For
the quarterly period ended
|
September
30, 2009
|
Commission File Number: Registration Statement No. 333-155299
|
BioDrain
Medical, Inc.
|
Minnesota
|
33-1007393
|
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification
No.)
|
2060
Centre Pointe Blvd., Suite 7,
|
Mendota
Heights, MN 55120
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
651-389-4800
|
(Registrant’s
telephone number, including area
code)
|
(Former
name, former address and former fiscal year, if changed since last
report)
|
Page No.
|
|
PART
I. FINANCIAL INFORMATION
|
|
Item
1. Condensed Financial Statements
|
3
|
Condensed
Balance Sheets September 30, 2009 and December 31, 2008
|
3
|
Condensed
Statements of Operations for three- and nine-month periods
ended
|
|
September
30, 2009 and September 30, 2008
|
4
|
Condensed
Statements of Cash Flows for nine-month periods ended September 30,
2009
|
|
and
September 30, 2008
|
6
|
Notes
to Condensed Financial Statements
|
7
|
Item 2. Management’s
Discussion and Analysis of Financial Condition and
|
16
|
Results
of Operations
|
|
Item
3. Quantitative and Qualitative Disclosures About Market
Risk
|
23
|
Item
4T. Controls and Procedures
|
23
|
PART
II. OTHER INFORMATION
|
|
Item
1. Legal Proceedings
|
23
|
Item
1A. Risk Factors
|
23
|
Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds
|
23
|
Item
3. Defaults Upon Senior Securities
|
24
|
Item
4. Submission of Matters to a Vote of Security
Holders
|
24
|
Item
5. Other Information
|
24
|
Item
6. Exhibits
|
24
|
Signatures
|
25
|
Exhibit
Index
|
25
|
EX-31.1
|
|
EX-32.1
|
September
30,
|
December
31,
|
|||||||
2009
|
2008
|
|||||||
|
(Unaudited)
|
|||||||
ASSETS
|
||||||||
Current
Assets:
|
||||||||
Cash
|
$ | 68,197 | $ | 463,838 | ||||
Accounts
receivable
|
15,737 | - | ||||||
Prepaid
expense and other assets
|
10,869 | 7,974 | ||||||
Restricted
cash in escrow (See Note 4)
|
163,333 | 163,333 | ||||||
Total
Current Assets
|
258,136 | 635,145 | ||||||
Fixed
assets, net
|
9,867 | 11,689 | ||||||
Intangibles,
net
|
141,532 | 142,145 | ||||||
Total
Assets
|
$ | 409,535 | $ | 788,979 | ||||
LIABILITIES AND SHAREHOLDERS'
DEFICIT
|
||||||||
Current
Liabilities:
|
||||||||
Current
portion of long term debt (See Note 8)
|
$ | 17,620 | $ | 17,620 | ||||
Current
portion of convertible debt (See Note 8)
|
170,000 | 170,000 | ||||||
Accounts
payable
|
686,066 | 497,150 | ||||||
Shares
due investors under registration payment arrangement
|
355,124 | - | ||||||
Accrued
expenses
|
296,267 | 305,248 | ||||||
Convertible
debenture (See Note 7)
|
10,000 | 10,000 | ||||||
Total
Current Liabilites
|
1,535,077 | 1,000,018 | ||||||
Long
term debt and convertible debt, net of discounts
|
||||||||
of
$19,619 and $26,157 (See Note 8)
|
94,821 | 98,406 | ||||||
Liability
for equity-linked financial instruments (See Note 10)
|
1,059,980 | - | ||||||
Stockholders
Deficit:
|
||||||||
Common
stock, $.01 par value, 40,000,000 authorized, 10,353,651 and 8,130,841
outstanding
|
103,536 | 81,308 | ||||||
Additional
paid-in capital
|
3,268,699 | 2,753,039 | ||||||
Deficit
accumulated during development stage
|
(5,652,578 | ) | (3,143,792 | ) | ||||
Total
Shareholder' Deficit
|
(2,280,343 | ) | (309,445 | ) | ||||
Total
