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 June 30, ~~2016~~2017

☐	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)

~~Minnesota, U.S.A.~~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, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and ~~“smaller reporting~~“emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer ☐	Accelerated Filer ☐	Non-Accelerated Filer ☐	Smaller Reporting Company ☒	Emerging Growth Company ☐
		(Do not check if a 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 ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extend transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

As of August ~~10, 2016~~7, 2017 the registrant had ~~26,144,299~~60,914,778 shares of common stock outstanding.

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INDEX

COGENTIX MEDICAL, INC. AND SUBSIDIARIES

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements

	Condensed Consolidated Balance Sheets (unaudited)	5

	Condensed Consolidated Statements of Operations (unaudited)	7

	Condensed Consolidated Statements of Comprehensive ~~Loss~~Income (Loss) (unaudited)	8

	Condensed Consolidated Statement of Shareholders’ Equity (unaudited)	9

	Condensed Consolidated Statements of Cash Flows (unaudited)	10

	Notes to the Condensed Consolidated Financial Statements (unaudited)	11

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2018

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	2624

Item 4.	Controls and Procedures	2624

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	2624

Item 1A.	Risk Factors	2724

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2724

Item 3.	Defaults upon Senior Securities	2724

Item 4.	Mine Safety Disclosures	2725

Item 5.	Other Information	2725

Item 6.	Exhibits	2725

	SIGNATURES	2926

	Certification by the PEO pursuant to Section 302	27

	Certification by the PFO pursuant to Section 302	27

	Certification by the PEO pursuant to Section 906	27

	Certification by the PFO pursuant to Section 906	27

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As used in this report, the terms ~~“Cogentix,”~~“Cogentix”, “Cogentix ~~Medical,” “Company,” “we,” “us,”~~Medical”, the “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~~^®Vision-Sciences®, ~~EndoSheath~~^®EndoSheath®, ~~Slide-On~~^®Slide-On®, ~~EndoWipe~~^® ~~and~~EndoWipe®, The Vision ~~System~~^®~~for our endoscopy products,~~ ~~Urgent~~ System®,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~~ Macroplastique®, VOX®, PTQ® and Uroplasty® ~~for Uroplasty, LLC, one of our subsidiaries~~. This report also contains trademarks, trade names and service marks that are owned by other persons or entities.

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 April 1, 2016 through June 30, 2016 to the three-month unaudited period from April 1, 2015 through June 30, 2015, and the six month unaudited period from January 1, 2016 through June 30, 2016 to the six month unaudited period from January 1, 2015 through June 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~~

When relying on forward-looking statements to make decisions with respect to the Company, our investors and ~~without implied limitation, such risks,~~others should carefully consider the foregoing factors and other uncertainties and ~~factors that affect~~potential events and read our ~~business included:~~filings with the SEC, including our annual report on Form 10K for the year ended December 31, 2016, for a discussion on these and other risks and uncertainties. These filings are available at www.sec.gov. 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.

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;

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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;

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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.

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~~PART I.~~

~~FINANCIAL INFORMATION~~

PART I. FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

COGENTIX MEDICAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	June 30, 2016		December 31, 2015		June 30, 2017		December 31, 2016

Assets
Current assets:
Cash and cash equivalents	$	2,867,080	$	1,976,594	$	10,431,068	$	9,369,624
Short-term investments						14,275,494		13,573,057
Accounts receivable, net		6,481,899		8,191,391		7,313,021		6,770,838
Inventories		5,680,959		4,584,844		7,235,436		7,235,043
Other		774,054		834,076		616,166		571,527
Total current assets		15,803,992		15,586,905		39,871,185		37,520,089

Property, plant, and equipment, net		2,305,452		2,554,822		2,186,034		2,115,316
Goodwill		18,749,888		18,749,888		18,749,888		18,749,888
Other intangible assets, net		10,664,294		11,846,009		8,303,379		9,482,578
Long-term investments						2,218,223		5,344,004
Deferred tax assets and other		289,109		269,121		162,044		163,427
Total assets	$	47,812,735	$	49,006,745	$	71,490,753	$	73,375,302

See accompanying notes to the Condensed Consolidated Financial Statements.

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COGENTIX MEDICAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	June 30, 2016			December 31, 2015			June 30, 2017			December 31, 2016

Liabilities and Shareholders’ Equity

Current liabilities:
Accounts payable	$	2,312,809		$	2,209,473		$	1,644,109		$	2,689,035
Income taxes payable		33,554			20,866			90,762			113,191
Accrued liabilities:
Compensation		4,338,519			3,281,809			3,536,817			4,670,640
Deferred revenue		517,045			307,936			629,538			597,524
Other		763,654			641,561			1,281,043			838,272
Total current liabilities		7,965,581			6,461,645			7,182,269			8,908,662

Convertible debt – related party, net		23,891,101			23,336,854
Interest payable		935,974			757,615
Accrued pension liability		734,541			663,071			360,429			308,918
Deferred rent		656,733			671,088			613,888			639,019
Other		154,010			157,453			62,426			278,780

Total liabilities		34,337,940			32,047,726			8,219,012			10,135,379

Shareholders’ equity:
Preferred stock, $0.01 par value 5,000,000 Shares authorized; none issued or outstanding		-			-
Common stock $.01 par value; 100,000,000 shares authorized, 26,044,299 and 26,057,327 shares issued and outstanding at June 30, 2016 and December 31, 2015, respectively		260,445			260,574
Preferred stock, $0.01 par value; 5,000,000 shares authorized; none issued or outstanding at June 30, 2017 and December 31, 2016, respectively								-			-
Common stock $0.01 par value; 100,000,000 shares authorized, 60,914,778 and 60,436,548 shares issued and outstanding at June 30, 2017 and December 31, 2016, respectively								609,149			604,368
Additional paid-in capital		76,653,435			76,485,650			145,226,680			144,430,381
Accumulated deficit		(62,541,882	)		(58,910,707	)		(81,907,939	)		(81,005,654	)
Accumulated other comprehensive loss		(897,203	)		(876,498	)		(656,149	)		(789,172	)

Total shareholders’ equity		13,474,795			16,959,019			63,271,741			63,239,923

Total liabilities and shareholders’ equity	$	47,812,735		$	49,006,745		$	71,490,753		$	73,375,302

See accompanying notes to the Condensed Consolidated Financial Statements.

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COGENTIX MEDICAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended June 30,					Six Months Ended June 30,
	2016			2015			2016			2015			2017		2016			2017			2016


Net sales	$	13,004,651		$	11,150,212		$	25,211,215		$	18,170,023		$	14,064,216	$	13,004,651		$	27,014,349		$	25,211,215
Cost of goods sold		4,087,165			3,652,510			7,888,359			4,454,278			4,658,334		4,087,165			9,152,247			7,888,359

Gross profit		8,917,486			7,497,702			17,322,856			13,715,745			9,405,882		8,917,486			17,862,102			17,322,856

Operating expenses
General and administrative		1,867,312			1,893,272			3,529,781			3,295,644			2,058,327		1,867,312			4,194,483			3,529,781
Research and development		1,100,056			1,062,459			2,036,934			1,671,763			1,031,851		1,100,056			2,322,509			2,036,934
Selling and marketing		5,433,439			6,651,380			11,069,201			11,596,495			5,347,078		5,433,439			11,002,038			11,069,201
One-time costs														-		2,177,990			-			2,311,541
Amortization of intangibles		590,858			634,191			1,181,716			641,453			588,646		590,858			1,179,199			1,181,716
Proxy settlement costs		2,177,990			-			2,311,541			-
Merger related costs		-			468,607			-			2,046,773
		11,169,655			10,709,909			20,129,173			19,252,128			9,025,902		11,169,655			18,698,229			20,129,173

Operating loss		(2,252,169	)		(3,212,207	)		(2,806,317	)		(5,536,383	)
Operating income (loss)														379,980		(2,252,169	)		(836,127	)		(2,806,317	)

Other income (expense)
Interest income		170			1,582			405			3,440
Interest expense		(376,363	)		(343,555	)		(766,667	)		(343,794	)
Interest income (expense)														61,704		(376,193	)		107,933			(766,262	)
Other income														6,192		-			6,364			-
Foreign currency exchange gain (loss)		(17,844	)		2,998			(25,406	)		2,034			33,453		(17,844	)		46,193			(25,406	)
		(394,037	)		(338,975	)		(791,668	)		(338,320	)		101,349		(394,037	)		160,490			(791,668	)

Loss before income taxes		(2,646,206	)		(3,551,182	)		(3,597,985	)		(5,874,703	)
Income (loss) before income taxes														481,329		(2,646,206	)		(675,637	)		(3,597,985	)

Income tax expense		18,561			17,578			33,190			27,298			61,700		18,561			115,151			33,190

Net loss	$	(2,664,767	)	$	(3,568,760	)	$	(3,631,175	)	$	(5,902,001	)
Net income (loss)													$	419,629	$	(2,664,767	)	$	(790,788	)	$	(3,631,175	)

Basic and diluted net loss per common share	$	(0.10	)	$	(0.14	)	$	(0.14	)	$	(0.28	)
Basic net income (loss) per common share													$	0.01	$	(0.10	)	$	(0.01	)	$	(0.14	)
Diluted net income (loss) per common share													$	0.01	$	(0.10	)	$	(0.01	)	$	(0.14	)

Weighted average common shares outstanding:
Basic and diluted		25,518,330			25,437,860			25,446,765			20,772,399
Basic														59,895,208		25,518,330			59,767,542			25,446,765
Diluted														60,349,266		25,518,330			59,767,542			25,446,765

See accompanying notes to the Condensed Consolidated Financial Statements.

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COGENTIX MEDICAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE ~~LOSS~~INCOME (LOSS)

(Unaudited)

	Three Months Ended June 30						Six Months Ended June 30						Three Months Ended June 30						Six Months Ended June 30
	2016			2015			2016			2015			2017			2016			2017			2016

Net loss	$	(2,664,767	)	$	(3,568,760	)	$	(3,631,175	)	$	(5,902,001	)
Net income (loss)													$	419,629		$	(2,664,767	)	$	(790,788	)	$	(3,631,175	)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments		(50,278	)		57,457			(24,622	)		(122,302	)		109,348			(50,278	)		130,772			(24,622	)
Unrealized loss on available-for-sale investments														8,065			-			7,860			-
Pension adjustments		12,491			(21,752	)		3,917			(331,990	)		(4,041	)		12,491			(5,609	)		3,917
Total other comprehensive income (loss), net of tax		(37,787	)		35,705			(20,705	)		(454,292	)		113,372			(37,787	)		133,023			(20,705	)
Comprehensive loss	$	(2,702,554	)	$	(3,533,055	)	$	(3,651,880	)	$	(6,356,293	)
Comprehensive income (loss)													$	533,001		$	(2,702,554	)	$	(657,765	)	$	(3,651,880	)

See accompanying notes to the Condensed Consolidated Financial Statements.

