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<SEC-DOCUMENT>0001019687-09-003182.txt : 20090831
<SEC-HEADER>0001019687-09-003182.hdr.sgml : 20090831
<ACCEPTANCE-DATETIME>20090831163106
ACCESSION NUMBER:		0001019687-09-003182
CONFORMED SUBMISSION TYPE:	10-K
PUBLIC DOCUMENT COUNT:		7
CONFORMED PERIOD OF REPORT:	20090531
FILED AS OF DATE:		20090831
DATE AS OF CHANGE:		20090831

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			BIOMERICA INC
		CENTRAL INDEX KEY:			0000073290
		STANDARD INDUSTRIAL CLASSIFICATION:	DENTAL EQUIPMENT & SUPPLIES [3843]
		IRS NUMBER:				952645573
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			0531

	FILING VALUES:
		FORM TYPE:		10-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-08765
		FILM NUMBER:		091046350

	BUSINESS ADDRESS:	
		STREET 1:		1533 MONROVIA AVENUE
		CITY:			NEWPORT BEACH
		STATE:			CA
		ZIP:			92663
		BUSINESS PHONE:		9496452111

	MAIL ADDRESS:	
		STREET 1:		1533 MONROVIA AVENUE
		CITY:			NEWPORT BEACH
		STATE:			CA
		ZIP:			92663

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	NMS PHARMACEUTICALS INC
		DATE OF NAME CHANGE:	19871130

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	NUCLEAR MEDICAL SYSTEMS INC
		DATE OF NAME CHANGE:	19830216

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	NUCLEAR INSTRUMENTS INC
		DATE OF NAME CHANGE:	19720508
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>biomerica_10k-053109.txt
<DESCRIPTION>FORM 10-K
<TEXT>
<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------
                                    FORM 10-K

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

      FOR THE FISCAL YEAR ENDED MAY 31, 2009

                                       or

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

     For The Transition Period From ______ To ______

                         COMMISSION FILE NUMBER: 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 of organization)                              Identification No.)

  1533 MONROVIA AVENUE, NEWPORT BEACH, CA                         92663
  (Address of principal executive offices)                      (Zip Code)

                         REGISTRANT'S TELEPHONE NUMBER:
                                 (949) 645-2111

         Securities registered under Section 12(b) of the Exchange Act:

  (TITLE OF EACH CLASS)            (NAME OF EACH EXCHANGE ON WHICH REGISTERED)
  ---------------------            -------------------------------------------
        NONE                                      OTC-BULLETIN BOARD

Securities registered pursuant to Section 12(g) of the Act:

                              (TITLE OF EACH CLASS)
                          COMMON STOCK, PAR VALUE $0.08

Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act Yes [_] No [X]

Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Securities Act. Yes [X] No [_]

Note - Checking the box above will not relieve any registrant required to file
reports pursuant to Section 13 or 15(d) of the Exchange Act from their
obligations under those Sections.

Indicate by check whether the registrant (1) 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 has submitted electronically and
posted on its corporate Website, if any, every Interactive Date File required to
be submitted and posted pursuant to Rule 405 of Regulation S-T (paragraph
232.405 of this chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such files).

         Yes [_] No [_]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (paragraph 229.405 of this chapter) is not contained herein,
and no disclosure will be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. [X]

Indicate by check mark whether the registrant is a large accelerated, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definitions of "large accelerated filer", "accelerated filer", and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.

           Large Accelerated Filer [_]           Accelerated Filer [_]
           Non-Accelerated Filer   [_]           Smaller Reporting Company [X]

Indicate by check mark whether the Registrant is a shell company (as defined in
Rule 12b-2 of the Act).

         Yes [_] No [X]

State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked price of such common equity, as the last
business day of the registrant's most recently completed second fiscal quarter
(based upon 5,302,847 shares held by non-affiliates and the closing price of
$0.43 per share for Common Stock in the over-the-counter market as of November
30, 2008): $2,280,224

Indicate the number of shares outstanding of each of the registrant's common
stock, par value $0.08, outstanding as of August 28, 2009: 6,631,039

DOCUMENTS INCORPORATED BY REFERENCE: Part III contains information incorporated
by reference to the Company's proxy statement for its 2009 Annual Meeting of
Stockholders, which will be filed not later than 120 days after the end of the
Company's fiscal year ended May 31, 2009. The Exhibit Index incorporates by
reference various documents previously filed with the Securities and Exchange
Commission.

<PAGE>

PART I*

ITEM 1. DESCRIPTION OF BUSINESS

BUSINESS OVERVIEW

THE COMPANY

Biomerica, Inc. ("Biomerica", the "Company", "we" or "our") was incorporated in
Delaware in September 1971 as Nuclear Medical Systems, Inc.

The Company develops, manufactures, and markets medical diagnostic products
designed for the early detection and monitoring of chronic diseases and medical
conditions. Our medical diagnostic products are sold worldwide in two markets:
1) clinical laboratories and 2) point of care (physicians' offices and
over-the-counter drugstores). Our diagnostic test kits are used to analyze blood
or urine from patients in the diagnosis of various diseases and other medical
complications, or to measure the level of specific hormones, antibodies,
antigens or other substances, which may exist in the human body in extremely
small concentrations.

Technological advances in medical diagnostics have made it possible to perform
diagnostic tests within the home and the physician's office (the point of care),
rather than in the clinical laboratory. One of our objectives has been to
develop and market rapid diagnostic tests that are accurate, employ easily
obtained specimens, and are simple to perform without instrumentation. Our
over-the-counter and professional rapid diagnostic products help to manage
existing medical conditions and may save lives through early detection and
prompt diagnosis. Until recently, tests of this kind required the services of
medical technologists and sophisticated instrumentation. Frequently, results
were not available until at least the following day. We believe that rapid point
of care tests are as accurate as laboratory tests when used properly and they
require no instrumentation, give reliable results in minutes and can be
performed with confidence in the home or the physician's office.

Our clinical laboratory diagnostic products include tests for bone and anemia
conditions, gastrointestinal diseases, food intolerance, diabetes and others.
These diagnostic test kits utilize enzyme immunoassay technology. Some of these
products have not yet been submitted for clearance by the FDA for diagnostic
use, but can be sold in various foreign countries.

                                       -1-
<PAGE>

A significant part of Biomerica's manufacturing and assembly operations are
located in Mexicali, Mexico, in order to reduce the cost of manufacturing and
compete more effectively worldwide. Biomerica maintains its headquarters in
Newport Beach, California where it houses administration, research and
development, sales and marketing, and customer services.

Biomerica has undergone no material change in the mode of conducting its
business other than as described above and it did not dispose of any material
amount of its assets in fiscal 2009 and 2008 except for its ownership in Lancer
Orthodontics in fiscal 2008.

PRODUCTION

Most of our diagnostic test kits are processed and assembled at our facilities
in Newport Beach, California and in Mexicali, Mexico. During fiscal 2003, the
diagnostics division established a manufacturing facility in Mexicali, Mexico.
We moved a significant portion of our diagnostic production (primarily packaging
and assembly) to that facility. We sublease facilities from and subcontract with
Lancer Orthodontics (a former subsidiary) to provide labor and other services.
Production of diagnostic tests can involve formulating component antibodies and
antigens in specified concentrations, attaching a tracer to the antigen, filling
components into vials, packaging and labeling. We continually engage in quality
control procedures to assure the consistency and quality of our products and to
comply with applicable FDA regulations. In June 2008 the Company incorporated in
Mexico under the name of Biomerica de Mexico for the purpose of establishing our
own mequiladora operation in Mexico at some time in the future.

All manufacturing production is regulated by the FDA Good Manufacturing
Practices for medical devices. We have an internal quality control department
that monitors and evaluates product quality and output. We also have an internal
Quality Systems department which ensures that our operating procedures are in
compliance with current FDA, CE Mark and ISO regulations. We either produce our
own antibodies and antigens or purchase these materials from qualified vendors.
We have alternate, approved sources for raw materials procurement and we do not
believe that material availability in the foreseeable future will be a problem.

RESEARCH AND DEVELOPMENT

Biomerica is engaged in research and development to broaden its diagnostic
product line in specific areas. Research and development expenses include the
costs of materials, supplies, personnel, facilities and equipment as well as
outside contract services. Consolidated research and development expenses
incurred by Biomerica for the years ended May 31, 2009 and 2008 aggregated
$278,308 and $259,085, respectively.

MARKETS AND METHODS OF DISTRIBUTION

Biomerica has approximately 450 current customers for its diagnostic business,
of which approximately 100 are distributors and the balance are hospital and
clinical laboratories, medical research institutions, medical schools,
pharmaceutical companies, chain drugstores, wholesalers and physicians' offices.

We rely on unaffiliated distributors, advertising in medical and trade journals,
exhibitions at trade conventions, direct mailings and an internal sales staff to
market our diagnostic products. We target two main markets: (a) clinical
laboratories and (b) point of care testing (physicians' offices and
over-the-counter drug stores). Marketing plans are utilized in targeting each of
the two markets.

For the year ended May 31, 2009 the Company had two customers which accounted
for 26% of consolidated sales and during fiscal 2008 the Company had two
customers which accounted for 29% of consolidated sales.

BACKLOG

At May 31, 2009 and 2008 Biomerica had a backlog of approximately $97,000 and
$346,000 respectively.

RAW MATERIALS

The principal raw materials utilized by Biomerica consist of various chemicals,
serums, reagents and packaging supplies. Almost all of our raw materials are
available from several sources, and we are not dependent upon any single source
of supply or a few suppliers. For the years ended May 31, 2009 and 2008, no
company accounted for more than 10% of the consolidated purchases of raw
materials.

We maintain inventories of antibodies and antigens as components for our
diagnostic test kits. Some sales orders are processed on the day received while
others are processed at a later date depending on the quantity and type of
order.


                                      -2-
<PAGE>


COMPETITION

Immunodiagnostic products are currently produced by more than 100 companies.
Biomerica is not a significant factor in the overall market.

Our competitors vary greatly in size. Many are divisions or subsidiaries of
well-established medical and pharmaceutical concerns which are much larger than
Biomerica and expend substantially greater amounts than we do for research and
development, manufacturing, advertising and marketing.

The primary competitive factors affecting the sale of diagnostic products are
uniqueness, quality of product performance, price, service and marketing. We
believe we compete primarily on the basis of the uniqueness of our products, the
quality of our products, the speed of our test results, our patent position, our
favorable pricing and our prompt shipment of orders. We offer a broader range of
products than many competitors of comparable size, but to date have had limited
marketing capability. We are working on expanding this capability through
marketing and strategic cooperation with larger companies and distributors.

GOVERNMENT REGULATION OF OUR DIAGNOSTIC BUSINESS

As part of our diagnostic business, we sell products that are legally defined to
be medical devices. As a result, we are considered to be a medical device
manufacturer, and as such are subject to the regulations of numerous
governmental entities. These agencies include the Food and Drug Administration
the "FDA"), the United States Drug Enforcement Agency (the "DEA"), Environmental
Protection Agency, Federal Trade Commission, Occupational Safety and Health
Administration, U.S. Department of Agriculture ("USDA"), and Consumer Product
Safety Commission. These activities are also regulated by various agencies of
the states and localities in which our products are sold. These regulations
govern the introduction of new medical devices, the observance of certain
standards with respect to the manufacture and labeling of medical devices, the
maintenance of certain records and the reporting of potential product problems
and other matters.

The Food, Drug & Cosmetic Act of 1938 (the "FDCA") regulates medical devices in
the United States by classifying them into one of three classes based on the
extent of regulation believed necessary to ensure safety and effectiveness.
Class I devices are those devices for which safety and effectiveness can
reasonably be ensured through general controls, such as device listing, adequate
labeling, pre-market notification and adherence to the Quality System Regulation
("QSR") as well as Medical Device Reporting (MDR), labeling and other regulatory
requirements. Some Class I medical devices are exempt from the requirement of
Pre-Market Approval ("PMA") or clearance. Class II devices are those devices for
which safety and effectiveness can reasonably be ensured through the use of
special controls, such as performance standards, post-market surveillance and
patient registries, as well as adherence to the general controls provisions
applicable to Class I devices. Class III devices are devices that generally must
receive pre-market approval by the FDA pursuant to a pre-market approval
application to ensure their safety and effectiveness. Generally, Class III
devices are limited to life-sustaining, life-supporting or implantable devices.
However, this classification can also apply to novel technology or new intended
uses or applications for existing devices. The Company's products are primarily
either Class I or Class II medical devices. The following is a breakdown of the
Biomerica products by class:

Class I - Fortel(TM) Ovulation test, EZ-LH(TM) Rapid Ovulation test

Class II - GAP(tm) IgG H. Pylori ELISA kit, GAP (TM)IgM H. Pylori ELISA kit,
Anti-thyroglobulin ELISA kit, anti-TPO ELISA kit, PTH (intact) ELISA kit,
Calcitonin ELISA kit, Erythropoietin ELISA kit, ACTH ELISA kit, Isletest(tm) GAD
ELISA kit, IAA ELISA kit, GAP(tm) IgA H. Pylori ELISA kit, C-Peptide ELISA kit,
Myoglobin ELISA, Troponin I ELISA, HS-CRP ELISA, Allerquant (tm) Food
Intolerance Kits, Allerquant( tm) Food Additive Intolerance Kit, Gliadin IgG and
IgA kits, Transglutaminase IgA kit, Fortel Ultra Midstream (OTC and plastic
stick), EZ-HCG(tm) Rapid Pregnancy test (professional and dipstick), EZ
Detect(tm) Fecal Occult Blood test (Physician's dispenser pack and OTC),
Aware(tm) Breast Self-Examination, drugs of abuse rapid tests, EZ-HP
Professional, EZ-HP OTC, Fortel Microalbumin test, Fortel Cat Allergy Test.

Class III - Isletest(tm) ICA ELISA kit, EZ PSA (Professional and OTC).

If the FDA finds that the device is not substantially equivalent to a predicate
device, the device may be deemed a Class III device, and a manufacturer or
seller is required to file a PMA application. Approval of a PMA application for
a new medical device usually requires, among other things, extensive clinical
data on the safety and effectiveness of the device. PMA applications may take
years to be approved after they are filed, but approval is required before the
product can be sold for general use in the U.S. In addition to requiring
clearance or approval for new medical devices, FDA rules also require a new
510(k) filing and review period, prior to marketing a changed or modified
version of an existing legally marketed device, if such changes or modifications
could significantly affect the safety of effectiveness of that device. The FDA
prohibits the advertisement or promotion of any approved or cleared device for
uses other than those that are stated in the device's approved or cleared
application.

