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Item 1. Business

2023-03-08 compared with 2022-03-10 · 197 added, 354 removed, 103 unchanged (84% of the section changed)

Business Overview

We are a 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.

We are initially focused on utilizing gammaCore in the management and treatment of primary headache conditions, but we believe our nVNS therapy may be used in the future to effectively treat other medical conditions with studies ongoing in stroke, post-traumatic stress disorder, and opioid withdrawal among others.

gammaCore is the first prescription-only nVNS therapy cleared by the Food and Drug Administration ("FDA").

Historically, vagus nerve stimulation, or VNS, required an invasive surgical procedure to implant a costly medical device which presents an infection risk.

These limitations have generally limited VNS from being used by anyone other than the most severe patients.

Our lead product, gammaCore Sapphire, is a simple-to-use handheld device intended for regular or intermittent use over many years.

Our gammaCore Sapphire delivers non-invasive VNS through a proprietary high-frequency burst waveform that safely and comfortably passes through the skin and stimulates therapeutically relevant fibers in the vagus nerve.

Multiple published studies suggest that VNS works through a number of mechanistic pathways including the modulation of neurotransmitters and has a measurable effect similar to several classes of commonly prescribed medications.

Since our inception, we have sought regulatory approvals to market our novel product in the United States and abroad.

As we have obtained initial and additional regulatory approvals, we have implemented commercial strategies to target an expanding base of potential patients.

Regulatory Clearances

gammaCore, is cleared by the FDA for use in the following indications:

the acute treatment of pain associated with each of migraine headache and episodic cluster headache in adults, or eCH;

the preventive treatment of migraine headache and adjunctive use for the preventive treatment of cluster headache in adults, or CH;

the acute and preventive treatment of migraine in adolescents between 12 and 17 years of age;

the treatment of Paroxysmal Hemicrania, or PH, and Hemicrania Continua, or HC, in adults.

We are also considering several additional indications for our nVNS technology which are being studied in a number of investigator-initiated trials, or IITs.

These indications include post-traumatic headache, stroke, mild traumatic brain injury, post-traumatic stress disorder, sub-arachnoid hemorrhage, opioid use disorders, symptoms of Parkinson's disease, post-operative ileus and gastroparesis.

The FDA clearances of our gammaCore therapy to treat headache were faci litated by the FDA’s creation of a new regulatory category:

External Vagus Nerve Stimulator for Headache (21 CFR 882-5892).

Based on this category’s description, we anticipate that some additional headache label expansions may be possible through the pathway under Section 510(k) of the Federal Drug and Cosmetic Act.

In January 2022, the FDA granted gammaCore Sapphire ‘Breakthrough Device designation for the treatment of post-traumatic stress disorder or PTSD’.

PTSD is a highly prevalent and disabling disorder with limited approved treatment options.

UK and European Regulatory Clearances

We received a CE Certificate of Conformity for gammaCore for the treatment of primary headache from the British Standards Institution, a European Union notified body.

This CE Certificate of Conformity allowed us to affix the CE Mark on gammaCore and to commercialize it in the European Economic Area and other countries that recognize the CE Mark.

In addition, we received CE Certificates of Conformity on gammaCore covering four other indications for use, including reactive airway disease and gastric motility disorders.

In 2019, the National Institute for Health and Care Excellence, or NICE, published a Medical Technology Guidance document recommending the use of gammaCore for CH within National Health Service, or NHS, of England and Wales.

I n January 2021, NHS Scotland adopted the NICE recommendation and recommended gammaCore for use in treatment of CH in Scotland.

NHS England awarded gammaCore a place on the Innovation Technology Payment, or ITP, program for treatment of patients with refractory (severe) cluster headache, a reimbursement pathway that opened in April 2019.

In October 2020, we announced that the ITP was extended through March 2021.

Effective April 1, 2021, gammaCore Sapphire was included in a new long-term reimbursement policy, the MedTech Funding Mandate Policy 2021/22, or MTFM.

Background of VNS

The vagus nerve is the largest and most extensive cranial nerve, connecting the brainstem to nearly every organ in the chest and abdomen.

Modulating the firing rate of the fibers within the vagus nerve can trigger the release of neurotransmitters, both in the central and peripheral nervous systems, affecting how the brain and peripheral organs function.

In the central nervous system, VNS activates areas of the brainstem that release important biochemicals including norepinephrine, cyclo-oxygenase, calcitonin gene-related peptide, acetylcholine, glutamate, serotonin, and gamma-Aminobutyric acid.

The release of these substances, which have been the targets of numerous pharmaceutical agents, have been identified as therapeutic for the treatment of multiple conditions, including epilepsy, depression and headache.

Over the past three decades, the body of scientific evidence in support of VNS in multiple medical conditions has grown.

Prior to gammaCore the cost and requirement for invasive surgery meant that VNS was only appropriate for the most severe patients.

With the FDA clearances and additional global regulatory approvals of gammaCore , this safe and effective therapy can now be noninvasively self-administered, at a fraction of the cost of a surgical implant, dramatically expanding its accessibility for the potential treatment of multiple medical conditions.

Our Therapy Delivery Platform

Our gammaCore therapy is prescription-only, with patients self-administering discrete doses using a handheld unit.

Our flagship model, gammaCore Sapphire is a portable, reusable, rechargeable and reloadable option for patients, with the prescription being written by a health care provider and dispensed from a specialty pharmacy, through the patient’s healthcare system, or fulfilled from our facility in Rockaway, NJ.

After the initial prescription is filled, access to additional therapy can be refilled for certain of our gammaCore Sapphire products periodically through the input of a prescription-only authorization code.

This code is currently delivered in the form of a radio-frequency identification, or RFID, card (similar to a credit card or hotel keycard), dispensed by mail from a specialty pharmacy distribution partner, or fulfilled by the Company directly to certain patients.

The Company also provides a validated cleaning and disinfection protocol allowing Sapphire devices to be used on multiple patients in a healthcare center or to recover and redeploy Sapphire devices in the field.

Competitive Strengths

We believe the competitive strengths of our company and nVNS therapy include:

Innovative bioelectronic medicine approach.

Our gammaCore therapy uses a proprietary electrical signal to safely deliver non-invasive VNS, which can cause targeted changes in neurotransmitter expression in a manner that has been shown to have minimal side effects through clinical studies and commercial experience encompassing tens of thousands of patients.

Our non-invasive therapy unlocks the long-held potential of VNS.

VNS therapy can, for the first time, be delivered safely and comfortably through the skin using gammaCore.

This eliminates the need for costly, invasive surgery that requires the implantation of an expensive medical device.

VNS therapy is no longer reserved for the most severe patients.

We have generated significant scientific data supporting the safety and efficacy of gammaCore which has led to FDA clearances and additional global regulatory approvals for use in multiple indications.

We believe our scientific data supporting the safety and efficacy of our therapy provides broader confidence in gammaCore.

Commercial arrangements in the United States.

We expect that a majority of our 2022 sales of gammaCore will be made pursuant to our qualifying contract under the Federal Supply Schedule, or FSS, which was secured by us in December 2018, as well as open market sales to individual facilities within government channels.

The FSS makes gammaCore available to patients managed within FSS eligible entities such as the Department of Veteran's Affairs or VA, Department of Defense or DoD, Bureau of Prisons, Indian Health Services and Public Health Services.

Commercial arrangements outside the United States.

We believe our success in gaining regulatory approval and reimbursement in the UK is significant both in its potential for commercial penetration, but also its precedential value in potentially getting reimbursement in other geographic areas.

Effective April 1, 2021, gammaCore Sapphire was included in a new long-term reimbursement policy in the UK.

The UK MedTech Funding Mandate, or MTFM policy, supports the use of NICE-approved, clinically effective and cost-saving medical devices, diagnostics and digital technologies that will improve patient outcomes.

In December 2019, NICE published a Medical Technology Guidance document recommending the use of gammaCore for CH within the NHS of England and Wales.

Consequently, in January 2021, gammaCore was recommended for use in treatment of CH in NHS Scotland.

Recently, we have also announced agreements with distributors to make gammaCore Sapphire available in several countries beyond the U.S.

and United Kingdom.

Broad intellectual property protection.

We hold more than 195 patents and patent applications, including 112 issued U.S.

patents, 42 U.S.

patent applications, and 45 international patents and applications that, we believe, provide broad protection of key technologies, methods and applications of our products.

Highly experienced management team .

Our management team includes a diverse group of executives with significant experience in senior positions in the medical device industry.

