the first module, which
covered manufacturing methods and procedures for the Diasensor
2000.  The FDA asked for additional information in September
1999, and we responded.  We filed the second module in May 2000.
The second module contained information regarding electrical and
mechanical standards for the FDA's requirements on safety and
effectiveness, and a description of how our noninvasive glucose
sensor will be used by patients.  Future modules must include raw
data, laboratory study methods and test results.

The Clinical Trials

In August 1999, we hired Joslin Diabetes Center to help us with
our FDA submission.  Joslin Diabetes Center designed and began to
conduct the clinical trials the FDA requires before they will
give us approval to market the sensor.  Clinical trials began in
October 2000, but we suspended them in the second quarter of 2002
to focus on the new generation sensor.  Unfortunately, we ran out
of money to fund any part of the project.  Until we are able to
raise more money, we won't be able to re-start the trials, and
even if we do have the money, we may not be able to find suitable
sites willing to work with us.

Current Status of the Noninvasive Glucose Sensor

We've had to discontinue our research and development of the
Diasensor because we ran out of money to continue funding the
project.  Until we are able to raise funds, we will not be able
to revive the project.

FDA approval is necessary to market the Diasensor in the United
States.  In 1999, we also focused additional effort on the
European market; since no material sales occurred, we
discontinued our European marketing efforts.

If and when we are able to re-start the clinical
trials, and if we are able to get FDA approval, we plan to market
the noninvasive glucose sensor to diabetics, through their
doctors' orders.  We may set our prices too high, which will
limit our sales, unless we can convince health insurance
companies to pay for them.  Because the health insurance industry
is in a constant state of change, we can't predict whether - when
- or if - we will convince them to pay for our noninvasive
glucose sensor or the telemedicine program.  Not all diabetics will
be suitable users of our noninvasive glucose sensor. Those diabetics
who require and benefit from frequent glucose monitoring and whose
physicians adjust their insulin dosages based on glucose averages
over time make up the potential market for our sensor, and we can't
accurately estimate the size of that potential market at this time.

Invasive Glucose Sensors

Currently, the majority of diabetics measure their blood glucose
levels by using invasive glucose sensors that use two different
methods.  The simplest method for monitoring blood glucose levels
requires the user to prick a finger, arm or leg, draw a drop of
blood, and place the blood on a chemically-treated test strip.
After a specified amount of time has elapsed, the blood must be
blotted or wiped off.  After an additional amount of time has
elapsed, the color of the test strip is visually compared to that
of a color chart, and the glucose level is read from the chart.
The second method requires the user of an invasive glucose sensor
to draw a drop of blood, and to place the blood on a test strip
similar to those described above.  Later, the user must wait a
prescribed period of time and place the test strip in the
invasive glucose sensor, which will display a readout of the
blood glucose level.  We believe that many of the existing
invasive glucose sensors are complicated, time-consuming, prone
to user error, inconvenient, unpleasant and entail significant
ongoing expenditures by the user for supplies.

We believe that these methods generally yield accuracy levels
within plus or minus 25-30 mg/dl of actual glucose levels,
depending upon testing conditions.  We believe that if our
research and development efforts are successful, our noninvasive
glucose sensor will have a range of accuracy at least as accurate
as currently available invasive glucose sensors.

With either method, adequate control of blood glucose levels
requires several finger or arm pricks each day, which is an
unpleasant experience for the user, especially for children.
Depending upon the relative facility of the user, it generally
takes at least two to four minutes for a readout to be provided
from existing invasive glucose sensors.  Moreover, the ongoing
costs of repeated testing are significant to the average user,
given the cost of test strips, lancets, swabs, antiseptics, test
solutions, etc., and could represent a monthly cost of up to $100
or more.  We believe that if our noninvasive glucose sensor is
successfully developed, manufactured and marketed, the
unpleasantness of existing testing methods will be effectively
eliminated, and the expense and inconvenience will, over the long
term, be significantly reduced.

Diabetes

The American Diabetes Association has estimated that diabetes is
the seventh leading cause of death in the United States.
Diabetics who are stricken with juvenile diabetes, the most
severe form of the disease, can survive with insulin injections.
However, the quality and length of their lives are generally
reduced by problems associated with insulin therapy and by the
onset of serious diabetic complications, including blindness,
kidney failure, impotence and increased susceptibility to
infection. Many tissues of the body normally rely on glucose, a form of
sugar, as a source of metabolic energy. Most cells store
significant amounts of glucose as glycogen, but certain tissues,
especially the brain, depend upon the blood to deliver a
continuous supply of glucose.  The concentration of glucose in
the bloodstream must be controlled within a relatively tight
range to maintain normal health.  If blood glucose drops too low,
causing hypoglycemia, the brain and nervous system stop working
properly, thereby causing faintness, weakness, tremulousness,
headache, confusion, and personality changes.  Severe
hypoglycemia can progress to convulsions, coma, and death.  If
blood glucose rises too high, causing hyperglycemia, there may be
excess urine production, thirst, weight loss, fatigue, and in the
most severe cases, dehydration, coma, and death.  Moreover,
hyperglycemia causes damage from chemical reactions between the
excess glucose and proteins in cells, tissues, and organs.  Over
long periods of time, episodes of hyperglycemia are thought to
lead to diabetic complications, including blindness, kidney
failure, impotence and increased susceptibility to infection.

To control the storage and metabolism of blood glucose, the
pancreas makes hormones that signal either removal or addition of
glucose to the blood, depending on the need.  Insulin is a
pancreatic hormone that lowers blood glucose levels.  Glucagon is
a pancreatic hormone that raises blood glucose levels.  Although
certain other hormones affect blood glucose levels, insulin and
glucagon have been considered the principal regulators of glucose
metabolism associated with eating.

When the concentration of glucose in the bloodstream is not
controlled within a relatively tight range, severe complications
result.  The principal disease associated with abnormal glucose
metabolism is diabetes mellitus, which is defined by the presence
of elevated blood glucose levels.  Over the last 20 years, it has
become generally accepted that there are several distinct
subclasses of diabetes, the two most important of which are Type
I diabetes and Type II diabetes. Type I Diabetes, or insulin-
dependent diabetes mellitus, typically begins during childhood or
early adulthood, and is therefore termed juvenile diabetes.  Type
II Diabetes, or non-insulin-dependent diabetes mellitus,
typically begins during or after middle age, and is therefore
termed adult onset diabetes.

Type I Diabetes.  The ADA has estimated that there are between
500,000 and 1 million Type I diabetics in the United States.
Type I Diabetes is caused by the destruction of the pancreatic
cells that make insulin, resulting in deficient hormonal control
of glucose metabolism and abnormally high blood glucose.  High
blood glucose levels can lead to coma and death if not adequately
controlled.

Before the discovery of insulin, Type I Diabetes was a rapidly
fatal disease.  Insulin therapy corrects the most serious
metabolic disorders, and the discovery of insulin is regarded as
a major triumph of medical science.  However, even with modern
insulin therapy, Type I diabetics cannot lead normal lives.  Type
I diabetics' life spans can be shortened by the onset of serious
complications, including blindness, kidney failure, impotence and
increased susceptibility to infection. Consequently, intensive
insulin therapy to control blood glucose is an objective of
modern diabetes treatment.  For Type I diabetics, glucose control
requires frequent monitoring of glucose levels and rigid
management of diet, exercise and therapy and is difficult to
achieve for many patients.

Type II Diabetes. The ADA estimates that there are nearly 10
million diagnosed Type II diabetics in the United States plus
another 5 million who are undiagnosed Type II diabetics and
people with impaired glucose tolerance, a condition characterized
by normal blood glucose levels before eating but a tendency
toward hyperglycemia afterward.

The cause of Type II Diabetes is not precisely known.  What is
known is that Type II Diabetes usually occurs during or after
middle age, heredity plays a role, and energy-rich diets coupled
with sedentary lifestyles are involved.  These factors appear to
combine to cause insulin resistance, which is a failure of
insulin to act normally to reduce blood glucose levels.  As a
consequence, even though insulin continues to be secreted by the
pancreas, sometimes in above-normal amounts, blood glucose is
poorly controlled.  Over time, the resulting episodes of
hyperglycemia are thought to cause widespread tissue damage,
including possible damage to insulin secretion mechanisms in the
pancreas.  Current therapies for Type II diabetics include rigid
dietary control, often in conjunction with the prescription of
sulfonylurea compounds or, in the late stages of the disease,
daily insulin injections.  Again, frequent monitoring of glucose
levels is required.

Diabecore Medical, Inc.