                                      -3-
<PAGE>

Pursuant to FDA requirements, we have registered our manufacturing facility with
the FDA as a medical device manufacturer, and listed the medical devices we
manufacture. We are also subject to inspection on a routine basis for compliance
with FDA regulations. This includes the Quality System Requirements, which
requires that we manufacture our products and maintain our documents in a
prescribed manner with respect to issues such as design controls, manufacturing,
testing and validation activities. Further, we are required to comply with other
FDA requirements with respect to labeling, and the Medical Device Reporting
(MDR) regulation which requires that we provide information to the FDA on deaths
or serious injuries alleged to have been associated with the use of our
products, as well as product malfunctions that are likely to cause or contribute
to death or serious injury if the malfunction were to recur. We believe that we
are currently in material compliance with all relevant QSR and MDR requirements.

In addition, our facility is required to have a California Medical Device
Manufacturing License. The license is not transferable and must be renewed
annually. Approval of the license requires that we be in compliance with QSR,
labeling and MDR regulations. Our license expires on March 16, 2010. These
licenses are renewed periodically, and to date we have never failed to obtain a
renewal.

Through compliance with FDA and California regulations, we can market our
medical devices throughout the United States. International sales of medical
devices are also subject to the regulatory requirements of each country. In
Europe, the regulations of the European Union require that a device have a "CE
Mark" in order to be sold in EU countries. The directive went into effect
beginning December 7, 2003. The Company has completed the process for complying
with the "CE Mark" directives, In Vitro Directive 98/79/EC, ISO 13485 for
medical devices, and Medical Device Directive 93/42/EEC. At present the
regulatory international review process varies from country to country. We, in
general, rely upon our distributors and sales representatives in the foreign
countries in which we market our products to ensure that we comply with the
regulatory laws of such countries. We believe that our international sales to
date have been in compliance with the laws of the foreign countries in which we
have made sales. Exports of most medical devices are also subject to certain FDA
regulatory controls.

The following products are FDA-cleared and may be sold to clinical laboratories,
physician laboratories and/or retail outlets in the United States as well as
internationally:

ACTH ELISA Kit
Anti-thyroglobulin ELISA kit
Anti-TPO ELISA Kit
AWARE(tm) Breast Self-Examination Kit
Calcitonin ELISA Kit
Drugs-of-Abuse Rapid Tests
Erythropoietin ELISA Kit
EZ-HCG Rapid Pregnancy Test
Fortel Microalbumin Test
EZ-LH(tm) Rapid Ovulation Test
EZ Detect(tm) Fecal Occult Blood Test (Physician's package, OTC package)
GAP IgG H.Pylori ELISA Kit
HS-CRP ELISA
Drugs-of-Abuse Rapid Tests
Myoglobin ELISA
PTH (Intact) ELISA Kit
Troponin I ELISA

The following products are not FDA-cleared. These are sold internationally and
can be sold in the U.S. "FOR RESEARCH ONLY":

Allerquant(tm) IgG Food Intolerance ELISA Kit (90-foods, 14-foods, custom kits)
Allerquant IgG Food Additives Kit
C-Peptide ELISA Kit
EZ-PSA Rapid Test
EZ-H. Pylori Rapid Test
Fortel Cat Allergy Test
Fortel Microalbumin Test
Fortel(tm) Ultra Midstream Pregnancy Test
Fortel(tm) Ovulation Test
GAP(tm) IgM H. Pylori ELISA Kit
GAP(tm) IgA H. Pylori ELISA Kit
Gliadin IgG ELISA Kit
Gliadin IgA ELISA Kit
Transglutaminase IgA ELISA Kit
Isletest(tm) GAD ELISA Kit
Isletest(tm) ICA ELISA Kit
Isletest(tm) IAA ELISA Kit


                                      -4-
<PAGE>

Biomerica is licensed to design, develop, manufacture and distribute IN VITRO
diagnostic and medical devices and is subject to the Code of Federal
Regulations, Section 21, parts 800 - 1299. The FDA is the governing body that
assesses and issues Biomerica's license to assure that it complies with these
regulations. Biomerica is currently licensed, and its last assessment was in
March 2006. During the inspection the FDA noted five observations that were
corrected in a timely manner. Biomerica is also registered and licensed with the
State of California's Department of Health Services. The Company believes that
all Biomerica products sold in the U.S. comply with the FDA regulations.

Biomerica's Quality Management System is in compliance with the International
Standards Organization (ISO) EN ISO 13485:2003. EN ISO 13485:2003 is an
internationally recognized standard in which companies establish their methods
of operation and commitment to quality.

SEASONALITY OF BUSINESS

The businesses of the Company and its subsidiary have not been subject to
significant seasonal fluctuations.

INTERNATIONAL BUSINESS

Most of Biomerica's property and equipment are located within Southern
California. The Company currently has a minor amount of property and equipment
located in Mexico. The following table sets forth the dollar volume of revenue
attributable to sales to domestic customers and foreign customers during the
last two fiscal years for Biomerica:

     Year Ended May 31,               2009                          2008

     Europe                     $2,631,000 /53.3%             $2,549,000 /51.7%
     U.S. Customers              1,198,000 /24.3%              1,359,000 /27.5%
     Asia                          956,000 /19.4%                854,000 /17.3%
     S. America                     92,000 /1.9%                  70,000 /1.4%
     Middle East                    40,000 /.8%                   57,000 /1.1%
     OTHER FOREIGN                  18,000 /.3%                   38,000 /1.0%
     ------------------------------------------------------------------------
     Total Revenues             $4,935,000 /100%              $4,927,000 /100%

We recognize that our foreign sales could be subject to some special or unusual
risks, which are not present in the ordinary course of business in the United
States. Changes in economic factors, government regulations, terrorism and
import restrictions all could impact sales within certain foreign countries.
Foreign countries have licensing requirements applicable to the sale of
diagnostic products, which vary substantially from domestic requirements;
depending upon the product and the foreign country, these may be more or less
restrictive than requirements within the United States. Foreign diagnostic sales
at Biomerica are made primarily through a network of approximately 100
independent distributors in approximately 60 countries.

INTELLECTUAL PROPERTY

We regard the protection of our copyrights, service marks, trademarks and trade
secrets as important to our future success. We rely on a combination of
copyright, trademark, service mark and trade secret laws and contractual
restrictions to establish and protect our proprietary rights in products and
services. We have entered into confidentiality and invention assignment
agreements with our employees and contractors, and nondisclosure agreements with
most of our fulfillment partners and strategic partners to limit access to and
disclosure of proprietary information. We cannot be certain that these
contractual arrangements or the other steps taken by us to protect our
intellectual property will prevent misappropriation of our technology. We have
licensed in the past, and expect that we may license in the future, certain of
our proprietary rights, such as trademarks or copyrighted material, to third
parties. While we attempt to ensure that the quality of our product brands is
maintained by such licensees, we cannot be certain that such licensees will not
take actions that might hurt the value of our proprietary rights or reputation.

BRANDS, TRADEMARKS, PATENTS, LICENSES

We registered the tradenames "Fortel", "Isletest", "Nimbus" and "GAP" with the
Office of Patents and Trademarks on December 31, 1985. Our unregistered
tradenames are "EZ-Detect", "Candiquant," "Candigen", "EZ-H.P." and EZ-PSA". A
trademark for "Aware" was issued and assigned in November 2001. In addition,
Biomerica holds the following patents: Immunotherapy Agents for Treatment of IgE
Mediated Allergies and Allergen-thymic Hormone Conjugates for Treatment of IgE

                                      -5-
<PAGE>

Mediated Allergies, U.S. Patent #5,275,814, issued January 4, 1994 and
Diagnostic Test for Measuring Islet Cell Autoantibodies and Reagents Relating
Thereto, U.S. Patent #5,786,221, issued July 28, 1998. Biomerica has obtained
the rights to manufacture and sell certain products. In some cases royalties are
paid on the sales of these products. Biomerica anticipates that it will license
or purchase the rights to other products or technology in the future.

The laws of some foreign countries do not protect our proprietary rights to the
same extent as do the laws of the U.S. Effective copyright, trademark and trade
secret protection may not be available in such jurisdictions. Our efforts to
protect our intellectual property rights may not prevent misappropriation of our
content. In addition, there can be no assurance that Biomerica is not violating
any third party patents.

On March 27, 2009 the Company signed an Asset Purchase Agreement with a European
company for the purchase of certain technology related to the manufacture of
certain medical diagnostic tests. Consideration for this purchase was a nominal
deposit upon signing the agreement and a nominal transfer fee upon successful
commencement of production of the products. A royalty shall be paid for five
years beginning on the date of first sale of finished product derived from the
Purchased Assets.

EMPLOYEES

As of May 31, 2009 and 2008, the Company employed 33 employees of whom 2 are
part-time employees in the United States. The following is a breakdown between
departments:

                             2009    2008
                             ------------
Administrative               4          5
Marketing & Sales            3          3
Research & Development       3          3
Production and Operations   23         22
                            -------------
Total                       33         33

In addition, Biomerica contracts with Lancer for the services of 17 people at
its Mexican facility. We also engage the services of various outside Ph.D. and
M.D. consultants as well as medical institutions for technical support on a
regular basis. We are not a party to any collective bargaining agreement and
have never experienced a work stoppage. We consider our employee relations to be
good.

ITEM 1A. RISK FACTORS

Distribution - Biomerica 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. Biomerica
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 to keep the exclusive while non-exclusive distributors have no
minimum purchase requirements. There can be no assurance of the volume of
product sales that may be achieved by such distributors. The Company has several
large distributors which account for a significant portion of its business. The
loss of one of these distributors could adversely affect the Company's financial
results.

Government Regulation - Biomerica's immunodiagnostic products are regulated in
the United States as medical devices primarily by the FDA and as such, require
regulatory clearance or approval prior to commercialization in the United
States. Pursuant to the Federal Food, Drug and Cosmetic Act, and the regulations
promulgated thereunder, the FDA regulates, among other things, the clinical
testing, manufacture, labeling, promotion, distribution, sale and use of medical
devices in the United States. Failure of Biomerica to comply with applicable
regulatory requirements can result in, among other things, warning letters,
fines, injunctions, civil penalties, recall or seizure of products, total or
partial suspension of production, the government's refusal to grant pre-market
clearance or pre-market approval of devices, withdrawal of marketing approvals,
and criminal prosecution.

Sales of medical devices outside the United States are subject to foreign
regulatory requirements that vary widely from country to country. The time
required to obtain registrations or approvals required by foreign countries may
be longer or shorter than that required for FDA clearance or approval, and
requirements for licensing may differ significantly from FDA requirements. There
can be no assurance that Biomerica will be able to obtain regulatory clearances
for its current or any future products in the United States or in foreign
markets.

European Community - Biomerica is required to obtain certification in the
European community to sell products in those countries. The certification
requires Biomerica to maintain certain quality standards. Biomerica has been
granted certification and undergoes annual audits to assure that the Company
remains in compliance with regulations. There is no assurance that Biomerica
will be able to retain its certification in the future. The loss of business or
the ability to conduct business in Europe could materially adversely affect the
results of the Company.


                                      -6-
<PAGE>

Risk of Product Liability - Testing, manufacturing and marketing of Biomerica's
products entails risk of product liability. Biomerica currently has product
liability insurance. There can be no assurance, however, that Biomerica will be
able to maintain such insurance at a reasonable cost or in sufficient amounts to
protect Biomerica against losses due to product liability. An inability to
obtain sufficient insurance coverage could prevent or inhibit the
commercialization of Biomerica'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.

Hazardous Materials - Biomerica's manufacturing and research and development
involves the controlled use of hazardous materials and chemicals. Although
Biomerica believes that safety procedures for handling and disposing of such
materials comply with the standards prescribed by state and Federal regulations,
the risk of accidental contamination or injury from these materials cannot be
completely eliminated. In the event of such an accident, the Company could be
held liable for any damages that result and any such liability could exceed the
resources of the Company. The Company may incur substantial costs to comply with
environmental regulations.

Common stock performance - The common stock of the Company is subject to
fluctuations as a result of a variety of factors including, but not limited to,
financial results, general economic conditions, fluctuations in sales volumes
and expenses, competition, and our failure to generate new products.

ITEM 2. DESCRIPTION OF PROPERTY

The Company is currently leasing its facilities on a month-to-month agreement
while it explores various other facility options. The facilities are owned and
operated by Ms. Janet Moore (an officer and director of the Company), Ilse
Sultanian, Susan Irani Rigdon and Jennifer Irani, some of whom are shareholders.
Effective May 1, 2007, the monthly rent was set at $14,000. Management believes
there would be no significant difference in the terms of the property rental if
the Company was renting from a third party. Total gross rent expense for this
facility was approximately $168,000 plus proportionate insurance and real estate
taxes per year during each of the years ended May 31, 2009 and 2008,
respectively.

On June 18, 2009, the Company entered into an agreement to lease a building in
Irvine, California, commencing September 1, 2009 and ending August 31, 2016. The
initial base rent is set at $18,490 with a security deposit of $22,080. The sum
of $40,568 was due upon execution of the lease. Management is currently working
on plans for the relocation of the Company which should take place by the end of
the calendar year.

ITEM 3. LEGAL PROCEEDINGS

None.

ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

None.

PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Since June 20, 2002, the Company's stock has been quoted on the OTC Bulletin
Board under the symbol "BMRA.OB". The following table shows the high and low bid
prices for Biomerica's common stock for the periods indicated, based upon data
reported by Yahoo Finance. Such quotations reflect inter-dealer prices, without
retail mark-up, mark-down or commissions, and may not necessarily represent
actual transactions.

                                                   Bid Prices

                                             HIGH              LOW
Quarter ended:
May 31, 2009                                 $0.70             $0.28
February 28, 2009                            $0.60             $0.25
November 30, 2008                            $0.99             $0.45
August 31, 2008                              $1.05             $0.75
May 31, 2008                                 $1.40             $0.76
February 29, 2008                            $1.55             $1.02
November 30, 2007                            $1.89             $1.10
August 31, 2007                              $1.50             $0.71


                                      -7-
<PAGE>

As of May 31, 2009, the number of holders of record of Biomerica's common stock
was approximately 880, excluding stock held in street name. The number of record
holders does not bear any relationship to the number of beneficial owners of the
Common Stock.

The Company has not paid any cash dividends on its Common Stock in the past and
does not plan to pay any cash dividends on its Common Stock in the foreseeable
future. The Company's Board of Directors intends, for the foreseeable future, to
retain any earnings to finance the continued operation and expansion of the
Company's business.

The table below provides information relating to our equity compensation plans
as of May 31, 2009:

<TABLE>
<CAPTION>
<S>     <C>

                                                                                           Securities Remaining
                                                                                     Available for Future Issuance
Securities               Number of Securities to Be       Compensation Plans           Under Compensation Plans
Plan                       Issued Upon Exercise of     Weighted-Average Exercise     (Excluding those Reflected in
Category                   Outstanding Options        Price of Outstanding Options            First Column)

Equity compensation
Plans approved by               1,472,675                         $0.54                          564,125
Securities holders
</TABLE>

ITEM 6. SELECTED FINANCIAL DATA

None.












