10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ Quarterly Report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended September 30, 2016

☐ Transition Report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934

For the Transition Period from ______ to _______.

Commission File No. 000-20970

COGENTIX MEDICAL, INC.

(Exact name of registrant as specified in its Charter)

Delaware	13-3430173
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

5420 Feltl Road

Minnetonka, Minnesota,  55343

(Address of principal executive offices)

(952) 426-6140

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (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 ☒  NO ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S (§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 ☒   NO ☐

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 the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer ☐ Accelerated Filer ☐ Non-Accelerated Filer ☐ Smaller Reporting Company ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)

YES ☐   NO ☒

As of November 8, 2016 the registrant had 60,349,579 shares of common stock outstanding.

Table of Contents

INDEX

COGENTIX MEDICAL, INC. AND SUBSIDIARIES

PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Operations	7
	Condensed Consolidated Statements of Comprehensive Income (Loss)	8
	Condensed Consolidated Statement of Shareholders’ Equity	9
	Condensed Consolidated Statements of Cash Flows	10
	Notes to the Condensed Consolidated Financial Statements	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	27
Item 4.	Controls and Procedures	27
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	27
Item 1A.	Risk Factors	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 3.	Defaults upon Senior Securities	28
Item 4.	Mine Safety Disclosures	28
Item 5.	Other Information	29
Item 6.	Exhibits	29
	SIGNATURES	30
	Certification by the PEO pursuant to Section 302
	Certification by the PFO pursuant to Section 302
	Certification by the PEO pursuant to Section 906
	Certification by the PFO pursuant to Section 906

Page 2

As used in this report, the terms “Cogentix,” “Cogentix Medical,” “Company,” “we,” “us,” “our” and similar references refer to Cogentix Medical, Inc. (formerly known as Vision-Sciences, Inc.) and our consolidated subsidiaries, and the term “common stock” refers to our common stock, par value $0.01 per share.  References to “VSCI,” “Vision-Sciences” or “Vision” generally refer to Vision-Sciences, Inc. and its consolidated subsidiaries prior to the consummation of the merger of Uroplasty, Inc. with and into Vision’s wholly-owned merger subsidiary (“Merger Sub”) on March 31, 2015 (the “Merger”), and sometimes also are used as references to our current, ongoing operations related to the historical VSCI that continue following the Merger.  References to “UPI” or “Uroplasty” generally refer to Uroplasty, Inc., and its consolidated subsidiaries prior to the consummation of the Merger, and sometimes also are used as reference to our current, ongoing operations related to the historical Uroplasty that continue following the Merger.

All share and per share amounts have been adjusted to reflect the one-for-five reverse split of Vision’s outstanding common stock effective on March 31, 2015 immediately prior to the effective time of the Merger.  All numbers and prices related to common shares and options of Uroplasty that predated the Merger have been adjusted to reflect the exchange ratio of 3.6331 shares of our common stock for each share of Uroplasty common stock, as well as the above mentioned one-for-five reverse stock split, a combined impact of 0.72662 shares of our common stock for each Uroplasty share of common stock.

This report contains the following trademarks, trade names and service marks of ours: PrimeSight^TM, Vision-Sciences^®, EndoSheath^®, Slide-On^®, EndoWipe^® and The Vision System^® for our endoscopy products, Urgent PC^® for our neuromodulation product, Macroplastique^® for our urological tissue bulking product, VOX^® for our otolaryngology tissue bulking products, PTQ^® for our colorectal tissue bulking and Uroplasty® for Uroplasty, LLC, one of our subsidiaries.

We changed our fiscal year from a fiscal year ending on March 31 of each year to a fiscal year ending on December 31 of each year effective as of December 31, 2015. This action created a transition period of April 1, 2015 through December 31, 2015 (the “Transition Period”).  Unless otherwise indicated herein, comparisons of fiscal year results or fiscal quarter results in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” portion of this Report, and elsewhere herein, compare results for the three-month unaudited period from July 1, 2016 through September 30, 2016 to the three-month unaudited period from July 1, 2015 through September 30, 2015, and the nine month unaudited period from January 1, 2016 through September 30, 2016 to the nine month unaudited period from January 1, 2015 through September 30, 2015.  As a result of the Merger, our financial statements prior to March 31, 2015 are the historical financial statements of Uroplasty, and our financial statements on or after March 31, 2015 reflect the results of the operations of Uroplasty and Vision-Sciences on a combined basis.

FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  Statements contained in this report that refer to our estimated or anticipated future results, including estimated synergies, or other non-historical facts are forward-looking statements that reflect our current perspective of existing trends and information as of the date of this report.  Forward-looking statements generally will be accompanied by words such as “anticipate,” “believe,” “plan,” “could,” “should,” “estimate,” “expect,” “forecast,” “outlook,” “guidance,” “intend,” “may,” “might,” “will,” “possible,” “potential,” “predict,” “project,” or other similar words, phrases or expressions.  These forward-looking statements are based on current expectations about future events affecting us and are subject to uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control and could cause our actual results to differ materially from those matters expressed or implied by our forward-looking statements.  Forward-looking statements (including oral representations) are only predictions or statements of current plans and can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties.  By way of example and without implied limitation, such risks, uncertainties and factors that affect our business included:

· we may obtain additional financing, which may not be available on favorable terms at the time it is needed and which could reduce our operational and strategic flexibility;

· we may attempt to acquire new products or technologies, and if we are unable to successfully complete these acquisitions or to integrate acquired businesses, products, technologies or employees, we may fail to realize expected benefit or harm our existing business;

Page 3

· the use and acceptance of our products depends heavily upon the availability of third-party reimbursement for the procedures in which its products are used;

· we cannot predict how quickly or how broadly the market will accept our products;

· that we are subject to changing federal and state regulations that could increase the cost of doing business or impose requirements with which we cannot comply;

· changes in regulatory policy, particularly at the FDA, might adversely affect our operations;

· if we are not able to attract, retain and motivate our sales force and expand our distribution channels, our sales and revenues will suffer;

· the size and resources of our competitors may render it difficult for us to successfully compete in the marketplace;

· we are primarily dependent on sales from a limited number of product lines and our business would suffer if sales of any of these product lines decline;

· we could be subject to fines and penalties, or required to temporarily or permanently cease offering products, if we fail to comply with the extensive regulations applicable to the sale and manufacture of medical products;

· our distributors may not obtain regulatory approvals in a timely basis, or at all;

· we may not have the resources to successfully market our products, which would adversely affect our business and results of operations;

· if we cannot attract and retain our key personnel and management team, we may not be able to manage and operate successfully, and we may not be able to meet our strategic objectives;

· if third parties claim that we infringe upon their intellectual property rights, we may incur liabilities and costs and may have to redesign or discontinue selling the affected product;

· if we are unable to adequately protect our intellectual property rights, we may not be able to compete effectively;

· product liability claims could adversely affect our business and results of operations;

· security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer;

· the loss or interruption of materials from any of our key suppliers could delay the manufacture of our products, which would limit our ability to generate sales and revenues;

· if we are not able to maintain sufficient quality controls, regulatory approvals of our products by the European Union, Canada, the FDA or other relevant authorities could be delayed or denied and our sales and revenues will suffer;

· if we are not able to acquire or license other products, our business and future growth prospects could suffer;

· our business strategy relies on assumptions about the market for our products, which, if incorrect, would adversely affect our business prospects and profitability;

· we derive a significant portion of our sales and revenues from outside of the U.S. and we are subject to the risks of international operations;

· failure to comply with the U.S. Foreign Corrupt Practices Act could subject us to, among other things, penalties and legal expenses that could harm our reputation and have a material adverse effect on our business, financial condition and operating results;

· our stock is thinly traded and you may find it difficult to sell your investment in our stock at quoted prices;

· our stock price may fluctuate and be volatile;

· future sales of our common stock in the public market could lower our share price;

· we are exempt from certain corporate governance requirements due to our status as a "controlled company" within the meaning of the Nasdaq rules, including certain rules related to board independence;

· our corporate documents contain provisions that could discourage, delay or prevent a change in control of the company; and

· we do not intend to declare dividends on our stock in the foreseeable future.

When relying on forward-looking statements to make decisions with respect to the Company, our investors and others should carefully consider the foregoing factors and other uncertainties and potential events and read our filings with the SEC, available at www.sec.gov for a discussion of these and other risks and uncertainties.  We do not undertake any obligation to update or revise any forward-looking statement, except as may be required by law.  We qualify all forward-looking statements by these cautionary statements.

Page 4

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

COGENTIX MEDICAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	September 30, 2016		December 31, 2015
Assets
Current assets:
Cash and cash equivalents	$	4,238,225	$	1,976,594
Accounts receivable, net		6,769,476		8,191,391
Inventories		6,222,457		4,584,844
Deferred financing costs		1,350,900		-
Other		562,783		834,076
Total current assets		19,143,841		15,586,905
Property, plant, and equipment, net		2,201,942		2,554,822
Goodwill		18,749,888		18,749,888
Other intangible assets, net		10,073,436		11,846,009
Deferred tax assets and other		300,286		269,121
Total assets	$	50,469,393	$	49,006,745

See accompanying notes to the Condensed Consolidated Financial Statements.

Page 5

COGENTIX MEDICAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	September 30, 2016			December 31, 2015
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	3,084,807		$	2,209,473
Income taxes payable		35,749			20,866
Accrued liabilities:
Compensation		5,075,767			3,281,809
Deferred revenue		504,274			307,936
Accrued legal fees		488,824			57,515
Accrued foreign and domestic sales tax/VAT		262,399			242,832
Accrued employee expenses		116,479			39,753
Other		486,447			301,461
Total current liabilities		10,054,746			6,461,645
Convertible debt – related party, net		24,173,141			23,336,854
Interest payable		1,019,120			757,615
Accrued pension liability		663,034			663,071
Deferred rent		647,876			671,088
Other		119,865			157,453
Total liabilities		36,677,782			32,047,726
Shareholders’ equity:
Preferred stock, $0.01 par value; 5,000,000 shares authorized; none issued or outstanding at September 30, 2016 and December 31, 2015, respectively		-			-
Common stock $0.01 par value; 100,000,000 shares authorized, 26,538,000 and 26,057,327 shares issued and outstanding at September 30, 2016 and December 31, 2015, respectively		265,382			260,574
Additional paid-in capital		76,863,499			76,485,650
Accumulated deficit		(62,435,568	)		(58,910,707	)
Accumulated other comprehensive  loss		(901,702	)		(876,498	)
Total shareholders’ equity		13,791,611			16,959,019
Total liabilities and shareholders’ equity	$	50,469,393		$	49,006,745

See accompanying notes to the Condensed Consolidated Financial Statements.

Page 6

COGENTIX MEDICAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Net sales	$	13,407,611		$	11,834,187		$	38,618,826		$	30,004,210
Cost of goods sold		4,369,574			3,953,940			12,257,933			8,408,218
Gross profit		9,038,037			7,880,247			26,360,893			21,595,992
Operating expenses
General and administrative		1,558,090			1,935,286			5,087,871			5,230,930
Research and development		1,218,669			1,035,253			3,255,603			2,707,016
Selling and marketing		5,203,477			5,845,798			16,272,678			17,442,292
Amortization of intangibles		590,858			634,191			1,772,574			1,275,644
Proxy settlement costs		(53,887	)		-			2,257,654			-
Merger related costs		-			437,252			-			2,484,025
		8,517,207			9,887,780			28,646,380			29,139,907
Operating income (loss)		520,830			(2,007,533	)		(2,285,487	)		(7,543,915	)
Other income (expense)
Interest income		124			964			529			4,404
Interest expense		(380,803	)		(353,387	)		(1,147,470	)		(697,181	)
Foreign currency exchange gain (loss)		(14,905	)		1,847			(40,311	)		3,881
		(395,584	)		(350,576	)		(1,187,252	)		(688,896	)
Income (loss) before income taxes		125,246			(2,358,109	)		(3,472,739	)		(8,232,811	)
Income tax expense		18,932			10,532			52,122			37,830
Net income (loss)	$	106,314		$	(2,368,641	)	$	(3,524,861	)	$	(8,270,641	)
Basic and diluted net income (loss) per common share	$	0.00		$	(0.09	)	$	(0.14	)	$	(0.37	)
Weighted average common shares outstanding:
Basic		25,633,172			25,410,646			25,509,584			22,389,920
Diluted		25,748,844			25,410,646			25,509,584			22,389,920

See accompanying notes to the Condensed Consolidated Financial Statements.

Page 7

COGENTIX MEDICAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

	Three Months Ended September 30						Nine Months Ended September 30
	2016			2015			2016			2015
Net income (loss)	$	106,314		$	(2,368,641	)	$	(3,524,861	)	$	(8,270,641	)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments		(4,458	)		(859	)		(29,080	)		(123,161	)
Pension adjustments		(41	)		254			3,876			(331,736	)
Total other comprehensive income (loss), net of tax		(4,499	)		(605	)		(25,204	)		(454,897	)
Comprehensive income (loss)	$	101,815		$	(2,369,246	)	$	(3,550,065	)	$	(8,725,538	)

See accompanying notes to the Condensed Consolidated Financial Statements.

Page 8

COGENTIX MEDICAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

Nine Months Ended September 30, 2016

(Unaudited)

	Common Stock						Additional Paid-in			Accumulated			Accumulated Other Comprehensive			Total Shareholders'
	Shares			Amount			Capital			Deficit			Income (Loss)			Equity
Balance at December 31, 2015		26,057,327		$	260,574		$	76,485,650		$	(58,910,707	)	$	(876,498	)	$	16,959,019
Share-based compensation		535,871			5,360			434,640			-			-			440,000
Payment of income tax from vested restricted stock		(55,198	)		(552	)		(56,791	)								(57,343	)
Comprehensive loss		-			-			-			(3,524,861	)		(25,204	)		(3,550,065	)
Balance at September 30, 2016		26,538,000		$	265,382		$	76,863,499		$	(62,435,568	)	$	(901,702	)	$	13,791,611

See accompanying notes to the Condensed Consolidated Financial Statements.

Page 9

COGENTIX MEDICAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 (Unaudited)

	Nine Months Ended September 30,
	2016			2015
Cash flows from operating activities:
Net loss	$	(3,524,861	)	$	(8,270,641	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		2,364,673			1,776,856
Loss on disposal of equipment		5,640			43,311
Share-based compensation expense		440,000			951,290
Amortization of discount on related party debt		836,288			535,073
Long term incentive plan		(64,404	)		(85,085	)
Tax benefit		(284	)		(93,913	)
Deferred rent		6,836			616,781
Proceeds from restricted stock exchanged for taxes		(57,343	)		(20,132	)
Changes in operating assets and liabilities:
Accounts receivable, net		1,399,070			(504,545	)
Inventories		(1,637,619	)		(67,759	)
Other current assets		265,395			(30,369	)
Accounts payable		394,573			(710,725	)
Interest payable		261,505			152,422
Accrued compensation		1,796,568			(59,175	)
Accrued liabilities, other		213,387			(733,486	)
Accrued pension liability		(45,463	)		143,459
Deferred revenue		220,789			47,707
Net cash provided by (used in) operating activities		2,874,750			(6,308,931	)
Cash flows from investing activities:
Cash acquired from merger with Vision-Sciences		-			2,019,610
Purchases of property, plant and equipment		(232,331	)		(1,430,311	)
Net cash (used in) provided by investing activities		(232,331	)		589,299
Cash flows from financing activities:
Financing costs		(375,839	)		-
Net cash used in financing activities		(375,839	)		-
Effect of exchange rates on cash and cash equivalents		(4,949	)		(55,463	)
Net increase (decrease) in cash and cash equivalents		2,261,631			(5,775,095	)
Cash and cash equivalents at beginning of period		1,976,594			8,703,790
Cash and cash equivalents at end of period	$	4,238,225		$	2,928,695
Supplemental disclosure of cash flow information:
Cash paid during the period for income tax	$	35,424		$	72,816
Cash paid during the period for interest	$	47,754		$	7,975
Non-cash financing activities:
Deferred financing costs in AP/Accruals	$	975,061		$	-

See accompanying notes to the Condensed Consolidated Financial Statements.

Page 10

COGENTIX MEDICAL, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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 a robust line of high performance fiberoptic and video endoscopy products under the PrimeSight^TM brand that are used across multiple surgical specialties in diagnostic and treatment procedures. The FDA-cleared and CE marked PrimeSight Endoscopy Systems and EndoSheath Protective Barrier 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.  We also offer the Urgent^® PC Neuromodulation System, a device that delivers percutaneous tibial nerve stimulation, for the office-based treatment of overactive bladder (“OAB”).  The Urgent® PC Neuromodulation System has FDA clearance in the United States and has regulatory approvals for the treatment of OAB and fecal incontinence (FI) in various international markets. 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. (“UPI”) and Vision-Sciences, Inc. (“VSCI”).  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, a wholly owned subsidiary of VSCI.   VSCI continued to be the sole member of the surviving company.  After the Merger, VSCI changed its name to 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.

All share amounts and price per share amounts for all periods presented relate to VSCI shares with UPI shares and price per share converted to VSCI amounts based on the conversion ratio in the acquisition agreement and the one for five reverse stock split that occurred on March 31, 2015.

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-KT for the nine-months ended December 31, 2015.