Liabilities and Shareholders' Deficit
|
$ | 409,535 | $ | 788,979 |
Period
From
|
||||||||||||||||||||
April
23, 2002
|
||||||||||||||||||||
(Inception)
|
||||||||||||||||||||
Three
Months Ended September 30,
|
Nine Months
Ended September 30,
|
To
September 30,
|
||||||||||||||||||
2009
|
2008
|
2009
|
2008
|
2009
|
||||||||||||||||
Revenue
|
$ | - | $ | - | $ | 15,737 | $ | - | $ | 15,737 | ||||||||||
Cost
of goods sold
|
- | - | 7,450 | 7,450 | ||||||||||||||||
Gross
margin
|
- | - | 8,287 | - | 8,287 | |||||||||||||||
General
and administrative expense
|
521,532 | 435,941 | 1,393,072 | 845,100 | 3,823,213 | |||||||||||||||
Operations
expense
|
156,523 | - | 351,449 | 91,449 | 805,323 | |||||||||||||||
Sales
and marketing expense
|
136,220 | 7,460 | 344,723 | 7,670 | 393,798 | |||||||||||||||
Interest
expense
|
24,689 | 4,134 | 64,009 | 11,135 | 274,711 | |||||||||||||||
Loss
(gain) on valuation of equity-linked
|
||||||||||||||||||||
financial
instruments
|
(65,949 | ) | - | 370,474 | - | 363,820 | ||||||||||||||
Total
expense
|
773,015 | 447,535 | 2,523,727 | 955,354 | 5,660,865 | |||||||||||||||
Net loss available to
common
shareholders
|
$ | (773,015 | ) | $ | (447,535 | ) | $ | (2,515,440 | ) | $ | (955,354 | ) | $ | (5,652,578 | ) | |||||
Loss
per common share
|
||||||||||||||||||||
basic
and diluted
|
$ | (0.08 | ) | $ | (0.08 | ) | $ | (0.28 | ) | $ | (0.35 | ) | $ | (2.77 | ) | |||||
Weighted
average shares used in computation, basic and diluted
|
9,634,828 | 5,582,437 | 8,903,119 | 2,758,557 | 2,041,540 |
Shares
|
Amount
|
Paid
in Capital
|
Deficit
|
Total
|
||||||||||||||||
Issuance
of common stock 9/1/02, $.0167 (1)
|
598,549 | $ | 5,985 | $ | 4,015 | $ | - | $ | 10,000 | |||||||||||
- | ||||||||||||||||||||
Issuance
of common 10/23/02, $1.67/share
|
2,993 | 30 | 4,970 | 5,000 | ||||||||||||||||
Net
loss
|
(51,057 | ) | (51,057 | ) | ||||||||||||||||
Balance
12/31/02
|
601,542 | $ | 6,015 | $ | 8,985 | $ | (51,057 | ) | $ | (36,057 | ) | |||||||||
Issuance
of common 2/12/03, $.0167 (2)
|
23,942 | 239 | 161 | 400 | ||||||||||||||||
Issuance
o common 6/11&12,$1.67 (3)
|
21,548 | 216 | 34,784 | 35,000 | ||||||||||||||||
Net
Loss
|
(90,461 | ) | (90,461 | ) | ||||||||||||||||
Balance
12/31/03
|
647,032 | $ | 6,470 | $ | 43,930 | $ | (141,518 | ) | $ | (91,118 | ) | |||||||||
Issuance
of common 5/25/04, $.0167 (4)
|
6,567 | 66 | 44 | 110 | ||||||||||||||||
Net
Loss
|
(90,353 | ) | (90,353 | ) | ||||||||||||||||
Balance
12/31/04
|
653,599 | $ | 6,536 | $ | 43,974 | $ | (231,871 | ) | $ | (181,361 | ) | |||||||||
Issuance
of common 12/14/05, $.0167 (5)
|
14,964 | 150 | 100 | 250 | ||||||||||||||||
Vested
stock options and warrants
|
2,793 | 2,793 | ||||||||||||||||||
Net
Loss
|
(123,852 | ) | (123,852 | ) | ||||||||||||||||
Balance
12/31/05
|
668,563 | $ | 6,686 | $ | 46,867 | $ | (355,723 | ) | $ | (302,170 | ) | |||||||||
Issuance
of common 5/16 & 8/8, $.0167 (6)
|
86,869 | 869 | 582 | 1,451 | ||||||||||||||||
Issuance
of common 10/19 & 23, $.0167 (7)
|
38,906 | 389 | 261 | 650 | ||||||||||||||||
Issuance
of common 12/01, $1.67 (8)
|
28,739 | 287 | 44,523 | 44,810 | ||||||||||||||||
Vested
stock options and warrants
|
13,644 | 13,644 | ||||||||||||||||||