During fiscal 2000 and 2001, we invested in Diabecore Medical,
Inc., a Canadian company that is conducting research and working
with other research institutions to develop a new type of insulin
to treat diabetes. In preliminary studies, this new insulin has
demonstrated effectiveness in controlling hyperglycemia without
risk of severe hypoglycemia.  Laboratory tests indicate that this
new insulin, when administered in large doses, extends the
duration of insulin action for improved control of glucose
levels, rather than producing hypoglycemia.  Those tests also
have shown the new insulin to be 3 to 4 times less hypoglycemic
when compared to presently available insulin.  William D.
Lougheed and Kusiel Perlman, M.D. are developing Diabecore's
insulin with the support of the Research Institute of the
Hospital for Sick Children in Toronto, where insulin was
discovered, and the Loyal True Blue and Orange Research Institute
in Richmond Hill, Ontario.  We have invested a total of
approximately $987,500 in Diabecore, and own approximately 24% of
Diabecore's stock.  In 2002, we decided to write down our
investment in Diabecore, since we don't believe it has a current
market value. We currently have no plans to make further
investments in Diabecore.

MicroIslet, Inc.

During fiscal 2000 and 2001, we also invested in MicroIslet, Inc.
MicroIslet is a California company that is developing several
diabetes research technologies with Duke University that focus on
optimizing microencapsulated islets for transplantation.  The
current research involves the use of microencapsulated pancreatic
cells, which are transplanted into diabetic animals.  The initial
trial on a non-human primate continues to provide very
encouraging results.  The diabetic animal achieved and maintained
normal glucose readings for over one year following the
transplant.  MicroIslet believes that there are several benefits
to using the microencapsulated islets for transplants, rather
than transplanting human pancreatic cells.  One benefit is the
supply; the only source of human cells is from deceased organ
donors, and more than one donor is needed for each transplant.
In addition, human transplants involve a serious course of immuno-
suppression therapy so the human recipient does not reject the
transplanted cells.  Dr. Emmanuel Opara, Ph.D. is the director of
islet transplantation research at Duke University Medical Center,
and he is heading up the research team.  We invested a total of
approximately $1.6 million in MicroIslet.

During calendar year 2002, we sold all of our MicroIslet stock
for a total of $2,070,726.

Net Sales

We have not sold any noninvasive glucose sensors to date.

Research and Development

We have discontinued the research and development of our
noninvasive glucose sensor because there is no money to continue.

Product Development

Development of other models of the noninvasive glucose
sensor was halted because there is no money to fund the project.

Manufacturing

During 2000, production of the Diasensor models
needed for our clinical trials was completed.  During 2001,
production and inventory buildup of the Diasensor 2000 continued.
We never began full scale manufacturing of the Diasensor 2000 because
we haven't received FDA approval. We currently have no facilities
to manufacture any products.

Marketing and Distribution

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

Patents, Trademarks and Licenses

We own a patent entitled "Non-Invasive Determination of Glucose
Concentration in Body of Patients" which covers certain aspects
of a process for measuring blood glucose levels noninvasively.
That patent was awarded to BICO's research team in December 1991
and was sold to Diasense, Inc. under a purchase agreement dated
November 18, 1991.  The patent will expire, if all maintenance
fees are paid, no earlier than the year 2008.  Because of the
lack of funding these maintenance fees were not paid and
approximately $26,000 in fees are required to reinstate these
patents. If clinical testing or regulatory review delays marketing
of a product made under the patent, we may be able to obtain an
extension of the term of the patent.  Our patent relates only to
noninvasive sensing of glucose but not to other blood constituents.
We have filed corresponding patent applications in a number of foreign
countries.

As of November 2002, a total of 14 U.S. and three foreign patents
have been issued, all of which have been assigned to Diasense,
Inc., and additional patents are pending.    Corresponding patent
applications have been filed in foreign countries where we
anticipate marketing the noninvasive glucose sensor.

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

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

We also rely upon trade secret protection for our confidential
and proprietary information.  Although we take all reasonable
steps to protect such information, including the use of
confidentiality agreements and similar provisions, there
can be no assurance that others will not independently develop
substantially equivalent proprietary information or techniques,
otherwise gain access to our trade secrets, disclose such
technology, or that we can meaningfully protect our trade
secrets.

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

Warranties and Product Liability

We do not currently have any product liability insurance coverage.

Source of Supply

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

Competition

With the rapid progress of medical technology, and in spite of
continuing research and development programs, our developmental
products are always subject to the risk of obsolescence if some
other company introduces a better product or technique.  We are
aware that other research groups have developed noninvasive
glucose sensors, and that others are still in the research &
development phase, but we have limited knowledge about the actual
technology or the stage of development for most of our
competitors.  We face the risk that some other group will
complete the development of their device and penetrate the market
before we do.   If that happens, there is a significant chance
that even if we receive FDA approval, our sensor will not be
successful because marketing efforts started too late.  We don't
believe there is any other company currently producing or
marketing noninvasive sensors for the measurement of blood
glucose that use the same technology as we do.  Competitive
success in the medical device field is dependent upon product
characteristics including performance, reliability, and design
innovations.

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

We face more direct competition from other companies who are
currently researching and developing noninvasive glucose sensors.
We have very limited knowledge as to the stage of development of
these other devices; however, if another company successfully
develops a noninvasive glucose sensor, obtains FDA approval, and
reaches the market before we do, we would suffer.

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

Government Regulations

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

In 1997, Congress passed legislation that addresses the
regulation of pharmaceutical and medical devices.  Although the
impact of the FDA Administration Modernization Act of 1997 was
expected to reduce the quantity of information a company must
submit for approval of devices that has not been our experience.

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

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

Human Resources

We currently have no full-time employees.

Financial Information About Foreign and Domestic Operations and
Export Sales

Our operations are located in the United States of America.

Item 2. Properties

Due to cash flow problems, we sold our office condominium in
1999, and we leased the same space for our administrative
offices. Due to the cessation of operations we entered into an
agreement with our landlord to terminate our lease early for
a settlement fee of $5,000.

We do not currently have any research and development and
manufacturing physical facilities. We have a month to month
lease for limited administrative space. If we resume
operations we will require  space, we believe such space will
be available at reasonable commercial rates, as long as we
have the funds to pay for it.

Item 3. Legal Proceedings

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

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

Item 4. Submission of Matters to a Vote of Security Holders

Not applicable.

                            PART II

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

We were incorporated in the Commonwealth of Pennsylvania on July
5, 1989.  We have the authority to issue 40,000,000 shares of
common stock at a par value of $.01, and 1,000,000 shares of
preferred stock.  As of January 7, 2005, 22,980,051 shares of
common stock were outstanding.  No shares of preferred stock are
outstanding.  As of January 7, 2005, there were currently
exercisable warrants outstanding to purchase 2,643,000 shares of
our common stock at exercise prices ranging from $.50 to $3.50
per share.  The warrants have various expiration dates through
April 23, 2006.

As of January 7, 2005 we had approximately 600 holders of
record for our common stock and no holders of record for our
preferred stock.

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

Common Stock

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

Preferred Stock

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

Dividends

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

Warrants

As of January 7, 2005 there were outstanding warrants, all of
which are currently exercisable, to purchase 2,643,000 shares of
our common stock at exercise prices ranging from $0.50 to $3.50
per share and having expiration dates through April 23, 2006.
From October 1, 2003 through January 7, 2005 no warrants were granted
or exercised.  The warrants were issued to our directors, officers
and employees and to certain  other persons for certain goods and
services transferred or rendered to us and, in the case of certain
officers, in consideration of meritorious service.  The number of
shares of common stock issuable upon the exercise of the warrants
and the exercise prices relating thereto are subject to adjustment
upon the occurrence of certain events, including stock dividends,
stock splits, mergers, consolidations and reorganizations.  We may
not redeem the warrants prior to their expiration.

Employment Agreement Provisions Related to Changes in Control

We no longer have any employment agreements.

Item 6. Selected Financial Data

The selected financial data presented herein has been derived
from our audited consolidated financial statements.  These
financial statements have been audited by Goff Backa Alfera &
Company, LLC, for the twelve-month periods ended September 30,
2003, 2002, 2001, 2000, and 1999; the reports of all of which
include explanatory paragraphs as to "going concern"
considerations.  The selected financial data should be read in
conjunction with "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS" and our financial
statements and related notes thereto included elsewhere in this
report.

<TABLE>
                FISCAL YEARS ENDED SEPTEMBER 30th

                 2003         2002         2001          2000        1999

          <c>          <c>          <c>          <c>          <c>

 Total        $        0   $  161,608   $1,727,940   $1,299,610   $   38,324
 Assets

 Total
 Liabilities  $1,959,936   $2,841,225   $3,946,454   $1,817,760   $   91,214
 Working
 Capital
 (Deficit)   ($1,959,936) ($2,679,617) ($3,945,204) ($1,704,662) ($   84,559)


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

 General and
 Administrative
 Expenses     $   96,173   $  356,230   $1,195,550   $1,956,676   $1,352,567


 Warrant
 Extensions   $        0   $        0   $        0   $        0   $    6,333

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


 Net Income
 (Loss)       $  719,681  ($  461,103) ($1,755,563) ($  695,438) ($ 487,756)

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

 Cash Dividends
 per share:
  Preferred          $ 0          $ 0          $ 0          $ 0         $ 0
  Common             $ 0          $ 0          $ 0          $ 0         $ 0
</TABLE>



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

We operate on a fiscal year ended September 30th.  Therefore,
years are referred to as fiscal years; for example, the year from
October 1, 2002 through September 30, 2003 is referred to as
fiscal 2003.

