U.S.
SECURITIES AND EXCHANGE COMMISSION


WASHINGTON,
DC 20549







FORM 10-K




x
            Annual
      report pursuant to Section 13 or 15(d) of the Securities Exchange Act
      of 1934




For
the fiscal year ended December 31, 2009




 ̈
            Transition
      report pursuant to Section 13 or 15(d) of the Securities Exchange Act
      of 1934




For
the transition period from
             to
            .




Commission File Number 021-74972




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)







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


None.




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


None.







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




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




Indicate
by check mark whether the issuer (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the issuer was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days. (1) Yes x No  ̈ (2) 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 (§232.45 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes  ̈ No  ̈




Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§229.405 of this chapter) is not contained herein, and will not
be contained, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. x




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
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.





Large
      accelerated filer
                    
                     ̈
                    
                    Accelerated filer
                    
                     ̈Non-accelerated
      filer
                    
                     ̈  (Do
      not check if a smaller reporting company)
                    
                    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




The
aggregate market value of the ordinary shares, $0.001 par value per share
(“Shares”), of the registrant held by non-affiliates on June 30, 2009 was
$26,961,010.




The
Company is authorized to issue 1,500,000,000 Shares. As of March 30, 2010, the
Company has issued and outstanding 1,461,998,871 Shares.




DOCUMENTS
INCORPORATED BY REFERENCE


None.












BIOELECTRONICS
CORPORATION




FORM
10-K





TABLE
OF CONTENTS





PART
      IItem
      1.
                  Business
                  4Item
      1A.
                  Risk
      Factors
                  13Item
      1B.
                  Unresolved
      Staff Comments
                  13Item
      2.
                  Properties
                  14Item
      3.
                  Legal
      Proceedings
                  14Item
      4.
                  (Removed
      and Reserved)
                  14PART
      IIItem
      5.
                  Market
      for Common Equity and Related Stockholder Matters and Small Business
      Issuer Purchases of Equity Securities
                  15Item
      6.
                  Selected
      Financial Data
                  17Item
      7.
                  Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operation
                  17Item
      7A.
                  Quantitative
      and Qualitative Disclosures About Market Risk
                  30Item
      8.
                  Financial
      Statements and Supplementary Data
                  31Item
      9.
                  Changes
      in and Disagreements With Accountants and Financial
    Disclosure
                  31Item
      9A.
                  Controls
      and Procedures
                  31PART
      IIIItem
      10.
                  Directors,
      Executive Officers and Corporate Governance
                  35Item
      11.
                  Executive
      Compensation
                  38Item
      12.
                  Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
                  42Item
      13.
                  Certain
      Relationships and Related Transactions, and Director
      Independence
                  44Item
      14.
                  Principal
      Accounting Fees and Services
                  45PART
      IVItem
      15.
                  Exhibits,
      Financial Statement Schedules
                  46Signatures
                  47




2





The
statements contained in this Report that are not historical facts are
“forward-looking statements” within the meaning of the Private Securities
Litigation Reform Act of 1995 with respect to our financial condition, results
of operations and business, which can be identified by the use of
forward-looking terminology, such as “estimates,” “projects,” “plans,”
“believes,” “expects,” “anticipates,” “intends,” or the negative thereof or
other variations thereon, or by discussions of strategy that involve risks and
uncertainties.  Management wishes to caution the reader of the
forward-looking statements that such statements, which are contained in this
Report, reflect our current beliefs with respect to future events and involve
known and unknown risks, uncertainties and other factors, including, but not
limited to, economic, competitive, regulatory, technological, key employee, and
general business factors affecting our operations, markets, growth, services,
products, licenses and other factors discussed in our other filings with the
Securities and Exchange Commission, and that these statements are only estimates
or predictions.  No assurances can be given regarding the achievement
of future results, as actual results may differ materially as a result of risks
facing us, and actual events may differ from the assumptions underlying the
statements that have been made regarding anticipated events.  Factors
that may cause our actual results, performance or achievements, or industry
results, to differ materially from those contemplated by such forward-looking
statements include, without limitation:





 ̈
            The
      availability of additional funds to successfully pursue our business
      plan;


 ̈
            The
      cooperation of industry service partners that have signed agreements with
      us;


 ̈
            Our ability
      to market our services to current and new customers and generate customer
      demand for our products and services in the geographical areas in which we
      operate;


 ̈
            The highly
      competitive nature of our
industry;


 ̈
            Our ability
      to retain key personnel;


 ̈
            Our ability
      to maintain adequate customer care and manage our churn
      rate;


 ̈
            Our ability
      to maintain, attract and integrate internal management, technical
      information and management information
  systems;


 ̈
            Our ability
      to manage rapid growth while maintaining adequate controls and
      procedures;


 ̈
            The
      availability and maintenance of suitable vendor relationships, in a timely
      manner, at reasonable cost;


 ̈
            General
      economic conditions.





These
forward-looking statements are subject to numerous assumptions, risks and
uncertainties that may cause our actual results to be materially different from
any future results expressed or implied by us in those statements.




These
risk factors should be considered in connection with any subsequent written or
oral forward-looking statements that we or persons acting on our behalf may
issue. All written and oral forward looking statements made in connection with
this Report that are attributable to us or persons acting on our behalf are
expressly qualified in their entirety by these cautionary
statements.  Given these uncertainties, we caution investors not to
unduly rely on our forward-looking statements. We do not undertake any
obligation to review or confirm analysts’ expectations or estimates or to
release publicly any revisions to any forward-looking statements to reflect
events or circumstances after the date of this document or to reflect the
occurrence of unanticipated events. Further, the information about our
intentions contained in this document is a statement of our intention as of the
date of this document and is based upon, among other things, the existing
regulatory environment, industry conditions, market conditions and prices, the
economy in general and our assumptions as of such date. We may change our
intentions, at any time and without notice, based upon any changes in such
factors, in our assumptions or otherwise.


3


PART I





Item 1.
Business.





1.  Form and year of
organization: BioElectronics Corporation (“the Company”) was formed as a
Maryland Corporation in April 2000.





2.  Description
of the Company’s business as a smaller reporting company.





a. Principal products or services and
their markets:BioElectronics Corporation is the maker of inexpensive,
drug–free, anti-inflammatory medical devices and patches; its primary SIC code
is 3845.  The Company's wafer thin patches contain an embedded
microchip and battery that deliver pulsed electromagnetic energy, a clinically
proven and widely accepted anti-inflammatory and pain relief therapy that
heretofore has only been possible to obtain from large, facility-based
equipment.  BioElectronics markets and sells its current products
under the brand names ActiPatch®, AllayTM, RecoveryRxTM and
HealFastTM.





The
dermal patch delivery system creates a multitude of new product opportunities
for chronic and acute inflammatory conditions.  The market potential
is estimated at $10 billion or 400 million incidents worldwide, according to a
study titled “Report on BioElectronics, Corp. – Sizing the Market Opportunity
and Assessing Possible Outcomes for the Company.”  The current market
for medical devices is 1⁄3 United States, 1⁄3 Europe, and 1⁄3 Asia.  The
distinctive value proposition of the device 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
current major applications are:





·
            Medical
      Surgeries


·
            Chronic
      Wounds


·
            Oral
      Surgeries


·
            Sprains
      and Strains


·
            Lower
      Back Pain


·
            Chronic
      Repetitive Stress Injuries, Heel Pain, Carpal Tunnel, Bursitis,
      etc.





The
Company manufactures a medical device that reduces inflammation without the use
of drugs, topical ointments, heat or cold therapy.  Inflammation
occurs following a variety of insults such as surgery, lacerations of the skin
and soft tissues, sprains and strains, (including those of the low back),
repetitive stress injuries such as plantar fasciitis, carpal tunnel syndrome,
and tennis elbow.  The Company has branded its device for many
applications and separated the market for the products into four distinct
segments- retail products designed for consumer use, a women’s health product,
medical professional products and veterinary use products.


4





How
the device works:





The
body's natural response to soft tissue trauma is a localized inflammatory
reaction. The damaged cells separate to prevent the transmission of infection.
The cells leak fluid and cellular components break down while the cellular
debris causes inflammation, swelling and pain.





This
inflammatory response, which has a physiologic protective action, in fact
creates an environment in which the healing process is actually prolonged
or stalled in chronic wounds.





The
devices use proven medical technology to truncate the body's inflammatory
response (i.e. breaks the cycle of chronic inflammation).  It does
this by delivering pulsed electromagnetic energy directly to the affected area
and driving out the edematous fluid along with byproducts of the damaged
tissue.  This provides a well-demonstrated and significant overall
improvement in the restorative and recovery process following
injury.  As a result the pain associated with soft tissue injury
is often substantially reduced.





The
Retail Products and Market





The
Company has developed distinct retail treatment kits.





Five kits
are marketed as ActiPatch® Therapy for Pain - for Back, Knee, Wrist, Tennis
Elbow, and Heel Pain.  The kits are unique to the market as drug free,
anti-inflammatory therapeutic agents that rapidly and safely reduce pain,
swelling and healing times.





5


Each
retail kit is designed for either 360 or 720 hours of use and includes a free
extremity wrap and an unconditional money back guarantee.  Priced at
$39.95, the cost benefit of these kits is an overwhelming sales
proposition.  These products are currently available in the retail
environment in Canada and Europe.





Women’s
Health Product and Market





The
AllayTM Menstrual Pain Therapy kit addresses dysmenorrhea, the painful monthly
cramps experienced by 40% of women during sometime in their life.  The
market for drug-free relief is enormous.  Current treatment such as
heat pads and medications such as NSAIDs are not as effective, nor as
safe.








Medical
Professionals Market





The
Company has been marketing to the U.S. medical market for almost three
years.  Most of the past sales efforts have centered on plastic
surgery and podiatry.  Sales increases have been very slow, partly due
to the lack of clinical evidence, partly due to the lack of a skilled sales
force and partly due to less than desirable product design.  In 2008,
the Company redesigned the product line, refocused on the plastic surgery,
Orthopedic and Sports Medicine markets and branded this line under the trademark
name RecoveryRxTM.  This current product line consists of five distinct
kits:


6








·
            Jaw
      Surgery Recovery Kit


·
            General
      Surgery Recovery Kit


·
            Breast
      Recovery Kit


·
            C-Section
      Recovery Kit


·
            Eye
      Surgery Recovery Kit





Also in
development are products for hernias and other surgeries including Dental and
Oral surgery. Additionally, the medical products are being used and tested for
eye disease, noses surgeries, skin grafts, and wound care.  Finally,
the Company recently obtained reimbursement approval from the Maryland state
Medicaid program for kidney compromised patients, and we believe that we can
also obtain reimbursement for cardiovascular and diabetic patients.