Net
Loss
|
(273,026 | ) | (273,026 | ) | ||||||||||||||||
Balance
12/31/06
|
823,077 | $ | 8,231 | $ | 105,877 | $ | (628,749 | ) | $ | (514,641 | ) | |||||||||
Issuance
of common 1/30/07 @ 1.67 (9)
|
599 | 6 | 994 | 1,000 | ||||||||||||||||
Value
of equity instruments issued with debt
|
132,938 | 132,938 | ||||||||||||||||||
Capital
contributions resulting from waivers of debt
|
346,714 | 346,714 | ||||||||||||||||||
Vested
stock options and warrants
|
73,907 | 73,907 | ||||||||||||||||||
Net
loss
|
(752,415 | ) | (752,415 | ) | ||||||||||||||||
Balance
12/31/07
|
823,676 | $ | 8,237 | $ | 660,430 | $ | (1,381,164 | ) | $ | (712,497 | ) | |||||||||
Issuance
of common 6/11 to 9/30, $.35 (10)
|
4,552,862 | 45,528 | 1,547,974 | 1,593,502 | ||||||||||||||||
Shares
issued to finders, agents
|
2,012,690 | 20,127 | (20,127 | ) | - | |||||||||||||||
Shares
issued to pay direct legal fees
|
285,714 | 2,857 | (2,857 | ) | ||||||||||||||||
Issuance
of common due to antidilution provisions
|
205,899 | 2,059 | (2,059 | ) | - | |||||||||||||||
Shares
issued to pay investor relations
|
||||||||||||||||||||
services 6/23/08,
$.35
|
250,000 | 2,500 | 85,000 | 87,500 | ||||||||||||||||
Vested
stock options and warrants
|
354,994 | 354,994 | ||||||||||||||||||
Capital
contributions resulting from waivers of debt
|
129,684 | 129,684 | ||||||||||||||||||
Net
loss
|
(1,762,628 | ) | (1,762,628 | ) | ||||||||||||||||
Balance
12/31/08
|
8,130,841 | $ | 81,308 | $ | 2,753,039 | $ | (3,143,792 | ) | $ | (309,445 | ) | |||||||||
Cumulative
effect of adoption of EITF 07-5
|
(486,564 | ) | 6,654 | (479,910 | ) | |||||||||||||||
Vested
stock options and warrants
|
100,545 | 100,545 | ||||||||||||||||||
Shares
issued 3/20/09 to pay for fund raising
|
125,000 | 1,250 | (1,250 | ) | - | |||||||||||||||
Shares
issued under PMM in April 2009, $.50
|
700,000 | 7,000 | 343,000 | 350,000 | ||||||||||||||||
Shares
issued under PPM in May 2009, $.50
|
220,000 | 2,200 | 107,800 | 110,000 | ||||||||||||||||
Shares
issued under PPM in June 2009, $.50
|
50,000 | 500 | 24,500 | 25,000 | ||||||||||||||||
Shares
issued under PPM in August 2009, $.50
|
80,000 | 800 | 39,200 | 40,000 | ||||||||||||||||
Shares
issued under PPM in September 2009, $.50
|
150,000 | 1,500 | 73,500 | 75,000 | ||||||||||||||||
Shares
issued to directors, management and consultant
|
||||||||||||||||||||
in
August 2009, $.50
|
797,810 | 7,978 | 390,927 | 398,905 | ||||||||||||||||
Shares
issued to finder in September 2009, $.50
|
100,000 | 1,000 | 49,000 | 50,000 | ||||||||||||||||
Capital
contributions resulting from waivers of debt
|
84,600 | 84,600 | ||||||||||||||||||
Value
of equity-linked financial instruments issued
|
(209,598 | ) | (209,598 | ) | ||||||||||||||||
in
connection with PPM
|
||||||||||||||||||||
Net
Loss (Unaudited)
|
(2,515,440 | ) | (2,515,440 | ) | ||||||||||||||||
Balance
9/30/09
|
10,353,651 | $ | 103,536 | $ | 3,268,699 | $ | (5,652,578 | ) | $ | (2,280,343 | ) |
April
23,
|
||||||||||||
2002
|
||||||||||||
Nine Months
|
(Inception)
|
|||||||||||
Ended September 30,
|
To September 30,
|
|||||||||||
2009
|
2008
|
2009
|
||||||||||
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
||||||||||
Cash