                                      -8-
<PAGE>


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS

EXCEPT FOR HISTORICAL INFORMATION CONTAINED HEREIN, THE STATEMENTS IN THIS FORM
10-K MAY BE FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 21E OF THE
SECURITIES EXCHANGE ACT OF 1934 AND SECTION 27A OF THE SECURITIES ACT OF 1933.
FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS AND UNCERTAINTIES
WHICH MAY CAUSE BIOMERICA'S RESULTS IN FUTURE PERIODS TO DIFFER MATERIALLY FROM
FORECASTED RESULTS. THESE RISKS AND UNCERTAINTIES INCLUDE, AMONG OTHER THINGS,
THE CONTINUED DEMAND FOR THE COMPANY'S PRODUCTS, AVAILABILITY OF RAW MATERIALS,
THE STATE OF THE ECONOMY, RESULTS OF RESEARCH AND DEVELOPMENT ACTIVITIES AND THE
CONTINUED ABILITY OF THE COMPANY TO MAINTAIN THE LICENSES AND APPROVALS
REQUIRED. THESE AND OTHER RISKS ARE DESCRIBED IN THE COMPANY'S ANNUAL REPORT ON
FORM 10-K AND IN THE COMPANY'S OTHER FILINGS WITH THE SECURITIES AND EXCHANGE
COMMISSION.

EXCEPT AS MAY BE REQUIRED BY APPLICABLE LAW, WE MAY NOT UPDATE OR REVISE OUR
FORWARD-LOOKING STATEMENTS AND THE LACK OF SUCH UPDATE DOES NOT IMPLY THAT
ACTUAL EVENTS ARE AS ORIGINALLY EXPRESSED BY SUCH FORWARD-LOOKING STATEMENTS.
YOU SHOULD READ THE DISCLOSURES IN THIS REPORT AND OTHER REPORTS WHICH WE FILE
WITH THE SECURITIES AND EXCHANGE COMMISSION.

RESULTS OF OPERATIONS

Fiscal 2009 Compared to Fiscal 2008

Our consolidated net sales were $4,934,771 for fiscal 2009 compared to
$4,926,505 for fiscal 2008. This represents an increase of $8,266, or 0% for
fiscal 2009.

Cost of sales in fiscal 2009 as compared to fiscal 2009 increased by $174,025 or
6.2%. The percentage of cost of sales relative to sales increased from 56.7% to
60.0%, or by 3.3% due to various factors which included write-offs in fiscal
2009 of new product scrap, obsolete inventory, increased reserves for
slow-moving inventory and to lower capitalization of labor and overhead into
inventory on some work in process and finished goods.

Selling, general and administrative costs increased in fiscal 2009 as compared
to fiscal 2008 by $76,848 or 5.6%. These increases were a result of a variety of
factors which included increase in the reserve for bad debt, Sarbanes-Oxley
consulting, trade show expense, wages, option expense and startup costs for
Biomerica Europe GmbH, the Company's newly formed subsidiary.

Research and development expense was $278,308 in fiscal 2009 as compared to
$259,085 in fiscal 2008. This is an increase of $19,223, or 7.4%. The Company
continues to work on the development of several new products and anticipates
that it will increase its efforts for development and product approvals in the
next fiscal year.

Interest expense decreased from $49,542 to $27,521 in fiscal 2009 as compared to
fiscal 2008, or 44.4%. The change in interest expense resulted from the decrease
in the balance on the shareholder/note payable and the equipment loan, as well
as a decrease in the interest rate on the accrued wages payable and equipment
loan. Interest income decreased from $33,552 to $29,867, primarily due to lower
interest rates.

Other income decreased by $1,132,370 in fiscal 2009 as compared to fiscal 2008.
This decrease was a result of one-time income from the sale of the Company's
interest in Lancer Orthodontics as well as income received as a result of the
one-time sale of a warrant held in Hollister-Stier in fiscal 2008.

LIQUIDITY AND CAPITAL RESOURCES

As of May 31, 2009, the Company had cash and cash equivalents in the amount of
$1,595,823, and a short-term investment (certificate of deposit) of $100,000 as
compared to $2,022,380 of cash and cash equivalents as of May 31, 2008. As of
May 31, 2009 and 2008, the Company had working capital of $3,831,112 and
$3,428,936, respectively. In May 2008 the Company sold its investment in Lancer
Orthodontics, Inc., for a net amount of $1,083,444, which increased the cash
position of the Company. In June 2007 the Company also exercised a warrant and
sold the underlying shares that it owned in Hollister-Stier (valued on the books
at zero cost) for a net amount of $697,034. During 2009, cash used in operations
was $101,999 as compared to cash used in fiscal 2008 of $194,595. During fiscal
2009, cash used in investing activities was $215,890 as compared to cash
provided by investing activities of $1,515,695 in fiscal 2008. Cash of $85,890
and $264,783 for fiscal 2009 and 2008, respectively, was used for the purchase
of property and equipment. In fiscal 2008 proceeds from the sale of marketable
securities was $1,780,478. Cash used in financing activities in fiscal 2009 was
$106,942 as compared to cash provided by financing activities of $184,380 in
fiscal 2008. During fiscal 2009, Biomerica repaid shareholder debt of $95,936 as
compared to $61,056 in fiscal 2008. The change in cash and cash equivalents at
May 31, 2009 compared to May 31, 2008 was a decrease of $426,557.


                                      -9-
<PAGE>

On February 13, 2009, the Company entered into a Small Business Banking
Agreement with Union Bank of California for a one year business line (the
"Line") of credit in the amount of $400,000. The interest rate for the line of
credit is the prime rate in effect on the first day of the billing period, as
published in the Wall Street Journal Prime West Coast Edition, plus a spread of
1.00%. Minimum monthly payments will be the sum of (i) the amount of interest
charge for the billing period, plus (ii) any amount past due, plus (iii) any
fees, late charges and/or out-of-pocket expenses assessed. If the Line is not
renewed as of the last day of the term of the Line, the entire unpaid balance of
the Line, including unpaid fees and charges will be due and payable. The Company
has granted the bank security interest in the assets of the Company as
collateral.

The Company must maintain for not less than thirty consecutive days in every
calendar year, a period in which all amounts due under the revolving credit
agreements with the Bank are at a zero balance. The Company did not owe anything
on this line of credit as of May 31, 2009.

In February 2007 the Company obtained a $200,000 working capital line of credit
and was approved for a $200,000 equipment loan with Commercial Bank of
California. The credit line and the equipment loan were collateralized by
substantially all of the assets of the Company. On February 13, 2009 the Company
entered into a Small Business Bank Agreement for a Business Loan with Union Bank
for $133,000. Loan proceeds were disbursed in one single funding on March 5,
2009. The loan was used for the purpose of paying off the business loan, which
had been established with Commercial Bank, for the acquisition of manufacturing
equipment. As of May 31, 2009 and 2008, $122,781 and $162,993 was owed on the
equipment loan and there was no outstanding balance due on the working capital
line of credit, respectively. The loan is payable in thirty-six monthly payments
of approximately $4,000. The interest rate is 6.50% and the payments are to be
made by automatic deduction from the Company's Union Bank account. Initial fees
for the loan were $740.

Payments on the shareholder's note payable were made during fiscal 2009,
according to the agreement through July 31, 2008, at which time the remaining
balance on the loan was paid in full.

As of May 31, 2009, the Company no longer has a line of credit with Commercial
Bank of California.

SUBSEQUENT EVENTS

On June 18, 2009, the Company entered into an agreement to lease a building in
Irvine, California, commencing September 1, 2009 and ending August 31, 2016. The
initial base rent is set at $18,490 with a security deposit of $22,080. The sum
of $40,568 was due upon execution of the lease. Management is currently working
on plans for the relocation of the Company which should take place by the end of
the calendar year.

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 of
America. Note 2 of the Notes to Consolidated Financial Statements describes the
significant accounting policies essential to the consolidated financial
statements. The preparation of these financial statements requires estimates and
assumptions that affect the reported amounts and disclosures.

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

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.

Revenues from product sales are recognized at the time the product is shipped,
customarily FOB shipping point, at which point title passes. An allowance is
established if necessary for estimated returns as revenue is recognized.

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 not probable and have established specific
reserves, but to the extent collection is made, the allowance will be released.
Additionally, if the financial condition of our customers were to deteriorate,
resulting in an impairment of their ability to make payments, additional
allowances may be required.


                                      -10-
<PAGE>

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.

Historically we were in a loss position for tax purposes, and established a
valuation allowance against deferred tax assets, as we did not believe it was
likely that we would generate sufficient taxable income in future periods to
realize the benefit of our deferred tax assets. Although the Company has
achieved net income in increasing amounts over the last four fiscal years,
predicting future taxable income is difficult, and requires the use of
significant judgment. Due to the fact that many factors can influence
profitability, management determined at May 31, 2008, that $170,000 of
previously allowed for deferred tax assets should be released, which resulted in
an income tax benefit of $170,000 being recognized. Management has determined
that the tax asset should be increased to $238,000 as of May 31, 2009.
Management will re-evaluate this determination periodically.

FACTORS THAT MAY AFFECT FUTURE RESULTS

You should read the following factors in conjunction with the factors discussed
elsewhere in this and our other filings with the Securities and Exchange
Commission 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, Inc. and are not meant to be
an exhaustive discussion of risks that apply to companies such as Biomerica,
Inc. Like other businesses, Biomerica, Inc. is susceptible to macroeconomic
downturns in the United States or abroad, as were experienced in recently, that
may affect the general economic climate and performance of Biomerica, Inc. 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 out 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 operations as a whole;
failure to manage the future expansion of our business could have a material
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, some 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; difficulties
encountered during the impending move of the Company's operations to its new
facility and other factors beyond our control. All these factors make it
difficult to predict operating results for any particular period.

RECENT ACCOUNTING PRONOUNCEMENTS

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements--an amendment of ARB No. 51. This statement
applies to all entities that prepare consolidated financial statements, except
for non-profit organizations, but will affect only those entities that have an
outstanding noncontrolling interest in one or more subsidiaries or that
deconsolidate a subsidiary. SFAS No. 160 is effective for annual periods
beginning December 15, 2008. The Company does not believe that the adoption of
SFAS No. 160 will have a material impact on its financial statements.

In December 2007, the FASB issued SFAS No. 141R, Business Combinations. SFAS
141R establishes a defined measurement period that governs the time period
within which the business combination must be reported. In addition, the revised
standard significantly expands the scope of disclosure requirements. SFAS No.
141R is effective for annual periods beginning after December 15, 2008. The
Company does not believe that the adoption of SFAS No. 141R will have a material
impact on its financial statements.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities-an Amendment of FASB Statement No. 133. This
Statement requires qualitative disclosures about objectives and strategies for
using derivatives, quantitative disclosures about fair value amounts of and
gains and losses on derivative instruments, and disclosures about credit-risk-
related contingent features in derivative agreements. SFAS No. 161 is effective
for financial statements issue years and interim periods beginning after
November 15, 2008. The Company does not believe that the adoption of SFAS No.
161 will have a material impact on its financial statements.


                                      -11-
<PAGE>

In May, 2009 the FASB issued SFAS No. 165, "Subsequent Events". This statement
established general standards of accounting for disclosure of events that occur
after the balance sheet date but before financial statement are issued or are
available to be issued. It requires the disclosure date through which an entity
has evaluated subsequent events and the basis for that date. This would alert
all users of financial statements that an entity has not evaluated subsequent
events after that in the set of financial statements being presented. This
statement is effective for interim and annual periods ending after June 15,
2009. The Company does not believe that the adoption of SFAS No. 165 will have a
material impact on its financial statements.

The FASB issued SFAS No. 168, "The FASB Accounting Standards Codification
(Codification) and the Hierarchy of Generally Accepted Accounting Principles- a
replacement of Financial Statement No. 162". On the effective date of the
statement, The FASB Accounting Standards Codification will become the source of
authoritative U.S. generally accepted accounting principles (GAAP) recognized by
the FASB to be applied by nongovernmental entities. This statement is effective
for financial statements issued for interim and periods ending after September
15, 2009. The Company does not believe that the adoption of SFAS No. 168 will
have a material impact on its financial statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

None

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Exhibit 99.3, "Biomerica, Inc. and Subsidiary Consolidated Financial Statements"
is incorporated herein by this reference.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

ITEM 9A. DISCLOSURE CONTROLS AND PROCEDURES

Attached as exhibits to this Form 10-K are certifications of our Chief Executive
Officer ("CEO") and Chief Financial Officer ("CFO") that are required in
accordance with Rule 13a-14 of the Exchange Act. This "Disclosure Controls and
Procedures" section includes information concerning the controls and controls
evaluation referred to in the certifications.

EVALUATION OF DISCLOSURE CONTROLS

Our management evaluated the effectiveness of our disclosure controls and
procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended, or the Exchange Act as of the end of the
period covered by this report. Our management recognizes that any controls and
procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving their objectives and management is required to
apply its judgment in evaluating the cost-benefit relationship of possible
controls and procedures. The disclosure controls and procedures have been
designed to provide reasonable assurance of achieving their objectives and the
Chief Executive Officer and Chief Financial Officer have concluded that our
disclosure controls and procedures are effective at the "reasonable assurance"
level. Based on that evaluation the Chief Executive Officer and Chief Financial
Officer concluded that information required to be disclosed in the reports that
we file and submit under the Exchange Act is (1) recorded, processed, summarized
and reported within the time periods specified in the Commission's rules and
forms; and (2) accumulated and communicated to the Company's management,
including its Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow timely decisions regarding required disclosure.

For the reasons discussed in "Management's Report on Internal Control over
Financial Reporting" below, Company management, including the Chief Executive
Officer and Chief Financial Officer concluded that, as of May 31, 2009, the
Company's internal control over financial reporting was effective. Management
has concluded that the consolidated financial statements included in this annual
report present fairly, in all material respects, the Company's financial
position, results of operations, and cash flows for the periods presented in
conformity with accounting principles generally accepted in the United States of
America.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There have been no changes in our internal control over financial reporting
identified in connection with the evaluation that occurred during the last
fiscal quarter that has materially affected, or that is reasonably likely to
affect, our internal control over financial reporting.


                                      -12-
<PAGE>


MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Company management is responsible for establishing and maintaining adequate
internal control over financial reporting as defined in Rule 13a-15(f) under the
Securities Exchange Act of 1934. The Company's internal control over financial
reporting is designed to provide reasonable assurance to the Company's
management and Board of Directors regarding the reliability of financial
reporting and the preparation and fair presentation of financial statements for
external purposes in accordance with generally accepted accounting principles.