Forward-Looking Statements

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

Liquidity and Capital Resources


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

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

During   fiscal  2001,  we  made  investments  in  unconsolidated
subsidiaries,  but we didn't make any investments  in  2002 or 2003.
In 2001,  we invested an additional $700,000 in MicroIslet, Inc.;  a
company   working  with  Duke  University  on  diabetes  research
technologies  that  focus on optimizing microencapsulated  islets
for   transplantation.   The  project  is  in  the  research  and
development  phase.  As of September 30, 2001,  we  had  invested
$1,600,000  in Microislet and owned approximately 20.2%  of  this
company.  In April 2002, MicroIslet participated in a merger with
ALD  Services,  Inc., a publicly traded company.   In  connection
with  the  merger,  Diasense, along  with  the  other  MicroIslet
shareholders,  consented to a forward stock split  of  MicroIslet
stock  where  each common stockholder received 3.1255  shares  of
MicroIslet  for  every one share owned.  As  a  result,  Diasense
received  3,465,451 shares of MicroIslet common stock.   All  the
common  stockholders maintained their same percentage  ownership.
Diasense,  along  with  the other MicroIslet  stockholders,  also
approved  the merger with ALDI.  As a result of the merger,  each
MicroIslet common stockholder - including Diasense - received one
share  of  ALDI stock for each share of MicroIslet  stock  owned.
After   the  merger,  Diasense  owned  approximately   15.3%   of
restricted  ALDI stock.  In May 2002, ALDI changed  its  name  to
MicroIslet,  Inc.  and  its trading symbol  to  MIIS.OB.   During
fiscal 2002, we sold 2,758,772 shares of our MicroIslet stock for
a  total of $1,379,386.  As of September 30, 2002, we still  held
706,679 shares in MicroIslet.  We sold the rest of our MicroIslet
stock  in  December 2002, and we discuss it at the  end  of  this
section.

During 2001, we also increased our investment in Diabecore
Medical, Inc.  Diabecore is a company in Toronto working with
other research institutions to develop a new insulin to treat
diabetes.  In fiscal 2001, we invested $486,684 increasing the
total amount invested to $987,468 and our ownership in this
company to approximately 24%.  This project is also in the
research and development phase.  At the end of fiscal 2002, we
wrote down our investment in Diabecore because we don't believe
it has a current market value.  We are hopeful that Diabecore
will complete its research and development and that our
investment will be worth more in the future.

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

Because we still don't have any revenue sources, we will have to
find additional financing that we'll use to finance development
of, and proceed to manufacture, our noninvasive glucose sensor.
In prior years, we were dependent upon BICO to support all
our sensor-related activity, but BICO discontinued our funding
in 2002, filed bankruptcy in March 2003 and sold its interest in
our Company in May 2004.  We've had to stop all our
activity, and we won't be able to re-start it unless we can raise
our own money.

Our financial statements contain a going concern opinion from our
auditors.  Our auditors issued that opinion because we have a
history of losses and no revenue to support our operations.  In
the past, we obtained cash to fund our operations by selling
securities - but we haven't been able to continue because there
is no market for our common stock.  Beginning in 1997, we became
dependent on BICO to sell stock to raise money to support us, but
beginning in late 2001, BICO's own ability to raise cash began to
suffer and since BICO sold its interest in us in May 2004 we no
longer receive any funding from them.  Because we're not sure -
and our auditors are not sure - how long we can continue, our
financial statements include the auditor's opinion that we may not
be able to continue operating as a going concern.

If we are not able to obtain additional financing of approximately
$100,000 we will not be able to resume operations.

Results of Operations

General and administrative expenses totaled $96,173 during
fiscal 2003 as compared to $356,230 during fiscal 2002, and
$1,195,550 during fiscal 2001. The decrease resulted primarily
from the cessation of our operations due to cash shortages.

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

Other income for the year ended September 30, 2003 includes
$269,449 in forgiveness of debt and $15,225 of rental income.
Other income for the years ending September 30, 2002 and 2001
consists of $62,100 of rental income respectively. The rental
income for all three periods was from BICO and its
subsidiaries for office space.

During fiscal 2001, we extended 1,147,750 warrants.
The warrants were originally granted to certain officers,
directors, employees and consultants in 1990 through 1996, with
expiration dates from 1995 through 2001, and exercise prices
between $.50 and $3.50 per share.  Rather than letting the warrants
expire, we extended them.  Because there was no increase in the
value of the warrants over the value recorded at the time the
warrants were originally granted, no expense was
recognized for the warrant extensions.  We did not extend any
warrants in fiscal 2002 or 2003.

We had losses from our unconsolidated subsidiaries, Diabecore
Medical and MicroIslet, during fiscal 2002 and 2001.    The
losses of $229,821 in fiscal 2002 and $240,166 in fiscal 2001
resulted because we absorbed part of the losses incurred by
Diabecore and MicroIslet.  Our share of the loss is determined
by applying our ownership percentage to the total loss incurred,
and we get to deduct the portion of the loss allocated to the
unrelated investors from our total net loss.

Income Taxes

As of September 30, 2003, we had approximately $26 million in
net operating losses available for federal tax purposes.  Subject
to certain limitations, these losses will be available as carry
forwards to offset future taxable income through the years 2005-
2021.  We also have federal research and development credit carry
forwards available to offset federal income taxes of
approximately $700,000, subject to limitations and expiring in
the years 2005 through 2013. Our ability to utilize these
carryforwards are significantly limited or eliminated due to
the change of ownership when BICO sold its 52% interest in
May 2004.

Item 8.  Financial Statements and Supplementary Data.

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

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

Not applicable.

PART III

Item 10. Directors and Executive Officers

As of September 30, 2003, our directors and executive officers
were as follows:

                               Director
        Name           Age      Since         Positions Held

Anthony Paterra         54       2003         Chief Executive Officer
	   						    Director



ANTHONY PATERRA, 54, joined BICO in 1999 as Director of Public
Affairs. He then began to consult on BICO and Diasense
corporate insurance issues. In May 2003 he was appointed
to our board of directors and was made CEO. Prior to joining
us, he worked as an Insurance Agent. He also served as a
director and CEO of BICO, Inc. until November 8, 2004.

Item 11. Executive Compensation

Normally, the following table would set forth information
concerning the annual and long-term compensation for services in
all capacities for the Fiscal Years ended September 30, 2003,
2002, and 2001 of those persons who were, at September 30, 2003:
(i) the Chief Executive Officer, and (ii) the other most highly
compensated executive officers whose remuneration exceeded
$100,000.

Anthony Paterra did not receive any compensation from Diasense.
Fred E. Cooper and Anthony J. Feola resigned as officers and
directors of Diasense in July 2002.  The figures for 2002 indicate
the amounts they were paid from October 1, 2002 through their
departure in July 2002.  At the time of their resignations, they
gave up all claims to any accrued payroll.


<TABLE>
             SUMMARY COMPENSATION TABLE

                 Annual Compensation                       Long-Term               All Other
                                                           Compension (1)          Compensation
                                                                                   ($)     (2)
<S>              <C>   <C>          <C>         <C>        <C>                     <C>
-----------------------------------------------------------------------------------------------
Name and         Year  Salary ($)   Bonus ($)   (2)Other   Awards
Principal                                           ($)    Warrants
Position                                                   (number of
                                                           shares) (#)
-----------------------------------------------------------------------------------------------
Fred E.          2002  $  41,417    $ 0         $ 0        0                       $ 0
Cooper,          2001  $ 497,000    $ 0         $ 0        138,000(4)              $ 0
CEO (5)
-----------------------------------------------------------------------------------------------
Anthony J.       2002  $  18,750    $ 0         $ 0        0                       $ 0
Feola (6)        2001  $ 225,000    $ 0         $ 0        100,000(4)              $ 0
-----------------------------------------------------------------------------------------------
</TABLE>


(1)  We do not currently have a Long-Term Incentive Plan or
     LTIP, and no payouts were made under any LTIP during the
     years 2003, 2002 or 2001.  Except as noted in Note (3)
     below, the Named Executives were awarded warrants to
     purchase the number of shares of our common stock set forth
     in the table above in each of the years noted.  We have no
     retirement, pension or profit-sharing programs for the
     benefit of our directors, officers or other employees.