The Condensed Consolidated Financial Statements presented herein as of September 30, 2016 and for the three and nine month periods ended September 30, 2016 and 2015, 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-KT for the nine-months ended December 31, 2015.  Based upon our review, we have determined that these policies remain our most critical accounting policies for the nine months ended September 30, 2016 and we have made no changes to these policies during 2016.

Page 11

Liquidity and Capital Resources

We have incurred substantial operating losses since our inception.  As of September 30, 2016, we had cash and cash equivalents totaling approximately $4.2 million. This report covers the quarter ended September 30, 2016, and as a result, this amount excludes $25.0 million in proceeds from our issuance of 16,219,033 shares of our common stock to Accelmed on November 3, 2016.  See Note 13 for additional details.  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 PrimeSight^TM and Urgent^® PC product lines and for general corporate purposes. Note 6 contains further information regarding the line of credit.  If operations do not generate sufficient cash in the future and 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.

Note 2. Business Combination - Merger Between Uroplasty, Inc. and Vision-Sciences, Inc.

The Merger has been accounted for as an acquisition of VSCI by UPI, in accordance with Accounting Standards Codification (ASC) Topic 805, "Business Combinations," using the acquisition method of accounting with UPI as the accounting acquirer. Since the Company (formerly known as Vision-Sciences), as the parent company of UPI after the Merger, is the legal acquirer, the Merger has been accounted for as a reverse acquisition.  Under these accounting standards, UPI’s total purchase price of $16.5 million is calculated as if UPI had issued its shares to VSCI stockholders and converted options and warrants to purchase VSCI shares to options and warrants to purchase UPI’s common stock.

Under the acquisition method of accounting, the total purchase price was allocated to the net tangible and intangible assets of VSCI acquired in the Merger, based on their fair values at the effective date of the Merger. The allocation was finalized without any change to the preliminary allocation and is as follows:

Cash and cash equivalents	$	2,020,000
Accounts receivable		4,249,000
Inventories		4,462,000
Other current assets		369,000
Property, plant and equipment		817,000
Goodwill		18,750,000
Other intangibles		13,660,000
Other non-current assets		97,000
Total assets acquired	$	44,424,000
Accounts payable and other liabilities	$	5,209,000
Deferred revenue		176,000
Convertible debt – related party		22,530,000
Other non-current liabilities		40,000
Total liabilities assumed		27,955,000
Total purchase price	$	16,469,000

The allocation of the purchase price to the net assets acquired and liabilities assumed resulted in the recognition of the following intangible assets:

	Amount		Weighted Average Life-Years
Developed technology	$	6,200,000		7
Customer relationships		7,270,000		5
Trade names		190,000		10
	$	13,660,000

Page 12

The supplemental unaudited pro forma net sales and net loss of the combined entity had the acquisition been completed on January 1, 2015:

	Nine months ended September 30, 2015 (unaudited)
Supplemental pro forma combined results of operations:
Net sales	$	35,669,538
Net loss	$	(12,164,228	)
Net loss per share – basic and diluted	$	(0.47	)

Adjustments to the supplemental pro forma combined results of operations are as follows:

	Nine months ended September 30, 2015 (unaudited)
Increase in amortization of intangibles	$	594,000
Interest amortization on related party debt		282,000
Increase in net loss	$	876,000

These unaudited pro forma condensed consolidated financial results have been prepared for illustrative purposes only and do not purport to be indicative of the results of operations that actually would have resulted had the acquisition occurred on January 1, 2015, or of future results of the consolidated entities.  The unaudited pro forma condensed consolidated financial information does not reflect any operating efficiencies and cost savings that may be realized from the integration of the acquisition.

Note 3. Goodwill and Other Intangible Assets

Goodwill

As described in Note 2, on March 31, 2015, for accounting purposes, UPI was deemed to have acquired VSCI for a purchase price of $16.5 million, and as a result, the Company recognized $18.8 million in goodwill. There was no change in the goodwill balance as of September 30, 2016.

Other Intangible Assets

Other intangible assets consisted of the following at September 30, 2016 and December 31 2015:

	September 30, 2016				December 31, 2015
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Developed technology	$	6,200,000	$	2,230,000	$	6,200,000	$	664,000
Patents		5,653,000		5,608,000		5,653,000		5,586,000
Trademarks and trade names		190,000		73,000		190,000		67,000
Customer relationships		7,270,000		1,329,000		7,270,000		1,150,000
	$	19,313,000	$	9,240,000	$	19,313,000	$	7,467,000
Accumulated amortization		9,240,000				7,467,000
Net book value of amortizable intangible assets	$	10,073,000			$	11,846,000

Page 13

For the nine months ended September, 2016 and 2015, amortization of intangible assets charged to operations was approximately $1,773,000 and $1,276,000, respectively.  The weighted average remaining amortization period for intangible assets as of September 30, 2016 was approximately 4.48 years.

Note 4. New Accounting Pronouncements

In August 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments.  This ASU is in response to diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows and provides guidance on eight specific cash flow classification issues.  It will be effective for reporting periods beginning after December 15, 2017, and interim periods within that reporting period.  Early adoption is permitted, including adoption in an interim period.  We do not believe the adoption of this update will have a material impact on our consolidated financial statements.

In March 2016, FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting. This ASU simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. This new standard is effective for annual periods beginning after December 15, 2016, and interim periods within that reporting period. Early adoption is permitted in any interim or annual period, with adjustments reflected as of the beginning of the fiscal year of adoption. We are evaluating the effect that this guidance will have on our consolidated financial statements and related disclosures.

In February 2016, FASB issued ASU 2016-2, Leases, under which lessees will recognize most leases on-balance sheet. This will generally increase reported assets and liabilities. For public entities, this ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2018. ASU 2016-2 mandates a modified retrospective transition method for all entities. The Company will begin the process of determining the impact this ASU will have on the Company’s consolidated financial statements.

In November 2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, which amends the guidance requiring companies to separate deferred income tax liabilities and assets into current and non-current amounts in a classified statement of financial position. This accounting guidance simplifies the presentation of deferred income taxes, such that deferred tax liabilities and assets be classified as non-current in a classified statement of financial position. This accounting guidance is effective for the Company beginning in the first quarter of 2017.  We do not believe the adoption of this update will have a material impact on our consolidated financial statements.

In September 2015, the FASB issued ASU No. 2015-16, Business Combinations (Topic 805).  The amendments in this update require that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined.  Under the new guidance, the acquirer should record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date.  On the face of the income statement or in the notes, the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods need to be reflected as if the adjustment to the provisional amounts had been recognized as of the acquisition date.  The amendments in ASU No. 2016-16 are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years.  We do not believe the adoption of this update will have a material impact on our financial statements.

In July 2015, the FASB issued ASU No. 2015-11, “Simplifying the Measurement of Inventory (Topic 330).”  Under the current guidance (i.e., ASC 330-10-352 before the ASU), an entity subsequently measures inventory at the lower of cost or market, with market defined as replacement cost, net realizable value (NRV), or NRV less a normal profit margin. An entity uses current replacement cost provided that it is not above NRV (i.e., the ceiling) or below NRV less an “approximately normal profit margin” (i.e., the floor).  The new guidance requires entities to measure most inventory “at the lower of cost and net realizable value,” thereby simplifying the current guidance under which an entity must measure inventory at the lower of cost or market (market in this context is defined as one of three different measures). The ASU will not apply to inventories that are measured by using either the last-in, first-out method or the retail inventory method.  The amendments in ASU No. 2015-11 are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years.  The adoption of this update will not have a material impact on our financial statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606).  The guidance in this update supersedes the revenue recognition requirements in Topic 605, “Revenue Recognition.”  In addition, the existing requirements for the recognition of a gain or loss on the transfer of nonfinancial assets that are not in a contract with a customer (for example, assets within the scope of Topic 360, Property, Plant, and Equipment, and intangible assets within the scope of Topic 350, Intangibles—Goodwill and Other) are amended to be consistent with the guidance on recognition and measurement (including the constraint on revenue) in this update.  Under the new guidance, an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  The amendments in ASU No. 2014-09 are effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early application is permitted for annual reporting periods beginning after December 31, 2016.  We are still evaluating whether or not this update is applicable to our business.

Page 14

Note 5. Fair Value Measurements

Estimates of fair value for financial assets and liabilities are based on the framework established in the accounting guidance for fair value measurements.  The framework defines fair value, provides guidance for measuring fair value and requires certain disclosures.  The framework prioritizes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.  The following three broad levels of inputs may be used to measure fair value under the fair value hierarchy:

· Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

· Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly.  These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

· Level 3: Significant unobservable inputs that cannot be corroborated by observable market data and reflect the use of significant management judgment.  These values are generally determined using pricing models for which the assumptions utilize management's estimates of market participant assumptions.

If the inputs used to measure the financial assets and liabilities fall within more than one of the different levels described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

On September 30, 2016 and December 31, 2015, the only asset or liability measured at fair value on a recurring basis was the long-term incentive plan accrual with a fair value of $10,000 and $130,000, respectively, considered a level 3 measurement. The long-term incentive plan began on October 2, 2014 and is described in Note 9. The estimated fair value of the accrual is calculated on a quarterly basis using a Monte Carlo valuation model.  Vesting is based on the probability of meeting the stock price criteria, the probability of which is considered in determining the estimated fair value.

Remeasurements to fair value on a nonrecurring basis relate primarily to our property, plant and equipment and intangible assets and occur when the derived fair value is below their carrying value on our Consolidated Balance Sheet.  As of September 30, 2016 and December 31, 2015 we had no remeasurements of such assets to fair value.

The carrying amounts reported in the Condensed Consolidated Balance Sheets for cash and cash equivalents, accounts receivable, inventories, other current assets, accounts payable, accrued liabilities and convertible debt-related party approximate fair market value.

Note 6. Line of Credit

On September 18, 2015, we entered into a loan agreement with Venture Bank, a Minnesota banking corporation, providing us with a committed $7 million secured revolving credit facility (“Facility”), subject to eligible accounts receivable and inventory.  The Facility will expire on March 18, 2017 and any loans outstanding on such date will mature and become payable.  The Facility is secured by substantially all of our assets.

Under the Facility, we may borrow the lesser of:  (a) the sum of (i) eighty percent (80%) of the value of eligible accounts receivable; and (ii) forty percent (40%) of the value of eligible inventory capped at the lesser of (1) $2 million or (2) fifty percent (50%) of the principal balance outstanding; or (b) $7 million.  As of September 30, 2016, based on eligible receivables and inventory, our total available borrowing base was $6,028,000.  We did not have any borrowings under the Facility as of September 30, 2016 and December 31, 2015.

Loans under the Facility bear interest at a rate per annum equal to the Wall Street Journal Prime Rate plus 2.25%, provided that in no case will the interest charged be less than 5.5%.  In the event that there is an event of default under the Facility, the interest rate will be increased by 6.0% for the entire period that an event of default exists.  In addition, we pay a non-usage fee of 0.25% based on the average unused and available portion of the Facility on a monthly basis.

Page 15

Note 7. Inventories

Inventories are stated at the lower of cost (first-in, first-out method) or market (net realizable value).  We value at lower of cost or market the slow moving and obsolete inventories based upon current and expected future product sales and the expected impact of product transitions or modifications.  Inventories consist of the following:

	September 30, 2016		December 31, 2015
Raw materials	$	3,998,000	$	2,385,000
Work-in-process		779,000		793,000
Finished goods		1,445,000		1,407,000
	$	6,222,000	$	4,585,000

Inventories acquired in a business combination are recorded at their estimated fair value less profit for sales efforts and expensed in cost of sales as that inventory is sold.  As of March 31, 2015, the purchase accounting adjustment of $240,000 related to VSCI inventory was recorded in cost of goods sold over approximately the first four months of the transition period ended December 31, 2015.

Note 8. Net Income / Loss per Common Share

We calculate basic net income (loss) per common share amounts by dividing net income (loss) by the weighted-average common shares outstanding.  For calculating diluted net income (loss) per common share amounts, we add additional shares to the weighted-average common shares outstanding for the assumed exercise of stock options and vesting of restricted shares, if dilutive.  Because we had a net loss during the nine months ended September 30, 2016 and 2015, and the three months and nine months ended September 30, 2015, the following options and warrants and outstanding and unvested restricted stock to purchase shares of our common stock were excluded from diluted net loss per common share because of their anti-dilutive effect, and therefore, basic net loss per common share equals dilutive net loss per common share:

	Number of options, warrants and unvested restricted stock		Range of stock option and warrant exercise prices
Three months ended September 30, 2015		3,762,000	$	1.64 to $24.40
Nine months ended September 30, 2016		2,975,000	$	0.88 to $24.40
Nine months ended September 30, 2015		3,762,000	$	1.64 to $24.40

The following options and warrants are excluded from our EPS calculation because they are antidilutive:

	Number of options, warrants and unvested restricted stock		Range of stock option and warrant exercise prices
Three months ended September 30, 2016		2,231,000	$	1.03 to $24.40

Note 9. Shareholders’ Equity

Share-based compensation.  On September 30, 2016, the Company had one active plan, the Cogentix Medical 2015 Omnibus Incentive Plan, for share-based compensation grants (“the 2015 Plan”). Under the 2015 Plan, if we have a change in control (as defined in the 2015 Plan) and the Company is not the surviving entity, all outstanding grants, including those subject to vesting or other performance targets, fully vest immediately if they are not assumed or replaced with equivalent grants.  If the Company is the surviving entity, there is no accelerated vesting of equity grants solely upon a change in control.  Under the 2015 Plan, we reserved 2,500,000 shares of our common stock for share-based grants and 1,475,870 shares remain available for grant on September 30, 2016.

We recognize share-based compensation expense in our Condensed Consolidated Statement of Operations based on the fair value at the time of grant of the share-based payment over the requisite service period.  We incurred approximately $440,000 and $951,000 in share-based compensation expense for the nine months ended September 30, 2016 and 2015, respectively.

Page 16

On September 30, 2016, we had approximately $371,000 of unrecognized share-based compensation expense, net of estimated forfeitures, related to stock options that we expect to recognize over a weighted-average period of approximately 2.25 years.

We grant option awards with an exercise price equal to the closing market price of our stock at the date of the grant.  Options granted under this plan generally expire seven years from date of grant and vest at varying rates ranging up to three years.

We determined the fair value of our option awards using the Black-Scholes option pricing model.  We used the following weighted-average assumptions to value the options granted during the nine months ended September 30:

	2016			2015
Expected life in years		3.90			3.84
Risk-free interest rate		0.98	%		1.11	%
Expected volatility		64.32	%		63.94	%
Expected dividend yield		0	%		0	%
Weighted-average grant date fair value	$	0.49		$	0.79

The expected life for options granted represents the period of time we expect options to be outstanding based on historical data of option holder exercise and termination behavior for similar grants.  The risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury rate over the expected life at the time of grant.  Expected volatility is based upon historical volatility of our stock.  We estimate the forfeiture rate for stock awards to be approximately 15% for executive employees and directors and approximately 20% for non-executive employees for calendar year 2016 awards based on our historical experience.

The following table summarizes the activity related to our stock options during the nine months ended September 30, 2016:

	Number of shares			Weighted average exercise price		Weighted average remaining life in years		Aggregate intrinsic value
Outstanding at December 31, 2015		2,573,640		$	4.44		4.64	$	-
Options granted		692,400			1.05
Options exercised		-			-
Options surrendered		(1,566,135	)		3.90
Outstanding at September 30, 2016		1,699,905		$	3.54		6.79	$	578,213
Exercisable at September 30, 2016		818,333		$	6.03		3.95	$	16,062

The total fair value of stock options that vested during the nine months ended September 30, 2016 and 2015 was approximately $268,000 and $600,000, respectively.

Our 2015 Plan also permits the compensation committee of our board of directors to grant other stock-based benefits, including restricted shares. The following table summarizes the activity related to our restricted shares during the nine months ended September 30, 2016:

	Number of Shares			Weighted average grant date fair value		Weighted average remaining life in years		Aggregate intrinsic value
Balance at December 31, 2015		686,910		$	2.41		1.59	$	886,114
Shares granted		837,858			1.06
Shares vested		(323,613	)		2.19
Shares forfeited		(301,822	)		2.48
Balance at September 30, 2016		899,333		$	1.21		1.54	$	1,636,786

Page 17

The aggregate intrinsic value shown above for the restricted shares represents the total pre-tax value based on the closing price of our common stock at the end of each period.

On September 30, 2016, we had $907,000 of unrecognized share-based compensation expense, net of estimated forfeitures, related to restricted shares that we expect to recognize over a weighted-average period of approximately 1.54 years.

Stock Warrants-Related Party.  On September 30, 2016, the Company has warrants outstanding that were issued to Mr. Lewis C. Pell, a member of the Company’s board of directors, to purchase an aggregate of 376,123 shares of our common stock at a weighted average exercise price of $9.31 per share.  The duration in which the warrants may be exercised commences on the earlier of (i) March 31, 2018 or (ii) three days prior to the record date established for the declaration of any dividend or distribution of any rights in respect to our common stock in cash or other property other than our common stock, and terminates on the later of (x) the maturity date of the convertible promissory notes held by Mr. Pell and described further in Note 10 or (y) the date the convertible promissory notes are paid in full or converted into shares.  In addition, the warrants may be exercised immediately prior to a change in control.