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COGENTIX MEDICAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

Six Months Ended June 30, ~~2016~~2017

(Unaudited)

                Common Stock
Additional
Paid-in
Capital

Accumulated
Deficit

Accumulated
Other
Comprehensive
Income (Loss)

Total
Shareholders'
Equity

Shares Amount

Balance at December 31, 2015 26,057,327 $ 260,574 $ 76,485,650 $ (58,910,707 ) $ (876,498 ) $ 16,959,019

Share-based compensation 42,170 423 224,576 - - 224,999

Payment of income tax from vested restricted stock (55,198 ) (552 ) (56,791 ) (57,343 )

Comprehensive loss - - - (3,631,175 ) (20,705 ) (3,651,880 )

Balance at June 30, 2016 26,044,299 $ 260,445 $ 76,653,435 $ (62,541,882 ) $ (897,203 ) $ 13,474,795

													Accumulated
							Additional						Other			Total
	Common Stock						Paid-in			Accumulated			Comprehensive			Shareholders'
	Shares			Amount			Capital			Deficit			Income (Loss)			Equity

Balance at December 31, 2016		60,436,548		$	604,367		$	144,430,382		$	(81,005,654	)	$	(789,172	)	$	63,239,923

Share-based compensation and vesting of restricted stock		486,080			4,861			698,459			-			-			703,320

Proceeds from exercise of stock options, net of shares exchanged		(7,850	)		(79	)		(13,658	)								(13,737	)

Adoption of ASU 2016-09		-			-			111,497			(111,497	)					-

Comprehensive loss		-			-			-			(790,788	)		133,023			(657,765	)

Balance at June 30, 2017		60,914,778		$	609,149		$	145,226,680		$	(81,907,939	)	$	(656,149	)	$	63,271,741

See accompanying notes to the Condensed Consolidated Financial Statements.

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COGENTIX MEDICAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

							Six Months Ended
	Six Months Ended June 30,						June 30,
	2016			2015			2017			2016
Cash flows from operating activities:
Net loss	$	(3,631,175	)	$	(5,902,001	)	$	(790,788	)	$	(3,631,175	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		1,590,903			925,107			1,544,473			1,590,903
Loss on disposal of equipment		-			38,668			233			-
Share-based compensation expense		224,999			536,439			703,320			224,999
Amortization of premium on available-for-sale securities								68,829			-
Deferred tax benefit (expense)								6,764			(1,161	)
Deferred rent								(14,983	)		9,895
Amortization of discount on related party debt		554,247			265,967			-			554,247
Long term incentive plan		(46,870	)		(8,491	)
Tax benefit		(1,161	)		(89,945	)
Deferred rent		9,895			(2,263	)
Long term incentive plan benefit								-			(46,870	)
Proceeds from restricted stock exchanged for taxes		(57,343	)		-			(17,690	)		(57,343	)
Changes in operating assets and liabilities:
Accounts receivable, net		1,691,231			258,291			(402,955	)		1,691,231
Inventories		(1,096,308	)		23,025			7,333			(1,096,308	)
Other current assets		68,790			22,829			(31,230	)		68,790
Accounts payable		104,130			(153,490	)		(1,050,123	)		104,130
Interest payable		178,359			76,211			-			178,359
Accrued compensation		1,059,496			2,306			(1,349,293	)		1,059,496
Accrued liabilities, other		118,912			(301,580	)		384,213			118,912
Accrued pension liability		42,862			174,014			27,338			42,862
Deferred revenue		250,679			72,080			24,402			250,679
Net cash provided by (used in) operating activities		1,061,646			(4,062,833	)		(890,157	)		1,061,646

Cash flows from investing activities:
Cash acquired from merger with Vision-Sciences		-			2,019,610
Proceeds from maturity of available-for-sale securities								4,800,000			-
Purchases of available-for-sale securities								(2,438,322	)		-
Purchases of property, plant and equipment		(166,976	)		(609,615	)		(398,426	)		(166,976	)
Proceeds from sale of property, plant and equipment		-			999
Net cash (used in) provided by investing activities		(166,976	)		1,410,994
Net cash provided by (used in) investing activities								1,963,252			(166,976	)

Cash flows from financing activities:
Borrowings from line of credit								3,033,385			2,646,500
Repayments of line of credit								(3,033,385	)		(2,646,500	)
Proceeds from exercise of stock options								3,953			-
Net cash provided by financing activities		-			-			3,953			-

Effect of exchange rates on cash and cash equivalents		(4,184	)		(55,705	)		(15,604	)		(4,184	)

Net increase (decrease) in cash and cash equivalents		890,486			(2,707,544	)
Net increase in cash and cash equivalents								1,061,444			890,486

Cash and cash equivalents at beginning of period		1,976,594			8,703,790			9,369,624			1,976,594

Cash and cash equivalents at end of period	$	2,867,080		$	5,996,246		$	10,431,068		$	2,867,080

Supplemental disclosure of cash flow information:
Cash paid during the period for income tax	$	19,378		$	17,578		$	135,936		$	19,378
Cash paid during the period for interest	$	34,061		$	1,400		$	13,625		$	34,061

See accompanying notes to the Condensed Consolidated Financial Statements.

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COGENTIX MEDICAL, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

~~Note 1.~~

Note 1. Summary of Significant Accounting Policies

Basis of Presentation

Cogentix Medical ~~Inc.,~~is a global medical device company headquartered in Minnetonka, Minnesota, with additional operations in New York, Massachusetts, The Netherlands and the United ~~Kingdom, is a global medical device company.~~Kingdom. We design, develop, manufacture and market a robust line of high performance fiberoptic and video endoscopy products under the PrimeSight^TMbrand 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~~procedures, with ~~a sterile, disposable microbial barrier, providing practitioners and healthcare facilities with a solution to meet~~our focus being on the ~~growing need for safe, efficient and cost-effective flexible endoscopy.~~urology market. We also offer the Urgent^® PC Neuromodulation System, a device that delivers percutaneous tibial nerve stimulation (“PTNS”), for the office-based treatment of overactive bladder (“OAB”). ~~The Urgent® PC Neuromodulation System has FDA clearance~~OAB is a chronic condition that affects approximately 40 million adults in the ~~United States~~U.S. The symptoms include urinary urgency, frequency and ~~has regulatory approvals for the treatment of OAB and fecal incontinence (FI) in various international markets. The Company~~urge incontinence. We also ~~offers Macroplastique®, a~~offer Macroplastique^® Implants, an injectable urethral bulking agent for the treatment of adult female stress urinary ~~incontinence.~~incontinence that is primarily due to intrinsic sphincter deficiency. Outside the U.S., ~~the Company markets~~we market additional bulking agents: ~~PTQ®~~ PTQ^®for the treatment ofif fecal incontinence and ~~VOX®~~ 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.augmentation.

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.~~Commission (the “SEC”). 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~~10-K for the ~~nine-months~~year ended December 31, ~~2015.~~2016.

The Condensed Consolidated Financial Statements presented herein as of June 30, ~~2016~~2017 and for the three and six month periods ended June 30, ~~2016~~2017 and ~~2015,~~2016, 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~~10-K for the ~~nine-months~~year ended December 31, ~~2015.~~2016. Based upon our review, we have determined that these policies remain our most critical accounting policies for the six months ended June 30, ~~2016~~2017 and we have made no changes to these policies during ~~2016.~~

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~~Liquidity and Capital Resources~~

We have incurred substantial operating losses since our inception. As of June 30, 2016, we had cash and cash equivalents totaling approximately $2.9 million. On September 18, 2015, we entered into a $7.0 million line of credit with Venture Bank to provide non-dilutive resources to execute management’s growth strategies2017 other than for the ~~PrimeSight~~^TMadoption of Accounting Standards Update (“ASU”) 2016-09, “Improvements to Employee Share-Based Payment Accounting.” Under the new ASU we no longer account for forfeitures throughout the vesting period and ~~Urgent~~^® ~~PC product lines and~~instead account for ~~general corporate purposes. Note 6 contains further information regarding the line of credit. If operations do not generate sufficient cash~~them 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 toperiod in which they occur. We also recognize certain tax benefits or tax shortfalls upon 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~~restricted-stock award vesting or stock option exercise relative to the ~~net tangible and intangible assets of VSCI acquired~~deferred tax asset position established 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

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

Six months
ended
June 30,
2015
(unaudited)

Supplemental pro forma combined results of operations:
Net sales $ 23,835,350
Net loss $ (10,264,196 )
Net loss per share – basic and diluted $ (0.40 )

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

Six months ended
June 30,
2015

Increase in amortization of intangibles $ 510,000
Interest amortization on related party debt 279,000
Increase in net loss $ 789,000

~~These unaudited pro forma condensed consolidated financial results have been prepared~~provision 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 the January 1, 2015 or of future results~~income taxes line of the consolidated ~~entities. The unaudited pro forma condensed~~statements of operations instead of within the consolidated ~~financial information does not reflect any operating efficiencies and cost savings that may be realized from the integration~~statement of ~~the acquisition.~~shareholders’ equity.

~~Note 3.~~

Note 2. 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 June 30, 2017 as compared to December 31, 2016.

