What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2021-03-11 compared with 2020-03-30 · 423 added, 450 removed, 624 unchanged (58% of the section changed)

15 unchanged sentences

Based on this evaluation, our management concluded that, as of December 31, 2020 our internal control over financial reporting was effective.

Management remediated the material weakness related to its inter nal control over financial reporting related to accounting for complex transactions that was disclosed in our prospectus dated June 21, 2018, filed with the SEC, pursuant to Rule 424(b) under the Securities Act.

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting.

3 unchanged sentences

Other Information

On March 26, 2020 we received notification from the FDA that our gammaCore therapy may be commercially marketed for the preventive treatment of migraine headache in adults.

Effective March 11, 2021, the Company terminated the Purchase Agreement with Lincoln Park.

No material termination penalties were incurred.

The foregoing information is included in this Annual Report on Form 10-K in lieu of a Current Report on Form 8-K.

Directors, Executive Officers and Corporate Governance

12 unchanged sentences

(1) Financial Statements:

Report of Independent Registered Public Accounting Firm

Reports of Independent Registered Public Accounting Firms

Consolidated Balance Sheets

1 unchanged sentence

Consolidated Statements of Comprehensive Loss

Consolidated Statements of Changes in Stockholders’ Equity and Members’ Deficit

Consolidated Statements of Equity

Consolidated Statements of Cash Flows

10 unchanged sentences

and Lincoln Park Capital Fund, LLC

Amended and Restated Investors’ Rights Agreement, dated as of August 18, 2017, by and among Electrocore, LLC and the investors party thereto

Description of Capital Stock

electroCore, Inc.

23 unchanged sentences

Non-Employee Director Compensation Policy

Employment Offer Letter, dated as of July 18, 2016, by and between ElectroCore, LLC and Francis R.

Employment Offer Letter, dated as of July 18, 2016, by and between ElectroCore, LLC and Joseph P.

Employment Offer Letter, dated as of May 1, 2017, by and between ElectroCore, LLC and Peter S.

Employment Offer Letter, dated as of July 25, 2016, by and between ElectroCore, LLC and Glenn S.

Rockaway, NJ Office Lease between Anson Logistics Assets LLC and electroCore, Inc.

3 unchanged sentences

Form of Bridge Warrant

Master Services Agreement dated October 17, 2016 between ElectroCore, LLC and Asembia LLC

Brian Posner Employment Agreement, dated as of January 30, 2019, incorporated by reference to the Company's Current Report on Form 8-K, as filed with the Commission on March 12, 2019 .

Amendment to Brian Posner Employment Agreement, dated as of August 8, 2019, incorporated by reference to the Company's Quarterly Report on Form 10-Q, as filed with the Commission on August 14, 2019 .

Employment Offer Letter, dated as of September 26, 2019, between electroCore, Inc.

and Daniel Goldberger, incorporated by reference to the Company's Current Report on Form 8-K, as filed with the Commission on October 2, 2019 .

Purchase Agreement, dated March 27, 2020, between electroCore, Inc.

and Lincoln Park Capital Fund, LLC

Brian Posner Employment Agreement, dated as of January 30, 2019, incorporated by reference to the Company's Current Report on Form 8-K, as filed with the Commission on March 12, 2019 .

Amendment to Brian Posner Employment Agreement, dated as of August 8, 2019, incorporated by reference to the Company's Quarterly Report on Form 10-Q, as filed with the Commission on August 14, 2019 .

List of subsidiaries of electroCore, Inc .

Consent of Marcum LLP

Consent of KPMG LLP

5 unchanged sentences

Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

XBRL Instance Document

XBRL Taxonomy Extension Schema Document

XBRL Taxonomy Extension Calculation Linkbase Document

XBRL Taxonomy Extension Definition Linkbase Document

XBRL Taxonomy Extension Label Linkbase Document

XBRL Taxonomy Extension Presentation Linkbase Document

Inline XBRL Instance Document

Inline XBRL Taxonomy Extension Schema Document

Inline XBRL Taxonomy Extension Calculation Linkbase Document

Inline XBRL Taxonomy Extension Definition Linkbase Document

Inline XBRL Taxonomy Extension Label Linkbase Document

Inline XBRL Taxonomy Extension Presentation Linkbase Document

Filed herewith.

Incorporated by reference to the Company’s Registration Statement on Form S ‑ 1, Registration No.

333 ‑ 228863.

Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2019 as filed with the Commission on August 14, 2019.

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Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated.

/s/ Carrie S.

/s/ Michael G.

Chairman of the Board

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March 11, 2021

/s/ Michael G.

/s/ John Gandolfo

March 11, 2021

John Gandolfo

/s/ Joseph P.

March 11, 2021

/s/Nicholas Colucci

/s/ Thomas Patton

March 11, 2021

Nicholas Colucci

Thomas Patton

/s/ Thomas J.

March 11, 2021

/s/ Trevor J.

March 11, 2021

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March 11, 2021

/s/James L.L.

/s/ Peter Cuneo

March 11, 2021

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm

Reports of Independent Registered Public Accounting Firms

Consolidated Balance Sheets as of December 31, 2020 and 2019

1 unchanged sentence

Consolidated Statements of Comprehensive Loss for the Years ended December 31, 2020 and 2019

Consolidated Statements of Changes in Stockholders’ Equity and Members’ Deficit for the Years ended December 31, 2019 and 2018

Consolidated Statements of Equity for the Years ended December 31, 2020 and 2019

Consolidated Statements of Cash Flows for the Years ended December 31, 2020 and 2019

1 unchanged sentence

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors

electroCore, Inc.:

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of electroCore, Inc., Subsidiaries and Affiliate (the “Company”) as of December 31, 2020, the related consolidated statements of operations, comprehensive loss, equity and cash flows for the year ended December 31, 2020, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and the results of its operations and its cash flows for the year ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

Explanatory Paragraph – Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

As more fully described in Note 3, the Company has incurred recurring losses and needs to raise additional funds to meet its obligations and sustain its operations.

These conditions raise substantial doubt about the Company's ability to continue as a going concern.

Management's plans in regard to these matters are also described in Note 3.

The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company's financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

/s/ Marcum llp

We have served as the Company’s auditor since 2020.

March 11, 2021

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

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Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of electroCore, Inc., Subsidiaries and Affiliate (the Company) as of December 31, 2019 and 2018, the related consolidated statements of operations, comprehensive loss, changes in stockholders equity and members’ deficit, and cash flows for each of the years in the two-year period ended December 31, 2019, and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2019, in conformity with U.S.

We have audited the accompanying consolidated balance sheet of electroCore, Inc., Subsidiaries and Affiliate (the Company) as of December 31, 2019, the related consolidated statements of operations, comprehensive loss, equity, and cash flows for the year ended December 31, 2019, and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019, and the results of its operations and its cash flows for the year ended December 31, 2019, in conformity with U.S.

generally accepted accounting principles.

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These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

We have served as the Company’s auditor since 2015.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides a reasonable basis for our opinion.

We served as the Company’s auditor from 2015 to 2020.

Short Hills, New Jersey

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Marketable securities

Accounts receivable

Accounts receivable, net

Inventories, net

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Property and equipment, net

Operating lease right of use assets

Liabilities and Stockholders' Equity

Operating lease right of use assets, net

Other assets, net

Liabilities and Equity

Current liabilities:

1 unchanged sentence

Accrued expenses

Notes payable, current

Current portion of operating lease liability

Total current liabilities

Deferred rent

Operating lease liabilities

Note payable, noncurrent

Operating lease liabilities, noncurrent

Total liabilities

1 unchanged sentence

Preferred Stock, par value $ 0.001 per share;

10,000,000 shares authorized at

December 31, 2019 and December 31, 2018;

0 shares issued and outstanding

at December 31, 2019 and December 31, 2018

10,000,000 shares authorized at December 31, 2020 and December 31, 2019;

0 shares issued and outstanding at December 31, 2020 and December 31, 2019

Common Stock, par value $ 0.001 per share;

500,000,000 shares authorized at

December 31, 2019 and December 31, 2018;

29,835,183 shares issued and outstanding

at December 31, 2019, and 29,450,035 shares issued and outstanding at December 31, 2018

500,000,000 shares authorized at December 31, 2020 and December 31, 2019;

45,559,765 shares issued and outstanding at December 31, 2020, and 29,835,183 shares issued and outstanding at December 31, 2019

Additional paid-in capital

Accumulated deficit

Accumulated other comprehensive (loss)/income

( 106,990,148

Accumulated other comprehensive loss

Total stockholders' equity

Noncontrolling interest

Total liabilities and stockholders' equity

Total liabilities and equity

See accompanying notes to the consolidated financial statements.

1 unchanged sentence

Consolidated Statements of Operations

Year ended December 31,

Years ended December 31,

Cost of goods sold

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Other (income)expense

Change in fair value of warrant liability

Interest and other income, net

Interest and other income

Other expense

1 unchanged sentence

Loss before income taxes

Provision for income taxes

Net loss from operations

Net income attributable to noncontrolling

Total net loss attributable to Electrocore LLC and

electroCore, Inc., subsidiaries and affiliate

Net loss attributable to Electrocore LLC,

subsidiaries and affiliate

Net loss attributable to electroCore, Inc.,

subsidiaries and affiliate

Net loss per share of common stock - Basic and Diluted

(see Note 13)

Weighted average and potential common shares outstanding -

Basic and Diluted (see Note 13)

Benefit/(provision) for income taxes

Net loss per share of common stock - Basic and Diluted (see Note 13)

Weighted average common shares outstanding - Basic and Diluted (see Note 13)

See accompanying notes to the consolidated financial statements.

1 unchanged sentence

Consolidated Statements of Comprehensive Loss

Year ended December 31,

Net loss from operations

Years ended December 31,

Other comprehensive (loss)/income:

Foreign currency translation adjustment

Amount reclassed from accumulated other comprehensive loss

Unrealized gain(loss) on marketable securities, net of taxes as applicable

Unrealized (loss) gain on marketable securities, net of taxes as applicable

Other comprehensive loss

Comprehensive loss

Comprehensive income attributable to

noncontrolling interest

Comprehensive loss attributable to Electrocore LLC

and electroCore, Inc., subsidiaries and affiliates

Comprehensive loss attributable to

Electrocore LLC, subsidiaries and affiliate

Comprehensive loss attributable to

electroCore, Inc., subsidiaries and affiliate

See accompanying notes to consolidated financial statements.