Long-Term Incentive Plan and Awards.  On October 1, 2014, the compensation committee of our board of directors and our board of directors approved and adopted a Performance Award Agreement under the Uroplasty, Inc. 2006 Amended Stock and Incentive Plan, as amended, and on October 2, 2014, grants of Performance Awards (the “Awards”) were made to members of our senior management team.

Performance goals for the Awards are based on the achievement of specified stock price targets during the period beginning on the date of grant and ending on the fourth anniversary of the date of grant or, if earlier, the closing date of a change of control (as defined in the Plan) of the Company (the “Performance Period”).  The stock price targets under the Awards are: $7.57 price per share of common stock, $10.32 price per share of common stock and $13.76 price per share of common stock.

A stock price target is considered achieved on the date (a) the average closing price of a share of our common stock equals or exceeds a stock price target for at least 45 consecutive trading days or (b) of the consummation of a change of control of the Company, provided the closing price of a share of our common stock on the last trading day immediately preceding the closing date of the change of control equals or exceeds a stock price target not previously achieved during the Performance Period.

The Awards are accounted for as liability awards under the share-based compensation accounting guidance, as the awards are based on the performance of our common stock and are expected to be settled in cash.  Expense for the awards is recognized over the derived service period of approximately 2.4 years. We recorded a liability of approximately $10,000 at September 30, 2016 and related reversal of expense was approximately $57,000 for the nine months ended ending September 30, 2016 for the Awards.

Note 10. Convertible Debt – Related Party

The following table is a summary as of September 30, 2016 of our convertible debt issued to a related party:

	Gross Principal Amount		Unamortized Debt Discount			Net Amount
Note Payable A	$	20,000,000	$	(3,048,813	)	$	16,951,187
Note Payable B		3,500,000		(470,720	)		3,029,280
Note Payable C		4,990,000		(797,326	)		4,192,674
	$	28,490,000	$	(4,316,859	)	$	24,173,141

Page 18

The convertible debt is held by Mr. Lewis C. Pell, a member of the Company’s board of directors, and consists of three convertible promissory notes.

•  Note Payable A accrues annual interest at the rate of 0.84%. The outstanding principal amount of Note Payable A is convertible into shares of our common stock at a conversion price of $6.00 per share.

•  Note Payable B accrues annual interest at the rate of 1.66%. The outstanding principal amount of Note Payable B is convertible into shares of our common stock at a conversion price of $4.45 per share.

•  Note Payable C accrues annual interest at the rate of 1.91%. The outstanding principal amount of Note Payable C is convertible into shares of our common stock at a conversion price of $5.55 per share.

At September 30, 2016, we had an aggregate amount of $1,019,120 in accrued interest under the convertible notes payable, which is shown as interest payable on our condensed consolidated balance sheet.

The convertible promissory notes mature on March 31, 2020 or earlier upon a change of control (as defined therein).  The convertible promissory notes generally cannot be converted by Mr. Pell prior to March 31, 2018. The convertible promissory notes may be converted earlier prior to a change in control or in connection with our prepayment of the convertible promissory notes.  The convertible promissory notes may be prepaid, at our option and upon 15 days’ notice to Mr. Pell, without other premium or penalty, with a combination of cash and common stock.  Interest on the convertible promissory notes is payable on the maturity date or upon repayment or conversion of all or any portion of the principal under the note.

Under purchase accounting for the Merger, the convertible promissory notes were recorded at fair value on the effective date of the Merger, resulting in a discount from their face value of $5,960,000 as of March 31, 2015. The discount is being amortized over the remaining term based on the effective interest rate method with an imputed interest rate of 4.72%.

Note 11. Savings and Retirement Plans

We sponsor various retirement plans for eligible employees in the United States, the United Kingdom, and The Netherlands. Our retirement savings plan in the United States conforms to Section 401(k) of the Internal Revenue Code and participation is available to substantially all employees. We may also make discretionary contributions ratably to all eligible employees. We made discretionary contributions to the U.S. plan of $308,000 and $259,000 for the nine months ended September 30, 2016, and 2015, respectively.

Our international subsidiaries have defined benefit retirement plans for eligible employees.  These plans provide benefits based on the employee’s years of service and compensation during the years immediately preceding retirement, termination, disability, or death, as defined in the plans.

The cost for our defined benefit retirement plans in The Netherlands and the United Kingdom includes the following components for the three- and nine-month periods ended September 30:

	Three Months Ended September 30						Nine Months Ended September 30
	2016			2015			2016			2015
Gross service cost	$	28,000		$	36,000		$	83,000		$	102,000
Interest cost		29,000			24,000			87,000			77,000
Expected return on assets		(24,000	)		(19,000	)		(72,000	)		(59,000	)
Amortization		(2,000	)		7,000			(5,000	)		14,000
Net periodic retirement cost	$	31,000		$	48,000		$	93,000		$	134,000

Note 12. Business Segment Information

ASC 280, “Segment Reporting,” establishes disclosure standards for segments of a company based on management’s approach to defining operating segments.  Reportable segments are defined primarily by the nature of products and services, the nature of the production processes, and the type of customers for our products and services.

Page 19

We operate in two markets, the medical market and the industrial market.  Within the medical market, we have a number of product lines, endoscopy-based products, including our PrimeSight flexible fiber and video endoscopes used in the practices of urology, pulmonology, trans-nasal esophagoscopy and ENT (ear, nose and throat) and a proprietary sterile disposable microbial barrier, known as EndoSheath Protective Barrier, the Urgent^® PC Neuromodulation System (“Urgent PC System”) a minimally-invasive, neuromodulation system that delivers percutaneous tibial nerve stimulation for office-based treatment of overactive bladder and associated symptoms; and Macroplastique® Implants (“Macroplastique”), an injectable, urethral bulking agent for the treatment of adult female stress urinary incontinence.

None of the industrial market sales, net losses or assets are more than 10% of our total sales, losses or assets.  Therefore, we aggregate our operating segments into one reportable segment in accordance with the objectives and principles of the applicable guidance.

For the three and nine months ended September 30, no country other than the United States represented more than 10% of our consolidated revenue.  Information regarding net sales to customers by geographic area for the three and nine months ended September 30 is as follows:

	United States		United Kingdom		All Other Foreign Countries (1)		Consolidated
Three months ended September 30, 2016	$	10,701,000	$	851,000	$	1,856,000	$	13,408,000
Three months ended September 30, 2015	$	8,828,000	$	596,000	$	2,410,000	$	11,834,000
Nine months ended September 30, 2016	$	28,877,000	$	3,036,000	$	6,706,000	$	38,619,000
Nine months ended September 30, 2015	$	21,520,000	$	2,954,000	$	5,530,000	$	30,004,000

(1) No other country accounts for 10% or more of the consolidated net sales.

Information regarding geographic area in which we maintain long-lived assets is as follows:

	United States		United Kingdom		The Netherlands		Consolidated
September 30, 2016	$	1,738,000	$	2,000	$	462,000	$	2,202,000
December 31, 2015	$	2,089,000	$	3,000	$	463,000	$	2,555,000

Accounting policies of the operations in the various geographic areas are the same as those described in Note 1.  Net sales attributed to each geographic area are net of intercompany sales.  No single customer represents 10% or more of our consolidated net sales.  Long-lived assets consist of property, plant and equipment.

Note 13. Subsequent Event

On September 7, 2016, we entered into a securities purchase agreement (the “Purchase Agreement”) with Accelmed Growth Partners, L.P. (“Accelmed”).  Under the terms of the Purchase Agreement, Accelmed purchased 16,219,033 shares of our common stock at $1.55 per share, for an aggregate price of $25 million.  As a condition to Accelmed closing the equity investment, the Company converted into common shares all the outstanding debt and accrued interest (see Note 10) owed to Lewis C. Pell.  On September 7, 2016, the Company and Mr. Pell entered into a definitive agreement (the “Note Exchange Agreement”) under which the debt owed by Cogentix to Mr. Pell was converted into Cogentix common stock at a price per share of $1.67 prior to closing the Purchase Agreement.  The Note Exchange Agreement also provides that, simultaneously with the conversion of such debt, all outstanding warrants (see Note 9) to purchase Cogentix common stock held by Mr. Pell were cancelled.

On November 3, 2016, the shareholders of the Company approved the transactions described above and these transactions closed on November 3, 2016.  As such, we converted all of the outstanding principal amount, approximately $28.5 million, and accrued interest, approximately $1.0 million, on our promissory notes held by Mr. Pell into 17,688,423 shares of our common stock.  We also issued 16,219,033 shares of our common stock to Accelmed in exchange for $25 million.

Page 20

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-looking Statements

We recommend that you read this quarterly report on Form 10-Q in conjunction with our annual report on Form 10-KT for the nine-months ended December 31, 2015.

You should read the following discussion of our financial condition and results of operation together with the unaudited consolidated financial statements and the notes thereto included elsewhere in this report and other financial information included in this report.  The following discussions may contain predictions, estimates and other forward-looking statements that involve a number of risks and uncertainties, as we discussed in our special note regarding “Forward-Looking Statements” beginning on page 3 of this report and under “Part I - Item 1A. Risk Factors” in our annual report on Form 10-KT for the nine-months ended December 31, 2015.  These risks could cause our actual results to differ materially from any further performance suggested below.

We do not undertake, nor assume any obligation, to update any forward-looking statement that we may make from time to time.

Overview

Cogentix Medical is a global medical device company.  We design, develop, manufacture and market innovative proprietary technologies serving the urology and airway management markets.  The Urgent^® PC Neuromodulation System is an FDA-cleared device that delivers percutaneous tibial nerve stimulation for the office-based treatment of overactive bladder (OAB).  The FDA-cleared PrimeSight^TM Endoscopy Systems utilizing the EndoSheath Protective Barrier 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.  We also offer 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 the VOX^® for vocal cord augmentation.

On December 21, 2014, Vision-Sciences entered into a merger agreement with Uroplasty, a publicly traded corporation.  The merger agreement provided for the merger of Uroplasty with and into a newly created, wholly-owned merger subsidiary of Vision-Sciences (the “Merger”).  Following the approval of the Merger by Vision-Sciences’ and Uroplasty’s stockholders on March 30, 2015 and pursuant to the terms of the merger agreement, on March 31, 2015, Uroplasty merged with and into the  Merger Sub, with Merger Sub continuing as the surviving entity and a wholly-owned subsidiary of Vision-Sciences under the name “Uroplasty, LLC.”  Vision-Sciences changed its name to “Cogentix Medical, Inc.”

The Merger was accounted for as a reverse acquisition due to a number of factors including the relative voting interests in the combined company of the former Vision-Sciences and Uroplasty stockholders following the Merger.  As a result, Uroplasty and its consolidated subsidiaries represent the accounting acquirer in the Merger, and Vision and its consolidated subsidiary represent the legal acquirer in the Merger.  Accordingly, while Vision was the legal acquirer in the Merger, Uroplasty is treated as the acquiring company in the Merger for accounting purposes.

As a result of the Merger, our financial statements prior to March 31, 2015 are the historical financial statements of Uroplasty, and our financial statements on and after March 31, 2015 reflect the results of the operations of Uroplasty and Vision-Sciences on a combined basis.  We refer you to Note 2 to the “Notes to Consolidated Financial Statements” in Part II, Item 8 of our annual report on Form 10-KT for the nine-months ended December 31, 2015 for an additional description of the Merger, the accounting treatment of the Merger, and the pro forma financial information for Cogentix on a combined basis.

On September 7, 2016, we entered into a securities purchase agreement (the “Purchase Agreement”) with Accelmed Growth Partners, L.P. (“Accelmed”).  Under the terms of the Purchase Agreement, Accelmed agreed to purchase 16,219,033 shares of our common stock at $1.55 per share, for an aggregate price of $25.0 million.  As a condition to Accelmed closing the equity investment, we agreed to convert into shares of our common stock all of the outstanding debt and accrued interest owed to Lewis C. Pell, one of our directors.  On September 7, 2016, we entered into a definitive agreement with Mr. Pell (the “Note Exchange Agreement”) under which the debt we owed to Mr. Pell would be converted into our common stock at a price per share of $1.67 prior to closing the Purchase Agreement.  The Note Exchange Agreement also provided that, simultaneously with the conversion of such debt, all outstanding warrants to purchase our common stock that are held by Mr. Pell would be cancelled.

Page 21

After the end of the third quarter, on November 3, 2016, our shareholders approved the transactions described above, and these transactions closed on November 3, 2016.  We converted the outstanding principal amount, approximately $28.5 million, and accrued interest, approximately $1.0 million, on our promissory notes held by Mr. Pell into 17,688,423 shares of our common stock.  We also issued 16,219,033 shares of our common stock to Accelmed in exchange for $25.0 million.

As a result of the transactions described above, Mr. Pell and Accelmed own or control a majority of the outstanding common stock of the Company as of November 3, 2016. In connection with the Purchase Agreement, Accelmed and Mr. Pell entered into a voting agreement (the “Voting Agreement”).  Pursuant to the terms of the Voting Agreement, Mr. Pell and Accelmed have agreed to vote their shares of the company’s common stock for the other party’s nominees to the board of directors.  Under the Voting Agreement, each of Mr. Pell and Accelmed are entitled to nominate two directors, with the remaining seats to be filled by nominees that are mutually agreed upon by Mr. Pell and Accelmed in accordance with the terms of the Voting Agreement. The Voting Agreement is intended, in part, to qualify the Company as a “Controlled Company” under Nasdaq Rule 5615(c)(2), which permits the Company to utilize the controlled company exemption to the independent director requirements of Nasdaq Listing Rule 5605.  Additionally, under the terms of the Purchase Agreement, the Company has agreed that one of the directors nominated to the board by Accelmed shall serve as Chairman of the Board until Accelmed or its affiliates no longer own 50% of the shares purchased pursuant to the Purchase Agreement or unless otherwise agreed by Accelmed.  The Company also amended its bylaws to reduce the required quorum for all stockholder meetings to one-third of all issued and outstanding shares of voting stock of the Company.

Critical Accounting Policies

We prepare our consolidated financial statements in accordance with U.S. generally accepted accounting principles, or GAAP, which require us to make estimates and assumptions in certain circumstances that affect amounts reported.  In preparing these consolidated financial statements, we have made our best estimates and judgments of certain amounts, giving due consideration to materiality.

We have identified in our annual report on Form 10-KT for the nine-months ended December 31, 2015, our “critical accounting policies,” which are certain accounting policies that we consider important to 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.  Management made no significant changes to our critical accounting policies during the nine months ended September 30, 2016.

Results of Operations

The reported operations for the three months ended September 30, 2016 and 2015 and the nine months ended September 30, 2016, are the results of Cogentix, while the nine months ended September 30, 2015 include the results of UPI for the period from January 1, 2015 through March 31, 2015 and the results of Cogentix beginning April 1, 2015, the day after the Merger was closed.  As such, results for the nine month current period will be materially different than the reported numbers of the same period of the prior year.

Three months ended September 30, 2016 compared to three months ended September 30, 2015

Net Sales:  During the current period, consolidated net sales of $13,408,000 represented a $1,574,000, or a 13% increase, over net sales of $11,834,000 from the prior period.  The revenue for the products from our PrimeSight endoscopy products increased $1,731,000, or 38%, in the current period.  This increase is due to our sales force becoming more proficient in selling this technology as well the fact that our PrimeSight technology platform meets the needs of our medical customers for always sterile, always ready flexible endoscopy solutions. Our PrimeSight products have been clinically proven to reduce the risk of cross contamination associated with the reuse or reprocessing of difficult to clean conventional endoscopes and they also reduce the typical 45-minute reprocessing time to less than 10 minutes, allowing for greater patient throughput, increased physician productivity and ultimately economic benefit for our customers.

Net sales to customers in the U.S. of $10,839,000 during the current period represented an increase of $1,874,000, or 21%, over net sales of $8,965,000 in the prior period.Our PrimeSight business had $4,700,000 in revenue in the U.S., up $1,600,000 or 50% from the year ago quarter.  The urology portion of our PrimeSight business had growth of $1,400,000 or 87%.  Urgent PC revenue in the U.S. was $4,600,000, representing growth of $300,000 or 6% over the prior period.  Urgent PC unit growth of 14% was partially offset by lower average selling prices.  While a new competitor to Urgent PC entered the market in early 2016, our sales team has effectively demonstrated the clinical efficacy and value proposition of Urgent PC to our physician customers resulting in the increased sales. The sales team continues to place a strong emphasis on servicing existing accounts and increasing utilization within existing accounts.

Page 22

Net sales to international customers of $2,600,000 for the third quarter decreased $300,000, or 11%, from the year ago quarter.  Two items were responsible for this decrease.  First, we experienced an unexpected delay in the renewal of our CE Mark for certain of our products during the third quarter, and due to this delay, we had approximately $350,000 in customer orders that we could not ship in the third quarter.  On short notice, we were forced to find a new notified body in order to renew the CE certificates when our existing notified body could not fulfill its obligations to us. In addition to the CE Mark delay, the impact of changes in foreign currency exchange rates negatively impacted international revenue by $100,000 or 1%. Absent these two items, international revenue would have increased $150,000 or 5% for the third quarter of 2016.  Subsequent to the end of the third quarter, we have obtained renewal of the CE Mark for Macroplastique and Urgent PC and  we expect our fourth quarter international revenues to be positively impacted by the shipment of the customer orders on hold at the end of the third quarter.

