What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2022-03-10 compared with 2021-03-11 · 272 added, 329 removed, 718 unchanged (46% of the section changed)

20 unchanged sentences

Other Information

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.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not applicable.

Directors, Executive Officers and Corporate Governance

7 unchanged sentences

The information required by this Item is incorporated herein by reference to the information that will be contained in our proxy statement related to the 2022 Annual Meeting of Stockholders or an amendment to this Annual Report, which we intend to file with the SEC within 120 days of the end of our fiscal year pursuant to General Instruction G(3) of Form 10-K.

Principal Accounting Fees and Services

Principal Accountant Fees and Services

Exhibits, Financial Statement Schedules

Exhibits and Financial Statement Schedules

(a) The following documents are filed as part of this report:

(1) Financial Statements:

Reports of Independent Registered Public Accounting Firms

Report of Independent Registered Public Accounting Firm PCAOB ID # 688

Consolidated Balance Sheets

11 unchanged sentences

Certificate of Incorporation of electroCore, Inc .

Bylaws of electroCore, Inc .

Amended and Restated Bylaws of electroCore, Inc .

Registration Rights Agreement, dated March 27, 2020, between electroCore, Inc.

3 unchanged sentences

2018 Omnibus Equity Incentive Plan

Form of Employee Incentive Stock Option Agreement for electroCore, Inc.

Form of Employee Restricted Stock Unit Agreement for electroCore, Inc.

2018 Omnibus Equity Incentive Plan

21 unchanged sentences

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

Basking Ridge, NJ Office Lease between 150 Allen Road, LLC and Electrocore, LLC

Form of Common Unit Warrant

7 unchanged sentences

Consent of Marcum LLP

Consent of KPMG LLP

Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 .

16 unchanged sentences

Incorporated by reference to the Company’s Current Report on Form 8-K as filed with Commission on March 27, 2020.

Incorporated by reference to the Company's Current Report on Form 8-K as filed with Commission on December 23, 2021

Indicates management agreement

9 unchanged sentences

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/ Michael G.

/s/ Peter Cuneo

Chairman of the Board

March 10, 2022

/s/ Michael G.

March 10, 2022

/s/ Daniel S.

12 unchanged sentences

March 10, 2022

/s/ Stephen L.

March 11, 2021

/s/ Peter Cuneo

March 11, 2021

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Reports of Independent Registered Public Accounting Firms

Report of Independent Registered Public Accounting Firm PCAOB ID # 688

Consolidated Balance Sheets as of December 31, 2021 and 2020

5 unchanged sentences

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors

To the Shareholders and Board of Directors of

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.

We have audited the accompanying consolidated balance sheets of electroCore, Inc.

and Subsidiaries (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive loss, equity and cash flows for each of the two years in the period ended December 31, 2021, 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, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

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.

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

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.

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

Those standards require that we plan and perform the audits 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.

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 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.

Our audits 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.

Our audits 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 audits provide a reasonable basis for our opinion.

/s/ Marcum LLP

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

New York , NY

March 10, 2022

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

ELECTROCORE, INC.

Opinion on the Consolidated Financial Statements

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.

Going Concern

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

As discussed in Note 3 to the consolidated financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raise substantial doubt about its 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 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 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 consolidated financial statements are free of material misstatement, whether due to error or fraud.

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 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

March 30, 2020

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

AND SUBSIDIARIES

Consolidated Balance Sheets

13 unchanged sentences

Accounts payable

Accrued expenses

Notes payable, current

Current portion of operating lease liability

Accrued expenses and other current liabilities

Note payable, current

Current portion of operating lease liabilities

Total current liabilities

Note payable, noncurrent

Operating lease liabilities, noncurrent

Note payable, noncurrent

Total liabilities

Commitments and contingencies (Note 17)

Stockholders' equity:

Preferred Stock, par value $ 0.001 per share;

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

10,000,000 shares authorized as of December 31, 2021 and December 31, 2020;

0 shares issued and outstanding as of both December 31, 2021 and December 31, 2020

Common Stock, par value $ 0.001 per share;

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

500,000,000 shares authorized as of both December 31, 2021 and 2020;

70,704,123 shares issued and outstanding at December 31, 2021, and 45,559,765 shares issued and outstanding at December 31, 2020

2 unchanged sentences

( 124,208,218

Accumulated other comprehensive loss

( 106,990,148

Accumulated other comprehensive income (loss)

Total stockholders' equity

2 unchanged sentences

See accompanying notes to the consolidated financial statements.