Other Intangible Assets

Other intangible assets consisted of approximately the following at June 30, ~~2016~~2017 and December 31, ~~2015:~~2016:

June 30, 2016 December 31, 2015

Gross
Carrying
Amount

Accumulated
Amortization

Gross
Carrying
Amount

Accumulated
Amortization

Developed technology $ 6,200,000 $ 1,107,000 $ 6,200,000 $ 664,000
Patents 5,653,000 5,601,000 5,653,000 5,586,000
Trademarks and trade names 190,000 71,000 190,000 67,000
Customer relationships 7,270,000 1,870,000 7,270,000 1,150,000
$ 19,313,000 $ 8,649,000 $ 19,313,000 $ 7,467,000
Accumulated amortization 8,649,000 7,467,000

Net book value of amortizable intangible assets $ 10,664,000 $ 11,846,000

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	June 30, 2017						December 31, 2016
	Gross Carrying Amount		Accumulated Amortization		Remaining Useful Life		Gross Carrying Amount		Accumulated Amortization		Remaining Useful Life
Developed technology	$	6,200,000	$	1,993,000		4.75	$	6,200,000	$	1,550,000		5.25
Patents		5,653,000		5,628,000		7.75		5,653,000		5,616,000		8.25
Trademarks and trade names		190,000		79,000		7.75		190,000		74,000		8.25
Customer relationships		7,270,000		3,310,000		2.75		7,270,000		2,590,000		3.25
	$	19,313,000	$	11,010,000			$	19,313,000	$	9,830,000
Accumulated amortization		11,010,000						9,830,000

Net book value of amortizable intangible assets	$	8,303,000				3.73	$	9,483,000				4.23

For the six months ended June ~~2016~~30, 2017 and ~~2015,~~2016, amortization of intangible assets charged to operations was approximately $1,179,000 and $1,182,000, ~~and $641,000,~~ respectively. ~~The weighted average remaining~~

Estimated amortization ~~period~~expense for all intangible assets as of June 30, ~~2016 was~~2017 is approximately ~~4.73 years.~~as follows:

July 1, 2017 through December 31, 2017	$	1,174,000
2018		2,347,000
2019		2,341,000
2020		1,254,000
2021		894,000
Thereafter		293,000
Total		8,303,000

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~~Note 4.~~

Note 3. New Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In March 2016, the Financial Accounting Standards Board (“FASB”) issued ~~Accounting Standards Update (“ASU”)~~ASU 2016-09, ~~Improvements~~“Improvements to Employee Share-Based Payment ~~Accounting~~.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. We adopted this standard as of January 1, 2017. The adoption did not have a material impact on our consolidated financial statements. Under the new ASU we no longer account for forfeitures throughout the vesting period and instead account for them in the period in which they occur. We also recognize certain tax benefits or tax shortfalls upon a restricted-stock award vesting or stock option exercise relative to the deferred tax asset position established in the provision for income taxes line of the consolidated statements of operations instead of within the consolidated statement of shareholders’ equity.

In August 2016, the FASB issued ASU No. 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 ~~any~~an interim ~~or annual period, with adjustments reflected~~period. The Company adopted this standard as of ~~the beginning of the fiscal year of adoption. We are evaluating the effect that this guidance will~~January 1, 2017. The adoption did not have a material impact on our consolidated financial ~~statements~~statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

In May 2017, the Financial Accounting Standards Board (“FASB”) issued ASU 2017-09, “Compensation – Stock Compensation: Scope of Modification Accounting.” This ASU is intended to provide guidance about which changes to the terms or conditions on a share-based payment aware require and entity to apply modification accounting. This new standard is effective for annual periods beginning after December 15, 2017, and interim periods within that reporting period. The Company does not expect these amendments to have a material effect on its consolidated financial statements.

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In March 2017, the FASB issued ASU 2017-08, “Receivables—Nonrefundable Fees and Other Costs: Premium Amortization on Purchased Callable Debt Securities” related ~~disclosures.~~to the amortization period for certain purchased callable debt securities held at a premium. The amendments shorten the amortization period for the premium to the earliest call date. The amendment is effective for interim and annual periods beginning after December 15, 2018. The Company does not expect these amendments to have a material effect on its consolidated financial statements.

In January 2017, the FASB, issued ASU No. 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment” which simplifies the accounting for goodwill impairment by eliminating Step 2 of the current goodwill impairment test. Goodwill impairment will now be the amount by which the reporting unit’s carrying value exceeds its fair value, limited to the carrying value of the goodwill. The standard is effective for us beginning January 1, 2020. Early adoption is permitted for any impairment tests performed after January 1, 2017. The new guidance is not expected to have a material impact on our results of operations and financial position.

In February 2016, the FASB issued ASU 2016-2, ~~Leases,~~“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 forWhile the Company ~~beginning in~~is still evaluating the ~~first quarter~~timing and impact of ~~2017. We do not believe~~ the adoption of this ~~update will have a material impact~~guidance on ~~our~~its consolidated financial ~~statements.~~statements, it anticipates that the adoption could result in an increase in the assets and liabilities recorded on its consolidated balance sheet.

~~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. 2015-12, “Plan Accounting: Defined Benefit Pension Plans (Topic 815).” Under the new guidance, plans are no longer required to measure fully benefit-responsive investment contracts (FBRICs) at fair value, disaggregate investments by nature, risks and characteristics, disclose individual investments that represent five percent or more of net assets available for benefits, or disclose net appreciation or depreciation for investments by general price. The amendments in ASU No. 2015-12 are effective for fiscal years beginning after December 15, 2015 and earlier adoption is permitted. 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 (LIFO) method or the retail inventory method (RIM). ~~The amendments in ASU No. 2015-11 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 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~~, as amended by ASU 2015-14, “Deferral 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,Effective Date”, which requires an entity ~~should~~to 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~~sets forth a new revenue recognition model that requires identifying the contract, identifying the performance obligations, determining the transaction price, allocating the transaction price to performance obligations and recognizing the revenue upon satisfaction of performance obligations. For public entities, this ASU is effective for annual reporting periods beginning after December 15, 2017 including interim reporting periods within that reporting period. ~~Early application is permitted~~The provisions can be adopted either retrospectively to each prior reporting period presented or as a cumulative-effect adjustment as of the date of adoption. We plan to adopt this ASU effective January 1, 2018 using the cumulative-effect adjustment method. The Company has completed the assessment of this ASU on each of our revenue streams and believes the impact on our consolidated financial statements will be immaterial. For each of our products, revenue will still be recognized when title passes to the customer, generally upon shipment. Revenue for ~~annual reporting periods beginning~~service repairs of equipment will continue to be recognized after ~~December 31, 2016.~~ ~~We are still evaluating whether or not this update is applicable to our business.~~service has been completed, and service contract revenue will be recognized ratably over the term of the contract.

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~~Note 5.~~

Note 4. 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 June 30, 2016~~The following table shows our cash and ~~December 31, 2015, the only asset or liability measured at~~available-for-sale securities’ adjusted cost, gross unrealized gains, gross unrealized losses and fair value on a recurring basis was the long-term incentive plan accrual with a fair value of $29,600 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 June 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~~by significant investment category recorded as cash and cash equivalents ~~accounts receivable, inventories, other current assets, accounts payable, accrued liabilities~~or short- or long-term investments as of June 30, 2017:

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	June 30, 2017
	Adjusted Cost		Unrealized Gains		Unrealized Losses			Fair Value		Cash and Cash Equivalents		Short-Term Investments		Long-Term Investments

Cash	$	2,290,062	$	-	$	-		$	2,290,062	$	2,290,062	$	-	$	-

Level 1:
Money market funds		8,141,006		-		-			8,141,006		8,141,006		-		-
Subtotal		8,141,006		-		-			8,141,006		8,141,006		-		-

Level 2:
Certificates of deposit		2,160,000		-		(936	)		2,159,064		-		1,439,326		719,738
Commercial paper		1,190,110		-		(238	)		1,189,872		-		1,189,872		-
Corporate notes/bonds		9,656,454		-		(6,198	)		9,650,256		-		9,650,256		-
U.S. government agencies		3,500,642		-		(6,117	)		3,494,525		-		1,996,040		1,498,485
Subtotal		16,507,206		-		(13,489	)		16,493,717		-		14,275,494		2,218,223

Total	$	26,938,274	$	-	$	(13,489	)	$	26,924,785	$	10,431,068	$	14,275,494	$	2,218,223

We consider all cash on-hand and ~~convertible debt-related party approximate~~highly liquid investments with original maturities of three months or less when purchased to be cash equivalents. We classify marketable securities having original maturities of more than three months when purchased and remaining maturities of one year or less as short-term investments and marketable securities with remaining maturities of more than one year as long-term investments. We further classify marketable securities as available-for-sale. We have not designated any of our marketable securities as trading securities or as held to maturity. We may sell any of our marketable securities prior to their stated maturities for strategic reason including, but not limited to, anticipation of credit deterioration and duration management. The long term securities have a contractual term that ranges from November to December 2018.

We consider the declines in market value of our marketable securities investment portfolio to be temporary in nature. We typically invest in highly-rated securities, and our investment policy generally limits the amount of credit exposure to any one issuer.

Cash and cash equivalents include highly liquid money market funds and debt securities with original maturities of three months or less totaling approximately $10.4 million and approximately $9.4 million at June 30, 2017 and December 31, 2016, respectively. Money market funds present negligible risk of changes in value due to changes in interest rates, and their cost approximates their fair market value. We maintain cash in bank accounts, which, at times, may exceed federally insured limits. We have not experienced any losses in such accounts. Cash and cash equivalents held in foreign bank accounts totaled approximately $669,000 and approximately $507,000 at June 30, 2017 and December 31, 2016, respectively.

Note 5. Line of Credit

~~Note 6.~~

~~Line of Credit~~

~~On September 18, 2015, we entered into~~We have a loan agreement with Venture Bank, a Minnesota banking corporation, providing us with a ~~committed $7~~$7.0 million secured revolving credit facility ~~(“Facility”~~(the “Facility”), subject to eligible accounts receivable and ~~inventory. The Facility will expire on March 18, 2017~~inventory, and ~~any loans outstanding on such date will mature and become payable. The Facility is~~ secured by substantially all of our assets. The Facility was amended in March 2017. Under the amended Facility, the Facility will expire on September 18, 2018.

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;~~$2.5 million; or (b) $7 million. As of June 30, ~~2016,~~2017, based on eligible receivables and inventory, our total available borrowing base was ~~$5,366,000.~~approximately $6,110,000. We did not have any borrowings under the ~~Facility~~facility as of June 30, ~~2016.~~2017.

Loans under the Facility bear interest at a rate per annum equal to the Wall Street Journal Prime Rate plus ~~2.25%~~1.25%, provided that in no case will the interest charged be less than ~~5.5%~~5.25%. 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, the Borrowers will pay a non-usage fee of ~~0.25%~~0.15% based on the average unused and available portion of the Facility on a monthly basis.