The
Veterinary Market





The
Company has a distribution agreement with eMarkets Group of North Caldwell, New
Jersey.  The products are marketed under the trade names HealFast and
the HealFast PetPatch.  The products are a drug-free therapy for
horses, cats and dogs that reduce swelling and pain, while speeding healing
of muscle and tendon injuries, sores and incisions.  There are currently
approximately 162 million companion animals in the United States and about 7
million horses.


7


b. Distribution methods of the
products or services:Most of the sales are through distribution
agreements with companies which sell items on a wholesale basis to retail
outlets, such as drug stores and medical supply outlets.





c. Status of any publicly announced
new product or service: During
2009, our focus was on developing product, obtaining additional domestic and
international distribution channels, conducting market research, completing
additional clinical trials, eliminating debt, and strengthening the balance
sheet.  The motivations for continued clinical trials are marketing
enrichment and obtaining additional U.S. Food and Drug Administration (FDA)
approved therapeutic indications for existing and future
products.  Securing additional U.S. FDA approval is central to market
entry and product acceptance.  Below are listed currently planned or
underway clinical studies:




Plantar Fasciitis (Heel Pain)
Study – Chief Investigator, Joel Brook, D.P.M. – A double-blind
randomized study spanning a 7-day treatment period.  Subjects recorded
pain levels using a Visual Analogue Scale (VAS).  Subjects also kept a
log of medication taken during the 7-day treatment period.  Clinical
data demonstrated a reduction in pain in the active ActiPatch group and a large
clinically significant different in pain medication usage.  The active
ActiPatch group took 55% less medication taken than the placebo ActiPatch
group.





Delayed Onset Muscle Soreness
Study – Chief Investigator, Sheena Kong, M.D. - This was an observational
study to evaluate the treatment of Delayed Onset Muscle Soreness
(DOMS).  After a vigorous resistance training exercise regiment
designed to induce DOMS, 102 study participants were placed into one of three
groups:  1) a control group; 2) a group that utilized the ActiPatch
device; and 3) a group that received over-the-counter strength acetaminophen in
the form of Extra Strength Tylenol after a vigorous resistance training exercise
regiment designed to induce DOMS.  The data yielded by this study
appears to demonstrate that the use of ActiPatch for the treatment of Delayed
Onset Muscle Soreness (DOMS) is both safe and
effective.  Additionally, the data yielded by the study appears to
demonstrate that the continuous use of ActiPatch will result in significantly
less DOMS-related pain and muscle soreness compared to a treatment regiment
consisting of an OTC dosage of acetaminophen.





Primary Dysmenorrhea (Menstrual
Pain) Study – Primary Investigator, Barry Eppley, M.D.D.M.D. – This
clinical study was a placebo controlled, double-blind, prospective randomized
trial comparing the efficacy and effectiveness of an active Allay device to an
inactive (placebo) Allay device.  The primary outcome measure was
reduction of menstrual pain in comparison with prior baseline
scores.  The intensity of pain was measured using a VAS.  Of
the active group, 77.1% reported either complete elimination or reduction in
their typical menstrual pain symptoms. Allay was demonstrated to be a safe and
effective drug-free method for the treatment of primary
dysmenorrhea.  It may be used as a primary treatment method for those
women with moderate dysmenorrhea who prefer not to take oral
medication.  In more severe cases of dysmenorrhea, it could be an
adjuvant treatment to reduce the amount of oral medications needed. Further
controlled clinical studies are needed for further evaluation.


8





d. Competitive business conditions
and the smaller reporting company's competitive position in the industry and
methods of competition:The manufacture, distribution and sale
of medical devices and equipment designed to relieve swelling and pain or to
treat chronic wounds is competitive and some of the Company’s competitors
possess significant product sales, and greater experience, financial resources,
operating history and marketing capabilities than us. For example, Diapulse
Corporation of America, Inc. manufactures and markets devices that are deemed by
the U.S. FDA to be substantially equivalent to some of the Company’s
products.  Regenesis Biomedical and Ivivi Technologies also
manufacture and market devices that deliver PEMF therapy.  A number of
other manufacturers, both domestic and foreign, and distributors market
shortwave diathermy devices that produce deep tissue heat and may be used for
the treatment of certain of the medical conditions that the Company’s products
are used for.  The Company’s products may also compete with pain
relief drugs and pain relief medical devices, as well as other forms of
treatment.





The
Company’s ability to compete effectively with other companies is materially
dependent upon the proprietary nature of its technologies.  We rely
primarily on patents and trade secrets to protect our technologies. There can be
no assurance that the Company will not be required to resort to litigation to
protect its patented technologies and other proprietary rights or that we will
not be the subject of additional patent litigation to defend its existing and
proposed products and processes against claims of patent infringement or any
other intellectual property claims.  Such litigation could result in
substantial costs, diversion of management's attention, and diversion of Company
resources.





The
Company strives to protect its trade secrets, including the processes, concepts,
ideas and documentation associated with our technologies, through the use of
confidentiality agreements and non-competition agreements with our current
employees and with other parties to whom we have divulged such trade
secrets.  If our employees or other parties breach our confidentiality
agreements and non-competition agreements or if these agreements are not
sufficient to protect our technology or are found to be unenforceable, our
competitors could acquire and use information that we consider to be our trade
secrets, and we may not be able to compete effectively.  Some of the
Company’s competitors have substantially greater financial, marketing, technical
and manufacturing resources, and we may not be profitable if our competitors are
also able to take advantage of our trade secrets.





The
Company may decide for business reasons to retain certain knowledge that it
considers proprietary as confidential and elect to protect such information as a
trade secret, as business confidential information or as know-how.  In
that event, the Company must rely upon trade secrets, know-how, confidentiality
and non-disclosure agreements and continuing technological innovation to
maintain our competitive position. There can be no assurance that others will
not independently develop substantially equivalent proprietary information or
otherwise gain access to or disclose such information.


9





The
Company’s ability to commercially exploit its products must be considered in
light of the problems, expenses, difficulties, complications and delays
frequently encountered in connection with the development of new medical devices
and products.  We believe that in order to continue to be competitive,
we need to develop and maintain sufficient market share.  Our methods
of competition include continuing our efforts to develop and sell products,
which, when compared to existing products, perform more efficiently and are
available at prices that are acceptable to the market; displaying our products
and providing associated literature at major industry trade shows; and pursuing
alliance opportunities for the distribution of our products.  We
further believe that our competitive advantages with respect to our products
include: the clinical efficacy of our technology and products, the benefits of
treatments utilizing our products, which include treatments that are
non-invasive and painless, are free from known side-effects and are not
susceptible to overdose or abuse, do not require special training to implement,
may be applied to any part of the body; and the relevant experience of the
members of our consultants including, among others, Dr. David Genecov, an
internationally recognized surgeon, and Dr. Kenneth McLeoad, a principal
innovator in PEMF technology.





e.      Sources and availability of raw
materials and the names of principal suppliers: The raw materials used as
components in Company’s products, mainly bandaging material and electronic
circuit boards, are readily available worldwide. The Company’s manufacturers
work on behalf of many similar companies, and possess additional capacity to
fulfill Company’s anticipated needs.





f.      Patents, trademarks, licenses,
franchises, concessions, royalty agreements or labor contracts, including
duration:The rights to the technology and patents supporting the
development of the current product line were acquired by BioElectronics in
2000.   Prior to that time, the previous owners of the technology
and patents had invested over $4.65 million in electronic engineering
prototypes, production runs, and in confirming clinical studies.  The
Company has been issued U.S. Patent #7551957B2   and has
additional patents pending in the United States and worldwide.





g.      Need
for any government approval of principal products or services. If government
approval is necessary and the smaller reporting company has not yet received
that approval, discuss the status of the approval within the government approval
process:





·
            The
      Company was granted its first approval from the U.S. FDA under a 510(k) in
      August 2002.  Prior to U.S. FDA approval and the establishment
      of its research and development group, PAW, LLC (the family of Andrew
      Whelan, President) paid and expensed the cost of
    development.


10





·
            In
      December 2004, the Company received ISO and CE (European Common Market)
      certification.  In 2005, Health Canada approved ActiPatch®
      Therapy for the relief of pain in musculoskeletal
    complaints.





·
            In
      early 2008, the Company redesigned its product and manufacturing process
      and established new disease specific products and distinct medical and
      retail product lines.  It also shifted its attention to
      international sales.





Generally
during its history, with regard to its efforts in 2009 and beyond, the Company
cannot assure that it will be successful in obtaining U.S. FDA clearance, and
without such clearance, we will be unable to enter the relief of pain and
discomfort associated with primary dysmenorrhea market in the United
States.  There are numerous medications used in the treatment of pain
and discomfort associated with primary dysmenorrhea, and if we receive clearance
to market this product, we intend to offer it as an alternative to such
medications.  These commonplace medications have been required to
carry warning labels due to potential dangerous side-effects (and some withdrawn
altogether), as compared to our non-invasive, drug-free alternative device with
no known side-effects.





h.    Effect of existing or probable
governmental regulations on the business: After a device is placed on the
market, within the United States, numerous regulatory requirements apply. These
include:





Ø
            Quality
      System Regulations, or QSR, which require finished device manufacturers,
      including contract manufacturers, to follow stringent design, testing,
      control, documentation and other quality assurance procedures during all
      aspects of the manufacturing
process;





Ø
            labeling
      regulations and U.S. FDA prohibitions against the promotion of products
      for uncleared, unapproved or "off-label"
uses;





Ø
            medical
      device reporting regulations, which require that manufacturers report to
      the U.S. FDA if their device may have caused or contributed to a death or
      serious injury or malfunctioned in a way that would likely cause or
      contribute to a death or serious injury if the malfunction of that or a
      similar company device were to recur;
and





Ø
            post-market
      surveillance regulations, which apply when necessary to protect the public
      health or to provide additional safety and effectiveness data for the
      device.