Gross Profit:  Gross profit was $9,038,000, or 67.4% of net sales in the current period, compared to $7,880,000, or 66.6% of net sales in the prior period.  The increase in gross profit percentage is attributed primarily to the expiration of an unprofitable Stryker Corporation distribution arrangement for ureteroscopes that was not renewed at the end of calendar 2015.

General and Administrative Expenses (G&A):  G&A expenses of $1,558,000 in the current period decreased $377,000 from $1,935,000 in the prior period.  The decrease is attributed primarily to lower legal, share based compensation, and consulting costs.

Research and Development Expenses (R&D):  R&D expenses of $1,219,000 in the current period increased $184,000 from $1,035,000 in the prior period.  The increase is attributed to increased spend on R&D projects and regulatory expenses, partially offset by lower personnel and legal costs.

Selling and Marketing Expenses (S&M):  S&M expenses of $5,203,000 in the current period decreased $643,000, from $5,846,000 in the prior period.  The decrease is attributed primarily to a decrease in sales personnel costs due to lower headcount as a result of the Merger and the repeal of the medical device tax.

Amortization of Intangibles: Amortization of intangibles was $591,000 in the current period compared to $634,000 in the prior period.  The decrease is due to certain identifiable intangible assets recorded as part of the Merger being fully amortized.

Proxy Settlement Costs:  On May 23, 2016, the Company and all of the then-current members of the board of directors of the Company, including Director Mr. Lewis Pell who had been independently soliciting proxies to support his proposals for the Company’s 2016 Annual Meeting of Stockholders originally scheduled for May 20, 2016 and adjourned for May 24, 2016, entered into an agreement to settle the pending proxy contest between the Company and Mr. Pell and related litigation in connection with the Annual Meeting (the “Settlement”).  We negotiated a credit for certain legal fees associated with the Settlement and recorded a reduction to these costs of $54,000.  There were no similar costs in the same period of the prior year.

Merger Related Costs:  Merger related costs totaled $437,000 in the three months ended September 30, 2015.  There were no similar costs in the current period.  Merger related costs include severance and retention, consulting and professional fees.

Other Income (Expense):  Other income (expense) includes interest income, interest expense, foreign currency exchange and other non-operating costs when incurred.  Net other expense was $396,000 in the current period compared to net other expense of $351,000 in the prior period.  Interest expense totaled $381,000 in the current period compared to $353,000 in the prior period.  This interest expense is primarily due to accrued interest on related party debt and the amortization of the debt discount associated with this debt as a result of the Merger.

The related party debt has a weighted average stated interest rate of 1.13% resulting in $83,000 of interest expense for the current period, compared to $76,000 in the prior period.  For the current period, the non-cash amortization of the debt discount totaled $282,000, compared to $269,000 in the prior period.

Income Tax Expense:  We recorded income tax expense of approximately $19,000 in the current period and $11,000 in the prior period.  Income tax expense is attributed to our European subsidiaries and to the payment of minimum taxes in the U.S.

Nine months ended September 30, 2016 compared to nine months ended September 30, 2015

Net Sales:  During the current period, consolidated net sales of $38,619,000 represented an $8,615,000 or a 29% increase over net sales of $30,004,000 in the prior period.  The revenue for our PrimeSight endoscopy products increased $7,762,000, or 88% in the current period.  The primary reason for this increase is the Merger, which occurred on March 31, 2015.  In addition, there was increased customer demand and customer recognition of the benefits of the products in reducing the risk of cross-contamination and in increasing physician productivity.  Revenue from Urgent^® PC increased $1,170,000, or 8%.  While a new competitor to Urgent PC entered the market in early 2016, our sales team has effectively demonstrated the clinical efficacy and value proposition of Urgent PC to our physician customers resulting in the increased sales. The sales team continues to place a strong emphasis on servicing existing accounts and increasing utilization within existing accounts.

Page 23

Net sales to customers in the U.S. of $29,371,000 during the current period represented an increase of $6,771,000, or 30%, over net sales of $22,600,000 in the prior period. Net sales to customers outside the U.S. increased $1,844,000, or 25%, to $9,248,000, compared to $7,404,000 in the prior period.

Gross Profit:  Gross profit was $26,361,000, or 68.3% of net sales in the current period, and $21,596,000, or 72.0% of net sales in the prior period.  The decrease in gross profit percentage is attributed primarily to the addition of the PrimeSight endoscopy products as part of the Merger, which have lower margins than the Uroplasty products.

General and Administrative Expenses (G&A):  G&A expenses of $5,088,000 in the current period decreased $143,000 from $5,231,000 in the prior period.  The decrease is attributed primarily to lower shared based compensation legal, postage, and insurance costs, offset partially by increased accounting and consulting costs.

Research and Development Expenses (R&D):  R&D expenses of $3,256,000 in the current period increased $549,000 from $2,707,000 in the prior period.  The increase is attributed primarily to increased spend on R&D projects, regulatory expenses, and personnel costs, offset partially by lower clinical studies costs.

Selling and Marketing Expenses (S&M):  S&M expenses of $16,273,000 in the current period, decreased $1,169,000, from $17,442,000 in the prior period.  The decrease is attributed primarily to a decrease in sales personnel costs due to lower headcount and reduced marketing project spend, and the repeal of the medical device tax.

Amortization of Intangibles: Amortization of intangibles was $1,773,000 in the current period compared to $1,276,000 in the prior period.  The increase is due to the establishment of $13,660,000 of identifiable intangible assets on March 31, 2015, as a part of the allocation of purchase accounting in the Merger.  These identifiable intangible assets are being amortized over a weighted average life of approximately 6 years.

Proxy Settlement Costs: For the nine months ended September 30, 2016, the Company incurred $2,258,000 of costs related to the Settlement, including $758,000 of professional fees (primarily legal) and $1,500,000 of severance costs for the Company’s former CEO.  There were no similar costs in the same period of the prior year.

Merger Related Costs:  Merger related costs totaled $2,484,000 in the nine months ended September 30, 2015.  There were no similar costs in the current period.  Merger related costs include severance and retention, consulting and professional fees.

Other Income (Expense):  Other income (expense) includes interest income, interest expense, foreign currency exchange and other non-operating costs when incurred.  Net other expense was $1,187,000 in the current period compared to net other expense of $689,000 in the prior period.  Other expense increased primarily as the result of the acquisition of related party debt and the amortization of the debt discount along with accrued interest associated with this debt as a result of the Merger.

The related party debt has a weighted average stated interest rate of the 1.13% resulting in $262,000 of interest expense for the current period.  Further, as part of the purchase price accounting related to the Merger, the related party debt was discounted to fair value.  For the current period, the non-cash amortization of the debt discount totaled $836,000.

Income Tax Expense:  We recorded income tax expense of approximately $52,000 in the current period and $38,000 in the prior period.  Income tax expense is attributed to our European subsidiaries and to the payment of minimum taxes in the U.S.

Non-GAAP Financial Measures:  The following tables reconcile our operating income/loss calculated in accordance with GAAP to non-GAAP financial measures that exclude non-cash charges for share-based compensation expense, long-term incentive plan, depreciation and amortization, as well as proxy settlement costs incurred in 2016 and Merger-related costs in 2015.  The non-GAAP financial measures used by management and disclosed by us are not a substitute for, or superior to, financial measures and consolidated financial results calculated in accordance with GAAP, and you should carefully evaluate our reconciliations to non-GAAP.  We may calculate our non-GAAP financial measures differently from similarly titled measures used by other companies.  Therefore, our non-GAAP financial measures may not be comparable to those used by other companies.  We have described the reconciliations of each of our non-GAAP financial measures described above to the most directly comparable GAAP financial measures.

Page 24

We use this non-GAAP financial information, and in particular non-GAAP cash operating income/loss, for internal managerial purposes because we believe such measures are one important indicator of the strength and the operating performance of our business.  Analysts and investors frequently ask us for this information.  We believe that they use this information to evaluate the overall operating performance of companies in our industry, including as a means of comparing period-to-period results and as a means of evaluating our results with those of other companies.

Our non-GAAP cash operating income, excluding non-cash expenses, proxy settlement and Merger related costs, during the three months ended September 30, 2016 was $1,444,000 and our non-GAAP cash operating loss for the three months ended September 30, 2015 was $(382,000). Our non-GAAP cash operating income, excluding non-cash expenses and Merger related costs during the nine months ended September 30, 2016 was $2,713,000 and our non-GAAP cash operating loss for the nine months ended September 30, 2015 was $(2,417,000).

				Expense Adjustments
Three-Months Ended	GAAP			Share- based Expense			Long-term Incentive Plan			Depreciation			Amortization			Non-GAAP
September 30, 2016
Gross profit	$	9,038,000		$	5,000		$	-		$	42,000		$	-		$	9,085,000
% of net sales		67.4	%														67.8	%
Operating expenses
General and administrative		1,558,000			(174,000	)		18,000			(56,000	)		-			1,346,000
Research and development		1,219,000			(8,000	)		-			(2,000	)		-			1,209,000
Selling and marketing		5,203,000			(28,000	)		-			(89,000	)		-			5,086,000
Amortization		591,000			-			-			-			(591,000	)		-
Proxy settlement costs		(54,000	)		-			-			-			-			(54,000	)
		8,517,000			(210,000	)		18,000			(147,000	)		(591,000	)		7,587,000
Operating income (loss)		521,000			215,000			(18,000	)		189,000			591,000			1,498,000
Proxy settlement costs		(54,000	)		-			-			-			-			(54,000	)
Cash operating income (loss) excluding proxy settlement costs																$	1,444,000
September 30, 2015
Gross profit	$	7,880,000		$	8,000		$	-		$	59,000		$	-		$	7,947,000
% of net sales		66.6	%														67.2	%
Operating expenses
General and administrative		1,935,000			(313,000	)		77,000			(54,000	)		-			1,645,000
Research and development		1,035,000			(19,000	)		-			-			-			1,015,000
Selling and marketing		5,846,000			(73,000	)		-			(104,000	)		-			5,669,000
Amortization		634,000			-			-			-			(634,000	)		-
Merger related costs		437,000			-			-			-			-			437,000
		9,887,000			(405,000	)		77,000			(158,000	)		(634,000	)		8,766,000
Operating income (loss)		(2,007,000	)		413,000			(77,000	)		217,000			634,000			(820,000	)
Merger related costs		437,000			-			-			-			-			437,000
Cash operating income (loss) excluding Merger related costs																$	(383,000	)

Page 25

				Expense Adjustments
Nine-Months Ended	GAAP			Share- based Expense			Long-term Incentive Plan			Depreciation			Amortization			Non-GAAP
September 30, 2016
Gross profit	$	26,361,000		$	28,000		$	-		$	135,000		$	-		$	26,524,000
% of net sales		68.3	%														68.7	%
Operating expenses
General and administrative		5,088,000			(315,000	)		64,000			(155,000	)		-			4,682,000
Research and development		3,255,000			(16,000	)		-			(3,000	)		-			3,236,000
Selling and marketing		16,273,000			(81,000	)		-			(299,000	)		-			15,893,000
Amortization		1,773,000			-			-			-			(1,773,000	)		-
Proxy settlement costs		2,258,000			-			-			-			-			2,258,000
		28,647,000			(412,000	)		64,000			(457,000	)		(1,773,000	)		26,069,000
Operating income (loss)		(2,286,000	)		440,000			(64,000	)		592,000			1,773,000			455,000
Proxy settlement costs		2,258,000			-			-			-			-			2,258,000
Cash operating income (loss) excluding proxy settlement costs																$	2,713,000
September 30, 2015
Gross profit	$	21,596,000		$	29,000		$	-		$	115,000		$	-		$	21,740,000
% of net sales		72.0	%														72.5	%
Operating expenses
General and administrative		5,231,000			(662,000	)		85,000			(154,000	)		-			4,500,000
Research and development		2,707,000			(47,000	)		-			(8,000	)		-			2,652,000
Selling and marketing		17,442,000			(213,000	)		-			(224,000	)		-			17,005,000
Amortization		1,276,000			-			-			-			(1,276,000	)		-
Merger related costs		2,484,000			-			-			-			-			2,484,000
		29,140,000			(922,000	)		85,000			(386,000	)		(1,276,000	)		26,641,000
Operating income (loss)		(7,544,000	)		951,000			(85,000	)		501,000			1,276,000			(4,901,000	)
Merger related costs		2,484,000			-			-			-			-			2,484,000
Cash operating income (loss) excluding Merger related costs																$	(2,417,000	)

Liquidity and Capital Resources

Cash Flows.

On September 30, 2016, our cash and cash equivalents balances totaled $4,238,000 and we had working capital (current assets less current liabilities) of approximately $9,089,000.

For the nine months ended September 30, 2016, cash provided by operating activities was $2,875,000, compared to cash used in operating activities of $6,309,000during the nine months ended September 30, 2015.  For the nine months ended September 30, 2016, we incurred a net loss of $3,525,000.  Proxy settlement costs of approximately $1,841,000 have been expensed but not yet paid as of September 30, 2016.  The remaining severance of $1,431,000 included in the proxy settlement costs is to be paid over the next 21 months and certain legal fees have not yet been paid.  Further, non-cash depreciation and amortization expense totaled $2,365,000 and non-cash debt discount amortization totaled $836,000.  In addition, accounts receivables decreased by $1,399,000.  For the nine months ended September 30, 2015, we used cash primarily to fund the operating loss, net of non-cash charges for depreciation, amortization of intangibles, long-term incentive plan and share-based compensation of $2,643,000 and $2,484,000 of merger related costs.

Page 26

During the nine months ended September 30, 2016 we used cash from investing activities of $232,000 for the purchase of property, plant and equipment.  During the nine months ended September 30, 2015, we generated $589,000 of net cash from investing activities, primarily from cash acquired from the Merger, partially offset by purchases of property, plant and equipment.

During the nine months ended September 30, 2016 we used cash from financing activities of $376,000 for the fees associated with our equity financing (see Note 13).

Sources of Liquidity.

We obtained an 18-month line of credit through Venture Bank for $7.0 million in September 2015.  In addition, after the end of the third quarter, we received $25.0 million in exchange for the issuance of 16,219,033 shares to Accelmed pursuant to the Purchase Agreement described under the Overview to Management’s Discussion and Analysis of Financial Condition and Results of Operations.  This report covers the quarter ended September 30, 2016, and as a result, the proceeds from this equity investment are excluded from the financial results disclosed.

Our ability to achieve significant revenue growth and/or maintain profitability will depend, in large part, on our ability to achieve widespread market acceptance of our products and successfully expand our business.  We cannot guarantee that we will successfully achieve such revenue growth.  If we fail to meet our projections of profitability and cash flow, or determine to use cash for matters we are not currently projecting, we may need to seek additional financing to meet our cash needs.  We cannot assure you that such financing, if needed, will be available to us on acceptable terms, if at all.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are a smaller reporting company and are not required to provide the information required by this Item.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures.

Under the supervision and with the participation of our management, including our President and Chief Executive Officer and Chief Financial Officer (“CEO and CFO”), we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e)) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  Based on this evaluation, our CEO and CFO of our company concluded that, as of the end of the period covered by this report, our disclosure controls and procedures are effective in ensuring that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in applicable rules and forms and that such information is accumulated and communicated to our management, including our CEO and CFO, in a manner that allows timely decisions regarding required disclosure.

Changes In Internal Controls Over Financial Reporting.

As part of our ongoing activities after the Merger, we are continuing to integrate our financial reporting functions and our controls and procedures.  We have also been augmenting our company-wide controls to reflect the risks inherent in a business combination of the magnitude and complexity of the Merger.  During the most recently completed quarter, there were no changes in internal controls over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

As previously disclosed, on May 23, 2016, the Company and all of the then-current members of the board of directors, including Mr. Lewis Pell, who had been independently soliciting proxies to support his proposals for the Company’s 2016 Annual Meeting of Stockholders (the “Annual Meeting”), entered into an agreement (the “Settlement Agreement”) to settle the pending proxy contest between the Company and Mr. Pell and related litigation in connection with the Annual Meeting (the “Settlement”). Under the terms of the Settlement Agreement, Mr. Darin Hammers, the then-current Chief Operating Officer of the Company, was appointed to serve as the interim Chief Executive Officer and President for a maximum of 90 days, after which time, on the condition of his adequate performance in the sole judgment of a majority of the Board, the Company would appoint him as Chief Executive Officer and President of the Company and a director on the board to fill the vacancy created by the resignation of the former Chief Executive Officer.

Page 27

Effective July 11, 2016, Mr. Hammers was appointed as the Chief Executive Officer of the Company and also as a director to serve as a member of Class III of the board, resulting in the board being comprised of three independent directors and three non-independent directors.

On July 21, 2016, the Company received a letter (the “Letter”) from Nasdaq notifying it that it no longer complies with Nasdaq’s independent director requirements as set forth in Nasdaq Listing Rule 5605.  Nasdaq Listing Rule 5605 requires, among other things, that a majority of the board of directors of a listed company must be comprised of “independent directors” as defined therein.  In the Letter, Nasdaq indicated that the Company has 45 calendar days to submit a plan to regain compliance, and that Nasdaq can grant an extension of up to 180 calendar days from the date of the Letter to procure evidence of compliance if such plan is accepted by Nasdaq.