Our team’s experience in clinical development, regulatory affairs, reimbursement sales and marketing, and capital markets allow us to pursue our strategy and growth plans.

Our goal is to be a leader in non-invasive neuromodulation medicine by using our proprietary nVNS platform therapy to deliver better patient outcomes.

We have generally focused most of our sales efforts in two channels, the U.S.

Department of Veterans Affairs and U.S.

Department of Defense, and the United Kingdom.

However, we believe there may be significant opportunities beyond these two markets.

Therefore, in 2022, we plan to invest in expanded commercial adoption of gammaCore with online stores and cash pay, physician dispense, telehealth, and direct-to-consumer approaches.

Key aspects of this strategy include;

Exploiting our qualifying contract on the FSS, which we secured in December 2018, and open market sales to individual VA facilities.

Veteran's Administration Headache Center of Excellence Annual Report, approximately 410,000 patients saw a VA healthcare provider for headache in 2020 and VA's National Director of the Headache Center of Excellence program has stated that the VA has approximately 29,000 cluster headache sufferers.

The VA and DoD have become our primary source of U.S.

revenue and, accordingly, we have redeployed most of our sales function to generating sales from this channel.

Expanding our direct-to-consumer promotion, including the opening of telemedicine portal and online stores in the United States and United Kingdom to reach patients and their health care advisors for the prevention and treatment of primary headache disorders.

Expanding call points from the traditional neurology headache specialists to include the wide range of medical providers who manage patients' headache conditions.

Those specialties include prescribers in primary care, women's health, pain management, functional and integrative medicine, as well as chiropractors, and PharmDs (Doctors of Pharmacy).

In the United Kingdom, continued expansion under the MTFM program for cluster headache and cash pay product offerings via the online store.

Working towards leveraging the unique HCPCS code K1020 "non-invasive vagus nerve stimulator" that was established as part of CMS' second biannual 2020 Coding Cycle for non-drug and non-biological items and services, and which we believe could streamline reimbursement for both government and commercial payers.

Utilizing selected distribution partners to commercialize our gammaCore therapy in territories outside of the United States and United Kingdom.

Developing future iterations of our therapy delivery platform, including the use of our intellectual property around the delivery of smartphone-integrated and smartphone-connected non-invasive therapies.

The clearance by FDA on April 14, 2017 of our de novo submission resulted in a new Class II regulatory category:

External Vagus Nerve Stimulator for Headache (21 CFR 882-5892).

The establishment of this product category has permitted us to apply for label expansions through the 510(k) regulatory pathway utilizing our own product as the predicate.

In January 2018, gammaCore was cleared by the FDA, through a 510(k) review, for commercial sale in the United States as an acute treatment for pain associated with migraine in adults.

In March 2020, gammaCore was cleared by the FDA, through a 510(k) review for commercial sale in the United States as a preventive treatment of migraine headache in adults.

In February 2021, gammaCore was cleared by the FDA, through a 510(k) review, for the acute and preventive treatment of migraine in adolescents between 12 and 17 years of age.

Migraine Market Factors and Competition

Migraine Prevalence and Market Size.

We are a commercial stage bioelectronic medicine and wellness company dedicated to improving health through our non-invasive vagus nerve stimulation (“nVNS”) technology platform.

Our focus is the commercialization of medical devices for the management and treatment of certain medical conditions and consumer product offerings utilizing nVNS to promote general wellbeing and human performance in the United States and select overseas markets.

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

Our nVNS treatment is delivered through a proprietary high-frequency burst waveform that safely and comfortably passes through the skin and stimulates therapeutically relevant fibers in the vagus nerve.

Various scientific publications suggest that nVNS works through several mechanistic pathways including the modulation of neurotransmitters.

Historically, vagus nerve stimulation or VNS, required an invasive surgical procedure to implant a costly medical device.

This limitation has generally limited VNS from being used by anyone other than the most severe patients.

Our medical devices and wellness products are self-administered and intended for regular or intermittent use over many years.

Our business is supported by our in-house capabilities spanning product development, regulatory affairs and compliance, sales and marketing, product testing, assembly, and fulfillment, and customer support.

We derive revenues from the sale of medical devices and wellness products in the United States and select overseas markets.

We have two principal product categories:

Handheld, personal use medical devices for the management and treatment of certain medical conditions;

• Handheld, personal use consumer product offerings utilizing nVNS technology to promote general wellbeing and human performance.

We believe our nVNS treatment may be used in the future to effectively treat additional medical conditions or improve human performance.

Primary Marketed Products and Business Strategy

Our goal is to be a leader in non-invasive neuromodulation by using our proprietary nVNS platform technology to deliver better health.

To achieve this, we offer multiple propositions:

gammaCore for the treatment of certain medical conditions such as primary headache;

• Truvaga for the support of general health and wellbeing;

• TAC-STIM for human performance as defined by the United States Air Force Research Laboratory.

Our flagship model, gammaCore Sapphire, is a prescription medical device currently FDA cleared for a variety of primary headache conditions.

gammaCore is available by prescription only and Sapphire is a portable, reusable, rechargeable and reloadable personal use option for patients to use at home or on the go.

Prescriptions are written by a health care provider and dispensed from a specialty pharmacy, through the patient’s healthcare system, or fulfilled directly to certain patients in the United States directly from our facility in Rockaway, NJ.

After the initial prescription is filled, access to additional therapy can be refilled for certain of our gammaCore products periodically through the input of a prescription-only authorization.

Truvaga is a personal use consumer electronics wellness product that does not require a prescription and is available direct-to-consumer from electroCore at www.truvaga.com.

Truvaga is not intended for medical use.

TAC-STIM is a form of nVNS for human performance and has been developed in collaboration with the United States Department of Defense Biotech Optimized for Operational Solutions and Tactics, or BOOST program.

We are exploring strategies to make this product offering available to other branches of the active-duty military and certain human performance professionals in the United States and abroad.

TAC-STIM is available as a Commercial Off the Shelf (COtS) solution to professional organizations and is the subject of ongoing research within the United States Air Force Special Operations Command and at the United States Air Force Research Laboratory.

Truvaga and TAC-STIM are intended for general wellness in compliance with the FDA guidance document entitled “General Wellness:

Policy for Low-Risk Devices;

Guidance for Industry and FDA Staff, issued on September 27 2019”.

They are not intended to treat medical conditions.

We have generally focused most of our historical sales efforts in two channels, the United States Department of Veterans Affairs and United States Department of Defense, or VA/DOD, and the United Kingdom utilizing our FDA cleared and CE marked product, gammaCore .

The United States Department of Veteran Affairs comprised 60.8% of our revenue during the year ended December 31, 2022.

We expect that a majority of our 2023 sales will be made pursuant to our qualifying contract under the Federal Supply Schedule or FSS, which was secured by us in December 2018, as well as open market sales to individual facilities within the government channels.

The FSS is scheduled to expire on January 15, 2024.

We intend to request an extension of the FSS from the United States Department of Veterans Affairs, but there is no assurance the FSS agreement will be renewed, if at all, or at terms favorable to us, which could have an adverse impact on our financial results.

Our sales function in this channel is comprised of employees and independent contractors.

Sales under the MTFM program for cluster headache in the UK comprised 15.1% of our revenue during the year ended December 31, 2022.

In 2023, we plan on continued expansion under this program, as well as continue to utilize distribution partners to commercialize our nVNS technology in territories outside the United States and United Kingdom.

In 2023, we expect the National Institute for Health and Care Excellence, or NICE, to review the guidance document and any changes in recommendation or pricing may adversely impact our ability to work with the National Health Service, or NHS, England on the MTFM program and could have an adverse impact on our financial results.

We believe there may be significant opportunities beyond these areas.

In 2023, therefore, we plan to continue our investment in expanded commercial adoption of gammaCore with cash pay, physician dispense, and direct-to-consumer approaches, and continue our early efforts to begin building wellness and human performance propositions through Truvaga and TAC-STIM.

Primary Headache Market and Competition for our gammaCore Products

In the United States, 39 million patients are affected by migraine, with more than 28 million being adult women.

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In the United States and EU, research has found that the age of first diagnosis of migraine peaks in the early-to-mid teens and the disease continues to persist throughout adulthood for many of these sufferers, demonstrating that it is often a disorder of long duration.

The marketing landscape for the treatment and prevention of migraine is highly competitive.

Current Treatments for Prevention of Migraine and Their Limitations.

Most migraine patients manage their conditions with over-the-counter therapies.

An estimated five million migraine patients in the United States require the care of a headache specialist.

