FORM 10-QSB
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                   QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

For Quarter Ended November 30, 2003                   Commission File No. 0-8765
                  -----------------                                       ------

                                 BIOMERICA, INC.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

Delaware                                                     95-2645573
--------------------------------------------------------------------------------
(State or other jurisdiction of                              (I.R.S. Employer
incorporation or organization)                               Identification No.)

1533 Monrovia Avenue, Newport Beach, California              92663
--------------------------------------------------------------------------------
(Address of principal executive offices)                     (Zip Code)

Registrant's telephone number including area code:  (949) 645-2111
--------------------------------------------------------------------------------

                                (Not applicable)
--------------------------------------------------------------------------------
             (Former name, former address and former fiscal year, if
                           changed since last report.)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                          Yes  [X]        No  [ ]

Indicate by check mark whether the Registrant is an accelerated filer (as
Defined in Rule 12b-2 of the Exchange Act).

                         Yes  [ ]         No  [X]

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 5,752,431 shares of common
stock as of January 14, 2004.

                                       1







                                 BIOMERICA, INC.

                                      INDEX

PART I

Item 1.  Condensed Consolidated Financial Statements:

         Condensed Consolidated Statements of Operations and
         Comprehensive Loss (unaudited) - Three and six Months Ended
         November 30, 2003 and 2002........................................3 & 4

         Condensed Consolidated Balance Sheet (unaudited) -
         November 30, 2003.................................................5 & 6

         Condensed Consolidated Statements of Cash Flows (unaudited) -
         Six Months Ended November 30, 2003 and 2002...........................7

         Condensed Consolidated Statement of Changes in Shareholders'
         Equity (unaudited) - Six Months Ended November 30, 2003...............8

         Notes to Consolidated Financial Statements.........................9-18

Item 2.  Management's Discussion and Analysis of Financial Condition
         and Selected Financial Data.......................................19-21

Item 3.  Quantitative and Qualitative Disclosures about Market Risk........21-22

Item 4.  Controls and procedures..............................................22

PART II  Other Information....................................................23

Item 1.  Legal Proceedings....................................................23

Item 2.  Changes in Securities and Use of Proceeds............................23

Item 3.  Defaults upon Senior Securities......................................23

Item 4.  Submission of Matters to a Vote of Security Holders..................23

Item 5.  Other Information....................................................23

Item 6.  Exhibits and Reports on Form 8-K.....................................23

         Signatures...........................................................24

                                       2








                                                  PART I - FINANCIAL INFORMATION
                                                 SUMMARIZED FINANCIAL INFORMATION
                                                   ITEM 1. FINANCIAL STATEMENTS

                                                          BIOMERICA, INC.
                                          CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                                AND COMPREHENSIVE LOSS (UNAUDITED)


                                                                        Six Months Ended                   Three Months Ended
                                                                           November 30,                        November 30,
                                                                      2003              2002              2003              2002
                                                                  ------------      ------------      ------------      ------------
                                                                                                            
Net sales ..................................................      $ 4,434,215       $ 4,226,038       $ 2,269,856       $ 2,136,529

     Cost of sales .........................................        3,137,829         2,952,354         1,611,118         1,517,924
                                                                  ------------      ------------      ------------      ------------
     Gross profit ..........................................        1,296,386         1,273,684           658,738           618,605
                                                                  ------------      ------------      ------------      ------------

Operating Expenses:
     Selling, general and administrative ...................        1,594,873         1,457,869           720,473           701,711
     Research and development ..............................          141,753           110,206            67,412            62,329
                                                                  ------------      ------------      ------------      ------------
                                                                    1,736,626         1,568,075           787,885           764,040
                                                                  ------------      ------------      ------------      ------------

Operating loss from continuing operations ..................         (440,240)         (294,391)         (129,147)         (145,435)
                                                                  ------------      ------------      ------------      ------------

Other Expense (income):
     Interest expense ......................................           15,376            17,700             4,915             6,903
     Other income, net .....................................          (33,258)          (51,922)          (26,247)           (3,942)
                                                                  ------------      ------------      ------------      ------------
                                                                      (17,882)          (34,222)          (21,332)            2,961
                                                                  ------------      ------------      ------------      ------------

Loss from continuing operations, before minority interest
   in net loss of consolidated subsidiaries and
   income taxes ............................................         (422,358)         (260,169)         (107,815)         (148,396)

Minority interest in net gain (losses) of consolidated sub..           93,819           (17,867)            2,761           (19,871)
                                                                  ------------      ------------      ------------      ------------
Loss from continuing operations, before income taxes .......         (328,539)         (278,036)         (110,576)         (168,267)

Income tax expense .........................................               --             1,794                --               194
                                                                  ------------      ------------      ------------      ------------

Net loss from continuing operations ........................         (328,539)         (279,830)         (110,576)         (168,461)



                                                                3




                                                          BIOMERICA, INC.
                                          CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                          AND COMPREHENSIVE LOSS - Continued (UNAUDITED)


                                                                        Six Months Ended               Three Months Ended
                                                                           November 30,                    November 30,
                                                                       2003            2002            2003           2002
                                                                  --------------  --------------  -------------  --------------
                                                                                                     
Discontinued operations:
  Income (loss) from discontinued operations, net .............          (2,944)         38,531         (3,020)         14,437
                                                                  --------------  --------------  -------------  --------------
Net loss ......................................................        (331,483)       (318,361)      (113,596)       (182,898)

Other comprehensive gain (loss), net of tax
  Unrealized gain (loss) on available-for-sale securities .....          22,362          (1,757)       (19,141)           (317)
                                                                  --------------  --------------  -------------  --------------

Comprehensive loss ............................................   $    (309,121)       (320,118)      (132,737)  $    (183,215)
                                                                  ==============  ==============  =============  ==============

Basic net loss per common share:

     Net loss from continuing operations ......................   $        (.06)  $        (.05)  $       (.02)  $        (.03)
     Net loss from discontinued operations ....................            (.00)           (.01)          (.00)           (.00)
                                                                  --------------  --------------  -------------  --------------
Basic net loss per common share ...............................   $        (.06)  $        (.06)  $       (.02)  $        (.03)
                                                                  ==============  ==============  =============  ==============
Diluted net loss per common share
     Net loss from continuing operations ......................   $        (.06)  $        (.05)  $       (.02)  $        (.03)
     Net loss from discontinued operations ....................            (.00)           (.01)          (.00)           (.00)
                                                                  --------------  --------------  -------------  --------------

Diluted net loss per common share .............................   $        (.06)  $        (.06)  $       (.02)  $        (.03)
                                                                  ==============  ==============  =============  ==============

Weighted average number of common and common equivalent shares:
     Basic and diluted ........................................       5,675,890       5,208,818      5,752,431       5,245,673
                                                                  ==============  ==============  =============  ==============

The accompanying notes are an integral part of these statements.


                                                                4




                                      BIOMERICA, INC.

                     CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)


                                                                                 November 30,
                                                                                     2003
                                                                                 -----------

Assets

                                                                              
Current Assets
    Cash and cash equivalents .............................................      $  296,939
    Available for-sale securities .........................................          35,474
    Accounts receivable, less allowance for doubtful accounts of $126,053..       1,355,874
    Inventories, net of reserve of $187,371 ...............................       2,655,486
    Notes receivable ......................................................           1,619
    Prepaid expenses and other ............................................         175,570
                                                                                 -----------

          Total Current Assets ............................................       4,520,962

Inventory, non-current ....................................................          26,000

Property and Equipment, net of accumulated depreciation and amortization ..         593,427

Intangible assets, net of accumulated amortization ........................          50,831

Other Assets ..............................................................          62,904
                                                                                 -----------

                                                                                 $5,254,124
                                                                                 ===========


The accompanying notes are an integral part of these statements.