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

Consolidated Statements of Changes in Stockholders’ Equity and Members’ Deficit

Convertible Preferred Units

electroCore, Inc.

Consolidated Statements of Equity

For the Years Ended December 31, 2020 and 2019

Accumulated other

(Deficit)/Equity attributable to Electrocore LLC and electroCore, Inc.,

Preferred Units

Total electroCore, Inc.,

comprehensive

stockholders'

Noncontrolling

and affiliate

Balances as of December 31, 2017

Net loss attributable to Electrocore, LLC

subsidiaries and affiliates

Reclass of accumulated deficit to APIC

income (loss)

Balances as of January 1, 2019

Other comprehensive income

Conversion of Series A preferred units to

Conversion of Series B preferred units

to common stock

Conversion of members common units to

Stock dividend issued to Series A preferred

Common stock issued related to initial

public offering

Issuance costs related to initial public

Reclass of warrant liability to equity

Noncontrolling interest distributions

Stock issued upon conversion of profit

Stock and Unit-based compensation

Net loss attributable to electroCore,

Inc., subsidiaries and affiliates

Issuance of warrants in settlement of lawsuit

Issuance of common stock in connection with employee stock plans, net

Stock based compensation

Balances as of December 31, 2019

Other comprehensive income

Issuance of warrants in lawsuit settlement

Issuance of stock (see Note 12)

Equity financing commitment fee*

Financing fees

Issuance of common stock in connection with employee stock plans, net

1 unchanged sentence

Balances as of December 31, 2020

( 106,990,148

* Reflects commitment shares issued in accordance with the Company's equity facility purchase agreement with Lincoln Park Capital.

For additional information see Note 12 .

Stockholders' Equity, Lincoln Park Purchase Agreement.

See accompanying notes to the consolidated financial statements.

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Cash flows from operating activities:

Net loss from operations

Adjustments to reconcile net loss to net cash used in operating activities:

Change in fair value of warrants and embedded derivative

Stock based compensation

Depreciation and amortization

Amortization of marketable securities discount

Amortization of marketable securities premium(discount)

Cloud computing arrangement implementation costs

Noncash lease expense, net

Legal expense settled with stock

Noncash lease expense

Inventory reserve charge

Write-off of right of use operating lease

Noncash portion of litigation settlement

Changes in operating assets and liabilities:

Accounts receivable, net

Accounts receivable

Prepaid expenses and other assets

1 unchanged sentence

Accrued expense and other current liabilities

Deferred rent

Operating lease liabilities

Net cash used in operating activities

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Purchases of property and equipment

Net cash provided by (used in) investing activities

Net cash (used in) provided by investing activities

Cash flows from financing activities:

Proceeds from shares issued, net of related expenses

Proceeds from note issued

Repayments of note issued

Sale of common stock, net of related expenses

Repayments of notes issued

Proceeds from shares issued in connection with employee stock purchase plan

1 unchanged sentence

Effect of changes in exchange rates on cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents – beginning of period

Cash and cash equivalents – end of period

Supplemental schedule of noncash financing activity:

Series A preferred units converted to common stock

Series B preferred units converted to common stock

Members' common units converted to common stock

Reclass of warrant liability to additional paid in capital

Reclass of deferred financing costs to additional paid in capital

Stock dividend distribution in connection with IPO

Capitalized cloud computing arrangement costs included in accounts payable and accrued expenses

Cash paid during the year for:

Net (decrease) increase in cash and cash equivalents

Cash and cash equivalents – beginning of year

Cash and cash equivalents – end of year

Supplemental cash flows disclosures:

Proceeds from sale of state net operating losses

Income taxes paid

Interest paid

Supplemental schedule of noncash activity:

Accounts payable paid through issuance of common stock

See accompanying notes to consolidated financial statements.

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Notes to Consolidated Financial Statements

Company Overview

electroCore, Inc.

(“electroCore” or the “Company”) is a commercial stage medical device company, engaged in the commercialization and development of a range of patient administered non-invasive Vagus Nerve Stimulation (“nVNS”) therapies.

electroCore was founded in 2005 and its focus currently is on primary headache conditions (migraine and cluster headache).

electroCore, headquartered in New Jersey, has wholly owned subsidiaries that include:

(“electroCore” or the “Company”) is a medical device company, engaged in the commercialization and development of a platform non-invasive Vagus Nerve Stimulation (“ nVNS”) therapy that can be self-administered by patients.

electroCore was founded in 2005 and has primarily focused on headache conditions (migraine and cluster headache).

electroCore, headquartered in New Jersey, has two wholly owned subsidiaries:

electroCore Germany GmbH, and electroCore UK Ltd.

The Company’s subsidiary, electroCore Bermuda, Ltd.

was dissolved in October 2019.

In addition, an affiliate, electroCore (Aust) Pty Limited, is subject to electroCore’s control on a basis other than voting interests and is a variable interest entity (“VIE”), for which electroCore is the primary beneficiary.

The Company has ceased its operations in Germany, although sales to Germany are still supported by electroCore UK Ltd.

In addition, an affiliate, electroCore (Aust) Pty Limited (“electroCore Australia”), is subject to electroCore’s control on a basis other than voting interests and is a variable interest entity (“VIE”), for which electroCore is the primary beneficiary.

As of May 2017, the VIE ceased operations.

In January 2018, the U.S.

Food and Drug Administration ("FDA") released the use of gammaCore, the Company's first generation disposable non-invasive vagus nerve stimulator therapy for the treatment of pain associated with migraine headache in adult patients.

Previously in April 2017, the FDA released the use of gammaCore for the acute treatment of pain associated with episodic cluster headache in adult patients.

Food and Drug Administration ("FDA") cleared the use of gammaCore, the Company's first generation disposable non-invasive vagus nerve stimulator therapy for the treatment of pain associated with migraine headache in adult patients.

Previously in April 2017, the FDA cleared the use of gammaCore for the acute treatment of pain associated with episodic cluster headache in adult patients.

Effective August 1, 2018, the Company announced gammaCore Sapphire, a rechargeable and reloadable version of the product for multi-year use, was available in the United States.

2 unchanged sentences

In March 2020, the FDA provided 510(k) clearance for an expanded label for gammaCore nVNS therapy for the preventive treatment of migraine headache in adult patients.

Corporate Conversion and Initial Public Offering

Effective June 21, 2018, the Company converted into a Delaware corporation pursuant to a statutory conversion and changed its name to electroCore, Inc.

Previously, the Company operated as a Delaware limited liability company under the name Electrocore, LLC.

As a result of the corporate conversion, the holders of the different series of units of Electrocore, LLC, or Units, became holders of common stock and options to purchase common stock of electroCore, Inc.

Warrants to purchase Units were converted to warrants to purchase common stock of electroCore, Inc.

The number of shares of common stock, options to purchase common stock, and warrants to purchase common stock that holders of Units and warrants to purchase Units were entitled to receive in the corporate conversion was determined in accordance with a plan of conversion that was based upon the terms of the Third Amended and Restated Limited Liability Company Agreement, dated November 21, 2017 (the “Operating Agreement”), and varied depending on which class and series of Units a holder owned, and the terms of the applicable warrants.

See Note 14 - Corporate Conversion and Equity.

In June 2018, the Company completed its initial public offering ("IPO") and issued 5,980,000 shares of common stock, including the underwriter’s exercise of their right to purchase additional shares, at an initial offering price to the public of $15.00.

The Company received net proceeds from the IPO of approximately $77.5 million, after deducting underwriting discounts and commissions and offering costs of approximately $12.2 million.

Significant Accounting Policies

In July 2020, the FDA granted the Company an Emergency Use Authorization ("EUA") authorizing the use of the Company's gammaCore Sapphire CV nVNS therapy at home or in a healthcare setting to acutely treat adult patients with known or suspected COVID-19 who are experiencing exacerbation of asthma-related dyspnea and reduced airflow, and for whom approved drug therapies are not tolerated or provide insufficient symptom relief.

In February 2021, gammaCore was cleared by the FDA for the acute and preventive treatment of migraine in adolescents between 12 and 17 years of age.

Summary of Significant Accounting Policies

(a) Basis of Presentation

The accompanying consolidated financial statements were prepared in conformity with U.S.

generally accepted accounting principles (“U.S.

(b) Principles of Consolidation

The accompanying consolidated financial statements were prepared in conformity with accounting principles generally accepted in the United States of America (“U.S.

GAAP”), and the rules and regulations of the Securities and Exchange Commission ("SEC").

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

Notes to Consolidated Financial Statements — Continued

(b) Principles of Consolidation

The accompanying consolidated financial statements include the accounts of electroCore and its wholly owned subsidiaries.

electroCore (Aust) Pty Limited, a VIE for which electroCore is the primary beneficiary, is also consolidated with the non-controlled equity presented as non-controlling inter est.

electroCore ( Aust ) Pty Limited, a VIE for which electroCore is the primary beneficiary, is also consolidated with the non-controlled equity presented as non-controlling interest.

The VIE has ceased its operations.

All intercompany balances and transactions have been eliminated in consolidation.

1 unchanged sentence

The preparation of financial statements in conformity with U.S.

generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

Actual results could differ from those estimates.

Significant items subject to such estimates and assumptions include the useful lives of fixed assets;

allowances for doubtful accounts and sales returns;

valuation of inventory, property and equipment, warrants and derivative instruments, stock compensation, and contingencies.

Significant items subject to such estimates and assumptions include valuation of inventory , stock compensation, and contingencies.

(d) Revenue Recognition

The Company accounts for its revenue transactions under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC Topic 606”).

T he Company accounts for its revenue transactions under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC Topic 606”).

In accordance with ASC Topic 606, the Company recognizes revenues when its customers obtain control of its product for an amount that reflects the consideration it expects to receive from its customers in exchange for that product.

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Cash and cash equivalents include all highly liquid investments with a maturity of three months or less when purchased.

The Company’s accounts are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $ 250,000 per financial institution in the United States, and up to £ 85,000 by the Financial Services Compensation Scheme (“FSCS”) per financial institution in the United Kingdom.

(f) Marketable Securities

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Cash, cash equivalents and marketable securities are financial instruments that potentially subject the Company to concentration of credit risk.

The Company periodically invests its cash in corporate debt securities, U.S.

bonds, and U.S.

sponsored agencies and municipal bonds with strong credit ratings.