A Company's internal control over financial reporting includes those policies
and procedures that (i) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (ii) provide reasonable assurance
that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that
receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (iii) provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company's assets that could have a
material effect on the financial statements.

The effectiveness of any system of internal control over financial reporting is
subject to inherent limitations, including the exercise of judgment in
designing, implementing, operating and evaluating the controls and procedures.
Because of these inherent limitations, internal control over financial reporting
cannot provide absolute assurance regarding the reliability of financial
reporting and may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.

Company management, with the participation of the Chief Executive Officer and
the Chief Financial Officer, evaluated the effectiveness of the Company's
disclosure controls and procedures as defined in Rules 13(a)-15(e) and
15(d)-15(e) under the Securities Exchange Act of 1934, as amended, or the
Exchange Act, as of the end of the period covered by this report. In making this
assessment, Management used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control -
Integrated Framework. Based on this assessment, management, with the
participation of the Chief Executive Officer and Chief Financial Officer,
believes that, as of May 31, 2009, the Company's internal control over financial
reporting was effective based on those criteria.

Company management will continue to monitor and evaluate the effectiveness of
its disclosure controls and procedures and its internal controls over financial
reporting on an ongoing basis and are committed to taking further action and
implementing improvements, as necessary and as funds allow.

Note: This 10-K does not include an attestation report of the Company's
registered public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by the Company's
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permit the Company to provide only management's
report in this 10-K.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.

This information is incorporated by reference to the Company's proxy statement
for its 2009 Annual Meeting of Stockholders, which will be filed not later than
120 days after the end of the Company's fiscal year ended May 31, 2009.

ITEM 11. EXECUTIVE COMPENSATION

This information is incorporated by reference to the Company's proxy statement
for its 2009 Annual Meeting of Stockholders, which will be filed not later than
120 days after the end of the Company's fiscal year ended May 31, 2009.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

This information is incorporated by reference to the Company's proxy statement
for its 2009 Annual Meeting of Stockholders, which will be filed not later than
120 days after the end of the Company's fiscal year ended May 31, 2009.


                                      -13-
<PAGE>


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In fiscal 2003, Biomerica entered into an agreement with Lancer whereby
Biomerica agreed to pay an initial shelter fee of $5,000 with additional monthly
payments of $2,875 for use of the Lancer de Mexico facilities to produce and
manufacture Biomerica products. The monthly payments are due as long as
Biomerica produces its products at the Lancer de Mexico facility. At May 31,
2009, Biomerica has paid all applicable shelter fees.

Other information regarding related transactions is incorporated by reference to
the Company's proxy statement for its 2009 Annual Meeting of Stockholders, which
will be filed not later than 120 days after the end of the Company's fiscal year
ended May 31, 2009.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The aggregate fees billed for professional services by PKF in 2009 and 2008 were
as follows:

                                    2009             2008
                                    ----             ----

Audit fees                        $72,182(1)       $58,198(2)
Audit related fees                     --              --
Tax fees                            6,043           9,874
ALL OTHER FEES                        784           3,792
- ---------------------------------------------------------
Total                             $79,009         $71,864

    (1)   Also includes fees to be billed in fiscal 2010 for fiscal 2009.
    (2)   Also includes fees to be billed in fiscal 2009 for fiscal 2008.

Audit Fees consist of the aggregate fees billed for professional services
rendered for the audit of our annual financial statements, the audit of our
subsidiary's financial statements, the reviews of the financial statements
included in our Forms 10-Q and for any other services that are normally provided
by PKF in connection with our statutory and regulatory filings or engagements.

Audit Related Fees consist of the aggregate fees billed for professional
services rendered for assurance and related services that were reasonably
related to the performance of the audit or review of our financial statements
and the financial statements of our subsidiary that were not otherwise included
in Audit Fees.

Tax Fees consist of the aggregate fees billed for professional services rendered
for tax compliance, tax advice and tax planning. Included in such Tax Fees were
fees for preparation of our tax returns and consultancy and advice on other tax
planning matters.

All Other Fees consist of the aggregate fees billed for products and services
provided by PKF and not otherwise included in Audit Fees, Audit Related fees or
Tax Fees.

POLICY ON AUDIT COMMITTEE PRE-APPROVAL OF AUDIT AND NON-AUDIT SERVICES

The Audit Committee has the responsibility of appointing the independent audit
firm and overseeing their work. The Audit Committee pre-approves all audit and
related services. Should the audit committee pre-approve any services other than
audit and related services, it evaluates whether the services would compromise
the auditor's independence.

Of the services provided in fiscal 2009 and 2008, all fees and services were
pre-approved by the audit committee.

PART IV

ITEM 15. EXHIBITS LIST AND REPORTS ON FORM 8-K

EXHIBIT NO.       DESCRIPTION

 3.1              Certificate of Incorporation of Registrant filed with the
                  Secretary of the State of Delaware on September 22, 1971
                  (incorporated by reference to Exhibit 3.1 filed with Amendment
                  No. 1 to Registration Statement on Form S-1, Commission File
                  No. 2-83308).

3.2               Certificate of Amendment to Certificate of Incorporation of
                  Registrant filed with the Secretary of the State of Delaware
                  on February 6, 1978 (incorporated by reference to Exhibit 3.1
                  filed with Amendment No. 1 to Registration Statement on Form
                  S-1, Commission File No. 2-83308).


                                      -14-
<PAGE>

3.3               Certificate of Amendment to Certificate of Incorporation of
                  Registrant filed with the Secretary of the State of Delaware
                  on February 4, 1983 (incorporated by reference to Exhibit 3.1
                  filed with Amendment No. 1 to Registration Statement on Form
                  S-1, Commission File No. 2-83308).

3.4               Certificate of Amendment to Certificate of Incorporation of
                  Registrant filed with the Secretary of the State of Delaware
                  on January 19, 1987 (incorporated by reference to Exhibit 3.4
                  filed with Form 8 Amendment No. 1 to the Registrant's Annual
                  Report on Form 10-K for the fiscal year ended May 31, 1987).

3.5               Certificate of Amendment of Certificate of Incorporation of
                  Registrant filed with the Secretary of the State of Delaware
                  on November 4, 1987 (incorporated by reference to Exhibit 3.1
                  filed with Amendment No. 1 to Registration Statement on Form
                  S-1, Commission File No. 2-83308).

3.6               Bylaws of the Registrant (incorporated by reference to Exhibit
                  3.2 filed with Amendment No. 1 to Registration Statement on
                  Form S-1, Commission File No. 2-83308).

3.7               Certificate of Amendment of Certificate of Incorporation of
                  Registrant filed with the Secretary of the State of Delaware
                  on December 20, 1994 (incorporated by reference to Exhibit 3.7
                  filed with Registrant's Annual Report on Form 10-KSB for the
                  fiscal year ended May 31, 1995).

3.8               First Amended and Restated Certificate of Incorporation of
                  Biomerica, Inc. filed with the Secretary of State of Delaware
                  on August 1, 2000 (incorporated by reference to Exhibit 3.8
                  filed with the Registrant's Annual Report on Form 10-KSB for
                  the fiscal year ended May 31, 2000).

4.1               Specimen Stock Certificate of Common Stock of Registrant
                  (incorporated by reference to Exhibit 4.1 filed with
                  Registrant's Registration Statement on Form SB-2, Commission
                  No. 333-87231 filed on September 16, 1999).

10.3              1999 Stock Incentive Plan of Registrant (incorporated by
                  reference to Exhibit 10.1 to Registration Statement on Form
                  S-8 filed with the Securities and Exchange Commission on March
                  29, 2000 and on May 30 , 2007).

10.4              1995 Stock Option and Common Stock Plan of Registrant
                  (incorporated by reference to Exhibit 4.3 to Registration
                  Statement on Form S-8 filed with the Securities and Exchange
                  Commission on January 20, 1996).

10.5              1991 Stock Option and Restricted Stock Plan of Registrant
                  (incorporated by reference to Exhibit 4.1 to Registration
                  Statement on Form S-8 filed with the Securities and Exchange
                  Commission on April 6, 1992).

10.31             Loan Modification, Forbearance and Security Agreement
                  (incorporated by reference to the Company's February 29, 2004
                  Form 10-QSB filed April 14, 2004).

10.32             Promissory Note (incorporated by reference to the Company's
                  February 29, 2004 Form 10-QSB filed April 14, 2004).

10.33             Second Amendment of the Note, Loan and Modification Agreement
                  (incorporated by reference to the Company's February 28, 2007
                  Form 10-QSB filed April 16, 2007).

10.34             Commercial Security Agreement (loan #0100000250) with
                  Commercial Bank of California dated February 20, 2007
                  (incorporated by reference to the Company's February 28, 2007
                  Form 10-QSB filed April 16, 2007).

10.35             Promissory Note (loan #0100000250) dated February 20, 2007
                  with Commercial Bank of California (incorporated by reference
                  to the Company's February 28, 2007 Form 10-QSB filed April 16,
                  2007).

10.36             Promissory Note (loan #0100000251) dated February 20, 2007
                  with Commercial Bank of California (incorporated by reference
                  to the Company's February 28, 2007 Form 10-QSB filed April 16,
                  2007).

10.37             Subordination Agreement (loan #0100000250) dated February 20,
                  2007 with Commercial Bank of California and Janet Moore,
                  Trustee of the Janet Moore Trust (incorporated by reference to
                  the Company's February 28, 2007 Form 10-QSB filed April 16,
                  2007).

10.38             Business Loan Agreement with Commercial Bank of California
                  (incorporated by reference to the Company's February 28, 2007
                  Form 10-QSB filed April 16, 2007).


                                      -15-
<PAGE>

10.39             Small Business Banking Agreement (Business Line of Credit
                  Number 0366422012) with Union Bank (incorporated by reference
                  to the Company's February 28, 2009 Form 10Q filed April 14,
                  2009).

10.40             Small Business Banking Agreement (Business Loan Number
                  0366422020) with Union Bank (incorporated by reference to the
                  Company's February 28, 2009 Form 10Q filed April 14, 2009).

23.1              Consent of Independent Registered Public Accounting Firm
                  (PKF).

31.1              Certification of Chief Executive Officer pursuant to 18 U.S.C.
                  Section 1350, as adopted pursuant to Section 302 of the
                  Sarbanes-Oxley Act of 2002.

31.2              Certification of Chief Financial Officer pursuant to 18 U.S.C.
                  Section 1350, as adopted pursuant to Section 302 of the
                  Sarbanes-Oxley Act of 2002.

32.1              Certification of Chief Executive Officer pursuant to 18 U.S.C.
                  Section 1350, as adopted pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002.

32.2              Certification of Chief Financial Officer pursuant to 18 U.S.C
                  Section 1350, as adopted pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002.

99.3              Biomerica, Inc. and Subsidiary Consolidated Financial
                  Statements For The Years Ended May 31, 2009 and 2008 and
                  Independent Registered Public Accounting Firm's Report.

(b) Reports on Form 8-K.

None.



                                      -16-
<PAGE>



SIGNATURES

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

                                            BIOMERICA, INC.
                                            Registrant

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

                                           Dated: 8/29/09

In accordance with the Exchange Act, 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 and Capacity

/s/ Zackary S. Irani                                         Date: 8/29/09
- --------------------
Zackary S. Irani
Director, Chief Executive Officer

/s/ Janet Moore                                              Date: 8/29/09
- ----------------
Janet Moore,
Secretary, Director, Chief Financial Officer

/s/ Francis R. Cano, PH.D.                                   Date: 8/29/09
- --------------------------
Francis R. Cano, Ph.D.
Director

/s/ Allen Barbieri                                           Date: 8/29/09
- ---------------------
Allen Barbieri
Director

/s/ Jane Emerson, M.D., PH.D.                                Date: 8/29/09
- --------------------------------
Jane Emerson,
M.D.,Ph.D. Director

/s/ John Roehm                                               Date: 8/29/09
- ----------------
John Roehm
Director



                                      -17-

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>2
<FILENAME>biomerica_10k-ex2301.txt
<DESCRIPTION>CONSENT
<TEXT>
<PAGE>

EXHIBIT 23.1

                             CONSENT OF INDEPENDENT
                        REGISTERED PUBLIC ACCOUNTING FIRM

Biomerica, Inc.
Newport Beach, California

We hereby consent to the incorporation by reference in, the previously filed
Registration Statements on Form S-8 (Nos. 333-33494, 333-00159 and 333-143346)
of Biomerica and Subsidiary, of our report dated August 28, 2009, relating to
the consolidated financial statements as of May 31, 2009 and 2008 and for the
years ended May 31, 2009 and 2008, which appears in this Form 10-K.


/s/ PKF
Certified Public Accountants
A Professional Corporation

San Diego, CA
August 28, 2009




</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>3
<FILENAME>biomerica_10k-ex3101.txt
<DESCRIPTION>CERTIFICATION
<TEXT>
<PAGE>
EXHIBIT 31.1


                    CERTIFICATION OF CHIEF EXECUTIVE OFFICER
                                   PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002



I, Zackary S. Irani, certify that:

1. I have reviewed this Annual Report on Form 10-K of Biomerica, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects,
the financial condition, results of operations and cash flows of the registrant
as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:

      a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiary, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;

      b) designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;

      c) evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and

      d) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of our internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or other persons performing the equivalent functions):

      a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and

      b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.

/s/ Zackary S. Irani
- --------------------
Zackary S. Irani
Chief Executive Officer

Date: August 29, 2009

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>4
<FILENAME>biomerica_10k-ex3102.txt
<DESCRIPTION>CERTIFICATION
<TEXT>
<PAGE>

EXHIBIT 31.2


                    CERTIFICATION OF CHIEF FINANCIAL OFFICER
                                   PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002



I, Janet Moore, certify that:

1. I have reviewed this Annual Report on Form 10-K of Biomerica, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects,
the financial condition, results of operations and cash flows of the registrant
as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:

      a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiary, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;

      b) designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;

      c) evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and

      d) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of our internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or other persons performing the equivalent functions):

      a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and

      b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.


/s/ Janet Moore
- ----------------------
Janet Moore
Chief Financial Officer

Date: August 29, 2009


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>5
<FILENAME>biomerica_10k-ex3201.txt
<DESCRIPTION>CERTIFICATION
<TEXT>
<PAGE>

EXHIBIT 32.1


                    CERTIFICATION OF CHIEF EXECUTIVE OFFICER
                                   PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


In connection with the Annual Report of Biomerica, Inc. (the "Company") on Form
10-K for the year ended May 31, 2009, as filed with the Securities and Exchange
Commission on the date hereof (the "Report"), I, Zackary Irani, Chief Executive
Officer of the Company, certify, to the best of my knowledge, Pursuant to
Exchange Act Rule 15d-14(b) and 18 U.S.C. Section 1350, as adopted Pursuant to
Section 906 of the Sarbanes Oxley Act of 2002,

i. The Report fully complies with the requirements of Sections 13(a) or 15(d) of
the Securities Exchange Act of 1934, and

ii. The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.