On September 2, 2016, the Company submitted a plan to Nasdaq as to how it plans to regain compliance with Nasdaq’s continued listing requirements, and requested an extension of time to regain compliance and on September 8, 2016, the Company received a response letter from a Director of Nasdaq Listing Qualifications, granting the Company an extension until January 17, 2017 to regain compliance with Nasdaq Listing Rule 5605.  The Voting Agreement between Mr. Lewis Pell and Accelmed, which is described under the Overview to Management’s Discussion and Analysis of Financial Condition and Results of Operations, is intended, in part, to qualify the Company as a “Controlled Company” under Nasdaq Rule 5615(c)(2), which permits the Company to utilize the controlled company exemption to the independent director requirements of Nasdaq Listing Rule 5605.

ITEM 1A. RISK FACTORS

We are a smaller reporting company and are not required to provide the information required by this Item.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Upon exercise of stock options or vesting of restricted stock, employees can request the company to withhold shares to pay the resulting income tax withholdings of the employee.  These transactions constitute stock repurchases and are the only stock repurchases engaged in by the Company.  Information regarding the Company’s stock repurchase during the nine months ended September 30, 2016 is as follows:

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
January 1, 2016 – March 31, 2016		-		-		-		-
April 1, 2016 – April 30, 2016		54,468		1.05		-		-
May1, 2016 – May 31, 2016		-		-
June  1, 2016 – June 30, 2016		730		1.02		-		-
July 1, 2016 – September 30, 2016		-		-		-		-
Total		55,198	$	1.04		-		-

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURE

Not applicable.

Page 28

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

Exhibits

Exhibit No.	Exhibit	Method of Filing
3.1	Amended and Restated By-laws of Cogentix Medical, Inc.	Incorporated by reference to Exhibit 3.2 to Quarterly Report on Form 10-Q as filed with the SEC on May 16, 2016 (file No. 000-20970).
3.1(a)	Amendment to the Amended and Restated By-laws of Cogentix Medical, Inc.	Incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K as filed with the SEC on September 12, 2016 (file No. 000-20970).
10.1	Settlement Agreement, dated May 23, 2016, by and among Cogentix Medical, Inc., Robert C. Kill, Lewis C. Pell, Howard I. Zauberman, Kevin H. Roche, Kenneth H. Paulus, James P. Stauner, and Cheryl Pegus.	Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K as filed with the SEC on May 27, 2016 (file No. 000-20870).
10.2	Separation and Release Agreement, dated May 23, 2016, by and among Cogentix Medical, Inc., Robert C. Kill and the other signatories thereto.	Incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K as filed with the SEC on May 27, 2016 (file No. 000-20870).
10.3	Second Amendment to Employment Agreement, dated May 24, 2016, by and among Cogentix Medical, Inc. and Darin Hammers.	Incorporated by reference to Exhibit 10.3 to Current Report on Form 8-K as filed with the SEC on May 27, 2016 (file No. 000-20870).
10.4	Employment Agreement, dated June 6, 2016, by and among Cogentix Medical, Inc. and Brett Reynolds.	Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K as filed with the SEC on June 15, 2016 (file No. 000-20870).
10.5	Employment Agreement, dated July 11, 2016, by and among Cogentix Medical, Inc. and Darin Hammers.	Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K as filed with the SEC on July 12, 2016 (file No. 000-20870).
10.6	Securities Purchase Agreement, dated September 7, 2016, by and between Cogentix Medical, Inc. and Accelmed Growth Partners, L.P.	Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K as filed with the SEC on September 7, 2016 (file No. 000-20870).
10.7	Note Exchange Agreement, dated September 7, 2016, by and between Cogentix Medical, Inc. and Lewis C. Pell.	Incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K as filed with the SEC on September 7, 2016 (file No. 000-20870).
10.8	Voting Agreement, dated September 7, 2016, by and between Accelmed Growth Partners, L.P. and Lewis C. Pell.	Incorporated by reference to Exhibit 99.2 to Current Report on Form 8-K as filed with the SEC on September 7, 2016 (file No. 000-20870).
31.1	Certification by the PEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith
31.2	Certification by the PFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith
32.1	Certification by the PEO pursuant to Section 18 USC Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Filed herewith
32.2	Certification by the PFO pursuant to Section 18 USC Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Filed herewith

Page 29

SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	COGENTIX MEDICAL, INC.
Date: November 14, 2016	By: /s/ DARIN HAMMERS Darin Hammers President and Chief Executive Officer (Principal Executive Officer)
Date: November 14, 2016	By: /s/ BRETT REYNOLDS Brett Reynolds Senior Vice President, Chief Financial Officer and Corporate Secretary (Principal Financial and Accounting Officer)

Page 30

EX-31.1

EXHIBIT 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Darin Hammers, certify that:

1. I have reviewed this report on Form 10-Q for the quarterly period ended September 30, 2016 of Cogentix Medical, Inc. (the “Registrant”);

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 and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-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 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.

Dated: November 14, 2016

/s/ DARIN HAMMERS

Darin Hammers

President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Brett Reynolds, certify that:

1. I have reviewed this report on Form 10-Q for the quarterly period ended September 30, 2016 of Cogentix Medical, Inc. (the “Registrant”);

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 and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-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 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.

Dated: November 14, 2016

/s/ Brett Reynolds

Brett Reynolds

Senior Vice President and Chief Financial Officer and Corporate Secretary

EX-32.1

 EXHIBIT 32.1

CERTIFICATION 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 Quarterly Report of Cogentix Medical, Inc. (the “Company”) on Form 10-Q for the quarterly period ended September 30, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Darin Hammers, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Darin Hammers

Darin Hammers

President and Chief Executive Officer

Dated: November 14, 2016

EX-32.2

EXHIBIT 32.2

CERTIFICATION 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 Quarterly Report of Cogentix Medical, Inc. (the “Company”) on Form 10-Q for the quarterly period ended September 30, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Brett Reynolds, Senior Vice President, Chief Financial Officer and Corporate Secretary of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Brett Reynolds

Brett Reynolds

Senior Vice President, Chief Financial Officer and Corporate Secretary

Dated: November 14, 2016

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2016	Nov. 08, 2016
Document and Entity Information [Abstract]
Entity Registrant Name	COGENTIX MEDICAL INC /DE/
Entity Central Index Key	0000894237
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		60,349,579
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q3
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2016

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($)	Sep. 30, 2016	Dec. 31, 2015
Current assets:
Cash and cash equivalents	$ 4,238,225	$ 1,976,594
Accounts receivable, net	6,769,476	8,191,391
Inventories	6,222,457	4,584,844
Deferred financing costs	1,350,900	0
Other	562,783	834,076
Total current assets	19,143,841	15,586,905
Property, plant, and equipment, net	2,201,942	2,554,822
Goodwill	18,749,888	18,749,888
Other intangible assets, net	10,073,436	11,846,009
Deferred tax assets and other	300,286	269,121
Total assets	50,469,393	49,006,745
Current liabilities:
Accounts payable	3,084,807	2,209,473
Income taxes payable	35,749	20,866
Accrued liabilities:
Compensation	5,075,767	3,281,809
Deferred revenue	504,274	307,936
Accrued legal fees	488,824	57,515
Accrued foreign and domestic sales tax/VAT	262,399	242,832
Accrued employee expenses	116,479	39,753
Other	486,447	301,461
Total current liabilities	10,054,746	6,461,645
Convertible debt - related party, net	24,173,141	23,336,854
Interest payable	1,019,120	757,615
Accrued pension liability	663,034	663,071
Deferred rent	647,876	671,088
Other	119,865	157,453
Total liabilities	36,677,782	32,047,726
Shareholders' equity:
Preferred stock, $0.01 par value 5,000,000 shares authorized; none issued or outstanding at September 30, 2016 and December 31, 2015, respectively	0	0
Common stock $0.01 par value; 100,000,000 shares authorized, 26,538,000 and 26,057,327 shares issued and outstanding at September 30, 2016 and December 31, 2015, respectively	265,382	260,574
Additional paid-in capital	76,863,499	76,485,650
Accumulated deficit	(62,435,568)	(58,910,707)
Accumulated other comprehensive loss	(901,702)	(876,498)
Total shareholders' equity	13,791,611	16,959,019
Total liabilities and shareholders' equity	$ 50,469,393	$ 49,006,745

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares	Sep. 30, 2016	Dec. 31, 2015
Shareholders' equity:
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized (in shares)	5,000,000	5,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	100,000,000	100,000,000
Common stock, shares issued (in shares)	26,538,000	26,538,000
Common stock, shares outstanding (in shares)	26,057,327	26,057,327

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) [Abstract]
Net sales	$ 13,407,611	$ 11,834,187	$ 38,618,826	$ 30,004,210
Cost of goods sold	4,369,574	3,953,940	12,257,933	8,408,218
Gross profit	9,038,037	7,880,247	26,360,893	21,595,992
Operating expenses
General and administrative	1,558,090	1,935,286	5,087,871	5,230,930
Research and development	1,218,669	1,035,253	3,255,603	2,707,016
Selling and marketing	5,203,477	5,845,798	16,272,678	17,442,292
Amortization of intangibles	590,858	634,191	1,772,574	1,275,644
Proxy settlement costs	(53,887)	0	2,257,654	0
Merger related costs	0	437,252	0	2,484,025
Total operating expenses	8,517,207	9,887,780	28,646,380	29,139,907
Operating income (loss)	520,830	(2,007,533)	(2,285,487)	(7,543,915)
Other income (expense)
Interest income	124	964	529	4,404
Interest expense	(380,803)	(353,387)	(1,147,470)	(697,181)
Foreign currency exchange gain (loss)	(14,905)	1,847	(40,311)	3,881
Total other income (expense)	(395,584)	(350,576)	(1,187,252)	(688,896)
Income (loss) before income taxes	125,246	(2,358,109)	(3,472,739)	(8,232,811)
Income tax expense	18,932	10,532	52,122	37,830
Net income (loss)	$ 106,314	$ (2,368,641)	$ (3,524,861)	$ (8,270,641)
Basic and diluted net income (loss) per common share (in dollars per share)	$ 0	$ (0.09)	$ (0.14)	$ (0.37)
Weighted average common shares outstanding:
Basic (in shares)	25,633,172	25,410,646	25,509,584	22,389,920
Diluted (in shares)	25,748,844	25,410,646	25,509,584	22,389,920

XML

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) [Abstract]
Net income (loss)	$ 106,314	$ (2,368,641)	$ (3,524,861)	$ (8,270,641)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	(4,458)	(859)	(29,080)	(123,161)
Pension adjustments	(41)	254	3,876	(331,736)
Total other comprehensive income (loss), net of tax	(4,499)	(605)	(25,204)	(454,897)
Comprehensive income (loss)	$ 101,815	$ (2,369,246)	$ (3,550,065)	$ (8,725,538)

XML

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (Unaudited) - 9 months ended Sep. 30, 2016 - USD ($)	Common Stock [Member]	Additional Paid-in Capital [Member]	Accumulated Deficit [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Total
Balance at Dec. 31, 2015	$ 260,574	$ 76,485,650	$ (58,910,707)	$ (876,498)	$ 16,959,019
Balance (in shares) at Dec. 31, 2015	26,057,327
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Share-based compensation	$ 5,360	434,640	0	0	440,000
Share-based compensation (in shares)	535,871
Payment of income tax from vested restricted stock	$ (552)	(56,791)			(57,343)
Payment of income tax from vested restricted stock (in shares)	(55,198)
Comprehensive loss	$ 0	0	(3,524,861)	(25,204)	(3,550,065)
Balance at Sep. 30, 2016	$ 265,382	$ 76,863,499	$ (62,435,568)	$ (901,702)	$ 13,791,611
Balance (in shares) at Sep. 30, 2016	26,538,000

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)	9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
Cash flows from operating activities:
Net loss	$ (3,524,861)	$ (8,270,641)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	2,364,673	1,776,856
Loss on disposal of equipment	5,640	43,311
Share-based compensation expense	440,000	951,290
Amortization of discount on related party debt	836,288	535,073
Long term incentive plan	(64,404)	(85,085)
Tax benefit	(284)	(93,913)
Deferred rent	6,836	616,781
Proceeds from restricted stock exchanged for taxes	(57,343)	(20,132)
Changes in operating assets and liabilities:
Accounts receivable, net	1,399,070	(504,545)
Inventories	(1,637,619)	(67,759)
Other current assets	265,395	(30,369)
Accounts payable	394,573	(710,725)
Interest payable	261,505	152,422
Accrued compensation	1,796,568	(59,175)
Accrued liabilities, other	213,387	(733,486)
Accrued pension liability	(45,463)	143,459
Deferred revenue	220,789	47,707
Net cash provided by (used in) operating activities	2,874,750	(6,308,931)
Cash flows from investing activities:
Cash acquired from merger with Vision-Sciences	0	2,019,610
Purchases of property, plant and equipment	(232,331)	(1,430,311)
Net cash (used in) provided by investing activities	(232,331)	589,299
Cash flows from financing activities:
Financing costs	(375,839)	0
Net cash used in financing activities	(375,839)	0
Effect of exchange rates on cash and cash equivalents	(4,949)	(55,463)
Net increase (decrease) in cash and cash equivalents	2,261,631	(5,775,095)
Cash and cash equivalents at beginning of period	1,976,594	8,703,790
Cash and cash equivalents at end of period	4,238,225	2,928,695
Supplemental disclosure of cash flow information:
Cash paid during the period for income tax	35,424	72,816
Cash paid during the period for interest	47,754	7,975
Non-cash financing activities:
Deferred financing costs in AP/Accruals	$ 975,061	$ 0

XML

Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2016

Summary of Significant Accounting Policies [Abstract]

Summary of Significant Accounting Policies

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 a robust line of high performance fiberoptic and video endoscopy products under the PrimeSight^TM brand that are used across multiple surgical specialties in diagnostic and treatment procedures. The FDA-cleared and CE marked PrimeSight Endoscopy Systems and EndoSheath Protective Barrier 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.  We also offer the Urgent^® PC Neuromodulation System, a device that delivers percutaneous tibial nerve stimulation, for the office-based treatment of overactive bladder (“OAB”).  The Urgent® PC Neuromodulation System has FDA clearance in the United States and has regulatory approvals for the treatment of OAB and fecal incontinence (FI) in various international markets. 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. (“UPI”) and Vision-Sciences, Inc. (“VSCI”).  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, a wholly owned subsidiary of VSCI.   VSCI continued to be the sole member of the surviving company.  After the Merger, VSCI changed its name to 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.

All share amounts and price per share amounts for all periods presented relate to VSCI shares with UPI shares and price per share converted to VSCI amounts based on the conversion ratio in the acquisition agreement and the one for five reverse stock split that occurred on March 31, 2015.

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-KT for the nine-months ended December 31, 2015.

The Condensed Consolidated Financial Statements presented herein as of September 30, 2016 and for the three and nine month periods ended September 30, 2016 and 2015, 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-KT for the nine-months ended December 31, 2015.  Based upon our review, we have determined that these policies remain our most critical accounting policies for the nine months ended September 30, 2016 and we have made no changes to these policies during 2016.

Liquidity and Capital Resources

We have incurred substantial operating losses since our inception.  As of September 30, 2016, we had cash and cash equivalents totaling approximately $4.2 million. This report covers the quarter ended September 30, 2016, and as a result, this amount excludes $25.0 million in proceeds from our issuance of 16,219,033 shares of our common stock to Accelmed on November 3, 2016.  See Note 13 for additional details.  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 PrimeSight^TM and Urgent^® PC product lines and for general corporate purposes. Note 6 contains further information regarding the line of credit.  If operations do not generate sufficient cash in the future and 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.

XML

Business Combination - Merger Between Uroplasty, Inc. and Vision-Sciences, Inc.

9 Months Ended

Sep. 30, 2016

Business Combination - Merger Between Uroplasty, Inc. and Vision-Sciences, Inc. [Abstract]

Business Combination - Merger Between Uroplasty, Inc. and Vision-Sciences, Inc.

Note 2. Business Combination - Merger Between Uroplasty, Inc. and Vision-Sciences, Inc.

The Merger has been accounted for as an acquisition of VSCI by UPI, in accordance with Accounting Standards Codification (ASC) Topic 805, "Business Combinations," using the acquisition method of accounting with UPI as the accounting acquirer. Since the Company (formerly known as Vision-Sciences), as the parent company of UPI after the Merger, is the legal acquirer, the Merger has been accounted for as a reverse acquisition.  Under these accounting standards, UPI’s total purchase price of $16.5 million is calculated as if UPI had issued its shares to VSCI stockholders and converted options and warrants to purchase VSCI shares to options and warrants to purchase UPI’s common stock.