flow from operating activities:
|
||||||||||||
Net
loss
|
$ | (2,515,440 | ) | $ | (955,354 | ) | $ | (5,652,578 | ) | |||
Adjustments
to reconcile net loss to
|
||||||||||||
net
cash used in operating activities:
|
||||||||||||
Depreciation
and amortization
|
2,434 | 350 | 3,353 | |||||||||
Vested
stock options and warrants
|
150,544 | 264,178 | 595,872 | |||||||||
Stock
issued for management and consulting services
|
398,905 | 486,405 | ||||||||||
Stock
based registration payments
|
355,124 | 355,124 | ||||||||||
Conversion
of accrued liabilites to capital
|
84,600 | - | 560,998 | |||||||||
Amortization
of debt discount
|
6,538 | - | 113,319 | |||||||||
Loss
on valuation of equity-linked instruments
|
370,474 | - | 363,820 | |||||||||
Changes
in assets and liabilities:
|
||||||||||||
Accounts
receivable
|
(15,737 | ) | - | (15,737 | ) | |||||||
Prepaid
expense and other
|
(2,895 | ) | (32,715 | ) | (10,869 | ) | ||||||
Notes
payable to shareholders
|
- | (8,500 | ) | (10,962 | ) | |||||||
Accounts
payable
|
188,916 | 77,542 | 686,066 | |||||||||
Accrued
expenses
|
(8,981 | ) | 50,832 | 296,267 | ||||||||
Net
cash used in operating activities:
|
(985,517 | ) | (603,667 | ) | (2,228,922 | ) | ||||||
Cash
flow from investing activities:
|
||||||||||||
Purchase
of fixed assets
|
- | (8,699 | ) | (12,258 | ) | |||||||
Purchase
of intangibles
|
- | (22,224 | ) | (142,495 | ) | |||||||
Net
cash used in investing activities
|
- | (30,923 | ) | (154,753 | ) | |||||||
Cash
flow from financing activities:
|
||||||||||||
Proceeds
from long term debt
|
- | - | 421,505 | |||||||||
Principal
payments on long term debt
|
(10,124 | ) | (16,623 | ) | (98,473 | ) | ||||||
Restricted
cash in escrow
|
- | (163,333 | ) | (163,333 | ) | |||||||
Issuance
of common stock
|
600,000 | 1,555,296 | 2,292,173 | |||||||||
Net
cash provided by (used in) financing activities
|
589,876 | 1,375,340 | 2,451,872 | |||||||||
Net
increase (decrease) in cash
|
(395,641 | ) | 740,750 | 68,197 | ||||||||
Cash
at beginning of period
|
463,838 | 4,179 | - | |||||||||
Cash
at end of period
|
$ | 68,197 | $ | 744,929 | $ | 68,197 |
Years
|
||||
Computers
and office equipment
|
3
|
|||
Furniture
and fixtures
|
5
|
|
Stock Options (1)
|
Warrants (1)
|
||||||||||||||
|
Number of
Shares
|
Average
Exercise
Price
|
Number of
Shares
|
Average
Exercise
Price
|
||||||||||||
Outstanding
at December 31, 2005
|
17,956
|
$ |
1.67
|
20,950
|
$ |
2.62
|
||||||||||
Issued
|
23,942
|
1.67
|
71,826
|
0.85
|
||||||||||||
Outstanding
at December 31, 2006
|
41,898
|
$ |
1.67
|
92,776
|
$ |
1.25
|
||||||||||
Issued
|
5,984
|
1.67
|
28,502
|
0.35
|
||||||||||||
Outstanding
at December 31, 2007
|
47,882
|
$ |
1.67
|
121,278
|
$ |
1.04
|
||||||||||
Issued
|
1,243,292
|
0.20
|
5,075,204
|
0.45
|
||||||||||||
Expired
|
(11,971)
|
3.76
|
||||||||||||||
Outstanding
at December 31, 2008
|
1,291,174
|
$ |
0.26
|
5,184,511
|
0.45
|
|||||||||||
Issued
|
175,000
|
0.35
|
1,903,302
|
0.54
|
||||||||||||
|
|
|
|
|||||||||||||
Outstanding
at September 30, 2009
|
1,466,174
|
0.27
|
7,087,813
|
0.48
|
|
(1)
|
Adjusted
for the reverse stock splits in total at June 6, 2008 and October 20,
2008. There were no options or warrants exercised in the
periods.