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

ELECTROCORE, INC.

AND SUBSIDIARIES

Consolidated Statements of Operations

8 unchanged sentences

Other (income) expense:

Gain on extinguishment of debt

Gain on termination of joint venture

Interest and other income

Other expense

Total other (income)expense

Total other income

Loss before income taxes

Benefit/(provision) for income taxes

Benefit from income taxes

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

1 unchanged sentence

See accompanying notes to the consolidated financial statements.

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

ELECTROCORE, INC.

AND SUBSIDIARIES

Consolidated Statements of Comprehensive Loss

Years ended December 31,

Other comprehensive (loss)/income:

Other comprehensive income (loss):

Foreign currency translation adjustment

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

Other comprehensive loss

Foreign currency translation adjustment - deconsolidation

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

Other comprehensive income (loss)

Comprehensive loss

See accompanying notes to consolidated financial statements.

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

ELECTROCORE, INC.

AND SUBSIDIARIES

Consolidated Statements of Equity

6 unchanged sentences

income (loss)

Balances as of January 1, 2019

Other comprehensive income

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

3 unchanged sentences

Financing fees

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

Stock based compensation

Issuance of common stock in connection with

employee stock plans, net of forfeitures

Share based compensation

Balances as of December 31, 2020

( 106,990,148

Other comprehensive income

Issuance of stock (see Note 12)

Issuance of stock to satisfy certain obligations (see Note 12)

Issuance of common stock in connection with

employee stock plans, net of forfeitures

Settlement of accrued bonus

Share based compensation

Termination of joint venture

Balances as of December 31, 2021

( 124,208,218

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

1 unchanged sentence

Stockholders' Equity, Lincoln Park Purchase Agreement.

See accompanying notes to the consolidated financial statements.

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

See accompan ying notes to the c onsolidated financial statements.

ELECTROCORE, INC.

AND SUBSIDIARIES

Consolidated Statements of Cash Flows

4 unchanged sentences

Depreciation and amortization

Amortization of marketable securities premium(discount)

Cloud computing arrangement implementation costs

Legal expense settled with stock

Amortization of marketable securities premium

Gain on extinguishment of debt

Gain on termination of joint venture

Gain on lease settlement

Increase in allowance for doubtful accounts

(Gain) loss on legal fee obligation settled with stock

Noncash lease expense

Inventory reserve charge

Write-off of right of use operating lease

Noncash portion of litigation settlement

Write-off of right of use operating lease asset

Changes in operating assets and liabilities:

3 unchanged sentences

Accrued expense and other current liabilities

Right of use operating lease assets

Operating lease liabilities

3 unchanged sentences

Proceeds from maturities of marketable securities

Purchases of property and equipment

Net cash (used in) provided by investing activities

Net cash provided by (used in) investing activities

Cash flows from financing activities:

1 unchanged sentence

Proceeds from note issued

Repayments of notes issued

Proceeds from shares issued in connection with employee stock purchase plan

Net cash provided by financing activities

Effect of changes in exchange rates on cash and cash equivalents

Net (decrease) increase in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents – beginning of year

5 unchanged sentences

Supplemental schedule of noncash activity:

Accounts payable paid through issuance of common stock

Settlement of certain obligations through issuance of common stock

2020 bonus paid in stock

See accompanying notes to consolidated financial statements.

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

Notes to Consolidated Financial Statements

ELECTROCORE, INC.

(“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:

ANd SUBSIDIARIES

Notes to Consolidated Financial Statements

electroCore is commercial stage medical device company with a proprietary non-invasive vagus nerve stimulation, or nVNS, therapy, called gammaCore.

nVNS is a platform bioelectronic medical therapy that modulates neurotransmitters and immune function through its effects on both the peripheral and central nervous systems.

The Company is initially focused on utilizing gammaCore in the management and treatment of primary headache conditions.

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

electroCore Germany GmbH, and electroCore UK Ltd.

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") 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.

The Company continues to market the non-reloadable disposable version of its gammaCore products in certain markets and to deploy it for use in clinical studies where a rechargeable version is not necessary.

In November 2018, the FDA provided 510(k) clearance for an expanded label for gammaCore nVNS therapy for adjunctive use for the preventive treatment of cluster headache in adult patients.

