UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington, D. C.
20549




FORM 10-Q




QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE


SECURITIES
EXCHANGE ACT OF 1934




For
Quarter Ended September 30, 2010




Commission
File Number 000-51809





BIOELECTRONICS
CORPORATION





(Exact
name of registrant as specified in its charter)





Maryland
            52-2278149(State
      or other jurisdiction of
              incorporation
      or organization)
            (I.R.S.
      employer
              identification
      number)





4539
Metropolitan Court


Frederick,
Maryland 21704


(Address
of principal executive offices and zip code)





Phone:  301.874.4890


Fax:  301.874.6935


(Registrant’s
telephone number, including area code)




Indicate
by check mark whether the registrant: (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was
required to file such returns), (2) has been subject to such filing
requirements for the past 90 days. YES  ̈ NO x




Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§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 whether the registrant is a large accelerated filer, 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. (Check
one)





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 Exchange Act). YES  ̈ NO x




Number of
shares of common stock, issued and outstanding as of November 5, 2010 is
1,499,448,871







BIOELECTRONICS
CORPORATION




(A
Development Stage Company)


FORM
10-Q


TABLE
OF CONTENTS





PART
      I – FINANCIAL INFORMATIONItem
      1.
                Condensed
      Financial Statements
                3Condensed
      Balance Sheets – (Unaudited) September 30, 2010 and December 31,
      2009
                3Condensed
      Statement of Operations – (Unaudited) Nine months and three months ended
      September 30, 2010 and 2009 and April 10, 2000 (date of inception) to
      September 30, 2010
                4Condensed
      Statement of Cash Flows – (Unaudited) Nine months ended September 30, 2010
      and 2009, and April 10, 2000 (date of inception) to September 30,
      2010
                5Notes
      to Condensed Financial Statements (Unaudited)
                6Item
      2.
                Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                24Item
      3.
                Quantitative
      and Qualitative Disclosures About Market Risk
                35Item
      4T.
                Controls
      and Procedures
                36PART
      II – OTHER INFORMATIONItem
      1.
                Legal
      Proceedings
                39Item
      1A.
                Risk
      Factors
                39Item
      2.
                Unregistered
      Sales of Equity Securities and Use of Proceeds
                39Item
      3.
                Defaults
      Upon Senior Securities
                39Item
      4.
                (Removed
      and Reserved)
                40Item
      5.
                Other
      Information
                40Item
      6.
                Exhibits
                40Signatures
                41


“We”,
“Us”, “Our” and “BIEL” unless the context otherwise requires, means
BioElectronics Corporation


2




PART I – FINANCIAL
INFORMATION




Item 1. Financial
Statements.


BioElectronics
Corporation (A Development Stage Company)


Condensed
Balance Sheets


As of September
                    30,
                  
                  
                  As of December
                    31,2010
                  
                  
                  2009(Unaudited)AssetsCurrent
      assets:Cash
      and cash equivalents
                  
                  $
                  55,676
                  
                  
                  $
                  296,352Trade
      and other receivables, net
                  
                  
                  -
                  
                  
                  
                  402,003Trade
      receivable assigned to related party
                  
                  
                  497,147
                  
                  
                  
                  -Trade
      receivable from related parties
                  
                  
                  53,971
                  
                  
                  
                  165,297Inventory
                  
                  
                  898,011
                  
                  
                  
                  201,359Prepaid
      expenses and others
                  
                  
                  66,915
                  
                  
                  
                  102,635Total
      current assets
                  
                  
                  1,571,720
                  
                  
                  
                  1,167,646Property
      and equipment
                  
                  
                  119,251
                  
                  
                  
                  93,502Less:
      Accumulated depreciation
                  
                  
                  (91,207
                  )
                  
                  
                  (79,921
                  )Property
      and equipment, net
                  
                  
                  28,044
                  
                  
                  
                  13,581Total
      assets
                  
                  $
                  1,599,764
                  
                  
                  $
                  1,181,227Liabilities
      and stockholders' deficiencyCurrent
      liabilities:Accounts
      payable
                  
                  $
                  243,425
                  
                  
                  $
                  85,661Accrued
      expenses
                  
                  
                  249,470
                  
                  
                  
                  43,241Notes
      payable
                  
                  
                  19,536
                  
                  
                  
                  12,654Financing
      of receivables with related party
                  
                  
                  67,958
                  
                  
                  
                  -Total
      current liabilities
                  
                  
                  580,389
                  
                  
                  
                  141,556Long-term
      liabilities:Related
      party notes payable
                  
                  
                  3,495,164
                  
                  
                  
                  1,824,176Total
      liabilities
                  
                  
                  4,075,553
                  
                  
                  
                  1,965,732Commitments
      and contingenciesStockholders'
      deficiency:Common
      stock, par value $0.001 per share, 1,500,000,000 authorized at September
      30, 2010 and December 31, 2009 and 1,499,448,871 and 1,470,998,871 shares
      issued and outstanding at September 30, 2010 and December 31, 2009,
      respectively
                  
                  
                  1,499,448
                  
                  
                  
                  1,470,999Additional
      paid-in capital
                  
                  
                  8,624,432
                  
                  
                  
                  8,408,986Deficit
      accumulated during the development stage
                  
                  
                  (12,599,669
                  )
                  
                  
                  (10,664,490
                  )Total
      stockholders' deficiency
                  
                  
                  (2,475,789
                  )
                  
                  
                  (784,505
                  )Total
      liabilities and stockholders' deficiency
                  
                  $
                  1,599,764
                  
                  
                  $
                  1,181,227


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


3


BioElectronics
Corporation (A Development Stage Company)





Condensed
Statements of Operations


(Unaudited)





Three Months
                                      Ended September
                                      30,
                                    
                                    
                                    Three Months
                                      Ended September
                                      30,
                                    
                                    
                                    Nine Months
                                      Ended September
                                      30,
                                    
                                    
                                    Nine Months
                                      Ended September
                                      30,
                                    
                                    
                                    Period from April
                                      10, 2000
                                      (Inception) to
                                      September 30,2010
                                    
                                    
                                    2009
                                    
                                    
                                    2010
                                    
                                    
                                    2009
                                    
                                    
                                    2010Sales
                                    
                                    $
                                    50,470
                                    
                                    
                                    $
                                    74,874
                                    
                                    
                                    $
                                    663,717
                                    
                                    
                                    $
                                    591,330
                                    
                                    
                                    $
                                    4,115,301Cost
      of Goods Sold
                                    
                                    
                                    56,811
                                    
                                    
                                    
                                    12,852
                                    
                                    
                                    
                                    303,457
                                    
                                    
                                    
                                    170,933
                                    
                                    
                                    
                                    1,817,950Gross
      profit
                                    
                                    
                                    (6,341
                                    )
                                    
                                    
                                    62,022
                                    
                                    
                                    
                                    360,260
                                    
                                    
                                    
                                    420,397
                                    
                                    
                                    
                                    2,297,351General
      and Administrative Expenses:Depreciation
      and Amortization
                                    
                                    
                                    12,867
                                    
                                    
                                    
                                    3,645
                                    
                                    
                                    
                                    32,903
                                    
                                    
                                    
                                    10,935
                                    
                                    
                                    
                                    129,616Investor
      Relations Expenses
                                    
                                    
                                    17,313
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    71,923
                                    
                                    
                                    
                                    11,585
                                    
                                    
                                    
                                    1,666,484Legal
      and Accounting Expenses
                                    
                                    
                                    94,636
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    464,226
                                    
                                    
                                    
                                    49,208
                                    
                                    
                                    
                                    1,247,279Sales
      Support Expenses
                                    
                                    
                                    314,363
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    466,064
                                    
                                    
                                    
                                    54,523
                                    
                                    
                                    
                                    1,893,994Other
      General and Administrative Expenses
                                    
                                    
                                    454,940
                                    
                                    
                                    
                                    102,608
                                    
                                    
                                    
                                    1,137,398
                                    
                                    
                                    
                                    427,191
                                    
                                    
                                    
                                    8,323,530Total
      General and Administrative Expenses
                                    
                                    
                                    894,119
                                    
                                    
                                    
                                    106,253
                                    
                                    
                                    
                                    2,172,514
                                    
                                    
                                    
                                    553,442
                                    
                                    
                                    
                                    13,260,903Loss
      from Operations
                                    
                                    
                                    (900,460
                                    )
                                    
                                    
                                    (44,231
                                    )
                                    
                                    
                                    (1,812,254
                                    )
                                    
                                    
                                    (133,045
                                    )
                                    
                                    
                                    (10,963,552
                                    )Interest
      Expense and Other:Interest
      Expense
                                    
                                    
                                    (47,891
                                    )
                                    
                                    
                                    (42,904
                                    )
                                    
                                    
                                    (117,234
                                    )
                                    
                                    
                                    (83,505
                                    )
                                    
                                    
                                    (1,594,574
                                    )Loss
      on Disposal of Assets
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (5,691
                                    )
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (41,543
                                    )Total
      Interest Expense and Other
                                    
                                    
                                    (47,891
                                    )
                                    
                                    
                                    (42,904
                                    )
                                    
                                    
                                    (122,925
                                    )
                                    
                                    
                                    (83,505
                                    )
                                    
                                    
                                    (1,636,117
                                    )Loss
      Before Income Taxes
                                    
                                    
                                    (948,351
                                    )
                                    
                                    
                                    (87,135
                                    )
                                    
                                    
                                    (1,935,179
                                    )
                                    
                                    
                                    (216,550
                                    )
                                    
                                    
                                    (12,599,669
                                    )Provision
      for Income Tax Expense
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -Net
      loss
                                    
                                    $
                                    (948,351
                                    )
                                    
                                    $
                                    (87,135
                                    )
                                    
                                    $
                                    (1,935,179
                                    )
                                    
                                    $
                                    (216,550
                                    )
                                    
                                    $
                                    (12,599,669
                                    )Net
      loss Per Share - Basic and Diluted
                                    
                                    $
                                    (0.00
                                    )
                                    
                                    $
                                    (0.00
                                    )
                                    
                                    $
                                    (0.00
                                    )
                                    
                                    $
                                    (0.00
                                    )
                                    
                                    
                                    N/AWeighted
      Average Number of Shares Outstanding -Basic and
      Diluted
                                    
                                    
                                    1,499,448,871
                                    
                                    
                                    
                                    1,325,999,863
                                    
                                    
                                    
                                    1,481,415,538
                                    
                                    
                                    
                                    820,484,844
                                    
                                    
                                    
                                    N/A




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


4


BioElectronics
Corporation (A Development Stage Company)


Condensed
Statements of Cash Flows


(Unaudited)


Nine Months
                              Ended
                              September 30,
                            
                            
                            Nine Months
                              Ended
                              September 30,
                            
                            
                            Period from April
                              10, 2000
                              (Inception) to
                              September 30,2010
                            
                            
                            2009
                            
                            
                            2010Cash
      flows from Operating Activities:Net
      loss
                            
                            $
                            (1,935,179
                            )
                            
                            $
                            (216,550
                            )
                            
                            $
                            (12,599,669
                            )Adjustment
      to Reconcile Net Loss to Net Cash Used In Operating
      Activities:Depreciation
      and amortization
                            
                            
                            22,686
                            
                            
                            
                            10,935
                            
                            
                            
                            120,970Provision
      for bad debts
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            58,255Amortization
      of non-cash debt issuance costs
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            725,373Non-cash
      expenses
                            
                            
                            -
                            
                            
                            
                            210,960
                            
                            
                            
                            1,455,978Stock-based
      employee compensation expense
                            
                            
                            206,696
                            
                            
                            
                            -
                            
                            
                            
                            244,637Non-cash
      interest related to notes payable
                            
                            
                            -
                            
                            
                            
                            5,018
                            
                            
                            
                            592,418Non-cash
      interest related to related party notes payable
                            
                            
                            112,202
                            
                            
                            
                            114,182
                            
                            
                            
                            (66,585
                            )Amortization
      of loan costs
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            129,852Increase
      in related party notes payable for services rendered
                            
                            
                            178,786
                            
                            
                            
                            -
                            
                            
                            
                            741,562Loss
      on disposal of property and equipment
                            
                            
                            5,691
                            
                            
                            
                            -
                            
                            
                            