                                            5




                                 BIOMERICA, INC.

          CONDENSED CONSOLIDATED BALANCE SHEET - Continued (UNAUDITED)



                                                                         November 30,
                                                                             2003
                                                                         ------------
Liabilities and Shareholders' Equity

                                                                      
Current Liabilities

     Line of credit ...............................................      $         --
     Accounts payable and accrued liabilities .....................         1,115,202
     Accrued compensation .........................................           491,226
     Current portion of shareholder loan ..........................            86,400
     Net liabilities from discontinued operations .................           367,299
                                                                         -------------

          Total Current Liabilities ...............................         2,060,127

Shareholder loan ..................................................           237,185
                                                                         -------------
Total Liabilities .................................................         2,297,312
                                                                         -------------

Minority interest .................................................         2,058,422
                                                                         -------------
Shareholders' Equity

     Common stock, $0.08 par value authorized  25,000,000 shares,
       subscribed or issued and outstanding 5,752,431 .............           460,193
     Additional paid-in-capital ...................................        17,211,165
     Accumulated other comprehensive gain .........................            12,705
     Accumulated deficit ..........................................       (16,785,673)
                                                                         -------------
Total Shareholders' Equity ........................................           898,390
                                                                         -------------

Total Liabilities and Equity ......................................      $  5,254,124
                                                                         =============


The accompanying notes are an integral part of these statements.

                                       6




                                                BIOMERICA, INC.
                          CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


For the six months ended November 30,                                                   2003            2002
                                                                                     ----------      ----------
                                                                                               
Cash flows from operating activities:
Net loss from continuing operations ...........................................      $(328,463)      $(279,830)

Adjustments to reconcile net loss to net cash
  (used in) provided by operating activities:
     Depreciation and amortization ............................................         57,449          72,650
     Minority interest in net loss of consolidated
       Subsidiary .............................................................        (93,819)         17,867
     Common stock, warrants and options issued for services
       rendered ...............................................................         55,172          99,131
     Provision for losses on accounts receivable ..............................          6,008            (920)
     Provision for losses on inventory ........................................         45,000              --
     Changes in current assets and liabilities:
       Accounts Receivable ....................................................        301,354         220,167
       Inventories ............................................................        (51,554)        225,343
       Prepaid expenses and other current assets ..............................         (5,766)          4,031
       Accounts payable and other accrued liabilities .........................       (164,932)        (46,153)
       Accrued compensation ...................................................        158,326          40,809
                                                                                     ----------      ----------

Net cash (used in) provided by operating activities ...........................        (21,225)        353,095
                                                                                     ----------      ----------

Cash flows from investing activities:
     Purchases of property and equipment ......................................       (244,948)        (60,910)
     Other assets .............................................................        (19,504)             --
     Purchases of intangibles .................................................             --         (21,986)
                                                                                     ----------      ----------
Net cash used in investing activities .........................................       (264,452)        (82,896)
                                                                                     ----------      ----------

Cash flows from financing activities:
     Change in minority interest ..............................................          6,180          10,501
     Increase (decrease) in shareholder loan ..................................         20,035         (52,050)
     Private placement, net of offering costs .................................         30,500              --
     Exercise of stock options ................................................          2,000              --
     Decrease in line of credit ...............................................           (426)        (65,669)
                                                                                     ----------      ----------

Net cash provided by (used in) financing activities ...........................         58,289         (72,395)
                                                                                     ----------      ----------

Net cash used in discontinued operations ......................................           (840)         (2,295)
                                                                                     ----------      ----------

Net (decrease) increase in cash and cash equivalents ..........................       (228,228)        160,686

Cash at beginning of period ...................................................        525,167         329,277
                                                                                     ----------      ----------

Cash at end of period .........................................................      $ 296,939       $ 489,963
                                                                                     ==========      ==========

Supplemental disclosures on non-cash financing activity
  Issuance of common stock at market value in exchange for
     settlement of accrued wages and shareholder loan .........................      $  20,000       $      --
                                                                                     ==========      ==========


The accompanying notes are an integral part of these statements.

                                                      7




                                                           BIOMERICA, INC.

                                CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)
                                             FOR THE SIX MONTHS ENDED November 30, 2003


                                                                    Common Stock
                            Common Stock                             Subscribed
                    ---------------------------               ---------------------------
                                                                                          Accumulated
                       Number                     Additional                              Other
                       of                         Paid-in                                 Comprehensive  Accumulated
                       Shares        Amount       Capital        Shares        Amount     Gain (loss)    Deficit          Total
                    ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
                                                                                                 
Balance at
 May 31, 2003          5,522,431  $    441,793  $ 17,117,393       18,000   $     4,500   $     (9,657) $(16,454,190)    1,099,839

Exercise of stock
Options                   10,000           800         1,200                                                                 2,000

Change in
unrealized
gain on available                                                                               22,362                      22,362
for sale securities

Net proceeds from
private placement        220,000        17,600        37,400      (18,000)       (4,500)                                    50,500

Compensation
expense related
to the fair
value of common stock
and warrants
issued to employees
in excess of con-
sideration received                                   55,172                                                                55,172

Net loss                                                                                                    (331,483)     (331,483)
                    ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------

Balance at             5,752,431  $    460,193  $ 17,211,165       --               --    $     12,705  $(16,785,673) $    898,390
November 30, 2003   ============= ============= ============= ============= ============= ============= ============= =============



The accompanying notes are an integral part of these statements.

                                                                8



                    NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

     November 30, 2003

(1)  Reference is made to Note 2 of the Notes to Consolidated Financial
     Statements contained in Biomerica, Inc.'s (the "Company") Annual Report on
     Form 10-KSB for the fiscal year ended May 31, 2003, for a summary of
     significant accounting policies utilized by the Company.

     The preparation of consolidated financial statements in conformity with
     accounting principles generally accepted in the United States of America
     ("GAAP"), requires management to make estimates and assumptions that affect
     the reported amounts of assets and liabilities and the disclosure of
     contingent assets and liabilities at the date of the consolidated financial
     statements, and the report amounts of revenues and expenses during the
     reporting period. Significant estimates made by Biomerica's and Lancer's
     management include, but are not limited to, allowances for doubtful
     accounts, allowances for sales returns, valuation of inventories,
     realizability of property and equipment through future operations and
     realizability of deferred tax assets. Actual results could materially
     differ from those estimates.

(2)  As of November 30, 2003, the Company had cash and available-for-sale
     securities in the amount of $332,413 and working capital of $2,460,835.
     Cash and working capital totaling $224,237 and $2,477,013, respectively,
     relates to the Lancer subsidiary. Lancer's line of credit restricts
     Biomerica's ability to draw on Lancer's resources and, as such, said cash,
     working capital and equity are not available to Biomerica.

     The Company has suffered substantial recurring losses from operations over
     the last couple of years. The Company has funded its operations through
     debt and equity financings, and may have to do so in the future.
     ReadyScript operations were discontinued in May 2001 and Allergy Immuno
     Technologies, Inc. was sold in May 2002. ReadyScript and Allergy Immuno
     Technologies were previously contributors to the Company's losses. The
     Company has reduced operating costs through certain cost reduction efforts
      and plans to concentrate on its core business in Lancer and Biomerica to
     increase sales. There can be no assurance that the Company will be able to
     become profitable, generate positive cash flow from operations or obtain
     the necessary equity or debt financing to fund operations in the future.
     Should the Company be unable to reduce costs adequately or should the
     Company be unable to secure additional financing, the result for the
     Company could be the inability to continue operations.