The U.S.
FDA has broad post-market and regulatory enforcement powers.  The
Company is subject to unannounced inspections by the U.S. FDA to determine the
Company’s compliance with the QSR and other regulations, and these inspections
include the manufacturing facilities of BioElectronics
Corporation.  Our location has been registered with the U.S. FDA as a
Medical Device establishment.  Such registration is renewable
annually, and although we do not believe that the registration will fail to be
renewed by the U.S. FDA, there can be no assurance of such
renewal.  The failure of the Company to obtain any annual renewal
would have a material adverse effect on us.


11





Failure
to comply with applicable regulatory requirements can result in enforcement
action by the U.S. FDA or the Department of Justice, which may include any of
the following sanctions, among others:





Ø
            fines,
      injunctions and civil penalties;





Ø
            mandatory
      recall or seizure of our products;





Ø
            operating
      restrictions and partial suspension or total shutdown of
      production;





Ø
            refusing
      our requests for 510(k) clearance or pre-market approval of new products
      or new intended uses;





Ø
            withdrawing
      510(k) clearance or pre-market approvals that are already granted;
      and





Ø
            criminal
      prosecution.





The U.S.
FDA also has the authority to require us to repair, replace or refund the cost
of any medical device that has been manufactured for us or distributed by
us.  If any of these events were to occur, they could have a material
adverse effect on our business.  We also are subject to a wide range
of federal, state and local laws and regulations, including those related to the
environment, health and safety, land use and quality assurance.  We
believe that we are in complete compliance with these laws and regulations as
currently in effect, and our compliance with such laws will not have a material
adverse effect on our capital expenditures, earnings and competitive and
financial position.





The
primary regulatory environment in Europe is that of the European Union, which
consists of 27 countries encompassing most of the major countries in
Europe.  Three member states of the European Free Trade Association
have voluntarily adopted laws and regulations that mirror those of the European
Union with respect to medical devices.  Other countries, such as
Switzerland, have entered into Mutual Recognition Agreements and allow the
marketing of medical devices that meet European Union requirements.





The
European Union has adopted numerous directives and European Standardization
Committees have promulgated voluntary standards regulating the design,
manufacture, clinical trials, labeling and adverse event reporting for medical
devices.  Devices that comply with the requirements of a relevant
directive will be entitled to bear a CE conformity marking (which stands for
Conformite Europeenne),
indicating that the device conforms with the essential requirements of the
applicable directives and, accordingly, can be commercially distributed
throughout the member states of the European Union, the member states of the
European Free Trade Association and countries which have entered into a Mutual
Recognition Agreement.  The method of assessing conformity varies
depending on the type and class of the product, but normally involves a
combination of self-assessment by the manufacturer of the product and a
third-party assessment by a Notified Body, an independent and neutral
institution appointed by a country to conduct the conformity
assessment.  This third-party assessment may consist of an audit of
the manufacturer's quality system and specific testing of the manufacturer's
device.  An assessment by a Notified Body in one member state of the
European Union, the European Free Trade Association or one country which has
entered into a Mutual Recognition Agreement is required in order for a
manufacturer to commercially distribute the product throughout these
countries.  ISO 9001 and ISO 13845 certifications are voluntary
harmonized standards.  Compliance establishes the presumption of
conformity with the essential requirements for a CE Marking.


12





i.      Estimate of the amount spent during
each of the last two fiscal years on research and development activities, and if
applicable, the extent to which the cost of such activities is borne directly by
customers: The Company’s R&D costs have been minimal.  New
product research and development is done by in-house engineers and a consulting
biophysicist





j.      Number of total employees and number
of full-time employees: Currently, the Company employs 9 full time staff
members and contracts for consulting services with an additional 3
persons.  None of the Company’s employees are represented by unions or
collective bargaining agreements.  We believe that our relationships
with our employees are good.





3. Reports to security
holders. The following will be disclosed in any registration statement
the Company files under the Securities Act of 1933:




i.    
Though not required to deliver an annual report to security holders, the Company
will voluntarily send an annual report, which will include audited financial
statements;




ii.   
The Company has voluntarily agreed to become a reporting company with the
Securities and Exchange Commission and subject to its reporting requirements,
including the filing of periodic reports and any other required
information;




iii.  
That the public may read and copy any materials file by the Company with the
Commission at the SEC's Public Reference Room at 100 F Street, NE., Washington,
DC 20549, on official business days during the hours of 10 a.m. to 3 p.m. State
that the public may obtain information on the operation of the Public Reference
Room by calling the Commission at 1-800-SEC-0330. The Commission maintains an
Internet site that contains reports, proxy and information statements, and other
information regarding issuers that file electronically with the Commission and
state the address of that site (http://www.sec.gov). The Company maintains its
own website at http://www.BIELCorp.com, where it will also post this
information.





Item
1A. Risk Factors. The Company is not required to provide the
information required by this Item because the Company is a smaller reporting
company.





Item
1B. Unresolved Staff Comments. The Company is not required to
provide the information required by this Item because the Company is a smaller
reporting company.


13





Item
2. Properties. The Company’s principal corporate office is located
at 4539 Metropolitan Court, Frederick, Maryland 21704 where it leases
approximately 3,000 square feet.  The Company uses approximately 1,600
square feet for its production and packaging facility and 1,400 square feet for
its executive offices.  The approximate rental amount is $5,800 per
month.  The lease term expires in 2011.




Item 3.
Legal Proceedings.





The
Company and Andrew Whelan, President & CEO are 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 claims 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 submitted to
arbitration at which the plaintiff prevailed and a judgment was entered against
BioElectronics Corporation, PAW, LLC and Andrew Whelan in the amount of
$1,217,919.10.  The Company and Mr. Whelan have filed a Petition to
Vacate Arbitration Award.  As of this date, there has been no ruling
on the motion.  The Company believes the plaintiff’s claims to be
without merit and the arbitrator’s decision to have been possible only by a
manifest disregard of the law.  The Company intends to defend the
lawsuit and pursue any counterclaims vigorously.





Item
4 (Removed and Reserved). Not applicable.


14


PART II





Item 5. Market for
Registrant’s Common equity, Related Stockholder Matters and Issuer Purchases of
equity Securities.





Market
for Securities





The
Company’s common stock currently trades via PinkSheets at http://www.OTCMarkets.com,
under the symbol BIEL.   The high and low closing price for each
quarterly period of our last two fiscal years is listed below:




High
                        
                        
                        LowFiscal 20081
      st  Quarter
                        
                        $
                        0.054
                        
                        
                        $
                        0.02552
      ndQuarter
                        
                        
                        0.045
                        
                        
                        
                        0.023
      rdQuarter
                        
                        
                        0.0224
                        
                        
                        
                        0.0064
      thQuarter
                        
                        
                        0.0125
                        
                        
                        
                        0.0037Fiscal 20091
      st  Quarter
                        
                        $
                        0.0045
                        
                        
                        $
                        0.0012
      ndQuarter
                        
                        
                        0.049
                        
                        
                        
                        0.00113
      rdQuarter
                        
                        
                        0.12
                        
                        
                        
                        0.0214
      thQuarter
                        
                        
                        0.103
                        
                        
                        
                        0.04







*
            The
      quotations reflect inter-dealer prices, without mark-up, mark-down or
      commission and may not represent actual
  transactions.





Penny
Stock Considerations





The
Company’s shares will be "penny stocks" as that term is generally defined in the
Securities Exchange Act of 1934 to mean equity securities with a price of less
than $5.00. Our shares thus will be subject to rules that impose sales practice
and disclosure requirements on broker-dealers who engage in certain transactions
involving a penny stock.





Under the
penny stock regulations, a broker-dealer selling a penny stock to anyone other
than an established customer or accredited investor must make a special
suitability determination regarding the purchaser and must receive the
purchaser's written consent to the transaction prior to the sale, unless the
broker-dealer is otherwise exempt. Generally, an individual with a net worth in
excess of $1,000,000 or annual income exceeding $100,000 individually or
$300,000 together with his or her spouse is considered an accredited investor.
In addition, under the penny stock regulations the broker-dealer is required
to:


15





*
            Deliver,
      prior to any transaction involving a penny stock, a disclosure schedule
      prepared by the Securities and Exchange Commissions relating to the penny
      stock market, unless the broker-dealer or the transaction is otherwise
      exempt;





*
            Disclose
      commissions payable to the broker-dealer and our registered
      representatives and current bid and offer quotations for the
      securities;





*
            Send
      monthly statements disclosing recent price information pertaining to the
      penny stock held in a customer's account, the account's value and
      information regarding the limited market in penny stocks;
    and





*
            Make
      a special written determination that the penny stock is a suitable
      investment for the purchaser and receive the purchaser's written agreement
      to the transaction, prior to conducting any penny stock transaction in the
      customer's account.





Because
of these regulations, broker-dealers may encounter difficulties in their attempt
to sell shares of our common stock, which may affect the ability of selling
stockholders or other holders to sell their shares in the secondary market and
have the effect of reducing the level of trading activity in the secondary
market. These additional sales practice and disclosure requirements could impede
the sale of our securities, if our securities become publicly traded. In
addition, the liquidity for our securities may be decreased, with a
corresponding decrease in the price of our securities. Our shares in all
probability will be subject to such penny stock rules and our stockholders will,
in all likelihood, find it difficult to sell their securities.





Holders





As of
December 31, 2009, the Company had 16,011 holders of record of its common
stock.





Securities
as Compensation





The
Company effected multiple transactions using its Common Stock as compensation in
2009, 2008 and 2007 to non-employees pursuant to consulting services agreements.
These issuances were made in reliance upon Section 4(2) of the Securities
Act of 1933.  The mandated tabular disclosure is contained in Item 12,
infra, and an
explanatory schedule is contained in Item 15, infra.





Dividends





The
Company has not declared any cash dividends on our common stock since its
inception and do not anticipate paying such dividends in the foreseeable future.
We plan to retain any future earnings for use in our business. Any decisions as
to future payments of dividends will depend on our earnings and financial
position and such other facts, as the board of directors deems
relevant.