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.

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.

On November 2, 2021, the Company formally terminated its agreement with electroCore ( Aust ) Pty Limited (“ electroCore Australia”).

Prior to this termination, electroCoreAustralia was subject to electroCore’s control on a basis other than voting interests and was a variable interest entity (“VIE”), for which electroCore was the primary beneficiary.

As of May 2017, the VIE had ceased operations.

(see Note 14)

Summary of Significant Accounting Policies

2 unchanged sentences

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

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

ELECTROCORE, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements — Continued

1 unchanged sentence

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 interest.

The VIE has ceased its operations.

electroCore Australia wa s consolidated with the non-controlled equity presented as non-controlling interest in the Company's consolidated financial statements for the year ended December 31, 2020.

As described in Note 1, the Company terminated its affiliation with electroCore Australia on November 2, 2021 and, as such, this dormant entity was not included in the Company's consolidated financial statements for the year ended December 31, 2021.

All intercompany balances and transactions have been eliminated in consolidation.

3 unchanged sentences

Actual results could differ from those estimates.

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

Significant items subject to such estimates and assumptions include allowances for doubtful accounts, trade credits, rebates, co-payment assistance and sales returns, valuation of inventory , stock compensation, incremental borrowing rate and contingencies.

(d) Revenue Recognition

15 unchanged sentences

A cash refund is allowed under specific circumstances for undamaged and non-defective returned products.

Shipping fees are not billed to the customer and are reflected as part of selling, general, and administrative expenses.

(e) Cash and Cash Equivalents

9 unchanged sentences

Interest and dividends on available-for-sale securities are included in Interest and other income.

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

ELECTROCORE, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements — Continued

1 unchanged sentence

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

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.

As of December 31, 2021, the Company's cash equivalents and marketable securities were largely comprised of money market funds.

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.

As of December 31, 2021 , approximately 99.2 % of the Company’s cash, cas h equivalents and marketable securities was denominated in U.S.

Dollars, the balance is subject to foreign exchange risk.

11 unchanged sentences

Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.

The Company evaluates inventory with respect to its operating cycle and classifies inventory as current or long-term on its balance sheet.

T he Company evaluates inventory with respect to its operating cycle and classifies inventory as current or long-term on its balance sheet.

Based upon estimated production needs and current inventory levels, the Company determined the amount of inventory necessary for the next twelve months.

9 unchanged sentences

Leasehold improvements

Lesser of estimated useful life or term of lease

Lesser of estimated useful life or remaining term of lease

Furniture and fixtures

Computer equipment

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

ELECTROCORE, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements — Continued

8 unchanged sentences

Rent expense for the operating lease is recognized on a straight-line basis over the lease term.

The new lease accounting guidance permits companies to utilize certain practical expedients in their implementation of the new standard.

The Company elected this package of practical expedients and was therefore not required to reassess the following upon adoption:

(i) whether an expired or existing contract met the definition of a lease;

(ii) the lease classification at January 1, 2019 for existing leases;

and (iii) whether leasing costs previously capitalized as initial direct costs would continue to be amortized.

This allowed the Company to continue to account for its existing office space leases as operating leases.

Upon adoption, the Company did not have an adjustment to the opening balance of retained earnings due to the election of these practical expedients .

(l) Cloud Computing Arrangement

14 unchanged sentences

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.

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

ELECTROCORE, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements — Continued

(o) Income Taxes

The Company uses the asset and liability method of accounting for income taxes.

Under this method, deferred taxes are recognized based on the differences between financial statement and income tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.

The Company follows the asset and liability method of accounting for income taxes under ASC 740, "Income Taxes." Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date.

Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

The Company provides a full valuation allowance on substantially all deferred tax assets.

The provision for income taxes represents the current state tax payable for the period.

The federal tax provision is immaterial given the Company reports losses in all its taxable jurisdictions and is recording a full valuation allowance on the net deferred tax asset.

The Company recognizes the effect of an income tax position only if, based on its merits, the position is more likely than not to be sustained on audit by the taxing authorities.

Interest and penalties related to uncertain tax positions are recorded as income tax expense.

ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax provisions taken or expected to be taken in a tax return.

For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities.

The Company is currently not aware of any issues under review that could result in significant payments, accruals or deviation from its position during the next twelve months.