As of December 31, 2020, the Company's cash equivalents and marketable securities were largely comprised of money market funds and U.S.

treasury bonds.

The Company has established guidelines relative to diversification and maturities that are designed to help ensure safety and liquidity.

These guidelines are periodically reviewed to take advantage of trends in yields and interest rates.

As of December 31, 2020, approximately 95.8 % of the Company’s cash, cash equivalents and marketable securities was denominated in U.S.

Dollars, the balance is subject to foreign exchange risk.

(h) Accounts Receivable

4 unchanged sentences

Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

During the years ended December 31, 2020 and 2019, the Company's allowance for doubtful accounts was immaterial.

The Company does not have any off balance sheet credit exposure related to its customers.

The Company controls its exposure to credit risk through credit analysis and approvals, credit limits, and monitoring procedures.

Collateral is generally not required for the Company’s accounts receivables.

Management believes the credit risk is limited.

(i) Inventories

Inventory, which consists of raw materials, work-in-process and finished product, is stated at the lower of cost and net realizable value.

Inventory, which consists of raw materials, work-in-process and finished product, is stated at the lower of cost or net realizable value.

Inventory is valued on a first-in first-out basis.

8 unchanged sentences

Depreciation is computed by the straight-line method based on the estimated useful lives of the respective assets, as discussed below.

Leasehold improvements are amortized over the lesser of the lease terms or the estimated useful lives of the assets.

Amounts expended for maintenance and repairs are charged to expense as incurred.

2 unchanged sentences

Leasehold improvements

Lesser of estimated useful life or term of lease

Furniture and fixtures

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Compensation expense reflects actual forfeitures and is primarily recognized on a straight-line basis over the requisite service period of the individual grants, which typically equals the vesting period.

In June 2018, the FASB issued ASU 2018-07, Compensation – Stock Compensation (Topic 718):

Improvements to Nonemployee Share Based Payment Accounting (“ASU 2018-07”), which expands the scope of ASC Topic 718, Compensation – Stock Compensation to include share-based payments issued to non-employees for goods or services.

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

Notes to Consolidated Financial Statements — Continued

Consequently, the Company’s accounting for share-based payments to non-employees and employees w as substantially aligned.

(o) Income Taxes

20 unchanged sentences

The Company views its operations and manages its business as one operating segment.

(s) Recently Adopted Accounting Pronouncements

In February 2016, the FASB established Topic 842, Leases by issuing ASU No.

2016-02 which requires lessees to recognize leases on the balance sheet and disclose key information about leasing arrangements.

Topic 842 was subsequently amended by ASU No.

2018-01, Land Easement Practical Expedient for Transition to Topic 842;

ASU No 2018-10, Codification Improvements to Topic 842, Leases, and ASU No.

2018-11, Targeted Improvements.

The new standard establishes a right-of-use (ROU) model that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months.

Leases will be classified as finance or operating.

At January 1, 2019, the Company recognized Lease ROU Assets and Lease Liabilities, principally for its office space leases, in which it is the lessee, on the Consolidated Balance Sheets.

(t) Recently Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326);

Measurement of Credit Losses on Financial Instruments, ASU 2016-13 changes the impairment model for most financial assets and certain other instruments.

For trade and other receivables, the Company will be required to use a new forward looking “expected loss” model that will replace the current “incurred loss” model and generally will result in the earlier recognition for losses.

The Company is required to adjust this new guidance effective January 1, 2020.

The Company is reviewing the pronouncement of the new standard and currently does not expect a material effect on its consolidated financial statements.

(s) Recently Adopted Accounting Standards

In August 2018, the FASB issued guidance which modified the disclosure requirements for fair value measurements.

The guidance is effective for the year ended December 31, 2020.

The Company adopted this guidance, and it was properly reflected in the consolidated financial statements.

The impact on the consolidated financial statements was immaterial.

I n June 2016, the FASB issued ASU 2016 - 13 , Financial Instruments – Credit Losses (Topic 326 );

Measurement of Credit Losses on Financial Instruments, ASU 2016 - 13 changes the impairment model for most financial assets, including trade and other receivables, from an incurred loss method to a new forward looking approach based on expected losses.

The new approach includes the consideration of historical experience, current conditions, and reasonable and supportable forecasts.

The Company adopted this guidance and determined the impact on the consolidated financial statements was immaterial.

(t) Recently Accounting Standards Not Yet Adopted

In December 2019, the FASB issued an update to simplify the accounting for income taxes and improve consistent application by clarifying or amending existing guidance.

This guidance is effective for the year ended December 31, 2021.

The Company does not expect this guidance to have a material impact on its consolidated financial statements upon adoption.

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

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Significant Risks and Uncertainties

Going Concern

The Company is subject to risks common to emerging medical device companies, including uncertainties related to commercialization of products and failing to secure additional funding.

The Company has experienced significant net losses, and it expects to continue to incur losses for the near future as it operates its sales and marketing infrastructure, increases market acceptance of its gammaCore therapy for the acute treatment of episodic cluster headache, or eCH, the prevention of cluster headache, and the preventive and acute treatment of migraine, and fund its research and development activities.

The Company has experienced significant net losses, and it expects to continue to incur losses for the near future as it operates its sales and marketing infrastructure, and works to increase market acceptance of its gammaCore therapy for the acute treatment of episodic cluster headache (“eCH”), the prevention of cluster headache, and the preventive and acute treatment of migraine.

The Company has never been profitable and has incurred net losses in each year since its inception.

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As of December 31, 2020, its accumulated deficit was $ 107.0 million.

The Company’s expected cash requirements for 2020 and beyond are based on the commercialization success of its products and its ability to reduce operating expenses.

There are significant risks and uncertainties as to its ability to achieve these operating results, including as a result of the potential adverse impact on its business from the COVID-19 pandemic.

Due to these risks and uncertainties, the Company may need to reduce its activities significantly more than in its current operating plan and cash flow projections assume in order to fund its operations to the end of 2020.

There can be no assurance that the Company will have sufficient cash flow and liquidity to fund its planned activities, which could force it to significantly reduce or curtail our activities and, ultimately, potentially cease operations.

The Company’s expected cash requirements for the next 12 months and beyond are based on the commercial success of its products and its ability to reduce operating expenses.

There are significant risks and uncertainties as to its ability to achieve these operating results, including as a result of the adverse impact on its headache business from the COVID-19 pandemic and significant potential investment necessary to generate potential sales of gammaCore Sapphire™ CV.

There can be no assurance that the Company will have sufficient cash flow and liquidity to fund its planned activities, which could force it to significantly reduce or curtail its activities and, ultimately, potentially cease operations.

These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

Even if the Company is not required to curtail its activities sooner, its ability to execute its operating plan beyond 2020 depends on its ability to increase revenue, reduce operating expenses and obtain additional funding through the sale of equity and or debt securities, a strategic transaction or otherwise.

There is no assurance that the Company will generate sufficient funding through its operating results or sale of securities, raising substantial doubt about the Company’s ability to continue as a going concern within one year of the date these financial statements are issued.

There is no assurance that the Company will generate sufficient funding through its operating results or financing activity, raising substantial doubt about the Company’s ability to continue as a going concern within one year of the date the accompanying financial statements are issued.

The accompanying financial statements do not include any adjustment that might result from the outcome of this uncertainty.

Concentration of Revenue Risks

The Company earns a significant amount of its revenue (i) in the United States from the Department of Veterans Affairs and Department of Defense pursuant to its qualifying contract under the Federal Supply Schedule and open market sales to individual Department of Veterans Affairs facilities and (ii) in the United Kingdom from the National Health Service.

In total, net sales from these two channels represented 86.9 % and 57.3 % of the Company’s net sales for years ended December 31, 2020 and 2019, respectively.

Each of these two channels accounted for 10 % or more of the Company's net sales as summarized below:

Years ended December 31,

Revenue channel:

Department of Veterans Affairs and Department of Defense

National Health Service

In 2020, five specific VA/DoD facilities represented approximately 50 % of the Company’s revenue from this channel, and two of those facilities each accounted for more than 10 % individually.

During these periods, no other customer accounted for 10 % or more of the Company's net sales.

Foreign Currency Exchange Risks

The Company has foreign currency exchange risk related to revenue and operating expenses in currencies other than the local currencies in which it operates.

The Company is exposed to currency risk from the potential changes in functional currency values of its assets, liabilities, and cash flows denominated in foreign currencies .

COVID-19 Risks and Uncertainties

The Company continues to monitor the impact of the COVID-19 pandemic on all aspects of its business and geographies, including how it will impact business partners.

While the Company experienced disruptions during the year ended December 31, 2020 from the COVID-19 pandemic, it is unable to predict the full impact that the COVID-19 pandemic may have on its financial condition, results of operations and cash flows due to numerous uncertainties.

These uncertainties include the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact and the direct and indirect economic effects of the pandemic and containment measures, among others.

The outbreak of COVID-19 in many countries, including the United States, has significantly adversely impacted global economic activity and has contributed to significant volatility and negative pressure in financial markets.

Depending upon the duration and severity of the pandemic, the continuing effect on the Company's results and outlook over the long term remains uncertain.

Revenue Recognition

Geographical Market Net Sales

Geographical Net Sales

The following table presents net sales disaggregated by geographic area:

Year ended December 31,

Years ended December 31,

Geographic Market

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Performance Obligations

Revenue, net of distribution discounts, vouchers, rebates, returns, and co-payment assistance is solely generated from the sales of the gammaCore products.

Revenue, net of discounts, vouchers, rebates, returns, and co-payment assistance is solely generated from the sales of the gammaCore products.

Revenue is recognized when delivery of the product is completed.

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Revenue is measured based on the consideration that the Company expects to receive in exchange for gammaCore, which represents the transaction price.

The transaction price includes the fixed per-unit price of the product and variable consideration in the form of trade credits, vouchers, rebates, and co-payment assistance.

The per-unit price is based on the

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

Notes to Consolidated Financial Statements — Continued

Company’s established wholesale acquisition cost less a contractually agreed upon distributor discount with the customer.

Any r eserve s based on estimated rebates with private payers was determined to be immaterial.

The transaction price includes the fixed per-unit price of the product and variable consideration in the form of trade credits, rebates, and co-payment assistance.

The per-unit price is based on the Company’s established wholesale acquisition cost less a contractually agreed upon distributor discount with the customer.

Trade credits are discounts that are contingent upon a timely remittance of payment and are estimated based on historical experience.