Among these specialists, many of whom also treat CH, are the approximately 1,100 physicians who are board-certified in the treatment of headache, many of whom practice in over 120 tertiary care centers in the United States.

The marketing landscape for the treatment and prevention of migraine is highly competitive with most migraine patients managing their conditions with over-the-counter therapies.

The triptan drug class is the current first line therapy for the acute treatment of migraine.

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Pharmacist, a leading pharmacy publication, more than 60% of patients have reported dissatisfaction with, or have contraindications to, the current standard of care, such as triptan medications.

Additional treatments for prevention of migraine include blood pressure-lowering medications such as beta blockers and channel blockers, antidepressants, and anti-seizure drugs.

BOTOX marketed by Allergan plc, is specifically approved for the prevention of chronic, but not episodic, migraine.

There are currently several antibodies to calcitonin gene-related peptide receptor, or CGRP, and its receptor, approved by FDA for the prevention of migraine including products sold by Teva Pharmaceuticals Industries Ltd., Eli Lilly and Company, Amgen Inc., which is in a co-marketing partnership with Novartis International AG and H.

Lundbeck A/S.

Preventive CGRP monoclonal antibodies are large molecules, delivered once per month or per quarter as a subcutaneous injection or infusion.

Gepants, on the other hand, are small molecule CGRP receptor antagonists that were initially utilized as migraine abortives but have also been approved to prevent migraine.

Recently, there have been two oral Gepants that have received FDA approval for the prevention of migraine headache including Nurtec ODT (rimegepant), a Gepant sold by Biohaven Pharmaceuticals Inc.

There are a number of neuromodulation devices that have been marketed for the prevention of migraine and which may be marketed for use in treating pain associated with primary headache without a prescription.

In addition, Cefaly received clearance for use to treat migraine in adolescents.

Current Acute Migraine Treatments and Their Limitations .

Triptan medications, or Triptans, are a family of tryptamine-based drugs first sold in the 1990s, which account for approximately 80% of the acute prescriptions written annually for migraine.

Triptans are sold in oral, nasal, and subcutaneous formulations.

Through their binding to specific serotonin receptor subgroups, Triptans cause constriction of blood vessels in the outer covering of the brain, or the meninges.

This vasoconstrictive activity may also affect blood vessels in other areas of the body, including the heart, which accounts for important risks associated with their use, and labeling limitations on the frequency of their use.

The FDA has approved two oral small molecule CGRP receptor antagonists for the acute treatment of migraine with or without aura in adults.

These products are marketed by Allergan plc and Biohaven Pharmaceuticals Inc.

The FDA has also approved Eli Lilly’s lasmiditan for acute treatment of migraine in adults.

There are a number of neuromodulation devices that have been marketed for the treatment of migraine, including Cefaly and, Nerivio (sold by Theranica Bioelectronics), as well as other neuromodulation devices that may be marketed for use in treating pain associated with primary headache.

There are many additional pharmaceutical approaches currently marketed and under development by third parties.

There are several neuromodulation devices that have been marketed for the treatment of migraine, including CEFALY (sold by CEFALY technologies sprl) and Nerivio (sold by Theranica Bioelectronics), as well as other neuromodulation devices that may be marketed for use in treating pain associated with primary headache.

Cefaly has been granted OTC clearance allowing it to be sold without a prescription and the impact of this clearance on the competitive landscape remains to be seen.

Other less commonly prescribed acute migraine treatments include ergotamines and analgesics, including non-steroidal anti-inflammatory drugs, or NSAIDs, acetaminophen and antiemetics.

Dihydroergotamine, or DHE, is a grain fungus derivative that, like triptans, is a potent vasoconstrictor.

DHE has been used for more than 50 years for the treatment of migraine, but modern physicians rarely prescribe it because of its significant side effects.

In 2021, a new DHE nasal spray was approved for the treatment of migraine.

More specifically, ergotamines and triptans are both vasoconstrictors with labels citing the risk of their use in migraine sufferers with risk factors for cardiovascular disease.

Cluster Headache

In April 2017, FDA granted our de novo submission , clearing our gammaCore for commercial sale in the United States for the acute treatment of pain associated with eCH in adults.

In December 2018, we were successful in receiving FDA clearance for gammaCore Sapphire as a prevention for CH, the first product in the United States or Europe to receive regulatory approval for this indication.

The estimated prevalence of CH in the United States ranges from 0.1 % to 0.2 % of the total population, with an estimated 400,000 patients.

CH is a condition in which patients experience extremely painful headache attacks that have been described by patients and physicians as some of the most painful known.

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Among CH patients, 85% to 90% experience eCH, with their cluster periods, or bouts, lasting from two to 12 weeks, followed by a remission period, often cycling into bouts twice per year.

There is only one other FDA-approved commercially available pharmaceutical option for acute CH treatment, and gammaCore is the only FDA-cleared option for the prevention of all forms of CH.

Cluster Headache Market Factors-United States

Prevalence and market size .

The estimated prevalence of CH in the United States ranges from 0.1% to 0.2% of the total population, with an estimated 400,000 patients.

Economic Burden .

According to a February 2020 published study in The American Journal of Managed Care, the overall average medical costs for eCH patients over a three -year period exceeded $ 22,500 , compared with $ 10,140 among non-headache sufferers.

Similarly, the overall average pharmacy costs per eCH patient during this period were $8,200, which was nearly double that of the non-headache sufferers.

Similarly, the overall average pharmacy costs per episodic CH patient during this period were $ 8,200 , which was nearly double that of the non-headache sufferers.

Participants in surveys of sufferers indicate that CH is associated with a large socioeconomic burden.

For example, research found that nearly 20 % of patients with CH reported loss of employment and approximately 8 % are unemployed or receiving disability services due to the disorder.

Other Therapies for the Treatment and Prevention of Cluster Headache .

Injectable sumatriptan (Imitrex) is an FDA-approved commercially available therapy for acute treatment for CH.

The side effect profile and cost of Imitrex, however, usually enables patients to treat only a small fraction of their attacks each month and use is also limited by the requirement for patients to subcutaneously self-inject, which may be particularly difficult to do while experiencing a CH attack.

In the United Kingdom, the estimated prevalence of CH ranges from 0.1% to 0.2% of the total population, with approximately 66,000 affected patients.

Injectable sumatriptan (Imitrex) is an FDA-approved commercially available therapy for the acute treatment for CH.

The side effect profile and cost of Imitrex, however, limits patients to treating only a small fraction of their attacks each month and has to be subcutaneously injected, which may be particularly difficult to do during an active CH attack.

The most frequently used acute treatments for CH attacks are subcutaneous sumatriptan and high flow rate inhaled oxygen.

Alternative treatments include intranasal triptans and intravenous dihydroergotamine, or DHE.

Galcanezumab, a calcitonin gene-related peptide that is produced by Eli Lilly and Company was recently approved by the FDA for the treatment of eCH.

Galcanezumab, a calcitonin gene-related peptide was recently approved by the FDA for the treatment of episodic CH.

Additional medications that are used by patients off-label include verapamil, lithium, and valproate.

Cluster Headache Market Factors - United Kingdom

Prevalence and market size .

The estimated prevalence of CH in the United Kingdom ranges from 0.1% to 0.2% of the total population, with approximately 66,000 affected patients.

Economic Burden .

According to the MTFM published by NHS England and NHS Improvement in January 2021, the overall cost for treating CH patients in England over the next five years will be approximately £218.7 million.

Participants in surveys of sufferers indicate that CH is associated with a large socioeconomic burden.

For example, research found that nearly 20% of patients with CH reported loss of employment and approximately 8% are unemployed or receiving disability payments due to the disorder.

Other Therapies for the Treatment of Cluster Headache .

The goal of available treatments is total attack cessation, or suppression of headache until the next episode.

Therapies are prescribed in an attempt to prevent CH attacks (prophylaxis) and to manage pain at the time of a headache (acute / abortive treatment);

the latter is rarely sufficient to achieve adequate control alone.

Primary Headache Market-Potential Future Market Factors

While we believe that our proprietary gammaCore therapy provides us with competitive advantages, there is fierce competition, particularly in the migraine market, from many different sources, including pharmaceutical, biotechnology, medical device and other healthcare companies.

In addition, academic institutions, governmental agencies and public and private research institutions are actively conducting research in overlapping fields of interest.

Our gammaCore therapy competes and will compete with numerous existing therapies and therapies that may become available in the future.