     The Company will continue to have limited cash resources. Although the
     Company's management recognizes the imminent need to secure additional
     financing there can be no assurance that the Company will be successful in
     consummating any such transaction or, if the Company does consummate such
     transaction, that the terms and conditions of such financing will not be
     unfavorable to us.

     Our independent certified public accountants have concluded that these
     factors, among others, raise substantial doubt as to the Company's ability
     to continue as a going concern for a reasonable period of time, and have,
     therefore modified their audit report on the Company's annual consolidated
     financial statements as of and for the year ended May 31, 2003, in the form
     of an explanatory paragraph describing the events that have given rise to
     this uncertainty. The consolidated financial statements do not include any
     adjustments relating to the recoverability and classification of asset
     carrying amounts or the amount and classification of liabilities that might
     result should the Company operating.

                                       9



     These consolidated financial statements have been prepared assuming that
     the Company will continue as a going concern. The Company has operating and
     liquidity concerns due to historically reporting net losses and negative
     cash flows from operations. Biomerica's shareholder's line of credit
     expired September 13, 2003. The unpaid principal and interest of $337,835
     was converted into a note payable bearing interest at 8% and payable in
     monthly installments over four years. The monthly payments required to pay
     the loan off in four years would be $8,248. The Company is currently making
     payments of $7,200 per month. The terms of the note are currently being
     negotiated. The note is secured by inventory and accounts receivable of
     Biomerica.

     During the quarter ended November 30, 2003, the Company's operations used
     cash of $21,225. This compares to cash provided by operations of $363,596
     in the same period in the prior fiscal quarter. Cash provided by financing
     activities was $58,289, which resulted in part from a private placement at
     Biomerica of $30,500, an increase in shareholder loan of $20,035, exercise
     of stock options of $2,000 and change in minority interest of $6,180.

(3)  In December 2002, the FASB issued FAS No. 148, "Accounting for Stock-Based
     Compensation - Transition And Disclosure," which amended FAS No. 123
     "Accounting for Stock-Based Compensation." The new standard provides
     alternative methods of transition for a voluntary change to the fair value
     based method of accounting for stock-based employee compensation.
     Additionally, the statement amends the disclosure requirements of FAS No.
     123 to require prominent disclosures in the annual and interim financial
     statements about the method of accounting for stock-based employee
     compensation and the effect of the method used on reported results. This
     statement is effective for financial statements for fiscal years ending
     after December 15, 2002. In compliance with FAS No. 148, we have elected to
     continue to follow the intrinsic value method in accounting for our
     stock-based employee compensation plan as defined by APB No. 25,
     "Accounting for Stock Issued to employees."

     The Black Sholes option valuation model was developed for use in estimating
     the fair value of traded options which have no vesting restrictions and are
     fully transferable. In addition, option valuations models require the input
     of highly subjective assumptions including the expected stock price
     volatility. Because the Company's employee stock options have
     characteristics significantly different from those of traded options, and
     because changes in the subjective input assumptions can materially affect
     the fair value estimate, in management's opinion, the existing models do
     not necessarily provide a reliable single measure of the fair value of its
     employee stock options. For purposes of pro forma disclosure, the estimated
     fair value of the options is amortized to expense over the options vesting
     period. Adjustments are made for options forfeited prior to vesting. The
     effect on compensation expense, net loss, and net loss per common share had
     compensation costs for the Company's stock option plans been determined
     based on a fair value at the date of grant consistent with the provisions
     of SFAS 148, for the six months and quarter ended November 30 is as
     follows:



                                               Six Months Ended   Three Months Ended
November 30,                                    2003      2002      2003       2002
---------------------------------------------------------------------------------------
                                                                 
Net loss from continuing
  operations, as reported                   $(328,539) $(279,830) $(110,576) $(168,461)
Plus: Stock-based employee compensation
  expense included in reported net loss        55,172     32,364      7,092     65,818
Less: Stock-based employee compensation
  expense determined using fair value
  based method                                (12,575)   (24,288)    (6,269)   (12,144)
---------------------------------------------------------------------------------------
Net loss from continuing operations,
 pro forma                                  $(285,942) $(271,754) $(109,753) $(114,787)
=======================================================================================

Pro forma net loss from
   continuing operations
   per share - basic                        $   (0.03) $   (0.02) $    (.02) $    (.03)
=======================================================================================
Pro forma net loss from
   continuing operations
   per share - diluted                      $   (0.03) $   (0.02) $    (.02) $    (.03)
=======================================================================================


                                       10



(4)  The following summary presents the options granted, exercised, expired, and
     outstanding as of November 30, 2003:

                                                                        Weighted
                                                                        Average
                         Number of Options                              Exercise
                    Employee        Non-employee      Total             Price
                    --------        ------------      -----             -----

Outstanding
May 31, 2003          990,386           75,000        1,065,386         $0.99

Granted                    --               --               --          0.00
Exercised                  --          (10,000)         (10,000)         0.20
Expired                (2,250)              --           (2,250)         0.85
Cancelled              (3,000)              --           (3,000)         0.40
                    ----------       ----------       ----------    ----------
Outstanding
November 30, 2003     985,136           65,000        1,050,136         $1.00
                    ==========       ==========       ==========    ==========

                                                                        Weighted
                                                                        Average
                         Number of Warrants                             Exercise
                    Employee        Non-employee      Total             Price
                    --------        ------------      -----             -----

Outstanding
May 31, 2003        1,285,688        1,131,746        2,417,434         $2.79

Granted               170,000           32,000          202,000          0.25
Exercised                  --               --               --          0.00
Expired                    --               --               --          0.00
                    ----------       ----------       ----------    ----------
Outstanding
November 30, 2003   1,455,688        1,163,746        2,619,434         $2.60
                    ==========       ==========       ==========    ==========

(5)  The information set forth in these condensed consolidated statements is
     unaudited and may be subject to normal year-end adjustments. The
     information reflects all adjustments which, in the opinion of management,
     are necessary to present a fair statement of the consolidated results of
     operations of Biomerica, Inc., for the periods indicated. It does not
     include all information and footnotes necessary for a fair presentation of
     financial position, results of operations, and cash flow in conformity with
     generally accepted accounting principles. Please see the Company's Annual
     Report on Form 10-KSB for the fiscal year ended May 31, 2003 for more
     detailed footnotes.

(6)  Consolidated results of operations for the interim periods covered by this
     report may not necessarily be indicative of results of operations for the
     full fiscal year.

(7)  Reference is made to Note 3 of the Notes to Consolidated Financial
     Statements contained in the Company's Annual Report on Form 10-KSB for the
     fiscal year ended May 31, 2003, for a description of the investments in
     affiliates and consolidated subsidiaries.

(8)  Reference is made to Notes 5 & 11 of the Notes to Consolidated Financial
     Statements contained in the Company's Annual Report on Form 10-KSB for the
     fiscal year ended May 31, 2003, for information on commitments and
     contingencies.

(9)  Aggregate market value exceeded cost of available-for-sale securities by
     approximately $12,705 at November 30, 2003.