                            41,543Changes
      in Assets and Liabilities(Increase)
      Decrease in:Trade
      and other receivables
                            
                            
                            435,794
                            
                            
                            
                            (113,467
                            )
                            
                            
                            (189,759
                            )Trade
      receivables assigned to related party
                            
                            
                            (530,938
                            )
                            
                            
                            -
                            
                            
                            
                            (530,938
                            )Inventory
                            
                            
                            (696,652
                            )
                            
                            
                            (188,400
                            )
                            
                            
                            (898,011
                            )Trade
      receivable from related parties
                            
                            
                            111,326
                            
                            
                            
                            -
                            
                            
                            
                            111,326Prepaid
      expenses and others
                            
                            
                            37,245
                            
                            
                            
                            (24,100
                            )
                            
                            
                            (52,735
                            )Increase
      (Decrease) in:Accounts
      payable
                            
                            
                            157,764
                            
                            
                            
                            (329,695
                            )
                            
                            
                            383,673Accrued
      expenses
                            
                            
                            213,429
                            
                            
                            
                            (243,453
                            )
                            
                            
                            465,112Customer
      deposits
                            
                            
                            -
                            
                            
                            
                            (119,398
                            )
                            
                            
                            -Net
      cash used in operating activities
                            
                            
                            (1,681,150
                            )
                            
                            
                            (893,968
                            )
                            
                            
                            (9,266,998
                            )Cash
      flows from Investing ActivitiesAcquisition
      of property and equipment
                            
                            
                            (31,440
                            )
                            
                            
                            -
                            
                            
                            
                            (160,169
                            )Net
      cash Used in Investing Activities
                            
                            
                            (31,440
                            )
                            
                            
                            -
                            
                            
                            
                            (160,169
                            )Cash
      flows from Financing ActivitiesProceeds
      from note payable, net of loan costs of $10,000
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            1,090,148Payments
      on note payable
                            
                            
                            (6,043
                            )
                            
                            
                            (62,000
                            )
                            
                            
                            (534,262
                            )Proceeds
      from related party notes payable
                            
                            
                            1,410,000
                            
                            
                            
                            1,731,186
                            
                            
                            
                            6,214,953Proceeds
      from financing of receivables with related party
                            
                            
                            116,978
                            
                            
                            
                            -
                            
                            
                            
                            116,978Payments
      on related party notes payable
                            
                            
                            -
                            
                            
                            
                            (931,600
                            )
                            
                            
                            (969,803
                            )Payments
      for financing of receivables with related party
                            
                            
                            (49,021
                            )
                            
                            
                            -
                            
                            
                            
                            (49,021
                            )Proceeds
      from issuance of common stock
                            
                            
                            -
                            
                            
                            
                            790,200
                            
                            
                            
                            3,623,837Other
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            (9,987
                            )Net
      cash provided by financing activities
                            
                            
                            1,471,914
                            
                            
                            
                            1,527,786
                            
                            
                            
                            9,482,843Net
      increase (Decrease) in cash
                            
                            
                            (240,676
                            )
                            
                            
                            633,818
                            
                            
                            
                            55,676Cash-
      Beginning of Period
                            
                            
                            296,352
                            
                            
                            
                            55,278
                            
                            
                            
                            -Cash-
      End of Period
                            
                            $
                            55,676
                            
                            
                            $
                            689,096
                            
                            
                            $
                            55,676Supplemental
      Disclosures of Cash Flow Information:Cash
      paid during the periods for:Interest
                            
                            $
                            5,132
                            
                            
                            $
                            -
                            
                            
                            $
                            71,764Supplemental
      Schedule of Non-Cash Investing and Financing Activities:Conversion
      of debt and accrued interest into common stock
                            
                            $
                            30,000
                            
                            
                            $
                            991,201
                            
                            
                            $
                            3,339,625Issuance
      of common stock from accrued expense
                            
                            $
                            7,200
                            
                            
                            $
                            -
                            
                            
                            $
                            7,200Conversion
      of warrants into common stock
                            
                            $
                            -
                            
                            
                            $
                            -
                            
                            
                            $
                            5,336Prepaid
      insurance expense through issuance of notes
                            
                            $
                            23,348
                            
                            
                            $
                            -
                            
                            
                            $
                            36,002Equipment
      purchases financed through capital leases and notes
payable
                            
                            $
                            -
                            
                            
                            $
                            -
                            
                            
                            $
                            9,986




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


5





NOTE
1 - BASIS OF PRESENTATION





The
Company





The
unaudited condensed financial statements included herein have been prepared by
BioElectronics Corporation (the “Company”, “we” or “us”), a Maryland corporation
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. In the opinion of management, all adjustments, consisting
of normal recurring adjustments, necessary for a fair presentation of financial
position and the results of operations for the interim periods presented have
been reflected herein. The results of operations for interim periods are not
necessarily indicative of the results to be expected for the full year. All such
adjustments are of a normal recurring nature.  Although, the Company
believes that the disclosures are adequate to make the information presented not
misleading, certain information and footnote disclosures, including a
description of significant accounting policies normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America (GAAP), have been condensed or omitted pursuant
to such rules and regulations.





The
year-end condensed balance sheet data were derived from audited financial
statements but do not include all disclosures required by accounting principles
generally accepted in the United States of America. Certain reclassifications
were made to the prior year financial statement amounts to conform to current
year presentation.  These financial statements should be read in
conjunction with the audited financial statements and accompanying notes
included in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2009, as filed with the SEC on March 31, 2010.





The
independent registered public accounting firm’s report on the financial
statements for the fiscal year ended December 31, 2009 states that because of
recurring substantial losses from operations and a deficit accumulated during
the development stage, there is substantial doubt about the Company’s ability to
continue as a going concern.  A “going concern” opinion indicates that
the financial statements have been prepared assuming the Company will continue
as a going concern and do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the outcome of this
uncertainty.


6


NOTE
1 - BASIS OF PRESENTATION (CONTINUED)





Background




BioElectronics
Corporation (OTCQB) (the “Company”) is the developer, marketer and manufacturer
of patented, inexpensive, drug–free, topical, anti-inflammatory medical devices
based upon proven therapy.  Pulsed electromagnetic therapy has been
used by physicians, sports trainers, and therapist around the world for eighty
years.  The Company has reduced the therapy to wafer thin devices that
are applied directly to the body. The devices consist of an inexpensive
microchip, battery and antenna that more effectively deliver the
energy.  Recent improved circuitry has created a product that heals
for 10 days and can be sold at prices competitive to hot and cold packs. These
products will be sold very competitively on Direct Response Television (DRTV),
Direct-To-Consumer (DTC) and in the analgesic aisle in stores around the
world.   The Company’s design cost goal is to make its chips
ubiquitous or one in every bandage.




The DRTV
and online marketing platforms enable customers to easily gain access to
information regarding these new and exciting consumer products and the ability
to purchase these items within the convenience of their own homes. The Company
works with its distribution partners to provide product distribution,
fulfillment and customer interaction, including the operation of customer call
centers




An
increased consumer awareness of the dangers of overuse of oral analgesics such
as acetaminophen and non-steroidal anti-inflammatory drugs (NSAIDs) has
significantly altered the competitive landscape for pain management
therapeutics.  Many common anti-inflammatory pain medications are
required to carry warning labels due to potential dangerous side effects (and
some have been withdrawn altogether).  Therefore, there is significant
market opportunity for a therapeutic agent with improved efficacy and no
side-effects. The distinctive value proposition of the products is the delivery
of drug-free therapy that reduces pain and inflammation and accelerates healing by
30% to 50% when compared with the present standard methods of patient
care.  The market potential is estimated at $10 billion
worldwide.




The
Company’s immediate objective is to sell and distribute its three main products:
ActiPatch® Back
Pain Therapy, ActiPatch Knee Pain Therapy, and AllayTM Menstrual Cycle Pain
Therapy, each of which has significant market potential.  To
accomplish these objectives, we incurred significant additional costs in period
expenses to:





·
            File
      our audited financial statements and other reports with the
      SEC


·
            Obtain
      additional regulatory clearances in Latin America, and
  U.S.


·
            Grow
      our international distribution
network


·
            Establish
      global brand management


·
            Conduct
      consumer and market research in more
areas


·
            Develop
      and broadcast infomercials


·
            Research
      and develop new products and make product
  improvements


7


NOTE
1 - BASIS OF PRESENTATION (CONTINUED)





During
the nine months ended September 30, 2010, our sales and marketing focus was on
launching DRTV in Latin America, Canada, and preparing other international
launches of DRTV campaigns.  The development of our product marketing
group and initiation of consumer research has increased sales and administration
expense.  Likewise, we have engaged B2C Agency for direct response and
advertising support for the United Kingdom and European market
expansion.  We committed substantial resources to biophysics and
regulatory consulting to obtain additional product market clearances in U.S.,
Latin America, and Canada.  Additionally, we have also made several
significant product improvements in the electronics, packaging, and affixing
methods.  Furthermore, as a result of our SEC filings, our accounting
and legal costs have dramatically increased.





The
Company is also focused on the domestic plastic surgery market, based on our
U.S. Food and Drug Administration (FDA) market clearance that is limited for
post eye surgery, and with prescription use only.  In the prior fiscal
year, we changed our marketing and sales focus to the DTC markets for menstrual
pain and back pain, where we concentrate on DRTV and retail presence. The DTC
and DRTV markets are more attractive because:





1.
            Our
      products are sold directly, allowing us to control the
      marketing;





2.
            Back
      Pain and Menstrual Pain products are much larger than post plastic surgery
      market. For example, in the US
alone:





a.
            Back
      injuries are the leading cause of disability in the United States for
      people younger than 45 years of age and represent the most expensive
      health care problem for people between 20 years and 50 year
      old;





b.
            Approximately
      1.0% of the United States population is chronically disabled due to back
      pain and an additional 1% is temporarily disabled
  and;





c.
            Each
      year, two percent of the United States work force has compensable back
      injuries each year;





d.
            Patients
      suffering from back pain consume more that $90 billion annually in
      health-care expenses, with approximately $26 billion of that amount
      directly attributable to treating back
pain;





e.
            A
      study by Duke University found the annual per capita expenditures for
      patients with back pain were 1.6 times higher than those without back
      pain.


8


NOTE
1 - BASIS OF PRESENTATION (CONTINUED)





3.
            The
      Over-the-counter (OTC) markets are more accessible internationally where
      we already have regulatory approvals to sell our products without
      prescription. DRTV helps us access these markets very fast, with only
      modest investments to start a
campaign.





This
significant change in company strategy is resulting in improvements in product
response, capture rate, pricing, market penetration, and other internal key
performance measures. During this expense, we developed new products that are
much more consumer oriented, supported with advanced market research and
marketing strategy. Examples of our new and exciting products
include:





1.
            Allay
      Menstrual Pain Therapy (disposable version) – We have developed a monthly
      device with a much thinner and smaller profile results in better market
      pricing.  We support the marketing of this device by a new
      tagline “So you can be there... and be yourself”. This tagline and theme
      was developed after extensive one-on-one interview sessions, using
      advanced interview techniques.   We also recently commenced
      a DRTV campaign with a new and exciting product in the UK that targets
      consumers to enroll in our “Loyalty Program.”  As a member of
      the Loyalty Program, consumers receive mothly product shipments and better
      pricing. Using this continuity model, we develop highly loyal customers
      who purchase in excess of $150 of product
  annually.





2.
            Insole
      Product – We just started manufacturing a new product that has our device
      inside a gel insole. This new product will be the only gel insole with an
      actual active therapeutic agent that treats inflammation and pain at the
      source for the tens of millions of people who suffer from heel pain, where
      the main injury condition is called Plantar Fasciitis. Together with our
      clinical study for patients with Plantar Fasciitis, we will be able to
      make a successful marketing campaign for the new insoles. This product has
      a significant competitive advantage over any other product in the market.
      While we are able to produce and market it ourselves, for this specific
      product we are not eliminating the option to partner with large
      international players in the insole
market.





3.
            ActiPatch
      New Product Line – As with Allay, our current ActiPatch device works for
      at least 720 hours. We are replacing it with a device that works for 5-7
      days, and be sold for a lower price, to increase trial and repeat
      purchase. Our products area very cost-effective alternative therapy,
      especially with improvements to our targeted pricing and production
      processes.