|
Year
|
Options
|
Fair Value
|
Fair value vested
|
|||||||||
2005
|
17,956 | $ | 0.671 | $ | 1,673 | |||||||
2006
|
23,942 | $ | 0.682 | $ | 12,919 | |||||||
2007
|
5,984 | $ | 0.687 | $ | 71,038 | |||||||
2008
|
1,243,292 | $ | 0.232 | $ | 220,287 | |||||||
2009
|
175,000 | $ | 0.141 | $ | 48,956 | |||||||
Total
|
1,466,174 | $ | 0.236 | $ | 354,873 |
Range of Exercise Prices
|
Shares
|
Weighted
Average
Remaining
Life
|
||||||
Options
|
||||||||
$0.01
|
$
|
543,292
|
$
|
9.43
|
||||
$0.35
|
700,000
|
4.46
|
||||||
$1.67
|
47,882
|
2.50
|
||||||
Total
|
1,291,174
|
|||||||
Warrants
|
||||||||
$0.02
|
71,826
|
5.45
|
||||||
$0.35
|
178,502
|
4.29
|
||||||
$0.46
|
4,889,291
|
2.57
|
||||||
$1.67
|
44,892
|
2.69
|
||||||
Total
|
5,184,511
|
Range of Exercise Prices
|
Shares
|
Weighted
Average
Remaining
Life
|
||||||
Options
|
||||||||
$0.01
|
$
|
543,292
|
$
|
8.68
|
||||
$0.35
|
875,000
|
3.87
|
||||||
$1.67
|
47,882
|
1.75
|
||||||
Total
|
1,466,174
|
|||||||
Warrants
|
||||||||
$0.02
|
71,826
|
4.70
|
||||||
$0.35
|
798,597
|
3.29
|
||||||
$0.46
|
4,954,291
|
1.79
|
||||||
$0.65
|
1,200,000
|
2.65
|
||||||
$1.67
|
44,892
|
1.94
|
||||||
Total
|
7,087,813
|
Stock Options:
|
||||||||
Year
|
Shares
|
Price
|
||||||
2005
|
17,956
|
$
|
1.67
|
|||||
2006
|
23,942
|
1.67
|
||||||
2007
|
5,984
|
.35-1.67
|
||||||
2008
|
1,243,292
|
.01-.35
|
||||||
Total
|
1,291,174
|
$
|
.01-$1.67
|
Warrants:
|
||||||||
Year
|
Shares
|
Price
|
||||||
2005
|
8,979
|
$
|
1.67
|
|||||
2006
|
71,826
|
.02-1.67
|
||||||
2007
|
28,502
|
.35
|
||||||
2008
|
5,075,204
|
.02-.46
|
||||||
Total
|
5,184,511
|
$
|
.02-$1.67
|
Stock
Options:
|
||||||||
Year
|
Shares
|
Price
|
||||||
2005
|
17,956
|
$ |
1.67
|
|||||
2006
|
23,942
|
1.67
|
||||||
2007
|
5,984
|
.35-1.67
|
||||||
2008
|
1,243,292
|
.01-.35
|
||||||
2009
|
175,000
|
.35
|
||||||
Total
|
1,466,174
|
$ |
.01-$1.67
|
|||||
Warrants:
|
||||||||
Year
|
Shares
|
Price
|
||||||
2005
|
8,979
|
$ |
1.67
|
|||||
2006
|
71,826
|
.02-1.67
|
||||||
2007
|
28,502
|
.35
|
||||||
2008
|
5,075,204
|
.02-.46
|
||||||
2009
|
1,903,202
|
.35-.65
|
||||||
Total
|
7,087,813
|
$ |
.02-$1.67
|
From
|
||||||||||||||||||||
Three Months Ended
|
Nine Months Ended
|
April 23, 2002
|
||||||||||||||||||
September 30,
|
September 30,
|
(Inception) To
|
||||||||||||||||||
2009
|
2008
|
2009
|
2008
|
September 30, 2009
|
||||||||||||||||
Numerator
|
||||||||||||||||||||
Net
Loss available in basic and
|
$ | (773,015 | ) | $ | (447,535 | ) | $ | (2,515,440 | ) | $ | (955,354 | ) | $ | (5,652,578 | ) | |||||