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~~Note 7.~~

Note 6. 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. ~~Historically, the inventory write-offs have generally been within our expectations.~~ Inventories consist of approximately the following:

	June 30, 2016		December 31, 2015		June 30, 2017		December 31, 2016

Raw materials	$	4,584,000	$	2,385,000	$	4,959,000	$	4,483,000
Work-in-process		8,000		793,000		184,000		462,000
Finished goods		1,089,000		1,407,000		2,092,000		2,290,000

	$	5,681,000	$	4,585,000
Total inventory					$	7,235,000	$	7,235,000

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 Loss~~Note 7. Net Income (Loss) per Common Share

We calculate basic net ~~loss~~income (loss) per common share amounts by dividing net ~~loss~~income (loss) by the weighted-average common shares ~~outstanding, excluding outstanding shares contingently subject to forfeiture.~~outstanding. For calculating diluted net ~~loss~~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~~The following table sets forth the computation of our basic and diluted net ~~loss during the six months ended June 30, 2016 and 2015 the~~income (loss) per share:

	Three Months Ended June 30,					Six Months Ended June 30,
	2017		2016			2017			2016
Net income (loss)	$	419,629	$	(2,664,767	)	$	(790,788	)	$	(3,631,175	)

Weighted average shares outstanding - Basic		59,895,208		25,518,330			59,767,542			25,446,765
Dilutive impact of common stock equivalents outstanding		454,058		-			-			-
Weighted Averages shares used to compute diluted net income (loss) per shares		60,349,266		25,518,330			59,767,542			25,446,765

Net income (loss) per share – Basic	$	0.01	$	(0.10	)	$	(0.01	)	$	(0.14	)
Net income (loss) per share – Diluted	$	0.01	$	(0.10	)	$	(0.01	)	$	(0.14	)

The following options ~~and warrants and outstanding and unvested restricted stock to purchase shares of our common stock were~~are excluded from ~~diluted net loss per common share~~our EPS calculations because ~~of their anti-dilutive effect, and therefore, basic net loss per common share equals dilutive net loss per common share:~~they are antidilutive:

	~~Number of~~ ~~options, warrants and~~ ~~unvested restricted~~ ~~stock~~		~~Range of stock~~ ~~option and warrant~~ ~~exercise prices~~

~~June 30, 2016~~		~~2,814,000~~	$	~~0.88 to $24.40~~
~~June 30, 2015~~		~~3,767,000~~	$	~~1.64 to $24.40~~

	Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016
Restricted stock		-		417,742		819,725		417,742
Common stock options		1,985,541		2,170,278		2,660,841		2,170,278
Stock warrants		-		376,123		-		376,123
		1,985,541		2,964,143		3,480,566		2,964,143

~~Note 9.~~

Note 8. Shareholders’ Equity

Share-based compensation. On June 30, ~~2016,~~2017, 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.~~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. In 2016, the Company experienced a change in control for which it was the surviving entity. Outstanding grants will vest if a participant’s employment or other service with the Company is terminated, without cause or by the participant for good reason, within two years of the November 3, 2016 change in control. Under the 2015 Plan, we reserved 2,500,000 shares of our common stock for share-based grants and ~~980,256~~12,270 shares remain available for grant on June 30, ~~2016.~~2017.

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We ~~recognize share-based compensation expense in our Condensed Consolidated Statement of Operations based on the fair value~~grant options at the ~~time~~discretion of ~~grant of the share-based payment over the requisite service period. We incurred approximately $225,000 and $559,000~~ ~~in share-based compensation expense for the six months ended June 30, 2016 and 2015, respectively.~~

On June 30, 2016, we had approximately $285,000 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 2.2 years. We also had $528,000 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 2.23 years.

our directors. We grant option awards with an exercise price equal to the closing market price of our stock at the date of the grant. ~~Options~~We have options outstanding to purchase 2,660,841 shares of common stock granted under ~~this plan~~the 2015 Plan or predecessor companies’ plans. Options generally expire over a period ranging from seven to ten years from date of grant and vest at varying rates ranging up to three years.

The options granted under the 2015 Plan generally provide for the exercise of options during a limited period following termination of employment, death or disability.

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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 six months ended June 30:

	2016			2015			2017

Expected life in years		3.82			3.84			3.00
Risk-free interest rate		0.94	%		1.11	%		1.45	%
Expected volatility		64.32	%		63.94	%		66.89	%
Expected dividend yield		0	%		0	%		0	%
Weighted-average grant date fair value	$	0.47		$	0.79		$	0.74

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 six months ended June 30, ~~2016:~~2017:

	Number of shares			Weighted average exercise price		Weighted average remaining life in years		Aggregate intrinsic value		Number of shares			Weighted average exercise price		Weighted average remaining life in years		Aggregate intrinsic value

Outstanding at December 31, 2015		2,573,640		$	4.46		5.24	$	-
Outstanding at December 31, 2016											1,680,990		$	3.54		6.55	$	752,290
Options granted		392,400			0.98						1,042,809			1.65
Options exercised		-			-						(2,411	)		1.64
Options surrendered		(795,762	)		3.20						(60,547	)	$	5.71

Outstanding at June 30, 2016		2,170,278		$	4.30		4.93	$	-
Outstanding at June 30, 2017											2,660,841		$	2.75		6.56	$	585,776

Exercisable at June 30, 2016		1,569,490		$	5.44		3.21	$	-
Exercisable at June 30, 2017											999,104		$	4.91		3.58	$	114,561

The total fair value of stock options that vested during the six months ended June, ~~30,~~2017 and 2016 ~~and 2015~~ was approximately ~~$252,000~~$155,000 and ~~$152,000,~~$252,000, respectively.

~~Our 2015 Plan also permits~~We grant restricted shares at the ~~compensation committee~~discretion of our ~~board of~~ directors with vesting terms ranging from six months to ~~grant other stock-based benefits, including restricted shares.~~one year. The following table summarizes the activity related to our restricted shares during the six months ended June 30, ~~2016:~~2017:

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 337,858 0.98
Shares vested (311,503 ) 2.11
Shares forfeited (295,523 ) 2.50

Balance at June 30, 2016 417,742 $ 1.41 2.23 $ 401,032

	Number of restricted shares			Weighted average grant date fair value		Weighted average remaining life in years		Aggregate intrinsic value
Balance at December 31, 2016		992,548		$	1.30		1.35	$	1,995,021
Shares granted		542,541			1.67
Shares vested		(658,903	)		1.40			$	1,146,491
Shares surrendered		(56,461	)		1.62

Balance at June 30, 2017		819,725		$	1.45		1.59	$	1,426,322

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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.

~~Stock Warrants-Related Party.~~ ~~On June 30, 2016, the Company has warrants outstanding that were issued to Mr. Lewis C. Pell, a member~~We recognize share-based compensation expense in our Condensed Consolidated Statement 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 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.

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~~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~~Operations based on the ~~achievement of specified stock price targets during~~fair value at the ~~period beginning on the date~~time 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~~payment over the ~~derived~~requisite service ~~period of~~period. We incurred approximately ~~2.4 years. We recorded a liability of approximately $28,000 at June 31, 2016~~$703,000 and ~~related reversal of~~$225,000 in share-based compensation expense ~~was approximately $49,000~~ for the six months ended ~~ending~~ June 30, 2017 and 2016, ~~for the Awards.~~respectively.

~~Note 10.~~

~~Convertible Debt – Related Party~~

On June 30, 2017, we had approximately $1,009,000 of unrecognized share-based compensation expense related to stock options that we expect to recognize over a weighted-average period of approximately 2.58 years.

~~The following table is a summary of our convertible debt – related party on~~On June 30, ~~2016:~~2017, we had approximately $1,020,000 of unrecognized share-based compensation expense related to restricted shares that we expect to recognize over a weighted-average period of approximately 1.59 years.

Gross
Principal
Amount

Unamortized
Debt
Discount

Net
Amount

Note Payable A $ 20,000,000 $ (3,248,007 ) $ 16,751,993

Note Payable B 3,500,000 (501,474 ) 2,998,526

Note Payable C 4,990,000 (849,419 ) 4,140,581
$ 28,490,000 $ (4,598,900 ) $ 23,891,100

~~The Convertible Debt-Related Party 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 June 30, 2016, we had an aggregate amount of $935,974 in accrued interest under the convertible notes payable, which is shown as interest payable on our consolidated balance sheet.~~

The convertible promissory notes mature on March 31, 2020 or earlier upon a change of control (as defined). 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.

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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.~~

Note 9. 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 ~~$305,000~~$322,000 and ~~$162,000~~$305,000 for the six months ended June 30, ~~2016,~~2017, and ~~2015,~~2016, 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 six-month periods ended June 30:

	Three Months Ended June 30						Six Months Ended June 30						Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015			2017			2016			2017			2016

Gross service cost	$	28,000		$	36,000		$	56,000		$	65,000		$	24,000		$	28,000		$	48,000		$	56,000
Interest cost		29,000			24,000			58,000			53,000			23,000			29,000			46,000			58,000
Expected return on assets		(24,000	)		(19,000	)		(49,000	)		(39,000	)		(21,000	)		(24,000	)		(42,000	)		(49,000	)
Amortization		(1,000	)		7,000			(3,000	)		7,000			-			(1,000	)		-			(3,000	)
Net periodic retirement cost	$	32,000		$	48,000		$	62,000		$	86,000		$	26,000		$	32,000		$	52,000		$	62,000

~~Note 12.~~

Note 10. 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,~~For financial reporting purposes, we ~~have~~report one operating segment as our Chief Operating Decision Maker utilizes financial statement information provided to him on 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.consolidated basis.

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~~For the three and six months ended June 30, 2016, no country other than the United States represented more than 10% of our consolidated revenue.~~ Information regarding geographic area net sales to customers ~~by geographic area~~ for the three and six months ended June 30, is approximately as follows:

United
States

United
Kingdom

All Other
Foreign
Countries (1)
Consolidated

Three months ended June 30, 2016 $ 9,533,000 $ 1,196,000 $ 2,276,000 $ 13,005,000

Three months ended June 30, 2015 $ 7,274,000 $ 1,077,000 $ 2,799,000 $ 11,150,000

Six months ended June 30, 2016 $ 18,176,000 $ 2,184,000 $ 4,851,000 $ 25,211,000

Six months ended June 30, 2015 $ 12,732,000 $ 1,660,000 $ 3,778,000 $ 18,170,000

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	United States		All Other Foreign Countries (1)		Consolidated

Three months ended June 30, 2017	$	10,346,000	$	3,718,000	$	14,064,000

Three months ended June 30, 2016	$	9,623,000	$	3,382,000	$	13,005,000

Six months ended June 30, 2017	$	19,575,000	$	7,439,000	$	27,014,000

Six months ended June 30, 2016	$	18,540,000	$	6,671,000	$	25,211,000

(1)

No other country accounts for 10% orof more of the consolidated net sales.