Under the acquisition method of accounting, the total purchase price was allocated to the net tangible and intangible assets of VSCI acquired in the Merger, based on their fair values at the effective date of the Merger. The allocation was finalized without any change to the preliminary allocation and is as follows:

Cash and cash equivalents	$	2,020,000
Accounts receivable		4,249,000
Inventories		4,462,000
Other current assets		369,000
Property, plant and equipment		817,000
Goodwill		18,750,000
Other intangibles		13,660,000
Other non-current assets		97,000
Total assets acquired	$	44,424,000
Accounts payable and other liabilities	$	5,209,000
Deferred revenue		176,000
Convertible debt – related party		22,530,000
Other non-current liabilities		40,000
Total liabilities assumed		27,955,000
Total purchase price	$	16,469,000

The allocation of the purchase price to the net assets acquired and liabilities assumed resulted in the recognition of the following intangible assets:

	Amount		Weighted Average Life-Years
Developed technology	$	6,200,000		7
Customer relationships		7,270,000		5
Trade names		190,000		10
	$	13,660,000

The supplemental unaudited pro forma net sales and net loss of the combined entity had the acquisition been completed on January 1, 2015:

	Nine months ended September 30, 2015 (unaudited)
Supplemental pro forma combined results of operations:
Net sales	$	35,669,538
Net loss	$	(12,164,228	)
Net loss per share – basic and diluted	$	(0.47	)

Adjustments to the supplemental pro forma combined results of operations are as follows:

	Nine months ended September 30, 2015 (unaudited)
Increase in amortization of intangibles	$	594,000
Interest amortization on related party debt		282,000
Increase in net loss	$	876,000

These unaudited pro forma condensed consolidated financial results have been prepared for illustrative purposes only and do not purport to be indicative of the results of operations that actually would have resulted had the acquisition occurred on January 1, 2015, or of future results of the consolidated entities.  The unaudited pro forma condensed consolidated financial information does not reflect any operating efficiencies and cost savings that may be realized from the integration of the acquisition.

XML

Goodwill and Other Intangible Assets

9 Months Ended

Sep. 30, 2016

Goodwill and Other Intangible Assets [Abstract]

Goodwill and Other Intangible Assets

Note 3. Goodwill and Other Intangible Assets

Goodwill

As described in Note 2, on March 31, 2015, for accounting purposes, UPI was deemed to have acquired VSCI for a purchase price of $16.5 million, and as a result, the Company recognized $18.8 million in goodwill. There was no change in the goodwill balance as of September 30, 2016.

Other Intangible Assets

Other intangible assets consisted of the following at September 30, 2016 and December 31 2015:

	September 30, 2016				December 31, 2015
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Developed technology	$	6,200,000	$	2,230,000	$	6,200,000	$	664,000
Patents		5,653,000		5,608,000		5,653,000		5,586,000
Trademarks and trade names		190,000		73,000		190,000		67,000
Customer relationships		7,270,000		1,329,000		7,270,000		1,150,000
	$	19,313,000	$	9,240,000	$	19,313,000	$	7,467,000
Accumulated amortization		9,240,000				7,467,000
Net book value of amortizable intangible assets	$	10,073,000			$	11,846,000

For the nine months ended September, 2016 and 2015, amortization of intangible assets charged to operations was approximately $1,773,000 and $1,276,000, respectively.  The weighted average remaining amortization period for intangible assets as of September 30, 2016 was approximately 4.48 years.

XML

New Accounting Pronouncements

9 Months Ended

Sep. 30, 2016

New Accounting Pronouncements [Abstract]

Newly Adopted Accounting Pronouncements

Note 4. New Accounting Pronouncements

In August 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments.  This ASU is in response to diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows and provides guidance on eight specific cash flow classification issues.  It will be effective for reporting periods beginning after December 15, 2017, and interim periods within that reporting period.  Early adoption is permitted, including adoption in an interim period.  We do not believe the adoption of this update will have a material impact on our consolidated financial statements.

In March 2016, FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting. This ASU simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. This new standard is effective for annual periods beginning after December 15, 2016, and interim periods within that reporting period. Early adoption is permitted in any interim or annual period, with adjustments reflected as of the beginning of the fiscal year of adoption. We are evaluating the effect that this guidance will have on our consolidated financial statements and related disclosures.

In February 2016, FASB issued ASU 2016-2, Leases, under which lessees will recognize most leases on-balance sheet. This will generally increase reported assets and liabilities. For public entities, this ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2018. ASU 2016-2 mandates a modified retrospective transition method for all entities. The Company will begin the process of determining the impact this ASU will have on the Company’s consolidated financial statements.

In November 2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, which amends the guidance requiring companies to separate deferred income tax liabilities and assets into current and non-current amounts in a classified statement of financial position. This accounting guidance simplifies the presentation of deferred income taxes, such that deferred tax liabilities and assets be classified as non-current in a classified statement of financial position. This accounting guidance is effective for the Company beginning in the first quarter of 2017.  We do not believe the adoption of this update will have a material impact on our consolidated financial statements.

In September 2015, the FASB issued ASU No. 2015-16, Business Combinations (Topic 805).  The amendments in this update require that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined.  Under the new guidance, the acquirer should record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date.  On the face of the income statement or in the notes, the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods need to be reflected as if the adjustment to the provisional amounts had been recognized as of the acquisition date.  The amendments in ASU No. 2016-16 are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years.  We do not believe the adoption of this update will have a material impact on our financial statements.

In July 2015, the FASB issued ASU No. 2015-11, “Simplifying the Measurement of Inventory (Topic 330).”  Under the current guidance (i.e., ASC 330-10-352 before the ASU), an entity subsequently measures inventory at the lower of cost or market, with market defined as replacement cost, net realizable value (NRV), or NRV less a normal profit margin. An entity uses current replacement cost provided that it is not above NRV (i.e., the ceiling) or below NRV less an “approximately normal profit margin” (i.e., the floor).  The new guidance requires entities to measure most inventory “at the lower of cost and net realizable value,” thereby simplifying the current guidance under which an entity must measure inventory at the lower of cost or market (market in this context is defined as one of three different measures). The ASU will not apply to inventories that are measured by using either the last-in, first-out method or the retail inventory method.  The amendments in ASU No. 2015-11 are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years.  The adoption of this update will not have a material impact on our financial statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606).  The guidance in this update supersedes the revenue recognition requirements in Topic 605, “Revenue Recognition.”  In addition, the existing requirements for the recognition of a gain or loss on the transfer of nonfinancial assets that are not in a contract with a customer (for example, assets within the scope of Topic 360, Property, Plant, and Equipment, and intangible assets within the scope of Topic 350, Intangibles—Goodwill and Other) are amended to be consistent with the guidance on recognition and measurement (including the constraint on revenue) in this update.  Under the new guidance, an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  The amendments in ASU No. 2014-09 are effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early application is permitted for annual reporting periods beginning after December 31, 2016.  We are still evaluating whether or not this update is applicable to our business.

XML

Fair Value Measurements

9 Months Ended

Sep. 30, 2016

Fair Value Measurements [Abstract]

Fair Value Measurements

Note 5. Fair Value Measurements

Estimates of fair value for financial assets and liabilities are based on the framework established in the accounting guidance for fair value measurements.  The framework defines fair value, provides guidance for measuring fair value and requires certain disclosures.  The framework prioritizes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.  The following three broad levels of inputs may be used to measure fair value under the fair value hierarchy:

· Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

· Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly.  These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

· Level 3: Significant unobservable inputs that cannot be corroborated by observable market data and reflect the use of significant management judgment.  These values are generally determined using pricing models for which the assumptions utilize management's estimates of market participant assumptions.

If the inputs used to measure the financial assets and liabilities fall within more than one of the different levels described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

On September 30, 2016 and December 31, 2015, the only asset or liability measured at fair value on a recurring basis was the long-term incentive plan accrual with a fair value of $10,000 and $130,000, respectively, considered a level 3 measurement. The long-term incentive plan began on October 2, 2014 and is described in Note 9. The estimated fair value of the accrual is calculated on a quarterly basis using a Monte Carlo valuation model.  Vesting is based on the probability of meeting the stock price criteria, the probability of which is considered in determining the estimated fair value.

Remeasurements to fair value on a nonrecurring basis relate primarily to our property, plant and equipment and intangible assets and occur when the derived fair value is below their carrying value on our Consolidated Balance Sheet.  As of September 30, 2016 and December 31, 2015 we had no remeasurements of such assets to fair value.

The carrying amounts reported in the Condensed Consolidated Balance Sheets for cash and cash equivalents, accounts receivable, inventories, other current assets, accounts payable, accrued liabilities and convertible debt-related party approximate fair market value.

XML

Line of Credit

9 Months Ended

Sep. 30, 2016

Line of Credit [Abstract]

Line of Credit

Note 6. Line of Credit

On September 18, 2015, we entered into a loan agreement with Venture Bank, a Minnesota banking corporation, providing us with a committed $7 million secured revolving credit facility (“Facility”), subject to eligible accounts receivable and inventory.  The Facility will expire on March 18, 2017 and any loans outstanding on such date will mature and become payable.  The Facility is secured by substantially all of our assets.

Under the Facility, we may borrow the lesser of:  (a) the sum of (i) eighty percent (80%) of the value of eligible accounts receivable; and (ii) forty percent (40%) of the value of eligible inventory capped at the lesser of (1) $2 million or (2) fifty percent (50%) of the principal balance outstanding; or (b) $7 million.  As of September 30, 2016, based on eligible receivables and inventory, our total available borrowing base was $6,028,000.  We did not have any borrowings under the Facility as of September 30, 2016 and December 31, 2015.

Loans under the Facility bear interest at a rate per annum equal to the Wall Street Journal Prime Rate plus 2.25%, provided that in no case will the interest charged be less than 5.5%.  In the event that there is an event of default under the Facility, the interest rate will be increased by 6.0% for the entire period that an event of default exists.  In addition, we pay a non-usage fee of 0.25% based on the average unused and available portion of the Facility on a monthly basis.

XML

Inventories

9 Months Ended

Sep. 30, 2016

Inventories [Abstract]

Inventories

Note 7. Inventories

Inventories are stated at the lower of cost (first-in, first-out method) or market (net realizable value).  We value at lower of cost or market the slow moving and obsolete inventories based upon current and expected future product sales and the expected impact of product transitions or modifications.  Inventories consist of the following:

	September 30, 2016		December 31, 2015
Raw materials	$	3,998,000	$	2,385,000
Work-in-process		779,000		793,000
Finished goods		1,445,000		1,407,000
	$	6,222,000	$	4,585,000

Inventories acquired in a business combination are recorded at their estimated fair value less profit for sales efforts and expensed in cost of sales as that inventory is sold.  As of March 31, 2015, the purchase accounting adjustment of $240,000 related to VSCI inventory was recorded in cost of goods sold over approximately the first four months of the transition period ended December 31, 2015.

XML

Net Income / Loss per Common Share

9 Months Ended

Sep. 30, 2016

Net Income / Loss per Common Share [Abstract]

Net Income / Loss per Common Share

Note 8. Net Income / Loss per Common Share

We calculate basic net income (loss) per common share amounts by dividing net income (loss) by the weighted-average common shares outstanding.  For calculating diluted net income (loss) per common share amounts, we add additional shares to the weighted-average common shares outstanding for the assumed exercise of stock options and vesting of restricted shares, if dilutive.  Because we had a net loss during the nine months ended September 30, 2016 and 2015, and the three months and nine months ended September 30, 2015, the following options and warrants and outstanding and unvested restricted stock to purchase shares of our common stock were excluded from diluted net loss per common share because of their anti-dilutive effect, and therefore, basic net loss per common share equals dilutive net loss per common share:

	Number of options, warrants and unvested restricted stock		Range of stock option and warrant exercise prices
Three months ended September 30, 2015		3,762,000	$	1.64 to $24.40
Nine months ended September 30, 2016		2,975,000	$	0.88 to $24.40
Nine months ended September 30, 2015		3,762,000	$	1.64 to $24.40

The following options and warrants are excluded from our EPS calculation because they are antidilutive:

	Number of options, warrants and unvested restricted stock		Range of stock option and warrant exercise prices
Three months ended September 30, 2016		2,231,000	$	1.03 to $24.40

XML

Shareholders' Equity

9 Months Ended

Sep. 30, 2016

Shareholders' Equity [Abstract]

Shareholders' Equity

Note 9. Shareholders’ Equity

Share-based compensation.  On September 30, 2016, the Company had one active plan, the Cogentix Medical 2015 Omnibus Incentive Plan, for share-based compensation grants (“the 2015 Plan”). Under the 2015 Plan, if we have a change in control (as defined in the 2015 Plan) and the Company is not the surviving entity, all outstanding grants, including those subject to vesting or other performance targets, fully vest immediately if they are not assumed or replaced with equivalent grants.  If the Company is the surviving entity, there is no accelerated vesting of equity grants solely upon a change in control.  Under the 2015 Plan, we reserved 2,500,000 shares of our common stock for share-based grants and 1,475,870 shares remain available for grant on September 30, 2016.

We recognize share-based compensation expense in our Condensed Consolidated Statement of Operations based on the fair value at the time of grant of the share-based payment over the requisite service period.  We incurred approximately $440,000 and $951,000 in share-based compensation expense for the nine months ended September 30, 2016 and 2015, respectively.

On September 30, 2016, we had approximately $371,000 of unrecognized share-based compensation expense, net of estimated forfeitures, related to stock options that we expect to recognize over a weighted-average period of approximately 2.25 years.

We grant option awards with an exercise price equal to the closing market price of our stock at the date of the grant.  Options granted under this plan generally expire seven years from date of grant and vest at varying rates ranging up to three years.

We determined the fair value of our option awards using the Black-Scholes option pricing model.  We used the following weighted-average assumptions to value the options granted during the nine months ended September 30:

	2016			2015
Expected life in years		3.90			3.84
Risk-free interest rate		0.98	%		1.11	%
Expected volatility		64.32	%		63.94	%
Expected dividend yield		0	%		0	%
Weighted-average grant date fair value	$	0.49		$	0.79

The expected life for options granted represents the period of time we expect options to be outstanding based on historical data of option holder exercise and termination behavior for similar grants.  The risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury rate over the expected life at the time of grant.  Expected volatility is based upon historical volatility of our stock.  We estimate the forfeiture rate for stock awards to be approximately 15% for executive employees and directors and approximately 20% for non-executive employees for calendar year 2016 awards based on our historical experience.

The following table summarizes the activity related to our stock options during the nine months ended September 30, 2016:

	Number of shares			Weighted average exercise price		Weighted average remaining life in years		Aggregate intrinsic value
Outstanding at December 31, 2015		2,573,640		$	4.44		4.64	$	-
Options granted		692,400			1.05
Options exercised		-			-
Options surrendered		(1,566,135	)		3.90
Outstanding at September 30, 2016		1,699,905		$	3.54		6.79	$	578,213
Exercisable at September 30, 2016		818,333		$	6.03		3.95	$	16,062

The total fair value of stock options that vested during the nine months ended September 30, 2016 and 2015 was approximately $268,000 and $600,000, respectively.

Our 2015 Plan also permits the compensation committee of our board of directors to grant other stock-based benefits, including restricted shares. The following table summarizes the activity related to our restricted shares during the nine months ended September 30, 2016:

	Number of Shares			Weighted average grant date fair value		Weighted average remaining life in years		Aggregate intrinsic value
Balance at December 31, 2015		686,910		$	2.41		1.59	$	886,114
Shares granted		837,858			1.06
Shares vested		(323,613	)		2.19
Shares forfeited		(301,822	)		2.48
Balance at September 30, 2016		899,333		$	1.21		1.54	$	1,636,786

The aggregate intrinsic value shown above for the restricted shares represents the total pre-tax value based on the closing price of our common stock at the end of each period.

On September 30, 2016, we had $907,000 of unrecognized share-based compensation expense, net of estimated forfeitures, related to restricted shares that we expect to recognize over a weighted-average period of approximately 1.54 years.

Stock Warrants-Related Party.  On September 30, 2016, the Company has warrants outstanding that were issued to Mr. Lewis C. Pell, a member of the Company’s board of directors, to purchase an aggregate of 376,123 shares of our common stock at a weighted average exercise price of $9.31 per share.  The duration in which the warrants may be exercised commences on the earlier of (i) March 31, 2018 or (ii) three days prior to the record date established for the declaration of any dividend or distribution of any rights in respect to our common stock in cash or other property other than our common stock, and terminates on the later of (x) the maturity date of the convertible promissory notes held by Mr. Pell and described further in Note 10 or (y) the date the convertible promissory notes are paid in full or converted into shares.  In addition, the warrants may be exercised immediately prior to a change in control.

Long-Term Incentive Plan and Awards.  On October 1, 2014, the compensation committee of our board of directors and our board of directors approved and adopted a Performance Award Agreement under the Uroplasty, Inc. 2006 Amended Stock and Incentive Plan, as amended, and on October 2, 2014, grants of Performance Awards (the “Awards”) were made to members of our senior management team.

Performance goals for the Awards are based on the achievement of specified stock price targets during the period beginning on the date of grant and ending on the fourth anniversary of the date of grant or, if earlier, the closing date of a change of control (as defined in the Plan) of the Company (the “Performance Period”).  The stock price targets under the Awards are: $7.57 price per share of common stock, $10.32 price per share of common stock and $13.76 price per share of common stock.

A stock price target is considered achieved on the date (a) the average closing price of a share of our common stock equals or exceeds a stock price target for at least 45 consecutive trading days or (b) of the consummation of a change of control of the Company, provided the closing price of a share of our common stock on the last trading day immediately preceding the closing date of the change of control equals or exceeds a stock price target not previously achieved during the Performance Period.