                                       11



(10) Earnings Per Share
     ------------------

     In February 1997, the Financial Accounting Standards Board ("FASB") issued
     Statement of Financial Accounting Standards (SFAS) No. 128, EARNINGS PER
     SHARE ("EPS"). SFAS No. 128 requires dual presentation of basic EPS and
     diluted EPS on the face of all income statements issued after December 15,
     1997 for all entities with complex capital structures. Basic EPS is
     computed as net income divided by the weighted average number of common
     shares outstanding for the period. Diluted EPS reflects the potential
     dilution that could occur from common shares issuable through stock
     options, warrants and other convertible securities.

     The computation of diluted loss per share excludes the effect of
     incremental common shares attributable to the exercise of outstanding
     common stock options and warrants because their effect was antidilutive due
     to losses incurred by the Company.

     As of November 30, 2003, there was a total of 3,669,570 potential dilutive
     shares of common stock outstanding.

(11) In June 2001, the FASB issued SFAS No. 143, "ACCOUNTING FOR ASSET
     RETIREMENT OBLIGATIONS", which requires that the fair value of a liability
     for an asset retirement obligation be recognized in the period in which it
     is incurred with the associated asset retirement costs being capitalized as
     a part of the carrying amount of the long-lived asset. SFAS No. 143 also
     includes disclosure requirements that provide a description of asset
     retirement obligations and reconciliation of changes in the components of
     those obligations. The statement is effective for fiscal years beginning
     after June 15, 2002. The Company does not expect the adoption of SFAS No.
     143 to have a material effect on the Company's consolidated financial
     position or results of operations.

     In June 2002, the FASB issued SFAS No. 146, "ACCOUNTING FOR COSTS
     ASSOCIATED WITH EXIT OR DISPOSAL ACTIVITIES," which updates accounting and
     reporting standards for personnel and operational restructurings. The
     Company was required to adopt SFAS No. 146 for exit, disposal or other
     restructuring activities that are initiated after December 31, 2002, with
     early application encouraged. The Company adoption of SFAS No. 146 did not
     have a material effect on the Company's consolidated financial position or
     results of operations.

     In April 2003, SFAS No. 149, "AMENDMENT OF STATEMENT 133 ON DERIVATIVE
     INSTRUMENTS AND HEDGING ACTIVITIES" was issued. This statement amends and
     clarifies financial accounting and reporting for derivative instruments,
     including certain derivative instruments embedded in other contracts
     (collectively referred to as derivatives) and for hedging activities under
     SFAS No. 133, "Accounting for Derivative Instruments and Hedging
     Activities." This statement is effective for contracts entered into or
     modified after June 30, 2003. The adoption of this statement is not
     expected to have a significant effect on the Company's consolidated
     financial position or results of operations.

     In May 2003, SFAS No. 150, "ACCOUNTING FOR CERTAIN FINANCIAL INSTRUMENTS
     WITH CHARACTERISTICS OF BOTH LIABILITIES AND EQUITY" was issued. This
     statement establishes standards for how an issuer classifies and measures
     certain financial instruments with characteristics of both liabilities and
     equity. This statement is effective for financial instruments entered into
     or modified after May 31, 2003. The adoption of SFAS No. 150 did not have a
     significant effect on the Company's consolidated financial position,
     results of operations, or cash flows.

     In November 2002, FASB issued FASB Interpretation No. 45, "Guarantor's
     Accounting and Disclosure Requirements for Guarantees, Including Indirect
     Guarantees of Indebtedness of Others" ("FIN 45"). FIN 45 clarifies that a
     guarantor is required to recognize, at the inception of a guarantee, a
     liability for the fair value of the obligation undertaken in issuing the

                                       12



     guarantee. The initial recognition and initial measurement provisions of
     FIN 45 are applicable on a prospective basis to guarantees issued or
     modified after December 31, 2002. The disclosure requirements of FIN 45 are
     applicable for financial statements of interim periods ending after
     December 15, 2002. The adoption of FIN 45 did not have a material impact on
     the Company's financial position, results of operations or cash flows.

     In January 2003, FASB issued FASB Interpretation No. 46, "Consolidation of
     Variable Interest Entities" ("FIN 46"). This interpretation clarifies the
     application of Accounting Research Bulletin No. 51, "Consolidated Financial
     Statements," relating to consolidation of certain entities. FIN 46 will
     require identification of the Company's participation in variable interests
     entities ("VIEs"), which are defined as entities with a level of invested
     equity that is not sufficient to fund future activities to permit them to
     operation on a stand-alone basis, or whose equity holders lack certain
     characteristics of a controlling financial interest. For entities
     indentified as VIEs, FIN 46 sets forth a model to evaluate potential
     consolidation based on an assessment of which party to the VIE, if any,
     bears a majority of the exposure to its expected losses, or stands to gain
     from a majority of its expected returns. FIN 46 also sets forth certain
     disclosures regarding interests in VIEs that are deemed significant, even
     if consolidation is not required. The adoption of FIN 46 did not have a
     material impact on the Company's financial position, results of operations
     or cash flows.

(12) Financial information about foreign and domestic operations and export
     sales is as follows:

                                                For the Six Months Ended
                                                11/30/03        11/30/02
                                                --------        --------

         Revenues from sales to unaffiliated
           customers:
         United States                         $2,168,000      $2,362,000
         Asia                                     100,000         117,000
         Europe                                 1,196,000         954,000
         South America                            248,000         167,000
         Oceania                                  286,000         208,000
         Other                                    436,000         418,000
                                               ----------      ----------
                                               $4,434,000      $4,226,000
                                               ==========      ==========

     No other geographic concentrations exist where net sales exceed 10% of
     total net sales.

(13) Pursuant to a decision by the Nasdaq Listing Qualifications Panel, the
     Company's common stock was delisted from the Nasdaq Stock Market effective
     June 20, 2002, for failure to comply with the net tangible assets or
     shareholders' equity requirements as set forth in Marketplace Rule
     4310(c)(2)(B). The Company's securities were immediately eligible to trade
     on The OTC Bulletin Board and are traded under the symbol BMRA.OB.

(14) Lancer has a $400,000 line of credit with a financial institution, which
     expires January 24, 2004. Borrowings are made at prime plus 2.0%, in no
     event less than 8.0%, (8.0% at November 30, 2003), and are limited to 80%
     of accounts receivable less than 90 days old with a liquidity factor of
     94%. The outstanding balance at November 30, 2003 was $0 and the unused
     portion available was approximately $326,000.

     The line of credit is collateralized by substantially all the assets of
     Lancer, including inventories, receivables, and equipment. The lending
     agreement for the line of credit requires, among other things, that Lancer
     maintain a tangible net worth ratio of $2,100,000 and that receivables'
     payments be sent to a controlled lockbox. In addition to interest, a
     management fee of .25% of the average monthly outstanding loan balance and
     an unused balance fee of .0425% on the average monthly unused portion
     available are required. Lancer is not required to maintain compensating
     balances in connection with this lending agreement. Proceeds from this line
     cannot be used to support the operations of Biomerica.

                                       13



     In October 2003 the line of credit was extended to January 24, 2004 by GE
     Capital Healthcare Financial Services so that Lancer could explore other
     financing options. An agreement with another financing institution is in
     the process of being finalized.