(p) Research and Development

11 unchanged sentences

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

(s) Recently Adopted Accounting Standards

(s) Revision of Statement of Cash Flows Activity

In preparation of its financial statements for the quarter ended March 31, 2021, the Company realized that proceeds from its July 1, 2020 Commercial Insurance Premium Finance and Security Agreement should have been treated as a noncash activity instead of grossed up on the accompanying consolidated statement of cash flows.

Even though the amount was not considered material, the financial statements have been revised.

As a result, net cash used in operating and provided by financing activities for the year ended December 31, 2020, decreased by approximately $ 52,000 .

(t) Prior year presentation

Prior year presentation has been conformed to current year presentation.

(u) Recently Adopted Accounting Standards

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

6 unchanged sentences

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

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

ELECTROCORE, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements — Continued

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, 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.

The Company has experienced significant net losses and cash used in operations, and it expects to continue to incur net losses and cash used in operations for the near future as it works to increase market acceptance of its gammaCore.

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

The Company incurred net losses of $ 17.2 million and $ 23.5 million for the years ended December 31, 2021 and 2020, respectively.

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

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.

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 beyond one year of the date the accompanying financial statements are issued.

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.

Cash used in operating activities was $ 13.6 million and $ 20.1 million for the years ended December 31, 2021 and 2020, respectively.

The Company’s expected cash requirements for the next 12 months and beyond are largely based on the commercial success of its products.

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 ongoing COVID-19 pandemic.

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

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.

The Company has historically funded its operations from the sale of its common stock.

During the year ended December 31, 2021, the Company received net proceeds of approximately $ 25.7 million from such sales and as of December 31, 2021, the Company’s cash, cash equivalents and marketable securities totaled $ 34.7 million.

The Company believes that the substantial doubt of its ability to continue as a going concern is alleviated based on proceeds received from its common stock offerings.

The Company believes its cash and marketable securities will enable it to fund its operating expenses and capital expenditure requirements, as currently planned, for at least the next 12 months from the date the accompanying financial statements are issued.

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:

The Company earns a significant amount of its revenue (i) in the United States from the Department of Veterans Affairs and Department of Defense ("VA/DoD") 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.

Each of these two channels accounted for 10 % or more of the Company's net sales in the years ended December 31, 2021 and 2020.

The following table reflects the respective concentration as a percentage of the Company's total net sales:

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.

The following table reflects the Company's net sales concentration within the VA/DoD :

Years ended December 31,

Number of VA/DoD facilities

VA/DoD net sales concentration

Number of VA/DoD facilities accounting for more than 10 % of VA/DoD net sales

ELECTROCORE, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements — Continued

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

Foreign Currency Exchange Risks

Foreign Currenc y Exchang e 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.

1 unchanged sentence

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.

The Company continues to monitor the impact of the coronavirus pandemic on all aspects of its business and geographies, including how it will impact business partners, customers and the global supply chain.

While the Company experienced disruptions during the years ended December 31, 2021 and 2020 from the coronavirus pandemic, it is unable to predict the full impact that the coronavirus 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.

The coronavirus pandemic 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.

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For the years ended December 31, 2021 and 2020, 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.

In February 2019, this program was modified to provide therapy to patients for up to 12 months while insurance coverage is being pursued.

In December 2019, the Company terminated this program.

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.

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

Rebate accruals are recognized in the same period the related revenue is recognized.

Gross to net accruals based on estimated rebates were determined to be de minimis.

Contract Balances

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

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

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AND SUBSIDIARIES

Notes to Consolidated Financial Statements — Continued

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Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

ELECTROCORE, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements — Continued

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

Fair Value Hierarchy

December 31, 2020

Cash and cash equivalents

Marketable Securities:

Treasury Bonds

December 31, 2019

Cash and cash equivalents

Marketable Securities:

Treasury Bonds

As of December 31, 2020, the Company's Marketable securities (U.S.

treasury bonds) in the amount of $ 18,386,160 were carried at fair value in accordance with Level 1 as described above.

The Company had no financial assets or liabilities as of December 31, 2021 that required valuation in accordance with the Levels described above.

The Company recognizes transfers between levels of the fair value hierarchy as of the end of the reporting period.

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As of December 31, 2021 and 2020, noncurrent inventory was comprised of approximately $ 0.9 million and $ 0.7 million of raw materials, respectively, and $ 3.0 million and $ 4.2 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 .