9


NOTE
1 - BASIS OF PRESENTATION (CONTINUED)





Securing
additional U.S. FDA market clearance is central to market entry and product
acceptance.  Plastic surgery is the only domestic market segment with
current U.S. FDA market clearance.  We have developed a new device and
honed our arguments on the power of our existing device to meet the standards
for a broader indication-of-use market clearance from the U.S. FDA, and thus, we
have submitted three form 510(k)’s for the new and existing device to the U.S.
FDA for broader market clearance.  The new market clearance will
enable us to market and sell to all surgeons and chronic would care providers,
home health care agencies, and nursing homes.





NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





DEVELOPMENT
STAGE COMPANY





As
defined by Accounting Standards Codification (ASC) Topic 915, “Development Stage
Entities,” the Company is devoting substantially all of its present efforts to
developing its business, developing markets, training and development of
personnel, raising capital, and financial planning.  Consequently, the
Company has not yet commenced one of its planned principal activities, the sales
of products in the U.S. retail market.  Accordingly, other activities
have commenced but there has been no significant revenue
therefrom.  All losses accumulated since inception have been
considered as part of the Company’s development stage
activities.  Costs of start-up activities, including organizational
costs, are expensed as incurred as the Company continues to obtain FDA approval
for its products.





CASH
AND CASH EQUIVALENTS





The
Company considers all highly liquid instruments purchased with an original
maturity of three months or less as short-term investments.





TRADE
RECEIVABLES





The
Company maintains reserves on customer accounts where estimated losses may
result from the inability of its customers to make required
payments.  These reserves are reviewed and determined based on a
number of factors on a weekly basis, including the current financial condition
of specific customers, the age of specific trade and other receivable balances
and historical loss rate.  The allowance for doubtful accounts was
$33,791 at both September 30, 2010 and December 31, 2009.  Bad debt
expense for the nine months ended September 30, 2010 and September 30, 2009 were
$0 and $5,085, respectively.  For the three months ended September 30,
2010 and September 30, 2009, bad debt expense was $0 and $5,085,
respectively.




10


NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)





ADVERTISING
COSTS





The
Company expenses the costs associated with advertising as
incurred.  However, costs incurred to fund the production of
advertisements are capitalized and reported as a prepaid expense if the related
advertisement has not yet been broadcast to the public.  Any prepaid
costs are amortized over the contract period directly attributable to a specific
broadcast.   Prepaid advertising cost incurred to fund the production
of infomercials, as part of our DRTV campaign, was $38,324 and $34,014 at
September 30, 2010 and December 31, 2009, respectively.  Amortized
advertising costs for the nine months ended September 30, 2010 and September 30,
2009 were $20,980 and $0, respectively.  Amortized advertising costs
for the three months ended September 30, 2010 and September 30, 2009 were $9,581
and $0, respectively.





REVENUE
RECOGNITION





Sales and
related cost of product sold are recognized when legal title passes to the
purchaser, which is primarily upon shipment of products. When customers, under
the terms of specific orders, request that the Company invoice goods and hold
the goods (“Bill and Hold”) for future shipment, the Company recognizes revenue
when legal title to the finished goods inventory passes to the purchaser.
Generally, the Company receives cash from the purchaser when legal title passes.
The Company believes it has met the criteria required by the accounting
standards for Bill and Hold treatment.




ISSUANCE
OF STOCK FOR NON-CASH CONSIDERATION





All
issuances of the Company’s stock for non-cash consideration are assigned a per
share amount based on either the market value of the shares issued or the value
of consideration received, whichever is more readily
determinable.  The majority of the non-cash consideration pertains to
services rendered by consultants and others.  The fair value of the
services received was used to record the related expense and value attributed to
the shares issued.  Fair value is calculated in accordance with ASC
718 – Stock Compensation, whereby the Company accounts for the compensation cost
based on the grant date.  On March 18, 2010, the Company issued
1,000,000 common shares, and on May 21, 2010, the Company issued 2,200,000
common shares to consultants in respect of services provided in the year ended
December 31, 2009.   The shares were valued at $0.00225 per share
(or $7,200 in aggregate) and were issued as payment of an accrued liability
recorded in the Company’s balance sheet as of September 30,
2010.


11


NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)





RECENT
ACCOUNTING PRONOUNCEMENTS





Recently
Adopted Accounting Pronouncements





In May
2010, the Financial Accounting Standards Board (“FASB”) issued Accounting
Standards Update (“ASU”) 2010-19, “Multiple Foreign Currency Exchange Rates(Topic 830)”.
The amendments in this Update are effective for reported balances in an entity’s
financial statements that differ from their underlying U.S. dollar denominated
values occurring in the first interim or annual period ending on or after March
15, 2010. The amendments are to be applied retrospectively. The Company adopted
these amendments in 2010 and the adoption did not have and is not expected to
have a material impact on the disclosures in the Company’s financial
statements.





In April
2010, the FASB issued ASU 2010-18, “Receivables (Topic 310):
Effect of a Loan Modification
When the Loan is Part of a Pool That Is Accounted for as a Single
Asset.”  The amendments in this Update are effective for
modifications of loans accounted for within pools under Subtopic 310-30
occurring in the first interim or annual period ending on or after July 15,
2010. The amendments are to be applied prospectively. Early application is
permitted. The Company adopted these amendments in the third quarter of 2010 and
the adoption did not have and is not expected to have a material impact on the
disclosures in the Company’s financial statements.





In April
2010, the FASB issued ASU 2010-17, “Revenue Recognition—Milestone
Method”,which provides guidance on defining the milestone and
determining when the use of the milestone method of revenue recognition for
research and development transactions is appropriate. It provides criteria for
evaluating if the milestone is substantive and clarifies that a vendor can
recognize consideration that is contingent upon achievement of a milestone as
revenue in the period in which the milestone is achieved, if the milestone meets
all the criteria to be considered substantive. ASU 2010-17 is effective for
milestones achieved in fiscal years, and interim periods within those years
beginning on or after June 15, 2010 with prospective
application.  Early adoption is permitted with specific
provisions.  The Company adopted these amendments in the third quarter
of 2010 and the adoption did not have and is not expected to have a material
impact on the disclosures in the Company’s financial statements.





In March
2010, the FASB issued ASU No. 2010-11, “Derivatives and Hedging (Topic 815)
— Scope Exception Related to Embedded Credit Derivatives.”  ASU
2010-11 clarifies that the only form of an embedded credit derivative that is
exempt from embedded derivative bifurcation requirements are those that relate
to the subordination of one financial instrument to another. As a result,
entities that have contracts containing an embedded credit derivative feature in
a form other than such subordination may need to separately account for the
embedded credit derivative feature. The Company adopted these amendments in the
third quarter of 2010 and the adoption did not have and is not expected to have
a material impact on the disclosures in the Company’s financial
statements.




12


NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)





In
October 2009, the FASB issued ASU No. 2009-14, “Software (Topic 985) — Certain
Revenue Arrangements That Include Software Elements (A Consensus of the FASB
Emerging Issues Task Force)”. ASU 2009-14 requires tangible products that
contain software and non-software elements that work together to deliver the
products essential functionality to be evaluated under the accounting standard
regarding multiple deliverable arrangements. This standard update may be adopted
prospectively for revenue arrangements entered into or materially modified after
the date of adoption or retrospectively for all revenue arrangements for all
periods presented. The adoption of this standard did not have and is not
expected to have a significant impact on the Company’s financial
statements.





In
September 2009, the FASB issued ASU 2009-13 (Topic 605-25), “Revenue Recognition;
Multiple-Element Arrangements.”  These amendments provide
clarification on whether multiple deliverables exist, how the arrangement should
be separated, and the consideration allocated.  An entity is required to
allocate revenue in an arrangement using estimated selling prices of
deliverables in the absence of vendor-specific objective evidence or third-party
evidence of selling price. These amendments also eliminate the use of the
residual method and require an entity to allocate revenue using the relative
selling price method.  The amendments significantly expand the disclosure
requirements for multiple-deliverable revenue arrangements.  These
provisions are to be applied on a prospective basis for revenue arrangements
entered into or materially modified in fiscal years beginning on or after
June 15, 2010, with earlier application permitted.  The Company
adopted these amendments in the third quarter of 2010 and the adoption did not
have and is not expected to have a material impact on the disclosures in the
Company’s financial statements.





Recently
Issued Accounting Pronouncements Not Yet Adopted





In July
2010, the FASB issued ASU 2010-20, “Receivables (Topic 310): Disclosure
about the Credit Quality of Financing Receivables and the Allowance for Credit
Losses”,which will require additional disclosures about the credit
quality of loans, lease receivables and other long-term receivables and the
related allowance for credit losses. Certain additional disclosures in this new
accounting guidance will be effective for the Company on December 31,
2010 with certain other additional disclosures that will be effective on
March 31, 2011. The Company does not expect the adoption of this new
accounting guidance to have a material impact on its financial
statements.




13





In April
2010, the FASB issued ASU 2010-13, “Compensation — Stock Compensation
(Topic 718) — Effect of Denominating the Exercise Price of a Share-Based Payment
Award in the Currency of the Market in Which the Underlying Equity Security
Trades.” ASU 2010-13 provides amendments to Topic 718 to clarify that an
employee share-based payment award with an exercise price denominated in the
currency of a market in which a substantial portion of the entity’s equity
securities trades should not be considered to contain a condition that is not a
market, performance, or service condition. Therefore, an entity would not
classify such an award as a liability if it otherwise qualifies as equity. The
amendments in ASU 2010-13 are effective for fiscal years, and interim periods
within those fiscal years, beginning on or after December 15, 2010 and are
not expected to have a significant impact on the Company’s financial
statements.





NOTE
3 – GOING CONCERN





The
Company’s financial statements have been prepared on a going concern basis which
contemplates the realization of assets and the liquidation of liabilities in the
ordinary course of business.  The Company has incurred substantial
losses from operations. Due to the "start up" nature of our business, we expect
to incur losses as we continue to identify and develop new markets and
distributors.  These conditions raise substantial doubt about our ability
to continue as a going concern.  Management recognizes that in order to
meet our capital requirements, and continue to operate, additional financing
will be necessary.  We are evaluating alternative sources of financing to
improve our cash position and are undertaking efforts to raise capital, but
there is no assurance that such additional funds will be available for us to
finance our operations on acceptable terms, if at all.  If we are unable to
raise additional capital or generate positive cash flow, it is unlikely that we
will be able to continue as a going concern.  The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.





The
Company sustained a net loss of $1,935,179 for the nine months ended September
30, 2010.  The Company projects that it will require an additional
$900,000 in working capital in the next 12 months.  Management has
already loaned the Company $200,000 and is committed to loan the additional
$350,000.  Given a current ratio of 1:3, management assumes it can
finance some additional growth with asset based financing.  As well,
the Company is discussing various strategic alternatives with
investors.  If sales increase as anticipated, the Company will seek
additional capital from new investors.  The Company has prepared a
financing proposal to discuss opportunities with potential investors or possible
strategic partners.  However, the Company can provide no assurance
that it will be able to obtain the financing it needs to continue its efforts
for market acceptance, U.S. FDA approval and to maintain operations and
alleviate doubt about its ability to continue as a going
concern.


14


NOTE
4 - INVENTORY




Inventories,
consisting of material, material overhead, labor, and manufacturing overhead,
are stated at the lower of cost (first-in, first-out) and consist of the
following as of September 30, 2010 and December 31, 2009:





September 30,
                    2010
                  
                  
                  December 31,
                    2009Raw
      materials
                  
                  $
                  182,130
                  
                  
                  $
                  27,900Finished
      goods
                  
                  
                  715,881
                  
                  
                  
                  173,459$
                  898,011
                  
                  
                  $
                  201,359





NOTE
5 – PROPERTY AND EQUIPMENT





Property
and equipment are recorded at cost. Depreciation is provided over the estimated
useful lives of the related assets using the straight-line method for financial
statement purposes. The Company uses other depreciation methods for taxes
purposes, where appropriate. Amortization of leasehold improvements is computed
using the straight-line method over the shorter of the remaining lease term or
the estimated useful lives of the improvements.