From February 2018 to mid-July 2018, the Company had a voucher program under which vouchers were issued to physicians to provide new patients with free therapy (i.e., one gammaCore device) by delivering non-voucher units for free therapy.

The transaction price of the non-voucher units redeemed and estimated to be redeemed was recognized as contra-revenue.

The cost to produce these units, in addition to any processing fees, are included as promotional expenses in selling, general, and administrative expense.

After mid-July 2018, the Company modified its voucher program to provide its distributor with gammaCore and gammaCore Sapphire promotional units at no charge (“voucher units”).

The voucher units have a distinct product item number to be used for the voucher program.

The costs to produce these voucher units given to patients under the voucher program are recognized in promotional expense.

For the years ended December 31, 2020 and 2019, trade credits and discounts were immaterial.

In October 2018, the Company launched its Partners for Coverage program that allows eligible commercial insurance patients uninterrupted access to gammaCore for up to two months while insurance coverage is being pursued.

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In December 2019, the Company terminated this program.

In addition, reimbursement for co-payments made by patients under the co-payment assistance program is considered variable consideration.

Reimbursement for co-payments made by patients under the co-payment assistance program is considered variable consideration.

Beginning in February 2019, eligible patients could receive a reduction of up to $ 300 from the cost of co-payments for the first month of therapy and a reduction of up to $ 250 from the cost of each refill for a maximum of 12 months.

Effective March 1, 2020, the amount of monthly co-payment assistance was reduced to a maximum of $ 100 per prescription.

For the years ended December 31, 2020 and 2019 , net sales reflect a reduction for the reduced cost of therapy under the co-payment assistance program.

The calculation of the accrual is based on an estimate of claims and the cost per claim that the Company expects to incur associated with inventory that exists in the distribution channel at period end.

Effective March 1, 2020, the amount of monthly co-payment assistance has been reduced to a maximum of $100 per prescription.

Managed care rebates represent our estimated obligations to pharmacy benefit managers.

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Accordingly, contracts with customers do not include a significant financing component.

The Company earns a significant amount of its revenue in the U.S.

from the Veterans Administration and Department of Defense pursuant to its qualifying contract under the Federal Supply Schedule and open market sales to individual VA facilities and in the U.K.

under the National Health Service.

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

3 unchanged sentences

As of December 31, 2020

Amortized Cost

Unrealized Gain

Unrealized (Loss)

Cash and cash equivalents

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As of December 31, 2019

Amortized Cost

Unrealized Gain

Unrealized (Loss)

Cash and cash equivalents

Corporate Debt Securities

Commercial Paper

Treasury Bonds

10 unchanged sentences

Notes to Consolidated Financial Statements — Continued

A summary of the assets and liabilities carrie d at fair value in accordance with the hierarchy defined above is as follows:

A summary of the assets and liabilities carried at fair value in accordance with the hierarchy defined above is as follows:

Fair Value Hierarchy

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Marketable Securities:

Corporate Debt Securities

Commercial Paper

Treasury Bonds

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Total current inventory

As of December 31, 2019, the Company reserved $287,544 for obsolete inventory.

As of December 31, 2018, the Company determined that raw materials of $147,450 became obsolete due to the development of new product technology.

The 2019 charge was recorded in cost of goods sold, and the 2018 charge was recorded in selling, general, and administrative expense.

Noncurrent inventory is comprised of approximately $1 million of raw materials and $5 million of work in process.

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

Notes to Consolidated Financial Statements — Continued

Property and Equipment , Net

Property and equipment, net, as of December 31, 2019 and 2018 consisted of the following:

Machinery and equipment

Furniture and fixture

Computer equipment and software

Leasehold improvements

Property and equipment - gross

accumulated depreciation

Property and equipment, net

During the year ended December 31, 2019, $70,639 of fully depreciated laboratory and production equipment, and office furniture were written off.

During the year ended December 31, 2018, $295,384 of fully depreciated assets in the Company’s Bermuda subsidiary and Australian affiliate were written off.

Depreciation expense for the years ended December 31, 2019 and 2018 was $108,546 and $66,663, respectively.

As of December 31, 2020 and 2019, the Company reserved $ 721,462 and $ 287,544 respectively, for obsolete inventory .

The Company records charges for obsolete inventory in cost of goods sold.

As of December 31, 2020 and 2019, noncurrent inventory was comprised of approximately $ 0.7 million and $ 1.0 million of raw materials, respectively, and $ 4.2 million and $ 5.0 million of work in process, respectively.

The Company implemented FASB ASU 2016-02, Leases (Topic 842), which required lessees to recognize most leases on its balance sheet effective January 1, 2019 .

1 unchanged sentence

The Company also recognized $ 4.2 million for lease liabilities.

The Company has elected not to recognize right of use assets and lease liabilities for short term leases, i.e., leases with a noncancelable period of 12 months or less.

The Company’s leases have remaining lease terms of approximately three to five years, some of which include options to extend the leases for up to an additional five years.

The Company elected not to recognize right of use assets and lease liabilities for short term leases, i.e., leases with a noncancelable period of 12 months or less .

The Company’s leases have remaining lease terms of approximately one to four years , some of which include options to extend the leases for up to an additional five years .

For the leases for the office space in Basking Ridge, New Jersey and the manufacturing and warehouse space in Rockaway, New Jersey, the Company recognized the options to renew the leases as part of the right of use asset and the lease liability as the Company deemed that the renewal options were reasonably certain to be exercised.

However, due to the Company’s decision to implement a comprehensive redeployment and cost reduction plan implemented in June 2019, the Company determined the renewal option for the office space at the Basking Ridge location is no longer reasonably certain to be exercised.

The Company remeasured the Basking Ridge right of use asset and the lease liability beginning June 1, 2019 utilizing the newly expected lease term.

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

Notes to Consolidated Financial Statements — Continued

Consistent with the Company’s 2019 cost reduction plan, it continues to evaluate and implement cost reduction strategies as appropriate.

Effective December 31, 2020, the Company relocated its corporate headquarters to the site of its manufacturing facility in Rockaway, New Jersey.

Although the Basking Ridge lease agreement provides for sublease, the Company will not elect this option in light of the current economic downturn in commercial real estate due to the pandemic and other factors.

In December 2020, the Company informed the Basking Ridge landlord of its intention to vacate the Basking Ridge office space on December 31, 2020.

The Company is currently in negotiations with the Basking Ridge landlord.

Effective December 31, 2020, the Company vacated the Basking Ridge office space.

On December 31, 2020, the Company wrote off the net book value of the operating lease right of use asset in the amount of $ 534,493 along with the related asset balances totaling $ 23,050 .

This charge is reflected in the Company’s Consolidated Statement of Operations for the year ended December 31, 2020, under selling, general and administrative expense .

The incremental borrowing rate used to determine the net present value of the leases at inception was 9.75 %.

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This expense does not include non-lease components associated with the lease agreements as the Company elected not to include such charges as part of the lease expense.

The tables below provide the details of the right of use assets and lease liabilities:

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

Notes to Consolidated Financial Statements — Continued

Supplemental Balance Sheet Information for Operating Leases :

December 31, 2019

Supplemental Balanc e Sheet Information for Operating Leases:

Operating leases:

6 unchanged sentences

Weighted average discount rate

Supplemental Statement of Cash Flows Information for Operating Leases:

For the year ended December 31, 2019

Noncash lease expense

Change in operating lease liabilities

Future minimum lease payments under non-cancellable operating leases as of December 31, 2020 :

3 unchanged sentences

Amounts representing interest

Total lease expense, in accordance with the superseded lease standard was $496,055 for 2018.

Future minimum lease payments under non-cancellable operating leases as of December 31, 2018 were as follows:

Financial year

2023 and thereafter

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

3 unchanged sentences

In accordance with ASU 2018-15, the implementation costs incurred in the CCA were deferred and recognized as other assets and are being amortized to expense over the noncancelable term of the arrangement.

The Company capitalized $826,918 in CCA costs for the year ended December 31, 2019 and $395,404 in 2018.

The implementation of this CCA was completed on June 30, 2019.

Beginning July 1, 2019, the Company went live with the cloud computing Enterprise Resource Planning system and all future related costs are expensed as incurred.

Beginning July 1, 2019, the Company went live with the cloud computing Enterprise Resource Planning system and all future related costs are expensed as incurre d.

In July 2019, the Company began amortizing the related deferred costs over the remaining period of the noncancelable arrangement.

Amortization costs for the year ended December 31, 2019 were $141,037.

Amortization costs for the year ended December 31, 2020 and 2019 were $ 282,075 and $ 141,037 , respectively.

As of December 31, 2020, the remaining term of the lease is approximately three years .

The CCA is included under the caption Other assets, net as presented in the Company's balance sheet for the years ended December 31, 2020 and 2019 and is summarized below:

Cloud Computing Arrangement

accumulated amortization

Cloud Computing Arrangement, net

Accrued Expenses

2 unchanged sentences

Accrued bonuses

Other accrued expenses

Other employee related expenses

Notes Payable

Loan Under the Paycheck Protection Program

On May 4, 2020, the Company received proceeds of $ 1.4 million in connection with a promissory note (the “Note”) entered into with Citibank, N.A.

(the “Lender”) evidencing an unsecured loan (the “Loan”) under the Paycheck Protection Program (" PPP").

The PPP is a program of the SBA established under the CARES Act.

Under the PPP, the proceeds of the Loan may be used for payroll and certain covered interest payments, lease payments and utility payments (“Qualifying Expenses”).

The Company intends to use the entire Loan amount for Qualifying Expenses under the PPP.

The interest rate on the Loan is 1.0 % per annum.

The Note matures on February 2, 2023 .

On September 2, 2021 (the “First Payment Date”), the Company is required to pay all accrued interest under the Loan that is not forgiven in accordance with the terms of the PPP.

Additionally, on the First Payment Date and on the second day of each month thereafter until February 2, 2023, the Company must make equal monthly payments of the amount of principal under the Loan that is not forgiven in accordance with the terms of the PPP and related accrued interest thereon.

The Company intends to apply for loan forgiveness under the guidelines of the SBA, which would result in a delay or elimination of the repayment period, if accepted in whole or in part by the Lender and SBA.

The Note contains events of default and other conditions customary for a Note of this type.