The Company recognized $ 3.9 million of right of use assets for leases for office, manufacturing and warehouse space and office equipment.

The Company also recognized $ 4.2 million for lease liabilities.

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 was 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

Inventory classified under the category Work in process consists of prefabricated assembled product.

ELECTROCORE, INC.

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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.

The Company accounts for leases in accordance with FASB ASU 2016-02, Leases (Topic 842), and its operating leases consist of office space, manufacturing/warehouse space, and office equipment.

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 recognized the option to renew its manufacturing/warehouse space (" Rockaway space") as part of the right of use asset and the lease liability as the Company deemed that the renewal option was reasonably certain to be exercised.

In connection with its cost reduction strategies, the Compan y vacated its New Jersey corporate headquarters ("Basking Ridge office space") and r elocated its corporate headquarters to the Rockaway space effective December 31, 2020.

Although the Basking Ridge lease agreement provided for sublease, the Company did not elect this option in light of the 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 .

On December 31, 2020, the Company wrote off the net book value of the operating lease right of use asset associated with the Basking Ridge office space 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 %.

This is the incremental borrowing rate that represents the rate of interest that the Company would expect to pay to borrow an amount equal to the lease payments under similar terms.

As the Company does not borrow on a collateralized basis, the non-collateralized borrowing rate is used as an input in deriving the incremental borrowing rate.

Following the comprehensive redeployment and cost reduction plan announcement and as required in the lease remeasurement process under Topic 842, the incremental borrowing rate was reassessed and increased to 13.75 % at the time of remeasurement.

The remeasurement updated the net present value of all operating leases from inception using the new discount rate at June 1, 2019.

On September 27, 2021, the Company entered into the Termination and Settlement Agreement ("Agreement") with the lessor of the Basking Ridge office space.

The Agreement provided for the immediate termination of the Basking Ridge lease in its entirety.

In consideration for the lease termination, the Company agreed to pay the lessor a total of $ 500,000 in cash and issue to the lessor 200,000 shares of its common stock.

As of December 31, 2021, such payments were satisfied by the Company.

The Company recorded a gain of $ 57,371 in connection with the termination of the Agreement which is included in the accompanying Consolidated Statements of Operations for the year ended December 31, 2021 under the caption Operating expenses - Selling, general and administrative.

For the years ended December 31, 2021 and 2020 , the Company recognized lease expense of $ 146,236 and $ 573,046 , respectively.

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.

Supplemental Balanc e Sheet Information for Operating Leases:

Supplemental Balance Sheet Information for Operating Leases:

Operating leases:

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Amounts representing interest

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

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Notes to Consolidated Financial Statements — Continued

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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, 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:

Amortization costs for the years ended December 31, 2021 and 2020 were $ 282,074 and $ 282,074 , respectively.

As of December 31, 2021, the remaining term of the lease is approximately two years .

The CCA is included in the accompanying Consolidated Balance Sheet for the years ended December 31, 2021 and 2020 under the caption Other assets, net, and is summarized below :

Cloud Computing Arrangement

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Cloud Computing Arrangement, net

Accrued Expenses

Accrued Expenses and Other Current Liabilities

Accrued expenses as of December 31, 2021 and 2020 consisted of the following:

Accrued professional fees

Accrued bonuses

Accrued bonuses and incentive compensation

Accrued insurance expense

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.

Miscellaneous taxes payable

Finance and Security Agreements

On July 2, 2021, the Company entered into a Commercial Insurance Premium Finance and Security Agreement (“the 2021 Agreement”).

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 2021 Agreement provides for a single borrowing by the Company of $ 1.2 million, with a ten -month term and an annual interest rate of 1.55 %.

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

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As of December 31, 2021 , the remaining balance un der the Agreement was $ 499,195 and during the year ended December 31, 2021, the Company recognized $ 5,292 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 %.

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

The 2020 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.

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

All borrowings related to the 2020 Agreement were fully repaid as of December 31, 2021.

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Notes to Consolidated Financial Statements — Continued

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 used the entire Loan amount for Qualifying Expenses under the PPP.

On May 18, 2021, the Company received notification from the Lender of SBA's approval of the Company's application for loan forgiveness.

Accordingly, the Company was not required to repay the loan.

The Company has recorded the loan forgiveness as a gain in the accompanying Consolidated Statements of Operations for the year ended December 31, 2021 under the caption Gain on extinguishment of debt.