16





Recent
Sales of Unregistered Securities





In years
of 2007, 2008 and 2009, the Company sold unregistered securities, the proceeds
of which were used for day-to-day operating capital, by filing Form D Notice of
Sale of Securities Pursuant to Regulation D, Section 4(6) and/or Uniform Limited
Offering Exemption with the Securities and Exchange Commission. There was no
underwriter related to the transactions, nor any commissions paid.  A
schedule of these series of transactions is provided in exhibit contained in
Item 15, infra.





Item
6.  Selected Financial Data.The
Company is not required to provide the information required by this Item because
the Company is a smaller reporting company.





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





This
Form 10-K may contain forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, as
amended.  These forward-looking statements involve a number of risks
and uncertainties including, without limitation, those identified under
Item 1A. “Risk Factors” and elsewhere in this Form 10-K. 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 and
in our other filings with the SEC that attempt to advise interested parties of
the risks and factors that may affect our business.





INTRODUCTION





We are
the maker of inexpensive, drug–free, anti-inflammatory medical devices and
patches.  Our wafer thin patches contain an embedded microchip and
battery that deliver pulsed electromagnetic energy, a clinically proven and
widely accepted anti-inflammatory and pain relief therapy that heretofore has
only been possible to obtain from large, facility-based equipment.  We
market and sell our products under the brand names ActiPatch®, AllayTM,
RecoveryRxTM and HealFastTM.





During
2009, our focus was on developing product, obtaining additional domestic and
international distribution channels, conducting market research, completing
additional clinical trials, eliminating debt, and strengthening the balance
sheet.  The motivations for continued clinical trials
are marketing enrichment and obtaining additional U.S. Food and Drug
Administration (FDA) approved therapeutic indications for existing and future
products.  Securing additional U.S. FDA approval is central to market
entry and product acceptance.





Our
customers include pharmacies, supermarkets, physicians, direct response
television and distributors.  Plastic surgery is the only domestic
market segment with current U.S. FDA market clearance.  Consequently,
until additional clearances are received from the U.S. FDA, domestic sales are
restricted primarily to medical providers, and the majority of sales will be
located outside the United States.  As of December 31, 2009, we have
established distribution agreements with distributors in Korea, Singapore,
Malaysia, Canada, Columbia, Italy, Scandinavia, Saudi Arabia, Japan, Benelux,
the Balkans, Austria, Australia, China and South America.  The
international market is expected to further expand going forward and to
eventually constitute two-thirds of our total sales.


17





MAJOR
GOALS, SIGNIFICANT ACTIVITIES AND RESULTS DURING 2009





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. During the
year ended December 31, 2009, we reduced our level of debt, improved our cash
position and significantly reduced our overhead
expenses.    We believe we now have a robust product line
with strong features and functions and are taking further actions to strengthen
our balance sheet and establish profitable operations.





We have
several major goals to continue the advancement of its business operations,
including:  1) completing additional clinical trials; 2) obtaining
additional U.S. FDA and international product market clearances; 3) continuing
to build our four primary brands; 4) building domestic distribution, including
direct response television commercials and drug/grocery store-based
distribution; and 5) continuing to expand our already growing international
distribution network.





Completion
of Clinical Trials





We have
been aggressively pursuing the completion of several clinical
trials.   Our heel/foot clinical trial was recently conducted in
October 2009 yielding a strong product advocacy and 100%
safety.  Future additional clinical trials include: cesarean section
recovery, breast augmentation recovery, and menstrual pain and cramping
associated dysmenorrhea.   Our international distribution groups
also sponsored other clinical trials.  Upon completion of these
studies, the data may be used in U.S. FDA submissions and to support our
marketing claims both domestically and abroad.





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





Our
product is 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.  As we expand internationally, we are required to and do
obtain additional market clearance in each country.


18





Continue
to Build Our Four Primary Markets





We
augmented our marketing team in 2009 with two experienced Brand Managers to help
build our brands.  I n the
coming months, we plan to add additional brand management staff to further
assist our marketing efforts.





Because
BioElectronics has only limited U.S. FDA clearance of its products, mass
distribution to direct consumers in the United States is
prohibited.  We believe U.S. FDA clearance for some of our products is
forthcoming, and thus, we are currently in the process of identifying and
building a domestic distribution network.





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 other markets, it has had regular
interest from international distribution companies to market and
distribute the product lines.  Our strategy has been 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 and
Italy.  As retail distribution is a core strategy, the Company is
regularly in negotiations with existing and future distributors, and hopes to
sign additional contracts with qualified distributors in Asia, Europe,
South/Central America and Australia.
 
 As part
of its intent to regularly expand the distribution of its products,
BioElectronics in 2009 expanded its television presence around the world via the
international Direct Response Televisions (DRTV) campaign.  To
establish its DRTV program, the Company has developed
television  materials produced by leading companies it has retained
(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 some of
the countries.  In Canada, we are partnering with Northern Response,
one of the world’s largest DRTV companies.  Northern Response is also
looking for further opportunities in six additional international locations that
show interest in our products.  The Canadian test is scheduled to
begin on April 5, 2010.  In Australia and New Zealand, Brand
Developers will test the Back Pain commercial.




Other
Issues Relative to Plan of Operations





Cash
Requirements - BioElectronics is currently in a strong current asset position
with its current assets significantly exceeding current liabilities, yielding a
current ratio well above one.  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.


19





Research
and Development – Our technologies are already highly developed and many of our
products are currently on the international market.  We are designing
several new products based on our core technologies with developmental costs
being financed through normal cash flows.





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
it is expected the majority of our hiring will focus on marketing personnel,
although our support and manufacturing staff will also be
expanded.  Our hiring plans are dependent upon revenue growth rates
over the coming quarters.





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 December 31,
2009.





Year
Ended December 31, 2009 Compared to Year Ended December 31, 2008





Revenue.  Revenue
from operations for the years ended December 31, 2009 and 2008 amounted to
approximately $1,146,000 and $717,000, respectively, an increase of $429,000 or
60% over the prior year.  The following table summarizes the company’s
domestic, international and veterinary (related party) revenues earned during
the years ended December 31, 2009 and 2008:





For
      the Years Ended December 31,2009
                      
                      
                      2008Amounts
                      
                      
                      Percentage
                      
                      
                      Amounts
                      
                      
                      PercentageDomestic
                      
                      $
                      263,815
                      
                      
                      
                      23
                      %
                      
                      $
                      254,927
                      
                      
                      
                      36
                      %International
                      
                      
                      610,785
                      
                      
                      
                      53
                      %
                      
                      
                      461,828
                      
                      
                      
                      64
                      %Veterinary
                      
                      
                      271,047
                      
                      
                      
                      24
                      %
                      
                      
                      -
                      
                      
                      
                      -$
                      1,145,647
                      
                      
                      
                      100
                      %
                      
                      $
                      716,755
                      
                      
                      
                      100
                      %





International
sales increased by approximately $149,000 or 32% in 2009 from 2008 as a result
of new distributorship agreements signed in 2009 and increased sales through
agreements signed in prior years.   Revenues from international
sales for the year ended December 31, 2009 include $150,000 of sales related to
a bill and hold transaction.  The units will be shipped in 2010 to
help meet the distribution 2010 purchase obligation.


20





Veterinary
revenues of $271,047 were recorded in connection with a distribution agreement
signed on February 9, 2009 with eMarkets, a company owned and controlled by a
member of the board of directors and sister of our
president.   The agreement provides for eMarkets to be the
exclusive distributor of our veterinary products to customers in certain
countries outside of the United States for a period of three
years.   The specialized veterinary products sold to eMarkets
include approximately $216,000 of revenues related to bill and hold transactions
and for which the related product is expected to be delivered during the fourth
quarter of 2010.





Cost of Goods Sold and Gross
Margin.  Costs of goods sold for the years ended
December 31, 2009 and 2008 amounted to approximately $390,000 and $509,000,
respectively.   Gross margin increased from approximately 29% of
sales for the year ended December 31, 2008 to approximately 66% for the year
ended December 31, 2009.   The increase was the result of higher
sales prices per unit, lower production costs (which arose primarily from
improvements in productivity) and a substantially lower defect
rate.  We expect 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.  For the year ended December 31, 2009, general
and administrative expenses amounted to approximately $904,000 as compared to
$2,040,000 in 2008, a decrease of $1,136,000 or 56% over the prior
year.   The decrease in general and administrative expenses in
2009 was primarily driven by reduced consulting expenses.




General
and administrative expenses of approximately $904,000 for the year ended
December 31, 2009 included approximately $147,000 in sales support
expenses, approximately $34,000 in consulting expense, approximately $15,000 in
depreciation and approximately $709,000 in other general and administrative
expenses.




General
and administrative expenses of approximately $2,040,000 for the year ended
December 31, 2008, consisted of approximately $439,000 in sales support
expenses, approximately $551,000 in consulting expense, approximately $15,000 in
depreciation and $1,035,000 in other general and administrative
expenses.




Interest Expense.Interest
expense decreased to approximately $111,000 for the year ended December 31,
2009 from $192,000 in the comparable period in 2008.   The
decrease in interest expense was attributed to the payoff of senior secured
convertible notes, during the year ended 2009.





Net Loss.  Net
losses decreased from approximately $2,024,000 during 2008 to approximately
$260,000 during 2009.  Losses were minimized primarily due to a
significant increase in sales and reduction in costs.


21





Year
Ended December 31, 2008 Compared to Year Ended December 31, 2007





Revenue.  Revenue
from operations for the years ended December 31, 2008 and 2007 were
approximately $717,000 and $603,000, respectively, an increase of $114,000 or
19% over the prior year.  The following table summarizes the company’s
domestic and international revenues earned during the years ended December 31,
2008 and 2007:





For
      the Years Ended December 31,2008
                      
                      
                      2007Amounts
                      
                      
                      Percentage
                      
                      
                      Amounts
                      
                      
                      PercentageDomestic
                      
                      $
                      254,927
                      
                      
                      
                      36
                      %
                      
                      $
                      232,871
                      
                      
                      
                      39
                      %International
                      
                      
                      461,828
                      
                      
                      
                      64
                      %
                      
                      
                      370,239
                      
                      
                      
                      61
                      %$
                      716,755
                      
                      
                      
                      100
                      %
                      
                      $
                      603,110
                      
                      
                      
                      100
                      %




The
primary contributor to the increase in revenue is continued expansion of
international and domestic markets.