Repairs
and maintenance are expensed as incurred.  Expenditures that increase
the value or productive capacity of assets are capitalized.  When
property and equipment are retired, sold, or otherwise disposed of, the assets
carrying amount and related accumulated depreciation are removed from the
accounts and any gain or loss is included in operations.





Property
and equipment consists of the following as of September 30, 2010 and December
31, 2009:




September 30,
                                  2010
                                
                                
                                December 31,
                                  2009Machinery
      & Equipment
                                
                                $
                                112,369
                                
                                
                                $
                                86,620Leasehold
      improvements
                                
                                
                                6,882
                                
                                
                                
                                6,882Total
      property and equipment
                                
                                
                                119,251
                                
                                
                                
                                93,502Less:
      accumulated depreciation
                                
                                
                                (91,207
                                )
                                
                                
                                (79,921
                                )Total
      property and equipment, net
                                
                                $
                                28,044
                                
                                
                                $
                                13,581





Depreciation
expense on property and equipment amounted to $11,922 and $10,935 for the nine
months ended September 30, 2010 and September 30, 2009,
respectively.  For the three months ended September 30, 2010 and
September 30, 2009, depreciation expense amounted to $3,286 and $3,645,
respectively.


15


NOTE
6 – INSURANCE PREMIUM FINANCING





During
2009, the Company entered into an insurance premium financing agreement with an
independent company to purchase insurance policies for directors’ and officers’
liability, general liability and product liability.  The annual
interest rate was 6.26%.  The remaining balance of the amount financed
was $12,654 as of December 31, 2009, and payments of $12,654 were made during
the nine months ended September 30, 2010.  The interest expense for
this note was $0 for the three and $100 for the nine months ended September 30,
2010.





On June
22, 2010, the Company entered into a new insurance premium financing agreement
with an independent company to purchase insurance policies for directors’ and
officers’ liability to replace a portion of the policy described
above.  The annual interest rate is 5.51%, the amount financed is
$12,925.  Additionally, on September 15, 2010, the Company entered
into separate insurance premium financing agreement with the same independent
company to purchase insurance policies for both general and product
liability.  The annual interest rate is 5.51%, the amount financed is
$10,423.  Payments of $3,814 were made on both financing agreements
during the nine months ended September 30, 2010.  The interest expense
for this note was $65 for the three and nine months ended September 30,
2010.





NOTE
7 – FINANCING OF RECEIVABLES WITH RELATED PARTY





The
Company entered into an agreement (the “Agreement”) on March 5, 2010, with
Jarenz LLC (“Jarenz”) pursuant to which Jarenz provides accounts receivable
financing and collection services to the Company.  Jarenz is a related
party, as defined in ASC 850, whose owner is a daughter of the President of the
Company.





The
Agreement provides for the Company to assign certain accounts receivable
balances to Jarenz in exchange for a Cash Advance Amount of up to 80% of the
face value of the receivables transferred; such amount determined upon
discussions between the parties.    Following collection of
the related receivable, Jarenz pays the balance thereof to BioElectronics minus
the initial down payment and a discount fee earned by Jarenz.





Jarenz’s
discount fee is a percentage, between 1% to 9.5%, of the Cash Advance Amount
based upon the number of days elapsing between the date of purchase by Jarenz
and the date of collection of the related accounts receivable.





The
Company accounts for transactions under the Agreement as secured borrowings
since the Company has not surrendered control of the transferred accounts
receivable to Jarenz under the Agreement.  The Company reports the
proceeds received from Jarenz as a current liability.   The
discount fee and any subsequent interest payments are recorded as interest
expense in the Statement of Operations.  The accounts receivable
balance at September 30, 2010 includes receivables amounting to $497,147 which
have been assigned to Jarenz under the Agreement.




16


NOTE
7 – FINANCING OF RECEIVABLES WITH RELATED PARTY (CONTINUED)





As of
September 30, 2010, Jarenz received $12,910 from the assigned receivables which
was not yet forwarded to the Company.  Interest expense of $4,865 was
recorded for the nine months ended September 30, 2010, and interest expense of
$911 was recorded for the three months ended September 30, 2010.





NOTE
8 – RELATED PARTY NOTES PAYABLE





On
January 1, 2005, the Company entered into an unsecured revolving convertible
promissory note agreement (“the Revolver”) with IBEX, LLC (“IBEX”) for a maximum
limit of $2,000,000, with interest at the Prime Rate plus 2% (5.25% for the nine
months ended September 30, 2010), and all accrued interest and principal due on
or before January 1, 2015, whether by the payment of cash or by conversion, at
the option of the holder, into shares of the Company’s common
stock.  The Revolver is convertible at various fixed conversion prices
based on the Volume-Weighted Average Price (“VWAP”) which is calculated by
averaging the 10 trading days preceding the date of note, which approximated the
fair value of the Company’s stock at the date of conversion.  IBEX,
LLC is a related party limited liability company, whose President is a daughter
of the President of the Company.  The balance of the Revolver was
$1,308,895 as at September 30, 2010.





In
addition to the Revolver as described above, the Company has entered into the
following convertible promissory note agreements with related
parties:





Date Issued
                          
                          Principal
                            Amount
                          
                          Due Date
                          
                          Lender
                          
                          Conversion
                            PriceAugust
      1, 2009
                          
                          $
                          519,920
                          
                          August
      31, 2011
                          
                          IBEX,
      LLC
                          
                          $
                          0.019February
      9, 2010
                          
                          
                          135,000
                          
                          February
      2, 2012
                          
                          IBEX,
      LLC
                          
                          $
                          0.010March
      31, 2010
                          
                          
                          310,000
                          
                          March
      31, 2012
                          
                          IBEX,
      LLC
                          
                          $
                          0.010April
      15, 2010
                          
                          
                          20,000
                          
                          April
      30, 2012
                          
                          IBEX,
      LLC
                          
                          $
                          0.010May
      5, 2010
                          
                          
                          120,000
                          
                          May
      31, 2012
                          
                          IBEX,
      LLC
                          
                          $
                          0.010May
      14, 2010
                          
                          
                          100,000
                          
                          May
      31, 2012
                          
                          IBEX,
      LLC
                          
                          $
                          0.010June
      22, 2010
                          
                          
                          130,000
                          
                          June
      30, 2012
                          
                          IBEX,
      LLC
                          
                          $
                          0.010June
      30, 2010
                          
                          
                          95,795
                          
                          June
      30, 2012
                          
                          St.
      Johns, LLC
                          
                          $
                          0.010July
      15, 2010
                          
                          
                          10,000
                          
                          July
      31, 2012
                          
                          IBEX,
      LLC
                          
                          $
                          0.010July
      23, 2010
                          
                          
                          100,000
                          
                          July
      31, 2012
                          
                          IBEX,
      LLC
                          
                          $
                          0.008August
      9, 2010
                          
                          
                          100,000
                          
                          August
      31, 2012
                          
                          Robert
      Whelan
                          
                          $
                          0.006August
      9, 2010
                          
                          
                          100,000
                          
                          August
      31, 2012
                          
                          Janel
      & Ryan Zaluski
                          
                          $
                          0.006August
      31, 2010
                          
                          
                          61,109
                          
                          August
      31, 2012
                          
                          St.
      Johns, LLC
                          
                          $
                          0.007September
      7, 2010
                          
                          
                          50,000
                          
                          September
      30, 2012
                          
                          IBEX,
      LLC
                          
                          $
                          0.007September
      14, 2010
                          
                          
                          185,000
                          
                          September
      30, 2012
                          
                          IBEX,
      LLC
                          
                          $
                          0.007September
      30, 2010
                          
                          
                          50,000
                          
                          September
      30, 2012
                          
                          IBEX,
      LLC
                          
                          $
                          0.007September
      30, 2010
                          
                          
                          21,882
                          
                          September
      30, 2012
                          
                          St.
      Johns, LLC
                          
                          $
                          0.007


17


NOTE
8 – RELATED PARTY NOTES PAYABLE (CONTINUED)





Each of
the above promissory notes bears simple interest at 8% per annum, and all
accrued interest and principal is due on the maturity date.  At the
option of the holder, the promissory notes are convertible into common shares of
the Company’s stock at a conversion rate equal to the quotient of (i) a sum
equal to the entire outstanding principal and interest, divided by (ii) the
conversion price indicated in the table above.  According to the
Security Agreements dated August 1, 2009 and February 9, 2010, the Company
grants IBEX a security interest in, all of the right, title, and interest of the
Company, in and to all of the Company’s personal property and intellectual
property, and all proceeds or replacements as collaterals.  Robert
Whelan is the son and Janel Zaluski is a daughter of the President of the
Company.  Additionally, St. Johns, LLC is a limited liability company,
which is owned by family members of the President of the Company.





Total
interest expense incurred on the related party notes payable for the nine months
ended September 30, 2010 and 2009 was $112,202 and $30,692,
respectively.  For the three months ended September 30, 2010 and
September 30, 2009, interest expense amounted to $46,916 and a credit benefit of
$9,786, respectively.





NOTE
9 – LOSS PER SHARE





The
following table sets forth the computation of basic and diluted share
data:





Three months ended September30,
                      
                      
                      Nine months ended September30,2010
                      
                      
                      2009
                      
                      
                      2010
                      
                      
                      2009Common Stock:Weighted
      average number of shares outstanding – basic
                      
                      
                      1,499,448,871
                      
                      
                      
                      1,325,999,863
                      
                      
                      
                      1,481,415,538
                      
                      
                      
                      820,484,844Effect
      of dilutive securities:Options
      and Warrants
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Weighted
      average number of shares outstanding – diluted
                      
                      
                      1,499,448,871
                      
                      
                      
                      1,325,999,863
                      
                      
                      
                      1,481,415,538
                      
                      
                      
                      820,484,844Options
      and Warrants not included above (anti-dilutive)Options
      to purchase common stock
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      350,000
                      
                      
                      
                      350,000Restricted
      Stock grants awarded to employees not yet issued
                      
                      
                      10,000,000
                      
                      
                      
                      -
                      
                      
                      
                      76,550,000
                      
                      
                      
                      -Warrants
      to purchase common stock
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      332,000
                      
                      
                      
                      4,844,44410,000,000
                      
                      
                      
                      -
                      
                      
                      
                      77,232,000
                      
                      
                      
                      5,194,444


18


NOTE
10 – SHARE BASED COMPENSATION
 
 On
November 30, 2004, as amended March 22, 2005, the Company adopted the
BioElectronics Equity Incentive Plan (''the Plan''), for the purpose of
providing incentives for officers, directors, consultants and key employees to
promote the success of the Company, and to enhance the Company's ability to
attract and retain the services of such persons.  The Plan initially
reserved 10 million shares of common stock for issuance, which was amended to
100 million shares on March 1, 2010.  The issuance can be in the forms
of options or shares.  The options may be incentive, nonqualified or
stock appreciation rights.  The shares may be issued for
performance.
 
 As of
September 30, 2010, the Company had 17,565,000 shares available for future grant
under the Plan.
  Restricted
Stock
  The
following table is a summary of activity related to restricted stock grants to
directors, consultants and key employees for the nine months ended September 30,
2010:
  Restricted
      shares granted
                    
                    
                    76,550,000Weighted
      average grant date fair value per share
                    
                    $
                    0.01381Aggregate
      grant date fair value
                    
                    $
                    1,057,156Restricted
      shares forfeited
                    
                    
                    -Vesting
      service period of shares granted
                    
                    3 yearsGrant
      date fair value of shares vested
                    
                    $
                    -
  Compensation
expense related to the fair value of these awards is recognized straight-line
over the requisite service period based on those restricted stock grants that
ultimately vest.  The fair value of grants is measured by the market
price of the Company’s common stock on the date of grant and then applied a
liquidity discount of 50 percent.  This discount rate is determined by
analyzing the Company’s liquidity history and using peer company data to
estimate.   Restricted stock awards generally vest ratably over
the service period beginning with the first anniversary of the grant
date.  After shares are vested, they will be issued upon the request
of the grantee.
 
 As of
September 30, 2009, there were 4,350,000 shares of restricted stock granted
under the Plan.
 