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

United
States

United
Kingdom

The
Netherlands
Consolidated

June 30, 2016 $ 1,841,000 $ 2,000 $ 462,000 $ 2,305,000

December 31, 2015 $ 2,089,000 $ 3,000 $ 463,000 $ 2,555,000

	United States		United Kingdom/ The Netherlands		Consolidated

June 30, 2017	$	1,710,000	$	476,000	$	2,186,000

December 31, 2016	$	1,676,000	$	439,000	$	2,115,000

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 11. Subsequent Event

On July 25, 2017, we purchased all of the outstanding shares of Genesis Medical Holdings, Ltd (“Genesis”), a London, UK based distributor of medical products to the urology and gynecology markets. Genesis has been the exclusive UK distributor of our PrimeSight urology technology since 2013. We believe this is a complimentary acquisition for us as it furthers our direct sales efforts in the UK.

The terms of the acquisition included an upfront cash payment of £200,000 (approximately $260,000) for the tangible net assets of Genesis, subject to change based on the preparation of a schedule of net assets of Genesis as of the closing date. Further, we will pay £415,000 (approximately $540,000 using the July 25, 2017 exchange rate) at the rate of 5% of revenues for the ongoing business. If certain revenue targets are achieved for the twelve months ended March 31, 2019, we will pay an additional £100,000. A preliminary purchase price allocation, estimated acquisition costs and proforma financial information are not available due to the timing of the acquisition.

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~~10-K for the ~~nine-months~~year ended December 31, ~~2015.~~2016.

You should read the following discussion of our financial condition and results of operation together with the unaudited, condensed, 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~~10-K for the ~~nine-months~~year ended December 31, ~~2015.~~2016. 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.~~company headquartered in Minnetonka, Minnesota, with additional operations in New York, Massachusetts, The Netherlands and the United Kingdom. We design, develop, manufacture and market ~~innovative proprietary technologies serving~~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, with our focus being on the urology ~~and airway management markets. The Urgent~~^®market. We also offer the Urgent® PC Neuromodulation System, ~~is an FDA-cleared~~a device that delivers percutaneous tibial nerve stimulation ~~(PTNS)~~(“PTNS”), for the office-based treatment of overactive bladder ~~(OAB)~~(“OAB”). OAB is a chronic condition that affects approximately 40 million adults in the U.S. 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~~symptoms include urinary urgency, frequency and ~~healthcare facilities with a solution to meet the growing need for safe, efficient and cost-effective flexible endoscopy.~~urge incontinence. We also offer ~~Macroplastique~~^® aMacroplastique® Implants, an injectable urethral bulking agent for the treatment of adult female stress urinary ~~incontinence.~~ incontinence that is primarily due to intrinsic sphincter deficiency. Outside the U.S., ~~the company markets~~we market additional bulking agents: PTQ^®for the treatment ofif 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. 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.”

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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 this report for additional description of this merger, the accounting treatment of the merger, and the pro forma financial information for Cogentix on a combined basis.

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~~10-K for the ~~nine-months~~year ended December 31, ~~2015,~~2016, 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 six months ended June 30, ~~2016.~~2017.

Results of Operations

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

Three months ended June 30, ~~2016~~2017 compared to three months ended June 30, ~~2015~~2016

Net ~~Sales~~Sales:~~: During~~ Consolidated net sales of $14,064,000 in the current period ~~consolidated~~represented a $1,059,000 increase, or 8.1%, over net sales of $13,005,000 in the prior period. The increase is primarily due to a $1,200,000 net increase in revenue from the Urology product lines, which is comprised of the PrimeSight, Urgent PC and Macroplastique products, and is offset by a $141,000 net decrease in revenue from the non-core Airway Management and Industrial product lines.

Consolidated net sales for PrimeSight urology products of $4,983,000 in the current period represented a ~~$1,855,000,~~$1,606,000 increase, or ~~a 17% increase,~~48%, over net sales of ~~$11,150,000 for~~$3,377,000 in the prior period. The ~~revenue for the products from Vision-Sciences increased $1,071,000, or 25%, in the current period. This~~ increase is primarily due to our sales force becoming more proficient in selling this technology as well ~~as an increase in orders~~the fact that our PrimeSight technology platform meets the needs of our medical customers for always ready, always sterile flexible endoscopy solutions. Our urology 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 ~~industrial business. Revenue from Urgent~~^® ~~PC increased $722,000, or 15%. While a new competitor to~~customers.

Consolidated net sales of our Urgent PC ~~entered~~System of $5,262,000 in the ~~market~~current period represented a $141,000 decrease, or 3%, when compared to net sales of $5,403,000 in ~~early 2016, our~~the prior period. U.S. unit growth of 5% was offset by a 5% decline in average selling price. U.S. unit growth was due primarily to sales execution and increased penetration in existing accounts, as well as increased new account conversions. 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. The decrease in average selling price is primarily due to a new entrant into the market.

~~Net~~Consolidated net sales of our Macroplastique product of $1,742,000 in the current period represented a $243,000 decrease, or 12%, over net sales of $1,985,000 in the prior period. Macroplastique serves a small market, and the focus of our sales force has been on growing our PrimeSight Urology and Urgent PC products.

Consolidated net sales of our non-urology products (Airway Management and Industrial Boroscopes) of $1,792,000 in the current period represented a $141,000 decrease, or 7%, over net sales of $1,933,000 in the prior period. The decrease is primarily due to our increased focus on Urology products. Additionally, we have begun to explore strategic alternatives for our non-Urology Airway Management and Industrial product lines.

Consolidated net sales to customers in the U.S. of ~~$9,614,000 during~~$10,346,000 in the current period represented an increase of ~~$1,300,000,~~$723,000, or ~~16%~~8%, over net sales of ~~$8,314,000~~$9,623,000 in the prior period. ~~Net~~Consolidated net sales to customers outside the U.S. ~~increased $554,000 (20%) to $3,391,000~~of $3,718,000 in the current period ~~compared to $2,837,000~~represented an increase of $336,000, or 10%, over net sales of $3,382,000 in the prior period.

Gross Profit: Gross profit was ~~$8,917,000,~~$9,406,000, or ~~68.6%~~66.9% of net sales in the current period, compared to ~~$7,498,000,~~$8,917,000, or ~~67.2%~~68.6% of net sales in the prior period. The ~~increase~~change in gross profit percentage is attributed primarily to ~~an unprofitable Stryker Corporation distribution arrangement for ureteroscopes that was not renewed at~~product mix, as revenue from our PrimeSight products were a higher proportion of total sales in the ~~end~~current quarter as compared to the same period of ~~calendar 2015.~~the prior year, and our PrimeSight products have a lower gross margin than Urgent PC and Macroplastique.

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Operating Expenses: Operating expenses in the current period totaled approximately $9,026,000, compared to approximately $11,170,000 in the prior period. Operating expenses included:

General and Administrative Expenses (G&A): G&A expenses of ~~$1,867,000~~$2,058,000 in the current period ~~decreased $26,000~~increased $191,000 from ~~$1,893,000~~$1,867,000 in the prior period. The increase is attributed primarily to increased share based compensation and business development costs.

Research and Development Expenses (R&D): R&D expenses of ~~$1,100,000~~$1,032,000 in the current period ~~increased $38,000~~decreased $68,000 from ~~$1,062,000~~$1,100,000 in the prior period.

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Selling and Marketing Expenses (S&M): S&M expenses of ~~$5,433,000~~$5,347,000 in the current period decreased ~~$1,218,000,~~$86,000, from ~~$6,651,000~~$5,433,000 in the prior period. The decrease is attributed primarily to ~~a decrease~~$372,000 for an IRS tax refund related to Medical Device taxes paid in ~~sales~~2013 -2015 and is partially offset by increased personnel ~~and travel costs due to lower headcount as a result of the Merger, lower consulting costs, the timing of our national sales meeting, and the repeal of the medical device tax.~~costs.

~~Amortization of Intangibles~~One-time Costs:~~: Amortization of intangibles was $591,000 in the current period compared to $634,000~~ One-time costs in the prior ~~period. The decrease is due~~period related to ~~some identifiable intangible assets recorded as part of~~ the ~~Merger that are now 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 settlement between the Company and Mr. Lewis Pell (a current director) and related ~~litigation in connection with the Annual Meeting (the “Settlement”). For the three months ended June 30, 2016, the Company incurred $2,178,000 of costs related to the Settlement, including~~litigation. These fees included $678,000 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.~~current period.

~~Merger Related Costs~~Amortization of Intangibles: ~~Merger related costs totaled $469,000 in the three months ended June 30, 2015. There were no similar costs~~Amortization of intangibles was $589,000 in the current period compared to $591,000 in the prior 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~~income was ~~$394,000~~$101,000 in the current period compared to net other expense of ~~$339,000~~$394,000 in the prior period. ~~Interest expense total $376,000~~Other income in the current ~~period compared to $343,000~~quarter is primarily interest income from our investments. Interest expense in the prior ~~period. This interest expense~~year 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 with Vision-Sciences.~~

~~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~~that was converted into equity in the ~~prior period. For the current period, the non-cash amortization~~fourth quarter of ~~the debt discount totaled $279,000, compared to $266,000 in the prior period.~~2016.

Income Tax Expense: We recorded income tax expense of approximately ~~$19,000~~$62,000 in the current period and ~~$18,000~~$19,000 in the prior period. Income tax expense is attributed to our European subsidiaries and to the payment of minimum taxes in the U.S.

Six months ended June 30, ~~2016~~2017 compared to six months ended June 30, ~~2015~~2016

Net ~~Sales~~Sales:~~: During~~ Consolidated net sales of $27,014,000 in the current period ~~consolidated net sales of $25,211,000~~ represented a ~~$7,041,000~~$1,803,000 increase, or ~~a 39% increase~~7.2%, over net sales of ~~$18,170,000~~$25,211,000 in the prior period. The increase is primarily due to a $2,322,000 net increase in revenue from the Urology product lines, which is comprised of the PrimeSight, Urgent PC and Macroplastique products, and is offset by a $519,000 net decrease in revenue from the Airway Management and Industrial product lines.