/s/ Zackary S. Irani
- --------------------
Zackary S. Irani
Chief Executive Officer

Date: August 29, 2009




</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.2
<SEQUENCE>6
<FILENAME>biomerica_10k-ex3202.txt
<DESCRIPTION>CERTIFICATION
<TEXT>
<PAGE>

EXHIBIT 32.2


                    CERTIFICATION OF CHIEF FINANCIAL OFFICER
                                   PURSUANT TO
                             18 U.S.C. SECTION 1350
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


In connection with the Annual Report of Biomerica, Inc. (the "Company") on Form
10-K for the year ended May 31, 2009, as filed with the Securities and Exchange
Commission on the date hereof (the "Report"), I, Janet Moore, Chief Financial
Officer of the Company, certify, to the best of my knowledge, Pursuant to
Exchange Act Rule 15d-14(b) and 18 U.S.C. Section 1350, as adopted Pursuant to
Section 906 of the Sarbanes Oxley Act of 2002,

i. The Report fully complies with the requirements of Sections 13(a) or 15(d) of
the Securities Exchange Act of 1934, and

ii. The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.



/s/ Janet Moore
- -----------------------
Janet Moore
Chief Financial Officer

Date: August 29, 2009

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.3
<SEQUENCE>7
<FILENAME>biomerica_10k-ex9903.txt
<DESCRIPTION>FINANCIAL STATEMENTS
<TEXT>
<PAGE>

<TABLE>
<S>                     <C>
Exhibit 99.3


                         BIOMERICA, INC. AND SUBSIDIARY
                                TABLE OF CONTENTS


Report Of Independent Registered Public Accounting Firm              FS-2

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Balance Sheets as of May 31, 2009 and 2008              FS-3

Consolidated Statements of Operations and Comprehensive
   Income for the Years Ended May 31, 2009 and 2008                  FS-4 - FS-5

Consolidated Statements of Shareholders' Equity for the
   Years Ended May 31, 2009 and 2008                                 FS-6 - FS-9

Consolidated Statements of Cash Flows for the Years
   Ended May 31, 2009 and 2008                                       FS-10 - FS-11

Notes to the Consolidated Financial Statements                       FS-12 - FS-26

</TABLE>

                                      FS-1

<PAGE>


             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



Board of Directors and Stockholders
Biomerica, Inc.
Newport Beach, California


We have audited the accompanying consolidated balance sheet of Biomerica, Inc.
(a Delaware Corporation) and its subsidiary as of May 31, 2009 and 2008 and the
related consolidated statements of operations and comprehensive income,
shareholders' equity, and cash flows for the years ended May 31, 2009 and 2008.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We have 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 audits to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. The Company
is not required to have, nor were we engaged to perform, an audit of its
internal controls over financial reporting. Our audits included consideration of
internal controls over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstance, but not for the purpose of
expressing an opinion on the effectiveness of the Company's internal control
over financial reporting. Accordingly, we express no such opinion. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Biomerica, Inc. as of May 31, 2009 and 2008, and the results of its consolidated
operations and cash flows for the years ended May 31, 2009 and 2008 in
conformity with accounting principles generally accepted in the United States of
America.

August 28, 2009                                    /s/ PKF
San Diego California                               Certified Public Accountants
                                                   A Professional Corporation


                                      FS-2
<PAGE>

<TABLE>
<CAPTION>
<S>     <C>

                                         BIOMERICA, INC. AND SUBSIDIARY
                                           CONSOLIDATED BALANCE SHEET


                                                                                   May 31, 2009    May 31, 2008
                                                                                   ------------    ------------
ASSETS

CURRENT ASSETS:
     Cash and cash equivalents                                                     $  1,595,823    $  2,022,380
     Short-term investment                                                              100,000              --
     Available-for-sale securities                                                           --             355
     Accounts receivable, less allowance for doubtful accounts
       of $86,432 and $84,206, respectively                                             640,668         614,330
     Inventories, net                                                                 1,999,463       1,764,202
     Deferred tax asset                                                                 103,000          35,000
     Prepaid Expenses and Other                                                         115,717         101,867
                                                                                   ------------    ------------
Total Current Assets                                                                  4,554,671       4,538,134
                                                                                   ------------    ------------

PROPERTY AND EQUIPMENT, at cost

Equipment                                                                               944,646         897,664
     Furniture, Fixtures and Leasehold Improvements                                     190,331         187,873
                                                                                   ------------    ------------
     Total Property and Equipment                                                     1,134,977       1,085,537
                                                                                   ------------    ------------

ACCUMULATED DEPRECIATION                                                               (768,158)       (715,957)
                                                                                   ------------    ------------
     Net property and equipment                                                         366,819         369,580

DEFERRED TAX ASSET-LONG-TERM                                                            135,000         135,000

INTANGIBLE ASSETS                                                                        30,000              --

OTHER ASSETS                                                                             65,582          64,997
                                                                                   ------------    ------------
                                                                                   $  5,152,072    $  5,107,711
                                                                                   ============    ============


LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
     Accounts payable and accrued expenses                                         $    263,998    $    473,539
     Accrued compensation                                                               417,307         487,115
     Capital lease - short-term portion                                                      --           4,180
     Note payable-shareholder                                                                --          95,936
     Loan for Equipment Purchase - Current-term                                          42,254          48,428
                                                                                   ------------    ------------
Total Current Liabilities                                                               723,559       1,109,198

LOAN FOR EQUIPMENT PURCHASE - LONG-TERM                                                  80,527         114,565

SHAREHOLDERS' EQUITY
     Common stock, $.08 par value; 25,000,000 shares authorized;
         6,631,039 and 6,489,839 shares and issued and outstanding, respectively        530,482         519,186
     Additional paid in capital                                                      17,502,986      17,407,096
     Common stock subscribed                                                                 --           3,000
     Accumulated other comprehensive loss                                                (1,726)         (7,398)
     Accumulated Deficit                                                            (13,683,756)    (14,037,936)
                                                                                   ------------    ------------
Total Shareholders' Equity                                                            4,347,986       3,883,948
                                                                                   ------------    ------------

                                                                                   $  5,152,072    $  5,107,711
                                                                                   ============    ============


        See report of independent registered public accounting firm and
            accompanying notes to consolidated financial statements.


                                      FS-3
<PAGE>


                         BIOMERICA, INC. AND SUBSIDIARY
         CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME



YEARS ENDED MAY 31                                     2009             2008
                                                   -----------      -----------
NET SALES                                          $ 4,934,771      $ 4,926,505
Cost of Sales                                        2,964,908        2,790,883
                                                   -----------      -----------
GROSS PROFIT                                         1,969,863        2,135,622
                                                   -----------      -----------

OPERATING EXPENSES
     Selling, general and administrative             1,443,896        1,367,048
     Research and Development                          278,308          259,085
                                                   -----------      -----------

Total Operating Expenses                             1,722,204        1,626,133
                                                   -----------      -----------

INCOME FROM OPERATIONS BEFORE INCOME TAX               247,659          509,489

OTHER (INCOME) EXPENSE
     Interest expense                                   27,521           49,542
     Interest income                                   (29,867)         (33,552)
     Other Income                                      (17,175)      (1,149,545)
                                                   -----------      -----------

INCOME TAX (BENEFIT) EXPENSE                           (87,000)         (67,000)
                                                   -----------      -----------

NET INCOME                                         $   354,180      $ 1,710,044
                                                   ===========      ===========

BASIC NET INCOME PER COMMON SHARE                  $      0.05      $      0.28
                                                   ===========      ===========

DILUTED NET INCOME PER COMMON SHARE                $      0.05      $      0.25
                                                   ===========      ===========



WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES

     Basic                                           6,619,399        6,125,981
                                                   ===========      ===========

     Diluted                                         7,007,601        6,978,039
                                                   ===========      ===========

         See report of independent registered public accounting firm and
            accompanying notes to consolidated financial statements.



                                      FS-4
<PAGE>

                         BIOMERICA, INC. AND SUBSIDIARY
   CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (CONTINUED)


YEARS ENDED MAY 31,                                               2009             2008
                                                               -----------    -----------
NET INCOME                                                     $   354,180    $ 1,710,044

OTHER COMPREHENSIVE (LOSS) INCOME, net of tax
     Unrealized gain on available-for-sale securities                   --        673,030
     Foreign currency translation                                   (1,726)            --
     Reclassification Adjustment, Net of Tax                            --       (450,711)
                                                               -----------    -----------

COMPREHENSIVE INCOME                                           $   352,454    $ 1,932,363
                                                               ===========    ===========





        See report of independent registered public accounting firm and
            accompanying notes to consolidated financial statements.


                                      FS-5
<PAGE>



                                          BIOMERICA, INC. AND SUBSIDIARY
                                  CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY



                                                                          Additional             Common Stock
                                                 Common Stock              Paid-in                Subscribed
                                             Shares         Amount         Capital            Shares        Amount
                                           ---------     -----------     -----------          ------     -----------
Balances, May 31, 2007                     5,944,214     $   475,535     $17,254,714              --     $        --

Exercise of stock options                    545,625          43,651         115,735          12,000           3,000

Change in unrealized gain (loss) on
   available-for-sale securities                  --              --              --              --              --

Compensation expense in connection
   with options and warrants granted              --              --          36,647              --              --

Net Income                                        --              --              --              --              --
                                           ---------     -----------     -----------          ------     -----------

Balances, May 31, 2008                     6,489,839     $   519,186     $17,407,096          12,000     $     3,000
                                           =========     ===========     ===========          ======     ===========




                                                     (Continued)


                                                        FS-6
<PAGE>

                                          BIOMERICA, INC. AND SUBSIDIARY
                            CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (CONTINUED)



                                   Accumulated
                                      Common        Other
                                       Stock     Comprehensive
                                    Subscribed       Income          Accumulated
                                    Receivable       (Loss)            Deficit            Total
                                    ----------    ------------      ------------      ------------

Balances, May 31, 2007                     --     $   (229,717)     $(15,747,980)     $  1,752,552

Exercise of stock options                  --               --                --           162,386

Change in unrealized gain (loss) on
   available-for-sale securities           --          222,319                --           222,319

Compensation expense in connection
   with options and warrants granted       --               --                --            36,647

Net Income                                 --               --         1,710,044         1,710,044
                                    ---------     ------------      ------------      ------------

Balances, May 31, 2008                     --     $     (7,398)     $(14,037,936)     $  3,883,948
                                    =========     ============      ============      ============


                                                     (Continued)


                                                        FS-7
<PAGE>


                                          BIOMERICA, INC. AND SUBSIDIARY
                            CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (CONTINUED)


                                                                            Additional               Common Stock
                                                     Common Stock             Paid-in                 Subscribed
                                                Shares        Amount          Capital            Shares          Amount
                                              ---------     -----------     -----------         -------      -----------

Exercise of stock options and warrants          141,200          11,296          25,090         (12,000)          (3,000)

Realized loss on available-for-sale
  securities                                         --              --              --              --               --

Foreign currency translation                         --              --              --              --               --

Tax effect of exercise of stock options
  and warrants                                       --              --          17,710              --               --

Compensation expense in connection
  with options and warrants granted                  --              --          53,090              --               --

NET INCOME                                           --              --              --              --               --
                                              ---------     -----------     -----------         -------      -----------

Balances, May 31, 2009                        6,631,039     $   530,482     $17,502,986              --      $        --
                                              =========     ===========     ===========         =======      ===========



                                                     (Continued)
                                                        FS-8
<PAGE>


                                          BIOMERICA, INC. AND SUBSIDIARY
                            CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (CONTINUED)

                                                          Accumulated
                                             Common         Other
                                             Stock      Comprehensive
                                           Subscribed       Income         Accumulated
                                           Receivable       (Loss)           Deficit             Tota
                                           ----------    -----------       ------------      ------------

Exercise of stock options and warrants            --               --                --            33,386

Realized loss on available-for-sale
   securities                                     --            7,398                --             7,398

Foreign currency translation                      --           (1,726)               --            (1,726)

Tax effect of exercise of stock options
   and warrants                                   --               --                --            17,710

Compensation expense in connection
   with options and warrants granted              --               --                --            53,090

Net Income                                        --               --           354,180           354,180
                                            --------     ------------      ------------      ------------

Balances, May 31, 2009                      $     --     $     (1,726)     $(13,683,756)     $  4,347,986
                                            ========     ============      ============      ============


                           See report of independent registered public accounting firm and
                               accompanying notes to consolidated financial statements.