     Biomerica entered into an agreement for a line of credit agreement on
     September 12, 2000 with a shareholder whereby the shareholder would loan to
     the Company, as needed, up to $500,000 for working capital needs. The line
     of credit bore interest at 8%, was secured by accounts receivable and
     inventory, and expired September 13, 2003. The outstanding principal and
     interest on September 12, 2003 was $337,835, including principal of
     $288,050 and interest of $48,985, all of which was converted into a note
     payable bearing interest at 8% with interest and principal due monthly. The
     monthly payments required to pay the loan off in four years would be
     $8,248. The Company is currently paying $7,200 per month toward interest
     and principal. The terms of the note are currently being negotiated. The
     remaining unpaid principal and interest, if any, are due September 12,
     2007. The note is secured by inventory and accounts receivable of
     Biomerica.

(15) In June 2003, the Company issued 202,000 shares of restricted common stock
     in a private placement to insiders and qualified investors. The stock was
     sold at $.25 per share and had one warrant for the purchase of restricted
     common stock attached to each share of common stock purchased. During the
     three months ended August 31, 2003, $48,080 was recorded as compensation
     expense for the excess in the market value of the issued common stock and
     warrants over the consideration received. The warrants vest immediately,
     expire in five years, and are exercisable at $.25 per share.

     On June 2, 2003, Lancer granted 52,500 stock options to purchase shares of
     Lancer common stock at an exercise price of $.43 per share to directors of
     the Lancer for services rendered. The options vest over two years and have
     a term Of five years.

     On June 2, 2003, Lancer granted 75,000 stock options to purchase shares of
     Lancer common stock at an exercise price of $.43 per share to its Chief
     Executive Officer in lieu of salary. The options vest over three years and
     have a term of five years.

     On June 2, 2003, Lancer granted 120,000 stock options to purchase shares of
     the Lancer's common stock at an exercise price of $.43 per share as
     pursuant to terms of the Employment agreement between Lancer and Dan
     Castner, the Vice President of Sales and Marketing. The options vest over
     four years and have a term of five years.

(16) Reportable business segments for the six months and quarter ended November
     30, 2003 and 2002 are as follows:


                                               Six Months               Three Months
                                            Ended November 30,       Ended November 30,
                                            2003         2002        2003          2002
    ---------------------------------------------------------------------------------------
                                                                    
    Domestic sales:
       Orthodontic products               $1,518,000  $1,566,000    $  784,000  $  812,000
    =======================================================================================

    Medical diagnostic products           $  650,000  $  796,000    $  256,000  $  269,000
    =======================================================================================

    Foreign sales:
        Orthodontic products              $1,366,000  $1,224,000    $  782,000  $  693,000
    =======================================================================================

    Medical diagnostic products           $  900,000  $  640,000      $448,000  $  363,000
    =======================================================================================

                                       14




                                               Six Months               Three Months
                                            Ended November 30,       Ended November 30,
                                            2003         2002        2003          2002
    ---------------------------------------------------------------------------------------
    Net sales:
        Orthodontic products              $2,884,000  $2,790,000    $1,566,000  $1,505,000
        Medical diagnostic products        1,550,000   1,436,000       704,000     632,000
    ---------------------------------------------------------------------------------------

    Total                                 $4,434,000  $4,226,000    $2,270,000  $2,137,000
    =======================================================================================

    Operating (loss) income:
       Orthodontic products               $ (147,000) $  (20,000)   $   (2,000) $   25,000
       Medical diagnostic products          (293,000)   (274,000)     (127,000)   (170,000)
    ---------------------------------------------------------------------------------------

    Total                                 $ (440,000) $ (294,000)   $ (129,000) $ (145,000)
    =======================================================================================

    Operating loss from discontinued segment:
      ReadyScript                         $    2,944  $   38,531    $    3,020  $   14,437
    ---------------------------------------------------------------------------------------

    Total                                 $    2,944  $   38,531    $    3,020  $   14,437
    =======================================================================================

    Domestic long-lived assets:
    Orthodontic products                  $  317,000  $   52,000
    Medical diagnostic products              137,000     184,000
                    ---------------------------------------------------

    Total                                 $  454,000  $  236,000
                    ===================================================

    Foreign long-lived assets:
     Orthodontic products                 $  122,000  $   19,000
     Medical diagnostic products              17,000        --
                    ---------------------------------------------------

    Total                                 $  139,000  $   19,000
                    ===================================================

    Total assets:
     Orthodontic products                $ 3,622,000  $3,532,000
     Medical diagnostic products           1,632,000   1,465,000
-----------------------------------------------------------------------

    Total                                $ 5,254,000  $4,997,000
=======================================================================

Depreciation and amortization
     expense:
      Orthodontic products               $    25,000  $   48,000
      Medical diagnostic products             32,000      25,000
-----------------------------------------------------------------------

    Total                                $    57,000  $   73,000
=======================================================================

Capital expenditures:
  Orthodontic products                   $   227,000  $   36,000
  Medical diagnostic products                 18,000      25,000
                    ---------------------------------------------------

    Total                                $   245,000  $   61,000
                    ===================================================


     The net sales as reflected above consist of sales of unaffiliated customers
     only as there were no significant intersegment sales during the quarter
     ended November 30, 2003 and 2002.

                                       15



(17) Pursuant to the terms of the employment agreement between Lancer and Dan
     Castner, the Vice President of Sales and Marketing of Lancer, dated May 20,
     2003, Lancer agreed to pay Mr. Castner an annual base salary of $135,000.
     In addition, Lancer granted Mr. Castner stock options on June 2, 2003, to
     purchase an aggregate of 120,000 shares of Lancer's common stock at an
     exercise price of $.43 per share. The stock options have a term of five
     years and will vest over four years as follows: (i) 25% vesting on the
     first anniversary of the date of grant; (ii) 25% vesting on the second
     anniversary of the date of grant; (iii) the remaining 50% vesting as to
     one-twenty fourth (1/24th) per month each month thereafter for the next two
     years. Should Lancer be purchased by an affiliated third party, the options
     shall vest 100%.

(18) In April 2003, Lancer de Mexico entered into a manufacturing subcontractor
     agreement with Biomerica, Inc., to provide manufacturing services in
     Mexicali, Mexico. The agreement requires reimbursement from Biomerica for
     discrete expenses such as payroll, shipping, and customs fees; lease and
     security deposits of approximately $2,000 and $1,100 per month,
     respectively; and service fees of approximately $2,900 per month.

(19) Under its bylaws, the Company has agreed to indemnify its officers and
     directors for certain events or occurrences arising as a result of the
     officer or director's serving in such capacity. The term of the
     indemnification period is for the officer's or director's lifetime. The
     maximum potential amount of future payments the Company could be required
     to make under these indemnification agreements is unlimited. However, the
     Company has a directors and officer liability insurance policy that limits
     its exposure and enables it to recover a portion of any future amounts
     paid.

     As a result of its insurance policy coverage, the Company believes the
     estimated fair value of these indemnification agreements is minimal and has
     no liabilities recorded for these agreements as of November 30, 2003. The
     Company enters into indemnification provisions under (i) its agreements
     with other companies in its ordinary course of business, typically with
     business partners, contractors, and customers, landlords and (ii) its
     agreements with investors. Under these provisions the Company generally
     indemnifies and hold harmless the indemnified party for losses suffered or
     incurred by the indemnified party as a result of the Company's activities
     or, in some cases, as a result of the indemnified party's activities under
     the agreement. These indemnification provisions often include
     indemnifications relating to representations made by the Company with
     regard to intellectual property rights. These indemnification provisions
     generally survive termination of the underlying agreement. In addition, in
     some cases, the Company has agreed to reimburse employees for certain
     expenses and to provide salary continuation during short-term disability.
     The maximum potential amount of future payments the Company could be
     required to make under these indemnification provisions is unlimited. The
     Company has not incurred material costs to defend lawsuits or settle claims
     related to these indemnification agreements. As a result, the Company
     believes the estimated fair value of these agreements is minimal.
     Accordingly, the Company has no liabilities recorded for these agreements
     as of November 30, 2003."