Cost of Goods Sold and Gross
Margin.  Costs of goods sold for the years ended
December 31, 2008 and 2007 were approximately $509,000 and $170,000,
respectively.  Gross margin decreased from 72% for the year ended
December 31, 2007 to 29% for the year ended December 31, 2008, as a result of
higher production costs which arose primarily from improvements in product
design and packaging.




General and Administrative
Expense.  For the year ended December 31, 2008, general
and administrative expenses amounted to approximately $2,040,000 as compared to
$1,818,000 in 2007, an increase of $222,000 or 12% over the prior
year.  The slight increase in general and administrative expenses in
2008 was primarily driven by the increase in sales support expenses and payroll
expense related to the hiring of vice president in international
sales.




General
and administrative expenses of approximately $2,040,000 for the year ended
December 31, 2008 consisted of approximately $439,000 in sales support
expenses, approximately $551,000 in consulting expense, approximately $15,000 in
depreciation and $1,035,000 in other general and administrative
expenses.




General
and administrative expenses of approximately $1,818,000 for the year ended
December 31, 2007 consisted of approximately $343,000 in sales support
expenses, approximately $543,000 in consulting expense, approximately $19,000 in
depreciation and approximately $912,000 in other general and administrative
expenses.




Interest Expense.Interest
expense decreased to approximately $192,000 for the year ended December 31,
2008 from $588,000 in the comparable period in 2007. The increase in interest
expense was primarily attributable to the amortization of discount on warrants
of approximately $351,000, as related to the senior convertible notes
agreement.  Such expense was fully amortized by the end of December
31, 2007.


22





Net Loss.  Net
losses increased slightly from approximately $2,003,000 during 2007 to
approximately $2,024,000 during 2008.  This slight increase is due to
lower gross margin and higher general and administrative expenses.




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 since our inception, we
have generated negative cash flow from operations.   At
December 31, 2009, our cash and cash equivalents were approximately
$296,000. Since the end of fiscal 2008, the increase of
approximately $241,000 in our cash and cash equivalents  resulted
primarily from the issuance of related party notes payable during the
year.





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 December 31, 2009, all
of the Company’s financing was provided by these related parties through
long-term notes payable.   We present these 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
December 31, 2009, we had positive working capital of approximately $1,026,000
as compared to negative working capital of approximately $1,164,000 at December
31, 2008.  The negative working capital at December 31, 2008 arose due
to the low level of current assets (which was the result of low level of sales
and higher expenses to that date), and balances due to suppliers (reported as
accounts payable and accrued expenses) and under our senior secured notes
payable.   The senior secured convertible notes were repaid and
converted to equity in 2009.





On
January 1, 2005, we entered into an unsecured revolving convertible promissory
note agreement (“the Revolver”) with IBEX, LLC (“IBEX”) a related party, for a
maximum limit of $2,000,000, with interest at the Prime Rate plus 2%, 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 conversion prices
based on the VWAP for the 10 trading days preceding the date of
conversion.  IBEX, LLC is a limited liability company, whose President
is the daughter of the President of the Company.  As of December 31,
2009, an amount of approximately $1,288,000 was drawn from the
Revolver.


23


Additionally,
on August 1, 2009, we entered into a convertible promissory note agreement with
IBEX, for $519,920, with simple interest at 8% per annum.  All accrued
interest and principal are due on or before August 31, 2011, whether by the
payment of cash or by conversion into shares of our common stock.  The
promissory note is convertible equal to the quotient of (i) a sum equal to the
entire outstanding principal and interest, divided by (ii) the conversion price
of $0.019 per share.




Net Cash Used In Operating
Activities.Net cash used in operating activities amounted to
approximately $1,363,000, $521,000 and $1,335,000 in the years ended December
31, 2009, 2008 and 2007, respectively.




Net cash
used in operating activities of approximately $1,363,000 in the year ended
December 31, 2009 was primarily because of the increase in trade and other
receivables of approximately $333,000, decrease in accrued expenses of
approximately $216,000, decrease in accounts payable of approximately $181,000,
increase in due from related party of approximately $165,000, and increase in
inventory of approximately $136,000.  Non-cash reconciling items
mainly include stock-based compensation expense of approximately $243,000 and
adjustment to related party notes payable of approximately
$266,000.




Net cash
used in operating activities of approximately $521,000 in the year ended
December 31, 2008 was primarily because of the decrease in trade and other
receivables of approximately $130,000, increase in accrued expenses of
approximately $261,000, decrease in inventory of approximately $126,000, and
increase in customer deposits of approximately $119,000.  Non-cash
reconciling items mainly include stock-based compensation expense of
approximately $400,000 and approximately $247,000 increase in related party
notes payable for services rendered.




Net cash
used in operating activities of approximately $1,335,000 in the year ended
December 31, 2007 was primarily because of the increase in inventory of
approximately $128,000 and decrease in accounts payable of approximately
$148,000.  Non-cash reconciling items mainly include amortization of
non-cash debt issuance costs of approximately $351,000, non-cash interest
related to convertible notes payable of approximately $205,000 and increase in
related party notes payable for services rendered of approximately
$309,000.




Net Cash Used in Investing
Activities.We did not make any significant investments in fixed or other
long-term assets during the years ended December 31, 2009, 2008, and 2007 and
therefore, did not have any substantial cash flows from investing
activities.




Net Cash Provided by Financing
Activities.Net cash provided by financing activities amounted to
approximately $1,604,000 and $547,000 in the years ended December 31, 2009 and
December 31, 2008, respectively.




During
the year ended December 31, 2009, the Company generated $2,597,860 in cash
from  financing activities through the issuance of notes payable to
related parties (amounting to $1,725,360) and the sale of common shares to
investors (amounting to $872,500).   The proceeds received from
these activities were used to repay certain notes payable (amounting to
$994,025) and to fund operations during the year.


24




During
the year ended December 31, 2008, the company generated $547,021 in cash from
financing activities through the issuance of notes payable to related parties
(amounting to $461,371) and the sale of common shares to investors (amounting to
$198,250).    The funds received were used to repay certain
notes payable (amounting to $112,600) and to fund operations.




Net cash
provided by financing activities for the year ended December 31, 2008 was
approximately $547,000 compared to approximately $1,243,000 in
2007.  The decrease of approximately $696,000 was primarily because of
the reduction in proceeds obtained from related party notes payable by
approximately $501,000.





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 2009
and prior years, including a net loss of $259,977 for the year ended December
31, 2009. The Company also has an accumulated deficit as of December 31, 2009 of
$10,644,490.





We are
currently looking for additional financing to provide funds for operations and
complete our developmental activities.  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.   Our auditors have
issued an opinion for the year ended December 31, 2009, which states that
there is substantial doubt about our ability to continue as a going
concern.




OBLIGATIONS
AND CONTRACTUAL COMMITMENTS




The
following table reflects our current contractual commitments as of
December 31, 2009:





Payments Due by PeriodTotal
                        
                        
                        2010
                        
                        
                        2011-2012
                        
                        
                        2013-2014
                        
                        
                        ThereafterOperating
      leases
                        
                        $
                        120,030
                        
                        
                        $
                        60,895
                        
                        
                        $
                        55,096
                        
                        
                        $
                        4,039
                        
                        
                        $
                        —Long-term
      liabilities (1)
                        
                        
                        1,824,176
                        
                        
                        
                        —
                        
                        
                        
                        536,222
                        
                        
                        
                        —
                        
                        
                        
                        1,287,954Total
      contractual obligations
                        
                        $
                        1,944,206
                        
                        
                        $
                        60,895
                        
                        
                        $
                        591,318
                        
                        
                        $
                        4,039
                        
                        
                        $
                        1,287,954





(1)
            These
      liabilities represent the Revolver loan and the convertible promissory
      note with IBEX.


25




At
December 31, 2009, we had available a $2,000,000 revolving credit facility
with approximately $1,288,000 balance with IBEX, a related party. For additional
information regarding our credit facility and operating leases, see Notes 7 and
12, respectively, of our financial statements.




CRITICAL
ACCOUNTING POLICIES AND ESTIMATES




Critical
Accounting Policies and Estimates




The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Our estimates and assumptions are based upon
a combination of historical information and various other assumptions believed
to be reasonable under the particular circumstances. Actual results could differ
from those estimates. Certain of the accounting policies which most impact our
consolidated financial statements and that require management to make difficult,
subjective or complex judgments are described below.  See also “Note
2. Summary of Significant Accounting Policies,” to our consolidated financial
statements included in Item 15 of this Annual Report on Form 10-K.




Development
Stage Company




We devote
substantially all of our present efforts to developing our business. One of our
principal operations, to sell and market in the U.S. retail market, has not yet
commenced as of December 31, 2009 pending U.S. FDA clearance
approval.  All losses accumulated since inception have been considered
as part of our development stage activities. Costs of start-up activities,
including organizational costs, are expensed as incurred.




Revenue
Recognition




We
recognize revenue when evidence of an arrangement exists, such as the presence
of an executed sales agreement, pricing is fixed and determinable, collection is
reasonably assured and shipment has occurred or title of the goods has been
transferred to our buyers.  Payment is due on a net basis in 30
days.  If the customer is deemed not credit worthy, payment in advance
is required. Our agreement with customers includes a right of
return.  An allowance for returns has been provided for the years
ended December 31, 2009, 2008 and 2007.  Defective units are replaced
at the request of the customer.


26




We enter
into bill and hold arrangements from time-to-time with certain distributors,
pursuant to which of our products are purchased by our distributor for shipment
at a later date.  We recognize revenue on bill and hold arrangements
when the following 7 criteria have been met:   1) the risk of
ownership has passed to the buyer; 2) the buyer has made a fixed commitment to
purchase the goods, preferably in writing; 3) the buyer, and not the seller, has
requested that the transaction is on a bill and hold basis; 4) there is a fixed
schedule for delivery of the goods, indicating a delivery date that is
reasonable and consistent with the buyer’s business purpose; 5) the buyer has
not retained any specific performance obligations such that the earnings process
is not complete; 6) the ordered goods are segregated from the seller’s inventory
and is not being used to fill other orders; and  7) the product must
be complete and ready for shipment.   In addition, payment must
be received and/or fixed payment dates be agreed with the customer pursuant to
which the risk of collection is reduced to a minimal level.