(2)  During the years ended September 30, 2002, 2001,
     the Named Executives received medical benefits under
     BICO's group insurance policy.

(3)  We did not grant any warrants to the named executives during
     Fiscal 2002 or 2001.

(4)  During Fiscal 2001, we extended warrants
     previously issued to the named executives, which would have
     otherwise expired.  Although the extensions were in
     connection with warrants already held by the named
     executives, they are shown in the table set forth above as
     "awards" for executive compensation disclosure purposes.
     However, the extended warrants did not appear in the
     "Option/Warrant Grant" Table, since, at the time of the
     extension, the exercise price of the warrants, which
     remained unchanged at $1.00 per share for the warrants
     extended in Fiscal 2000, and $.50 per share for the
     warrants extended in Fiscal 2001, was greater than or equal
     to the designated "market price" of the common stock,
     assumed to be $.50 per share, although there is currently
     no public trading market for the common stock.  During
     Fiscal 2001, Fred E. Cooper's warrants to purchase 138,000
     shares of our common stock at $.50 per share were extended
     until April 24, 2004; and Anthony J. Feola's warrants to
     purchase 100,000 shares of our common stock at $.50 per
     share were extended until April 24, 2004.  During Fiscal
     2000, Fred E. Cooper's warrants to purchase 213,500 shares
     of our common stock at $1.00 per share were extended until
     January 27, 2003.

(5)  In addition, Mr. Cooper was paid salary and bonuses
     aggregating approximately $181,667 - which includes $15,000
     in consulting fees and $692,000 by BICO and its
     other subsidiaries during calendar years 2002,2001 respectively.

(6)  In addition, Mr. Feola was paid salary and bonuses
     aggregating approximately $109,071 and $558,850 by BICO during
     calendar years 2002 and 2001, respectively.

          Option/Warrant/SAR Grants in Last Fiscal Year

We did not grant any options, warrants or SARs to any of the
named executives during fiscal 2003.

Employment Agreements. We no longer have any employment
agreements. We entered into employment agreements with Fred E.
Cooper and David L. Purdy effective November 1, 1994. , In
November 2000, Mr. Purdy resigned effective February 2001.  In
December 2001, we amended our agreement with Mr. Cooper and he
agreed to waive his salary from January 1, 2002 through December
31, 2002; Mr. Cooper then resigned as our officer and director in
July 2002, and gave up all of his rights under his employment
agreement.

Item  12.  Security  Ownership of Certain Beneficial  Owners  and
Management
                                                                  Percent of
                     Amount & Nature               Ownership with Class with
Name and Address     of Beneficial     Percent of  Warrants and   Warrants and
of Beneficial Owner  Ownership(1)      Class (2)     Options(3)   Options (4)

Dominion Assets, LLC   11,975,000         52.1%      11,975,000       52.1%
22255 Whitfield Place
Suite 206
Potomac Falls, VA  20165

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

* Less than one percent
________________________

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

(2)  Represents current common stock owned by each person, as
     set forth in the first column, excluding currently
     exercisable warrants, as a percentage of the total number
     of shares of common stock outstanding as of September 30,
     2003, which was 22,980,051.

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

(4)  Represents total number of shares of common stock owned by
     each person, as set forth in the third column, which each
     named person or group has the right to acquire, through the
     exercise of warrants or options within sixty (60) days,
     together with common stock currently owned, as a percentage
     of the total number of shares of common stock outstanding
     as of September 30, 2003.  For individual computation
     purposes, the total number of shares of common stock
     outstanding as of September 30, 2003 has been increased by
     the number of additional shares which would be outstanding
     if the person or group owned the number of shares set forth
     in the third column.

Item 13. Certain Relationships and Related Transactions

Employment Relationships

Anthony Paterra, who is our CEO and a member of our board of
directors, was also the CEO and chairman of the board for BICO.

Intercompany Agreements

Licensing and Marketing Agreement. We acquired the exclusive
marketing rights for the noninvasive glucose sensor and related
products and services from BICO in August 1989 in exchange for
8,000,000 shares of our common stock. That agreement was canceled
with a cancellation dated November 18, 1991, and superseded by a
purchase agreement dated November 18, 1991. The cancellation
agreement provides that BICO retain the 8,000,000 shares of our
common stock, which BICO received under the license and
marketing agreement.

Purchase Agreement. We entered into a purchase agreement with
BICO dated November 18, 1991. BICO conveyed to us its entire
right, title and interest in the noninvasive glucose sensor and
its development, including its extensive knowledge, technology
and proprietary information. The conveyance includes BICO's
patent received in December 1991.

In consideration of the conveyance of its entire right in the
noninvasive glucose sensor and its development, BICO received
$2,000,000. In addition, we may endeavor, at our own expense,
to obtain patents on other inventions relating to the noninvasive
glucose sensor. We also guaranteed BICO the right to use patented
technology in the development of BICO's proposed implantable
closed0loop system, arelated system in the early stages of
development.

In December 1992, we, along with BICO, executed an amendment to
the purchase agreement, which clarified terms of the purchase
agreement. The amendment defines "sensors" to include all devices
for the noninvasive detection of analytes in mammals or in other
biological materials. In addition, the amendment requires BICO to
pay us a royalty connection with any sales by BICO of its proposed
closed-loop system.

Research and Development Agreement. We are in the process of
negotiating a termination of this contract with BICO.

Manufacturing Agreement. We are in the process of negotiating a
termination of this contract with BICO.

Investments and Loans

Beginning in 2000 and through fiscal 2002, we invested a total of
$1.6 million in MicroIslet, Inc. One of our former directors,
John Steel, is the president of MicroIslet.  During calendar year
2002, we sold all of our MicroIslet stock for a total of
$2,070,726.

In connection with the purchase of the 52% ownership of Diasense
on July 23, 2004 by Dominion Assets, LLC from BICO. The intercompany
payable from Diasense to BICO was assigned to Dominion Assets, LLC.
This liability was documented by a note payable on demand without
interest.

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


                            PART IV

Item 14. Principal Accountant Fees and Services

There were no audit, audit related, tax or other fees to our
principal accountants during fiscal years 2004 and 2003.

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


1.   Consolidated Financial Statements

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


(a)  Consolidated Financial Statements                           Page

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

     Consolidated Balance Sheets as of September 30, 2003;
     September 30, 2002. ...                                     F-3

     Consolidated Statements of Operations For the Fiscal
     Years Ended September 30, 2003, 2002, 2001; and July
     5, 1989 (inception) through September 30, 2003..            F-4

     Consolidated Statements of Changes in Stockholders'
     Equity for the period and from July 5, 1989 (inception)
     through September 30, 2003 . . . . .                        F-5

     Consolidated Statements of Cash Flows for the Fiscal
     Years Ended September 30, 2003, 2002, 2001; and July 5,
     1989 (inception) through September 30, 2003.                F-6

     Notes to Consolidated Financial Statements for the
     Fiscal Year Ended September 30, 2003........                F-7

2.   Exhibits

(a)  Reports on Form 8-K

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

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

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

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

3.2       Amended and Restated Bylaws of Diasense, Inc.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


                           SIGNATURES

Based  on  the  requirements  of  Section  13  or  15(d)  of  the
Securities  Exchange Act of 1934, the Registrant has duly  caused
this  report  to  be  signed on its behalf  by  the  undersigned,
thereunto duly authorized, on the 7th day of January 2005.

                                   DIASENSE, INC.

                                   By:    /s/ Anthony Paterra
                                              Anthony Paterra, Director,
                                              principal executive
                                              officer, principal
                                              accounting officer and
                                              principal financial
                                              officer

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

     Signature                Title               Date


 /s/Anthony Paterra           Director            January 7, 2005
    Anthony Paterra




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

                     3325 Saw Mill Run Blvd.
                         Pittsburgh, Pa

       Report of Independent Certified Public Accountants


Board of Directors
Diasense, Inc.


We  have audited the accompanying consolidated balance sheets  of
Diasense, Inc. (a development stage company) as of September  30,
2003  and 2002, 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, 2003, and for the period
from  July 5, 1989 (inception) through September 30, 2003.  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  consolidated  financial  positions   of
Diasense, Inc. as of September 30, 2003 and 2002, and the results
of  its operations and its cash flows for each of the three years
in  the period ended September 30, 2003, and for the period  from
July   5,  1989  (inception)  through  September  30,  2003,   in
conformity with U.S. 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 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 years
ended September 30, 2002 and 2001 and  from July  5,  1989
(inception) through September  30, 2003 raising substantial doubt
about its ability  to continue  as a going concern.  Management's
plans in regard to these matters are  also described in note B.
The financial statements do not include any adjustments   that
might  result  from  the  outcome of this uncertainty, including
adjustments relating to the recoverability and classification of
recorded assets that might be necessary  in the  event  the
Company cannot continue to  meet  its  financing requirements and
achieve productive operations.