                                                        FS-9
<PAGE>

                                        BIOMERICA, INC. AND SUBSIDIARY
                                    CONSOLIDATED STATEMENTS OF CASH FLOWS


For the Years Ended May 31,                                                        2009             2008
                                                                                -----------      -----------

CASH FLOWS FROM OPERATING ACTIVITIES
     Net income                                                                 $   354,180      $ 1,710,044
     Adjustments to reconcile net income
       to net cash used in operating activities:
       Depreciation and amortization                                                 88,651           65,827
       Provision for losses on accounts receivable                                    2,226           25,423
       Inventory reserve                                                            134,924           29,810
       Loss (Gain) or write-down on available-for-sale securities                     7,753       (1,147,845)
       Tax effect of exercise of stock options and warrants                          17,710               --
       Compensation expense in connection with options and warrants granted          53,090           36,647
       Changes in assets and liabilities:
          Accounts receivable                                                       (28,564)        (134,986)
          Inventories                                                              (370,185)        (332,299)
          Prepaid expenses and other                                                (13,850)          27,568
          Other assets                                                                 (585)         (31,598)
          Accounts payable and other accrued expenses                              (209,541)        (192,710)
          Increase in deferred tax asset                                            (68,000)        (170,000)
          Accrued Compensation                                                      (69,808)         (80,476)
                                                                                -----------      -----------
Net Cash Used in Operating Activities                                              (101,999)        (194,595)
                                                                                -----------      -----------

CASH FLOWS FROM INVESTING ACTIVITIES
     Investment in certificate of deposit                                          (100,000)              --
     Proceeds from sale of available-for-sale securities                                 --        1,780,478
     Purchases of property and equipment                                            (85,890)        (264,783)
     Purchase of Intangible Assets                                                  (30,000)              --
                                                                                -----------      -----------
Net Cash (Used In) Provided by Investing Activities                                (215,890)       1,515,695
                                                                                ===========      ===========


                                                     (Continued)


                                                    FS-10
<PAGE>



                                        BIOMERICA, INC. AND SUBSIDIARY
                               CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)



For the Years Ended May 31,                                                        2009              2008
                                                                                -----------      -----------
CASH FLOWS FROM FINANCING ACTIVITIES
     Payments on capital leases                                                      (4,180)          (4,394)
     Decrease of shareholder debt                                                   (95,936)         (61,056)
     Payment of common stock subscribed                                              (3,000)              --
     Exercise of stock options and warrants                                          36,386          148,507
     Borrowings on loan for equipment purchase                                      133,000          119,530
     Payments On Loan for Equipment                                                (173,212)         (18,207)
                                                                                -----------      -----------

Net Cash (Used In) Provided by Financing Activities                                (106,942)         184,380
                                                                                -----------      -----------

Effect of Exchange Rate Changes On Cash                                              (1,726)              --
                                                                                -----------      -----------

Net Change in Cash and Cash Equivalents                                            (426,557)       1,505,480
                                                                                -----------      -----------

CASH AND CASH EQUIVALENTS, beginning of year                                      2,022,380          516,900
                                                                                -----------      -----------

CASH AND CASH EQUIVALENTS, end of year                                          $ 1,595,823      $ 2,022,380
                                                                                ===========      ===========
SUPPLEMENTAL DISCLOSURE OF CASH-FLOW INFORMATION
     CASH PAID DURING THE YEAR FOR:
       Interest                                                                 $    27,347      $    53,922
                                                                                ===========      ===========
       Income taxes (net of refund)                                             $    96,092      $     4,523
                                                                                ===========      ===========



SUPPLEMENTAL DISCLOSURE OF NON-CASH
  INVESTING AND FINANCING ACTIVITIES
     Unrealized (loss) gain on available-for-sale securities                    $        --      $   222,319
                                                                                ===========      ===========

     Non-cash exercise of warrants and options by reduction of note payable     $        --      $    10,878
                                                                                ===========      ===========

     Subscribed stock receivable                                                $        --      $     3,000
                                                                                ===========      ===========



                       See report of independent registered public accounting firm and
                           accompanying notes to consolidated financial statements.
</TABLE>


                                                    FS-11
<PAGE>



                         BIOMERICA, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        YEARS ENDED MAY 31, 2009 AND 2008

1.    ORGANIZATION

ORGANIZATION

Biomerica, Inc. and Subsidiary (collectively "the Company") are primarily
engaged in the development, manufacture and marketing medical diagnostic kits.
As of May 31, 2009 and 2008 the Company had one operational unit.

The Company develops, manufactures, and markets medical diagnostic products
designed for the early detection and monitoring of chronic diseases and medical
conditions. Our medical diagnostic products are sold worldwide in two markets:
1) clinical laboratories and 2) point of care (physicians' offices and
over-the-counter drugstores). Our diagnostic test kits are used to analyze blood
or urine from patients in the diagnosis of various diseases and other medical
complications, or to measure the level of specific hormones, antibodies,
antigens or other substances, which may exist in the human body in extremely
small concentrations.

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements for the years ended May 31, 2009 and 2008
include the accounts of Biomerica, Inc. ("Biomerica") and ReadyScript, Inc. (as
discontinued operations) as well as the Company's newly formed German subsidiary
which has not begun full operations. All significant intercompany accounts and
transactions have been eliminated in consolidation. During fiscal 2009 and 2008
there were no transactions in the discontinued operation and management intends
to formally dissolve the corporation during fiscal 2010.

ACCOUNTING ESTIMATES

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

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company has financial instruments whereby the fair market value of the
financial instruments could be different than that recorded on a historical
basis. The Company's financial instruments consist of its cash and cash
equivalents, short-term investments, accounts receivable, available-for-sale
securities, capital lease, shareholder debt, commercial bank line of credit (of
which the balance was zero at May 31, 2009 and 2008), commercial bank equipment
loan and accounts payable. The carrying amounts of the Company's financial
instruments approximate their fair values at May 31, 2009.

SFAS No. 157, Fair Value Measurement, defines fair value, establishes a
framework for measuring fair value and expands disclosures about fair value
measurements. SFAS No. 157 defines fair value as the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. SFAS No. 157
states that a fair value measurement should be determined based on the
assumptions the market participants would use in pricing the asset or liability.
In addition, SFAS No. 157 specifies a hierarchy of valuation techniques based on
whether the types of valuation information ("inputs") are observable or
unobservable. Observable inputs reflect market data obtained from independent
sources, while unobservable inputs reflect the reporting entity's own
assumptions about the assumptions market participants would use in pricing the
asset or liability developed based on the best information available in the
circumstances.


                                     FS-12
<PAGE>


                         BIOMERICA, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        YEARS ENDED MAY 31, 2009 AND 2008

The three broad levels defined by SFAS No. 157 hierarchy are as follows:

Level 1 - quoted prices for identical assets or liabilities in active markets.

Level 2 - pricing inputs are other than quoted prices in active markets, which
are either directly or indirectly observable as of the reported date.

Level 3 - valuations derived from methods in which one or more significant
inputs or significant value drivers are unobservable in the markets. These
financial instruments are measured using management's best estimate of fair
value, where the inputs into the determination of fair value require significant
management judgment to estimation.

Valuations based on unobservable inputs are highly subjective and require
significant judgments. Changes in such judgments could have a material impact on
fair value estimates. In addition, since estimates are as of a specific point in
time, they are susceptible to material near-term changes. Changes in economic
conditions may also dramatically affect the estimated fair values.

The carrying values reflected in the consolidated balance sheet at May 31, 2009
reasonably approximate the fair values for financial instruments in accordance
with SFAS No. 157. In making such assessment, Company has utilized quoted prices
in active markets for identical assets (Level 1). No allowance for potential
credit losses was considered necessary at May 31, 2009.

<TABLE>
<CAPTION>
<S>     <C>

                                                                      Fair Value Measurements at Reporting Date Using
                                                        Quoted Prices in Active       Significant
                                                              Markets for                Other               Significant
                                                           Identical Assets         Observable Inputs     Unobservable Inputs
Description                          May 31, 2009               (Level 1)               (Level 2)              (Level 3)
- --------------------------------     ------------       -----------------------     -----------------     --------------------
 Short term investment
        Certificates of Deposit         $100,000                      $100,000                $   --                  $   --
                                        --------                      --------                ------                  ------

Total                                   $100,000                      $100,000                $   --                  $   --
                                        ========                      ========                ======                  ======
</TABLE>


CONCENTRATION OF CREDIT RISK

The Company, on occasion, maintains cash balances at certain financial
institutions in excess of amounts insured by federal agencies.

The Company provides credit in the normal course of business to customers
throughout the United States and foreign markets. The Company's sales are not
materially dependent on a single customer or a small group of customers.
Biomerica had two customers which accounted for 26% of its sales for the fiscal
year ended May 31, 2009 and two customers which accounted for 29% of its sales
for the fiscal year ended May 31, 2008. The Company performs ongoing credit
evaluations of its customers and requires prepayment in some circumstances. The
Company does not obtain collateral with which to secure its accounts receivable.
The Company maintains reserves for potential credit losses based upon the
Company's historical experience related to credit losses. The Company monitors
its accounts receivables balances closely. At May 31, 2009 and 2008, three
customers each accounted for greater than 10% of gross accounts receivable.

For the year ended May 31, 2009 no company accounted for more than 10% of the
purchases of raw materials for Biomerica. For the fiscal year ended May 31, 2008
three companies accounted for more than 30% of the purchases for Biomerica on an
unconsolidated basis.

GEOGRAPHIC CONCENTRATION

As of May 31, 2009 and 2008, respectively, approximately $807,000 and $523,000
of Biomerica's gross inventory and $15,000 and $22,000 of Biomerica's property
and equipment, net of accumulated depreciation and amortization, was located in
Mexicali, Mexico.


                                     FS-13
<PAGE>


                         BIOMERICA, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        YEARS ENDED MAY 31, 2009 AND 2008

CASH EQUIVALENTS

Cash and cash equivalents consist of demand deposits and money market accounts
with original maturities of less than three months.

SHORT TERM INVESTMENT

Short term investment held by the Company consisted of a certificate of deposit.

AVAILABLE-FOR-SALE SECURITIES

The Company accounts for investments in accordance with Statement of Financial
Accounting Standards No. 115 (SFAS 115), "ACCOUNTING FOR CERTAIN INVESTMENTS IN
DEBT AND EQUITY SECURITIES." This statement addresses the accounting and
reporting for investments in equity securities which have readily determinable
fair values and all investments in debt securities. The Company's marketable
equity securities are classified as available-for-sale under SFAS 115 and
reported at fair value, with changes in the unrealized holding gain or loss
included in shareholders' equity. Available-for-sale securities consist of
common stock of publicly-traded companies and are stated at market value in
accordance with SFAS 115. Cost for purposes of computing realized gains and
losses is computed on a specific identification basis. The proceeds from the
sale of available-for-sale securities during fiscal 2009 was zero and during
fiscal 2008 it was $1,780,478. Accumulated other comprehensive income (loss)
relating to available-for-sale securities for the years ended May 31, 2009 and
2008 was $(7,398) and $0, respectively. The Company wrote off the entire amount
of available-for-sale securities at May 31, 2009.

ACCOUNTS RECEIVABLE

The Company extends credit to its trade accounts receivable on a regular basis.
International accounts are required to prepay until they establish a history
with the Company and at that time they are extended credit at levels based on a
number of criteria. Credit levels are approved by designated upper level
management. Domestic customers are extended initial $500 credit limits until
they establish a history with the Company or submit credit information. All
increases in credit limits are also approved by designated upper level
management. Management evaluates receivables on a quarterly basis and adjusts
the reserve for bad debt accordingly. Balances over ninety days old are reserved
for. Management evaluates quarterly what items to charge off. Any charge-offs
are approved by upper level management prior to charging off.

INVENTORIES

Inventories are stated at the lower of cost (first-in, first-out method) or
market and consist primarily of biological chemicals. Cost includes raw
materials, labor, manufacturing overhead and purchased products. Market is
determined by comparison with recent purchases or net realizable value. Such net
realizable value is based on forecasts for sales of the Company's products in
the ensuing years. The industry in which the Company operates is characterized
by technological advancement and change. Should demand for the Company's
products prove to be significantly less than anticipated, the ultimate
realizable value of the Company's inventories could be substantially less than
the amount shown on the accompanying consolidated balance sheet.

Inventories approximate the following at May 31:

                         2009             2008
                      -----------      -----------

Raw materials         $   809,000      $   718,000
Work in progress          818,000          570,000
Finished ProductS         537,000          506,000
                      -----------      -----------

Inventory Reserve        (165,000)         (30,000)
                      -----------      -----------

Total                 $ 1,999,000      $ 1,764,000
                      ===========      ===========


Allowances for inventory obsolescence are recorded as necessary to reduce
obsolete inventory to estimated net realizable value or to specifically reserve
for obsolete inventory that the Company intends to dispose of.


                                     FS-14
<PAGE>

                         BIOMERICA, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        YEARS ENDED MAY 31, 2009 AND 2008

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Expenditures for additions and major
improvements are capitalized. Repairs and maintenance costs are charged to
operations as incurred. When property and equipment are retired or otherwise
disposed of, the related cost and accumulated depreciation or amortization are
removed from the accounts, and gains or losses from retirements and dispositions
are credited or charged to income.

Depreciation and amortization are provided over the estimated useful lives of
the related assets, ranging from 5 to 10 years, using the straight-line method.
Leasehold improvements are amortized over the lesser of the estimated useful
life of the asset or the term of the lease. Depreciation and amortization
expense amounted to $88,651 and $65,827 for the years ended May 31, 2009 and
2008, respectively.

Management of the Company assesses the recoverability of property and equipment
by determining whether the depreciation and amortization of such assets over
their remaining lives can be recovered through projected undiscounted cash
flows. The amount of impairment, if any, is measured based on fair value
(projected discounted cash flows) and is charged to operations in the period in
which such impairment is determined by management. Management has determined
that there is no impairment of property and equipment at May 31, 2009.

INTANGIBLE ASSETS

On June 1, 2002, the Company adopted Statement of Financial Accounting Standards
No. 142 ("SFAS No. 142"), "Goodwill and Other Intangible Assets." SFAS No. 142
requires that the Company's license agreements be tested annually (or more
frequently if impairment indicators arise) for impairment. The Company has
established the date of May 31 on which to conduct its annual impairment test.

Intangible assets are being amortized using the straight-line method over the
useful life, not to exceed 18 years for marketing and distribution rights and
purchased technology use rights, and 17 years for patents. Amortization amounted
to $0 and $2,588 for each of the years ended May 31, 2009 and 2008,
respectively. Intangible assets with indefinite lives such as perpetual licenses
are not amortized but rather tested for impairment at least annually (see Note
3).

The Company assesses the recoverability of these intangible assets by
determining whether the amortization of the asset's balance over its remaining
life can be recovered through projected undiscounted future cash flows. The
amount of impairment, if any, is measured based on fair value and charged to
operations in the period in which the impairment is determined by management.

STOCK-BASED COMPENSATION

All share-based payments to employees, including the grants of employee stock
options, are recognized in the consolidated financial statements based on their
fair values, but only to the extent that vesting is considered probable.
Compensation cost for awards that vest will not be reversed if the awards expire
without being exercised. The fair value of stock options is determined using the
Black-Scholes option-pricing model. Compensation costs for awards are amortized
using the straight-line method. Option pricing model input assumptions such as
expected term, expected volatility and risk-free interest rate impact the fair
value estimate. Further, the forfeiture rate impacts the amount of aggregate
compensation. These assumptions are subjective and generally require significant
analysis and judgment to develop. When estimating fair value, some of the
assumptions are based on or determined from external data and other assumptions
may be derived from the Company's historical experience with share-based
arrangements. The appropriate weight to place on historical experience is a
matter of judgment, based on relevant facts and circumstances.

The Company relies on its historical experience and post-vested termination
activity to provide data for estimating expected term for use in determining the
fair value of its stock options. The Company currently estimates its stock
volatility by considering historical stock volatility experience and other key
factors. The risk-free interest rate is the implied yield currently available on
U.S. Treasury zero-coupon issues with a remaining term equal to the expected
term used as the input to the Black-Scholes model. The Company estimates
forfeitures using its historical experience, which will be adjusted over the
requisite service period based on the extent to which actual forfeitures differ,
or are expected to differ, from such estimates. Because of the significant
amount of judgment used in these calculations, it is reasonably likely that
circumstances may cause the estimate to change. If, for example, actual
forfeitures are lower than the Company's estimate, additional charges to net
income may be required.


