SecProbe.io

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

       DIVISION OF
CORPORATION FINANCE
     Mail Stop 3030
        April 17, 2009
 Kevin R. Davidson Chief Executive Officer 2060 Centre Pointe Boulevard, Suite 7 Mendota Heights, Minnesota  55120
Re: BioDrain Medical, Inc.
Amendment No. 3 to Registrati on Statement on Form S-1
Filed April 6, 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.
Prospectus Summary, page 1

The Offering, page 1

1. Tell us how the numbers in the bullet poi nts account for the options and warrants
granted to Ms. Doerfert pursuant to her employment agreement.

Because we are a development stage company…, page 3

2. Either expand the caption to also highli ght the fact that your independent audit
firm has issued a going concern opinion, or relocate that disclosure under a
separately titled caption.

Kevin R. Davidson
BioDrain Medical, Inc.
April 17, 2009 Page 2  Management’s Discussion and Analysis, page 19

3. We see that you obtained FDA final clea rance for your product on April 1, 2009.
Please revise your disclosure to stat e when you expect to begin generating
revenues from the sale of your product.

Critical Accounting Policies and Estimates, page 20
 4. We reference prior comment 9.  Please revise the discussi on of stock-based
compensation to describe how you determin ed each of the individual assumptions
used in the Black-Scholes-Merton option- pricing model.  In addition, you should
discuss how you determine measurement dates for non-employee stock transactions and the judgments involved in assessing probability when accounting
for equity instruments with performance and service conditions.

Results of Operations, page 22

5. We see that you discuss “general and administrative expense”, “operations
expense,” and “sales and marketing expe nse,” which do not reconcile to the line
items on the statement of operations of “operating expenses” and “product
development expenses.” Please revise to  reconcile your MD&A discussion with
the line items presented on th e statement of operations.
 General and Administrati ve expense, page 22

 6. We reference the disclosure that th e increase in stock based compensation
expense resulted from using the “grant date  fair value method.”  Clarify if this
method is different from that used in prior years.  If not, please revise to provide a
substantive discussion of the underlying r easons for increased expense for stock-
based compensation, such as a descri ption of the underlying arrangements
responsible for the increased expense in 2008.
 7. Please reference the response to prior co mment 10.   To further assist us in
understanding the accounting applied in the reduction of accrued salaries, please
respond to the following:

• Please tell us how much of the $346,000 was accrued as of December 31,
2006.  That is, clarify for us the dollar amount accrued in prior years that was
later credited to expense in 2007.
• In the third bullet you indicate that you accounted for the reduction of accrued
shareholder salaries as an early extin guishment of debt under APB 26.  Tell us
why you believe, as stated in your response, that the forgiveness of amounts due to your shareholders for services previously rendered and accrued for is

Kevin R. Davidson
BioDrain Medical, Inc.
April 17, 2009 Page 3
not a capital contribution to your business under footnote 1 of APB 26.  That is, please explain the basis in GAAP for your view that the shareholders did not make a contribution to capital upon agreeing to waive the accrued amounts due them.
• In the fourth bullet you indi cate that the equity instru ments to be issued are
compensation for past services.  Accord ingly, tell us why issuance of those
instruments is linked to future financ ing, including why issuance of those
instruments is dependent on your liquidit y.  Also, tell us the period when the
underlying services were rendered.
• We refer to the fourth and sixth bulle ts.  You indicate that the compensation
expense for the equity instruments is being amortized over the derived service period.  Please tell us that period and tell us how you determined that service period under the guidance from SFAS 123(R).
• As a related matter, if as indicated in the fourth bullet, the equity instruments are for past services, please tell us why the sixth bullet indicates that the value
assigned to the equity instruments is be ing amortized over some future period.
That is, if the equity instruments are for past services, please tell us why the
full fair value was not expens ed at the date of the agreements.  In that regard,
as previously requested please fully e xplain to us in a written response how
the accounting for these instruments is consistent with SFAS 123(R).
 8. We refer to your response to prior comment 10 and to the disclosure about the
accrued salary reduction on pages 27 and F-12.