Stockholders’ Equity

Public Offering of Common Stock

On July 2, 2021, the Company completed a public offering of 20,700,000 shares of its common stock at a purchase price of $ 1.00 per share.

The net proceeds of the offering to the Company were approximately $ 18.8 million, after deducting the underwriting discounts, commissions, and other offering expenses.

Other 2021 Securities Purchase Agreements

On August 30, 2021, the Company entered into a Securities Purchase Agreement with its legal counsel pursuant to which the Company issued 952,380 shares of common stock, at a purchase price of $ 1.05 per share.

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

Settlement of Lease Liability

During 2021, the Company agreed to issue 200,000 shares of its common stock in connection with the lease termination related to its former headquarters located in Basking Ridge, NJ.

Settlement of Accrued Bonus

In January 2021, the Company issued 165,413 shares of its common stock as payment for certain executive incentive bonuses accrued in 2020.

Lincoln Park Purchase Agreement

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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) .

During 2020 , the Company issued 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.

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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.

In January 2021 , the Company sold an additional 2,750,000 shares of its common stock under the Purchase Agreement, resulting in aggregate proceeds of approximately $ 6.9 million to the Company.

On March 11, 2021, the Company terminated the Purchase Agreement and, accordingly, the Company will not sell any further shares of its common stock to Lincoln Park under the Purchase Agreement.

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Notes to Consolidated Financial Statements — Continued

Other 2020 Securities Purchase Agreements

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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

Stock Purchase Warrants

The following table presents a summary of stock purchase warrants outstanding as of December 31, 2021:

Number of Warrants

Weighted Average Exercise Price

Weighted Average Remaining Contractual Term (Years)

Aggregate Intrinsic Value

Outstanding, January 1, 2021

Outstanding, December 31, 2021

Exercisable, December 31, 2021

Net Loss Per Share

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Stock purchase warrants

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

# of Warrants

Exercise Price

Expiration Date

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Notes to Consolidated Financial Statements — Continued

Variable Interest Entity

As discussed in Note 1 , electroCore is the primary beneficiary of electroCore (Aust) Pty Limited.

As discussed in Note 1 , electroCore was the primary beneficiary of electroCore (Aust) Pty Limited (" electroCore Australia") .

electroCore has contributed certain intellectual property rights, all rights to distribute, market and sell specified products in Australia and New Zealand, and other rights outlined in the shareholders’ deed of electroCore (Aust) Pty Limited in return for 50 % of the shares of such entity.

In addition, electroCore can also appoint two of the four directors and can exercise significant influence.

This along with the fact that electroCore is electroCore (Aust) Pty Limited’s only supplier causes electroCore, for accounting purposes, to be the primary beneficiary of electroCore (Aust) Pty Limited.

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

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.

In addition, electroCore had the right to appoint two of the four directors and exercise significant influence.

This along with the fact that electroCore was electroCore Australia ’s only supplier caused electroCore, for accounting purposes, to be the primary beneficiary of electroCoreAustralia.

The activities related to electroCoreAustralia were not material to the Company's consolidated financial statements.

Effective May 2017, the VIE had ceased operations.

On November 2, 2021, the Company terminated its interest in electroCoreAustralia and recorded the related a gain of $ 549,254 in the accompanying Consolidated Statement of Operations for the year ended December 31, 2021 under the caption Gain on termination of joint venture.

The benefit for income taxes for the years ended December 31, 2021 and 2020 consisted of 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:

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Total deferred

Total income tax (benefit) expense

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

Total income tax benefit

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Notes to Consolidated Financial Statements — Continued

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Accrued expenses

Allowance for bad debt

Deferred rent

Charitable contributions

Deferred FICA Tax

Lease liabilities

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Less valuation allowance

( 21,171,967 )

Total deferred tax assets

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Nondeductible expenses

Loss incurred as pass-through

PPP loan forgiveness

Unrealized gain from termination of joint venture

Change in valuation allowance for deferred tax assets

Provision for income taxes

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

Income tax benefit

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Notes to Consolidated Financial Statements — Continued

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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 .

During the year ended December 31, 2021 in accordance with the State of New Jersey's Technology Business Tax Certificate Program, which allowed certain high technology and biotechnology companies to sell unused NOL carry forwards to other New Jersey based corporate taxpayers, the Company sold New Jersey NOL carry forwards, resulting in the recognition of $876,690 of income tax benefit, net of transaction costs.