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

Pittsburgh, Pennsylvania
January 6, 2005


<PAGE>1

                               DIASENSE,INC.
                         (A Development Stage Company)

                          Consolidated Balance Sheets

                                                  September 30,   September 30,
               ASSETS                                 2003           2002
                                                   -----------    -----------
Current assets
  Prepaid expenses                                 $         -    $       868
                                                   -----------    -----------
Property and equipment - at cost
  Furniture and fixtures                                     -         42,750
                                                  ------------    -----------
                                                             -         42,750
  Less accumulated depreciation                              -         42,709
                                                  ------------    -----------
                                                             -             41
                                                   -----------    -----------

Other Assets
  Investment                                                 -        160,461
  Security Deposit                                           -            238
                                                   -----------     ----------
                                                             -        160,699
                                                   -----------     ----------
               TOTAL ASSETS                        $         -    $   161,608
                                                   ===========     ==========

               LIABILITIES and STOCKHOLDERS' EQUITY (DEFICIENCY)

Current liabilities
  Accounts payable                                 $     5,000     $   43,099
  Due to BICO                                        1,954,936      2,630,184
  Accrued payroll and withholdings                           -        167,942
                                                   -----------    -----------
               Total current liabilities             1,959,936      2,841,225

Commitment and Contingencies

Stockholders' equity (deficiency)
  Preferred stock, 1,000,000 shares authorized,
   none issued.
  Common stock, 40,000,000 shares
   of $.01 par value authorized; issued and
   outstanding 22,980,051 at Sept. 30, 2003 and
   Sep. 30, 2002                                       229,801        229,801
  Additional paid-in capital                        33,327,775     30,018,353
  Warrants                                          12,009,202     15,318,624
  Deficit accumulated during the  development stage(47,526,714)   (48,246,395)
                                                    -----------    -----------
                                                    (1,959,936)    (2,679,617)
                                                    -----------    -----------
TOTAL LIABILITIES AND
  STOCKHOLDERS'EQUITY (DEFICIENCY)                 $         -    $   161,608
                                                    ===========    ===========
<FN>

The accompanying notes are an integral part of this statement.

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

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                                        From July 5, 1989
                                         For the year ended    For the year ended  For the year ended  (inception) thru
                                         September 30, 2003    September 30, 2002  September 30, 2001   September 30, 2003
                                         ------------------    ------------------  ------------------   ------------------
<S>                                        <C>                  <C>                  <C>                  <C>
Research and development expenses
                                           $       -            $       -             $      -             $ 10,556,405

General and administrative expenses              96,173              356,230            1,195,550            16,876,759

Warrant extensions                                 -                    -                    -               17,890,676

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

Interest expense                                   -                    -                   1,196                11,725

Loss on unconsolidated subsidiaries                -                 229,821              240,166               575,412

Impairment Loss                                    -                 690,124                 -                  690,124

Amortization of Goodwill                           -                    -                 380,810               535,057

Other income                                   (284,974)             (62,100)             (62,159)           (1,042,997)

Other expense                                      -                    -                    -                   37,405

Gain from sale of MicroIslet Stock             (530,880)            (752,972)                -               (1,283,852)
                                           --------------       --------------       --------------       ---------------
Net income (loss)                          $    719,681         $ (  461,103)         $(1,755,563)       $  (47,496,714)
                                           ==============       ==============       ==============       ===============
Net income (loss) per common share         $       0.03         $      (0.02)         $     (0.08)       $        (2.30)
                                           ==============       ==============       ==============       ===============

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

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

                                 Diasense, Inc.
                         (A Development Stage Company)

  CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

     For the period July 5, 1989 (inception) through September 30, 2003


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

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

 Warrants issued for services                            -         -          -          -      55,199            -       55,199
 Warrant extensions                                      -         -          -          -           -            -            -
 Warrant expired                                         -         -          -          -           -            -            -
 Net Loss                                                -         -          -          -           -   (1,755,563)  (1,755,563)
                                                ---------- --------- ---------- ----------  ----------  -----------   ----------
Balances at September 30, 2001                  22,980,051  $229,801 $        -$29,960,946 $15,376,031 $(47,785,292) $(2,218,514)
                                                ---------- --------- ---------- ----------  ----------  -----------   ----------
 Warrant expired                                         -         -          -     57,407     (57,407)           -            -
 Net Loss                                                -         -          -          -           -     (461,103)    (461,103)
                                                ---------- --------- ---------- ----------  ----------  -----------   ----------
Balances at September 30, 2002                  22,980,051  $229,801 $        -$30,018,353 $15,318,624 $(48,246,395) $(2,679,617)
                                                ========== ========= ========== ==========  ==========  ===========   ===========
 Warrant expired                                         -         -          -  3,309,422  (3,309,422)           -            -
 Net Income (Loss)                                       -         -          -          -           -      719,681      719,681
                                                ---------- --------- ---------- ----------  ----------  -----------   ----------
Balances at September 30, 2003                  22,980,051  $229,801 $        -$33,327,775 $12,009,202 $(47,526,714) $(1,959,936)
                                                ========== ========= ========== ==========  ==========  ===========   ===========

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

                                 Diasense, Inc.
                         (A Development Stage Company)

                      CONSOLIDATED STATEMENT OF CASH FLOWS

<CAPTION>
                                                                                                        From July 5, 1989
                                         For the year ended    For the year ended  For the year ended   (inception) thru
                                         September 30, 2003    September 30, 2002  September 30, 2001   September 30, 2003
                                         ------------------    ------------------  ------------------   ------------------
<S>                                        <C>                   <C>                 <C>                 <C>

Cash flows from operating activities:
 Net income (loss)                          $     719,681         $  (461,103)        $ (1,755,563)       $  (47,496,714)
 Adjustments to reconcile net loss to net
 cash used by operating activities:
  Depreciation                                         41               2,579                5,692                90,047
  Amortization                                        -                   -                380,810               535,057
  Impairment loss                                     -               690,124                  -                 704,491
  Gain on sale of MicroIslet stock               (530,880)           (752,972)                 -              (1,283,852)
  Loss on unconsolidated subsidiaries                 -               229,821              240,166               575,412
  Stock issued in exchange for services               -                   -                    -                 138,950
  Stk issued for License & Marketing Agreement        -                   -                    -                  80,000
  Warrants issued for services                        -                   -                 55,199               513,915
  Warrant extensions                                  -                   -                    -              17,890,676
  Inventory deposit - BICO                            -                   -                    -              (1,000,000)
  (Increase) decrease in prepaid expenses             868                 382               (1,250)                  -
  Decrease in rec. due from BICO Sub.                 -                   -                 19,838                   -
  Increase (decrease)in accounts payable          (38,099)             34,337                8,762                 5,000
  Increase (decrease) in accrued payroll
    and withholdings                             (167,942)            122,171              (46,069)                  -
  Decrease in other assets                            239              17,012                  -                     -
                                               -------------        -------------     -------------        -------------
Net cash used in operating activities             (16,092)           (117,649)          (1,092,415)          (29,247,018)

Cash flows from investing activities:
  Disposal of property and equipment                  -                   -                    -               175,000
  Purchase of property and equipment                  -                   -                    -              (279,413)
  Investment - MicroIslet                             -                   -               (700,000)         (1,600,000)
  Investment - Diabecore                              -                   -               (486,684)           (987,468)
  Proceeds from sale of MicroIslet stock          691,340           1,379,386                  -             2,070,726
  (Increase)in notes rec-related parties              -                   -                    -              (125,000)
  (Increase)in interest rec-related parties           -                   -                    -               (13,538)
                                               -------------        -------------     -------------        -------------
Net cash provided by (used in) investing
          activities                              691,340           1,379,386           (1,186,684)           (759,693)

Cash flows from financing activities:
  Advances to BICO                                    -                   -                   -             (7,498,369)
  Repayment of advances to BICO                       -                   -                   -              9,203,493
  Advances from BICO, net                             -               104,246           2,166,001           14,496,167
  Repayment of advances from BICO                (675,248)         (1,365,983)                -             (2,041,231)
  Proceeds from issuance of common stock              -                   -                   -             10,971,834
  Proceeds from issuance of common stk to BICO        -                   -                   -              4,200,000
  Proceeds from warrants exercised                    -                   -                   -                118,066
  Purchase from treasury stock                        -                   -                   -                (35,000)
  Proceeds from Regulation S                          -                   -                   -                288,751
  Proceeds from issuance of notes payable             -                   -                   -                303,000
                                               -------------       --------------     ------------         -------------
Net cash (used in)provided by fin. activities    (675,248)         (1,261,737)          2,166,001           30,006,711
                                               -------------       --------------     ------------         -------------
Net increase(decrease)in cash and cash equiv.         -                   -              (113,098)                 -
Cash and cash equivalents at beg of period            -                   -               113,098                  -
                                               -------------       --------------     ------------         -------------
Cash and cash equivalents at end of period     $      -            $      -           $       -           $        -
                                               =============       ==============     ============         =============

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


                         DIASENSE, INC.
                  (A Development Stage Company)

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                       September  30, 2003

NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
         POLICIES

1.   ORGANIZATION

Diasense, Inc. (Diasense) was incorporated in the Commonwealth of
Pennsylvania  on  July 5, 1989 as a wholly  owned  subsidiary  of
BICO, Inc. (BICO).  BICO owned approximately 52% of the stock  of
Diasense until July 23, 2004 when BICO sold  its  entire ownership
interest to Dominion Assets, LLC.(see Note L) Diasense's activities
have been focused on developing a noninvasive glucose sensor (the
Sensor). The  Sensor  would  use  electromagnetic  technology  to
measure  the  concentration  of  glucose in  human tissue without
requiring  the user to take a blood sample. However, all of these
activities were curtailed when BICO ceased operations  and  filed
for Chapter 11 bankruptcy in March 2003.