 The
Company adopted the provisions of SFAS No. 123R in the beginning of
2006.  SFAS No. 123R requires that compensation cost relating to
share-based payment transactions be recognized as an expense over the service
period or vesting term.   Accordingly, compensation costs recognized for
the restricted stock for the nine months ended September 30, 2010 and 2009
totaled $206,695 and $0, respectively.  For the three months ended
September 30, 2010 and 2009, compensation expense was $83,227 and $0,
respectively.
  19
  NOTE
10 – SHARE BASED COMPENSATION (CONTINUED)
 
 Stock
Options
 Option
awards are granted with an exercise price equal to Company's bid price on the
Over-the-Counter Pink Sheets on the date of grant, which is fair
value.  The options vest over three years of continuous service and
are exercisable over ten years from the date of grant.
 
 There
were no grants, exercises or expirations of options during the nine months ended
September 30, 2010.
 
 Summary
information about the Company's stock options outstanding as of September
30, 2010:
 
 Weighted AverageExercise
                      
                      Options
                      
                      
                      Remaining Years of
                      
                      
                      Weighted Average
                      
                      
                      OptionsPrice
                      
                      Outstanding
                      
                      
                      ContractualLife
                      
                      
                      ExercisePrice
                      
                      
                      Exercisable$
                      0.300
                      
                      
                      350,000
                      
                      
                      
                      0.25
                      
                      
                      $
                      0.300
                      
                      
                      
                      350,000
 
 NOTE
11 - WARRANTS
 
 There
were no grants or exercises of warrants during the nine months ended September
30, 2010.  All warrants have expired as of September 30,
2010.
  NOTE
12 – FAIR VALUE MEASUREMENTS
 
 The
Company’s financial instruments consist primarily of cash and cash equivalents,
receivables, accounts payable and notes payable.  The carrying amounts of
such financial instruments approximate their respective estimated fair value due
to the short-term maturities and/or approximate market interest rates of these
instruments.  The estimated fair value is not necessarily indicative of the
amounts the Company would realize in a current market exchange or from future
earnings or cash flows.
  20
  NOTE
13 – INCOME TAXES
 
 The
Company has not provided for income tax expense for the nine months ended
September 30, 2010 because of a significant net operating loss carry-forward of
approximately $5.9 million.  A full valuation allowance has been
recorded against the deferred tax asset resulting from the benefits associated
with the net operating loss carry-forward.
 
 NOTE
14 – COMMITMENTS AND CONTINGENCIES LITIGATION
 
 General
 In the
ordinary course of conducting its business, the Company may become involved in
various legal actions and other claims, some of which are currently
pending.  Litigation is subject to many uncertainties and management
may be unable to accurately predict the outcome of individual litigated
matters.  Some of these matters may possibly be decided unfavorably
towards the Company.
 
 The
Company is involved, on a continuing basis, in monitoring our compliance with
jurisdictional laws and in making capital and operating improvements necessary
to comply with existing and anticipated regulatory
requirements.  While it is impossible to predict with certainty,
management currently does not foresee such expenses in the future as having a
material effect on the business, results of operations, or financial condition
of the Company.
 
 William Lyons v.
BioElectronics Corporation
 In 2005,
a lawsuit was filed against the Company by William Lyons for alleged breach of
contract and conversion claims associated with fees for services provided to the
Company.  Mr. Lyons alleged that Andrew Whelan, the President of the
Company, the Company, and PAW II, a Maryland limited liability company,
(collectively, “the Defendants”) reached an agreement to convey stock to Mr.
Lyons. As discussed in Note 16 – Subsequent Events, and as a result of a
subsequent settlement, the Company recorded a loss of $235,000 in accordance
with ASC Topic 450 “Contingencies” in the three months and nine months ended
September 30, 2010.
 
 NOTE
15 – RELATED PARTY TRANSACTIONS
 
 In
addition to the related party transactions disclosed in Note 7 and Note 8,
BioElectronics signed a distribution agreement on February 9, 2009 with eMarkets
Group, LLC (eMarkets) a company owned and controlled by a member of the board of
directors and sister of the company's president.   The agreement
provides for eMarkets to be the exclusive distributor of the veterinary products
of the Company to customers in certain countries outside of the United States
for a period of three years.   The distribution agreement lists
the prices to be paid for the company's products by eMarkets and provides for
the Company to provide training and customer support at its own cost to support
the distributor’s sales function.
  21
  NOTE
15 – RELATED PARTY TRANSACTIONS (CONTINUED)
 
 Sales to
eMarkets recognized for the three months ended September 30, 2010 and 2009
amounted to $370 and $1,590, respectively.  For the three months ended
September 30, 2010 and 2009, the cost of goods sold to eMarkets amounted to $172
and $459, respectively.  Sales include $0 from bill and hold revenue
transactions for the both the three months ended September 30, 2010 and 2009,
respectively.
 
 Sales
transactions to eMarkets recognized for the nine months ended September 30, 2010
include $2,257 in sales and $906 in cost of goods sold.  For the nine
months ended September 30, 2009, sales to eMarkets accounted for $114,817 in
sales and $30,348 in cost of goods sold to eMarkets.  Sales include $0
and $112,270 from bill and hold revenue transactions for the nine months ended
September 30, 2010 and 2009, respectively.  The balance due from
eMarkets was $41,053 and $165,297 at September 30, 2010 and December 31, 2009,
respectively.  Such amounts were presented under “Trade receivables
from related parties”.
 
 NOTE
16 – SUBSEQUENT EVENTS
 
 The
Company and Andrew Whelan, President & CEO, were defendants in a lawsuit
brought by a plaintiff who is seeking damages arising from a breach by the
Company of certain alleged oral contractual obligations.  The
plaintiff claimed that, pursuant to these alleged obligations, he would have
been entitled to receive common stock from the Company as compensation for
rendering certain services to the Company.  The matter was removed
from Maryland state court to arbitration provided for in the contract at
issue.  The plaintiff prevailed in arbitration, and a judgment was entered
against BioElectronics Corporation, PAW, LLC and Andrew Whelan. The case was
subsequently settled for a lump sum payment of $235,000 and recorded in the
three and nine months ended September 30, 2010.
 
 On
November 10, 2010 the Company increased its authorized shares
of common stock to 1,750,000,000 in order to cover the potential issuance
of common stock.  The holders of the remaining shares to be issued
upon conversion or exercise of equity instruments are likely to promptly resell
the shares into the public market. It is possible that resale of these shares
will significantly reduce the market price for our common stock. In addition,
the issuance of shares upon conversion of the convertible notes or exercise of
the options will have a dilutive impact on our stockholders. As a result, our
net income per share could decrease in future periods, and the market price of
our common stock could decline.
  22
  NOTE
16 – SUBSEQUENT EVENTS (CONTINUED)
 
 The
Company will restate and reissue previously issued statements as
following:
 
 1.
              Audited
      financial statements for the fiscal years ended December 31, 2006 through
      December 31, 2009 (prepared in accordance with Article 8 of Regulation
      S-X);
 
 2.
              Unaudited
      (but reviewed by independent auditors) quarterly financial statements, for
      the sixteen quarters in 2006 through 2009 consistent with the requirements
      of Article 10 of Regulation S-X;
and
 
 3.
              Management’s
      Discussion and Analysis disclosure for the fiscal years ended December 31,
      2006 through December 31, 2009, as well as the sixteen fiscal quarters in
      2006 through 2009, which will separately address the annual and quarterly
      periods, as well as narrative disclosure of operating results, trends, and
      liquidity for each interim and annual
period.
 
 The
Company plans to file the above items in aggregate by December 23, 2010 in lieu
of filing separate Forms 10-K for the fiscal years ended December 31, 2006
through December 31, 2009 and Forms 10-Q for each of the quarters in 2006
through 2009.
  23
  Item 2. Management’s
Discussion and Analysis of Financial Condition and Results of
Operations.
  This
Quarterly Report on Form 10-Q may contain certain forward-looking statements,
including without limitation, statements concerning BioElectronics Corporation
(“the Company”) operations, economic performance and financial condition. These
forward-looking statements are made pursuant to the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995, and within the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended.
The words "believe," "expect," "anticipate," "will," "could," "would,"
"should," "may," "plan," "estimate," "intend," "predict," "potential,"
"continue," and the negatives of these words and other similar
expressions generally identify forward-looking statements. These
forward-looking statements may include statements addressing our operations
and our financial performance. Readers are cautioned not to place undue reliance
on these forward-looking statements, which speak only as of their dates. These
forward-looking statements are based largely on the Company's current
expectations and are subject to a number of risks and uncertainties.
Factors we have identified that may materially affect our results are discussed
in our Annual Report on Form 10-K, including the documents, for the year ended
December 31, 2009, particularly under Item 1A, "Risk Factors". In
addition, other important factors to consider in evaluating such forward-looking
statements include changes in external market factors, changes in the Company’s
business or growth strategy or an inability to execute its strategy, including
due to changes in its industry or the economy generally. In light of these risks
and uncertainties, there can be no assurances that the results referred to in
the forward-looking statements will, in fact, occur. We undertake no obligation
to revise any forward-looking statements in order to reflect events or
circumstances that may arise after the date of this report. Readers are urged to
carefully review and consider the various disclosures made in this report, in
our Annual Report on Form 10-K and in our other filings with the Securities and
Exchange Commission that attempt to advise interested parties of the risks
and factors that may affect our business.
 
 INTRODUCTION
  BioElectronics
Corporation (OTCPK) (the “Company”) is the developer, marketer and manufacturer
of patented, inexpensive, drug–free, topical, anti-inflammatory medical devices
based upon proven therapy.  Pulsed electromagnetic therapy has been
used by physicians, sports trainers, and therapist around the world for eighty
years.  The Company has reduced the therapy to wafer thin devices that
are applied directly to the body. The devices consist of an inexpensive
microchip, battery and antenna that more effectively deliver the
energy.  Recent improved circuitry has created a product that heals
for 10 days and can be sold at prices competitive to hot and cold packs. These
products will be sold very competitively on Direct Response Television (DRTV),
Direct-to-Consumer (DTC), and in the analgesic aisle in stores around the
world.   The Company’s design cost goal is to make its chips
ubiquitous or one in every bandage.
  The DRTV
and online marketing platforms enable customers to easily gain access to
information regarding these new and exciting consumer products and the ability
to purchase these items within the convenience of their own homes. The Company
works with its distribution partners to provide product distribution,
fulfillment and customer interaction, including the operation of customer call
centers
  An
increased consumer awareness of the dangers of overuse of oral analgesics such
as acetaminophen and non-steroidal anti-inflammatory drugs (NSAIDs) has
significantly altered the competitive landscape for pain management
therapeutics.  Many common anti-inflammatory pain medications are
required to carry warning labels due to potential dangerous side effects (and
some have been withdrawn altogether).  Therefore, there is significant
market opportunity for a therapeutic agent with improved efficacy and no
side-effects. The distinctive value proposition of the products is the delivery
of drug-free therapy that reduces pain and inflammation and accelerates healing by
30% to 50% when compared with the present standard methods of patient
care.  The market potential is estimated at $10 billion
worldwide.
  24
  The
Company’s immediate objective is to sell and distribute its three main products:
ActiPatch® Back
Pain Therapy, ActiPatch Knee Pain Therapy, and AllayTM Menstrual Cycle Pain
Therapy, each of which has significant market potential.  To
accomplish these objectives, we incurred significant additional costs in period
expenses to:
 
 ·
              File
      our audited financial statements and other reports with the
      SEC
 ·
              Obtain
      additional regulatory clearances in Latin America, the US and
      Canada
 ·
              Grow
      our international distribution
network
 ·
              Establish
      global brand management
 ·
              Conduct
      consumer and market research in more
areas
 ·
              Develop
      and broadcast infomercials
 ·
              Research
      and develop new products and make product
  improvements
 
 During
the nine months ended September 30, 2010, our sales and marketing focus was on
launching direct response television (DRTV) in Latin America, Canada, and
preparing other international launches of DRTV campaigns.  The
development of our product marketing group and initiation of consumer research
has increased sales and administration expense.  Likewise, we have
engaged B2C Agency for direct response and advertising support for the United
Kingdom and European market expansion.  We committed substantial
resources to biophysics and regulatory consulting to obtain additional product
market clearances in U.S., Latin America, and Canada.  Additionally,
we have also made several significant product improvements in the electronics,
packaging, and affixing methods.  Furthermore, as a result of our SEC
filings, our accounting and legal costs have dramatically
increased.
 