(20) The Chief Executive Officer and Chief Financial Officer of Biomerica are
     not currently taking a cash salary. Their wages are being recorded as an
     administrative expense and reported as part of accrued wages on the balance
     sheet.

(21) Included in accounts payable is $115,699 due for rental of the Company's
     facilities according to the terms of the lease. All of this amount is past
     due.

(22) CRITICAL ACCOUNTING POLICIES

     The discussion and analysis of our financial condition and results of
     operations are based on the consolidated financial statements, which have
     been prepared in accordance with accounting principles generally accepted
     in the United States. The preparation of these consolidated financial
     statements requires estimates and assumptions that affect the reported
     amounts and disclosures.

     We believe the following to be critical accounting policies as they require
     more significant judgments and estimates used in the preparation of our
     consolidated financial statements. Although we believe that our judgments
     and estimates are appropriate and correct, actual future results may differ
     from our estimates.

                                       16



     In general the critical accounting policies that may require judgments or
     estimates relate specifically to the recognition of revenue, the Allowance
     for Doubtful Accounts, Inventory Reserves for Obsolescence and Declines in
     Market Value, Impairment of Long-Lived Assets, Stock Based Compensation and
     Deferred Income Tax Valuation and Allowances.

     We recognize product revenues when an arrangement exists, delivery has
     occurred, the price is determinable and collection is reasonably assured.

     The Allowance for Doubtful Accounts is established for estimated losses
     resulting from the inability of our customers to make required payments.
     The assessment of specific receivable balances and required reserves is
     performed by management and discussed with the audit committee. We have
     identified specific customers where collection is probably and have
     established specific reserves, but to the extent collection is made, the
     allowance will be released. Additionally, of the financial condition of our
     customers were to deteriorate, resulting in an impairment of their ability
     to make payments, additional allowances may be required. Reserves are
     provided for excess and obsolete inventory, which are estimated based on a
     comparison of the quantity and cost of inventory on hand to management's
     forecast of customer demand. Customer demand is dependent on many factors
     and requires us to use significant judgment in our forecasting process. We
     must also make assumptions regarding the rate at which new products will be
     accepted in the marketplace and at which customers will transition from
     older products to newer products. Once a reserve is established, it is
     maintained until the product to which it relates is sold or otherwise
     disposed of, even if in subsequent periods we forecast demand for the
     product.

     In general, we are in a loss position for tax purposes, and have
     established a valuation allowance against deferred tax assets, as we do not
     believe it is likely that we will generate sufficient taxable income in
     future periods to realize the benefit of our deferred tax assets.
     Predicting future taxable income is difficult, and requires the use of
     significant judgment. At November 30, 2003, all of our deferred tax assets
     were reserved. Accruals are made for specific tax exposures and are
     generally not material to our operating results or financial position, nor
     do we anticipate material changes to these reserves in the near future.

     We have adopted SFAS No. 123, "Accounting for Stock-Based Compensation,"
     for Disclosure purposes. Under SFAS No. 123, we measure compensation for
     our stock- based employee compensation plan using the intrinsic value
     method prescribed in Accounting Principles Board ("APB") No. 25,
     "Accounting for Stock Issued to Employees" and its related interpretations.
     We provide pro forma disclosure of the effect on net income or loss as if
     the fair value based method prescribed in SFAS No. 123 has been applied in
     measuring compensation expense.

     We have provided a full valuation reserve related to our substantial
     deferred tax assets. In the future, it sufficient evidence of our ability
     to generate sufficient future taxable income in certain tax jurisdictions
     becomes apparent, we may be required to reduce our valuation allowances,
     resulting in income tax enefits in our consolidated statement of
     operations. We evaluate the realiza- bility of the deferred tax assets and
     assess the need for valuation allowance quarterly. The utilization of the
     net operating loss carryforwards could be substantially limited due to
     restrictions imposed under federal and state laws upon a change of
     ownership.

(23) Risks and Uncertainties

     License Agreements - Certain of the Company's sales of products are
     governed by license agreements with outside third parties. All of such
     license agreements to which the Company currently is a party, are for fixed
     terms which will expire after ten years from the commencement of the
     agreement or upon the expiration of the underlying patents. After the
     expiration of the agreements or the patents, the Company is free to use the
     technology that had been licensed. There can be no assurance that the
     Company will be able to obtain future license agreements as deemed
     necessary by management. The loss of some of the current licenses or the
     inability to obtain future licenses could have an adverse affect on the
     Company's financial position and operations. Historically, the Company has
     successfully obtained all the licenses it believed necessary to conduct its
     business.

                                       17



     Distribution - The Company has entered into various exclusive and
     non-exclusive distribution agreements (the "Agreements") which generally
     specify territories of distribution. The agreements range in term from one
     to five years. The Company may be dependent upon such distributors for the
     marketing and selling of its products worldwide during the terms of these
     agreements. Such distributors are generally not obligated to sell any
     specified minimum quantities of the Company's product. There can be no
     assurance of the volume of product sales that may be achieved by such
     distributors.

     Government Regulations - The Company's products are subject to regulation
     by the FDA under the Medical Device Amendments of 1976 (the "Amendments").
     The Company has registered with the FDA as required by the Amendments.
     There can be no assurance that the Company will be able to obtain
     regulatory clearances for its current or any future products in the United
     States or in foreign markets.

     European Community - The Company is required to obtain certification in the
     European Community to sell products in those countries. The certification
     requires the Company to maintain certain quality standards. The Company has
     been granted certification on certain products. However, there is no
     assurance that the Company will be able to retain its certification in the
     future.

     Risk of Product Liability - Testing, manufacturing and marketing of the
     Company's products entail risk of product liability. The Company currently
     has product liability insurance. There can be no assurance, however, that
     the Company will be able to maintain such insurance at a reasonable cost or
     in sufficient amounts to protect the Company against losses due to product
     liability. An inability could prevent or inhibit the commercialization of
     the Company's products. In addition, a product liability claim or recall
     could have a material adverse effect on the business or financial condition
     of the Company.

                                       18



                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND SELECTED FINANCIAL DATA

CERTAIN INFORMATION CONTAINED HEREIN (AS WELL AS INFORMATION INCLUDED IN ORAL
STATEMENTS OR OTHER WRITTEN STATEMENTS MADE OR TO BE MADE BY BIOMERICA) CONTAINS
STATEMENTS THAT ARE FORWARD-LOOKING, SUCH AS STATEMENTS RELATING TO ANTICIPATED
FUTURE REVENUES OF THE COMPANY AND SUCCESS OR CURRENT PRODUCT OFFERINGS. SUCH
FORWARD-LOOKING INFORMATION INVOLVES IMPORTANT RISKS AND UNCERTAINTIES THAT
COULD SIGNIFICANTLY AFFECT ANTICIPATED RESULTS IN THE FUTURE, AND ACCORDINGLY,
SUCH RESULTS MAY DIFFER MATERIALLY FROM THOSE EXPRESSED IN ANY FORWARD-LOOKING
STATEMENTS MADE BY OR ON BEHALF OF BIOMERICA. THE POTENTIAL RISKS AND
UNCERTAINTIES INCLUDE, AMONG OTHERS, FLUCTUATIONS IN THE COMPANY'S OPERATING
RESULTS. THESE RISKS AND UNCERTAINTIES ALSO INCLUDE THE SUCCESS OF THE COMPANY
IN RAISING NEEDED CAPITAL, THE CONTINUAL DEMAND FOR THE COMPANY'S PRODUCTS,
COMPETITIVE AND ECONOMIC FACTORS OF THE MARKETPLACE, AVAILABILITY OF RAW
MATERIALS, HEALTH CARE REGULATIONS AND THE STATE OF THE ECONOMY. READERS ARE
CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH
SPEAK ONLY AS OF THE DATE HEREOF, AND THE COMPANY UNDERTAKES NO OBLIGATION TO
UPDATE THESE FORWARD-LOOKING STATEMENTS.