The  consolidated financial statements include  the  accounts  of
Diasense UK LTD., a 100% owned subsidiary of Diasense, Inc. as of
September  30, 2003.  All significant intercompany  accounts  and
transactions have been eliminated.

2.   CASH AND CASH EQUIVALENTS

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

3.   PROPERTY AND EQUIPMENT

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

4.   INCOME TAXES

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

5.   ESTIMATES AND ASSUMPTIONS

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

6.   NET INCOME (LOSS) PER COMMON SHARE

Net income (loss) per common share is based on the weighted
average number  of  common  shares  outstanding,  which  amounted
to 22,980,051  for  the  years  ended  September  30,  2003   and
September 30, 2002 and September 30, 2001. The loss per  share
does  not  include common stock equivalents since  the  effect
would be anti-dilutive.

For the period from July 5, 1989 (inception) to September 30,
2003,  net  loss  per common share is based  on  the  weighted
average number of common shares outstanding and the number  of
common  shares issuable on the exercise of 1,708,000  warrants
issued  in  1992; reduced by 488,000 common shares  that  were
assumed  to  have  been purchased with the proceeds  from  the
exercise  of  the warrants at an assumed price  of  $3.50  per
share.   The inclusion of the warrants in the income (loss)per
share calculation is  required by the rules of the  Securities
and   Exchange   Commission   relative   to   the      initial
registration statement  which  included  Diasense's  financial
statements  through   the   period ended March 31, 1993.   The
registration statement  became effective  July  19, 1993.  The
weighted average  number of common shares including the effect
of the conversion of the warrants for the period from July  5,
1989 (inception) to September 30, 2003 amounted to 20,618,721.

7.   RESEARCH AND DEVELOPMENT

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

8.   TREASURY STOCK

Diasense records treasury stock transactions using the par
value method.

9.   INTERCOMPANY ACTIVITY

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

10.  COMMON STOCK WARRANTS

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

11.  COMPREHENSIVE INCOME

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


NOTE B - OPERATIONS

Diasense has discontinued development of the Sensor and has  not,
as yet, achieved a commercially marketable product. The ability of
Diasense  to  continue in existence is dependent  on  its  having
sufficient financial resources to restore and maintain operations,
to complete the research and development necessary to successfully
bring  the  Sensor  to  market, and for  marketplace  acceptance.
Diasense has no other commercial products and is dependent on the
successful  development of the Sensor technology.   Diasense  has
had no sales of its common stock over the last five fiscal years.
Until  BICO's  bankruptcy  in  March 2003, Diasense's  operations
were  funded by advances from BICO. As discussed in Note  C,  the
proceeds from the sale of MicroIslet stock, during the years ended
September 30,  2002  and  2003, were  used  to  reduce  the amount
payable  to BICO.

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

Diasense has incurred significant losses and negative cash  flows
from operations from inception through September 30, 2003 and has
a  significant  accumulated deficit as  of  September  30,  2003,
raising  substantial doubt about its ability  to  continue  as  a
going concern. Since 1997, Diasense has been financially dependent
upon BICO and  therefore  BICO's ability  to  raise money through
its stock sales to  support  its operations. With the curtailment
of funding from BICO due to BICO's bankruptcy  in  March  2003,
Diasense will  be  required  to  find other funding in order to
continue as a going concern. The Company plans to liquidate assets
to the extent necessary to continue operations.

Effective January 1, 2002, Fred E. Cooper, Former CEO and Anthony
J. Feola, Diasense's  Former Chief  Operating  Officer, agreed to
waive any rights to compensation through December 31, 2002. In
July  2002, both   Mssrs  Cooper  and  Feola  resigned  as  both
officers and directors of BICO and all of BICO's affiliates including
Diasense.

NOTE C - INVESTMENTS IN UNCONSOLIDATED SUBSIDIARIES

There were no additional investments during the years ended
September 30, 2002 and 2003 in MicroIslet, Inc., an investment
interest initially  acquired  during the fiscal year ended
September  30, 2000.   MicroIslet  is a California company, which
has  licensed several diabetes research technologies  from  Duke
University  with a  specific  focus  on  optimizing
microencapsulated  islets  for transplantation.

The Company's ownership percentage as of March 31, 2002  in
MicroIslet,  Inc.  was 20.21%. When MicroIslet raised  additional
capital  through  the sale of stock during the first  quarter  of
fiscal  year  2002, the Company was issued additional  shares  in
order to maintain an ownership percentage of 20.21%.  As a result
of  this  transaction, the Company's share of the underlying  net
assets of  MicroIslet  increased by $179,364 with a corresponding
decrease in goodwill.  In April 2002, MicroIslet participated  in
a  merger with ALD Services, Inc., a publicly traded company also
known  as ALDI.   In  connection with the merger, Diasense, along
with the other MicroIslet shareholders,  consented  to  a forward
stock split  of  MicroIslet   stock where each common shareholder
received 3.1255  shares  of MicroIslet common stock for every one
share owned.   As a result, Diasense received 3,465,451 shares of
MicroIslet common stock.  All the common shareholders  maintained
their   same percentage ownership. Diasense, along with the other
MicroIslet  shareholders, also approved a merger with ALDI.  As a
result  of the  merger,  each  MicroIslet  common  shareholder  -
including  Diasense  -  received one share of ALDI stock for each
share  of MicroIslet stock  owned.  After  the  merger,  Diasense
owned approximately 15.3% of restricted ALDI stock.  In May 2002,
ALDI changed its name to MicroIslet, Inc. and its trading  symbol
to  MIIS.OB.  Because  the Company's  ownership  percentage  went
below 20% and because the Company was not represented on the board
of directors of MicroIslet, this investment was  reported  on the
cost basis  at  September  30, 2002 and no longer reported  under
the equity  method.  Also, the investment is no longer classified
as  an investment in an unconsolidated subsidiary as of September
30, 2002.  This change in reporting method and classification had
no effect on the carrying value of the investment.

In July 2002, Diasense sold 1,000,000 shares of MicroIslet common
stock  for $500,000 and an additional 1,758,772 shares were  sold
in  September 2002 for $879,386.  The purchasers of the stock are
not  affiliated with the Company, its subsidiaries or any of  its
officers and directors.  A gain of $752,973 was recognized  as  a
result of these sales.  The proceeds from the sales were used  to
reduce the amount owed by Diasense to BICO.  As of September  30,
2002  Diasense  owned 706,679 shares of MicroIslet  common  stock
recorded at a carrying value of $160,461.In December 2002, Diasense
sold the balance of its 706,679 shares of MicroIslet stock for
an aggregate of $691,340 which was used to reduce its payable to
BICO.

There  were  no additional investments during the  year  ended
September 30, 2002 and 2003 in Diabecore Medical,   Inc.,   an
unconsolidated  subsidiary interest initially acquired  during
the  fiscal  year  ended September 30,  2000.   The  Company's
ownership percentage as of September 30, 2002 and 2003 in
Diabecore Medical,Inc. was approximately 24%. Diabecore Medical,
Inc. is  a  Toronto-based company working to develop a new
insulin for the treatment of diabetes.

Although the investment in MicroIslet was being reported on the
cost  basis  at  September  30,  2002,  both  investments  had
previously  been reported on the equity basis and  differences
in  the  investment  and  the underlying  net  assets  of  the
unconsolidated subsidiaries were capitalized as  part  of  the
investment  in unconsolidated subsidiaries.  These differences
had  previously  been  amortized as  goodwill  over  a  5-year
period.   However, Statement of Financial Accounting Standards
(SFAS)  No. 142, "Goodwill and Other Intangible Assets" became
effective for the Company's financial statements as of October
1,  2001  and,  under this provision, goodwill  is  no  longer
amortized.   As  a  result of management's evaluation  of  the
Diabecore investment for the quarter ended September 30, 2002,
an   impairment  loss  was  recognized  to  write  it  off  in
accordance with SFAS No. 142.

