SecProbe.io

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

       DIVISION OF
CORPORATION FINANCE
     Mail Stop 3030
        February 24, 2009
 Kevin R. Davidson Chief Executive Officer 2060 Centre Pointe Boulevard, Suite 7 Mendota Heights, Minnesota  55120
Re: BioDrain Medical, Inc.
Amendment No. 2 to Registrati on Statement on Form S-1
Filed February 12, 2009
  File No. 333-155299

Dear Mr. Davidson:

We have reviewed your filing and have the following comments.  Where
indicated, we think you should re vise your document in response to these comments.  If
you disagree, we will consider your explanation as to why our comment is inapplicable or
a revision is unnecessary.  Please be as deta iled as necessary in your explanation.  In
some of our comments, we may ask you to provi de us with information so we may better
understand your disclosure.  After reviewing th is information, we may raise additional
comments.
We welcome any questions you may have  about our comments or any other
aspect of our review.  Feel fr ee to call us at the telephone numbe rs listed at the end of this
letter.
Fee Table

1. We will continue to evaluate your re sponse to prior comment one after you
respond to the comments in this letter.
 2. Please tell us how your fee table account s for the disclosure you added in
response to prior comment 3.  We note, for example, the multiple references to
“N/A” in the column captioned “Proposed maximum offering price per share.”

Prospectus Cover Page

3. We will continue to evaluate your respons e to prior comment 2 after the warrants
underlying the convertible notes have been issued.

Kevin R. Davidson
BioDrain Medical, Inc.
February 24, 2009 Page 2   Prospectus Summary, page 1

4. Please disclose the second sentence of  your response to prior comment 7.

Risk Factors, page 3
 Because we are a development stage company . . ., page 3

   5. Please tell us the reasons for the deletions to this risk factor.  Does management
no longer believe the factors described in th is risk factor rais e substantial doubt
about your ability to continue as a going concern?  If so, explain why and what
circumstances have changed, particularly  given your stage of development and
lack of revenues.
 If we do not succeed . . ., page 7

 6. We note your response to prior comment 6:

• Please revise the last paragraph to clarify how FDA approval may eliminate
your “prospectus”;
• Clarify how the restructuring changes pose a risk to potential investors in this
offering.  In this regard, please reconc ile your response and disclosure on page
54 regarding whether investors will ow n a public company shell after the
restructuring changes are implemented;
• Expand to disclose whether the “Investo rs” or your affiliates are engaged in
any discussions or negotiations with  respect to a reverse merger; and
• Clarify the meaning of the last senten ce in this risk factor.  Your other
disclosure indicates that your assets and operations will be transferred to
Privco at the time of the restructuring.

We are dependent for our success . . ., page 8

 7. We note the disclosure that you have entered into employment agreements with
all members of your senior management t eam, including Ms. Doerfert.  Please file
your agreement with her as an exhibit.
 Market Price of and Dividends . . ., page 16

 8. We reissue prior comment 10, given that it appears your disclosure here and page
28 continue to disclose different  numbers of outstanding warrants.

Kevin R. Davidson
BioDrain Medical, Inc.
February 24, 2009 Page 3  Critical Accounting Policies and Estimates, page 21

9. We re-issue prior comment 12.  Please re vise to provide a discussion of your
critical accounting policies and estimates.   This discussion should present your
analysis of the uncertaintie s involved in applying an accounting principle at a
given time and the variability that is  reasonably likely to result from its
application over time. You should addr ess specifically why your accounting
estimates and assumptions bear the ri sk of change.  Refer to FR-72.

In that regard, it would appear that  accounting for stock-based compensation
under SFAS 123(R), EITF 96-18 and related guidance is particularly complex and
subjective.  For instance: (1) determination of fair  value generally involves
subjective assumptions, such as those used for Black-Scholes purposes, (2)
determination of the measurement date is complex, especially for non-employee transactions and (3) the acc ounting for equity instrume nts with performance and
service conditions involves subjectiv e judgments about probability.
 While we see the changes in response to the prior comment, the revisions do not address relevant accounting complexities and do provide the required disclosure.

Nine Months Ended September 30, 2008 and 2007, page 21

General and Administrative, page 22

10. We refer to your response to prior co mment 15 from our letter dated January 29,
2009 and prior comment 27 from our letter  dated December 10, 2008.   The basis
in GAAP applied in accounting for the reduc tion of accrued salaries continues to
be unclear and we have continuing con cerns that the accounting may not comply
with GAAP.  Please respond to the following:
• In a written response tell us the da te the accrued salary reduction was
recorded.  Also provide us a schedul e that shows the amounts accrued for each
individual before and after the $346,000 adjustment.
• In some instances, such as on page 22, you indicate that th e accrued salaries
were “deferred.”  In other instances, you indicate that th e accrued salaries
were “waived.”  Please tell us and clarif y whether the salaries were deferred
or waived.
• It appears that the accrued salaries were  for services rendered by your officers
who also appear to be shareholders.  Accordingly, to the extent accrued
salaries were waived, it is  not clear why there is not  a contribution to capital
from these individuals.  As well, it is not clear how the accounting considers

Kevin R. Davidson
BioDrain Medical, Inc.
February 24, 2009 Page 4
the guidance from SAB Topic 1.B.1, which requires that the financial statements include all cost s of doing business.  Please advise in a complete
written response.  Also, cite the basis in GAAP on which you have relied.
• Tell us whether the cash bonuses and equity instruments to be paid upon
raising $3 million are intended to be compensation for raising the $3 million
or payment for the services rendered pr ior to the reduction of the accrual.
• Tell us why the accrual was not adjusted to the fair value of the agreed upon
future cash and equity payments in the 2007 financial statements.  Tell us why
the accounting is contingent on the futu re funding.  Provide us a complete
written response that explai ns your view and that expl ains how that view is
consistent with GAAP.  Cite the literature on which you rely.
• Tell us how your accounting for the con tingent stock options considers the
guidance from paragraphs 47, 48 and Appendix A of SFAS 123(R).  Your
written response should fully explain how  you applied the guidance applicable
to stock options with a performance condition.
11. As a related matter, while we see the di sclosure about the accounting applied in
the reversal of accrued salaries under Ge neral and Administrative (page 22), the
paragraph does not appear to make understandable accounting disclosure.  We may have further comment on your disclo sure upon resolution of the related
accounting issue.
12. We note your response to prior comment 13.  If the full salary rate has been
accrued as an expense and not actually paid  in a timely manner or at all, as
suggested by your response, then revi se your disclosure to eliminate any
implication that you “paid” salaries.

Liquidity and Capital Resources, page 22

13. Regarding your response to prior comment 16:

• We reissue the first bullet, given the continued inconsistencies on pages 23, 25
and 26 regarding outstanding debt payments you are obligated to make;
• Expand your response to the third bulle t to disclose th e total amount of
accrued payroll expense you have accrued;
• Expand your response to the fourth bullet to clarify whether you have
sufficient cash to satisfy a formal payment demand.  If you do not, disclose what rights the holders of debt have; fo r example, may they seize your assets?;
and
• We reissue the eighth bullet, which requested disclosure of the nature of the
“other operating expenses” noted on page 23.

Kevin R. Davidson
BioDrain Medical, Inc.
February 24, 2009 Page 5  Stock Options and Warrants, page 27

   14. We note your response to prior comment 47 and the second paragraph below the
table on page 29.  Please explain th e purpose and significance of the 1,920,000
determination mentioned.  Also, given your  disclosure in this section, including
the table on page 30, explain why the reverse splits only impacted the securities held by your founders.

Description of Business, page 34

15. We reissue prior comment 21.  We note, for example, the June 16 and August 11,
2008 transactions mentioned on page 31 do not re fer to an exercise price.

Overview, page 34

16. Please reconcile your response to prior comment 22 with your disclosure here
regarding the identity  of your founders.

17. Revise the first paragraph to disclose the products for which you have obtained
patent rights.
 Industry and Market Analysis, page 35

18. We note your response to prior comment 5.  However, your disclosure in this
section and on page 48 continues to cite to  data from third-part y sources.  Please
provide us copies of that data, marki ng the relevant sec tions to support the
disclosure.
 The Fluid Management System (“FMS”), page 38

19. Please reconcile your reference to your “proprietary” cleaning fluid in the fourth bullet on page 40 and on page 53 with your response to prior comment 28.

Patents and Intellectual Properties, page 41

20. Please expand the second paragraph on page  43 to disclose the first sentence of
your response to prior comment 28.

21. Please reconcile your disclosure added to the first paragraph of this section on
page 41 with your disclosure on page 38, which notes that the product made by
MD Technologies also has unlimited fluid capacity.

Kevin R. Davidson
BioDrain Medical, Inc.
February 24, 2009 Page 6  Current Competition, Technology, and Costs, page 46

  22. Please tell us where you have disclosed the third and last sentences in your
response to prior comment 33.
 Engineering and Manufacturing, page 51

 23. We note the disclosure that  your disposable cleaning kit will be sourced through
alternative suppliers.  Please reconcile th at disclosure with your disclosure on
page 43, which indicates that you will ha ve only one supplier of that product.
 Government Regulation, page 51

24. Please provide current disclosure.  We not e, for example, the disclosures on page
52 that final documentation of testing results is scheduled for January 31, 2009
and that you expect successful testing.  If previously disclosed plans have
changed, disclose the material r easons for the change or delay.
 25. We note your response to prior comment 37.  Your disclosure on pages 7 and 54
continue to state that you entered into the restructuring agreement in June 2007;
however, exhibit 10.42 states that the date  of such agreement was June 9, 2008.
Therefore, we reissue prior comment 37.
  26. We note your response to prior comment 38:

• It continues to appear that  investors who acquire the sh ares to be sold pursuant
to this registration statement will not be able to cause the restructuring
changes mentioned in your disclosure.  Pl ease revise to disclose this fact, if
true;
• Your first paragraph continues to state that the “Investors” will maintain their
shares of your common stock.  Clarify how this will occur, as previously
requested, given that those shares are registered here for resale;
• Clarify how the “Investors” will have  the same percentage ownership of
Privco that they had in the company before the transaction, given that the
“Investors” shares are registered here for resale.  This arrangement appears to
result in the “Investors” ow ning indirectly a higher percentage of Privco than
they would appear to be entitled, give n that the “Investors” shares may be
sold.  As such, it also appears that the percentage owne rship that potential
purchasers of your securities may have will not be based on the number of
shares they actually hold;
• Disclose your response to the third bullet;
• We reissue the fourth and sixth bullets  of prior comment 38, which requested
expanded disclosure regarding the identity of the “Company shareholders”

Kevin R. Davidson
BioDrain Medical, Inc.
February 24, 2009 Page 7
and whether a reverse merger or si milar transaction involving you was
currently being negotiated or considered;
• It appears from your response to the fifth bullet that you are relying on no
authority for your conclusion that share holder approval is not required for the
asset transfer to Privco.  Please confir m that understanding.  Also tell us how
you concluded that Privco will be a “wholly-owned” subsidiary, given that the
“Founders” will also own Privco shares; and
• If only the “[PPM] investors” will receive  the proceeds of a sale or liquidation
of Privco, as noted in your response to th e last bullet, then disclose that fact,
and highlight that risk to  potential investors.
 27. We note your responses to prior comments 40 and 41:

• You state that the restructuring agreem ent was not part of the subscription
agreement for your recent financi ng and were only a “unilateral
acknowledgement” by the “Founders.” You th en state that no investor in the
financing executed the agreement and that the “PPM” was modified.  Please tell us how investors in that financing agreed to the terms of the restructuring.  Given your disclosure that  the restructuring was designed to induce these
investors, it appears that they would have actually ag reed to the terms of the
restructuring.  Also tell us why if the “PPM” was modified per your response,
those modifications are not reflected in exhibit 10.31.
• Given your deletions in response to pr ior comment 40, it is unclear how the
“June 2007” restructuring agreement is  “in connection w ith” your October
2008 financing.  Please revise to cl arify how those agreements relate.

Directors, Executive Officers, . . ., page 59

28. We note your response to prior comment 42.  Given your disclosure on page 40
regarding the qualifications and experience  of the FDA consultants and advisors
you have retained, it is unclear why you should not provide di sclosure required by
Regulation S-K Item 401 as to them .  See Item 401(c) and Rule 408.

29. Given your disclosure on page 60, please re vise to include Ms. Doerfert in your
table here.

Medical Advisory Board, page 61

30. We reissue the third bullet of prior co mment 43, because it is unclear where you
provided the disclosure requested by that bullet.

Summary Compensation Table, page 63

31. We note your response to prior comment 44:

Kevin R. Davidson
BioDrain Medical, Inc.
February 24, 2009 Page 8
• Please reconcile your disclosures in the notes to the summary compensation
table and on pages 64 and 65 regard ing the amounts to which Messrs.
Davidson and Rice were entitled to receive pursuant to their employment
agreements and whether they have or ha ve not received options in satisfaction
of unpaid salaries.  Your table on page  29 also indicates that such options
have already been issued; and
• Clarify how the amounts of salary for 2008 that were unpaid will be
addressed; for example, did Messrs. Rice and Davidson agree to waive such
amounts?;

Certain Relationships and Re lated Transactions, page 70

32. We note your response to prior comment 48.  Please file as an exhibit the
agreement related to the deferral of consulting fees owed to Mr. Morawetz.