Consolidated net sales for ~~the~~PrimeSight urology products ~~from Vision-Sciences increased $6,030,000, or 40%~~of $9,441,000 in the current period represented a $2,978,000 increase, or 46%, over net sales of $6,463,000 in the prior period. The ~~primary reason for this~~ increase is primarily due to our sales force becoming more proficient in selling this technology as well the ~~Merger, which occurred on March 31, 2015. Revenue from Urgent~~^® PCfact that our PrimeSight technology platform meets the needs of our medical customers for always ready, always sterile flexible endoscopy solutions. Our urology 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 ~~$1,035,000, or 11%. While a new competitor to~~physician productivity and ultimately economic benefit for our customers.

Consolidated net sales of our Urgent PC ~~entered~~System of $10,242,000 in the ~~market~~current period represented a $268,000 decrease, or 3%, when compared to net sales of $10,510,000 in ~~early 2016, our~~the prior period. U.S. unit growth of 3% was offset by a 5% decline in average selling price. U.S. unit growth was due primarily to sales execution and increased penetration in existing accounts. 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. The decrease in average selling price is primarily due to a new entrant into the market.

~~Net~~Consolidated net sales of our Macroplastique product of $3,522,000 in the current period represented a $317,000 decrease, or 8%, over net sales of $3,839,000 in the prior period. Macroplastique serves a small market, and the focus of our sales force has been on growing our PrimeSight Urology and Urgent PC products.

Consolidated net sales of our non-Urology products of $3,288,000 in the current period represented a $519,000 decrease, or 14%, over net sales of $3,807,000 in the prior period. The decrease is primarily due to our increased focus on Urology products.

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Consolidated net sales to customers in the U.S. of ~~$18,532,000 during~~$19,575,000 in the current period represented an increase of ~~$4,662,000,~~$1,035,000, or ~~34%~~6%, over net sales of ~~$13,870,000~~$18,540,000 in the prior period. ~~Net~~Consolidated net sales to customers outside the U.S. ~~increased $2,379,000 to $6,679,000, compared to $4,300,000~~of $7,439,000 in the current period represented an increase of $768,000, or 12%, over net sales of $6,671,000 in the prior period.

Gross Profit: Gross profit was $17,862,000, or 66.1% of net sales in the current period, compared to $17,323,000, or 68.7% of net sales in the ~~current period, and $13,716,000, or 75.5% of net sales in the~~ prior period. The ~~decrease~~change in gross profit percentage is attributed primarily to product mix, as revenue from our PrimeSight products were a higher proportion of total sales in the ~~addition~~current year as compared to the same period of the ~~Vision-Sciences~~prior year, and our PrimeSight products ~~which~~ have a lower ~~margins~~gross margin than Urgent PC and Macroplastique.

Operating Expenses: Operating expenses in the ~~Uroplasty products.~~current period totaled approximately $18,698,000, compared to approximately $20,129,000 in the prior period. Operating expenses included:

General and Administrative Expenses (G&A): G&A expenses of ~~$3,530,000~~$4,194,000 in the current period increased ~~$234,000~~$665,000 from ~~$3,296,000~~$3,530,000 in the prior ~~period due~~period. The increase is attributed primarily to ~~the Merger.~~higher share based compensation and business development costs.

Research and Development Expenses (R&D): R&D expenses of ~~$2,037,000~~$2,323,000 in the current period increased ~~$365,000~~$286,000 from ~~$1,672,000~~$2,037,000 in the prior period. The increase is attributed ~~primarily~~ to ~~the Merger, offset partially by lower personnel costs and lower expenditure on R&D projects.~~ongoing enhancements to our PrimeSight product line.

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Selling and Marketing Expenses (S&M): S&M expenses of ~~$11,069,000~~$11,002,000 in the current period decreased ~~$527,000,~~$67,000, from ~~$11,596,000~~$11,069,000 in the prior period. The decrease is attributed primarily to ~~a decrease~~$372,000 for an IRS tax refund related to Medical Device taxes paid in ~~sales~~2013 -2015 and is partially offset by increased personnel ~~costs due to lower headcount and reduced marketing project spend.~~costs.

~~Amortization of Intangibles~~One-time Costs:~~: Amortization of intangibles was $1,182,000 in the current period compared to $641,000~~ One-time costs in the prior ~~period. The increase is due~~period related to the establishment of $13,660,000 of identifiable intangible assets on March 31, 2015, as a part of the allocation of purchase accounting. These identifiable intangible assets are being amortized over a weighted average life of approximately 6 years.

~~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 settlement between the Company and Mr. Lewis Pell and related litigation in connection with the ~~Annual Meeting (the “Settlement”). For the six months ended June 30, 2016, the Company incurred $2,312,000 of costs related to the Settlement, including~~2015Annual Meeting. These fees included $812,000 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.~~current period.

~~Merger Related Costs~~Amortization of Intangibles: ~~Merger related costs totaled $2,047,000 in the six months ended June 30, 2015. There were no similar costs~~Amortization of intangibles was $1,179,000 in the current period compared to $1,182,000 in the prior 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~~income was ~~$792,000~~$160,000 in the current period compared to net other expense of ~~$338,000~~$792,000 in the prior period. Other income in the current year is primarily interest income from our investments. Interest expense ~~increased~~in the prior year is primarily ~~as the result of the acquisition of~~due to interest on related party debt ~~and~~that was converted into equity in the ~~amortization~~fourth quarter of ~~the debt discount along with accrued interest associated with this debt as a result of the merger with Vision-Sciences.~~

The related party debt has a weighted average stated interest rate of the 1.13% resulting in $178,000 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 $554,000.2016.

Income Tax Expense: We recorded income tax expense of approximately ~~$33,000~~$115,000 in the current period and ~~$27,000~~$33,000 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 ~~table reconciles~~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.~~amortization. The non-GAAP financial measures used by management and disclosed by us are not a substitute for, ornor 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.

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 ~~loss,~~income, excluding non-cash expenses, ~~proxy settlement and merger related costs,~~ during the three months ended June 30, ~~2016~~2017 was $1,509,000 and ~~2015 was $827,000 and $(1,691,000),~~ ~~respectively.~~ ~~Our~~our non-GAAP cash operating ~~loss,~~income, excluding non-cash expenses and ~~merger related~~one-time costs, ~~during~~for the ~~six~~three months ended June 30, 2016 ~~and 2015~~ was ~~$1,274,000 and $(2,036,000), respectively~~.$826,000.

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				Expense Adjustments																		Expense Adjustments
Three-Months Ended	GAAP			Share- based Expense			Long-term Incentive Plan			Depreciation			Amortization			Non-GAAP			GAAP			Share- based Expense			Long-term Incentive Plan			Depreciation			Amortization			Non-GAAP
June 30, 2017
Gross profit																			$	9,405,882		$	4,380		$	-		$	46,779		$	-		$	9,457,041
% of net sales																				66.9	%														67.2	%
Operating expenses
General and administrative																				2,058,327			(302,583	)		-			(50,187	)		-			1,705,557
Research and development																				1,031,851			(9,289	)		-			(4,646	)		-			1,017,916
Selling and marketing																				5,347,078			(37,830	)		-			(84,404	)		-			5,224,844
Amortization																				588,646			-			-			-			(588,646	)		-
Total operating expenses																			$	9,025,902		$	(349,702	)	$	-		$	(139,237	)	$	(588,646	)	$	7,948,317

Operating income																			$	379,980		$	354,082		$	-		$	186,016		$	588,646		$	1,508,724

June 30, 2016
Gross profit	$	8,917,000		$	18,000		$	-		$	43,000		$	-		$	8,978,000		$	8,917,486		$	17,586		$	-		$	42,832		$	-		$	8,977,904
% of net sales		68.6	%														69.0	%		68.6	%														69.0	%
Operating expenses
General and administrative		1,867,000			(113,000	)		25,000			(52,000	)		-			1,727,000			1,867,312			(112,863	)		25,122			(51,957	)		-			1,727,614
Research and development		1,100,000			(15,000	)		-			(1,000	)		-			1,084,000			1,100,056			(15,464	)		-			(591	)		-			1,084,001
Selling and marketing		5,433,000			5,000			-			(98,000	)		-			5,340,000			5,433,439			5,307			-			(98,052	)		-			5,340,694
Amortization		591,000			-			-			-			(591,000	)		-			590,858			-			-			-			(590,858	)		-
Proxy settlement costs		2,178,000			-			-			-			-			2,178,000
One-time costs																				2,177,990			-			-			-			-			2,177,990
Total operating expenses																			$	11,169,655		$	(123,020	)	$	25,122		$	(150,600	)	$	(590,858	)	$	10,330,299
	$	11,169,000		$	(123,000	)	$	25,000		$	(151,000	)	$	(591,000	)	$	10,329,000

Operating loss	$	(2,252,000	)	$	141,000		$	(25,000	)	$	194,000		$	591,000		$	(1,351,000	)
Proxy settlement costs	$	2,178,000			-			-			-			-		$	2,178,000
Cash operating loss excluding proxy settlement costs																$	827,000

June 30, 2015
Gross profit	$	7,498,000		$	10,000		$	-		$	52,000		$	-		$	7,560,000
% of net sales		67.2	%														67.8	%
Operating expenses
General and administrative		1,893,000			(124,000	)		29,000			(58,000	)		-			1,740,000
Research and development		1,062,000			(17,000	)		-			(8,000	)		-			1,037,000
Selling and marketing		6,652,000			(74,000	)		-			(104,000	)		-			6,474,000
Amortization		634,000			-			-			-			(634,000	)		-
Merger related costs		469,000			-			-			-			-			469,000
	$	10,710,000		$	(215,000	)	$	29,000		$	(170,000	)	$	(634,000	)	$	9,720,000

Operating loss	$	(3,212,000	)	$	225,000		$	(29,000	)	$	222,000		$	634,000		$	(2,160,000	)
Merger related costs	$	469,000			-			-			-			-		$	469,000
Cash operating loss excluding merger related costs																$	(1,691,000	)
Operating income (loss)																			$	(2,252,169	)	$	140,606		$	(25,122	)	$	193,432		$	590,858		$	(1,352,395	)
One-time costs																				2,177,990															2,177,990
Cash operating income excluding one-time costs																																		$	825,595

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Expense Adjustments
Six-Months Ended GAAP
Share-
based
Expense