diluted
calculation
|
||||||||||||||||||||
Denominator
|
||||||||||||||||||||
Weighted
average common shares
|
||||||||||||||||||||
oustanding-basic
|
9,634,828 | 5,582,437 | 8,903,119 | 2,758,557 | 2,041,540 | |||||||||||||||
Effect
of dilutive stock options and
|
||||||||||||||||||||
warrants
(1)
|
- | - | - | - | - | |||||||||||||||
Weighted
average common shares
|
||||||||||||||||||||
outstanding-diluted
|
9,634,828 | 5,582,437 | 8,903,119 | 2,758,557 | 2,041,540 | |||||||||||||||
Loss
per common share-basic
|
||||||||||||||||||||
and
diluted
|
$ | (0.08 | ) | $ | (0.08 | ) | $ | (0.28 | ) | $ | (0.35 | ) | $ | (2.77 | ) |
September 30,
|
December 31,
|
|||||||
2009
|
2008
|
|||||||
(Unaudited)
|
|
|||||||
Deferred
Tax Asset:
|
||||||||
Net
Operating Loss
|
$ | 1,266,000 | $ | 747,000 | ||||
Total
Deferred Tax Asset
|
1,266,000 | 747,000 | ||||||
Less
Valuation Allowance
|
1,266,000 | 747,000 | ||||||
Net
Deferred Income Taxes
|
$ | — | $ | — |
September 30,
2009
|
December 31,
2008
|
|||||||
(Unaudited)
|
|
|||||||
Notes
payable to seven individuals due April 2008 including 8% fixed interest
and are now delinquent. The notes are convertible into 620,095 shares of
the Company’s common stock and automatically convert at the effective date
of this registration statement.
|
$ | 170,000 | $ | 170,000 | ||||
Note
payable to bank in monthly installments of $1,275/including variable
interest at 2% above the prevailing prime rate (3.25% at December 31,
2008) to August 2011 when the remaining balance is payable. The note is
personally guaranteed by former executives of the Company.
|
31,486 | 38,183 | ||||||
Notes
payable to two individuals, net of discounts of $19,619 and $26,157 with
interest only payments at 12% to March 2012 when the remaining balance is
payable. The notes are convertible into 285,715 shares of stock in the
Company at $.35 per share.
|
80,381
|
73,843 | ||||||
Notes
payable to four shareholders of the Company that are overdue. The notes
are convertible into 11,429 shares of stock in the Company at $.35 per
share.
|
4,000 | 4,000 | ||||||
Total
|
282,441 | 286,026 | ||||||
Less
amount due within one year
|
187,620 | 187,620 | ||||||
Long-Term
Debt
|
$ | 94,821 | $ | 98,406 |
2009 -
|
$
|
197,620
|
||
2010 -
|
$
|
14,353
|
||
2011 -
|
$
|
10,210
|
||
2012 -
|
$
|
100,000
|
||
2013 -
|
$
|
0
|
2009
|
$
|
35,000
|
||
2010
|
29,000
|
|||
2011
|
30,000
|
|||
2012
|
30,000
|
|||
2013
|
26,000
|