UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
(Amendment No. 3)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2011
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number: 333-155299
BIODRAIN MEDICAL, INC.
(Exact name of registrant as specified in its charter)
| Minnesota | 33-1007393 |
| (State or other jurisdiction of | (I.R.S. Employer |
| incorporation or organization) | Identification No.) |
| 2915 Commers Drive, Suite 900 | |
| Eagan, Minnesota | 55121 |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (651) 389-4800
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act:
| Title of each class | Name of each exchange on which registered | |
| Common Stock, One Cent ($0.01) Par Value Per Share |
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 registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x 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 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 ¨ | 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
As of June 30, 2011, no market price existed for the voting and non-voting common equity held by non-affiliates of the registrant. There were 103,052,673 shares of the registrant’s common stock outstanding as of December 13, 2012.
DOCUMENTS INCORPORATED BY REFERENCE
None.
EXPLANATORY NOTE
On April 16, 2012, we filed our Annual Report on Form 10-K for the year ended December 31, 2011 (the “Original Filing”), with the Securities and Exchange Commission (the “SEC”). This Amendment No. 3 (this “Amendment”) on Form 10-K/A, which amends and restates Item 9A (Controls and Procedures) is being filed to provide revised disclosure in that Item. Except for the foregoing amended and restated information, this Amendment does not amend, update or change any other information presented in the Original Filing.
In addition, as required by Rule 12b-15 of the Securities Exchange Act of 1934, this Form 10-K/A contains new certifications by our principal executive officer and principal financial and accounting officer, filed as an exhibit hereto.
INDEX TO FORM 10-K/A
| Page Number | ||
| PART II | ||
| Item 9A | Controls and Procedures | 5 |
| PART IV | ||
| Item 15 | Exhibits and Financial Statement Schedules | 8 |
| SIGNATURES |
PART II
ITEM 9A. CONTROLS AND PROCEDURES.
Disclosure Controls
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized, and reported within the timelines specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objectives, and in reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Our Chief Executive Officer/Chief Financial Officer evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covering this report. Based on this evaluation, our Chief Executive Officer/Chief Financial Officer concluded that, as of December 31, 2011, our disclosure controls and procedures were not effective.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in the rules promulgated under the Securities Exchange Act of 1934. Under the supervision and with the participation of our management, including our Chief Executive Officer/Chief Financial Officer, we have conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management has concluded that the Company’s internal control over financial reporting was not effective as of December 31, 2011 as a result of the material weakness in the accounting and disclosure for stock options and warrants as described below.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis by our internal controls. In connection with our assessment of our internal control over financial reporting as required under Section 404 of the Sarbanes-Oxley Act of 2002, we identified the following material weakness in our internal control structure over financial reporting as of December 31, 2011:
In the 4th quarter of 2011, there was an improper gap in maintaining issuance of stock options and warrants discovered in account reconciliations at December 31, 2011. In particular there was a large adjustment converting equity value into compensation expense. These audit adjustments did materially affect our financial position and results of operations for the year ended December 31, 2011.
Remediation of Material Weakness in Internal Control Structure over Financial Reporting
We are in the process of implementing remediation efforts with respect to our control environment and the material weakness noted above as follows:
We plan over the next quarter, to implement corrections to ensure that stock option and warrants are effectively recorded, filed, maintained and reconciled and reviewed for any discrepancies to avoid misstatements of our financial position or results of operations.
Item 15. Exhibits and Financial Statement Schedules
Exhibits. See “Exhibit Index to Form 10-K” immediately following the signature page of this Amendment.
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.
| BIODRAIN MEDICAL, INC. | ||
| Date: December 14, 2012 | By: | /s/ Joshua Kornberg |
| Joshua Kornberg President and Chief Executive Officer | ||
EXHIBIT INDEX
BIODRAIN MEDICAL, INC.