Our gammaCore therapy competes and will compete with numerous existing therapies from many different sources, including pharmaceutical, biotechnology, medical device and other healthcare companies, and therapies that may become available in the future.

We believe the key competitive factors affecting the potential success of our therapy are safety, efficacy, side effect profile, convenience, price, the availability of generic drugs and the availability of coverage and reimbursement from government and certain other third-party payers.

Given the competitive landscape in the markets in which gammaCore competes, there can be no assurance that demand for our products may not be constrained, or face significant pricing pressure, or that the scope of coverage and reimbursement from third-party payers will expand or not be curtailed.

Many of the companies we are competing with now, or with which we may compete in the future, have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, sales and marketing, market access, and regulatory affairs than we do.

Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies and healthcare related institutions.

These competitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.

The completion of our competitors’ clinical trials with respect to their headache products could negatively impact the perception of us or our gammaCore therapy.

The perception by physicians, payers or patients that a competitor’s product is superior to our gammaCore therapy or offers comparable benefits at a lower cost or lower incidence of undesirable side effects as compared against our gammaCore therapy, could have a material adverse effect on us.

Given the size of the existing and potential primary headache markets in the United States and abroad, we expect that as we continue to seek to expand our commercial efforts, our current and future competitors will grow in number and take aggressive actions to grow, enhance and protect their market positions to our potential detriment.

We seek to protect the intellectual property and proprietary technology that we believe is important to our business, which includes seeking and maintaining patents covering our technology and products, proprietary processes and any other inventions that are commercially or strategically important to the development of our business.

We also rely upon trademarks to build and maintain the integrity of our brand, and we seek to protect the confidentiality of trade secrets that may be important to the development of our business.

For more information, please see “Risk Factors—Risks Related to Intellectual Property.”

Emergency Use Authorization

In July 2020, the FDA granted the Company an Emergency Use Authorization ("EUA") authorizing the use 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.

We did not recognize material revenue from the sales of gammaCore Sapphire CV during the year ended December 31, 2021, and we do not expect to recognize material revenue from the sale of gammaCore Sapphire CV in general.

Market and Competition for our General Wellness Products

In April 2021, McKinsey & Company, or McKinsey estimated the global wellness market to be more than $1.5 trillion with annual growth of 5-10%, With the US market, spanning health, fitness, appearance, sleep, nutrition, and mindfulness, to be more than $450 billion and growing at great than 5% annually .

With the U.S.

market, spanning health, fitness, appearance, sleep, nutrition, and mindfulness, estimated to be more than $450 billion and growing at greater than 5% annually.

In a survey McKinsey conducted in August 2020 with roughly 7,500 customers in Brazil, China, Germany, Japan, the United Kingdom and the United States, 79% of the respondents said they believed wellness is important, and 42% considered it a top priority.

Around 37% of surveyed consumers expressed a desire for additional products and services in both the sleep and mindfulness categories, with almost 1/3 of customers wanting more across the remaining four wellness dimensions.

Research and Development

We are developing future iterations of nVNS technology, including the use of our intellectual property around the delivery of smartphone-integrated and smartphone-connected non-invasive therapies.

We are supporting a variety of Investigator Initiated Trials (IIT) to evaluate additional indications and/or markets for our products.

If successful, we believe these trials will provide marketing support for future expansion of our business to new indications and markets.

Regulatory Clearances

gammaCore, which is our prescription only, handheld device intended for regular or intermittent use over many years, is cleared by the FDA for use in the following indications:

• the acute treatment of pain associated with each of migraine headache and episodic cluster headache in adults, or eCH ;

• the preventive treatment of migraine headache and adjunctive use for the preventive treatment of cluster headache in adults, or CH;

• the acute and preventive treatment of migraine in adolescents between 12 and 17 years of age;

• the treatment of Paroxysmal Hemicrania , or PH, and Hemicrania Continua, or HC, in adults.

The FDA clearances of our gammaCore therapy to treat headache were facilitated by the FDA's creation of a new regulatory category:

External Vagus Nerve Stimulator for Headache (21 CFR 882-5892).

Based on this category’s description, we anticipate that some additional label expansions may be possible through the pathway under Section 510(k) of the Federal Drug and Cosmetic Act.

In January 2022, the FDA granted gammaCore Sapphire “Breakthrough Device designation for the treatment of post-traumatic stress disorder or PTSD”.

PTSD is a highly prevalent and disabling disorder with limited approved treatment options.

The FDA’s Breakthrough Device designation is designed to expedite the development and regulatory review of medical devices that hold the potential for more effective treatment or diagnosis of life-threatening or irreversibly debilitating disease or condition.

We also are considering several additional medical indications for our nVNS technology which are being studied in several investigator-initiated trials, or IITs.

These indications include, post-traumatic stress disorder, opioid use disorders, symptoms of Parkinson's disease, stroke, concussion, attention, nausea, mood, fatigue and memory retention among others.

We received a CE Certificate of Conformity for gammaCore for the treatment of primary headache from the British Standards Institution, a European Union notified body.

This CE Certificate of Conformity allowed us to affix the CE Mark on gammaCore and to commercialize it in the European Economic Area and other countries that recognize the CE Mark.

In addition, we received CE Certificates of Conformity on gammaCore covering four other indications for use, including reactive airway disease and gastric motility disorders.

In 2019, NICE, published a Medical Technology Guidance document recommending the use of gammaCore for CH within NHS of England and Wales.

We expect NICE to review the Medical Technology Guidance in 2023.

In January 2021, NHS Scotland adopted the NICE recommendation and recommended gammaCore for use in treatment of CH in Scotland.

Effective April 1, 2021, gammaCore was listed on the NHS England MedTech Funding Mandate (MTFM) Policy.

gammaCore is still listed in the policy, which requires commissioners fund the therapy from their existing allocations.

Non-Prescription

During 2022, we launched the Truvaga product line for consumer wellness applications.

During 2022, we launched the TAC-STIM product line designed for active-duty military personnel.

Truvaga and TAC-STIM are being marketed in the United States as wellness and human performance devices pursuant to the FDA guidance document entitled “ General Wellness:

Policy for Low-Risk Devices;

Guidance for Industry and FDA Staff, issued on September 27 2019”.

Manufacturing

We are the FDA-registered manufacturer of our gammaCore Sapphire and related products.

We rely upon third-party contract manufacturers and suppliers, located both within and outside the United States, for substantially all of the components of our gammaCore products, including the handheld stimulator assembly, charging case, RFID cards and conductive gel.

At our facility in Rockaway, New Jersey, we inspect inbound component parts to ensure they meet our design and manufacturing specifications.

This quality process involves physical inspection and electrical performance testing.

After successful completion of this inspection, each gammaCore unit is then packaged, along with appropriate labeling, instructions for use, important safety information, an initial RFID card (when the therapy is not preloaded), and conductive gel, and shipped into our distribution network, or direct-to-end user.

Additional RFID cards and conducive gels are sent at the time of prescription refills.

In order to protect against risk of supply chain disruption, we have qualified an approved secondary contract manufacturer.

We are the FDA-registered and ISO registered manufacturer of our nVNS products.

We rely upon third-party contract manufacturers and suppliers, located both within and outside the United States, for substantially all the components of our nVNS products.

In order to protect against risk of supply chain disruption, we seek to maintain adequate inventory and have qualified an approved secondary contract manufacturer.

Additionally, we retain the internal expertise and capabilities to perform all assembly aspects of our commercial product.

These measures include purchasing a sufficient advanced supply of key components to reasonably assure that no component shortages will interrupt our ability to manufacture and deliver our products to patients on a timely basis.

As of December 31, 2021, we had approximately $5.3 million of inventory.

Our inventory significantly exceeds forecasted demand for 2022, therefore, $3.9 million of inventory has been classified as long-term on our balance sheet as of December 31, 2021.

This amount of inventory creates a risk of an adverse financial impact from inventory obsolescence.

These measures include purchasing what we consider to be a sufficient advanced supply of key components to reasonably assure that no component shortages will interrupt our ability to manufacture and deliver our products to patients on a timely basis.

All the electronic components used in our products are either high-volume, non-custom commodity components, or are readily available from multiple vendors.

The majority of these components have multiple sources, and the few with single sources have been purchased with sufficient reserves to permit continued production while simple product design modifications can be made.

We rely upon third parties, however, for the design function for new and modified devices.

At our facility in Rockaway, NJ, we inspect inbound component parts to ensure they meet our design and manufacturing specifications prior to assembly.

This quality process involves physical inspection and electrical performance testing.

After successful completion of this inspection, each unit is then assembled, packaged, along with appropriate labeling and accessories.