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

Notes to Consolidated Financial Statements — Continued

Under the terms of the CARES Act, PPP loan recipients can be granted forgiveness for all or a portion of the loan granted under the PPP, with such forgiveness to be determined, subject to limitations, based on the use of the loan proceeds for payment of Qualifying Expenses and the recipient maintaining its payroll levels over certain required thresholds under the PPP.

The terms of any forgiveness also may be subject to further requirements in any regulations and guidelines the SBA may adopt.

No assurance can be provided that the Company will obtain forgiveness of the Note in whole or in part.

Official guidance and interpretations of the requirements of the program have been limited and have been changing over time.

Despite the Company’s good-faith belief that it properly satisfied all eligibility requirements for the PPP loan, there has been increasing scrutiny of public companies that received loans, and there can be no assurance that the Company will not become subject to regulatory or other scrutiny, including a request or requirement for repayment of some or all of the loan.

The Company has accounted for the Loan in accordance with FASB ASC Topic 470, Debt .

Accordingly, the Loan is reflected as a liability on its Consolidated Balance Sheet as of December 31, 2020, $ 311,604 as a current liability and $ 1,097,946 and as a noncurrent liability.

The Company will record a gain if the Loan is forgiven in whole or in part.

Finance and Security Agreements

On July 1, 2020, the Company entered into a Commercial Insurance Premium Finance and Security Agreement (“the Agreement”).

The Agreement provides for a single borrowing by the Company of $807,347, with a seven-month term, and an annual interest rate of 2.99%.

The Agreement provides for a single borrowing by the Company of $ 1.2 million, with a seven -month term and an annual interest rate of 2.18 %.

The proceeds from this transaction were used to partially fund the premiums due under some of the Company’s insurance policies.

The amounts payable are secured by the Company’s rights under such policies.

At December 31, 2019, the remaining balance is $111,878 and during the year ended December 31, 2019, the Company recognized $3,457 in interest expense.

The balance was fully paid as of January 2020.

The Company began to pay monthly installments of approximately $ 164,800 beginning in July 2020.

As of December 31, 2020, the remaining balance un der the Agreement was $ 164,832 and during the year ended December 31, 2020, the Company recognized $ 8,339 in interest expense.

On July 1, 2019, the Company entered into a separate Commercial Insurance Premium Finance and Security Agreement (“the 2019 Agreement”).

The 2019 Agreement provided for a single borrowing by the Company of $ 807,347 , with a seven -month term, and an annual interest rate of 2.99 %.

The proceeds from this transaction were used to partially fund the premiums due under some of the Company’s insurance policies.

As of December 31, 2020, the balance was fully paid.

During the years ended December 31, 2020 and 2019, the Company recognized $ 341 and $ 3,457 in interest expense, respectively.

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

Notes to Consolidated Financial Statements — Continued

Stockholders’ Equity

Lincoln Park Purchase Agreement

On March 27, 2020, the Company and Lincoln Park entered into an equity facility purchase agreement ("Purchase Agreement") pursuant to which the Company has the right to sell to Lincoln Park shares of common stock having an aggregate value of up to $ 25,000,000 , subject to certain limitations and conditions set forth in the purchase agreement.

Upon entering into the Purchase Agreement with Lincoln Park, the Company issued an aggregate of 461,676 shares of common stock to Lincoln Park as a commitment fee.

The fair value of these shares on the date of issuance was approximately $ 186,300 .

During 2020, the Company issued to an additional 230,838 shares of common stock to Lincoln Park as a further commitment fee based on the first $ 5,000,000 of shares of common stock issued to Lincoln Park under the Purchase Agreement as Purchase Shares (as such term is defined in the Purchase Agreement) .

The Company did not receive any cash proceeds from the issuance of any of the foregoing commitment shares.

No further commitment fee shares remain issuable under the Purchase Agreement.

The net proceeds under the Purchase Agreement to the Company will depend on the frequency and prices at which shares of common stock are sold to Lincoln Park.

Actual sales of shares of common stock to Lincoln Park under the Purchase Agreement and the amount of such net proceeds will depend on a variety of factors, including market conditions, the trading price of the common stock and determinations by the Company as to other available and appropriate sources of funding for the Company.

The Company has and expects to continue to use the proceeds from this agreement for general corporate purposes and working capital.

During 2020, the Company sold 10,179,676 shares of common stock under the Purchase Agreement, resulting in aggregate proceeds of approximately $ 15.5 million to the Company.

As of December 31, 2020, the Company had the right to sell under the Purchase Agreement approximately $ 9.5 million of additional shares of common stock.

20 Subsequent Events for further discussion of the Purchase Agreement.

Other Securities Purchase Agreements

On April 14, 2020, the Company entered into a Securities Purchase Agreement (“First SPA”) with certain accredited investors pursuant to which the Company agreed to sell an aggregate of 2,058,822 shares of common stock at a purchase price of $ 0.85 per share for aggregate proceeds to the Company of approximately $ 1.75 million.

Each of the purchasers was an affiliate and/or existing shareholder of the Company, including some members of the Company’s board of directors.

In addition, the purchasers were granted customary registration rights as further described in the First SPA.

On May 14, 2020, the Company entered into a Securities Purchase Agreement (“Second SPA”) with its legal counsel pursuant to which the Company agreed to issue 1,564,345 shares of common stock, at a purchase price of $ 0.99 per share.

Upon issuance of the shares, certain outstanding financial obligations of the Company owed to its legal counsel were deemed paid and satisfied in full.

In addition, the Company’s legal counsel was granted customary registration rights as further described in the Second SPA.

During 2020, the Company recorded a non-cash charge of $ 156,434 in connection with this transaction.

On May 18, 2020, the Company entered into a third Securities Purchase Agreement (“Third SPA”) with certain accredited investors pursuant to which the Company agreed to sell an aggregate of 505,205 shares of common stock at a purchase price of $ 0.9178 per share, for aggregate proceeds to the Company of approximately $ 0.45 million.

In addition, the purchasers were granted customary registration rights as further described in the Third SPA.

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

Notes to Consolidated Financial Statements — Continued

Net Loss Per Share

Basic net loss per share is computed by dividing net loss available to electroCore, Inc.

by the weighted-average number of shares of common stock outstanding during the period.

Diluted loss per share is computed by dividing net loss available to electroCore, Inc.

by the weighted-average number of shares of common stock outstanding adjusted to give effect to potentially dilutive securities.

Restricted stock awards and units, and stock options have not been included in the diluted loss per share calculation as their inclusion would have had an anti-dilutive effect.

As described in Note 14, Corporate Conversion and Equity, on June 21, 2018, electroCore, Inc.

completed a Corporate Conversion as well as its initial public offering to, among other things, provide for a single class of common stock of electroCore, Inc., in exchange for the previous convertible preferred units and common units of the Company.

This conversion changed the relative ownership of electroCore, Inc.

such that retroactive application of the conversion to periods prior to the IPO for the purposes of calculating loss per share would not be meaningful.

Net loss attributable to electroCore, Inc.

subsidiaries and affiliate for the year ended December 31, 2018 of $1.19 per share includes the loss attributable to the period June 21, 2018 to December 31, 2018 and is based on the number of days in which the shares were outstanding during the period June 21, 2018 to December 31, 2018.

Basic net loss per share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during the period.

Diluted loss per share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding adjusted to give effect to potentially dilutive securities.

Restricted stock and unit awards, and stock options have not been included in the diluted loss per share calculation as their inclusion would have had an anti-dilutive effect.

The potential common stock equivalents that have been excluded from the computation of diluted loss per share consist of the following:

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Stock purchase warrants

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

Notes to Consolidated Financial Statements — Continued

Corporate Conversion and Equity

On June 21, 2018, the Company completed the Corporate Conversion.

Pursuant to the certificate of incorporation effected in connection with the Corporate Conversion, the Company’s authorized capital stock consists of 500 million shares of common stock, par value $0.001 per share and 10 million shares of preferred stock, par value $0.001 per share.

As a result of this conversion and related initial public offering, 29,450,035 shares of common stock and zero shares of preferred stock were issued.

On June 22, 2018, the common stock began trading on the Nasdaq Global Market under the symbol “ECOR”.

Prior to the Corporate Conversion of the Company, the Operating Agreement permitted the issuance of four classes of Units - Series A Preferred Units, Series B Preferred Units, Series B-1 Preferred Units and Common Units.

Except as otherwise provided in the Operating Agreement, each member was entitled to one vote for each Unit held and the Units of all classes and series voted together as a single class on all matters (on an as converted to common unit basis).

Upon the Corporate Conversion, all Units were converted into an aggregate of 23,470,035 shares of common stock and options to purchase 2,141,748 shares of common stock as follows :

holders of Common Units, other than Common Units that were originally issued as “profits interests” (as such term is used for purposes of the Internal Revenue Code) (“Profits Interests”) received an aggregate of 12,099,280 shares of common stock;

holders of Series A Preferred Units received an aggregate of 4,181,856 shares of common stock, which included 241,939 shares of common stock as payment in full of the approximately $3.6 million accrued and unpaid preferred return that was payable in respect of the Series A Preferred Units;

holders of Series B Preferred Units received an aggregate of 5,843,668 shares of common stock;

holders of Profits Interests received an aggregate of 1,345,231 shares of common stock;

holders of Profits Interests who were employees or consultants at the time of the corporate conversion received options to purchase an aggregate of 2,141,748 shares of common stock, with an exercise price of $15.00 which was equal to the initial public offering price.

Additionally, upon the conversion, the accumulated deficit of Electrocore LLC, subsidiaries and affiliates was reclassed to additional paid in capital in accordance with SEC SAB Topic 4B.

Series A Preferred Units

The Series A Preferred Units were entitled to a preference on distributions, ahead of the Common Units but behind Series B Preferred Units, in the amount of $54,923,430 plus the Series A Preferred Return (as described below), as of June 20, 2018.

The Series A Preferred Units were entitled to a return in an annual non-compounded amount with respect to each outstanding Series A Preferred Unit equal to the product of the Series A Preferred Return Percentage and the Series A Unreturned Capital Value for each Unit, which accrued to the extent not paid.

The Series A Preferred Return Percentage was 4% and could be reduced to 2% if certain requirements were met as outlined in the amended and restated Operating Agreement.

Upon an IPO, the payment of the Series A Preferred Return was at the sole discretion of the Board of Managers.

As of June 20, 2018, the Series A Preferred Return payable, following the 2017 amendments to the Operating Agreement, upon a public offering of the Company’s common stock was fixed at $3,629,092.