FORM 10-K/A
|
Exhibit Number |
Description | |
| 3.1 | Articles of Incorporation, as amended | |
| 3.2 | Bylaws, as amended (7) | |
| 10.1 | Employment Agreement between the Registrant and Kevin R. Davidson, dated October 4, 2006 (1)** | |
| 10.2 | Confidential Separation Agreement and Release between the registrant and Lawrence W. Gadbaw, dated August 13, 2008 (1)** | |
| 10.3 | Stock Option Agreement between the registrant and Kevin R. Davidson, dated June 5, 2008 (1)** | |
| 10.4 | Director Stock Option Agreement between the registrant and Thomas McGoldrick, dated August 22, 2006 (1)** | |
| 10.5 | Director Stock Option Agreement between the registrant and Andrew P. Reding, dated November 11, 2006 (1)** | |
| 10.6 | Consulting Agreement between the registrant and Marshall C. Ryan and Mid-State Stainless, Inc., dated June 2008 (1) | |
| 10.7 | Patent Assignment by Marshall C. Ryan in favor of the registrant, dated June 18, 2008 (1) | |
| 10.8 | Convertible Debenture between the registrant and Kevin R. Davidson, dated February 2, 2007 (1) | |
| 10.9 | Convertible Debenture between the registrant and Peter L. Morawetz, dated February 2, 2007 (1) | |
| 10.10 | Convertible Debenture between the registrant and Andrew P. Reding, dated February 2, 2007 (1) | |
| 10.11 | Convertible Debenture between the registrant and Thomas McGoldrick, dated January 30, 2007 (1) | |
| 10.12 | Convertible Debenture between the registrant and Andcor Companies, Inc., dated September 29, 2006 (1) | |
| 10.13 | Convertible Debenture between the registrant and Carl Moore, dated March 1, 2007 (1) | |
| 10.14 | Convertible Debenture between the registrant and Roy Moore, dated March 1, 2007 (1) |
| 10.15 | Form of Subscription Agreement (1) | |
| 10.16 | Form of Registration Rights Agreement (1) | |
| 10.17 | Form of Escrow Agreement (1) | |
| 10.18 | Form of Warrant (1) | |
| 10.19 | 2008 Equity Incentive Plan (1)** | |
| 10.20 | Office Lease Agreement between the registrant and Roseville Properties Management Company, as agent for Lexington Business Park, LLC (1) | |
| 10.21 | Employment Agreement between the registrant and David Dauwalter, dated August 11, 2008 (2)** | |
| 10.22 | Amendment No. 1 to Employment Agreement between the registrant and David Dauwalter, dated September 11, 2008 (2)** | |
| 10.23 | Consulting Agreement by and between the registrant and Andcor Companies, Inc., dated September 15, 2008 (2) | |
| 10.25 | Independent Contractor Agreement between Belimed, Inc. and the registrant, dated February 2, 2009 (3) | |
| 10.26 | Supply Agreement between Oculus Innovative Sciences, Inc., and the registrant, dated February 20, 2009 (4) | |
| 10.27 | Agreement between the registrant and Peter Morawetz, dated May 15, 2009 (5) | |
| 10.28 |
Amendment No. 1 to BioDrain Medical, Inc. 2008 Equity Incentive Plan (6)** | |
|
10.29 |
Convertible Note Purchase Agreement between the Company and SOK Partners, LLC dated March 28, 2012, including the form of Convertible Promissory Grid Note (8) | |
| 10.30 | Amended and Restated Note Purchase Agreement between the Company and Dr. Samuel Herschkowitz dated as of December 20, 2011, including the form of Convertible Promissory Note (issued in the amount of $240,000) (8) | |
| 14.1*** | Code of ethics | |
| 23.1 | Consent of Independent Registered Public Accounting Firm (9) | |
| 31.1* | Certification of principal executive officer required by Rule 13a-14(a) |
| 31.2* | Certification of principal financial officer required by Rule 13a-14(a) |
| 32.1* | Section 1350 Certification |
*Filed herewith.
**Compensatory Plan or arrangement required to be filed pursuant to Item 15(b) of Form 10-K.
*** Previously filed with Form 10-K filed on April 16, 2012.
| (1) | Filed on November 12, 2008 as an exhibit to our Registration Statement on Form S-1 and incorporated herein by reference. |
| (2) | Filed on January 12, 2009 as an exhibit to Amendment No. 1 to our Registration Statement on Form S-1and incorporated herein by reference. |
| (3) | Filed on April 6, 2009 as an exhibit to our Amendment No. 3 to our Registration Statement on Form S-1and incorporated herein by reference. |
| (4) | Filed on July 1, 2009 as an exhibit to our Amendment No. 5 to our Registration Statement on Form S-1and incorporated herein by reference. |
| (5) | Filed on August 12, 2009 as an exhibit to Amendment No. 7 to our Registration Statement on Form S-1and incorporated herein by reference. |
| (6) | Filed on June 15, 2011 as an exhibit to our Current Report on Form 8-K and incorporated herein by reference. |
| (7) | Filed on November 23, 2011 as an exhibit to Amendment No. 1 to our Quarterly Report on Form 10-Q and incorporated herein by reference. |
| (8) |
Filed on April 3, 2012 as an exhibit to our Current report on Form 8-K and incorporated herein by reference.