Intellectual Property

Patents and Patent Applications

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All of our current issued patents are projected to expire between 2026 and 2037 .

We also rely upon trademarks to build and maintain the integrity of our brand, and we seek to protect the confidentiality of trade secrets that may be important to the development of our business.

For more information, please see "Risk Factors-Risks Related to Intellectual Property."

Copyrights, Trademarks and Trade Secrets

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As of February 1, 2022, our trademark portfolio consisted of six US trademark registrations, including electroCore, gammaCore and gammaCore Sapphire, twelve international trademark registrations, and seven pending US and international trademark applications.

As of February 1, 2023, our trademark portfolio consisted of six US trademark registrations, including electroCore, gammaCore, and gammaCore Sapphire, 19 international trademark registrations, and 15 pending US and international trademark applications.

We also rely upon trade secrets, know-how and continuing technological innovation, and may pursue licensing opportunities in the future, to develop and maintain our competitive position.

We seek to protect our proprietary rights through a variety of methods, including confidentiality agreements and proprietary information agreements with suppliers, employees, consultants and others who may have access to proprietary information, under which they are bound to assign to us inventions made during the term of their employment or term of service.

Government Regulation

Our products and operations are subject to extensive and rigorous regulation by the FDA under the Federal Food, Drug, and Cosmetic Act, or FFDCA, and its implementing regulations, guidance documentation, and standards.

Our gammaCore products are regulated by the FDA as medical devices.

The FDA regulates the design, development, research, testing, manufacturing, safety, labeling, storage, recordkeeping, promotion, distribution, sale and advertising of medical devices in the United States to ensure that medical products distributed domestically are safe and effective for their intended uses.

The FDA also regulates the export of medical devices manufactured in the United States to international markets.

Any violations of these laws and regulations could result in a material adverse effect on our business, financial condition and results of operations.

In addition, if there is a change in law, regulation or judicial interpretation, we may be required to change our business practices, which could have a material adverse effect on our business, financial condition and results of operations.

Under the FFDCA, medical devices are classified into one of three classes—Class I, Class II or Class III—depending on the degree of risk associated with each medical device and the extent of control needed to ensure safety and effectiveness.

Class I devices are those for which safety and effectiveness can be assured by adherence to FDA’s “general controls” for medical devices, which include compliance with the applicable portions of the FDA’s Quality System Regulation, or QSR, facility registration and product listing, reporting of adverse medical events, and appropriate, truthful and non-misleading labeling, advertising, and promotional materials.

Some Class I devices also require premarket clearance by the FDA through the 510(k) premarket notification process described below.

Class II devices are subject to FDA’s general controls, and any other “special controls” deemed necessary by FDA to ensure the safety and effectiveness of the device, such as performance standards, product-specific guidance documents, special labeling requirements, patient registries or post-market surveillance.

Premarket review and clearance by the FDA for Class II devices is accomplished through the 510(k) premarket notification procedure, though certain Class II devices are exempt from this premarket review process.

When a 510(k) is required, the manufacturer must submit to the FDA a premarket notification submission demonstrating that the device is “substantially equivalent” to a legally marketed device, which in some cases may require submission of clinical data.

Unless a specific exemption applies, 510(k) premarket notification submissions are subject to user fees.

If the FDA determines that the device, or its intended use, is not substantially equivalent to a legally marketed device, the FDA will place the device, or the particular use of the device, into Class III, and the device sponsor must then fulfill much more rigorous premarketing requirements.

We believe that our products are or would be classified as either Class I or Class II devices.

Class III devices, consisting of devices deemed by the FDA to pose the greatest risk, such as life-sustaining, life-supporting or implantable devices, or devices deemed not substantially equivalent to a predicate device.

We do not believe our products are or would be classified as Class III devices.

510(k) Clearance

To obtain 510(k) clearance for a medical device, an applicant must submit to the FDA a premarket notification demonstrating that the proposed device is “substantially equivalent” to a legally marketed device, known as a “predicate device.” A legally marketed predicate device may include a device that was legally marketed prior to May 28, 1976 for which a PMA is not required (known as a “pre-amendments device” based on the date of enactment of the Medical Device Amendments of 1976), a device that has been reclassified from Class III to Class II or Class I, or a device that was found substantially equivalent through the 510(k) process.

A device is substantially equivalent if, with respect to the predicate device, it has the same intended use and has either (i) the same technological characteristics, or (ii) different technological characteristics, but the information provided in the 510(k) submission demonstrates that the device does not raise new questions of safety and effectiveness and is at least as safe and effective as the predicate device.

A showing of substantial equivalence sometimes, but not always, requires clinical data.

Before the FDA will accept a 510(k) submission for substantive review, the FDA will first assess whether the submission satisfies a minimum threshold of acceptability.

If the FDA determines that the 510(k) submission is incomplete, the FDA will issue a “Refuse to Accept” letter which generally outlines the information the FDA believes is necessary to permit a substantive review and to reach a determination regarding substantial equivalence.

An applicant must submit the requested information before the FDA will proceed with additional review of the submission.

Once the 510(k) submission is accepted for review, by regulation, the FDA has 90 days to review and issue a determination.

As a practical matter, clearance often takes longer.

The FDA may require additional information, including clinical data, to make a determination regarding substantial equivalence.

If the FDA agrees that the device is substantially equivalent to a predicate device currently on the market, it will grant 510(k) clearance to commercially market the device.

If the FDA determines that the device is “not substantially equivalent” to a previously cleared device, the device is automatically designated as a Class III device.

The device sponsor must then fulfill more rigorous PMA requirements, or can request a risk-based classification determination for the device in accordance with the “de novo” process, which is a route to market for novel medical devices that are low to moderate risk and are not substantially equivalent to a predicate device.

After a device receives 510(k) marketing clearance, any modification that could significantly affect its safety or effectiveness, or that would constitute a major change or modification in its intended use, will require a new 510(k) marketing clearance or, depending on the modification, PMA approval.

The determination as to whether or not a modification could significantly affect the device’s safety or effectiveness is initially left to the manufacturer using available FDA guidance.

Many minor modifications today are accomplished by a “letter to file” in which the manufacture documents the rationale for the change and why a new 510(k) is not required.

However, the FDA may review such letters to file to evaluate the regulatory status of the modified product at any time and may require the manufacturer to cease marketing and recall the modified device until 510(k) clearance or PMA approval is obtained.

The manufacturer may also be subject to significant regulatory fines or penalties.

The Commissioner of the FDA, under delegated authority from the Secretary of the U.S.

Department of Health and Human Services, or DHHS, may, under certain circumstances, issue an EUA that would permit the use of an unapproved drug product or unapproved use of an approved drug product.

De Novo Classification

Medical device types that the FDA has not previously classified as Class I, II or III are automatically classified into Class III regardless of the level of risk they pose.

The Food and Drug Administration Modernization Act of 1997 established a new route to market for low to moderate risk medical devices that are automatically placed into Class III due to the absence of a predicate device, called the “Request for Evaluation of Automatic Class III Designation,” or the de novo classification procedure.

This procedure allows a manufacturer whose novel device is automatically classified into Class III to request down-classification of its medical device into Class I or Class II on the basis that the device presents low or moderate risk, rather than requiring the submission and approval of a PMA application.

Prior to the enactment of the Food and Drug Administration Safety and Innovation Act of 2012, or the FDASIA, a medical device could only be eligible for de novo classification if the manufacturer first submitted a 510(k) premarket notification and received a determination from the FDA that the device was not substantially equivalent.

FDASIA streamlined the de novo classification pathway by permitting manufacturers to request de novo classification directly without first submitting a 510(k) premarket notification to the FDA and receiving a not substantially equivalent determination.

Under FDASIA, the FDA is required to classify the device within 120 days following receipt of the de novo submission.

If the manufacturer seeks reclassification into Class II, the manufacturer must include a draft proposal for special controls that are necessary to provide a reasonable assurance of the safety and effectiveness of the medical device.

In addition, the FDA may reject the reclassification petition if it identifies a legally marketed predicate device that would be appropriate for a 510(k) or determines that the device is not low to moderate risk or that general controls would be inadequate to control the risks and special controls cannot be developed.

In April 2017, FDA approved our de novo classification request and cleared our gammaCore therapy in the United States for the acute treatment of pain associated with eCH in adults.

Based on this approval of our de novo classification request, gammaCore has been down classified to Class II under a new Class II device regulatory category for non-invasive cervical vagus nerve stimulators for the treatment of headache.