Inventories





Our
inventories consist of raw materials, supplies and finished goods. All
inventories are valued at lower of average cost or market determined under the
first-in, first-out method. We periodically review our inventories and identify
items considered outdated or obsolete.  Such items are reduced to
their estimated net realizable value.





Issuance
of stock in exchange for services received





We
receive services from consultants and others in exchange for shares of our
common stock.  All issuances of our stock in exchange for services
received are assigned a per share amount determined with reference to either the
market value of the shares issued or the value of consideration received,
whichever is more readily determinable.  Due to the low price and lack
of trading in our stock, we believe that the fair value of the services received
is more readily determinable, and therefore, we used it to record the related
expense in the statement and value attributed to the common shares
issued.





Our
accounting policy for equity instruments issued to consultants and vendors in
exchange for goods and services follows the provisions of the relevant
authoritative guidance, in which the measurement date for the fair value of the
equity instruments issued is determined at the earlier of (i) the date at which
a commitment for performance by the consultant or vendor is reached or (ii) the
date at which the consultant or vendor’s performance is
complete.


27


NEW
ACCOUNTING STANDARDS





Accounting Standards
Codification





In
June 2009, the FASB issued Statement of Financial Accounting Standards
(“SFAS”) No. 168, The
FASB Accounting Standards Codification and the Hierarchy of Generally Accepted
Accounting Principles(the “Codification”).  This standard
replaces SFAS No. 162, The Hierarchy of Generally Accepted
Accounting Principles, and establishes only two levels of U.S. generally
accepted accounting principles (“GAAP”), authoritative and
nonauthoritative.  The FASB ASC has become the source of
authoritative, nongovernmental GAAP, except for rules and interpretive releases
of the SEC, which are sources of authoritative GAAP for SEC registrants. All
other nongrandfathered, non-SEC accounting literature not included in the
Codification will become nonauthoritative. This standard is effective for
financial statements for interim or annual reporting periods ending after
September 15, 2009. The adoption of the Codification changed our references
to GAAP accounting standards but did not impact our results of operations,
financial position or liquidity.





Participating Securities Granted in
Share-Based Transactions





Effective
January 1, 2009, we adopted a new accounting standard included in ASC 260,
Earnings Per Share(formerly FASB Staff Position (“FSP”) Emerging Issues Task Force (“EITF”)
03-6-1, Determining Whether
Instruments Granted in Share-Based Payment Transactions Are Participating
Securities).The new guidance clarifies that non-vested share-based
payment awards that entitle their holders to receive nonforfeitable dividends or
dividend equivalents before vesting should be considered participating
securities and included in basic earnings per share. Our adoption of the new
accounting standard did not have a material effect on previously issued or
current earnings per share.





Fair Value Measurement and
Disclosure





Effective
January 1, 2009, we adopted a new accounting standard included in ASC 820,
Fair Value Measurements and
Disclosures(“ASC 820”) (formerly FASB FSP No 157-2, Effective Date of FASB Statement
No. 157),which delayed the effective date for disclosing all
non-financial assets and non-financial liabilities, except for items that are
recognized or disclosed at fair value on a recurring basis (at least annually).
This standard did not have a material impact on our financial
statements.





In
April 2009, the FASB issued new guidance for determining when a transaction
is not orderly and for estimating fair value when there has been a significant
decrease in the volume and level of activity for an asset or liability. The new
guidance, which is now part of ASC 820 (formerly FSP 157-4, Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly), requires
disclosure of the inputs and valuation techniques used, as well as any changes
in valuation techniques and inputs used during the period, to measure fair value
in interim and annual periods. In addition, the presentation of the fair value
hierarchy is required to be presented by major security type as described in ASC
320, Investments — Debt and
Equity Securities. The provisions of the new standard were effective for
interim periods ending after June 15, 2009. The adoption of the new
standard on April 1, 2009 did not have a material effect on our financial
statements.


28





In
April 2009, we adopted a new accounting standard included in ASC 820,
(formerly FSP 107-1 and Accounting Principles Board (“APB”) 28-1, Interim Disclosures about Fair Value
of Financial Instruments).The new standard requires disclosures of the
fair value of financial instruments for interim reporting periods of publicly
traded companies in addition to the annual disclosure required at year-end. The
provisions of the new standard were effective for the interim periods ending
after June 15, 2009. Our adoption of this new accounting standard did not
have a material effect on our financial statements.





In
August 2009, the FASB issued new guidance relating to the accounting for
the fair value measurement of liabilities. The new guidance, which is now part
of ASC 820, provides clarification that in certain circumstances in which a
quoted price in an active market for the identical liability is not available, a
company is required to measure fair value using one or more of the following
valuation techniques: the quoted price of the identical liability when traded as
an asset, the quoted prices for similar liabilities or similar liabilities when
traded as assets, or another valuation technique that is consistent with the
principles of fair value measurements. The new guidance clarifies that a company
is not required to include an adjustment for restrictions that prevent the
transfer of the liability and if an adjustment is applied to the quoted price
used in a valuation technique, the result is a Level 2 or 3 fair value
measurement. The new guidance is effective for interim and annual periods
beginning after August 27, 2009. Our adoption of the new guidance did not
have a material effect on our financial statements.





Derivative Instruments and Hedging
Activities





Effective
January 1, 2009, we adopted a new accounting standard included in ASC 815,
Derivatives and Hedging(SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities, an amendment of SFAS No. 133).
The new accounting standard requires enhanced disclosures about an entity’s
derivative and hedging activities and is effective for fiscal years and interim
periods beginning after November 15, 2008. Since the new accounting
standard only required additional disclosure, the adoption did not impact our
financial statements.





Other-Than-Temporary
Impairments





In
April 2009, the FASB issued new guidance for the accounting for
other-than-temporary impairments. Under the new guidance, which is part of ASC
320, Investments — Debt and
Equity Securities(formerly FSP 115-2 and 124-2, Recognition and Presentation of
Other-Than-Temporary Impairments),an other-than-temporary impairment is
recognized when an entity has the intent to sell a debt security or when it is
more likely than not that an entity will be required to sell the debt security
before its anticipated recovery in value.The new guidance does not
amend existing recognition and measurement guidance related to
other-than-temporary impairments of equity securities and is effective for
interim and annual reporting periods ending after June 15, 2009. Our
adoption of the new guidance did not have a material effect on our financial
statements.


29





Subsequent
Events





In
May 2009, the FASB issued new guidance for subsequent events. The new
guidance, which is part of ASC 855, Subsequent Events(formerly
SFAS No. 165, Subsequent
Events)is intended to establish general standards of accounting for and
disclosure of events that occur after the balance sheet date but before
financial statements are issued or are available to be issued. Specifically,
this guidance sets forth the period after the balance sheet date during which
management of a reporting entity should evaluate events or transactions that may
occur for potential recognition or disclosure in the financial statements, the
circumstances under which an entity should recognize events or transactions
occurring after the balance sheet date in its financial statements, and the
disclosures that an entity should make about events or transactions that
occurred after the balance sheet date.  The new guidance is effective
for fiscal years and interim periods ended after June 15, 2009 and will be
applied prospectively. Our adoption of the new guidance did not have a material
effect on our financial statements.  Management has evaluated the
impact of events occurring after December 31, 2009 up to the date of issuance of
these financial statements. These statements contain all necessary adjustments
and disclosures resulting from that evaluation.





INTEREST
RATE AND FOREIGN EXCHANGE RISK




We are
subject to interest rate risk on our notes payable and related party notes
payable. We do not expect our business, results of operations, financial
position or cash flows to be affected to any significant degree by a sudden
change in market interest rates. 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 transactions in U.S. dollars, and,
therefore, we have no foreign exchange risk.





Item 7A.
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.


30




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 8.
Financial Statements and Supplementary Data




Our
audited Financial Statements are contained pursuant to Item 15 of this Form
10-K, as Exhibit 99.





Item
9. Changes in and Disagreeements with Accountants and Financial
Disclosure. Not Applicable.





Item 9A.Controls and
Procedures





Attached
as exhibits to this Annual Report on Form 10-K are certifications of our
President and Chief Executive Officer (“CEO”) which are required pursuant to
Rule 13a-14 of the Exchange Act.     This
“Controls and Procedures” section of this Annual Report on Form 10-K
includes information concerning the controls and controls evaluation referenced
in the certifications.    This section of the Annual Report
on Form 10-K should be read in conjunction with the certifications for a
more complete understanding of the matters presented.





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 Annual
Report on Form 10-K. 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 Annual Report on Form 10-K 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 CEO and other
management, as appropriate, to allow timely decisions regarding required
disclosure.





Based on
the evaluation, our President and Chief Executive 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
December 31, 2009, 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.


31


Management’s
annual report on internal control over financial reporting





Management
is responsible for establishing and maintaining internal control over financial
reporting, as such term is defined in Exchange Act Rule 13a-15(f). Our
management evaluated, under the supervision and with the participation of our
President and Chief Executive Officer, the effectiveness of our internal control
over financial reporting as of December 31, 2009.





Based on
its evaluation under the framework in Internal Control — Integrated
Framework, issued by the Committee of Sponsoring Organizations of the
Treadway Commission, our management concluded that our internal control over
financial reporting was not effective as of December 31, 2009, due to the
existence of significant deficiencies constituting material weaknesses, as
described in greater detail below. A material weakness is a control deficiency,
or combination of control deficiencies, such that there is a reasonable
possibility that a material misstatement of the annual or interim financial
statements will not be prevented or detected on a timely basis.





This
annual report does not include an attestation report of the Company’s
independent registered public accounting firm regarding internal control over
financial reporting.  Management’s report was not subject to
attestation by the Company’s independent registered public accounting firm
pursuant to temporary rules of the SEC that permit the Company to provide only
management’s report in this annual report.