| |
| (9) | Filed April 16, 2012 as an exhibit to our Annual Report on Form 10-K and incorporated herein by reference. |
| (10) | Filed May 2, 2012 as an exhibit to our Annual Report on Form 10-K/A and incorporated herein by reference. |
EXHIBIT 31.1
CERTIFICATION
I, Joshua Kornberg, certify that:
| 1. | I have reviewed this annual report on Form 10-K of BioDrain Medical, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15-d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: December 14, 2012 | /s/ Joshua Kornberg |
| Joshua Kornberg | |
| Chief Executive Officer (Principal Executive Officer) | |
|
|
EXHIBIT 31.2
CERTIFICATION
I, Bob Myers, certify that:
| 1. | I have reviewed this annual report on Form 10-K of BioDrain Medical, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15-d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: December 14, 2012 | /s/ Bob Myers |
| Bob Myers | |
| Chief Financial Officer (Principal Financial Officer) | |
Exhibit 32.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
AND PRINCIPAL FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-K of BioDrain Medical, Inc. (the "Company") for the year ended December 31, 2011 as amended by the Form 10-K/A filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Joshua Kornberg, Chief Executive Officer and, I, Bob Myers, Chief Financial Officer, of the Company, certify, pursuant to § 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. § 1350, that to my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: December 14, 2012
/s/ Joshua Kornberg
Joshua Kornberg
Chief Executive Officer and (Principal Executive Officer)
/s/Bob Myers
Bob Myers
Chief Financial Officer and (Principal Financial Officer)
BioDrain Medical, Inc.
2915 Commers Drive, Suite
Eagan, Minnesota 55121
651.389.4806 phone
651.389.4807 fax
www.biodrainmedical.com
December 14, 2012
VIA EDGAR AND FEDERAL EXPRESS
Mr. Brian Cascio
Accounting Branch Chief
Securities and Exchange Commission
100 F Street NE
Washington, D.C. 20549
Re: BioDrain Medical, Inc.
Form 10-K for the fiscal year ended December 31, 2011
Filed April 16, 2012
Form 10-Q for the quarterly period ended September 30, 2012
Filed November 15, 2012
File No. 000-54361
Dear Mr. Cascio,
This letter responds on behalf of BioDrain Medical, Inc. (the “Company”) to your comment letter addressed to the undersigned dated December 11, 2012 with respect to the filings listed above. Included below is your comment and the corresponding response supplied by the Company:
Form 10-K for the fiscal year ended December 31, 2011
Item 9A. Controls and Procedures
Management’s Report on Internal Control over Financial Reporting, page 39
| 1. | We note your response to prior comment 2. While we note the references to material weaknesses in internal control structure, Item 303(a) (3) requires a statement indicating whether or not internal control over financial reporting is effective as of the end of your most recent fiscal year. Please amend your filing to comply with Item 308(a)(3) of Regulation S-K. |
On the date hereof, BioDrain has filed Amendment No. 3 to its Form 10-K for the year ended December 31, 2012. Item 9A has been restated to include a statement to the effect that management has concluded that our internal control over financial reporting was not effective as of the end of the most recent fiscal year.
In addition, we acknowledge that:
| · | we are responsible for the adequacy and accuracy of the disclosures in the filing; |
| · | staff comments or changes to disclosures in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and |
| · | we may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States. |
Thank you for your consideration. If you have any questions or further comments about these responses, please contact the undersigned at (651) 389-4806.
Sincerely,
Bob Myers
Chief Financial Officer
cc: Martin Rosenbaum, Maslon Edelman Borman & Brand LLP
Brett Olsen, Olsen Thielen & Co., Ltd.