 The
Company is focused on the domestic plastic surgery market, based on our FDA
market clearance that is limited for post eye surgery, and with prescription use
only.  In the prior fiscal year, we changed our marketing and sales
focus to the Direct-To-Consumer (DTC) markets for menstrual pain and back pain,
where we concentrate on Direct Response Television (DRTV) and retail presence.
The DTC and DRTV markets are more attractive because:
 
 1.
              Our
      products are sold directly, allowing us to control the
      marketing;
  2.
              Back
      Pain and Menstrual Pain products are much larger than post plastic surgery
      market. Just to give an example, in the US
  alone:
  a.
              Back
      injuries are the leading cause of disability in the United States for
      people younger than 45 years of age and represent the most expensive
      health care problem for people between 20 years and 50 year
      old;
  b.
              Approximately
      1.0% of the United States population is chronically disabled due to back
      pain and an additional 1% is temporarily disabled
  and;
  25
  c.
              Each
      year, two percent of the United States work force has compensable back
      injuries each year.
  d.
              Patients
      suffering from back pain consume more that $90 billion annually in
      health-care expenses, with approximately $26 billion of that amount
      directly attributable to treating back
pain.
  e.
              A
      study by Duke University found the annual per capita expenditures for
      patients with back pain were 1.6 times higher than those without back
      pain.
  3.
              The
      DTC markets are more accessible internationally where we already have
      regulatory approvals to sale our products without prescription. DRTV helps
      us access these markets very fast, with only small investments to start a
      campaign.
  Management
believes the significant change in company strategy is expected to improve
product response, capture rate, pricing, market penetration, and other internal
key performance measures. During this transit, we developed new products that
are much more consumer oriented, supported with advanced market research and
marketing strategy. Examples of our new and exciting products
include:
 
 1.
              Allay
      Menstrual Pain Therapy (disposable version) – We have developed a monthly
      device with a much thinner and smaller profile results in better market
      pricing.  We support the marketing of this device by a new
      tagline “So you can be there... and be yourself”. This tagline and theme
      was developed after extensive one-on-one interview sessions, using
      advanced interview techniques.   We also recently commenced
      a DRTV campaign with a new and exciting product in the UK that targets
      consumers to enroll in our “Loyalty Program.”  As a member of
      the Loyalty Program, consumers receive better pricing for both the
      products and shipping fees. Using this continuity model, we target highly
      loyal customers that remain on the therapy
  program.
 
 2.
              Insole
      Product – We commenced manufacturing a new product that has our device
      inside a gel insole. This new product will be the only gel insole with an
      actual active therapeutic agent that treats inflammation and pain at the
      source for people that suffer from heel pain, where the main injury
      condition is called Plantar Fasciitis. Together with our clinical study
      for patients with Plantar Fasciitis, we will be able to make a successful
      marketing campaign for the new insoles. This product has a significant
      competitive advantage over any other product in the market. While we are
      able to produce and market it ourselves, for this specific product we are
      not eliminating the option to partner with large international players in
      the insole market.
 
 3.
              ActiPatch
      New Product Line – As with Allay, our current ActiPatch device works for
      at least 720 hours. We are replacing it with a device that works for 5-7
      days, and be sold for a lower price, to increase trial and repeat
      purchase. Our products area very cost-effective alternative therapy,
      especially with improvements to our targeted pricing and production
      processes.
  26
  Securing
additional U.S. FDA market clearance is central to market entry and product
acceptance.  Plastic surgery is the only domestic market segment with
current U.S. FDA market clearance.  We have developed a new device and
honed our arguments on the power of our existing device to meet the standards
for a broader indication-of-use market clearance from the U.S. FDA, and thus, we
have submitted a form 510(k) for the new and existing device to the U.S. FDA for
broader market clearance.  The new market clearance will enable us to
market and sell to all surgeons and chronic would care providers, home health
care agencies, and nursing homes.
 
 We have
received a Not Significantly Equivalent (NSE) letter from the U.S. FDA for both
our Actipatch musculoskeletal pain and Allay Menstrual Pain Therapy market
clearance applications.  We have filed formal requests to have both
products reclassified under Section 513 of the Food and Drug Act.  The
NSE letters are required to use the simpler reclassification provisions of the
Section 513.  During the last several months, we have performed
substantial tests and developed additional documentation to support our
reclassification requests.  We have also developed an alternative
over-the-counter device to submit in another product category to preclude the
complications of a pulsed electromagnetic classification.  We are
confident that we will obtain U.S. over-the-counter clearance for our
products.
 
 As of
September 30, 2010, we have established distribution agreements with
distributors that offer our product for sale in over 40 countries
internationally, mainly in Europe, Latin America, Middle East and South East
Asia.  The international market is expected to further expand going
forward and to eventually constitute two-thirds of our total sales.
 
 MAJOR
GOALS, SIGNIFICANT ACTIVITIES AND RESULTS
 DURING
FIRST NINE MONTHS OF 2010
 
 BioElectronics’
operational plan is centered on marketing oriented functions.  We
believe our product set is very strong, our quality is very high, our
ISO-certified production capabilities are extensive, and our Company is
structured for accelerated growth.  Over the past 24 months, the
Company has significantly strengthened its product lines, improved product
quality, created new packaging, and redesigned marketing materials and
products.
 
 We have
several major goals to continue the advancement of business operations,
including:
 
 ·
              Obtain
      additional U.S. FDA market clearances
for:
 o
              the
      postoperative treatment of pain and edema in soft
  tissue
 o
              over-the-counter
      treatment of musculoskeletal pain
 o
              over-the-counter
      treatment of menstrual cycle pain and
discomfort
 o
              the
      treatment of chronic pain
 ·
              Develop
      a management team, DRTV, advertising, and brand management expertise and
      infrastructure necessary to support large scale, multiple product
      offerings on a national and international
level.
 ·
              Maintain
      primary management focus on our leading back pain, knee pain, and
      menstrual cycle pain blockbuster
products.
  27


·
            Obtain
      3rd
      party product reimbursement (insurance coverage) for kidney compromised,
      cardiovascular, diabetic and C-section
patients.


·
            Continue
      product improvements and manufacturing cost reductions to maintain market
      dominance.


·
            Pursue
      additional clinical studies and research to support sales and marketing
      and new product introductions.


·
            Optimize
      the Company’s presence on securities
exchanges.





Additional
U.S. Government FDA and International Regulatory Body Filings





Outside
the U.S., our products are classified as Class II devices and are sold
over-the-counter.  In the US, our products are currently classified as
a high risk, Class III device.  We have U.S. FDA market clearance for
the treatment of edema following blepharoplasty.  We have filed two
additional 510(k) market clearance applications for “relief of musculoskeletal
pain” and “relief of menstrual cycle pain and discomfort” for over-the-counter
sales.  Even though the U.S. FDA is reluctant to give us
over-the-counter clearance for a Class III device, we are currently pursuing
both reclassification and approval of the pending applications.  We
are also preparing an additional U.S. FDA market clearance request for our new
chronic pain device and a market clearance request for post-operative pain and
edema.  As we expand internationally, we are required to and do obtain
additional market clearance in each country.





Continue
to Build Our Four Primary Markets





We
augmented our marketing team with two experienced Brand Managers to help build
our brands.  As we grow, we plan to add additional brand management
staff to manage new product categories such as foot care products, would care
orthopedics, etc.





Due to
BioElectronics having only limited U.S. FDA clearance of its products, mass
distribution to direct consumers in the U.S. is prohibited.  We
believe U.S. FDA clearance for our products is forthcoming, and thus, we are
currently in the process of identifying and building a domestic distribution
network for both the over-the-counter and medical markets.





Continued
Expansion of Our Already Growing International Distribution Network





BioElectronics
has made steady, significant progress in building an international distribution
network.  Due to the Company obtaining over-the-counter sales approval
for its products in Canada, Europe and many other markets, it has regular
interest from international distribution companies to market and distribute the
product lines. Our strategy is to partner with distributors that have the
experience and financial ability to place our products into the consumer goods
retail sales channels.  We have seen success in executing this
strategy relative to Canada, Western Europe, South-East Asia and the Middle
East.  Since retail distribution is a core strategy, the Company is
regularly in negotiations with existing and future distributors, and anticipates
signing additional contracts with qualified distributors in Asia, Europe, and
other international locations.


28


The
Company developed Direct Response Television (DRTV) materials produced by
leading companies (Schulberg Media Works for English-speaking markets, and RC
Productions for Hispanic markets) for both the ActiPatch Back Pain product and
the Allay Menstrual Pain Therapy product. Subsequently, the commercials are
extremely helpful with establishing partnerships with major DRTV companies to
test our products in many countries. The Company contracted with TeleDEPOT in
Latin America, where it completed a very successful test in several countries.
In Turkey, the distributor has created a Turkish Allay infomercial and has begun
DRTV testing and retail distribution.  In Canada, the Company has
assumed sales and marketing responsibilities to prepare for its U.S. launch and
to introduce its new disposable products.





Critical
Accounting Policies




General


Our
discussion and analysis of our financial condition and results of operations is
based on our financial statements, which have been prepared in accordance with
accounting principles generally accepted in the U.S. (USGAAP).  The
preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities and expenses.
We base our estimates on historical experience and on various other assumptions
that we believe to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results may
differ from these estimates under different assumptions or conditions. We
believe the following critical accounting policies affect our most significant
judgments and estimates used in preparation of our financial
statements.





Other
Issues Relative to Plan of Operations





Cash
Requirements - BioElectronics is currently in a positive current asset position
with its current assets exceeding current liabilities.  As is typical
for most growth companies, BioElectronics may, in the future, need to raise
additional funds to finance its working capital requirements.  It is
unknown at this time how much, if any, additional funds will be needed to
execute our business plan, as it is highly dependent upon our sales growth
trajectory over the coming quarters.





Research
and Development – Our products are substantially developed and ready for sale,
and many of our products are currently offered for sale on the international
market.  We are designing several new products based on our core
technologies with developmental costs being financed by funds provided by
related parties.





Expected
Purchase or Sale of Plant and Significant Equipment - BioElectronics does not
anticipate any major purchases or sales of plant or significant
equipment.





Expected
Changes in the Number of Employees - We are currently recruiting new talent and
expect our hiring will focus on marketing personnel, support, and manufacturing
staff.  Our hiring plans are dependent upon revenue growth rates over
the coming quarters.


29


RESULTS
OF OPERATIONS





Our
principal activity, to sell and market in the U.S. retail market, has not yet
commenced due to the lack of U.S. FDA approval for our
product.   As a result, we consider ourselves a development stage
entity in accordance with FASB Accounting Standards Codification Topic 915,
“Development Stage Enterprise”, and accordingly present, in our financial
statements, the results of operations and other disclosures for the company for
the period from our inception, April 10, 2000, to September 30,
2010.  Apart from the additional financial information provided
regarding our financial results for the period from inception, April 10, 2000,
to September 30, 2010, our designation as a Development Stage Company did not
affect our accounting or other information provided in our financial
statements.