                                     FS-15
<PAGE>

                         BIOMERICA, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        YEARS ENDED MAY 31, 2009 AND 2008

The following assumptions were used within the Black Scholes option-pricing
model for the years ended May 31, 2009 and 2008; risk free interest rates
ranging from 1.16% to 4.89%; dividend yield of 0%; expected life of the options
of 3.5 and 6 years; volatiliy factors of the expected market price of the
Company's common stock ranging from 71.18% to 104.13%.

When shares are issued for services or other non-cash consideration, fair value
is measured using the current market value on the day of the board approval of
such issuance.

MINORITY INTEREST

At May 31, 2009 and 2008, Biomerica owned 88.9% of ReadyScript, which was
discontinued in 2001. During fiscal 2009 and 2008, there were no transactions
relating to the discontinued operations and the remaining balance sheet of the
discontinued operations is de minimus.

REVENUE RECOGNITION

Revenues from product sales are recognized at the time the product is shipped,
customarily FOB shipping point, at which point title passes. An allowance is
established when necessary for estimated returns as revenue is recognized. As of
May 31, 2009 and 2008, the reserve for allowances is $0.

SHIPPING AND HANDLING FEES AND COSTS

The consolidated financial statements reflect, for all periods presented, the
adoption of the classification or disclosure requirements pursuant to Emerging
Issues Task Force ("EITF") 00-10, "Accounting for Shipping and Handling Fees and
Costs." The Company has historically classified income from freight charges to
customers as sales, which has been offset by shipping and handling costs. The
income from freight for the fiscal years 2009 and 2008, respectively, was
$120,728 and $122,668. The financial statements presented herein show the income
from shipping and handling as a component of sales for both periods and the
costs of shipping and handling as a component of cost of goods sold.

RESEARCH AND DEVELOPMENT

Research and development expenses are expensed as incurred. The Company expensed
$278,308 and $259,085 of research and development expenses during the years
ended May 31, 2009 and 2008, respectively.

INCOME TAXES

The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, "ACCOUNTING FOR INCOME TAXES." Under the asset and
liability method of Statement No. 109, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. Under
Statement No. 109, the effect on deferred tax assets and liabilities of a change
in tax rates is recognized in income in the period that includes the enactment
date.

ADVERTISING COSTS

The Company reports the cost of all advertising as expense in the period in
which those costs are incurred. Advertising costs were approximately $6,000 and
$57,000 for the years ended May 31, 2009 and 2008, respectively.

FOREIGN CURRENCY TRANSLATION

The subsidiary located in Germany operates primarily using local functional
currency. Accordingly, assets and liabilities of this subsidiary are translated
using exchange rates in effect at the end of the period, and revenues and costs
are translated using average exchange rates for the period. The resulting
adjustments are presented as a separate component of accumulated other
comprehensive income.


                                     FS-16
<PAGE>


                         BIOMERICA, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        YEARS ENDED MAY 31, 2009 AND 2008

RECLASSIFICATION

Certain prior year amounts within the consolidated statement of operations and
comprehensive income and consolidated statement of cash flows have been
reclassified to conform to current year presentation.

NET INCOME PER SHARE

Basic earnings per share is computed as net income divided by the weighted
average number of common shares outstanding for the period. Diluted earnings per
share reflects the potential dilution that could occur from common shares
issuable through stock options, warrants and other convertible securities. The
total amount of anti-dilutive warrants or options not included in the earnings
per share calculation for the years ended May 31, 2009 and 2008 was 586,500 and
150,000, respectively.

The following table illustrates the required disclosure of the reconciliation of
the numerators and denominators of the basic and diluted earnings per share
computations.

<TABLE>
<CAPTION>
<S>     <C>

For the Years Ended May 31                                         2009           2008
                                                                ----------     ----------

Numerator for basic and diluted net income per common share     $  354,180     $1,710,044
                                                                ==========     ==========


Denominator for basic net income per common share                6,619,399      6,125,981
Effect of dilutive securities:
   Options and Warrants                                            388,202        852,058
                                                                ----------     ----------

Denominator for diluted net income per common share              7,007,601      6,978,039
                                                                ==========     ==========

Basic net income per common share                               $     0.05     $    0. 28
                                                                ==========     ==========
Diluted net income per common share                             $     0.05     $    0. 25
                                                                ==========     ==========
</TABLE>


                                     FS-17
<PAGE>

                         BIOMERICA, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        YEARS ENDED MAY 31, 2009AND 2008

SEGMENT REPORTING

The FASB has issued SFAS No. 131 "DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE
AND RELATED INFORMATION". SFAS 131 requires public companies to report
information about segments of their business in their annual financial
statements and requires them to report selected segment information in their
quarterly reports issued to shareholders. It also requires entity-wide
disclosures about the product, services an entity provides, the material
countries in which it holds assets and reports revenues, and its major
customers. The Company's business segments are disclosed in Note 7.

REPORTING COMPREHENSIVE INCOME

In June 1997, the FASB issued SFAS No. 130, "REPORTING COMPREHENSIVE INCOME."
This statement establishes standards for reporting the components of
comprehensive income (loss) and requires that all items that are required to be
recognized under accounting standards as components of comprehensive income
(loss) be included in a financial statement that is displayed with the same
prominence as other financial statements. Comprehensive income (loss) includes
net income (loss) as well as certain items that are reported directly within a
separate component of shareholders' equity.

RECENT ACCOUNTING PRONOUNCEMENTS

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements--an amendment of ARB No. 51. This statement
applies to all entities that prepare consolidated financial statements, except
for non-profit organizations, but will affect only those entities that have an
outstanding noncontrolling interest in one or more subsidiaries or that
deconsolidate a subsidiary. SFAS No. 160 is effective for annual periods
beginning December 15, 2008. The Company does not believe that the adoption of
SFAS No. 160 will have a material impact on its financial statements.

In December 2007, the FASB issued SFAS No. 141R, Business Combinations. SFAS
141R establishes a defined measurement period that governs the time period
within which the business combination must be reported. In addition, the revised
standard significantly expands the scope of disclosure requirements. SFAS No.
141R is effective for annual periods beginning after December 15, 2008. The
Company does not believe that the adoption of SFAS No. 141R will have a material
impact on its financial statements.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities-an Amendment of FASB Statement No. 133. This
Statement requires qualitative disclosures about objectives and strategies for
using derivatives, quantitative disclosures about fair value amounts of and
gains and losses on derivative instruments, and disclosures about
credit-risk-related contingent features in derivative agreements. SFAS No. 161
is effective for financial statements issue years and interim periods beginning
after November 15, 2008. The Company does not believe that the adoption of SFAS
No. 161 will have a material impact on its financial statements.

In May, 2009 the FASB issued SFAS No. 165, "Subsequent Events". This statement
established general standards of accounting for disclosure of events that occur
after the balance sheet date but before financial statement are issued or are
available to be issued. It requires the disclosure date through which an entity
has evaluated subsequent events and the basis for that date. This would alert
all users of financial statements that an entity has not evaluated subsequent
events after that in the set of financial statements being presented. This
statement is effective for interim and annual periods ending after June 15,
2009. The Company does not believe that the adoption of SFAS No. 165 will have a
material impact on its financial statements.

The FASB issued SFAS No. 168, "The FASB Accounting Standards Codification
(Codification) and the Hierarchy of Generally Accepted Accounting Principles- a
replacement of Financial Statement No. 162". On the effective date of the
statement, The FASB Accounting Standards Codification will become the source of
authoritative U.S. generally accepted accounting principles (GAAP) recognized by
the FASB to be applied by nongovernmental entities. This statement is effective
for financial statements issued for interim and periods ending after September
15, 2009. The Company does not believe that the adoption of SFAS No. 168 will
have a material impact on its financial statements.


                                     FS-18
<PAGE>


                         BIOMERICA, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        YEARS ENDED MAY 31, 2009AND 2008

3.    INTANGIBLE ASSETS

Intangible assets, net of accumulated amortization, consist of the following at
May 31:

                                    2009           2008
                                  ---------     ---------

Patents and other intangible      $  36,465     $  36,465
Less Accumulated Amortization       (36,465)      (36,465)
                                  ---------     ---------
                                  $      --     $      --
                                  =========     =========

The amounts included in the table above for the year ended May 31, 2009 exclude
approximately $30,000 related to licenses which have an indefinite life and are
not being amortized.

4.    RELATED PARTY TRANSACTIONS

NOTES PAYABLE - SHAREHOLDER

In March 2004 the Company signed a note payable for the principal and interest
due at that time of $313,318 and agreed to a forbearance of any payments for the
length of the agreement. The note payable was secured by all the Company's
assets except for the Lancer common stock owned by Biomerica. The note was due
September 1, 2004. On March 9, 2007 the Company entered into an additional
agreement entitled "Second Amendment of the Note, Loan and Modification
Agreement" which was filed as an exhibit to a Form 10-QSB on April 16, 2007. The
agreement called for payment of overdue principal by August 31, 2007, agreement
by Janet Moore to enter into a Commercial Subordination Agreement, pledge of
additional collateral to Janet Moore (all of which is subordinate to the
Commercial Bank of California) and the reduction of the shareholder note through
payments of $3,500 or (depending on certain quarterly results of the Company)
$2,000 per month. As of May 31, 2009 and 2008 there were $0 and $95,936 payable
on the shareholder note.

During 2009 and 2008, the Company incurred $1,227 and $10,973, respectively, in
interest expense related to the shareholder note.

During 2004, a shareholder/director advanced the Company $4,000. At May 31, 2009
and 2008 $1,659, was owed in interest payable on this loan and a previous loan
of $10,000. This amount was paid in July 2009.

RENT EXPENSE

Biomerica, Inc. currently leases facilities from four individuals, some of whom
are shareholders of the Company. Gross rent expense of approximately $168,000
was incurred during each of the years ended May 31, 2009 and 2008, for this
lease. There was no rent payable at May 31, 2009 or 2008.

ACCRUED COMPENSATION

During fiscal 2002-2005, two officers, who are also shareholders of the Company,
agreed to defer payment of a portion of their salaries. At May 31, 2009 and
2008, $166,768 and $240,118, respectively, of deferred officer's salary is
included in accrued compensation in the accompanying consolidated financial
statements. No interest was accrued on the deferred wages until March 2007. As
of March 1, 2007 the Company began accruing interest at the rate of 8% per year.
In October, 2008 the interest rate was decreased to 4% per year. For the years
ended May 31, 2009 and 2008, $20,187 and $20,299 in interest expense was
incurred, respectively.

Included in accrued compensation as of May 31, 2009 and 2008 is vacation accrual
of $189,916 and $171,998, respectively. Included in the 2009 and 2008 vacation
accrual is approximately $121,000 due to the former chief executive officer's
estate. The Company is disputing the validity of this claim.


                                     FS-19
<PAGE>


                         BIOMERICA, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        YEARS ENDED MAY 31, 2009 AND 2008


5.    SHAREHOLDERS' EQUITY

1995 AND 1999 STOCK OPTION AND RESTRICTED STOCK PLANS

In January 1996, the Company adopted a stock option and restricted stock plan
(the "1995 Plan") which provided that non-qualified options and incentive stock
options and restricted stock covering an aggregate of 500,000 of the Company's
unissued common stock may be granted to affiliates, employees or consultants of
the Company. Options granted under the 1995 Plan may be granted at prices not
less than 85% of the then fair market value of the common stock and expire not
more than 10 years after the date of grant. The 1995 plan expired in 2006. No
option grants have occurred since 2006, however there are still some outstanding
options.

In August 1999, the Company adopted a stock option and restricted stock plan
(the "1999 Plan") which provides that non-qualified options and incentive stock
options and restricted stock covering an aggregate of 1,000,000 of the Company's
unissued common stock may be granted to affiliates, employees or consultants of
the Company. As of January 1, of each calendar year, commencing January 1, 2000,
this amount is subject to automatic annual increases equal to the lesser of 1.5%
of the total number of outstanding common shares, assuming conversion of
convertible securities, or 500,000. Options granted under the 1999 Plan may be
granted at prices not less than 85% of the then fair market value of the common
stock and expire not more than 10 years after the date of grant.

The Company has 201,999 warrants outstanding at May 31, 2009, which are included
in the table below. The warrants were issued in transactions related to
financing, primarily as a component of private placements. The warrants are for
restricted stock and have expiration dates ranging from five to ten years from
date of issue. Purchase prices for warrants range from $0.65 to $3.00.


Activity as to stock options and warrants granted are as follows:

<TABLE>
<CAPTION>
<S>     <C>

                                                        NUMBER                         WEIGHTED
                                                        OF STOCK                        AVERAGE
                                                      OPTIONS AND    PRICE RANGE       EXERCISE
                                                       WARRANTS       PER SHARE          PRICE
                                                      -----------------------------------------
Options and warrants outstanding at May 31, 2007      2,053,249      $0.20 - $3.00     $   0.48
Options granted                                          41,000      $0.78 - $1.30     $   0.98
Options and warrants exercised                         (557,625)     $0.20 - $0.73     $   0.29
Options and Warrants Canceled or Expired                (34,500)     $0.33 - $0.80     $   0.69
                                                      ---------      -------------     --------

Options and warrants outstanding at May 31, 2008      1,502,124      $0.25 - $3.00     $   0.76
Options granted                                         378,500      $0.45 - $0.75     $   0.57
Options and warrants exercised                         (129,200)     $0.25 - $0.40     $   0.26
Options and Warrants Canceled or Expired                (76,750)     $0.25 - $1.30     $   0.62
                                                      ---------      -------------     --------

Options and Warrants Outstanding At May 31, 2009      1,674,674      $0.30 - $3.00     $   0.77
                                                      ---------      -------------     --------
</TABLE>

The weighted average fair value of options and warrants granted during 2009 and
2008 was $0.57 and $0.98, respectively. The aggregate intrinsic value of options
exercised during fiscal 2009 and 2008 was approximately $3,900 and $295,000,
respectively. The aggregate intrinsic value of options outstanding at May 31,
2009 was approximately $273,000. The aggregate intrinsic value of options vested
and exercisable at May 31, 2009 was approximately $214,000.

At May 31, 2009 total compensation cost related to nonvested stock option awards
not yet recognized totaled $104,435. The weighted-average period over which this
amount is expected to be recognized is 2.5 years.

The weighted average remaining contractual term of options and warrants that
were exercisable at May 31, 2009 was 2.13 years.


                                     FS-20
<PAGE>


                         BIOMERICA, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        YEARS ENDED MAY 31, 2009AND 2008

The following summarizes information about all of the Company's stock options
and warrants outstanding at May 31, 2009. These options and warrants are
comprised of those granted under the 1995 and 1999 plan and those granted
outside of these plans.