This amount was paid with the issuance of 241,939 shares of common stock upon the IPO.

The Series A Preferred Units were converted into common stock mandatorily immediately prior to the initial public offering as outlined in the amended and restated Operating Agreement, and then subject to a 1:18 stock conversion.

As of December 31, 2018, there were no outstanding warrants to purchase Series A Preferred Units, except for warrants to purchase in the aggregate 221,766 Series A Preferred Units issued in connection with the December 2015 term loan (which was repaid and/or converted into equity in 2016) and as compensation to one of the financial advisors.

In connection with the IPO, these outstanding Series A warrants by their terms converted into warrants to purchase in the aggregate 12,321 shares of common stock at an exercise price of $15.30 per share.

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

Notes to Consolidated Financial Statements — Continued

Series B Preferred Units

In 2017, the Company entered into a Series B Preferred Unit Purchase Agreement with multiple investors, including Core Ventures II, LLC and Merck Global Health Innovation Fund.

Under the terms of the Purchase Agreement, as amended, through December 31, 2017, the Company received cash proceeds of $46,911,300 and converted $26,718,910 of outstanding promissory notes (the “Bridge Notes”) and related accrued and unpaid interest for an aggregate amount of $73,630,210 (inclusive of amounts mentioned in Note 17 related to conversion of Bridge Notes and related accrued and unpaid interest) through the sale of Series B Preferred Units at an initial closing and several additional closings.

Each Series B Preferred Unit was converted into one Common Unit mandatorily upon the occurrence of the Corporate Conversion as outlined in the amended and restated Operating Agreement, and then subject to an 1:18 stock conversion pursuant to the terms of the plan of conversion for the Corporate Conversion.

In connection with all Series B Preferred Unit closings, the Company issued warrants for the purchase of 35,452,084 Common Units at an exercise price of $1.25 per Unit, which expired unexercised upon the closing of the IPO.

The Company also issued warrants to advisors for the purchase of 2,724,549 common units at an exercise price of $0.70 per Unit.

The Company also issued 72,000 warrants to purchase common units with an exercise price of $1.25 per Unit, which expired upon the closing of the IPO.

The fair value of these warrants to purchase common units were recorded within additional-paid-in-capital.

In connection with the Corporate Conversion, the 2,724,549 warrants issued to advisors were converted to warrants to purchase 151,364 shares of common stock at an exercise price of $12.60 per share of common stock.

As of June 21, 2018, the Series B warrants that were issued to purchasers of the Bridge Notes were converted to (i) warrants to purchase 429,948 shares of common stock at an exercise price of $12.60 per share (see Note 17) and (ii) the Series B Preferred warrants that were issued to financial advisors were converted into warrants to purchase 101,119 shares of common stock at an exercise price of $12.60 per share.

The following table summarizes the stock purchase warrants outstanding as of December 31, 2020 and 2019:

# of Warrants

Exercise Price

Expiration Date

Variable Interest Entity

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The activities related to electroCore (Aust) Pty Limited are not material to the consolidated financial statements.

The provision for income taxes for the years ended December 31, 2019 and 2018 related to foreign taxes and state minimum taxes.

The Company has incurred operating losses since inception in the US.

Prior to the Corporate Conversion on June 21, 2018, the Company was a limited liability company in the United States, which is treated as a flow-through entity for Federal and state income tax purposes.

Accordingly, the Company was not subject to U.S.

income taxes until its conversion.

Effective May 2017, the VIE ceased operations.

The provision for income taxes for the years ended December 31, 2020 and 2019 related to foreign taxes, state minimum tax and a benefit from the sale of state net operating losses.

Domestic and foreign components of the loss before provision for income taxes is as follows:

December 31, 2020

December 31, 2019

The income tax provision from continuing operations contains the following components:

December 31, 2020

December 31, 2019

Total current

Total deferred

Total income tax (benefit) expense

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

Notes to Consolidated Financial Statements — Continued

The Company has evaluated the available evidence supporting the realization of its deferred tax assets, including the amount and timing of future taxable income, and has determined that it is more likely than not that its net deferred tax assets will not be realized in the United States and certain foreign jurisdictions.

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When the Company determines that it will be able to realize some portion or all of its deferred tax assets, an adjustment to its valuation allowance on its deferred tax assets would have the effect of increasing net income in the period such determination is made.

A reconciliation of the income tax provision computed at statutory rates to the reported income tax provision for the years ended December 31, 2019 and 2018 is as follows:

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

Notes to Consolidated Financial Statements — Continued

Year ended December 31,

Statutory rate

State tax expected (recovery), net of federal benefit

Nondeductible expenses

Loss incurred as pass-through

Change in valuation allowance for deferred tax assets

Provision for income taxes

The net change in the valuation allowance was an increase of $ 7.8 million.

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Less valuation allowance

( 21,171,967 )

Total deferred tax assets

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Deferred tax assets, net

As of December 31, 2019 and 2018, the Company had accumulated non-capital losses totaling $3.5 and $3.7 million, respectively, in Germany which can be carried forward indefinitely, and net operating losses of $65.7 and $24.6 million respectively, in the U.S.

A reconciliation of the income tax provision computed at statutory rates to the reported income tax provision for the years ended December 31, 2020 and 2019 is as follows:

Year ended December 31,

Statutory rate

State tax expected (recovery), net of federal benefit

Stock compensation

State tax NOL sale

Nondeductible expenses

Loss incurred as pass-through

Change in valuation allowance for deferred tax assets

Provision for income taxes

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

Notes to Consolidated Financial Statements — Continued

As of December 31, 2020 and 2019 , the Company had accumulated net operating losses totaling $ 87.2 million and $ 65.7 million, respectively, in the U.S.

(federal and state), which may be available to carry forward and offset future years' taxable income.

federal losses can be carried forward indefinitely, and state losses expire in various amounts beginning in 2026.

The Company also had accumulated losses totaling $ 3.9 million and $ 3.5 million in Germany which can be carried forward indefinitely.

However, the NOL carryforwards may be, or become subject to, an annual limitation in the event of certain cumulative changes in the ownership interest of significant stockholders over a three year period in excess of 50 %, as defined under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, as well as similar state tax provisions.

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If and when the Company utilizes the NOL carryforwards in a future period, it will perform an analysis to determine the effect, if any, of these loss limitation rules on the NOL carryforward balances .

Domestic and foreign components of loss before provision for income taxes is as follows:

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

Notes to Consolidated Financial Statements — Continued

December 31, 2019

December 31, 2018

The income tax provision from continuing operations contains the following components:

December 31, 2019

December 31, 2018

Total current

Total deferred

Total income tax expense/(benefit)

As of December 31, 2020, the Company had Federal and NJ research and development credits of $ 282,801 and $ 191,863 respectively.

The Federal R&D credits can be carried forward 20 years and will begin to expire in 2038.

The New Jersey R&D credits can be carried forward seven years and will begin to expire in 2025.

Uncertain Tax Positions

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It is not anticipated that unrecognized tax benefits would significantly increase or decrease within 12 months of the reporting date.

Warrant Liability

During the period ended June 30, 2017, the Company issued bridge notes together with associated warrants (“Bridge Note Warrants”).

Since the Bridge Note Warrants entitled the holders to purchase securities in the qualified equity round at the purchase price payable for the related equity securities, the exercise price of the warrants was undetermined at the time of their issuance.

Also, because the terms of redemption of the Series B Preferred Units were unknown at the time of their issuance as well as the deemed liquidation terms, the warrant liability was recorded at fair value and marked to market.

The valuation of the warrant liability was determined using Level 3 inputs.

In connection with the bridge note closings, at the time of the qualified equity round, the Company issued 7,739,092 Bridge Note Warrants all of which were outstanding as of March 31, 2018.

At the time of the Corporate Conversion, these warrants were converted to warrants to purchase 429,948 shares of common stock at an exercise price of $12.60 and were reclassified to equity upon the determination that they no longer met the criteria to be classified as liabilities.

Stock Compensation and Unit-Based Compensation

The issuance of common stock and options to purchase common stock to prior holders of Profits Interests in connection with the Corporate Conversion was accounted for as a type-1 modification of the old awards.

Under the previous LLC structure, in connection with employment and service provider agreements, the Company granted Units that constitute profits interests for income tax purposes to grantees pursuant to Unit Forfeiture Agreements, subject to certain restrictions defined in each such agreement.

The Company maintained a Unit award account for each of the grantees.

Generally, the Units vested 25% on the one-year anniversary of the employment start date or agreement date and the balance ratably per quarter thereafter over an additional three-year period.

After the restrictions lapsed, the grantees became fully vested in such Units.

In 2018, the Company granted 19,447,218 Units to its employees, of which 110,354 were forfeited immediately prior to the Corporate Conversion.

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

Notes to Consolidated Financial Statements — Continued

In connection with the Corporate Conversion, 62,765,605 U nits ( outstanding immediately prior to the IPO ) were converted, in the aggregate, into (i) 1,345,231 shares of common stock, and (ii) with respect to Units held by current employees and consultants at the time of the conversion, options to purchase 2,141,748 shares of electroCore, Inc.

common stock at an exercise price of $15.00 per share.

The number of shares of common stock and the number of options issued for the outstanding units were determined based upon the appreciation in value of the Company after the date of Unit grant through the completion of the IPO.

The number of shares of common stock issued for each Unit (the "Conversion Shares") was equal to (x) the percentage of the capital account balance associated with such Unit as it related to the total value of the Company at the IPO pre-money valuation, divided by (y) the percentage interest in the Company represented by such Unit based on the total outstanding Units in the Company immediately prior to the IPO, multiplied by (z) the total number of Units represented by the applicable Profits Interest.

Of the shares of common stock issued for the Units, 1,157,139 vested immediately, 188,092 vested January 1, 2019, and the balance vesting over the next succeeding 10 calendar quarters.

The Company accounts for the 1,345,231 shares of common stock as restricted stock awards as reflected in the table below.

As of December 31, 2018, the total number of restricted shares outstanding was 185,571 as 2,521 share awards were forfeited and no further share awards were granted in 2018.

The number of options issued in respect of each Unit was equal to (i) the total number of Units represented by such Profits Interest prior to the corporate conversion minus (ii) the Conversion Shares issued in respect of such Profits Interest.

Of the options issued for the Units, 228,954 vested 100% on January 1, 2019, 1,912,797 vested 25% on January 1, 2019, and the balance vesting over the next succeeding 14 calendar quarters.