The establishment of this category created a 510(k) regulatory pathway for the potential expansion of the gammaCore label to include acute treatment and/or prevention of pain associated with migraine and cCH, as well as acute treatment and/or prevention of other primary and secondary headaches.

Additionally, we may consider utilizing the de novo classification process to obtain marketing authorization for our product candidates under development outside the headache field.

Continuing Regulation

After a device is placed on the market, numerous regulatory requirements apply.

Food and Drug Administration (FDA) Regulation

The majority of our products are medical devices that are subject to extensive regulation by the U.S.

FDA under the Federal Food, Drug, and Cosmetic Act, or FDCA, and the regulations promulgated thereunder, as well as by other regulatory bodies in the United States and abroad.

The FDA classifies medical devices into one of three classes based on the risks associated with the medical device and the controls deemed necessary to reasonably ensure the device’s safety and effectiveness.

Those three classes are:

Class I, the lowest risk products, which require compliance with medical device general controls, including labeling, establishment registration, device product listing, adverse event reporting and, for some products, adherence to good manufacturing practices through the FDA’s quality system regulations;

• Class II, comprising moderate-risk devices, which also require compliance with general controls and in some cases, so-called special controls that may include performance standards, particular labeling requirements, or post-market surveillance obligations;

typically a Class II device also requires pre-market review and clearance by FDA of a pre-market notification (also referred to as a “510(k) application”) as well as adherence to the quality system regulations/good manufacturing practices for devices;

• Class III, high-risk devices that are often implantable or life-sustaining, which also require compliance with the medical device general controls and quality system regulations, but which generally must be approved by FDA before entering the market, through a more-lengthy pre-market approval (PMA) application.

Approved PMAs can include post-approval conditions and post-market surveillance requirements, analogous to some of the special controls that may be imposed on Class II devices.

Before being introduced into the U.S.

market, our medical devices must obtain marketing clearance or approval from FDA through the 510(k) pre-market notification process, the de novo classification process (summarized below under De Novo Classification Process), or the PMA process, unless they are determined to be Class I devices or to otherwise qualify for an exemption from one of these available forms of pre-market review and authorization by the FDA.

To date, our products have all been classified as Class II, moderate-risk medical devices and have been subject to the 510(k) review and clearance process.

Additionally, t he FDA also has a policy, General Wellness:

Policy for Low Risk Devices , regarding general wellness products.

Under this policy, the FDA does not intend to examine low risk general wellness products to determine whether they are devices within the meaning of the FDCA or, if they are devices, whether they comply with the relevant regulatory requirements for devices (e.g., establishment registration, pre-market review).

The policy defines general wellness products as products that meet the following two factors:

(1) are intended for only general wellness use, as defined in the policy, and (2) present a low risk to the safety of users and other persons.

We market Truvaga and TAC-STIM as general wellness products pursuant to this policy.

510(k) Pre-Market Notification Process

Class II devices typically require pre-market review and clearance by the FDA, which is accomplished through the submission of a 510(k) pre-market notification before the device may be marketed.

To obtain 510(k) clearance, we must demonstrate that a new device is substantially equivalent to another device with 510(k) clearance or grandfathered status, or to a device that was reclassified from Class III to Class II or Class I - this device to which the new device is compared is called the “predicate device.” In some cases, we may be required to perform clinical trials to support a claim of substantial equivalence.

If clinical trials are required, we may be required to submit an application for an investigational device exemption, or IDE, which must be cleared by the FDA prior to the start of a clinical investigation, unless the device and clinical investigation are considered non-significant risk by the FDA or are exempt from the IDE requirements.

Whether or not an IDE is required for a clinical study involving a medical device, an appropriate Institutional Review Board (IRB) must review and approve the study protocol before it is initiated.

It generally takes three months from the date of the pre-market notification submission to obtain a final 510(k) clearance decision from the FDA, but it can be significantly longer.

After a medical device receives a 510(k) clearance letter, which authorizes commercial marketing of the new device for one or more specific indications for use, any modification that could significantly affect its safety or effectiveness, or that would constitute a major change in its intended use, requires the submission of a new 510(k) notification or could require de novo classification or a PMA.

The FDA allows each company to make this determination, but the FDA can review the decision as part of routine compliance audits of the company.

If the FDA disagrees with a company’s decision not to seek prior FDA authorization, the FDA may require the company to seek additional 510(k) clearance or pre-market approval.

The FDA also can require the company to cease marketing and/or recall the medical device in question until its regulatory status is resolved.

De Novo Classification Process

If the FDA determines that a new, previously unclassified medical device or its intended use is not substantially equivalent to a predicate device, the device is automatically placed into Class III, requiring the submission of a PMA.

Devices that cannot be cleared through the 510(k) process due to lack of a predicate device but would be considered low or moderate risk (in other words, they do not rise to the level of requiring the approval of a PMA because any risks associated with the device could be mitigated through general controls and/or special controls) may be eligible for the 510(k) De Novo classification process.

If a product is classified as Class II through the De Novo classification process, then that device may serve as a predicate device for subsequent 510(k) pre-market notifications.

FDA has issued a Guidance document that formally codifies requirements for the medical device De Novo process and the procedures and criteria for product developers to file a De Novo classification request.

PMA Application Process

If a medical device does not qualify for the 510(k) pre-market notification process and is not eligible for classification as a low or moderate-risk device through the De Novo process, the device is deemed to be Class III and a company must submit a PMA application to seek authorization for its commercial sale.

A PMA requires more extensive pre-filing testing than is required in the 510(k) application and is more costly, lengthy and uncertain.

The PMA review and approval process can take one to three years or longer, from the time the PMA application is filed with the FDA.

Under a PMA, the company must demonstrate to the FDA that the new medical device is safe and effective for its intended purpose.

A PMA typically includes extensive pre-clinical and clinical trial data, and information about the device, its design, manufacture, labeling and components.

Before approving a PMA, the FDA generally also performs an on-site inspection of manufacturing facilities for the product to ensure compliance with the FDA’s quality system regulation, or QSR.

If FDA approves the PMA, the approved indications may be more limited than those originally sought.

In addition, FDA’s approval order may include post-approval conditions that the FDA believes necessary to ensure the safety and effectiveness of the device, including, among other things, restrictions on labeling, promotion, sale and distribution and post-market study requirements.

Failure to comply with the post-approval conditions can result in adverse enforcement or administrative actions, including the withdrawal of the approval.

Approval of a new PMA application or a PMA supplement may be required before making certain types of modifications to the device, including to its labeling, intended use or indication, or manufacturing process, especially when such modifications have the potential to affect safety and effectiveness.

Post-Marketing Compliance Obligations

Regardless of which pre-market pathway a medical device uses to reach the U.S.

market, after a device is placed on the market, numerous regulatory requirements continue to apply.

These include:

Product listing and establishment registration, which helps facilitate FDA inspections and other regulatory action;

QSR, which requires manufacturers, including third-party manufacturers, to follow stringent design, testing, control, documentation and other quality assurance procedures during all aspects of the design and manufacturing process;

labeling regulations and FDA prohibitions against the promotion of products for uncleared or unapproved “off-label” uses;

clearance of product modifications that could significantly affect safety or efficacy or that would constitute a major change in intended use of one of our cleared devices;

approval of product modifications that affect the safety or effectiveness of one of our approved devices;

medical device reporting regulations, which require that manufacturers comply with FDA requirements to report if their device may have caused or contributed to a death or serious injury, or has malfunctioned in a way that would likely cause or contribute to a death or serious injury if the malfunction of the device or a similar device were to recur;

post-approval restrictions or conditions, including post-approval study commitments;

post-market surveillance regulations, which apply when necessary to protect the public health or to provide additional safety and effectiveness data for the device;

the FDA’s recall authority, whereby it can ask, or under certain conditions order, device manufacturers to recall from the market a product that is in violation of governing laws and regulations;

regulations pertaining to voluntary recalls;

notices of corrections or removals;

HIPAA compliance around patient information.

Advertising and promotion of medical devices, in addition to being regulated by the FDA, are also regulated by the Federal Trade Commission and by state regulatory and enforcement authorities.

Recently, promotional activities for FDA-regulated products of other companies have been the subject of enforcement action brought under healthcare reimbursement laws and consumer protection statutes.

In addition, under the federal Lanham Act and similar state laws, competitors and others can initiate litigation relating to advertising claims.

If the FDA determines that our promotional materials or training constitutes promotion of an unapproved or uncleared use, it could request that we modify our training or promotional materials or subject us to regulatory or enforcement actions.