Long-term
Incentive
Plan
Depreciation Amortization Non-GAAP
June 30, 2016
Gross profit $ 17,323,000 $ 22,000 $ - $ 93,000 $ - $ 17,438,000
% of net sales 68.7 % 69.2 %
Operating expenses
General and administrative 3,530,000 (140,000 ) 47,000 (106,000 ) - 3,331,000
Research and development 2,037,000 (9,000 ) - (1,000 ) - 2,027,000
Selling and marketing 11,069,000 (54,000 ) - �� (209,000 ) - 10,806,000
Amortization 1,182,000 - - - (1,182,000 ) -
Proxy settlement costs 2,312,000 - - - - 2,312,000
$ 20,130,000 $ (203,000 ) $ 47,000 $ (316,000 ) $ (1,182,000 ) $ 18,476,000

Operating loss $ (495,000 ) $ 225,000 $ (47,000 ) $ 409,000 $ 1,182,000 $ (1,038,000 )
Proxy settlement costs $ 2,312,000 - - - - $ 2,312,000
Cash operating loss excluding proxy settlement costs $ 1,274,000

June 30, 2015
Gross profit $ 13,716,000 $ 21,000 $ - $ 56,000 $ - $ 13,793,000
% of net sales 75.5 % 75.9 %
Operating expenses
General and administrative 3,296,000 (346,000 ) 8,000 (100,000 ) - 2,858,000
Research and development 1,672,000 (28,000 ) - (8,000 ) - 1,636,000
Selling and marketing 11,596,000 (141,000 ) - (120,000 ) - 11,335,000
Amortization 641,000 - - - (641,000 ) -
Merger related costs 2,047,000 - - - - 2,047,000
$ 19,252,000 $ (515,000 ) $ 8,000 $ (228,000 ) $ (641,000 ) $ 17,876,000

Operating loss $ (5,536,000 ) $ 536,000 $ (8,000 ) $ 284,000 $ 641,000 $ (4,083,000
Merger related costs $ 2,047,000 - - - - $ 2,047,000
Cash operating loss excluding merger related costs $ (2,036,000 )

Our non-GAAP cash operating income, excluding non-cash expenses, during the six months ended June 30, 2017 was $1,412,000 and our non-GAAP cash operating income, excluding non-cash expenses and one-time costs for the six months ended June 30, 2016 was $1,274,000.

				Expense Adjustments
Six-Months Ended	GAAP			Share- based Expense			Long-term Incentive Plan		Depreciation			Amortization			Non-GAAP
June 30, 2017
Gross profit	$	17,862,102		$	11,815		$	-	$	86,136		$	-		$	17,960,053
% of net sales		66.1	%													66.5	%
Operating expenses
General and administrative		4,194,483			(605,909	)		-		(99,439	)		-			3,489,135
Research and development		2,322,509			(19,398	)		-		(5,334	)		-			2,297,777
Selling and marketing		11,002,038			(66,198	)		-		(174,365	)		-			10,761,475
Amortization		1,179,199			-			-		-			(1,179,199	)		-
Total operating expenses	$	18,698,229		$	(691,505	)		-		(279,138	)	$	(1,179,199	)	$	16,548,387

Operating income (loss)	$	(836,127	)	$	703,320		$	-	$	365,274		$	1,179,199		$	1,411,666

June 30, 2016
Gross profit	$	17,322,856		$	22,254		$	-	$	93,280		$	-		$	17,438,390
% of net sales		68.7	%													69.2	%
Operating expenses
General and administrative		3,529,781			(140,452	)		46,870		(105,442	)		-			3,330,757
Research and development		2,036,934			(8,665	)		-		(1,181	)		-			2,027,088
Selling and marketing		11,069,201			(53,628	)		-		(209,284	)		-			10,806,289
Amortization		1,181,716			-			-		-			(1,181,716	)		-
One-time costs		2,311,541			-			-		-			-			2,311,541
Total operating expenses	$	20,129,173		$	(202,745	)	$	46,870	$	(315,907	)	$	(1,181,716	)	$	18,475,675

Operating income (loss)	$	(2,806,317	)	$	224,999		$	46,870	$	(315,907	)	$	1,181,716		$	(1,037,285	)
One-time costs		2,311,541													$	2,311,541
Cash operating income excluding one-time costs															$	1,274,256

Liquidity and Capital Resources

Cash Flows.

OnAt June 30, ~~2016,~~2017, our cash, ~~and~~ cash equivalents ~~balances~~and investments totaled ~~$2,867,000 and we~~ ~~had~~$26,925,000. Our net working capital ~~(current assets less current liabilities)~~as of June 30, 2017, totaled approximately ~~$7,838,000~~.$32,689,000.

For the six months ended June 30, ~~2016,~~2017, cash used in operating activities was $890,000, compared to cash provided by operating activities ~~was~~of $1,062,000 ~~compared to cash used in operating activities of $4,063,000~~ during the six months ended June 30, ~~2015.~~2016. For the six months ended June 30, 2017, we incurred a net loss of $791,000. Significant non-cash expenses incurred in this period include depreciation and amortization expense of $1,544,000 and share based compensation of $703,000. Working capital changes that used cash include lower accrued compensation, lower accounts payable, higher accounts receivable, and higher accrued liabilities. For the six months ended June 30, 2016, we incurred a net loss of $3,631,000. ~~Proxy settlement costs of approximately $2,000,000 have been expensed but not yet paid as of June 30, 2016. The severance of $1,500,000 included~~Significant non-cash expenses incurred in the proxy settlement costs are to be paid over 18 months and certain legal fees have not yet been paid pending determination if any are reimbursable under our directors and officers insurance policy. Further, non-cashthis period include depreciation and amortization expense ~~totaled~~of $1,591,000 and ~~non-cash debt discount amortization totaled $554,000. In addition,~~share based compensation of $225,000. Working capital changes that provided cash include lower accounts receivables ~~decreased by $1,691,000 due to strong collection efforts. For the six months ended June 30, 2015, we~~and higher accrued compensation, while cash was used ~~cash primarily to fund the operating loss, net~~as a result of ~~non-cash charges for depreciation, amortization of intangibles, long-term incentive plan and share-based compensation of~~ ~~$1,453,000 and $2,047,000 of merger related costs.~~inventories increasing.

During the six months ended June 30, ~~2016 we used~~2017, cash ~~from~~provided by investing activities included $4,800,000 of ~~$167,000~~proceeds from the maturity of available-for-sale securities, partially offset by $2,438,000 in purchases of available-for-sale securities and $398,000 for the purchase of property, plant, and equipment. During the six months ended June 30, ~~2015,~~2016, we ~~generated $1,411,000~~used $167,000 of net cash ~~from investing activities, primarily from cash acquired from~~for the ~~merger with Vision-Sciences, partially offset by purchases~~purchase of property, plant, and equipment.

Sources of Liquidity.

In addition to our cash and investments, we have a secured revolving credit facility (“Facility”), subject to eligible accounts receivable and inventory. 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 $2.5 million; or (b) $7 million. As of June 30, 2017, based on eligible receivables and inventory, our total available borrowing base was approximately $6,110,000. We ~~obtained~~did not have any borrowings under the Facility as of June 30, 2017.

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On April 19, 2017, we filed a universal shelf registration statement with the SEC that will enable us to raise capital through the offering from time to time of an ~~18-month line~~aggregate amount of ~~credit~~up to $100 million of securities, including common stock, preferred stock, warrants to purchase common stock or preferred stock, units consisting of a combination of securities, and subscription rights to purchase the foregoing securities. We may offer and sell securities covered by the registration statement through ~~Venture Bank~~one or more methods of distribution, subject to market conditions and our capital needs. However, the aggregate market value of securities sold during a 12-month period can be no more than one-third of the aggregate market value of voting and nonvoting common equity held by our non-affiliates. The terms of any offering under the shelf registration statement will be established at the time of the offering and described in ~~September 2015.~~ a prospectus supplement filed with the SEC prior to the completion of the offering.

We may obtain additional debt and/or equity financing during calendar year 2016. We have historically not generated cash from operations because we have yet to achieve profitability, and to achieve profitability, we must generate substantially more revenue than we have generated this year or in prior years.2017.

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~~Table of Contents~~

Our ability to achieve significant revenue growth will depend, in large part, on our ability to achieve widespread market acceptance of our products and successfully expand our ~~business.~~business in the U.S. 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.

The Company does not have any commitments for capital expenditures.

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 (Principal Executive Officer) and Chief Financial Officer (Principal Financial and Accounting 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~~were 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~~Based on the evaluation conducted by our management, with the participation of the principal executive officer, principal financial officer and principal accounting officer, pursuant to Rules 13a-15(d) and 15d-15(d) promulgated under the Exchange Act, our ~~ongoing activities after the Merger, we are continuing~~management (including such officers) have concluded that there were no changes to ~~integrate~~ our internal control over financial reporting ~~functions and~~(as defined in Rules 13a-15(f) or 15d-15(f) under the Exchange Act) that occurred since March 31, 2017 that have materially affected, or are reasonably likely to materially affect, 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. There have been no changes in internal ~~controls since December 31, 2015.~~control over financial reporting.

~~PART II.~~PARTII.

OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

On May 23, 2016, Cogentix Medical, Inc. and all of its then-current members of the Board of Directors, including Mr. Lewis Pell who has 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 (the “Annual Meeting”), entered into an agreement to settle the pending proxy contest between the Company and Mr. Pell and related litigation in the Court of Chancery of the State of Delaware in connection with the Annual Meeting (the “Settlement Agreement”).None.