Three
and Nine Months Ended September 30, 2010 and 2009





Revenue.  Revenue
from operations for the three months ended September 30, 2010 and 2009 amounted
to approximately $50,000 and $75,000, respectively, a decrease of $25,000 or 33%
over the prior year.  Revenues were approximately $663,000 and
$591,000, for the nine months ended September 30, 2010 and 2009, respectively,
resulting in an increase of $72,000 or 12% over the prior year.  The
following table summarizes the Company’s domestic, international and veterinary
(related party) revenues earned during the three and nine months ended September
30, 2010 and 2009:




Three Months Ended, September 30
                    
                    
                    Nine Months Ended, September 302010
                    
                    
                    2009
                    
                    
                    2010
                    
                    
                    2009Amounts
                    
                    
                    Percentage
                    
                    
                    Amounts
                    
                    
                    Percentage
                    
                    
                    Amounts
                    
                    
                    Percentage
                    
                    
                    Amounts
                    
                    
                    PercentageInternational
                    
                    $
                    16,464
                    
                    
                    
                    33
                    %
                    
                    $
                    45,031
                    
                    
                    
                    60
                    %
                    
                    $
                    568,372
                    
                    
                    
                    86
                    %
                    
                    $
                    265,661
                    
                    
                    
                    45
                    %Domestic
                    
                    
                    33,636
                    
                    
                    
                    66
                    %
                    
                    
                    28,253
                    
                    
                    
                    38
                    %
                    
                    
                    93,088
                    
                    
                    
                    14
                    %
                    
                    
                    210,852
                    
                    
                    
                    36
                    %Veterinary
                    
                    
                    370
                    
                    
                    
                    1
                    %
                    
                    
                    1,590
                    
                    
                    
                    2
                    %
                    
                    
                    2,257
                    
                    
                    
                    0
                    %
                    
                    
                    114,817
                    
                    
                    
                    19
                    %$
                    50,470
                    
                    
                    
                    100
                    %
                    
                    $
                    74,874
                    
                    
                    
                    100
                    %
                    
                    $
                    663,717
                    
                    
                    
                    100
                    %
                    
                    $
                    591,330
                    
                    
                    
                    100
                    %




International
sales decreased by approximately $29,000 or 64% in the three months
ended  September 30, 2010 due to decreased in customer orders.
International sales increased $303,000 or 114% in the nine months ended
September 30, 2010 from the comparative periods in 2009 as a result of new
distributorship agreements signed in 2010 and increased sales through agreements
signed in prior years.  Domestic sales increased by approximately
$5,000 or 19% in the three months ended September 30, 2010 from increased
distributors. Domestic sales decreased by $118,000 or 56% in the nine months
ended September 30, 2010 from the comparative periods in 2009 resulting from
sales of special cervical devices totaling $100,000 in 2009.





Veterinary
revenues of $370 and $1,590 were recorded in the three months ended September
30, 2010 and 2009, respectively, and $2,257 and $114,817 were recorded in the
nine months ended September 30, 2010 and 2009,
respectively.   The reduction in veterinary revenues is primarily
due to eMarkets requesting shipment of the bill and hold transactions from 2009
in lieu of purchasing additional units.  eMarkets is our exclusive
distributor of veterinary products to customers in certain countries outside of
the United States.


30


At
September 30, 2010, the Company has not yet delivered 40,258 units, totaling
approximately $338,000 bill and hold sales recognized for the year ended
December 31, 2009.  The units will be shipped during 2010 to help meet
the distribution 2010 purchase obligation.





Cost of Goods Sold and Gross
Margin.  Costs of goods sold for the three months ended
September 30, 2010 and 2009 amounted to approximately $57,000 and $13,000,
respectively, and for the nine months ended September 30, 2010 and 2009 amounted
to approximately $303,000 and $171,000, respectively.   Gross
margin decreased from approximately 71% of sales for the nine months ended
September 30, 2009 to approximately 54% for the nine months ended September 30,
2010.  The decrease was primarily the result of replacing 7,500
defective units totaling approximately $30,000 in cost of goods
sold.  Other factors include higher production costs, which arose from
an increase in the use of contingent workers to expedite shipment of the new
Allay packaging, and higher shipping costs related to international
sales.  We expect the normal gross margins on our products to be in
the range of 66 % to 70 % of sales in the future, depending on product mix and
sales prices. This gross margin range is consistent with other medical device
and pharmaceutical companies.





General and Administrative
Expense.  General and administrative expenses for the three
months ended September 30, 2010 and 2009 amounted to approximately $894,000 and
$106,000, respectively, an increase of $788,000 or 744%.  For the nine
months ended September 30, 2010, general and administrative expenses amounted to
approximately $2,173,000 as compared to $553,000 in comparative period of 2009,
an increase of $1,620,000 or 293% over the prior
period.  Substantially all of the changes are a result of timing
differences, increased payroll and staff, and advisory fees. The following table
summarizes the Company’s general and administrative expenses for the three and
nine months ended September 30, 2010 and 2009:




Three months ended September 30,
                  
                  
                  Nine months ended September 30,2010
                  
                  
                  2009
                  
                  
                  2010
                  
                  
                  2009General
      and Administrative Expenses:Depreciation
      and Amortization
                  
                  $
                  12,867
                  
                  
                  $
                  3,645
                  
                  
                  $
                  32,903
                  
                  
                  $
                  10,935Investor
      Relations Expenses
                  
                  
                  17,313
                  
                  
                  
                  -
                  
                  
                  
                  71,923
                  
                  
                  
                  11,585Legal
      and Accounting Expenses
                  
                  
                  94,636
                  
                  
                  
                  -
                  
                  
                  
                  464,226
                  
                  
                  
                  49,208Payroll
      Expenses
                  
                  
                  289,531
                  
                  
                  
                  99,096
                  
                  
                  
                  717,012
                  
                  
                  
                  189,484Sales
      Support Expenses
                  
                  
                  314,363
                  
                  
                  
                  -
                  
                  
                  
                  466,064
                  
                  
                  
                  54,523Other
      General and Administrative Expenses
                  
                  
                  165,409
                  
                  
                  
                  3,512
                  
                  
                  
                  420,386
                  
                  
                  
                  237,707Total
      General and Administrative Expenes
                  
                  $
                  894,119
                  
                  
                  $
                  106,253
                  
                  
                  $
                  2,172,514
                  
                  
                  $
                  553,442




Depreciation
and Amortization expense for the three months ended September 30, 2010 and 2009
was $12,867 and $3,645, respectively.  For the nine months ended
September 30, 2010 and 2009, the Depreciation and Amortization expense was
$32,903 and $10,935, an increase due to increased purchases of additional
property and equipment in 2010.  Additionally, the increase in
Amortization expense is derived from amortizing increased DRTV costs in
2010.




For the
three months ended September 30, 2010 and 2009, Investor Relations expense was
$17,313 and $0, respectively.  Investor Relations expense for the nine
months ended September 30, 2010 increased by $60,338 over the comparable period
in 2009.  The increase is due to the Company hiring an outside public
relations consultant.


31




Legal and
Accounting expense increased to approximately $95,000 for the three months ended
September 30, 2010 from $0 in the comparable period in 2009.  For the
nine months ended September 30, 2010 and 2009, Legal and Accounting expense
amounted to $464,000 and $49,000, respectively.   This increase
is attributed to additional expenses necessary to prepare annual, quarterly and
other reports for filing with the SEC, while preparing our products for FDA and
jurisdictional compliance.




Payroll
expense, including payroll, compensation, and other payroll related expenses,
increased to $290,00 for the three months ended September 30, 2010 from
approximately $99,000 in the comparable period in 2009.   For the
nine months ended September 30, 2010 increased by approximately $528,000
compared to the previous period in 2009.  This increase is primarily
driven by an increase in sales and marketing personnel, as well as recording the
compensation expense associated with granting restricted stock.




For the
three months ended September 30, 2010, Sales expense increased by $314,363
compared to the previous period in 2009.  Sales expense for the nine
months ended September 30, 2010 amounted to $466,064 and for the nine months
ended September 30, 2010, sales expense amount to $54,523.  The
increase is due to additional initiatives to improve the product branding,
awareness and promotion thereof.  The increase also includes the
recognized contingency loss associated with Lyons’ settlement as discussed in
footnote 16 of the condensed financial statements attached hereto.




The
increase in Other General and Administrative Expenses for the three and nine
months ended September 30, 2010 was primarily driven by an increase in sales and
marketing personnel.  Additionally, for the nine month ended September
30, 2010, there was an increase in consulting expense of approximately $68,000
for consulting services related to product enhancements and preparing support
for submissions to the FDA, and there was an increase in travel expense of
approximately $61,000 related to several new trade shows and international
distribution.




Interest Expense.Interest
expense increased to approximately $48,000 for the three months ended September
30, 2010 from approximately $43,000 in the comparable period in
2009.  For the nine months ended September 30, 2010 and 2009, Interest
expense amounted to $117,000 and $84,000, respectively.   The
increase in Interest expense was mainly attributed to the new financing loans
with IBEX, LLC and St. Johns, LLC.  IBEX, LLC is a limited liability
company, whose President is a daughter of the President of the
Company.  St. Johns, LLC is a limited liability company, which is
owned by family members of the President of the Company.


32


Net Loss.  Net
losses during the three months ended September 30, 2010 and 2009 amount to
approximately $948,000 and $87,000, respectively.  Net losses
increased from approximately $217,000 during the first nine months of 2009 to
approximately $1,900,000 during the comparative period in
2010.  Losses were increased primarily due to increase in general and
administrative expense and interest expense.





LIQUIDITY
AND CAPITAL RESOURCES





Our
sources of funds are primarily cash flows from financing
activities.  We raise funds for our operations by borrowing on notes,
agreements with third parties and related parties, and selling equity in the
capital markets.  We are still operating as a development stage
company, in which we are devoting substantially all of our present efforts to
developing our business.  For every year and period since our
inception, we have generated negative cash flow from
operations.   At September 30, 2010, our cash and cash
equivalents were approximately $56,000. Since December 31, 2009, our balance of
cash and cash equivalents decreased by approximately $241,000 as a result of our
loss from operations in the first nine months of 2010 of $1,935,179, offset by
changes in our working capital balances and proceeds received from our financing
activities, primarily proceeds from the issuance of related party notes payable
and assignment of receivables under our factoring agreement with Jarenz LLC
(“Jarenz”), a related party.  Jarenz is a limited liability company,
whose owner is a daughter of the President of the Company.





Since our
inception on April 10, 2000, the majority of our financing has been provided by
the Company’s founders including the CEO, certain board members, and their
immediate family and associates.  As of September 30, 2010, all of the
Company’s debt was provided by these related parties.  We present the
secured borrowing as short-term liabilities and the notes payable as long-term
liabilities in our financial statements, as the holders of these notes (who are
related parties) have no current intention to pursue repayment of these
amounts.





At
September 30, 2010, we had positive working capital of approximately $991,000
which is comparable to approximately $1,026,000 at December 31,
2009.





On
January 1, 2005, we entered into an unsecured revolving convertible promissory
note agreement (“the Revolver”) with IBEX, for a maximum limit of $2,000,000,
with interest at the Prime Rate plus 2% (i.e. 5.25% for the nine months ended
September 30, 2010), and all accrued interest and principal due on or before
January 1, 2015, whether by the payment of cash or by conversion into shares of
our common stock.  The Revolver is convertible at various fixed
conversion prices based on the Volume-Weighted Average Price (“VWAP”) for the 10
trading days preceding the date of note, which approximated the fair value of
the Company’s stock at the date of conversion.  As of September 30,
2010, an amount of approximately $1,309,000 was drawn from the
Revolver.





We refer
to Note 8 of our interim financial statements included in this Report on Form
10-Q which contains information on borrowings received in the form of promissory
notes from IBEX, LLC and St. Johns, LLC.


33


The
Company entered into an Agreement (the “Agreement”) on March 5, 2010, with
Jarenz pursuant to which Jarenz is providing accounts receivable financing and
collection services to the Company.  The Agreement provides for the
Company to assign certain accounts receivable balances to Jarenz in exchange for
a cash advance amount of up to 80% of the face value of the receivables
transferred; such amount determined upon discussions between the
parties.    Following collection of the related receivable,
Jarenz pays the balance thereof to BioElectronics minus the initial down payment
and a discount fee earned by Jarenz.  Jarenz’s discount fee is a
percentage of the cash advance amount based upon the number of days elapsing
between the date of purchase by Jarenz and the date of collection of the related
accounts receivable.  As at September 30, 2010, 10% of the initial
down payment of the assigned receivables was drawn totaling approximately
$497,147.  The Company will draw further cash advance amounts upon
additional financing needs.




Net Cash Used In Operating
Activities.Net cash used in operating activities amounted to
approximately $1,681,000 and $894,000 in the nine months ended September 30,
2010 and September 30, 2009, respectively.




Net cash
used in operating activities amounted to approximately $1,681,000 for the nine
months ended September 30, 2010 primarily as a result of the net loss incurred,
offset by changes in the Company’s capital balances including a decrease in
trade and other receivables, including from related parties, of approximately
$17,000, increase in accounts payable of approximately $158,000, and increase in
inventory of approximately $697,000.




Net cash
used in operating activities amounted to approximately $894,000 for the nine
months ended September 30, 2009 primarily as a result of the net loss incurred,
offset by changes in the Company’s capital balances including an increase in
trade and other receivables of approximately $113,000, decrease in accounts
payable of approximately $330,000, increase in inventory of approximately
$188,000, and decrease in customer deposits of approximately
$119,000.