The Company recognized $1,170,890 of income tax benefit from the sale of New Jersey carry forwards in 2020.

There can be no assurance as to the continuation or magnitude of this program in the future.

As of December 31, 2021, the Company had Federal and NJ research and development credits of $ 282,801 and $ 191,863 respectively.

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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.

The Company has evaluated the impact of the CARES Act, and determined that the provisions of the CARES Act did not have an impact on its financial statements or internal controls over financial reporting.

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Notes to Consolidated Financial Statements — Continued

Stock Based Compensation

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Total expense

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

Notes to Consolidated Financial Statements — Continued

The following table presents a summary of stock option award activity during the year ended December 31, 2021:

3 unchanged sentences

Aggregate Intrinsic Value

Outstanding, December 31, 2019

Outstanding, January 1, 2021

Outstanding, December 31, 2021

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$ 7.53 - $ 15.00

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Notes to Consolidated Financial Statements — Continued

The following table presents a summary of restricted stock award ("RSA" or "RSAs") activity during the year ended December 31, 2021:

1 unchanged sentence

Weighted Average Grant Date Fair Value

Nonvested, December 31, 2019

Nonvested, January 1, 2021

Nonvested, December 31, 2021

3 unchanged sentences

Weighted Average Grant Date Fair Value

Nonvested, December 31, 2019

Nonvested, January 1, 2021

Nonvested, December 31, 2021

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

Notes to Consolidated Financial Statements — Continued

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

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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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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 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

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Notes to Consolidated Financial Statements — Continued

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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.

The appeal was argued on September 27, 2021.

On October 8, 2021, the Appellate Division issued an order reversing the decision of the Superior Court.

The case was remanded to the Superior Court for oral argument on the motion to dismiss.

On November 11, 2021 the defendants filed a supplemental motion to dismiss based on the certificate of incorporation’s forum selection clause.

On December 10, 2021, the Superior Court heard argument of the original motion to dismiss and the supplemental motion to dismiss based on the federal forum selection clause.

On December 14, 2021, the Superior Court granted both motions in their entirety and dismissed the action without leave to re-plead.

On January 27, 2022, the plaintiffs filed a notice of appeal to the Appellate Division.

A briefing schedule has been set by the Appellate Division for the appeal but an argument date has not 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 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.

Argument of the motion to dismiss occurred on June 18, 2021.

On August 13, 2021, the Court dismissed the amended complaint with leave to re-plead.

On October 4, 2021, the plaintiffs filed a second amended complaint.

On November 17, 2021, the defendants moved to dismiss the new complaint.

Briefing on the motion is now complete.

Argument of the motion has not yet been scheduled.

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Notes to Consolidated Financial Statements — Continued

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

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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.

On March 8, 2021, purported stockholder Ewrin 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.

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The Company expenses associated legal fees in the period they are incurred.

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

Notes to Consolidated Financial Statements — Continued

Settlement Agreement

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 Dates

April 1, 2021

March 30, 2022

June 30, 2022

August 31, 2022

Purchase Commitments

4 unchanged sentences

The Company has purchase obligations of approximate ly $ 1.3 million as of December 31, 2021 .

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Notes to Consolidated Financial Statements — Continued

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:

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

Year ended December 31, 2020

2 unchanged sentences

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

On May 29, 2019, the Company announced significant adjustments to the deployment of personnel and resources across the organization.

The effort was intended to focus the Company on currently available and near-term revenue opportunities and on clinical programs specifically designed to expand the gammaCore product labeling.

To achieve this goal, the Company reduced the size of its organizational structure, including its field sales force and clinical operations.

The costs associated with this initiative primarily represent severance and other costs associated with employee terminations, the majority of which have been settled in cash, and totaled approximately $ 1,050,000 .

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.

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

Notes to Consolidated Financial Statements — Continued

Other Severance Related Charges

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

Pursuant to the Separation Agreement, Mr.

Amato was paid $ 800,000 on October 1, 2019.

In addition, all options to purchase Company common stock held by Mr.

Amato continued to vest through the Separation Date and remain exercisable until the one-year anniversary of the Separation Date.

All restricted stock units held by Mr.

Amato continued to vest through the Separation Date.

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.

Subsequent Events

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 .

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

As of December 31, 2021 , the Company has no payable in connection with the above described charges.

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