The Awards are accounted for as liability awards under the share-based compensation accounting guidance, as the awards are based on the performance of our common stock and are expected to be settled in cash.  Expense for the awards is recognized over the derived service period of approximately 2.4 years. We recorded a liability of approximately $10,000 at September 30, 2016 and related reversal of expense was approximately $57,000 for the nine months ended ending September 30, 2016 for the Awards.

XML

Convertible Debt - Related Party

9 Months Ended

Sep. 30, 2016

Convertible Debt - Related Party [Abstract]

Convertible Debt - Related Party

Note 10. Convertible Debt – Related Party

The following table is a summary as of September 30, 2016 of our convertible debt issued to a related party:

	Gross Principal Amount		Unamortized Debt Discount			Net Amount
Note Payable A	$	20,000,000	$	(3,048,813	)	$	16,951,187
Note Payable B		3,500,000		(470,720	)		3,029,280
Note Payable C		4,990,000		(797,326	)		4,192,674
	$	28,490,000	$	(4,316,859	)	$	24,173,141

The convertible debt is held by Mr. Lewis C. Pell, a member of the Company’s board of directors, and consists of three convertible promissory notes.

•  Note Payable A accrues annual interest at the rate of 0.84%. The outstanding principal amount of Note Payable A is convertible into shares of our common stock at a conversion price of $6.00 per share.

•  Note Payable B accrues annual interest at the rate of 1.66%. The outstanding principal amount of Note Payable B is convertible into shares of our common stock at a conversion price of $4.45 per share.

•  Note Payable C accrues annual interest at the rate of 1.91%. The outstanding principal amount of Note Payable C is convertible into shares of our common stock at a conversion price of $5.55 per share.

At September 30, 2016, we had an aggregate amount of $1,019,120 in accrued interest under the convertible notes payable, which is shown as interest payable on our condensed consolidated balance sheet.

The convertible promissory notes mature on March 31, 2020 or earlier upon a change of control (as defined therein).  The convertible promissory notes generally cannot be converted by Mr. Pell prior to March 31, 2018. The convertible promissory notes may be converted earlier prior to a change in control or in connection with our prepayment of the convertible promissory notes.  The convertible promissory notes may be prepaid, at our option and upon 15 days’ notice to Mr. Pell, without other premium or penalty, with a combination of cash and common stock.  Interest on the convertible promissory notes is payable on the maturity date or upon repayment or conversion of all or any portion of the principal under the note.

Under purchase accounting for the Merger, the convertible promissory notes were recorded at fair value on the effective date of the Merger, resulting in a discount from their face value of $5,960,000 as of March 31, 2015. The discount is being amortized over the remaining term based on the effective interest rate method with an imputed interest rate of 4.72%.

XML

Savings and Retirement Plans

9 Months Ended

Sep. 30, 2016

Savings and Retirement Plans [Abstract]

Savings and Retirement Plans

Note 11. Savings and Retirement Plans

We sponsor various retirement plans for eligible employees in the United States, the United Kingdom, and The Netherlands. Our retirement savings plan in the United States conforms to Section 401(k) of the Internal Revenue Code and participation is available to substantially all employees. We may also make discretionary contributions ratably to all eligible employees. We made discretionary contributions to the U.S. plan of $308,000 and $259,000 for the nine months ended September 30, 2016, and 2015, respectively.

Our international subsidiaries have defined benefit retirement plans for eligible employees.  These plans provide benefits based on the employee’s years of service and compensation during the years immediately preceding retirement, termination, disability, or death, as defined in the plans.

The cost for our defined benefit retirement plans in The Netherlands and the United Kingdom includes the following components for the three- and nine-month periods ended September 30:

	Three Months Ended September 30						Nine Months Ended September 30
	2016			2015			2016			2015
Gross service cost	$	28,000		$	36,000		$	83,000		$	102,000
Interest cost		29,000			24,000			87,000			77,000
Expected return on assets		(24,000	)		(19,000	)		(72,000	)		(59,000	)
Amortization		(2,000	)		7,000			(5,000	)		14,000
Net periodic retirement cost	$	31,000		$	48,000		$	93,000		$	134,000

XML

Business Segment Information

9 Months Ended

Sep. 30, 2016

Business Segment Information [Abstract]

Business Segment Information

Note 12. Business Segment Information

ASC 280, “Segment Reporting,” establishes disclosure standards for segments of a company based on management’s approach to defining operating segments.  Reportable segments are defined primarily by the nature of products and services, the nature of the production processes, and the type of customers for our products and services.

We operate in two markets, the medical market and the industrial market.  Within the medical market, we have a number of product lines, endoscopy-based products, including our PrimeSight flexible fiber and video endoscopes used in the practices of urology, pulmonology, trans-nasal esophagoscopy and ENT (ear, nose and throat) and a proprietary sterile disposable microbial barrier, known as EndoSheath Protective Barrier, the Urgent^® PC Neuromodulation System (“Urgent PC System”) a minimally-invasive, neuromodulation system that delivers percutaneous tibial nerve stimulation for office-based treatment of overactive bladder and associated symptoms; and Macroplastique® Implants (“Macroplastique”), an injectable, urethral bulking agent for the treatment of adult female stress urinary incontinence.

None of the industrial market sales, net losses or assets are more than 10% of our total sales, losses or assets.  Therefore, we aggregate our operating segments into one reportable segment in accordance with the objectives and principles of the applicable guidance.

For the three and nine months ended September 30, no country other than the United States represented more than 10% of our consolidated revenue.  Information regarding net sales to customers by geographic area for the three and nine months ended September 30 is as follows:

	United States		United Kingdom		All Other Foreign Countries (1)		Consolidated
Three months ended September 30, 2016	$	10,701,000	$	851,000	$	1,856,000	$	13,408,000
Three months ended September 30, 2015	$	8,828,000	$	596,000	$	2,410,000	$	11,834,000
Nine months ended September 30, 2016	$	28,877,000	$	3,036,000	$	6,706,000	$	38,619,000
Nine months ended September 30, 2015	$	21,520,000	$	2,954,000	$	5,530,000	$	30,004,000

(1) No other country accounts for 10% or more of the consolidated net sales.

Information regarding geographic area in which we maintain long-lived assets is as follows:

	United States		United Kingdom		The Netherlands		Consolidated
September 30, 2016	$	1,738,000	$	2,000	$	462,000	$	2,202,000
December 31, 2015	$	2,089,000	$	3,000	$	463,000	$	2,555,000

Accounting policies of the operations in the various geographic areas are the same as those described in Note 1.  Net sales attributed to each geographic area are net of intercompany sales.  No single customer represents 10% or more of our consolidated net sales.  Long-lived assets consist of property, plant and equipment.

XML

Subsequent Event

9 Months Ended

Sep. 30, 2016

Subsequent Event [Abstract]

Subsequent Event

Note 13. Subsequent Event

On September 7, 2016, we entered into a securities purchase agreement (the “Purchase Agreement”) with Accelmed Growth Partners, L.P. (“Accelmed”).  Under the terms of the Purchase Agreement, Accelmed purchased 16,219,033 shares of our common stock at $1.55 per share, for an aggregate price of $25 million.  As a condition to Accelmed closing the equity investment, the Company converted into common shares all the outstanding debt and accrued interest (see Note 10) owed to Lewis C. Pell.  On September 7, 2016, the Company and Mr. Pell entered into a definitive agreement (the “Note Exchange Agreement”) under which the debt owed by Cogentix to Mr. Pell was converted into Cogentix common stock at a price per share of $1.67 prior to closing the Purchase Agreement.  The Note Exchange Agreement also provides that, simultaneously with the conversion of such debt, all outstanding warrants (see Note 9) to purchase Cogentix common stock held by Mr. Pell were cancelled.

On November 3, 2016, the shareholders of the Company approved the transactions described above and these transactions closed on November 3, 2016.  As such, we converted all of the outstanding principal amount, approximately $28.5 million, and accrued interest, approximately $1.0 million, on our promissory notes held by Mr. Pell into 17,688,423 shares of our common stock.  We also issued 16,219,033 shares of our common stock to Accelmed in exchange for $25 million.

XML

Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2016

Summary of Significant Accounting Policies [Abstract]

Basis of Presentation

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 a robust line of high performance fiberoptic and video endoscopy products under the PrimeSight^TM brand that are used across multiple surgical specialties in diagnostic and treatment procedures. The FDA-cleared and CE marked PrimeSight Endoscopy Systems and EndoSheath Protective Barrier 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.  We also offer the Urgent^® PC Neuromodulation System, a device that delivers percutaneous tibial nerve stimulation, for the office-based treatment of overactive bladder (“OAB”).  The Urgent® PC Neuromodulation System has FDA clearance in the United States and has regulatory approvals for the treatment of OAB and fecal incontinence (FI) in various international markets. 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. (“UPI”) and Vision-Sciences, Inc. (“VSCI”).  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, a wholly owned subsidiary of VSCI.   VSCI continued to be the sole member of the surviving company.  After the Merger, VSCI changed its name to 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.

All share amounts and price per share amounts for all periods presented relate to VSCI shares with UPI shares and price per share converted to VSCI amounts based on the conversion ratio in the acquisition agreement and the one for five reverse stock split that occurred on March 31, 2015.

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-KT for the nine-months ended December 31, 2015.

The Condensed Consolidated Financial Statements presented herein as of September 30, 2016 and for the three and nine month periods ended September 30, 2016 and 2015, 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-KT for the nine-months ended December 31, 2015.  Based upon our review, we have determined that these policies remain our most critical accounting policies for the nine months ended September 30, 2016 and we have made no changes to these policies during 2016.

Liquidity and Capital Resources

Liquidity and Capital Resources

We have incurred substantial operating losses since our inception.  As of September 30, 2016, we had cash and cash equivalents totaling approximately $4.2 million. This report covers the quarter ended September 30, 2016, and as a result, this amount excludes $25.0 million in proceeds from our issuance of 16,219,033 shares of our common stock to Accelmed on November 3, 2016.  See Note 13 for additional details.  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 PrimeSight^TM and Urgent^® PC product lines and for general corporate purposes. Note 6 contains further information regarding the line of credit.  If operations do not generate sufficient cash in the future and 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.

XML

Business Combination - Merger Between Uroplasty, Inc. and Vision-Sciences, Inc. (Tables)

9 Months Ended

Sep. 30, 2016

Business Combination - Merger Between Uroplasty, Inc. and Vision-Sciences, Inc. [Abstract]

Schedule of Allocation of Purchase Price to Assets Acquired and Liabilities Assumed

The allocation was finalized without any change to the preliminary allocation and is as follows:

Cash and cash equivalents	$	2,020,000
Accounts receivable		4,249,000
Inventories		4,462,000
Other current assets		369,000
Property, plant and equipment		817,000
Goodwill		18,750,000
Other intangibles		13,660,000
Other non-current assets		97,000
Total assets acquired	$	44,424,000
Accounts payable and other liabilities	$	5,209,000
Deferred revenue		176,000
Convertible debt – related party		22,530,000
Other non-current liabilities		40,000
Total liabilities assumed		27,955,000
Total purchase price	$	16,469,000

Schedule of Recognition of Intangible Assets

The allocation of the purchase price to the net assets acquired and liabilities assumed resulted in the recognition of the following intangible assets:

	Amount		Weighted Average Life-Years
Developed technology	$	6,200,000		7
Customer relationships		7,270,000		5
Trade names		190,000		10
	$	13,660,000

Schedule of Supplemental Pro forma Combined Results of Operations

The supplemental unaudited pro forma net sales and net loss of the combined entity had the acquisition been completed on January 1, 2015:

	Nine months ended September 30, 2015 (unaudited)
Supplemental pro forma combined results of operations:
Net sales	$	35,669,538
Net loss	$	(12,164,228	)
Net loss per share – basic and diluted	$	(0.47	)

Schedule of Adjustments to Supplemental Pro forma Combined Results of Operations

Adjustments to the supplemental pro forma combined results of operations are as follows:

	Nine months ended September 30, 2015 (unaudited)
Increase in amortization of intangibles	$	594,000
Interest amortization on related party debt		282,000
Increase in net loss	$	876,000

XML

Goodwill and Other Intangible Assets (Tables)

9 Months Ended

Sep. 30, 2016

Goodwill and Other Intangible Assets [Abstract]

Schedule of Other Intangible Assets

Other intangible assets consisted of the following at September 30, 2016 and December 31 2015:

	September 30, 2016				December 31, 2015
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Developed technology	$	6,200,000	$	2,230,000	$	6,200,000	$	664,000
Patents		5,653,000		5,608,000		5,653,000		5,586,000
Trademarks and trade names		190,000		73,000		190,000		67,000
Customer relationships		7,270,000		1,329,000		7,270,000		1,150,000
	$	19,313,000	$	9,240,000	$	19,313,000	$	7,467,000
Accumulated amortization		9,240,000				7,467,000
Net book value of amortizable intangible assets	$	10,073,000			$	11,846,000

XML

Inventories (Tables)

9 Months Ended

Sep. 30, 2016

Inventories [Abstract]

Inventories

Inventories consist of the following:

	September 30, 2016		December 31, 2015
Raw materials	$	3,998,000	$	2,385,000
Work-in-process		779,000		793,000
Finished goods		1,445,000		1,407,000
	$	6,222,000	$	4,585,000

XML

Net Income / Loss per Common Share (Tables)

9 Months Ended

Sep. 30, 2016

Net Income / Loss per Common Share [Abstract]

Anti-dilutive Securities Excluded from Diluted Loss per Common Share

We calculate basic net income (loss) per common share amounts by dividing net income (loss) by the weighted-average common shares outstanding.  For calculating diluted net income (loss) per common share amounts, we add additional shares to the weighted-average common shares outstanding for the assumed exercise of stock options and vesting of restricted shares, if dilutive.  Because we had a net loss during the nine months ended September 30, 2016 and 2015, and the three months and nine months ended September 30, 2015, the following options and warrants and outstanding and unvested restricted stock to purchase shares of our common stock were excluded from diluted net loss per common share because of their anti-dilutive effect, and therefore, basic net loss per common share equals dilutive net loss per common share:

	Number of options, warrants and unvested restricted stock		Range of stock option and warrant exercise prices
Three months ended September 30, 2015		3,762,000	$	1.64 to $24.40
Nine months ended September 30, 2016		2,975,000	$	0.88 to $24.40
Nine months ended September 30, 2015		3,762,000	$	1.64 to $24.40

The following options and warrants are excluded from our EPS calculation because they are antidilutive:

	Number of options, warrants and unvested restricted stock		Range of stock option and warrant exercise prices
Three months ended September 30, 2016		2,231,000	$	1.03 to $24.40

XML

Shareholders' Equity (Tables)

9 Months Ended

Sep. 30, 2016

Shareholders' Equity [Abstract]

Weighted-average Assumptions used to Value the Options Granted

We used the following weighted-average assumptions to value the options granted during the nine months ended September 30:

	2016			2015
Expected life in years		3.90			3.84
Risk-free interest rate		0.98	%		1.11	%
Expected volatility		64.32	%		63.94	%
Expected dividend yield		0	%		0	%
Weighted-average grant date fair value	$	0.49		$	0.79

Stock Option Activity

The following table summarizes the activity related to our stock options during the nine months ended September 30, 2016:

	Number of shares			Weighted average exercise price		Weighted average remaining life in years		Aggregate intrinsic value
Outstanding at December 31, 2015		2,573,640		$	4.44		4.64	$	-
Options granted		692,400			1.05
Options exercised		-			-
Options surrendered		(1,566,135	)		3.90
Outstanding at September 30, 2016		1,699,905		$	3.54		6.79	$	578,213
Exercisable at September 30, 2016		818,333		$	6.03		3.95	$	16,062

Restricted Shares Activity

The following table summarizes the activity related to our restricted shares during the nine months ended September 30, 2016:

	Number of Shares			Weighted average grant date fair value		Weighted average remaining life in years		Aggregate intrinsic value
Balance at December 31, 2015		686,910		$	2.41		1.59	$	886,114
Shares granted		837,858			1.06
Shares vested		(323,613	)		2.19
Shares forfeited		(301,822	)		2.48
Balance at September 30, 2016		899,333		$	1.21		1.54	$	1,636,786

XML

Convertible Debt - Related Party (Tables)

9 Months Ended

Sep. 30, 2016

Convertible Debt - Related Party [Abstract]

Summary of Convertible Debt - Related Party

The following table is a summary as of September 30, 2016 of our convertible debt issued to a related party:

	Gross Principal Amount		Unamortized Debt Discount			Net Amount
Note Payable A	$	20,000,000	$	(3,048,813	)	$	16,951,187
Note Payable B		3,500,000		(470,720	)		3,029,280
Note Payable C		4,990,000		(797,326	)		4,192,674
	$	28,490,000	$	(4,316,859	)	$	24,173,141

XML

Savings and Retirement Plans (Tables)

9 Months Ended

Sep. 30, 2016

Savings and Retirement Plans [Abstract]

Components of Benefit Costs for Defined Benefit Retirement Plans

The cost for our defined benefit retirement plans in The Netherlands and the United Kingdom includes the following components for the three- and nine-month periods ended September 30:

	Three Months Ended September 30						Nine Months Ended September 30
	2016			2015			2016			2015
Gross service cost	$	28,000		$	36,000		$	83,000		$	102,000
Interest cost		29,000			24,000			87,000			77,000
Expected return on assets		(24,000	)		(19,000	)		(72,000	)		(59,000	)
Amortization		(2,000	)		7,000			(5,000	)		14,000
Net periodic retirement cost	$	31,000		$	48,000		$	93,000		$	134,000

XML

Business Segment Information (Tables)

9 Months Ended

Sep. 30, 2016

Business Segment Information [Abstract]

Sales to Customers and Long-Lived Assets by Geographic Area

Information regarding net sales to customers by geographic area for the three and nine months ended September 30 is as follows:

	United States		United Kingdom		All Other Foreign Countries (1)		Consolidated
Three months ended September 30, 2016	$	10,701,000	$	851,000	$	1,856,000	$	13,408,000
Three months ended September 30, 2015	$	8,828,000	$	596,000	$	2,410,000	$	11,834,000
Nine months ended September 30, 2016	$	28,877,000	$	3,036,000	$	6,706,000	$	38,619,000
Nine months ended September 30, 2015	$	21,520,000	$	2,954,000	$	5,530,000	$	30,004,000

(1) No other country accounts for 10% or more of the consolidated net sales.