RESULTS OF OPERATIONS

Consolidated net sales for Biomerica were $4,434,215 for the six months ended
November 30, 2003 as compared to $4,226,038 for the same period in the prior
fiscal year. This represents an increase of $208,177, or 4.9% for the six month
period. Of this increase $93,356 was attributable to an increase in sales at
Lancer. Consolidated net sales for the quarter then ended were $2,269,856 as
compared to $2,136,529 for the same period in the previous year. This represents
an increase of $133,327, or 6.2%. Of this quarterly increase $$60,748 was
attributable to sales at Lancer. The increase in sales at Lancer was primarily
attributable to increases In sales in Central and South America. Domestic sales
at Lancer decreased by $49,258 and $28,778 for the six month and quarter,
respectively. Increases in sales at Biomerica were a result of sales of new
products and an increase in foreign sales.

Cost of sales as a percentage of sales increased from 69.9% to 70.8% for the six
months remained consistent at 71.0% for the quarter. Lancer's cost of sales as a
percentage of sales increased from 70.9% to 72.0% for the six months and for the
quarter increased from 70.1% to 70.3%. These increases were attributable to
increased production costs and reserve for obsolete inventory. Biomerica's cost
of sales as a percentage of sales increased for the six months from 67.9% to
68.4%. For the quarter Biomerica's cost of sales decreased from 73.3% to 72.4%.
The increase for the six month was due to the start up of the Mexico facility,
whereas the decrease for the three months was attributable to lower wage costs.

Selling, general and administrative costs increased by $137,004, or 9.4% for the
six months and increased by $18,762, or 2.7% for the quarter. Lancer had
increased selling, general and administrative costs of $29,565 for the six
months and $93,165 for the quarter. Lancer had increased labor costs in
marketing which was partially offset by decreased labor and professional fees in
the administrative department. Administrative expenses at Biomerica increased
due to a variety of expense increases, Such as consulting, utilities and
insurance.

Research and development increased by $31,547, or 28.6% for the six months and
by $5,083 for the three months. Lancer had an increase in research and
development costs of $28,679 and $11,362 for the six and three months,
respectively. These expenses were attributable to the development of a new
product line. Biomerica had increased costs of $2,868 and decreased costs of
$6,278 for the six and three months, respectively. The increase for the six
months was due to higher wages and the decrease for the quarter was due to lower
material costs.

                                       19



For the six months ended November 30, 2003, other income of $33,258 was realized
as compared to $51,992 in the prior year which was a result of the insurance
claim settlement of $47,981 for the theft of inventory at the Lancer
Orthodontics Inc.'s Mexicali facility. For the three months, other income was
$26,247 as compared to $3,942. The increase was primarily due to the sale of
securities by Biomerica.

Interest expense decreased by $2,324 (13.1%) for the six months compared to the
previous year and by $1,988 for the quarter. The decrease was primarily due to
use of cash instead of line of credit at Lancer for part of the year.

Please refer to Note 3 in the Notes to the Consolidated Financial Statements in
the Company's report on Form 10-KSB for the year ended May 31, 2003, for a more
in-depth discussion of subsidiaries.

LIQUIDITY AND CAPITAL RESOURCES

As of November 30, 2003, the Company had cash and available-for-sale securities
in the amount of $332,413 and working capital of $2,460,835. Cash and working
capital totaling $224,237 and $2,477,013 respectively, relates to the Lancer
subsidiary. Lancer's line of credit restricts Biomerica's ability to draw on
Lancer's resources and, as such, said cash, working capital and equity are not
available to Biomerica.

The Company has suffered substantial recurring losses from operations over the
last couple of years. The Company has funded its operations through debt and
equity financings, and may have to do so in the future. ReadyScript operations
were discontinued in May 2001 and Allergy Immuno Technologies was sold in May
2002. ReadyScript and Allergy Immuno Technologies were previously contributors
to the Company's losses. The Company has reduced operating costs through certain
cost reduction efforts and plans to concentrate on its core business in Lancer
and Biomerica to increase sales. There can be no assurance that the Company will
be able to become profitable, generate positive cash flow from operations or
obtain the necessary equity or debt financing to fund operations in the future.
Should the Company be unable to reduce costs adequately or should the Company be
unable to secure additional financing, the result for the Company could be the
inability to continue operations.

The Company will continue to have limited cash resources. Although the Company's
management recognizes the imminent need to secure additional financing there can
be no assurance that the Company will be successful in consummating any such
transaction or, if the Company does consummate such transaction, that the terms
and conditions of such financing will not be unfavorable to us.

Our independent certified public accountants have concluded that these factors,
among others, raise substantial doubt as to the Company's ability to continue as
a going concern for a reasonable period of time, and have, therefore modified
their audit report on the Company's annual consolidated financial statements as
of and for the year ended May 31, 2003 in the form of an explanatory paragraph
describing the events that have given rise to this uncertainty. The consolidated
financial statements do not include any adjustments relating to the
recoverability and classification of asset carrying amounts or the amount and
classification of liabilities that might result should the Company be unable to
continue as a going concern.

These consolidated financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has operating and
liquidity concerns due to historically reporting net losses and negative cash
flows from operations. Biomerica's shareholder's line of credit expired
September 13, 2003. The unpaid principal and interest of $337,835 was converted
into a note payable bearing interest at 8% and payable in monthly installments
over four years. The monthly payments required to pay the loan off would be
$8,248 per month. The Company is currently making payments of $7,200 per month.
The terms of the note are currently being negotiated. The note is secured by
inventory and accounts receivable.

                                       20



During the six months ended November 30, 2003, the Company operations used cash
of $21,225. This compares to cash provided by operations of $363,596 in the same
period in the prior fiscal year. The Lancer subsidiary used cash in operations
of $53,281 during this fiscal year and provided cash of $407,005 in the last
fiscal year. Cash provided by financing activities was $58,289, which resulted
from a private placement of $30,500, increase in shareholder loan of $20,035,
change in minority interest of $6,180 and exercise of stock option of $2,000.

The Company purchased $244,948 in fixed assets during the first six month of
this fiscal year. Of this, $227,378 was a result of expenditures at the Lancer
subsidiary.

The Chief Executive Officer and Chief Financial Officer of Biomerica are not
currently taking a cash salary. Their wages are being recorded as an
administrative expense and reported as part of accrued wages on the balance
sheet.

Pursuant to a decision by the Nasdaq Listing Qualifications Panel, the Company's
common stock was delisted from the Nasdaq Stock Market effective June 20, 2002,
for failure to comply with the net tangible assets or shareholders' equity
requirements as set forth in Marketplace Rule 4310(c)(2)(B). The Company's
securities were immediately eligible to trade on the OTC Bulletin Board and are
traded under the symbol BMRA.OB.