It is also possible that other federal, state or foreign enforcement authorities might take action if they consider our promotional or training materials to constitute promotion of an unapproved or uncleared use, which could result in significant fines or penalties under other statutory authorities, such as laws prohibiting false claims for reimbursement.

In that event, our reputation could be damaged, and adoption of the products would be impaired.

Furthermore, our products could be subject to voluntary recall if we or the FDA determine, for any reason, that our products pose a risk of injury or are otherwise defective.

Moreover, the FDA can order a mandatory recall if there is a reasonable probability that our gammaCore therapy would cause serious adverse health consequences or death.

The FDA has broad post-market and regulatory enforcement powers.

We are subject to unannounced inspections by the FDA to determine our compliance with the QSR and other regulations, and these inspections may include the manufacturing facilities of some of our subcontractors.

Failure by us or by our suppliers to comply with applicable regulatory requirements can result in enforcement action by the FDA or other regulatory authorities, which may result in sanctions including, but not limited to:

untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties;

unanticipated expenditures to address or defend such actions;

customer notifications for repair, replacement, refunds;

recall, detention or seizure of our products;

operating restrictions or partial suspension or total shutdown of production;

refusing or delaying our requests for 510(k) clearance or PMA approval of new products or modified products;

operating restrictions;

withdrawing 510(k) clearances or PMA approvals that have already been granted;

refusal to grant export approval for our products;

criminal prosecution;

reputational damage.

To date, our facility has not been inspected by the FDA.

• the FDA’s QSR, which requires manufacturers, including third-party manufacturers, to follow stringent design, testing, control, documentation and other good manufacturing practice and quality assurance procedures during all aspects of the manufacturing process (unless a device category is exempt from this requirement by the FDA, such as in the case of many Class I devices);

• correction and removal reporting regulations, which require that manufacturers report to the FDA field corrections and device recalls or removals if undertaken to reduce a risk to health by the device or to remedy a violation of the FDA caused by the device that may present a risk to health;

• post-market surveillance regulations, which apply to Class II or III devices if the FDA has issued a post-market surveillance order and the failure of the device would be reasonably likely to have serious adverse health consequences, the device is expected to have significant use in the pediatric population, the device is intended to be implanted in the human body for more than one year, or the device is intended to be used to support or sustain life and to be used outside a user facility;

• regular and for-cause inspections by FDA to review a manufacturer’s facility and its compliance with applicable FDA requirements;

• the FDA’s recall authority, whereby it can ask, or order, device manufacturers to recall from the market a product that is in violation of applicable laws and regulations.

• the guidance document entitled “ General Wellness:

Policy for Low Risk Devices;

Guidance for Industry and FDA Staff, issued on September 27 2019” under which Truvaga and TAC-STIM are marketed under as wellness devices.

Our international sales are subject to regulatory requirements in the countries in which our products are sold.

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The MDR, among other things, is intended to establish a uniform, transparent, predictable and sustainable regulatory framework across the EEA for medical devices and ensure a high level of safety and health while supporting innovation.

The MDR will be applicable on May 26, 2021.

The MDR became applicable on May 26, 2021, with the transition period intended to end on May 26, 2024.

While progress has been made on the transition from the MDD to the MDD, a European Commission proposal published on January 6, 2023, stated that the overall number and capacity of conformity assessment (a.k.a., ‘notified’) bodies remains insufficient to carry out the tasks required of them.

In addition, many manufacturers are not sufficiently prepared to meet the strengthened requirements of the MDR by the end of the transition period.

This is threatening the availability of medical devices on the EU market.

According to an estimation presented by notified bodies to the Medical Device Coordination Group on November 17, 2022, the number of certificates issued by May 2024 may reach around 7,000 if the current rate of certificate issuance remains the same with no changes to current conditions.

Notified bodies estimate that the transition of all Directives’ certificates to MDR certificates could possibly be completed by December 2027.

The European Commission’s “ Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Regulations (EU) 2017/745 and (EU) 2017/746 as regards the transitional provisions for certain medical devices and in vitro diagnostic medical devices, Brussels, 1.6.2023 intends” to extend the transition period from May 26, 2024 until December 31, 2027 for high-risk Class III and Class IIb implantable devices, and until December 31, 2028 for medium and lower risk Class IIb and Class IIa devices.

The gammaCore products (gammaCore Sapphire, gammaCore-S) are EU Class IIa devices.

Once applicable, the new regulations will among other things:

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The transitional period ended on December 31, 2020.

T he effects of Brexit will be determined by the EU–UK Trade and Cooperation Agreement which was agreed on December 24, 2020 and ratified by the UK Parliament on December 30, 2020 and was “provisionally” applied by the EU from December 31, 2020.

The effects of Brexit will be determined by the EU–UK Trade and Cooperation Agreement which was agreed on December 24, 2020 and ratified by the UK Parliament on December 30, 2020 and was “provisionally” applied by the EU from December 31, 2020.

Following Brexit, EU law and the EU Court of Justice no longer have supremacy over British laws or its Supreme Court.

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Finally, Brexit may also disrupt the way that the United Kingdom interprets obligations under CE Certificates of Conformity.

Federal Trade Commission

We are subject to Federal Trade Commission, or FTC, regulatory oversight.

Under the Federal Trade Commission Act (FTC Act), the FTC is empowered, among other things, to (a) prevent unfair methods of competition and unfair or deceptive acts or practices in or affecting commerce;

(b) seek monetary redress and other relief for conduct injurious to consumers;

and (c) gather and compile information and conduct investigations relating to the organization, business, practices, and management of entities engaged in commerce.

The FTC has very broad enforcement authority, and failure to abide by the substantive requirements of the FTC Act and other consumer protection laws can result in administrative or judicial penalties, including civil penalties, or injunctions affecting the manner in which Truvaga could be marketed in the future .

Other Regulations

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These laws include, without limitation, applicable anti-kickback, false claims, transparency and patient privacy and security laws and regulations.

Anti-Kickback Statute :

The federal Anti-Kickback Statute prohibits, among other things, persons or entities from knowingly and willfully soliciting, offering, receiving or paying any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, in exchange for or to induce either the referral of an individual for, or the purchase, lease, order or recommendation of, any good, facility, item or service for which payment may be made, in whole or in part, under federal healthcare programs such as Medicare and Medicaid.

The federal Anti-Kickback Statute is broad and prohibits many arrangements and practices that are lawful in businesses outside of the healthcare industry.

The term “remuneration” includes kickbacks, bribes, or rebates and also has been broadly interpreted to include anything of value, including for example, gifts, discounts, the furnishing of supplies or equipment, credit arrangements, payments of cash, waivers of payments, ownership interests, relieving a referral source of a financial or administrative burden and providing anything at less than its fair market value.

In addition, longstanding OIG guidance makes clear that the opportunity for a referring physician to earn a profit, including through an investment in an entity for which he or she generates business, could constitute illegal remuneration under the Anti-Kickback Statute.

The Anti-Kickback Statute is violated if even one purpose of the remuneration is to induce such referrals.

There are a number of narrow statutory exceptions and regulatory safe harbors protecting certain defined business arrangements from prosecution under the federal Anti-Kickback Statute.

These statutory exceptions and safe harbors protect an entity from prosecution under the federal Anti-Kickback Statute if the entity meets every requirement of a specific exception or safe harbor.

The failure of a transaction or arrangement to fit precisely within one or more applicable statutory exceptions or safe harbors does not necessarily mean that it is illegal or that prosecution will be pursued.

However, conduct and business arrangements that do not fully satisfy all requirements of an applicable safe harbor may result in increased scrutiny by government enforcement authorities and will be evaluated on a case-by-case basis based on a cumulative review of all of its facts and circumstances.

Further, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.

In addition, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act which is discussed below.

Penalties for violations of the Anti-Kickback Statute include, but are not limited to, significant civil monetary penalties for each violation, criminal fines, disgorgement, individual imprisonment, exclusion from Medicare, Medicaid and other federal healthcare programs, and the possible curtailment or restructuring of operations.

Physician Self-Referral Law :

In the event that third-party payers require us to be a DME supplier or we sell our products directly to providers who are DME suppliers that submit claims to such payers, we may be subject to the federal Stark physician self-referral law, or Stark Law, which prohibits a physician from making a referral for certain designated health services covered by the Medicare program or Medicaid program, including DME, if the physician or an immediate family member has a financial relationship with the entity providing the designated health services, and prohibits that entity from billing or presenting a claim for the designated health services furnished pursuant to the prohibited referral, unless an exception applies.