Limitations
on Effectiveness of Controls





Our
management, including our President and Chief Executive Officer, does not expect
that our disclosure controls or our internal control over financial reporting
will prevent all errors and all fraud. A control system, no matter how well
conceived and operated, can provide only reasonable, not absolute, assurance
that the objectives of the control system are met.  Further, the
design of a control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered relative to their
costs.    Because of the inherent limitations in all control
systems, no evaluation of controls can provide absolute assurance that all
control issues and instances of fraud, if any, within the Company have been
detected.  These inherent limitations include the realities that
judgments in decision-making can be faulty, and that breakdowns can occur
because of a simple error or mistake. Additional controls can be circumvented by
the individual acts of some persons, by collusion of two or more people, or by
management override of the controls.  The design of any system of
controls also is based in part upon certain assumptions about the likelihood of
future events, and there can be no assurance that any design will succeed in
achieving its stated goals under all potential future conditions; over time,
controls may become inadequate because of changes in conditions, or the degree
of compliance with the policies or procedures may deteriorate. Because of the
inherent limitations in a cost-effective control system, misstatements due to
error or fraud may occur and not be detected.


32


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.





(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 year ended December 31, 2009, 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.


33


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 Annual Report on Form 10-K. 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.





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 fourth quarter of 2009 that materially affected, or are reasonably likely to
materially affect, our internal control over financing
reporting.


34


PART
III





Item 10.
Directors, Executive Officers and Corporate Governance.





Richard
      Staelin, Ph. D
                
                Age
      70
                
                Chairman
      of the Board, DirectorAndrew
      Whelan
                
                Age
      65
                
                President
      / CEO / Director / CFOMary
      Whelan
                
                Age
      57
                
                Director





Richard
Staelin, Ph. D., Chairman of the Board


Dr.
Staelin joined the board in 2006.  He is the Edward and Rose Donnell
Chaired Professor of Business Administration at Duke's Fuqua School of Business
and the President of Informs Society for Marketing Scientists.  He was
an Associate Dean at The Fuqua School of Business, Duke University for 10 years,
past Executive Director of Marketing Science Institute and has held numerous
positions at the American Marketing Association (AMA) and The Institute of
Management Science (TIMS).  He was an editor or an editorial board
member of Marketing Science, Journal of Marketing Research, the Journal of
Marketing, the Journal of Consumer Psychology and the Journal of Consumer
Research.  He has also consulted for the FDA and the
FTC.  At December 31, 2009, Dr. Staelin owns approximately 950,000
shares of BioElectronics common stock.





Andrew
J. Whelan, CEO, CFO. President and Board Member


Mr.
Whelan is a founder of the Company and has served as the President and Chairman
of the Board of Directors since April 2000.  He is a seasoned business
executive with a strong financial, consulting and management
background.  From 1993 to April 2000, Mr. Whelan served as the
President of P.A. Whelan & Company, Inc., a consulting firm owned by Mr.
Whelan and his wife that specialized in the health care industry.  Mr.
Whelan was also a founder of Drug Counters, Inc., a chain of managed care retail
pharmacies, where he served as President and Chief Executive Officer from 1992
until 1993.  Drug Counters was sold to Diagnostek, Inc. in
1994.  From 1984 until 1992, Mr. Whelan served as Chairman of the
Board of Directors and President of Physicians' Pharmaceutical Services, Inc., a
public company of which he was a founder.  Physicians Pharmaceutical
Services was a charter member of the Maryland Chapter of Inc's Fastest Growing
Companies in America.  Mr. Whelan received his B.S. in accounting from
St. Peter's College.  Mr. Whelan does not currently own BioElectronics
common stock.


35


Mary
K. Whelan, Board Member


Ms.
Whelan has served as a director of the Company since April 2002.  Ms.
Whelan also served as Vice President - Marketing from September 2002 until July
2003 and as Secretary from February 2002 until September 2004.  Ms.
Whelan currently is Founder and CEO, Revalent Media, Inc., a mobile marketing
company.  She was previously EVP at mPhase
Technologies.  She worked more than 20 years at AT&T Corp., Lucent
Technologies, Inc. and Bell Labs.  During that time, Ms. Whelan
successfully launched many high technology products.  Ms. Whelan
served as Vice President - eBusiness at Lucent Technologies.  Prior to
that, Ms. Whelan served as Lucent's Vice President - Strategic Communications
and Market Operations, in which capacity she was responsible for Lucent
Technologies' global marketing operations, including marketing communications
and customer programs, and for the global sales support environment for the
worldwide sales force.  That environment included channel development,
sales training, recognition and compensation.  Ms. Whelan received
extensive experience in all aspects of marketing and public relations at
AT&T.  She also had P&L responsibility for AT&T's
Directory business.  Ms. Whelan is the sister of Andrew
Whelan.  At December 31, 2009, eMarkets Group, owned by Ms. Whelan,
beneficially owns approximately 2.3 million shares of BioElectronics common
stock.




Involvement in certain legal
proceedings.No officer, director, or persons nominated
for such positions, promoter or significant employee has been involved in the
last five years in any of the following:




Ø
            Any
      bankruptcy petition filed by or against any business of which such person
      was a general partner or executive officer either at the time of the
      bankruptcy or within two years prior to that
  time;




Ø
            Any
      conviction in a criminal proceeding or being subject to a pending criminal
      proceeding (excluding traffic violations and other minor
      offenses);




Ø
            Being
      subject to any order, judgment, or decree, not subsequently reversed,
      suspended or vacated, of any court of competent jurisdiction, permanently
      or temporarily enjoining, barring, suspending or otherwise limiting his
      involvement in any type of business, securities or banking activities;
      and




Ø
            Being
      found by a court of competent jurisdiction (in a civil action), the
      Commission or the Commodity Futures Trading Commission to have violated a
      federal or state securities or commodities law, and the judgment has not
      been reversed, suspended, or
vacated.




Regulation
S-K Item 405:




Based
solely upon a review of Forms 3 and 4 and amendments thereto furnished to the
Company under 17 CFR 240.16a-3(e) during its most recent fiscal year and Form 5
and amendments thereto furnished to the Company with respect to its most recent
fiscal year, and any written representation referred to in paragraph (b)(1) of
this section, the Company is not aware of any director, officer, beneficial
owner of more than ten percent of any class of equity securities of the Company
registered pursuant to Section 12 that failed to file on a timely basis, as
disclosed in the above Forms, reports required by Section 16(a) during the
most recent fiscal year or prior years.


36




Regulation
S-K Item 406:




The
Company has adopted a written Code of Ethics applicable to its overall
operations, including its principal executive, financial or accounting
officer.




Regulation
S-K Item 407(c)(3):




None.




Regulation
S-K Item 407(d)(4) and (5):




The
Company does not fulfill the requirements for this
disclosure.  However, the Company has an audit committee, consisting
solely of Dr. Staelin.


37




Item 11.
Executive Compensation.




2009
Summary Compensation Table




The
following table sets forth the aggregate cash and other compensation paid, if
any, for the years ended December 31, 2009 and 2008, to the Company's
Principal Executive Officer and each of its other executive officers whose
annual salary and non-equity incentive compensation for the fiscal years ended
December 31, 2009 and 2008 exceeded $100,000 (the "Named Executive
Officers").




Name and Principal Position
                        
                        Year
                        
                        Salary ($)
                        
                        Stock
                          Awards ($)
                        
                        Option
                          Awards ($)
                        
                        Non-Equity
                          Incentive Plan
                          Compensation ($)
                        
                        All Other
                          Compensation
      ($)
                        
                        Total ($)(note
      1)
                        
                        (note 1)
                        
                        (note 1)
                        
                        (note 2)
                        
                        (note 1)Andrew
      J. Whelan (1) (2) (3)
                        
                        
                        2009
                        
                        —
                        
                        
                        —
                        
                        —
                        
                        
                        —
                        
                        150,000
                        
                        
                        150,000President,
      Chief Executive Officer and Chief Financial Officer
                        
                        
                        2008
                        
                        —
                        
                        
                        —
                        
                        —
                        
                        
                        —
                        
                        150,000
                        
                        
                        150,000








(1)
              Mr.
      Whelan is paid as an independent contractor for services
      provided.    Mr. Whelan did not receive any stock
      awards, option awards, non-equity incentive plan compensation, employee
      benefits or other compensation of any type in respect of the years ended
      December 31, 2009 or 2008.





(2)
            Except
      for Mr. Whelan, the Company did not employ any other executive during the
      years ended December 31, 2009 and 2008, whose annual salary and non equity
      compensation for the years exceeded
  $100,000.





(3)
            During
      the years ended December 31, 2009 and 2008, the Company did not record any
      expense in its financial statements related to the issuance of stock
      options or equity compensation
awards.




Narrative
Disclosure to Summary Compensation Table




Employment
Agreements




There is
no written employment or similar agreement between the Company and Mr.
Whelan.




Mr.
Whelan is a founder of the Company and has served as the President, Chief
Executive Officer, and Chief Financial Officer since April 2000.  Mr.
Whelan also served as the Chairman of the Board of Directors from April 2000 to
July 2009, until such role was transferred to Richard
Staelin.   Following this date, Mr. Whelan serves as a member of
the Board of Directors.  Mr. Whelan was paid $150,000 for services
provided during the years ended December 31, 2009 and 2008.  Mr.
Whelan did not receive any other types of compensation, such as stock or option
awards, non-equity incentive plan compensation or other compensation for the
years ended December 31, 2009 and 2008.


38


Material
Terms of Option Grants and Grants of Restricted Stock




There
were no option grants or grants of restricted stock to Mr. Whelan during the
years ended December 31, 2009 and 2008.




Material
Terms of Non-Equity Incentive Awards




There
were no non-equity incentive awards granted to Mr. Whelan for the years ended
December 31, 2009 and 2008.




ADDITIONAL
COMPENSATION DISCLOSURE NARRATIVE




Retirement
Benefits




The
Company does not currently maintain or support a 401(k) or other defined
contribution pension plan for any of its employees.




Executive
Perquisites




The
Company did not provide executive perquisites to Mr. Whelan during the years
ended December 31, 2009 and 2008.