NOTE  D  - Goodwill and Other Intangible Assets - Adoption  of
           Statement 142

In   June   2001,  the  FASB  issued  Statement  of  Financial
Accounting  Standards No. 142, "Goodwill and Other  Intangible
Assets."  SFAS 142 supersedes APB Opinion No. 17 and addresses
financial  accounting and reporting for acquired goodwill  and
other  intangible  assets.   Under  this  provision,  goodwill
associated  with  the Company's investments in  unconsolidated
subsidiaries will no longer be amortized.  These  assets  will
be evaluated on a periodic basis to determine if an impairment
loss  needs to be recorded.  The provisions of this  statement
became  effective for the Company's fiscal year ending
September  30,  2002.   A  summary  of  the  impact   of   the
implementation of SFAS 142 follows:


                      For the year        For the year     From July 5, 1989
                         ended               ended        (inception)through
                      Sept. 30, 2002      Sept. 30, 2001   Sept. 30, 2003
                      -------------       -------------    ------------------
Reported net loss     $   (461,103)       $ (1,755,563)    $  (48,216,395)
Add back: Goodwill
 Amortization                    0             380,810            535,057
 Impairment Loss           690,124                   0            690,124
                      -------------       -------------    ------------------
Adjusted net (loss)
 income               $    229,021        $ (1,374,753)    $  (46,991,214)
                      =============       =============    ==================

Earnings per share:
 Reported net loss    $       (.02)       $       (.07)    $        (2.37)
 Add back: Goodwill
  Amortization                 .00                 .02                .03
  Impairment Loss              .03                 .00                .03
                      -------------       -------------    ------------------
 Adjusted net (loss)
  income                       .01               (.05)             (2.31)
                      =============       =============    ==================


NOTE E - LEASE

In  December 1998 Diasense sold its building and leased  it  back
under an agreement which required monthly rent of $5,750 for five
years  beginning  on  January  1, 1999.   Minimum  rental
payments  under  this lease are $69,000 for each  of  the  fiscal
years  ending on September 30, 2002 and 2003 and $17,250 for  the
final  three  months of the lease concluding December  31,  2003.
Diasense  paid  a security deposit of $17,250 upon entering  into
this  lease agreement. At September 30, 2003 the security deposit
had been used to partially offset the amount due on this  lease.
Subsequent to September 30, 2003 Diasense and the landlord agreed
to settle all obligations under this lease for a total payment
of $5,000.

NOTE F - OTHER INCOME

Other  income  for  the  year  ended  September 30, 2003 includes
$269,449 in forgiveness of debt and  $15,525  of  rental  income.
Other  income for the years ending September 30, 2002 and 2001
consists of  $62,100, and $62,100 of rental income for  their
respective periods.  The total rental income  for  the years ended
September 30, 2003, 2002 and 2001, was from BICO  and
its subsidiaries for office space.

NOTE G - INCOME TAXES

As  of  September 30, 2003, Diasense has available  approximately
$26 million  of  net  operating loss  carryforwards  for  federal
income  tax purposes.  These carryforwards are available, subject
to  limitations, to offset future taxable income, and  expire  in
the  tax years 2005 through 2021.  Diasense also has research and
development  credit  carryforwards available  to  offset  federal
income  taxes  of approximately $700,000 subject to  limitations,
expiring in the years 2005 through 2013. The ability to utilize
these carry forwards are significantly limited or eliminated due
to the change in ownership which occured in May 2004.

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

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

The  following  is  a  summary of the composition  of  Diasense's
deferred   tax  asset  and  associated  valuation  allowance   at
September 30, 2003 and 2002:

                                  2003        2002

   Net Operating Loss       $8,897,860     $8,986,851
   Warrant Expense           6,111,310      6,111,310
   Patent Amortization         331,340        331,340
   Tax Credit Carry Forward    700,000        700,000
                             ----------    ----------
                            16,040,510     16,129,501
   Valuation Allowance     (16,040,510)   (16,129,501)
                             ----------    ----------
   Net Deferred Tax Asset   $        0     $        0
                             ==========    ==========

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


                                Deferred    Increase (Decrease)
                                  Tax       in Valuation
                                Benefit     Allowance        Net


Year Ended September 30, 2003  $     88,991    $   (88,991)   $0
Year Ended September 30, 2002  $   (156,007)   $   156,007    $0
Year Ended September 30, 2001  $   (389,830)   $   389,830    $0
Year Ended September 30, 2000  $   (122,436)   $   122,436    $0
Year Ended September 30, 1999  $   (203,637)   $   203,637    $0
From July 5, 1989 (inception)
   through September 30, 2003  $(16,040,510)   $16,040,510    $0


NOTE H - RELATED PARTY TRANSACTIONS

1.   INTERCOMPANY ACTIVITY

For the fiscal years ended September 30, 2003, 2002 and 2001, net
intercompany charges from BICO and its subsidiaries  to  Diasense
were $0, $104,246 and $2,166,001, respectively. In the fiscal
years ended September 30, 2003 and 2002 Diasense repaid $675,248
and $1,365,983 respectively to BICO.

2.  ACCRUED PAYROLL

Total accrued wages at September 30, 2002 included $128,042 to
Mr. Cooper our former CEO and director and $37,500 to TJ Feola,
a former director. Mr. Cooper and Mr. Feola resigned their
positions in July 2002 and subsequently released Diasense from
these claims for prior wages.

NOTE I - COMMITMENTS AND CONTINGENCIES

During April 1998, BICO and its affiliates, including Diasense,
were served with  subpoenas  requesting  documents  in  connection
with an investigation  by  the U.S. Attorneys' office  for  the
District Court  for  the Western District of Pennsylvania.  In July
2002, the  Company  was notified that this investigation was  concluded
with no charges against BICO or its subsidiaries.

On  April 30, 1996, a class action  lawsuit  was  filed   against
BICO,   Diasense,    and  individual   officers   and  directors.
The  suit, captioned Walsingham v. Biocontrol Technology, et al.,
was  certified as a class action in the U.S. District  Court  for
the   Western   District  of  Pennsylvania.   The  suit   alleged
misleading disclosures in connection with the noninvasive glucose
sensor   and   other   related  activities,  which  BICO  denies.
Without  agreeing  to  the alleged charges or  acknowledging  any
liability or wrongdoing, BICO agreed to settle the lawsuit for  a
total  amount  of $3,450,000.  During September 2002,  the  class
action  lawsuit was settled when BICO made thee final payment  of
$50,000; the Company considers the case closed.

NOTE J - STOCKHOLDERS' EQUITY

Common Stock

Diasense  sold  2,800,000 shares of common  stock  at  $0.50  per
share,  from August 1989 to May 1991 in connection with  a  joint
private  offering  with BICO.  The aggregate  amount  raised  was
$1,400,000, on which no commissions were paid to any third party.
Diasense  sold  4,997,500 shares of common stock,  at  $1.00  per
share, in a private offering from May 1991 to January 1992.   The
aggregate  amount raised was $4,985,201, on which no  commissions
were paid to any third party.

Diasense sold, in July 1992, 7,212 shares of common stock, at
$3.50  per  share,  in  a  private  offering  to  one  accredited
investor.  The aggregate amount raised was $25,242, on  which  no
commissions were paid to any third party.

Diasense sold 300,000 shares of common stock, at $3.50 per share,
in  a private offering from July 1992 through November 1992.  The
aggregate  amount raised was $1,050,000, on which no  commissions
were paid to any third party.

In  December 1991, Diasense issued 235,000 shares of common stock
in  exchange for the cancellation of outstanding promissory notes
for $235,000.

In  June  1994, Diasense sold 91,667 shares of its  common  stock
pursuant  to the requirements set forth in Regulation  S  of  the
Securities Act of 1933 ("Regulation S").  In connection with such
sale,  the purchasers and any entity which facilitated such  sale
undertook  to  ensure compliance with Regulation S,  which  among
other  things,  limits  a  foreign investor's  ability  to  trade
Diasense's  stock  in the United States.  Diasense  received  net
proceeds in the amount of $288,751 pursuant to such sales.

During  1995, Diasense issued the following shares of its  common
stock  to  BICO:  3,000,000 shares at an assigned price of  $3.50
per  share in return for a corresponding reduction in the  amount
due  from  Diasense  to  BICO  pursuant  to the R&D Agreement  of
$10,500,000; and 1,200,000 shares of its common stock at a  price
of $3.50 per share.