<TABLE>
<CAPTION>
<S>     <C>

                                                              WEIGHTED
                                             AVERAGE          WEIGHTED          NUMBER              WEIGHTED
   RANGE OF             NUMBER              REMAINING          AVERAGE        EXERCISABLE            AVERAGE
   EXERCISE           OUTSTANDING          CONTRACTUAL        EXERCISE            AT                EXERCISE
    PRICES           MAY 31, 2009         LIFE IN YEARS         PRICE         MAY 31, 2009            PRICE
- -----------------------------------------------------------------------------------------------------------
$0.30 - $0.60         1,036,175              2.54               $0.45          812,300               $0.43
$0.65 - $0.80           484,499              4.19               $0.75          326,374               $0.75
$1.30 - $3.00           154,000              0.12               $2.96          152,000               $2.98
</TABLE>

STOCK ACTIVITY

In July 2007 the Board of Directors granted a stock option for 25,000 options to
a new Company director. The options vested one half immediately and then will
vest one quarter per year thereafter. The option is exercisable at a price of
$0.78 per share and expires in five years. Management assigned a value of
$10,541 to this option.

In November 2007 the Board of Directors granted stock options for 16,000 options
to employees of the Company. The options vested one quarter immediately and then
will vest one quarter per year thereafter. The options are at the exercise price
of $1.30 and expire in five years. Management assigned a value of $10,952 to
these options.

In October 2008 the Board of Directors granted stock options for 100,000 options
to outside directors of the Company. The options vested one quarter immediately
and then will vest one quarter per year thereafter. The options are at the
exercise price of $0.75 and expire in ten years. Management assigned a value of
$58,834 to these options.

In January 2009 the Board of Directors granted stock options for 168,500 options
to employees of the Company. The options vested one quarter immediately and then
will vest one quarter per year thereafter. The options are at the exercise price
of $0.45 and expire in five years. Management assigned a value of $38,270 to
these options.

In March 2009 the Board of Directors granted stock options for 110,000 options
to employees of the Company. The options vested one quarter immediately and then
will vest one quarter per year thereafter. The options are at the exercise price
of $0.60 and expire in five years. Management assigned a value of $35,938 to
these options.

During the fiscal year ended May 31, 2008, options and warrants to purchase
557,625 shares were exercised at prices ranging from $0.20 to $0.73. Total
proceeds to the Company were $162,386.

During the fiscal year ended May 31, 2009, options and warrants to purchase
141,200 shares were exercised at prices ranging from $0.20 to $0.40. Total
proceeds to the Company were $36,386.


                                     FS-21
<PAGE>



                         BIOMERICA, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        YEARS ENDED MAY 31, 2009 AND 2008

6.    INCOME TAXES

Income tax (benefit) expense from continuing operations for the years ended May
31, 2009 and 2008 consists of the following current (benefit) provisions:

May 31,                     2009          2008
                         ---------      ---------
Current:
     U.S. Federal        $      --      $(149,000)
     State and Local        37,000         82,000
                         ---------      ---------
                            37,000        (67,000)
Deferred:
     U.S. Federal          (68,000)            --
     State and Local       (56,000)            --
                         ---------      ---------
                          (124,000)            --
                         ---------      ---------

                         $ (87,000)     $ (67,000)
                         =========      =========

Income tax benefit expense from continuing operations differs from the amounts
computed by applying the U.S. Federal income tax rate of 35 percent to pretax
loss as a result of the following:

<TABLE>
<CAPTION>
<S>     <C>
May 31,                                                            2009          2008
                                                                ---------      ---------

Computed "expected" tax expense (benefit)                       $  93,000      $ 575,000
Increase (reduction) in income taxes resulting from:
     True up of carryforwards and other items                     (43,000)       148,000
     Change in valuation allowance                                (93,000)      (731,000)
     State income taxes, net of federal benefit                    15,000         94,000
     Tax benefit from the release of deferred tax allowance       (58,000)      (170,000)
     Other                                                         (1,000)        17,000
                                                                ---------      ---------

                                                                $ (87,000)     $ (67,000)
                                                                =========      =========

The tax effect of significant temporary differences are presented below.

May 31,                                                           2009          2008
                                                               ---------      ---------

Deferred tax assets:
     Accounts receivable, principally due to allowance for
       doubtful accounts and sales returns                      $  35,000      $  34,000
     Inventory valuation                                           67,000             --
     Compensated absences and deferred payroll                    166,000        196,000
     Net operating loss carryforwards                             314,000        391,000
     Tax credit carryforwards                                      18,000          6,000
     Accumulated depreciation of property and equipment            (9,000)        16,000
     Other                                                         62,000         93,000

Less Valuation Allowance                                         (415,000)      (566,000)
                                                                ---------      ---------

Net deferred tax asset                                          $ 238,000      $ 170,000
                                                                =========      =========
</TABLE>


                                     FS-22
<PAGE>


                         BIOMERICA, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        YEARS ENDED MAY 31, 2009 AND 2008

The Company has provided a valuation allowance for $415,000 and $566,000 as of
May 31, 2009 and 2008, respectively. Although the Company has achieved net
income over the last four fiscal years, predicting future taxable income is
difficult and influenced by many factors. After analyzing our tax position,
Management has provided such allowance to provide for future income.

At May 31, 2009 and 2008, the Company has federal income tax net operating loss
carryforwards of approximately $1,100,000 and $1,119,000, respectively. Of the
reported net operating loss carryforwards, approximately $211,000 are related to
windfall tax benefits from the exercise of the Company's stock options by
certain employees. Pursuant to SFAS No. 165, Share-Based Payments, the federal
benefit of approximately $74,000 associated with this portion of the net
operating loss will be credited to additional paid in capital when the tax
benefits are actually realized. The federal net operating loss carryforwards
begin to expire in 2021. The federal credits begin to expire in 2015.

At May 31, 2009 and 2008, the Company has federal research and development tax
credit carryforward of approximately $18,000 and $6,000, respectively. The
federal credits begin to expire in 2009.

Pursuant to Internal Revenue Code Sections 382 and 383, annual use of the
Company's net operating loss ("NOL") and credit carryforwards may be limited by
statute because of a cumulative change in ownership of more than 50%. Pursuant
to Sections 382 and 383 of the Code, the annual use of the Company's NOLs would
be limited if there is a cumulative change of ownership (as that term is defined
in Section 382(g) of the Code) of greater than 50% in a three year period. Based
on management's analysis the Company does not believe that a cumulative change
in ownership of greater than 50% has taken place.

In June 2006, the FASB issued Interpretation No. 48, or FIN 48, Accounting for
Uncertainty in Income Taxes - an Interpretation of FAS 109. FIN 48 provides
clarification for the financial statement measurement and recognition of tax
positions that are taken or expected to be taken on a tax return. For the fiscal
year ended May 31, 2009 and 2008 the Company did an analysis of its FIN 48
position and has not identified any uncertain tax positions as defined under FIN
48. Should such position be identified in the future and should the Company owe
interest and penalties as a result of this, these would be recognized as income
taxes in the financial statements.

7.    BUSINESS SEGMENTS

Reportable business segments are identified by product line and for the years
ended May 31, 2009 and 2008 and approximate the following:

                                       2009         2008
                                     --------     --------

Domestic long-lived assets, net:
   Medical diagnostic products       $352,000     $348,000
                                     ========     ========

Foreign long-lived assets, net:
   Medical diagnostic products       $ 15,000     $ 22,000
                                     ========     ========

The Company operates in one business segment, Medical Diagnostic Products.

Identifiable assets by business segment are those assets that are used in the
Company's operations in each industry. Identifiable assets are held primarily in
the United States.


                                     FS-23
<PAGE>


                         BIOMERICA, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        YEARS ENDED MAY 31, 2009 AND 2008

The net sales as reflected above consist of sales to unaffiliated customers only
as there were no significant intersegment sales during fiscal years 2009 and
2008. Biomerica had two customers which accounted for 26% of its sales for the
fiscal year ended May 31, 2009 and two customers which accounted for 29% of its
sales for the fiscal year ended May 31, 2008.

Geographic information regarding net sales is approximately as follows:

                            2009           2008
                         ----------     ----------

Net sales:

     Europe              $2,631,000     $2,549,000
     United States        1,198,000      1,359,000
     Asia                   956,000        854,000
     South America           92,000         70,000
     Middle East             40,000         57,000
     Other foreign           18,000         38,000
                         ----------     ----------

     Total net sales     $4,935,000     $4,927,000
                         ==========     ==========

8.    COMMITMENTS AND CONTINGENCIES

OPERATING LEASES

The Company is currently leasing its facilities on a month-to-month basis. The
facilities are owned and operated by four individuals, some of whom are
shareholders and one of whom is an officer and director. Effective May 1, 2007,
the monthly rent was set at $14,000 and has not increased. Management believes
there would be no significant difference in the terms of the property rental if
the Company leased from a third party. Total rent expense for this facility was
approximately $168,000 during each of the years ended May 31, 2009 and 2008.

Biomerica has various insignificant leases for office equipment.

RETIREMENT SAVINGS PLAN

Effective September 1, 1986, the Company established a 401(k) plan for the
benefit of its employees. The plan permits eligible employees to contribute to
the plan up to the maximum percentage of total annual compensation allowable
under the limits of Internal Revenue Code Sections 415, 401(k) and 404. The
Company, at the discretion of its Board of Directors, may make contributions to
the plan in amounts determined by the Board each year. No contributions by the
Company have been made since the plan's inception.

LITIGATION

The Company is, from time to time, involved in legal proceedings, claims and
litigation arising in the ordinary course of business. While the amounts claimed
may be substantial, the ultimate liability cannot presently be determined
because of considerable uncertainties that exist. Therefore, it is possible the
outcome of such legal proceedings, claims and litigation could have a material
effect on quarterly or annual operating results or cash flows when resolved in a
future period. However, based on facts currently available, management believes
such matters will not have a material adverse affect on the Company's
consolidated financial position, results of operations or cash flows. There were
no legal proceedings pending as of May 31, 2009, except for proceedings related
to the collection of accounts receivable which have been previously reserved
for.


                                     FS-24
<PAGE>

                         BIOMERICA, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        YEARS ENDED MAY 31, 2009 AND 2008


CONTRACTS

During the first quarter of fiscal 2006 the Company entered into an agreement
with another company for the purpose of developing certain technology for
Biomerica. The total amount of the contract was for $55,000, with a 40% down
payment required and milestone payments for the balance of the contract. The
balance due at May 31, 2007 was $16,500. On June 5, 2006, a milestone payment of
$16,500 was made which was included in payables as of May 31, 2006. The
remaining $16,500 has not been recorded as a liability at May 31, 2009 due to
the fact that payment of it is contingent upon performance of certain functions
by the contractor. The Company has not and does not expect to make the final
payment in the future on this contract because complete performance of the
contract has not been achieved and the contract has been discontinued.

Biomerica has two royalty agreements in which it has obtained rights to
manufacture and market certain products for the life of the products. Royalty
expense of approximately $106,300 and $118,500 is included in cost of sales for
these agreements for the years ended May 31, 2009 and 2008, respectively. Sales
of products manufactured under these agreements comprise approximately 16.4% and
17.6% of total sales for the fiscal years ended May 31, 2009 and 2008,
respectively. Biomerica may license other products or technology in the future
as the Company deems necessary for conducting business.

On March 27, 2009 the Company signed an Asset Purchase Agreement with a European
company for the purchase of certain technology related to the manufacture of
certain medical diagnostic tests. Consideration for this purchase was a nominal
deposit upon signing the agreement and a nominal transfer fee upon successful
commencement of production of the products. A royalty shall be paid for five
years beginning on the date of first sale of finished product derived from the
purchased assets. These purchased assets did not constitute a business under FAS
141(R). Royalty payments of 10% of sales are due on these products for a period
of five years.

9.    DEBT

In February 2007 the Company entered into a Commercial Security Agreement, two
Promissory Notes, a Subordination Agreement and a Business Loan Agreement. These
agreements pertain to a $200,000 working capital line of credit and a $200,000
equipment loan with Commercial Bank of California and were collateralized by
substantially all of the assets of the Company. In February 2009 the equipment
loan was paid off through proceeds from the loan obtained from Union Bank (see
below). The line of credit was discontinued in November 2008.

On February 13, 2009, the Company entered into a Small Business Banking
Agreement with Union Bank of California for a one year business line (the
"Line") of credit in the amount of $400,000. The interest rate for the line of
credit is the prime rate in effect on the first day of the billing period, as
published in the Wall Street Journal Prime West Coast Edition, plus a spread of
1.00%. Minimum monthly payments will be the sum of (i) the amount of interest
charge for the billing period, plus (ii) any amount past due, plus (iii) any
fees, late charges and/or out-of-pocket expenses assessed. If the Line is not
renewed as of the last day of the term of the Line, the entire unpaid balance of
the Line, including unpaid fees and charges will be due and payable. The Company
has granted the bank security interest in the assets of the Company as
collateral.

The Company must maintain for not less than thirty consecutive days in every
calendar year, a period in which all amounts due under the revolving credit
agreements with the bank are at a zero balance. The Company did not owe anything
on this line of credit as of May 31, 2009.

On February 13, 2009, the Company entered into a Small Business Bank Agreement
with Union Bank for a business loan ("Loan") for $133,000 and an interest rate
of 6.50%. Loan proceeds were disbursed in one single funding on March 5, 2009.
The Loan was used for the purpose of paying off the business loan, which had
been established with Commercial Bank. The fixed asset serves as collateral for
the loan.

The Loan is payable in thirty-six monthly payments of approximately $4,000.


                                     FS-25
<PAGE>

                         BIOMERICA, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        YEARS ENDED MAY 31, 2009 AND 2008

Future maturity of the commercial line of credit is as follows:

Year Ended May 31,
                2010     $ 42,254
                2011       45,084
                2012       35,443
                         --------

Total obligation          122,781
Less Current Portion       42,254
                         --------
Long-term portion        $ 80,527
                         ========

10.   DISCONTINUED OPERATIONS

The following summarizes the net liabilities of the discontinued operations of
ReadyScript, as of May 31, 2009 and 2008. There was no operational activity for
the years ended May 31, 2009 and 2008.

Balance Sheet Items:

May 31,                            2009       2008
                                  ------     ------
Assets:
     Miscellaneous receivable     $5,304     $5,304
Less liabilities:
     Accrued Expenses              4,709      4,709
                                  ------     ------
Net liabilities                   $  595     $  595
                                  ======     ======

11.   SUBSEQUENT EVENTS

On June 18, 2009, the Company entered into an agreement to lease a building in
Irvine, California, commencing September 1, 2009 and ending August 31, 2016. The
initial base rent is set at $18,490 with a security deposit of $22,080. The sum
of $40,568 was due upon execution of the lease. Management is currently working
on plans for the relocation of the Company which should take place by the end of
the calendar year.




                                     FS-26

</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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