Under the terms of the Settlement Agreement, (i) the parties to the Settlement Agreement agreed to take all necessary steps, among other things, to qualify Messrs. Lewis Pell, Howard Zauberman and Dr. James D’Orta as Class I directors to be elected to serve on the Board, (ii) Mr. Robert Kill, the then-current President, Chief Executive Officer and Corporate Secretary of the Company, agreed to resign as an employee and officer of the Company and any of its affiliates and subsidiaries, including his position as the President, Chief Executive Officer and Corporate Secretary of the Company effective as of May 23, 2016 and Mr. Kill will receive severance payments in respect of any and all contracts with the Company and any of its affiliates and subsidiaries pursuant to the terms of a Separation and Release Agreement by and between the Company and Mr. Kill dated May 23, 2016 (the “Separation and Release Agreement”), (iii) Mr. Darin Hammers, the current Chief Operating Officer of the Company, was appointed to serve as the interim Chief Executive Officer and President for 90 days, after which time, on the condition of his adequate performance in the sole judgment of a majority of the Board, the Company intends to appoint him as Chief Executive Officer and President of the Company and a director on the Board to fill the vacancy created by Mr. Kill’s resignation, (iv) each of Messrs. Robert Kill, Kevin Roche, who had been serving as the Chair of the Governance and Nominating Committee, and Kenneth Paulus, who had been serving as the Chair of the Compensation Committee and the Chair and financial expert of the Audit Committee, agreed to resign as a director of the Company effective as of May 24, 2016 and the remaining members of the Board agreed to use best efforts to, within 60 days of the effectiveness of such resignations, nominate and elect as directors two (2) outside, independent directors who are qualified under the Company’s governing documents and policy, including one director to be qualified under NASDAQ Rule 5605(c)(2) as a financial expert, and (v) the parties to the Settlement agreed to certain mutual release of claims relating to or arising out of the governance and management of the Company, the proxy contest and/or other matters as issue in the related litigation.

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~~Table of Contents~~

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 three months ended June 30, 2016 is as follows:

Period
Total
Number of
Shares
Purchased(a)

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

April 1, 2016 – April 30, 2016 54,468 $ 1.05 - -
May1, 2016 – May 31, 2016 - -
June 1, 2016 – June 30, 2015 730 1.02 - -

Total 55,198 $ 1.04 - -

~~ITEM 3.~~

~~DEFAULTS UPON SENIOR SECURITIES~~

None.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

None.

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ITEM 4.

MINE SAFETY DISCLOSURE

Not applicable.

ITEM 5.

OTHER INFORMATION

~~None.~~NONE.

ITEM 6.

EXHIBITS

~~Exhibits~~

Exhibit No.	Exhibit	Method of Filing
*2.1
10.1*	Fifth Amendment dated May 9, 2017, to the Supply Agreement, ~~and Plan of Merger~~ dated ~~as of~~ December ~~21, 2014~~6, 2007, by and ~~among Vision-Sciences,~~between Cogentix Medical, Inc.~~, Visor Merger Sub~~ and Covidien SalAs LLC ~~and Uroplasty, Inc.~~	Incorporated by reference to Exhibit ~~2.1~~10.8 to ~~Current~~Quarterly Report on Form ~~8-K as~~10-Q for the quarter ended March 31, 2017 filed with the SEC on ~~December 22, 2014~~May 12, 2017 (File No. 000-20970)

~~3.1~~31.1	~~(a) Amended and Restated Certificate~~Certification by the PEO pursuant to Section 302 of ~~Incorporation.~~the Sarbanes-Oxley Act of 2002	~~Incorporated by reference to Exhibit 3.1 to Annual Report on Form 10-K for the fiscal year ended March 31, 2001 (File No. 000-20970)~~Filed herewith

31.2	~~(b) Certificate~~Certification by the PFO pursuant to Section 302 of ~~Amendment to Certificate~~the Sarbanes-Oxley Act of ~~Incorporation.~~2002	~~Incorporated by reference to Exhibit 3.1 to Annual Report on Form 10-K for the fiscal year ended March 31, 2001 (File No. 000-20970)~~Filed herewith

32.1	~~(c) Certificate~~Certification by the PEO pursuant to Section 18 USC Section 1350, as adopted pursuant to Section 906 of ~~Amendment to Certificate~~the Sarbanes-Oxley Act of ~~Incorporation.~~2002	~~Incorporated by reference to Exhibit 99.2 to Current Report on Form 8-K as filed with the SEC on December 15, 2010 (File No. 000-20970)~~Filed herewith

32.2	~~(d) Certificate~~Certification by the PFO pursuant to Section 18 USC Section 1350, as adopted pursuant to Section 906 of ~~Amendment to Certificate~~the Sarbanes-Oxley Act of ~~Incorporation.~~2002	~~Incorporated by reference to Exhibit 99.1 to Current Report on Form 8-K as filed with the SEC on August 1, 2014 (File No. 000-20970)~~

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~~Table of Contents~~

	~~(e) Certificate of Amendment to Amended and Restated Certificate of Incorporation.~~	~~Incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K as filed with the SEC on March 31, 2015 (File No. 000-20970)~~Filed herewith

101	~~(f) Certificate of Amendment to Amended and Restated Certificate of Incorporation.~~	~~Incorporated by reference to Exhibit 3.2 to Current~~Financial Statements for the Quarterly Report on Form ~~8-K as filed with~~10-Q of the ~~SEC on March 31, 2015 (File~~Company for the quarter ended June 30, 2017, formatted in Extensible Business Reporting Language: (i) Condensed Consolidated Balance Sheets; (ii) Condensed Consolidated Statement of Operations; (iii) Condensed Consolidated Statement of Comprehensive Income (Loss); (iv) Condensed Consolidated Statement of Shareholders’ Equity; (v) Condensed Consolidated Statement of Cash Flows and (vi) Notes to Condensed Consolidated Financial Statements	Filed herewith

*	Portions of this exhibit have been exhibit have been omitted pursuant to a request for confidential treatment

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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: August 11, 2017	By:	/s/ DARIN HAMMERS
	Darin Hammers
	President and Chief Executive Officer
	(Principal Executive Officer)
Date: August 11, 2017	By:	/s/ BRETT REYNOLDS
	Brett Reynolds
	Senior Vice President, Chief Financial Officer and Corporate Secretary
	(Principal Financial and Accounting Officer)

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Exhibit Index

Exhibit No. ~~000-20970)~~	Exhibit	Method of Filing

~~3.2~~10.1*	~~Amended~~Fifth Amendment dated May 9, 2017, to the Supply Agreement, dated December 6, 2007, by and ~~Restated Bylaws, as Amended.~~between Cogentix Medical, Inc. and Covidien Sales LLC	Incorporated by reference to Exhibit ~~3.2~~10.8 to Quarterly Report on Form 10-Q asfor the quarter ended March 31, 2017 filed with the SEC on May ~~16, 2016~~12, 2017 (File No. 000-20970).

~~10.1~~	~~Loan Agreement, made as of September 18, 2015, by and among Cogentix Medical, Inc., Machida Incorporated, Uroplasty, LLC and Venture Bank~~	~~Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K as filed with the SEC on September 21, 2015 (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

~~101.INS~~	~~XBRL Instance~~	~~Furnished herewith~~

~~101.SCH~~101	~~XBRL Taxonomy Extension Schema~~Financial Statements for the Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2017, formatted in Extensible Business Reporting Language: (i) Condensed Consolidated Balance Sheets; (ii) Condensed Consolidated Statement of Operations; (iii) Condensed Consolidated Statement of Comprehensive Income (Loss); (iv) Condensed Consolidated Statement of Shareholders’ Equity; (v) Condensed Consolidated Statement of Cash Flows and (vi) Notes to Condensed Consolidated Financial Statements	~~Furnished herewith~~

~~101.CAL~~	~~XBRL Taxonomy Extension Calculation~~	~~Furnished herewith~~

~~101.DEF~~	~~XBRL Taxonomy Extension Definition~~	~~Furnished herewith~~

~~101.LAB~~	~~XBRL Taxonomy Extension Labels~~	~~Furnished herewith~~

~~101.PRE~~	~~XBRL Taxonomy Extension Presentation~~	~~Furnished~~Filed herewith

*	Portions of this exhibit have been exhibit have been omitted pursuant to a request for confidential treatment

* Certain schedules to the Agreement and Plan of Merger have been omitted pursuant to Item 601(b)(2) of Regulation S-K. We will furnish copies of any such omitted schedules to the SEC upon request.

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~~Table of Contents~~

~~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:~~	~~August 15, 2016~~	~~By:~~	~~/s/ DARIN HAMMERS~~
		~~Darin Hammers~~ ~~President and Chief Executive Officer~~ ~~(Principal Executive Officer)~~
~~Date:~~	~~August 15, 2016~~	~~By:~~	~~/s/ BRET REYNOLDS~~
		~~Brett Reynolds~~ ~~Senior Vice President, Chief Financial Officer and Corporate Secretary~~ ~~(Principal Financial and Accounting Officer)~~

~~Page 29~~27

	Common Stock						Additional Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Total Shareholders' Equity
	Shares			Amount			Additional Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Total Shareholders' 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		42,170			423			224,576			-			-			224,999

Payment of income tax from vested restricted stock		(55,198	)		(552	)		(56,791	)								(57,343	)

Comprehensive loss		-			-			-			(3,631,175	)		(20,705	)		(3,651,880	)

Balance at June 30, 2016		26,044,299		$	260,445		$	76,653,435		$	(62,541,882	)	$	(897,203	)	$	13,474,795

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

	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

	Six months ended June 30, 2015 (unaudited)

Supplemental pro forma combined results of operations:
Net sales	$	23,835,350
Net loss	$	(10,264,196	)
Net loss per share – basic and diluted	$	(0.40	)

	Six months ended June 30, 2015

Increase in amortization of intangibles	$	510,000
Interest amortization on related party debt		279,000
Increase in net loss	$	789,000

	Gross Principal Amount		Unamortized Debt Discount			Net Amount

Note Payable A	$	20,000,000	$	(3,248,007	)	$	16,751,993

Note Payable B		3,500,000		(501,474	)		2,998,526

Note Payable C		4,990,000		(849,419	)		4,140,581
	$	28,490,000	$	(4,598,900	)	$	23,891,100

	United States		United Kingdom		All Other Foreign Countries (1)		Consolidated

Three months ended June 30, 2016	$	9,533,000	$	1,196,000	$	2,276,000	$	13,005,000

Three months ended June 30, 2015	$	7,274,000	$	1,077,000	$	2,799,000	$	11,150,000

Six months ended June 30, 2016	$	18,176,000	$	2,184,000	$	4,851,000	$	25,211,000

Six months ended June 30, 2015	$	12,732,000	$	1,660,000	$	3,778,000	$	18,170,000

	United States		United Kingdom		The Netherlands		Consolidated

June 30, 2016	$	1,841,000	$	2,000	$	462,000	$	2,305,000

December 31, 2015	$	2,089,000	$	3,000	$	463,000	$	2,555,000

Period	Total Number of Shares Purchased(a)		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
April 1, 2016 – April 30, 2016		54,468	$	1.05		-		-
May1, 2016 – May 31, 2016		-		-
June 1, 2016 – June 30, 2015		730		1.02		-		-

Total		55,198	$	1.04		-		-