Net Cash Used in Investing
Activities.During the nine months ended September 30, 2010, we purchased
approximately $31,000 of laboratory equipment to develop new products and to
improve quality assurance.   We did not make any significant
investments in fixed or other long-term assets during the nine months ended
September 30, 2009.




Net Cash Provided by Financing
Activities.Net cash provided by financing activities amounted to
approximately $1,472,000 and $1,528,000 in nine months ended September 30, 2010
and September 30, 2009, respectively.  The decrease of approximately
$56,000 was primarily because of the decrease in proceeds obtained from related
party notes payable.




During
the nine months ended September 30, 2010, the Company generated approximately
$1,472,000 in cash from financing activities through the issuance of notes
payable to related parties (amounting to $1,410,000) and the assignment of
receivables to related parties (amounting to $117,000).  The proceeds
received from these activities were used to repay notes payable and financing of
receivable (amounting to $60,000) and to fund operations during the
year.


34




During
the nine months ended September 30, 2009, the Company generated $1,528,000 in
cash from financing activities mainly through the issuance of related party
notes payable (amounting to $1,731,000) and the sale of common shares (amounting
to $790,000).  The funds received were used to repay certain notes
payable and related party notes payable (amounting to $994,000) and to fund
operations.





Going
concern.   The Company’s financial statements have been
prepared on a going concern basis which contemplates the realization of assets
and the liquidation of liabilities in the ordinary course of
business.  We have incurred substantial losses from operations in the
nine months ended September 30, 2010 and prior years, including a net loss of
approximately $1,935,000 and $217,000 for the nine months ended September 30,
2010 and September 30, 2009 respectively.  The Company also has an
accumulated deficit as of September 30, 2010 of $12,364,669.





The
Company projects that it will require an additional $900,000 in working capital
in the next 12 months.  Management has already loaned the Company
$200,000 and is committed to loan the additional $350,000.  Given a
current ratio of 1:3, management assumes it can finance some additional growth
with asset based financing.  If sales increase as anticipated, the
Company will seek additional capital from new investors.  The Company
has prepared a financing proposal to discuss opportunities with potential
investors or possible strategic partners.   However, we can
provide no assurance that we will be able to obtain financing on reasonable
terms and at sufficient levels to enable us to complete developmental
activities, receive U.S. FDA approval and develop sufficient sales revenue and
achieve profitable operations.  Until sufficient financing has been
received to complete our developmental activities, there exists substantial
doubt as to our ability to continue as a going concern.





Off-Balance Sheet
Arrangements.None




Recent Accounting
Pronouncements.  For the period ended September 30, 2010, there
were no accounting standards or interpretations issued that are expected to have
a material impact on our financial position, operations or cash
flows.




Item
3.  Quantitative and Qualitative Disclosures About Market
Risk.





We have
minimal market risk inherent in our financial position.  We do not
have any derivative financial instruments and do not hold any derivative
financial instruments for trading purposes.  Our market risk primarily
represents the potential loss arising from adverse changes in market interest
rates.  Our results from operations could be impacted by decreases in
interest rates on our cash and cash equivalents.  Additionally, we may
be exposed to market risk from changes in interest rates related to any debt
that may be outstanding under our related party notes payable.  We do
not expect our cash flows to be affected to any significant degree by a sudden
change in market interest rates.


35


We
operate our business within the United States and sell to the United States and
certain international locations such as Italy, Canada, Saudi Arabia,
Scandinavia, Netherlands and Singapore.  We execute all of our
transactions in U.S. dollars and therefore do not have any foreign currency
exchange risk.




Item 4T. Controls and
Procedures.





We
maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed by us in reports that we file or submit
under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in the SEC’s rules and forms and that such
information is accumulated and communicated to our management, including our
President, Chief Executive Officer and Chief Financial Officer, as appropriate,
to allow timely decisions regarding required disclosures. In designing and
evaluating these disclosure controls and procedures, management recognizes that
any controls and procedures, no matter how well designed and operated, can
provide only reasonable assurance of achieving the desired control objectives,
and management necessarily is required to apply its judgment in evaluating the
cost-benefit relationship of possible controls and procedures.





Evaluation
of disclosure controls and procedures





We
evaluated the effectiveness of the design and operation of our disclosure
controls and procedures as of the end of the period covered by this Quarterly
Report on Form 10-Q. Disclosure controls and procedures are designed to
ensure that information required to be disclosed in our reports filed under the
Exchange Act, such as this Quarterly Report on Form 10-Q are recorded,
processed, summarized and reported within the time periods specified by the
SEC.  Disclosure controls are also designed to ensure that such
information is accumulated and communicated to our President, Chief Executive
Officer and Chief Financial Officer, and other management, as appropriate, to
allow timely decisions regarding required disclosure.





Based on
the evaluation, our President, Chief Executive Officer and Chief Financial
Officer after evaluating the effectiveness of our “disclosure controls and
procedures” (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)),
have concluded that, subject to the inherent limitations noted in this
Part II, Item 9A, as of September 30, 2010, our disclosure controls
and procedures were not effective due to the existence of several material
weaknesses in our internal control over financial reporting, as discussed
below.





Material
Weaknesses Identified





In
connection with the preparation of our financial statements for the year ended
December 31, 2009, certain significant deficiencies in internal control
became evident to management that, in the aggregate, represent material
weaknesses, including:





(i) Lack
of a sufficient number of independent directors for our board and audit
committee.  We currently only have one independent director on our
board, which is comprised of three directors, and on our audit committee, which
is comprised of one director.  Although we are considered a controlled
company, whereby a group holds more than 50% of the voting power and as such are
not required to have a majority of our board of directors be independent, it is
our intention to have a majority of independent directors in due
course.


36





(ii) Lack
of a financial expert on our audit committee.  We currently do not
have an audit committee financial expert, as defined by SEC regulations, on our
audit committee.





(iii) Insufficient
segregation of duties in our finance and accounting functions due to limited
personnel.   During the nine months ended September 30, 2010, we
had one person on staff that performed nearly all aspects of our financial
reporting process, including, but not limited to, access to the underlying
accounting records and systems, the ability to post and record journal entries
and responsibility for the preparation of the financial
statements.   This creates certain incompatible duties and a lack
of review over the financial reporting process that would likely result in a
failure to detect errors in spreadsheets, calculations, or assumptions used to
compile the financial statements and related disclosures as filed with the
SEC.   These control deficiencies could result in a material
misstatement to our interim or annual consolidated financial statements that
would not be prevented or detected.





As part
of the communications by Berenfeld, Spritzer Shechter & Sheer LLP,
(“Berenfeld, Spritzer”), with our Audit Committee with respect to Berenfeld,
Spritzer’s audit procedures for fiscal 2009, Berenfeld, Spritzer informed the
audit committee that these deficiencies constituted material weaknesses, as
defined by Auditing Standard No. 5, “An Audit of Internal Control Over
Financial Reporting that is Integrated with an Audit of Financial Statements and
Related Independence Rule and Conforming Amendments,” established by the Public
Company Accounting Oversight Board (“PCAOB”).





Plan
for Remediation of Material Weaknesses





We intend
to take appropriate and reasonable steps to make the necessary improvements to
remediate these deficiencies.  We intend to consider the results of
our remediation efforts and related testing as part of our year-end 2010
assessment of the effectiveness of our internal control over financial
reporting.





We have
implemented certain remediation measures and are in the process of designing and
implementing additional remediation measures for the material weaknesses
described in this Quarterly Report on Form 10-Q.  Such
remediation activities include the following:





·
            At
      an appropriate time, we will recruit one or more additional independent
      board members to join our board of directors.  Such recruitment
      will include at least one person who qualifies as an audit committee
      financial expert to join as an independent board member and as an audit
      committee member.





·
            We will
      hire or engage additional qualified and experienced accounting personnel
      as necessary to review our quarter-end closing processes as well as
      provide additional oversight and supervision within the accounting
      department.


37


In
addition to the foregoing remediation efforts, we will continue to update the
documentation of our internal control processes, including formal risk
assessment of our financial reporting processes.





Changes
in Internal Controls over Financial Reporting




There
were no significant changes in internal control over financial reporting during
the third quarter of 2010 that materially affected, or are reasonably likely to
materially affect, our internal control over financing
reporting.


38




PART II - OTHER
INFORMATION





Item 1. Legal
Proceedings.


The
Company and Andrew Whelan, President & CEO, were defendants in a lawsuit
brought by a plaintiff who is seeking damages arising from a breach by the
Company of certain alleged oral contractual obligations.  The
plaintiff claimed that, pursuant to these alleged obligations, he would have
been entitled to receive common stock from the Company as compensation for
rendering certain services to the Company.  The matter was removed
from Maryland state court to arbitration provided for in the contract at
issue.  The plaintiff prevailed in arbitration, and a judgment was entered
against BioElectronics Corporation, PAW, LLC and Andrew Whelan. The case was
subsequently settled for a lump sum payment of $235,000.





Item 1A.
Risk Factors.  As a smaller reporting company, Registrant is
not required to provide the information required by this item.





Item 2. Unregistered Sales
of Equity Securities and Use of Proceeds.


On March
18, 2010 and May 21, 2010, the Company issued and tendered 1,000,000 and
2,200,000 common shares to consultants in respect of services provided in the
year ended December 31, 2009.  The shares were recorded at $0.00225
per share (or $7,200 in aggregate), and the related expense was recorded in the
prior year.





Item 3. Defaults Upon Senior
Securities.


We have
minimal market risk inherent in our financial position.  We do not
have any derivative financial instruments and do not hold any derivative
financial instruments for trading purposes.  Our market risk primarily
represents the potential loss arising from adverse changes in market interest
rates.  Our results from operations could be impacted by decreases in
interest rates on our cash and cash equivalents.  Additionally, we may
be exposed to market risk from changes in interest rates related to any debt
that may be outstanding under our related party notes payable.  We do
not expect our cash flows to be affected to any significant degree by a sudden
change in market interest rates.


39


Item 4.
(Removed and Reserved).Not
applicable.





Item 5.
Other Information.





The
Company will restate and reissue previously issued statements as
following:





1.
            Audited
      financial statements for the fiscal years ended December 31, 2006 through
      December 31, 2009 (prepared in accordance with Article 8 of Regulation
      S-X);





2.
            Unaudited
      (but reviewed by independent auditors) quarterly financial statements, for
      the sixteen quarters in 2006 through 2009 consistent with the requirements
      of Article 10 of Regulation S-X;
and





3.
            Management’s
      Discussion and Analysis disclosure for the fiscal years ended December 31,
      2006 through December 31, 2009, as well as the sixteen fiscal quarters in
      2006 through 2009, which will separately address the annual and quarterly
      periods, as well as narrative disclosure of operating results, trends, and
      liquidity for each interim and annual
period.





The
Company plans to file the above items in aggregate by December 23, 2010 in lieu
of filing separate Forms 10-K for the fiscal years ended December 31, 2006
through December 31, 2009 and Forms 10-Q for each of the quarters in 2006
through 2009.





Item 6.
Exhibits.





Exhibit
31.1. Certification of Principal Executive Officer and Principal Financial
Officer


Exhibit
32.1. Certification of Andrew Whelan, Chief Executive Officer and Chief
Financial Officer, pursuant to 18 U.S.C. Section 1350.


Exhibit
99.  Additional Exhibits


40


SIGNATURES





Pursuant
to the requirements of  Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned; thereunto duly authorized, in Frederick, Maryland, on November 15,
2010.




BIOELECTRONICS
      CORPORATIONNovember
      15, 2010
              By:
              /S/Andrew
      WhelanAndrew
      WhelanPresident,
      Chief Executive Officer, Chief
                Financial
      Officer and Director(Principal
      Executive Officer and
                Principal Financial
      Officer)




Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of Registrant and in the
capacities indicated on November 15, 2010.




Signature
              
              Title/S/Andrew
      Whelan
              
              President,
      Chief Executive Officer, Chief Financial
                Officer and
      DirectorAndrew
      Whelan
              
              (Principal
      Executive Officer and Principal Financial
                Officer)




41


EXHIBITS