At November 30, 2003, Lancer had a $400,000 line of credit with a financial
Institution, which expires January 24, 2003. Borrowings are made at prime plus
2.0% (8.0% at November 30, 2003) and are limited to 80% of accounts receivable
less than 90 days old with a liquidity factor of 94%. The outstanding balance at
November, 2003 was $0 and the unused portion available was approximately
$326,000.

The line of credit is collateralized by substantially all the assets of Lancer,
including inventories, receivables, and equipment. The lending agreement for the
line of credit requires, among other tings, that Lancer maintain a tangible net
worth ratio of $2,100,000, which was met, and that receivables' payments be sent
to a controlled lockbox. In addition to interest, a management fee of .25% of
the average monthly outstanding loan balance and an unused balance fee of .0425%
on the average monthly unused portion available are required. Lancer is not
required to maintain compensating balances in connection with this lending
agreement. Proceeds from this line cannot be used to support the operations of
Biomerica.

In October 2003 the line of credit was extended to January 24, 2004 by GE
Capital Healthcare Financial Services so that Lancer could explore other
financing options. An agreement with another financing institution is in the
process of being finalized.

Biomerica, Inc. entered into a line of credit agreement on September 12, 2000
with a shareholder whereby the shareholder would loan to the Company, as needed,
up to $500,000 for working capital needs. The line of credit expired September
12, 2003. The outstanding principal and interest on September 12, 2003 was
$337,835, including principal of $288,850 and interest of $48,985, all of which
was converted into a note payable bearing interest at 8% with interest and
principal due monthly. The remaining principal and interest, if any, are due
September 12, 2007. The monthly payments required to pay the loan off in four
years would be $8,248 per month. The Company is currently paying $7,200 per
month. The terms of the note are currently being negotiated. The note is secured
by inventory and accounts receivables of Biomerica.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

You should read the following factors in conjunction with the factors discussed
elsewhere in this and our other filings with the SEC and in materials
incorporated by reference in these filings. The following is intended to
highlight certain factors that may affect the financial condition and results of
operations of Biomerica and are not meant to be an exhaustive discussion of
risks that apply to companies such as Biomerica. Like other businesses,
Biomerica is susceptible to macroeconomic downturns in the United States or

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abroad, as were experiences in fiscal year 2002, that may affect the general
economic climate and performance of Biomerica or its' customers. Aside from
general macroeconomic downturns, the additional material factors that could
affect future financial results include, but are not limited to: Terrorist
attacks and the impact of such events; diminished access to raw materials that
directly enter into our manufacturing process; shipping labor disruption or
other major degradation of the ability to ship our products to end users;
inability to successfully control our margins which are affected by many factors
including competition and product mix; protracted shutdown of the U.S. Border
due to an escalation of terrorist or counter terrorist activity; any changes in
our business relationships with international distributors or the economic
climate they operate in; any event that has a material adverse impact on our
foreign manufacturing operations may adversely affect our operation as a whole;
failure to manage the future expansion of our business could have an adverse
affect on our revenues and profitability; possible costs in complying with
government regulations and the delays in receiving required regulatory approvals
or the enactment of new adverse regulations or regulatory requirements; numerous
competitors, most of which have substantially greater financial and other
resources than we do; potential claims and litigation brought by patients or
medical professionals alleging harm caused by the use of or exposure to our
products; quarterly variations in operating results caused by a number of
factors, including business and industry conditions and other factors beyond our
control. All of these factors make it difficult to predict operating results for
any particular period.

In October 2003 the line of credit at Lancer was extended to January 24, 2004 by
GE Capital Healthcare Financial Services so that Lancer could explore other
financing options. An agreement with another financing institution is in the
process of being finalized.

Item 4.  CONTROLS AND PROCEDURES

The Company's Chief Executive Officer and Chief Financial Officer (the Company's
principal executive officer and principal financial offier, respectively) have
concluded, based on their evaluation as of November 30, 2003, that the design
and operation of the Company's "disclosure controls and procedures" (as defined
in rules 13a-15(e) under the Securities Exchange Act of 1934, as amended
("Exchange Act") are effective to ensure that information required to be
disclosed by the Company in the reports filed or submitted by the Company under
the Exchange Act is accumulated, recorded, processed, summarized and reported to
the Company's management, including the Company's principal executive officer
and principal financial officer, as appropriate to allow timely decisions
regarding whether or not disclosure is required.

During the quarter ended November 30, 2003, there were no changes in the
Company's "internal controls over financial reporting" (as defined in Rule
13a-15(f) under the Exchange Act) that have materially affected, or are
reasonably likely to materially affect, the Company's internal controls over
financial reporting.

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                           PART II. OTHER INFORMATION

Item 1.  LEGAL PROCEEDINGS.  Inapplicable.

Item     2. CHANGES IN SECURITIES AND USE OF PROCEEDS. The following shares of
         Restricted common stock were issued during the six months Ended
         November 30, 2003:
                                    Class or Persons     Price
         Date     Title    Amount   Sold to              Per Share     Total
         ----     -----    ------   -------              ---------     -----

         6/5/03   common   46,000  qualified investors       $.25     $11,500
         6/6/03   common    8,000  qualified investor        $.25       2,000
         6/9/03   common    8,000  qualified investor        $.25       2,000
         6/17/03  common  100,000  qualified investor        $.25      25,000
                                   and insider
         6/23/03  common   20,000  qualified investor        $.25       5,000
         6/26/03  common   20,000  qualified investor        $.25       5,000

         The exemption relied upon for the issuance of the unregistered shares
         was that the shares were issued to qualified investors within the
         meaning of Securities and Exchange Commission Rule 501, Regulation D.

Item 3.  DEFAULTS UPON SENIOR SECURITIES.  Inapplicable.

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

         The 2002 Annual Meeting of the Company's stockholders was held on
         September 2, 2003. Two matters were voted on at the meeting, as set
         Forth in the proxy statement dated June 26, 2003, as filed with the
         Securities and Exchange Commission pursuant to Rule 14 under the
         Securities Act of 1934. The following summarizes the voting:

         Proposal No. 1:  Election of Directors

         Name                       For              Votes Withheld
         ----                       ---              --------------

         Barbieri                   4,745,095        230,842
         Cano                       4,745,095        230,842
         Irani                      4,744,305        232,184
         Moore                      4,744,705        231,232
         Orlando                    4,745,095        230,842

         All directors were elected.

         Proposal No. 2:  Proposal to Ratify and Approve the Company's 2002
         Stock Incentive Plan

                                    For           Against              Abstain
                                    ---           -------              -------

                                    1,870,275      400,481             70,483

         Proposal No. 2 did not receive a plurality of the votes and therefore
         was not approved.

Item 5.  OTHER INFORMATION.  Inapplicable.

Item 6.  EXHIBITS AND REPORTS ON FORM 8-K. Inapplicable.

(a)      Exhibits

99.1     Certifications of Chief Executive Officer and Chief Financial Officer
         pursuant To 18 U.S.C., Section 1350, as adopted pursuant to Section 302
         and 906 of the Sarbanes-Oxley Act of 2002.

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                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has fully caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

Date:  January 20, 2004

                                             BIOMERICA, INC.

                                             By: /S/ Zackary S. Irani
                                                 -----------------------------
                                             Zackary S. Irani
                                             Chief Executive Officer

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