Information regarding geographic area in which we maintain long-lived assets is as follows:

	United States		United Kingdom		The Netherlands		Consolidated
September 30, 2016	$	1,738,000	$	2,000	$	462,000	$	2,202,000
December 31, 2015	$	2,089,000	$	3,000	$	463,000	$	2,555,000

XML

Summary of Significant Accounting Policies (Details) $ in Millions		3 Months Ended
	Nov. 03, 2016 USD ($) shares	Mar. 31, 2015 Company	Sep. 30, 2016 USD ($) shares	Dec. 31, 2015 shares	Sep. 18, 2015 USD ($)
Business Acquisition [Line Items]
Number of companies merged | Company		2
Liquidity and Capital Resources [Abstract]
Cash and cash equivalents			$ 4.2
Number of shares issued (in shares) | shares			26,538,000	26,538,000
Subsequent Event [Member]
Liquidity and Capital Resources [Abstract]
Proceeds from the sale of stock	$ 25.0
Number of shares issued (in shares) | shares	16,219,033
Uroplasty Inc ("UPI") [Member]
Business Acquisition [Line Items]
Ownership percentage		62.50%
Vision Sciences Inc ("VSCI") [Member]
Business Acquisition [Line Items]
Ownership percentage		37.50%
Reverse stock split ratio		5
Venture Bank [Member] | Revolving Credit Facility [Member]
Liquidity and Capital Resources [Abstract]
Line of credit					$ 7.0

XML

Business Combination - Merger Between Uroplasty, Inc. and Vision-Sciences, Inc. (Details) - USD ($)	9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Dec. 31, 2015	Mar. 31, 2015
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Assets [Abstract]
Goodwill	$ 18,749,888		$ 18,749,888	$ 18,800,000
Vision-Sciences Inc [Member]
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Assets [Abstract]
Cash and cash equivalents	2,020,000
Accounts receivable	4,249,000
Inventories	4,462,000
Other current assets	369,000
Property, plant and equipment	817,000
Goodwill	18,750,000
Other intangibles	13,660,000
Other non-current assets	97,000
Total assets acquired	44,424,000
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Liabilities [Abstract]
Accounts payable and other liabilities	5,209,000
Deferred revenue	176,000
Convertible debt - related party	22,530,000
Other non-current liabilities	40,000
Total liabilities assumed	27,955,000
Total purchase price	16,469,000
Recognition of Intangible Assets [Abstract]
Other intangibles	13,660,000
Supplemental Pro forma Combined Results of Operations [Abstract]
Net sales		$ 35,669,538
Net loss		$ (12,164,228)
Net loss per share - basic and diluted (in dollars per share)		$ (0.47)
Adjustments to Supplemental Pro forma Combined Results of Operations [Abstract]
Increase in amortization of intangibles		$ 594,000
Interest amortization on related party debt		282,000
Increase in net loss		$ 876,000
Vision-Sciences Inc [Member] | Developed Technology [Member]
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Assets [Abstract]
Other intangibles	6,200,000
Recognition of Intangible Assets [Abstract]
Other intangibles	$ 6,200,000
Weighted Average Life-Years	7 years
Vision-Sciences Inc [Member] | Customer Relationships [Member]
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Assets [Abstract]
Other intangibles	$ 7,270,000
Recognition of Intangible Assets [Abstract]
Other intangibles	$ 7,270,000
Weighted Average Life-Years	5 years
Vision-Sciences Inc [Member] | Trade Names [Member]
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Assets [Abstract]
Other intangibles	$ 190,000
Recognition of Intangible Assets [Abstract]
Other intangibles	$ 190,000
Weighted Average Life-Years	10 years

XML

Goodwill and Other Intangible Assets (Details) - USD ($)	3 Months Ended			9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Mar. 31, 2015	Sep. 30, 2016	Sep. 30, 2015	Dec. 31, 2015
Goodwill and Other Intangible Assets [Abstract]
Amount of purchase price			$ 16,500,000
Goodwill	$ 18,749,888		$ 18,800,000	$ 18,749,888		$ 18,749,888
Finite-Lived Intangible Assets [Line Items]
Gross carrying amount	19,313,000			19,313,000		19,313,000
Accumulated amortization	9,240,000			9,240,000		7,467,000
Net book value of amortizable intangible assets	10,073,000			10,073,000		11,846,000
Amortization of intangible assets	590,858	$ 634,191		$ 1,772,574	$ 1,275,644
Weighted average remaining amortization period				4 years 5 months 23 days
Developed Technology [Member]
Finite-Lived Intangible Assets [Line Items]
Gross carrying amount	6,200,000			$ 6,200,000		6,200,000
Accumulated amortization	2,230,000			2,230,000		664,000
Patents [Member]
Finite-Lived Intangible Assets [Line Items]
Gross carrying amount	5,653,000			5,653,000		5,653,000
Accumulated amortization	5,608,000			5,608,000		5,586,000
Trademarks and Trade Names [Member]
Finite-Lived Intangible Assets [Line Items]
Gross carrying amount	190,000			190,000		190,000
Accumulated amortization	73,000			73,000		67,000
Customer Relationships [Member]
Finite-Lived Intangible Assets [Line Items]
Gross carrying amount	7,270,000			7,270,000		7,270,000
Accumulated amortization	$ 1,329,000			$ 1,329,000		$ 1,150,000

XML

Fair Value Measurements (Details) - USD ($)	Sep. 30, 2016	Dec. 31, 2015
Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member]
Assets, Fair Value Disclosure [Abstract]
Fair value of plan assets	$ 10,000	$ 130,000

XML

Line of Credit (Details) - Revolving Credit Facility [Member] - USD ($)	9 Months Ended
	Sep. 30, 2016	Sep. 18, 2015
Line of Credit Facility [Line Items]
Borrowing capacity percentage based on value of eligible accounts receivable	80.00%
Borrowing capacity percentage based on value of eligible inventory	40.00%
Notes principal balance outstanding cap value	$ 2,000,000
Notes principal balance outstanding cap percentage	50.00%
Line of credit facility available borrowing	$ 6,028,000
Variable interest rate per annum	2.25%
Line of credit interest rate	5.50%
Line of credit interest rate increase	6.00%
Line of credit non-usage fee	0.25%
Venture Bank [Member]
Line of Credit Facility [Line Items]
Line of credit facility amount		$ 7,000,000

XML

Inventories (Details) - USD ($)	Sep. 30, 2016	Dec. 31, 2015	Mar. 31, 2015
Inventories [Abstract]
Raw materials	$ 3,998,000	$ 2,385,000
Work-in-process	779,000	793,000
Finished goods	1,445,000	1,407,000
Inventories	$ 6,222,457	$ 4,584,844
Inventory adjustment			$ 240,000

XML

Net Income / Loss per Common Share (Details) - Options, Warrants and Unvested Restricted Stock [Member] - $ / shares	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Number of anti-dilutive shares excluded from computation of diluted loss per common share (in shares)	2,231,000	3,762,000	2,975,000	3,762,000
Range of exercise prices - lower range limit (in dollars per share)	$ 1.03	$ 1.64	$ 0.88	$ 1.64
Range of exercise prices - upper range limit (in dollars per share)	$ 24.40	$ 24.40	$ 24.40	$ 24.40

XML

Shareholders' Equity (Details)	9 Months Ended
	Sep. 30, 2016 USD ($) Plan $ / shares shares	Dec. 31, 2015 USD ($) $ / shares shares	Sep. 30, 2015 USD ($) $ / shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation expense | $	$ 440,000		$ 951,000
Mr. Lewis C. Pell [Member]
Stock Warrants-Related Party [Abstract]
Warrants issued to purchase common stock (in shares) | shares	376,123
Warrants exercise price (in dollars per share)	$ 9.31
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized share-based compensation expense | $	$ 371,000
Unrecognized compensation expense, weighted average period of recognition	2 years 3 months
Weighted-average assumptions used to value the options granted [Abstract]
Expected life in years	3 years 10 months 24 days		3 years 10 months 2 days
Risk-free interest rate	0.98%		1.11%
Expected volatility	64.32%		63.94%
Expected dividend yield	0.00%		0.00%
Weighted-average grant date fair value (in dollars per share)	$ 0.49		$ 0.79
Stock options, number of shares [Roll Forward]
Outstanding, beginning of period (in shares) | shares	2,573,640
Options granted (in shares) | shares	692,400
Options exercised (in shares) | shares	0
Options surrendered (in shares) | shares	(1,566,135)
Outstanding, end of period (in shares) | shares	1,699,905	2,573,640
Exercisable, end of period (in shares) | shares	818,333
Stock options, weighted average exercise price [Roll Forward]
Outstanding, beginning of period (in dollars per share)	$ 4.44
Options granted (in dollars per share)	1.05
Options exercised (in dollars per share)	0
Options surrendered (in dollars per share)	3.90
Outstanding, end of period (in dollars per share)	3.54	$ 4.44
Exercisable, end of period (in dollars per share)	$ 6.03
Stock options, additional disclosures [Abstract]
Outstanding, weighted average remaining life in years	6 years 9 months 14 days	4 years 7 months 20 days
Options exercisable, Weighted average remaining life in years	3 years 11 months 12 days
Outstanding, aggregate intrinsic value | $	$ 578,213	$ 0
Exercisable, aggregate intrinsic value | $	16,062
Fair value of stock options vested | $	$ 268,000		$ 600,000
Stock Options [Member] | Executive Employees and Directors [Member]
Weighted-average assumptions used to value the options granted [Abstract]
Forfeiture rate	15.00%
Stock Options [Member] | Non-Executive Employees [Member]
Weighted-average assumptions used to value the options granted [Abstract]
Forfeiture rate	20.00%
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized share-based compensation expense | $	$ 907,000
Unrecognized compensation expense, weighted average period of recognition	1 year 6 months 14 days
Restricted shares and warrants, number of shares [Roll Forward]
Balance, beginning of period (in shares) | shares	686,910
Shares granted (in shares) | shares	837,858
Shares vested (in shares) | shares	(323,613)
Shares forfeited (in shares) | shares	(301,822)
Balance, end of period (in shares) | shares	899,333	686,910
Restricted shares, weighted average grant date fair value [Roll Forward]
Balance, beginning of period (in dollars per share)	$ 2.41
Shares granted (in dollars per share)	1.06
Shares vested (in dollars per share)	2.19
Shares forfeited (in dollars per share)	2.48
Balance, end of period (in dollars per share)	$ 1.21	$ 2.41
Restricted shares and warrants, additional disclosures [Abstract]
Weighted average remaining life in years, Balance	1 year 6 months 14 days	1 year 7 months 2 days
Aggregate intrinsic value, Balance | $	$ 1,636,786	$ 886,114
Performance Award [Member]
Long-Term Incentive Plan and Awards [Abstract]
First stock price target of common stock (in dollars per share)	$ 7.57
Second stock price target of common stock (in dollars per share)	10.32
Third stock price target of common stock (in dollars per share)	$ 13.76
Number of consecutive trading days	45 days
Award requisite service period	2 years 4 months 24 days
Recorded liability | $	$ 10,000
Recorded income | $	$ 57,000
2015 Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of active plans for share-based compensation grants | Plan	1
Number of shares reserved for share-based grants (in shares) | shares	2,500,000
Shares remain available for grant (in shares) | shares	1,475,870
2015 Plan [Member] | Stock Options [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Term of share-based payment award	7 years
Vesting period	3 years

XML

Convertible Debt - Related Party (Details) - USD ($)	9 Months Ended
	Sep. 30, 2016	Sep. 07, 2016	Dec. 31, 2015	Mar. 31, 2015
Convertible Debt - Related Party [Abstract]
Net Amount	$ 24,173,141		$ 23,336,854
Debt conversion price (in dollars per share)		$ 1.67
Accrued interest	$ 1,019,120		$ 757,615
Maturity date	Mar. 31, 2020
Number of days notice for conversion of debt	15 days
Face value of debt				$ 5,960,000
Effective interest rate				4.72%
Convertible Debt [Member]
Convertible Debt - Related Party [Abstract]
Gross Principal Amount	$ 28,490,000
Unamortized Debt Discount	(4,316,859)
Net Amount	24,173,141
Convertible Debt [Member] | Note Payable A [Member]
Convertible Debt - Related Party [Abstract]
Gross Principal Amount	20,000,000
Unamortized Debt Discount	(3,048,813)
Net Amount	$ 16,951,187
Annual interest rate	0.84%
Debt conversion price (in dollars per share)	$ 6.00
Convertible Debt [Member] | Note Payable B [Member]
Convertible Debt - Related Party [Abstract]
Gross Principal Amount	$ 3,500,000
Unamortized Debt Discount	(470,720)
Net Amount	$ 3,029,280
Annual interest rate	1.66%
Debt conversion price (in dollars per share)	$ 4.45
Convertible Debt [Member] | Note Payable C [Member]
Convertible Debt - Related Party [Abstract]
Gross Principal Amount	$ 4,990,000
Unamortized Debt Discount	(797,326)
Net Amount	$ 4,192,674
Annual interest rate	1.91%
Debt conversion price (in dollars per share)	$ 5.55

XML

Savings and Retirement Plans (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Savings and Retirement Plans [Abstract]
Employer discretionary contribution amount to U.S. plan			$ 308,000	$ 259,000
Defined Benefit Plans, Net Periodic Retirement Cost [Abstract]
Gross service cost	$ 28,000	$ 36,000	83,000	102,000
Interest cost	29,000	24,000	87,000	77,000
Expected return on assets	(24,000)	(19,000)	(72,000)	(59,000)
Amortization	(2,000)	7,000	(5,000)	14,000
Net periodic retirement cost	$ 31,000	$ 48,000	$ 93,000	$ 134,000

XML

Business Segment Information (Details)		3 Months Ended		9 Months Ended
		Sep. 30, 2016 USD ($)	Sep. 30, 2015 USD ($)	Sep. 30, 2016 USD ($) Segment Customer	Sep. 30, 2015 USD ($)	Dec. 31, 2015 USD ($)
Business Segment Information [Abstract]
Number of operating markets | Segment				2
Number of operating segments | Segment				1
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues		$ 13,407,611	$ 11,834,187	$ 38,618,826	$ 30,004,210
Long-lived assets		2,201,942		$ 2,201,942		$ 2,554,822
Number of major customers | Customer				0
United States [Member] | Reportable Geographical Components [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues		10,701,000	8,828,000	$ 28,877,000	21,520,000
Long-lived assets		1,738,000		1,738,000		2,089,000
United Kingdom [Member] | Reportable Geographical Components [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues		851,000	596,000	3,036,000	2,954,000
Long-lived assets		2,000		2,000		3,000
All Other Foreign Countries [Member] | Reportable Geographical Components [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues	[1]	1,856,000	$ 2,410,000	6,706,000	$ 5,530,000
The Netherlands [Member] | Reportable Geographical Components [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Long-lived assets		$ 462,000		$ 462,000		$ 463,000

[1] No other country accounts for 10% or more of the consolidated net sales.

XML

Subsequent Event (Details) - USD ($)	Nov. 03, 2016	Sep. 30, 2016	Sep. 07, 2016	Dec. 31, 2015
Subsequent Event [Line Items]
Debt conversion price (in dollars per share)			$ 1.67
Accrued interest		$ 1,019,120		$ 757,615
Number of shares issued (in shares)		26,538,000		26,538,000
Accelmed Growth Partners, L.P. [Member]
Subsequent Event [Line Items]
Number of shares to be purchased under agreement (in shares)			16,219,033
Purchase price per share (in dollars per share)			$ 1.55
Aggregate purchase price			$ 25,000,000
Subsequent Event [Member]
Subsequent Event [Line Items]
Outstanding principal amount of convertible debt	$ 28,500,000
Accrued interest	$ 1,000,000
Debt conversion, converted shares (in shares)	17,688,423
Number of shares issued (in shares)	16,219,033
Proceeds from the sale of stock	$ 25,000,000