Post-Employment
Compensation




The
Company has not undertaken to provide any post-employment compensation or
post-employment benefits of any type to Mr. Whelan, or any other executive, as
of December 31, 2009.




The
Company does not have any contract, agreement, plan of arrangement with Mr.
Whelan that provides for payments to him at, following, or in connection with
the executive’s resignation, retirement or termination, a change in control if
the issuer, or a change in the executive’s responsibilities following a change
in control.


39




2009
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLE




The
following table summarizes the unexercised options, nonvested stock and equity
incentive planawards
outstanding and held by the Principal Executive Officer as of December 31,
2009:




OptionAwards
                
                
                StockAwardsName
                
                No. of Securities
                  Underlying
                  Unexercised
                  Options
                  (#)
                  Exercisable
                
                
                No. of Securities
                  Underlying
                  Unexercised
                  Options
                  (#)
                  Unexercisable
                
                
                Option
                  Exercise
                  Price
                  ($)
                
                
                Option
                  Expiration
                  Date
                
                
                No. of Shares
                  or Units
                  of Stock
                  That Have
                  Not Vested
                  (#)
                
                
                Market Value
                  of Shares or
                  Units of Stock
                  That Have Not
                  Vested
                  ($)Andrew
      J.  Whelan
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —







Notes:




(1)
              Mr. Whelan
      did not have any outstanding equity awards as of December 31,
      2009.


40




DIRECTOR
COMPENSATION




2009
DIRECTOR COMPENSATION TABLE




The
following table sets forth the cash and noncash compensation paid to the
Company's directors in respect of services provided during the year ended
December 31, 2009:




Name
                          
                          Fees Earned or
                            Paid in Cash
                            ($)
                          
                          Stock Awards
                            ($)
                          
                          Option Awards
                            ($)(1)
                          
                          Total
                            ($)Richard
      Staelin,
                          
                          
                          —
                          
                          —
                          
                          
                          —
                          
                          —Andrew
      J. Whelan
                          
                          
                          —
                          
                          —
                          
                          
                          —
                          
                          —Mary
      K. Whelan
                          
                          
                          —
                          
                          —
                          
                          
                          —
                          
                          —





(1)
              There
      were no fees earned or paid (whether in the form of cash, stock or option
      awards) to any of the directors during the year ended December 31,
      2009.   In July 2009, 20,000,000 shares of common stock
      were issued to Mr. Staelin and Ms. Whelan respectively for their services
      as Board of Directors during the calendar year ended December 31,
      2008.   The value of the shares issued was recorded as
      directors’ expenses for the year ended December 31, 2008 at $0.00225 per
      share, or $90,000 in total.





(2)
              There
      were no outstanding option awards held by directors as of
      December 31, 2009.




COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION




During
fiscal 2009, there is not a formal Compensation Committee.   All
Board of Directors participated in the material compensation
decision.  No interlocking relationships exist between any of these
members of the Board or any executive officer of the Company.


41


Item 12. Security Ownership
of Certain Beneficial Owners and Management and Related Stockholder
Matters.




Regulation
S-K Item 201d:  Securities authorized for issuance under equity
compensation plans.




Equity Compensation Plan InformationNumber ofsecuritiesremainingNumber of
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          available for futuresecurities to be
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          issuance underissued upon
                                                                          
                                                                          
                                                                          Weighted-average
                                                                          
                                                                          equityexercise of
                                                                          
                                                                          
                                                                          exercise price of
                                                                          
                                                                          compensationoutstanding
                                                                          
                                                                          
                                                                          outstanding
                                                                          
                                                                          plans (excludingoptions, warrants
                                                                          
                                                                          
                                                                          options, warrants
                                                                          
                                                                          securities reflectedand rights
                                                                          
                                                                          
                                                                          and rights
                                                                          
                                                                          in column (a))Plan category
                                                                          
                                                                          (a)
                                                                          
                                                                          
                                                                          (b)
                                                                          
                                                                          (c)Equity
      compensationplans
      approved bysecurity
      holders
                                                                          
                                                                          -
                                                                          
                                                                          $
                                                                          -
                                                                          
                                                                          -Equity
      compensation plans not approved by security holders
                                                                          
                                                                          10,000,000
                                                                          
                                                                          
                                                                          0.30
                                                                          
                                                                          4,115,000Total
                                                                          
                                                                          10,000,000
                                                                          
                                                                          $
                                                                          0.30
                                                                          
                                                                          4,115,000


42


Regulation
S-K Item 403a:  Security ownership of certain beneficial owners of
more than five percent (5%).




None





Regulation
S-K Item 403b:  Security ownership of Management.





(1) Title of class
                      
                      (2) Name of beneficial
                        owner
                      
                      (3) Amount
                        and nature
                        of beneficial
                        ownership
                      
                      
                      (4) Percent of
                        classCommon
                      
                      Richard
      Staelin
                      
                      
                      950,000
                      
                      
                      0.06
                      %Common
                      
                      Andrew
      J. Whelan
                      
                      
                      -
                      
                      
                      
                      -Common
                      
                      Mary
      K. Whelan
                      
                      
                      2,318,472
                      
                      
                      
                      0.16
                      %




Unless
otherwise indicated in the footnotes, the address for each principal shareholder
is in the care of BioElectronics Corporation, 4539 Metropolitan Court,
Frederick, Maryland 21704.  To the best of the Company’s knowledge,
none of the Management’s holdings may result in a future change in its
control.


43


Item 13. Certain
Relationships and Related Transactions, and Director
Independence.





Regulation
S-K Item 404:





On
January 1, 2005, the Company entered into an unsecured revolving convertible
promissory note agreement (“the Revolver”) with IBEX, LLC (“IBEX”) a related
party, for a maximum limit of $2,000,000, with interest at the Prime Rate plus
2%, 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 the Company’s
common stock. The Revolver is convertible at various conversion prices based on
the VWAP for the 10 trading days preceding the date of
conversion.  IBEX, LLC is a limited liability company, whose President
is the daughter of the President of the Company.





During
the year ended December 31, 2007, IBEX converted $910,000 of the Revolver’s
outstanding balance and received 26,000,000 shares of the Company’s common stock
at conversion prices ranging from $.02 to $.10 per share.





During
the year ended December 31, 2008, IBEX converted $722,400 of the Revolver’s
outstanding balance and received 57,000,000 shares of the Company’s common stock
at conversion prices ranging from less than $.01 to $.02 per
share.  At December 31, 2008, the balance of the Revolver was
$1,099,722.





During
the year ended December 31, 2009, IBEX converted $529,100 of the Revolver’s
outstanding balance and received 439,500,000 shares of the Company’s common
stock at conversion prices at less than $.01 per share.  At December
31, 2009, the balance of the Revolver was $1,287,954.





In
addition to the Revolver as described above, on August 1, 2009, the Company
entered into a convertible promissory note agreement with IBEX, for $519,920,
with simple interest at 8% per annum.  All accrued interest and
principal are due on or before August 31, 2011, whether by the payment of cash
or by conversion into shares of the Company’s common stock.  The
promissory note is convertible equal to the quotient of (i) a sum equal to the
entire outstanding principal and interest, divided by (ii) the conversion price
of $.019 per share.  According to the Security Agreement dated August
1, 2009, 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.




The
Company has entered into related party loans with various stockholders of the
Company. The loans are interest-bearing at rates consisting of prime plus 2.0%
(5.25% at December 31, 2009 and 7.00% at December 31, 2008) and stated rates at
8% with no stated maturity dates.  During the year ended December 31,
2009, the Company obtained an additional loan of $1,033,249 from the
shareholders and made payments of $893,000.  The amounts owed to the
stockholders other than IBEX as of December 31, 2009 and 2008 were $0 and
$498,757, respectively.




Additionally,
the Company 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 company's
line of products 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.    Revenues for the year ended
December 31, 2009 include $271,047 for sales and $63,496 for cost of goods sold
to eMarkets, a related party, and a balance due from such company at
December 31, 2009 of $165,297.




44




Regulation
S-K Item 407(a):





The
Company does not fulfill the requirements for this disclosure.





Item 14. Principal
Accounting Fees and Services.





The
following table represents aggregate fees billed to us during the years ended
December 31, 2009 and 2008 by Berenfeld, Spritzer Shechter & Sheer LLP,
our principal independent registered public accounting firm for the audit of our
financial statements for 2008, 2007 and 2006.





Fiscal Year Ended December 31:
                  
                  2009
                  
                  
                  2008Audit
      Fees
                  
                  $
                  29,800
                  
                  
                  $
                  —Audit-Related
      Fees
                  
                  
                  —
                  
                  
                  
                  —Tax
      Fees
                  
                  
                  —
                  
                  
                  
                  —All
      Other Fees
                  
                  
                  —
                  
                  
                  
                  —Total
                  
                  $
                  29,800
                  
                  
                  $
                  —





Audit
fees primarily include services for auditing our financial statements along with
reviews of our interim financial
information.     Berenfeld, Spritzer Shechter &
Sheer LLP’s work on these audits was performed by full time, regular employees
and partners of the firm.





Audit-related
fees include professional services rendered in connection with SEC registration
statements.    There were no audit related, tax or other
fees billed during the years ended December 31, 2009 and 2008.





All fees
described above were approved by our Audit Committee, and the Audit Committee
considers whether the provision of the services rendered in respect of those
fees is compatible with maintaining the auditor’s independence.


45




PART
IV


Item 15.
Exhibits.





5.1
            Securities
      as Compensation





5.2
            Recent
      Sales of Unregistered Securities





10.1
            Company’s
      Code of Business Conduct and Ethics





31.1
            Certification
      of Principal Executive Officer and Principal Financial
    Officer








99
            Financial
      Statements Period from April 10, 2000 (Inception) to December 31,
      2009





·
            Report
      of Independent Registered Public Accounting
Firm


·
            Balance
      Sheets


·
            Statements
      of Operations


·
            Statement
      of Changes in Stockholders’
Deficiency


·
            Statement
      of Cash Flows


·
            Notes
      to Financial Statements


46


SIGNATURES




Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned; thereunto duly authorized, in Frederick, Maryland, on
March 31, 2010.




BIOELECTRONICS
      CORPORATIONMarch
      31, 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 March 31, 2010.




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




47


Exhibits