The options have an exercise price of $15.00 per share.

Stock compensation expense for the Profits Interests not recognized prior to the Corporate Conversion was $2.8 million.

This expense was allocated to the common stock and options to purchase common stock awards based on their relative fair value on the date of the IPO.

For the common stock awards that vested at the time of issuance, the Company recognized $1.2 million immediately.

At the time of issuance of stock compensation expense for the common stock awards and the options to purchase common stock that did not vest immediately totaled, $0.2 million and $1.4 million, respectively, and is being amortized over the respective vesting periods.

The incremental stock compensation expensed due to the modification was $7.8 million.

This expense was allocated to the common stock and the options to purchase common stock based on their fair value on the date of the awards.

For the common stock that vested at the time of issuance, the Company recognized $3.8 million.

For the common stock awards and the options to purchase common stock that did not vest immediately, the Company will recognize $0.4 million and $3.6 million, respectively, over the respective vesting periods.

Coronavirus Aid, Relief, and Economic Security Act

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act, the "CARES Act", was enacted and signed into law, and GAAP requires recognition of the tax effects of new legislation during the reporting period that includes the enactment date.

The CARES Act, among other things, includes changes to the tax provisions that benefits business entities and makes certain technical corrections to the 2017 Tax Cuts and Jobs Act, including, permitting net operating losses, or NOLs, carryovers and carrybacks to offset 100 % of taxable income for taxable years beginning before 2021.

In addition, the CARES Act allows NOLs incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes.

The CARES Act provides other reliefs and stimulus measures.

The Company has evaluated the impact of the CARES Act, and does not expect that any provision of the CARES Act would result in a material cash benefit to the Company or have a material impact on its financial statements or internal controls over financial reporting.

Stock Based Compensation

On June 21, 2018, the Company adopted the 2018 Omnibus Equity Incentive Plan (“Plan”).

This plan reserved 6.2 million shares with an increase to be added annually beginning in 2019 through 2028 up to 4 % of the total number of shares of common stock issued and outstanding on a fully diluted basis as of the end of the immediately preceding fiscal year, providing that the aggregate number of additional shares shall not exceed a total of 45 million shares, and a maximum of 40 million shares pursuant to the exercise of stock options.

Effective January 1, 2019, the amount of shares reserved under the Plan was increased to approximately 6.9 million.

Effective January 1, 2021, the number of shares reserved under the Plan was increased by 2.0 million to approximately 8.9 million.

The Company’s policy is to issue new shares of its common stock upon the exercise of stock options, new grants of restricted stock awards, and settlement of restricted stock units.

Stock options issued under the plan have a contractual life of 10 years and are generally forfeited upon separation from the Company.

The options issued in conjunction with the Corporate Conversion were issued under this Plan.

At December 31, 2019 there were approximately 2,120,000 shares available to be awarded under the Plan.

The following table presents stock compensation expense recognized by the Company for the years ended December 31, 2020 and 2019.

Total unrecognized compensation cost related to equity awards as of December 31, 2020 was $ 5.0 million and is expected to be recognized over the next 2.3 years.

Year ended December 31,

Selling, general and administrative

Research and development

Cost of goods sold

Total expense

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

Notes to Consolidated Financial Statements — Continued

The following table presents a summary of stock options granted :

The following table presents a summary of stock option award activity during the year ended December 31, 2020:

Number of Options

Weighted Average

Exercise Price

Weighted Average

Weighted Average Exercise Price

Weighted Average Remaining Contractual Term (Years)

Aggregate Intrinsic Value

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The intrinsic value is calculated as the difference between the fair market value at December 31, 2020 and the exercise price per share of the stock options.

The fair market value per share of common stock as of December 31, 2019 was $1.59.

In general, option awards granted to employees and consultants vest over four years.

Options awards granted to employees generally vest over a four -year period.

The following table provides additional information about stock options that are outstanding and exercisable at December 31, 2020:

Exercise Price

Weighted Average

Options Outstanding (number)

Options Outstanding Weighted Average Remaining Contractual Life (Years)

Options Exercisable (number)

$ 1.40 - $ 2.50

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$ 7.53 - $ 15.00

The following table presents a summary of restricted stock awards granted:

The following table presents a summary of restricted stock award ("RSA" or "RSAs") activity during the year ended December 31, 2020:

Number of Shares

Weighted Average

Weighted Average Grant Date Fair Value

Nonvested, December 31, 2019

Nonvested, December 31, 2020

In general, restricted stock awards granted to employees and consultants in 2019 vest over 4 years.

The following table presents a summary of restricted and deferred stock units (“Stock Units”) granted:

In general, RSAs granted to employees vest over a four -year period.

The following table presents a summary of restricted and deferred stock unit (“Unit” or "Units") activity during the year ended December 31, 2020:

Number of Shares

Weighted Average

Weighted Average Grant Date Fair Value

Nonvested, December 31, 2019

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Notes to Consolidated Financial Statements — Continued

In general, Stock Units awarded to employees and consultants vest over two years.

In general, Units granted to employees vest over two to four years .

Immediately following the Company’s annual meeting of stockholders, the Company generally grants each non-employee director an equity award that vests over a 12 -month period.

Upon a non-employee director’s initial appointment or election to the board of directors, the Company grants such non-employee director an equity award subject to vesting as determined by the board of directors.

For the years ended December 31, 2019 and 2018, stock compensation expense reported as a component of selling, general and administrative expense was $2.7 million and $4.6 million, respectively.

For the same period, stock compensation expense reported as a component of research and development expense was $1.1 million and $2.8 million, respectively.

For the years ended December 31, 2019 and 2018, stock compensation expense reported as a component of cost of goods sold was $0.1 million and $0.2 million respectively.

Total unrecognized compensation cost related to equity awards as of December 31, 2019 was $7.9 million and is expected to be recognized over the next 3 years.

Valuation Information for Stock-Based Compensation

The fair value of each stock option award granted was estimated on the date of grant using the Black-Scholes model.

Expected volatility was based on historical volatility of the Company’s common stock.

Expected volatility was based on historical common stock volatility of the Company’s peers.

Prior to 2020, expected volatility was based on historical volatility of the Company’s common stock.

The risk-free interest rate was based on the average U.S.

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Dividend yield

The fair value of restricted stock awards and restricted stock units is the market close price of the Company’s common stock on the trading day immediately preceding the date of grant.

Employee Stock Purchase Plan

Effective January 1, 2019, the Company adopted the 2019 Employee Stock Purchase Plan.

The plan, which was terminated effective January 1, 2020, provided eligible employee of the Company with an opportunity to purchase common stock of the Company through accumulated payroll deductions.

The maximum number of shares reserved for delivery under the plan was 300,000 shares, plus an annual increase not to exceed an aggregate of 4,500,000 shares over the life of the plan.

The weighted average assumptions used in the Black-Scholes valuation of the fair value of the discount for the year ended December 31, 2019 were:

Fair value at grant date

Expected volatility

Risk-free interest rate

Expected holding period

Dividend yield

Employee Benefit Plan

The Company has a defined contribution 401(k) profit sharing plan which covers all employees.

The fair value of RSAs and Units is the market close price of the Company’s common stock on the trading day immediately preceding the date of grant.

Employee 401(K) Plan

The Company has a defined contribution 401 (k) plan which covers all employees.

Employees are eligible upon date of hire.

Employee contributions are voluntary and are based on specific percentages of compensation, which may not

Employee contributions are voluntary and are based on specific percentages of compensation, which may not exceed ma ximum amounts established by Internal Revenue Code.

Employer contributions are discretionary.

The maximum Company matching contribution is $ 0.25 per dollar subject to a limit of 3 % of eligible employee compensation.

The Company's expense for contributions to its defined contribution plan totaled $ 15,600 for 2020.

There were no employer contributions for the year ended December 31, 2019.

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

Notes to Consolidated Financial Statements — Continued

exceed maximum amounts established by Internal Revenue Code.

Employer contributions are discretionary.

There were no employer contributions for the years ended December 31, 2019 and 2018 .

Commitments and Contingencies

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SOM-L 001007-19, respectively.

In addition to the Company, the defendants include present and past directors and officers, Evercore Group L.L.C., Cantor Fitzgerald & Co., JMP Securities LLC and BTIG, LLC, the underwriters for its IPO;

In addition to the Company, the defendants included present and past directors and officers, Evercore Group L.L.C., Cantor Fitzgerald & Co., JMP Securities LLC and BTIG, LLC, the underwriters for its IPO;

and two of the Company’s stockholders.

On August 15, 2019, the Superior Court entered an order consolidating the Kuehl and Stone actions, which are proceeding under Docket No.

On August 15, 2019, the Superior Court entered an order consolidating the Kuehl and Stone actions, which proceeded under Docket No.

SOM-L 000876-19.

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The complaint sought unspecified compensatory damages, interest, costs and attorneys’ fees.

On October 31, 2019, the Company filed a motion to dismiss the complaint or in the alternative to stay the action in favor of the pending federal action (discussed below).

On October 31, 2019, the Company and the other defendants filed a motion to dismiss the complaint or in the alternative to stay the action in favor of the pending federal action (discussed below).

On February 21, 2020 the court granted the defendants’ motion to dismiss the consolidated amended complaint with prejudice.

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Superior Court – Appellate Division.

The appeal was fully briefed as of July 17, 2020.

The date for argument of the appeal has not yet been set.

On September 26, 2019 and October 31, 2019, purported stockholders of the Company served putative class action lawsuits in the United States District Court for the District of New Jersey captioned Allyn Turnofsky vs.

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The plaintiffs each seek to represent a class of stockholders who (i) purchased the Company’s common stock in the IPO or whose purchases are traceable to the IPO, or (ii) who purchased common stock between the IPO and September 25, 2019.

The complaints each allege that the defendants violated Sections 11 and 15 of the Securities Act and Sections 10(b) and 20(a) of the Exchange Act, with respect to (i) the registration statement and related prospectus for the IPO, and (ii) certain post-IPO disclosures filed with the SEC.

The complaints seek unspecified compensatory damages, interest, costs and attorneys’ fees.

In the Turnofsky case, several plaintiffs and their counsel are engaged in motion practice to select a lead plaintiff and lead plaintiff’s counsel.

Briefing is complete on the motions, but the court has not yet ruled.

On February 19, 2020, the Priewe case was voluntarily dismissed.