• Please disclose, as indicated in your re sponse, that accrued  payroll after the
reduction recorded in November 2007 was $115,000 and disclose the financial
caption statement where the accrued amount is presented.
• Please disclose, as indicated in the four th bullet of your resp onse, that the cash
amounts and equity instruments to be issu ed are for past services rendered by
individuals and disclose th e periods when the services were rendered.  Please
clarify, as indicated in y our response, that the cash and equity payments are
not compensation for obtaining the future funding on which payment is contingent.
• As your response indicates that the equ ity instruments were earned for prior
services, please disclose why issuance of those instruments is contingent on future funding.
• Add disclosure that explains how the equity instruments are being accounted
for and that provides sufficient cont ext to clarify how the accounting is
appropriate under SFAS 123(R).

Kevin R. Davidson
BioDrain Medical, Inc.
April 17, 2009 Page 4  Liquidity and Capital Resources, page 23

 9. We note your response to prior comment 13:

• We reissue the first bullet given the c ontinued inconsistenc ies regarding your
outstanding debt obligations on pages 23, 26 and 27.  As one example, you
disclose on page 23 that you owe Andcor  $50,000 but disclose on page 26 that
the amount of such debt is $10,000; and
• Disclose the nature of the “other operating expenses” mentioned in the table
on page 23.  Also, your response implies that you believe such expenses are
“insignificant.”  If so, tell us how you reached that conclusion, given that such
expenses comprise almost half of your known capital requirements.

Stock and Stock Options, page 31

 10. We note the disclosure on page 32 regardi ng the vesting of options granted to Mr.
Dauwalter.  Given the terms of such vesting as noted in exhibit 10.38 and your
disclosures regarding FDA cl earance on April 1, 2009, it a ppears that a portion of
those options have already veste d.  Please revise or advise.
 Description of Business, page 34

Overview, page 34

11. We note your response to prior comment 4.  If you will register a class of your
securities under Section 12 of the Exchange Act concurrently with the
effectiveness of this registration statement, then please revise to state so directly.
The third paragraph under this caption im plies that you will be subject to the
reporting requirements of the Exchange Act solely because this registration
statement will become effective.
 12. We reissue prior comment 15.  Contrary to  your response, you have not disclosed
on page 32 the exercise prices with respect to the June 16 and August 11, 2008
transactions.

Industry and Market Analysis, page 35

13. Regarding your response to prior comment 18:

• Please furnish the staff with the Frost & Sullivan research report that contains
the $120 million estimate that you reference in the penultimate paragraph on
page 35; and

Kevin R. Davidson
BioDrain Medical, Inc.
April 17, 2009 Page 5
• We reissue prior comment 18 with resp ect to the study cited in the first
paragraph on page 48 and Outpatient Surg ery Magazine article cite in the first
paragraph on page 50.
 14. Expand the table on page 38 to include the comparative information for the
Cardinal disposal system.

Corporate Strategy, page 43

 15. Please clarify the meaning of the pe nultimate bullet point on page 44.  The
meaning of that sentence is unclear.
 Drainage Systems, page 45

 16. Please revise the first paragraph on pa ge 46.  It appears words are missing.
 Handling Costs, page 47

 17. We note your reliance on the research articl e referenced in the last paragraph.  We
also note that the article covers a total of 31 exposures, the majority of which are
percutaneous exposures from needle sticks  or cuts from sharp objects which are
more severe and more costly for hospitals to  address.  We also note that the article
concludes that the overall mean cost was $1,687 per exposure, including the more
serious percutaneous exposures.  Please cl arify this for investors and revise your
cost estimate accordingly for non-percutaneous exposures.
 Engineering and Manufacturing, page 50

 18. Please reconcile your response to prior co mment 23 with your disclosure in this
section, where you indicate that you “have not yet entered into agreements with
any suppliers for there products.”  If you have entered “an exclusive licensing
agreement with Oculus Innovative Resear ch,” as mentioned in your response,
ensure that your disclosu re describes the material terms of that agreement
including, among other things, the du ration and any minimum purchase
requirements.
 Employees, page 57

   19. Reconcile your disclosure here with your disclosure on page 8.  It appears your
disclosure here regarding the number of your employees does not include Mr.
Shuler.

Kevin R. Davidson
BioDrain Medical, Inc.
April 17, 2009 Page 6  Directors, Executive Officers, Promotors and Control Persons, page 58

 20. Please tell us why you deleted information regarding Mr. Gerald Rice from this
section.  We note that according to the signatures page, he is a member of your
board of directors.
 21. Given your disclosure on page 8, please disclose the information required by Item
401 of Regulation S-K with respect to Mr. Alan Shuler.  Please also file as an
exhibit your employment ag reement with Mr. Shuler.

Summary Compensation Table, page 62

 22. We note your response to prior comment 31:

• Your disclosure in the notes to the summary compensation table continues to
be inconsistent with your disclosure on pages 64-65 and response to the third
bullet of prior comment 34 regarding the amounts Messrs. Davidson and Rice
were entitled to receive pursuant to  their employment agreements.  For
example, your response to prior comme nt 34 states that Mr. Davidson was
entitled to receive $185,000 under his em ployment agreement; however, your
disclosure here states he was entit led to $160,000 and your disclosure on page
64 states he was entitled to receiv e $170,000.  Similarly, you disclose here
that in 2008, Mr. Rice was entitled to receive $114,250 but disclose on page 64 that he was entitled to r eceive $118,500.  Please reconcile;
• As a result of the inconsistencies noted above, the numbers in the notes
following this table are difficult to foll ow.  For example, you state that Mr.
Davidson was entitled to receive $160,000 in 2008.  You then state that he was paid $126,650, including a bonus, a nd waived payment of $58,250.  The
amounts he was paid and waived do not appear to add to $160,000.  Similarly,
you state that Mr. Davidson was en titled to receive $150,000 in 2007.  You
then state that he was paid $59,375 and waived $70,000 in compensation for
2007 and prior years.  As a result, it appears the amounts he was paid and waived in 2007 do not add to $150,000.   Please reconcile; and
• Disclose the reasons for awardi ng Mr. Davidson a $25,000 bonus in 2008,
given your disclosures regarding shortage of  cash and liquidity issues.

Outstanding Equity Awards at Fiscal Year End, page 63

23. Your response to prior comment 78 indicates that you will issue the 80,000 and
160,000 options to Messrs. Davidson and Rice, respectively, when you have
raised an additional $3 million.  Your tabl e here, including note 1, indicates that
you have issued those options and that ve sting, rather than issuance, of those
options is contingent on raising an additional $3 million.  Please reconcile.

Kevin R. Davidson
BioDrain Medical, Inc.
April 17, 2009 Page 7  Employment Agreements . . ., page 64

 24. Refer to the third full paragraph on page  67 regarding the vesting of options
granted to Mr. Ruwe.  Given your disclosu re that you have requested and received
FDA clearance, it appears that a portion of those options have vested and are now
exercisable.  If so, please revise to disclose that fa ct.  Also ensure that your
disclosure in the tables appearing on pages 71-73 and 77 account for any changes
in the number of vested and exer cisable options held by Mr. Ruwe.
 25. Discuss the material terms of Ms. Doerfert’s employment agreement.
 Certain Relationships and Re lated Transactions, page 70

 26. Regarding your reference to a verbal ag reement in response 32, please refer to
Regulation S-K Compliance and Disclo sure Interpretation Question 146.04
available on our web site at http://www.sec.gov/divisions /corpfin/guidance/regs-
kinterp.htm .
 Selling Security Holders, page 70

  27. We note your response to prior comment 38.  However, the first bullet on page 71
continues to refer to shares underlying  a “convertible debenture” while notes 11-
17 and 24 refer to shares underlying a “conve rtible promissory note.”  You also
refer on page 79 to outstanding convertible notes.  Please reconcile.
 Security Ownership of Certain Benefi cial Owners and Management, page 76

28. Please disclose your response to prior co mment 39.  Also revise your disclosure
on page 34 under the caption “Private Placement Financing” and on page 79
where you state that the warrants “are immediately exercisable.”

Common Stock, page 78

29. Please provide current disclosure.  We note the references in the first paragraph to
the number of shares outstanding and number  of shareholders as of November 1,
2008.

Warrants and Convertible Notes, page 79
 30. Regarding your response to prior comment 41:

• Your response to prior comment 61 in our letter dated January 29, 2009 stated
that “the convertible note financing that was closed in July 2007 was
considered a bridge loan to allow su fficient time to arrange a subsequent

Kevin R. Davidson
BioDrain Medical, Inc.
April 17, 2009 Page 8
financing which was finalized in Octobe r 2008.”  If so, please disclose that
fact.  Your current disclosure is un clear regarding how the convertible note
financing relates to the October 2008 financing; and
• Disclose the identities of the seven br idge loan holders mentioned in your
response to prior comment 41.  That co mment requested disclosure of those
identities, not simply identifyi ng them in your response letter.
 Legal Matters and Interests of Named Experts, page 85

 31. We note your response to prior comment 42.  Given your response to prior
comment 41 regarding the identities of th e bridge loan holders , it is unclear how
you co