In  July,  1993,  Diasense commenced a public  offering.   As  of
September  30,  1998, an aggregate of 1,063,460 shares  had  been
issued  with proceeds to Diasense of $3,561,892.  Of that  total,
230,961  shares  with  net proceeds of $786,245  were  issued  in
fiscal 1994; 437,768 shares with net proceeds of $1,501,492  were
issued  in  fiscal  1995; 410,731 shares  with  net  proceeds  of
$1,365,155 were sold in fiscal 1996; 1,000 shares were issued  in
fiscal  1998  at $3.50 per share; 10,000 shares were  issued  for
consulting  services  at  a charge to operations  of  $35,000  in
fiscal 1996; and 27,000 shares were reimbursed with net repayment
of $94,500 in fiscal 1997.

Diasense  issued  unregistered  common  stock  in  exchange   for
consulting services of 7,200 shares in fiscal 1994, 17,500 shares
in  fiscal  1995, 5,000 shares in fiscal 1996 and none in  fiscal
1997 through 2002.  The associated consulting service expense was
recognized  at a rate of $3.50 per share, which is the  price  at
which  the  common  stock  was being sold  in  Diasense's  public
offering.

Common Stock Warrants

At September 30, 2003, Diasense has reserved 10,575,800 shares of
Diasense's   unissued  common  stock  for  warrants  which   were
outstanding  and  exercisable. The fiscal years in which warrants
expire are as follows:

     Warrant Expiration Fiscal Year          Number of Shares

               2004                             5,649,750
               2005                             2,143,000
               2006                               500,000
                                               ----------
                                                8,292,750
                                               ==========

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


<TABLE>
                           2003          2002       2001       2000        1999
<S>                      <C>         <C>          <C>        <C>        <C>
Outstanding beginning     10,575,800  10,635,013   10,463,013  8,644,113  6,676,513
 of year

Granted during the year            0           0      500,000  2,085,000  2,070,000

Canceled during the year  (2,283,050)    (59,213)    (328,000)  (266,100)  (102,400)

                          ----------  ----------    ---------  ---------  ---------
Outstanding, and           8,292,750  10,575,800   10,635,013 10,463,013  8,644,113
eligible for exercise.    ==========  ==========    =========  =========  =========
</TABLE>

There were no warrants issued or extended during the fiscal years
ended September 30, 2002 and 2003.

During  the  period October 1, 2000 through September  30,  2001,
Diasense  extended  the  exercise date of  warrants  to  purchase
1,147,750  shares of common stock to certain officers, directors,
employees  and  consultants.  Warrants for  648,000  shares  were
originally  granted at an exercise price of $.05  per  share  and
warrants  for  499,750  shares  were  originally  granted  at  an
exercise  price of $3.50 per share and were extended at the  same
price.   No  expense  was  recognized  in  connection  with   the
extension of these warrants because there was no increase in  the
value  of  the warrants over the value recorded at the  time  the
warrants  were originally granted. In addition, during  the  year
ended  September 30, 2001, Diasense granted warrants to  purchase
500,000 shares of common stock to employees and consultants at an
exercise  price of $.50 per share.  These warrants  were  granted
for  services  rendered  which were  recognized  in  general  and
administrative expenses for a total of $55,199.

During  the  period October 1, 1999 through September  30,  2000,
Diasense  extended  the  exercise date of  warrants  to  purchase
2,428,050  shares of common stock to certain officers, directors,
employees  and  consultants.  Warrants for  215,000  shares  were
originally     granted    at    an  exercise  price  of  $.50 per
share,  warrants for 2,131,250 shares were originally granted  at
an  exercise  price  of $1.00 per share and warrants  for  81,800
shares were originally granted at an exercise price of $3.50  per
share  and  were  extended at the same  price.   No  expense  was
recognized  in  connection with the extension of  these  warrants
because  there was no increase in the value of the warrants  over
the  value  recorded  at  the time the warrants  were  originally
granted.  In addition, during the year ended September 30,  2000,
Diasense granted warrants to purchase 2,085,000 shares of  common
stock to employees and consultants at an  exercise price of  $.50
per  share.   These  warrants were  granted for services rendered
which were recognized in general and  administrative expenses for
a total of $230,178.

During  the  period October 1, 1998 through September  30,  1999,
Diasense  extended  the  exercise date of  warrants  to  purchase
2,346,213  shares of common stock to certain officers, directors,
employees   and   consultants.   Warrants  for   2,262,000   were
originally  granted  at  an exercise price  of  $.50  per  share,
warrants  for  29,213  shares  were  origainally  granted  at  an
exercise price of $1.00 per share and warrants for 55,000  shares
were  originally granted at an exercise price of $3.50 per  share
and  were  extended  at the same price.  In connection  with  the
extension of these warrants Diasense recorded a charge of  $6,333
against operations.  In addition, during the year ended September
30,  1999, Diasense granted warrants to purchase 2,070,000 shares
of common stock to employees and consultants at an exercise price
of  $.50  per  share.  These warrants were granted  for  services
rendered  which  were  recognized in general  and  administrative
expenses for a total of $228,538.

During the period October 1, 1997 through September 30, 1998,
Diasense  extended  the  exercise date of  warrants  to  purchase
758,000  shares  of common stock to certain officers,  directors,
employees  and consultants.  Warrants for 748,000 were originally
granted  at an exercise price of $.50 per share and warrants  for
10,000  shares  were originally granted at an exercise  price  of
$1.00 per share and were extended  at  the same  price.  Diasense
recorded  $25,000  against  operations  in  connection  with  the
extension of these warrants.

During  the  period October 1, 1996 through September  30,  1997,
Diasense  extended  the  exercise date of  warrants  to  purchase
2,236,550  shares of common stock to certain officers, directors,
employees   and   consultants.   Warrants  for   2,236,550   were
originally  granted at an exercise price of $1.00 per  share  and
were  extended  at  the same price. Diasense recorded  $5,593,875
against operations  in  connection   with  the extension of these
warrants.   In  addition, during  the  year  ended  September 30,
1997,  Diasense  granted  warrants  to  purchase 59,000 shares of
common stock to employees and  consultants  at  an exercise price
of $1.00  and  $3.50  per share. These  warrants were granted for
services   rendered  which   were   recognized  in   general  and
administrative  expenses  for  a total of $2,500.

During  the  period October 1, 1995 through September  30,  1996,
Diasense  extended  the  exercise date of  warrants  to  purchase
2,556,213  shares of common stock to certain officers, directors,
employees  and  consultants.  Warrants for 49,213  and  2,507,000
shares were originally granted at  an  exercise  price  of  $1.00
and  $.50  per share, resepectively,  and  were extended  at  the
same   price.   Diasense  recorded  $7,640,468 against operations
in connection with the extensions  of  these warrants.

During  the  period October 1, 1994 through September  30,  1995,
Diasense  extended  the  exercise date of  warrants  to  purchase
1,550,000  shares of common stock to certain officers, directors,
employees and consultants.  The warrants were originally  granted
at an exercise price of $.50 per share and  were  extended at the
same price.  The assumed value of the stock when  the  extensions
were granted was $3.50 per share.  Diasense  recorded  $4,625,000
against operations in connection  with  the  extensions  of these
warrants.

In  1990, Diasense granted warrants to purchase 800,000 shares of
common  stock  at an exercise price of $.50 per  share  to  eight
current  or former directors or officers of Diasense or BICO  who
personally  guaranteed the payment of a lease obligation  to  the
bank  for the premises occupied by BICO at the 300 Indian Springs
Road  location.   Diasense  also  granted  warrants  to  purchase
100,000  shares  of  common stock each to an individual  and  his
company  at  an  exercise price of $.50 per share for  personally
guaranteeing the payment of an obligation related to the purchase
of  equipment by BICO.  In addition, Diasense granted warrants to
purchase 100,000 shares of common stock for services performed by
consultants  at  an exercise price of $.50 per  share.   Diasense
recorded  an  estimated value of these warrants at $27,500  which
was charged to operations.

NOTE K- SUPPLEMENT CASH FLOW INFORMATION

Diasense's  financing activities included the  following  noncash
transactions.

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

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

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

Cash paid for interest and income taxes were as follows:

                                                            From July 5, 1989
                                                              (inception)
                    September       September   September    through September
                     30,2003         30,2002     30,2001         30,2003

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


NOTE L - SUBSEQUENT EVENTS

On July 23, 2004, BICO sold its entire ownership interest (approximately 52%)
to Dominion Assets, LLC.

Inn connection with this transaction, the intercompany payable from Diasense
to BICO was assigned to Dominion Assets, LLC. This liability was documented
by a note payable on demand without interest.

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

On September 29, 2004, Diasense entered into a non-circumvention and
consulting fee agreement with Keith R. Keeling, President of Dominion
Assets, LLC (Diasense's majority shareholder). Under the terms of the
agreement Mr. Keeling will assist in the sale of Diasense assets and
will receive upon funding of any such sale a fee equal to 5% of the sale
proceeds. Diasense agreed to work exclusively through Mr. Keeling in
connection with its sales of assets.