The complaints each alleged that the defendants violated Sections 11 and 15 of the Securities Act and Sections 10(b) and 20(a) of the Exchange Act, with respect to (i) the registration statement and related prospectus for the IPO, and (ii) certain post-IPO disclosures filed with the SEC.

The complaints sought unspecified compensatory damages, interest, costs and attorneys’ fees.

In the Turnofsky case, on November 25, 2019 several plaintiffs and their counsel moved to be selected as lead plaintiff and lead plaintiff’s counsel.

On April 24, 2020.

the Court granted the motion of Carole Tibbs and the firm Bragar, Eagel & Squire, P.C.

On July 17, 2020 the plaintiffs filed an amended complaint in Turnofsky .

In addition to the prior claims, the amended complaint added an additional director defendant and two investors as defendants and adds a claim against the Company and the underwriters for violating Section 12(a)(2) of the Securities Act.

On September 15, 2020, the Company and the other defendants filed a motion to dismiss the amended complaint for failure to state a claim.

On November 6, 2020, the plaintiffs filed their opposition to the motion to dismiss.

The Company and the other defendants filed reply papers in support of the motion on December 7, 2020.

Argument on the motion to dismiss has not yet been scheduled.

The parties have agreed to a non-binding mediation with JAMS, which will occur on March 30, 2021.

The Priewe case was voluntarily dismissed on February 19, 2020.

On March 4, 2021, purported stockholder Richard Martz brought a purported stockholder derivative action in the United States District Court for the District of New Jersey.

The action is captioned Richard Maltz, derivatively on behalf of electroCore, Inc., vs.

Amato, et al., Case 3:21-cv-04135.

The defendants include present and past directors and officers of the Company.

The plaintiff purports to pursue derivative claims on behalf of the Company in connection with the IPO and actions occurring between the IPO and September 25, 2019.

The complaint alleges that demand on the board of directors is excused.

The complaint purports to allege claims against the defendants for violating Section 14(a) of the Exchange Act, breaching fiduciary duties, unjust enrichment and waste of corporate assets.

The complaint also purports to allege claims for contribution in connection with the Turnofsky case described above, pursuant to Section 11(f) of the Securities Act and Sections 10(b) and 21D of the Exchange Act.

The complaint seeks unspecified compensatory damages, interest, costs and attorneys’ fees;

declaratory relief;

and an order requiring changes to corporate governance and internal procedures and a vote on proposed amendments to the Bylaws and Certificate of Incorporation.

On March 8, 2021, purported stockholder Erin Yuson brought a purported stockholder derivative action in the United States District Court for the District of New Jersey.

The action is captioned Erwin Yuson, derivatively on behalf of electroCore, Inc., vs.

Amato, et al., Case 3:21-cv-04481.

The defendants include present and past directors and officers of the Company.

The plaintiff purports to pursue derivative claims on behalf of the Company in connection with a 2019 proxy statement and actions occurring from the IPO through September 25, 2019.

The complaint alleges that demand on the board of directors is excused.

The complaint purports to allege claims against the defendants for violating Section 14(a) of the Exchange Act and breaching fiduciary duties.

The complaint seeks unspecified compensatory damages, interest, costs and attorneys’ fees;

declaratory relief;

and an order requiring changes to corporate governance and internal procedures and a vote on proposed amendments to the Bylaws and Certificate of Incorporation.

The Company intends to continue to vigorously defend itself in these matters.

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Settlement Agreement

In January 2019, the Company settled a dispute with one of its former advisors, Madison Global Partners, who had filed a complaint against us in the Supreme Court of the State of New York, County of New York (Index No.

652329/2018) as previously reported.

As part of that settlement, the Company paid Madison Global $325,000 and issued to Madison Global and its representatives warrants to purchase in the aggregate 62,181 shares of Company common stock at prices ranging from $5.68 per share to $12.60 per share.

Substantially all such amounts were accrued in prior accounting periods.

In January 2019, the Company settled a dispute with one of its former advisors, Madison Global Partners ("Madison Global"), which had filed a complaint against the Company in the Supreme Court of the State of New York, County of New York (Index No.

652329/2018).

As part of that settlement, the Company paid Madison Global $ 325,000 and issued to Madison Global and its representatives warrants to purchase in the aggregate 62,181 shares of its common stock at prices ranging from $ 5.68 per share to $ 12.60 per share.

In January 2019, 5,192 warrants with an exercise price of $ 5.68 were issued and the expense was recognized.

All other amounts were accrued in prior accounting periods.

The warrants issued are shown in the following table:

Exercise Price

Expiration Date

Expiration Dates

April 1, 2021

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August 31, 2022

Claim from Lifehealthcare Pty Ltd.

The Company was party to a joint venture arrangement (“JV Arrangement”) in Australia with Lifehealthcare Pty Ltd (“LHP”).

In 2017, the parties agreed to terminate the JV Arrangement.

In March 2019, the Company received a letter from LHP alleging certain breaches by the Company under the JV Arrangement, primarily arising out of the Company’s alleged failure to notify LHP of the Company’s IPO.

The Company strongly disputes these allegations and notified LHP in writing in April 2019 of its position on this matter and its intent to vigorously defend itself against these claims.

The Company has received no further communications from LHP since that time.

Although no assurance can be given that LHP will not pursue this matter further, the financial impact, if any, in connection with any potential resolution of this matter is not expected to be material.

Purchase Commitments

3 unchanged sentences

The Company has included as purchase obligations its commitments under agreements to the extent they are quantifiable and are not cancelable.

The Company has purchase obligations of approximately $1.7 million as of December 31, 2019.

Restructuring Charges and Other Severance Related Charges

The Company has purchase obligations of approximate ly $ 2.3 million as of December 31, 2020 .

Restructuring Charges and Other Related Charges

The following table provides a summary of the Company’s restructuring and other related charges for the years end December 31, 2020 and 2019:

Year ended December 31,

Employee separation costs

Payment in lieu of severance

Other restructuring costs

As of December 31, 2020 , $ 25,000 is payable by the Company in connection with the above described charges.

This amount is included under the caption Accrued expenses and other current liabilities in the Company’s Consolidated Balance Sheet as of December 31, 2020

Restructuring charges

4 unchanged sentences

In June 2019, as part of this process, the Company formally communicated the termination of employment to 32 employees, and as of September 30, 2019, the Company had terminated all of these employees.

As of December 31, 2019, the Company has paid all obligations related to the restructuring charges.

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

Notes to Consolidated Financial Statements — Continued

Other Severance Related Charges

Officer Separation Costs

In January 2020, the Company entered into a separation agreement with a former officer which agreement required an aggregate severance payment of $ 190,000 over a six-month period.

In January 2020, the Company also entered into an agreement with a new employee that requires the unconditional payment of $ 175,000 , in lieu of future severance to be paid in equal monthly installments over a fourteen-month period.

On June 10, 2019, Frank Amato, the Company’s former Chief Executive Officer, offered his resignation.

The Company entered into a Separation Agreement with Mr.

Amato, pursuant to which he remained as Chief Executive Officer and a

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

Notes to Consolidated Financial Statements — Continued

member of the b oard until September 30, 2019 (the “Separation Date”).

Amato, pursuant to which he remained as Chief Executive Officer and a member of the board until September 30, 2019 (the “Separation Date”).

Pursuant to the Separation Agreement, Mr.

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Amato continued to vest through the Separation Date.

Amato provided substantial services to the Company, the Company recognized all costs related to the Separation Agreement over the period from June 10, 2019 to September 30, 2019.

In connection with the Separation Agreement, the Company recorded a cash charge of $800,000 for the year ended December 31, 2019.

Additional Executive Separation Costs

Amato provided substantial se rvices to the Company, the Company recognized all costs related to the Separation Agreement over the period from June 10, 2019 to September 30, 2 019.

In connection with the Separation Agreement, the Company recorded a cash charge of $ 800,000 during the year ended December 31, 2020.

Effective July 31, 2019, the Company entered into a Separation Agreement with a former officer.

Pursuant to the agreement, a severance payment of $ 147,500 was recognized and is to be paid evenly over the subsequent six months.

As of December 31, 2019, the remaining balance of approximately $25,000 has been accrued.

Subsequent Events

Stock Purchase Agreement with Lincoln Park

On March 27, 2020, the Company and Lincoln Park Capital Fund, LLC (“Lincoln Park”) entered into a purchase agreement pursuant to which the Company has the right to sell to Lincoln Park shares of common stock having an aggregate value of up to $25,000,000, subject to certain significant limitations of the amount and timing of any such sales due to terms and conditions set forth in the purchase agreement.

In consideration for entering into the purchase agreement with Lincoln Park, the Company issued an aggregate of 461,676 shares of common stock to Lincoln Park as a commitment fee.

In addition, the Company shall issue to Lincoln Park up to an aggregate of 230,838 additional shares of common stock as a further commitment fee based on a pro-rata percentage of the first $5,000,000 of shares of common stock issued to Lincoln Park under the Purchase Agreement as Purchase Shares (as such term is defined in the purchase agreement with Lincoln Park).

The Company will not receive any cash proceeds from the issuance of any of the foregoing commitment shares.

The net proceeds under the purchase agreement to the Company will depend on the frequency and prices at which shares of common stock are sold to Lincoln Park.

Actual sales of shares of common stock to Lincoln Park under the purchase agreement and the amount of such net proceeds will depend on a variety of factors, including market conditions, the trading price of the common stock and determinations by the Company as to other available and appropriate sources of funding for the Company.

The Company expects to use the proceeds from this agreement for general corporate purposes and working capital.

Changes to Board of Directors

On March 26, 2020, the Company announced the appointments of three new independent members to its Board of Directors effective April 2, 2020.

The newly appointed board members are John Gandolfo, Thomas Patton and Peter Cuneo.

The Company also announced that current Board members Nick Colucci and Jim Tullis will be stepping down from the Board prior to the Company’s annual meeting of stockholders that is expected to be held in June 2020.

Chairman Carrie S.

Cox is stepping down from the Board on April 1, 2020 and will be succeeded in that role by independent Board member Michael G.

Sale of Common Stock and Termination of Purchase Agreement

In January 2021, the Company sold 2,750,000 shares of the Company’s common stock under its purchase agreement with Lincoln Park ("Purchase Agreement"), resulting in aggregate proceeds of approximately $ 6.9 million to the Company.

On March 11 , 2021, the Company terminated its Purchase Agreement with Lincoln Park .

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures