Note 1.

Summary of Significant Accounting Policies

Basis of Presentation

Cogentix Medical, Inc., headquartered in Minnetonka, Minnesota, with additional operations in New York, Massachusetts, The Netherlands and the United Kingdom, is a global medical device company. We design, develop, manufacture and market innovative proprietary technologies serving the urology, urogynecology/gyn, ENT (ear, nose and throat) and gastrointestinal markets. The Urgent® PC Neuromodulation System delivers percutaneous tibial nerve stimulation (PTNS) which has FDA clearance for the office-based treatment of overactive bladder (OAB) and has regulatory approvals for the treatment of OAB and fecal incontinence (FI) in various international markets. The FDA-cleared and CE marked EndoSheath® Systems combine state-of-the-art endoscopic technology with a sterile, disposable microbial barrier, providing practitioners and healthcare facilities with a solution to meet the growing need for safe, efficient and cost-effective flexible endoscopy. The Company also offers Macroplastique®, a urethral bulking agent for the treatment of stress urinary incontinence. Outside the U.S., the Company markets additional bulking agents: PTQ® for the treatment of fecal incontinence and VOX® for vocal cord augmentation and vesicourethral reflux.

The Company is the result of the Merger effective as of March 31, 2015, of two medical device companies, Uroplasty, Inc. and Vision-Sciences, Inc. On the effective date of the Merger, the two companies completed an all-stock merger, pursuant to which UPI merged with and into Merger Sub. Merger Sub was the surviving company from the Merger, and changed its name to Uroplasty, LLC. After the merger, VSCI and its consolidated subsidiaries, including Uroplasty, LLC, and its subsidiaries, operate under the name Cogentix Medical, Inc.

Upon closing of the Merger, the former UPI stockholders owned approximately 62.5% and the VSCI shareholders retained approximately 37.5% of the Company. Accordingly, while VSCI was the legal acquirer and issued its shares in the Merger, UPI is the acquiring company in the Merger for accounting purposes and the Merger has been accounted for as a reverse acquisition under the acquisition method of accounting for business combinations. As a result, the financial statements of the Company prior to the effective date of the Merger are the historical financial statements of UPI, whereas the financial statements of the Company after the effective date of the Merger reflect the results of the operations of UPI and VSCI on a combined basis. See additional disclosure provided in note 2.

We have prepared our Condensed Consolidated Financial Statements included in this quarterly report on Form 10-Q, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP, have been condensed or omitted, pursuant to such rules and regulations, although we believe that our disclosures are adequate to make the information not misleading. The consolidated results of operations for any interim period are not necessarily indicative of results for a full fiscal year. These Condensed Consolidated Financial Statements, presented herein, should be read in conjunction with the audited consolidated financial statements and related notes included in our annual report on Form 10-K for the fiscal year ended March 31, 2015.

The Condensed Consolidated Financial Statements presented herein as of September 30, 2015 and for the three- and six-month periods ended September 30, 2015 and 2014, reflect, in the opinion of management, all material adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the consolidated financial condition, results of operations and cash flows for the interim periods.

We have identified certain accounting policies that we consider particularly important for the portrayal of our results of operations and financial condition and which may require the application of a higher level of judgment by our management, and as a result are subject to an inherent level of uncertainty. These are characterized as “critical accounting policies” and address revenue recognition, accounts receivable, valuation of inventory, foreign currency translation/transactions, purchase price allocation on acquisition, the determination of recoverability of long-lived and intangible assets, long-term incentive plans, share-based compensation, defined benefit pension plans and income taxes, each of which is described in our annual report on Form 10-K for the fiscal year ended March 31, 2015. Based upon our review, we have determined that these policies remain our most critical accounting policies for the six months ended September 30, 2015 and we have made no changes to these policies since March 31, 2015.

Liquidity and Capital Resources

We have incurred substantial operating losses since our inception. We anticipate that we will incur negative cash flows from operations during fiscal 2016, driven by continued investment in a direct sales force for the U.S. market, spending for marketing and for research and development, integration of UPI and VSCI, and general business operations. As of September 30, 2015, we had cash and cash equivalents totaling approximately $2.9 million. On September 18, 2015, we entered into a $7.0 million line of credit with Venture Bank to provide non-dilutive resources to execute management’s growth strategies for the EndoSheath and Urgent PC product lines and for general corporate purposes. Note 6 contains further information regarding the line of credit. If we were to seek additional financing, there can be no assurance that any such additional financing will be available on terms acceptable to us, if at all. If required, we believe we would be able to reduce our expenses to a sufficient level to continue to operate as a going concern.