Sanctions for violating the Stark Law include denial of payment, significant per claim civil monetary penalties, and exclusion from the federal health care programs.

Failure to refund amounts received as a result of a prohibited referral on a timely basis may constitute a false or fraudulent claim and may result in civil penalties and additional penalties under the FCA.

The statute also provides for financial penalties for a circumvention scheme.

Various states also have corollary laws to the Stark Law, including laws that require physicians to disclose any financial interest they may have with a healthcare provider to their patients when referring patients to that provider.

Both the scope and exceptions for such laws vary from state to state.

Federal Civil False Claims Act :

The federal civil False Claims Act prohibits, among other things, persons or entities from knowingly presenting or causing to be presented a false or fraudulent claim for, or the knowing use of false statements to obtain, payment of federal funds.

In addition, private individuals have the ability to bring actions under the civil False Claims Act in the name of the government and themselves and to share in any monetary recover.

Such suits, known as qui tam actions, have increased significantly in the healthcare industry in recent years.

Manufacturers can be held liable under these laws if they are deemed to “cause” the submission of false or fraudulent claims by, for example, providing inaccurate billing or coding information to customers or promoting a product off-label.

Penalties for a federal civil False Claims Act violation include significant per claim or statement mandatory civil penalties, plus treble damages, and the potential for exclusion from participation in federal healthcare programs.

Civil Monetary Penalties .

The Civil Monetary Penalty Act of 1981 imposes penalties against any person or entity that, among other things, is determined to have presented or caused to be presented a claim to a federal healthcare program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent, or offering or transferring remuneration to a federal healthcare beneficiary that a person knows or should know is likely to influence the beneficiary’s decision to order or receive items or services reimbursable by the government from a particular provider or supplier.

Federal Healthcare Fraud Laws .

Other federal healthcare fraud-related laws also provide criminal liability for violations.

The criminal healthcare fraud statute (18 U.S.C.

§ 1347) enacted by the Health Insurance Portability and Accountability Act of 1996 (HIPAA) prohibits, among other things, knowingly and willfully executing a scheme to defraud any healthcare benefit program, including private third-party payers.

Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the HIPAA fraud statute or specific intent to violate it in order to have a committed a violation.

Federal criminal false statement laws at 18 U.S.C.

§§ 1001 and 1035, among other sections, prohibit, among other things, knowingly and willfully falsifying, concealing, or covering up a material fact or making any materially false, fictitious, or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items, or services, or in any matter within the jurisdiction of the federal government.

Health Insurance Portability and Accountability Act of 1996:

HIPAA and its implementing regulations established uniform standards for certain covered entities, which are healthcare providers, health plans and healthcare clearinghouses, as well as their business associates, governing the conduct of specified electronic healthcare transactions and protecting the security and privacy of protected health information.

HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH has four tiers of civil monetary penalties and state attorneys have general authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions.

The Department of Justice also may impose criminal penalties.

Additionally, certain states have adopted comparable privacy and security laws and regulations, some of which may be more stringent than HIPAA and HITECH, and numerous federal and state laws, including state data breach notification laws, state health information privacy laws, and federal and state consumer protection laws, including for example, Section 5 of the Federal Trade Commission Act of 1914, as amended, and the California Consumer Privacy Act (CCPA), govern the collection, use, and disclosure and protection of certain health-related and other personal information.

The Federal Physician Payments Sunshine Act:

The federal Physician Payments Sunshine Act requires certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program, with certain exceptions, to report annually to the CMS, information related to “payments or other transfers of value” made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, and to report annually to CMS certain ownership and investment interests held by physicians and their immediate family members.

The government may impose significant civil monetary penalties, for all payments, transfers of value or ownership or investment interests that are not timely, accurately, and completely reported in an annual submission.

Beginning in 2022, applicable manufacturers also will be required to report information regarding payments and transfers of value provided to physician assistants, nurse practitioners, clinical nurse specialists, certified nurse anesthetists and certified nurse-midwives.

Analogous State Laws:

The majority of states also have statutes or regulations similar to the federal Anti-Kickback Statute and federal civil False Claims Act, which apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payer.

Certain states also require device and drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures, require device and drug companies to comply with the industry’s voluntary compliance guidelines and the applicable compliance guidance promulgated by the U.S.

federal government, or otherwise restrict payments that may be made to healthcare providers and other specified recipients.

Data Protection Legislation:

We are subject to laws and regulations in non-US countries covering data privacy and the protection of health-related and other personal information.

The EU, EU member states and other jurisdictions have adopted data protection laws and regulations, which impose significant compliance obligations.

The EU General Data Protection Regulation, or GDPR, became applicable on May 25, 2018, and is directly applicable in each EU member state and may result in a more uniform application of data privacy laws across the EU.

The GDPR imposes strict requirements and onerous accountability obligations on companies that process personal data, especially if they process sensitive personal data (such as data concerning health), including significant fines for non-compliance with the GDPR.

Implementation of the GDPR has influenced other jurisdictions to either amend or propose legislation to amend their existing data privacy and cybersecurity laws to resemble the requirements of GDPR.

For example, on June 27, 2019, California adopted the California Consumer Privacy Act of 2019, or CCPA.

The CCPA has been characterized as the first “GDPR-like” institutes a comprehensive consumer privacy framework.

The CCPA became effective January 1, 2021.

Like the GDPR, the CCPA imposes strict requirements and obligations on companies that collect, use, and share personal information.

Fines and penalties for non-compliance can be substantial.

Unlike the GDPR, the CCPA gives California residents a private right of action where California resident’s nonencrypted and nonredacted personal information is subject to a date breach as a result of a business’s failure to implement reasonable security procedures.

In November 2020, California voters passed Proposition 24 , also known as the California Privacy Rights Act, which amends and expands the CCPA, effective January 1, 2023.

The Foreign Corrupt Practices Act:

The Foreign Corrupt Practices Act, or FCPA, prohibits any US individual or business from paying, offering, or authorizing payment or offering of anything of value, directly or indirectly, to any foreign official, political party or candidate for the purpose of influencing any act or decision of the foreign entity in order to assist the individual or business in obtaining or retaining business.

The FCPA also obligates companies whose securities are listed in the United States to comply with accounting provisions requiring such companies to maintain books and records that accurately and fairly reflect all transactions of the corporation, including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for international operations.

Healthcare Reform

The United States and some foreign jurisdictions are considering or have enacted a number of legislative and regulatory proposals to change the healthcare system in ways that could affect our ability to sell our products profitably.

Among policy makers and payers in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality or expanding access.

Current and future legislative proposals to further reform healthcare or reduce healthcare costs may limit coverage of or lower reimbursement for our products.

The cost containment measures that payers and providers are instituting and the effect of any healthcare reform initiative implemented in the future could impact our revenue from the sale of our products.

We expect additional state and federal healthcare reform measures to be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for our products or additional pricing pressure.

Federal Contracting Regulations

Our qualifying contract on the FSS and open market sales to individual VA facilities necessitates compliance with applicable federal procurement laws and regulations, including commercial price disclosures, commercial-to-federal price indexing, and various federal programs.

We are subject to contractual remedies as well as potential administrative, civil, and criminal sanctions for non-compliance.

Advertising and Promotion

Advertising and promotion of medical devices, in addition to being regulated by the FDA, are also regulated by the FTC and by federal and state regulatory and enforcement authorities, including the Department of Justice, the Office of Inspector General of the Department of Health and Human Services, and various state attorneys general.

Although physicians are permitted to use their medical judgment to use medical devices for indications other than those cleared or approved by the FDA, we may not promote our products for such “off-label” uses and can only market our products for cleared or approved uses.

Other companies’ promotional activities for their FDA-regulated products have been the subject of FTC enforcement actions brought under healthcare reimbursement laws and consumer protection statutes.

FTC enforcement actions often result in consent decrees that constrain future actions.

In addition, under the federal Lanham Act and similar state laws, competitors and others can initiate litigation relating to advertising claims.

Import and Export Requirements

To import a device, the importer must file an entry notice and bond with the United States Bureau of Customs and Border Protection (CBP).

All devices are subject to FDA examination before release from CBP.

Any article that appears to be in violation of the FDCA may be refused admission and a notice of detention and hearing may be issued.

If the FDA ultimately refuses admission, the CBP may issue a notice for redelivery and, if a company fails to redeliver the goods or otherwise satisfy CBP and the FDA with respect to their disposition, may assess liquidated damages for up to three times the value of the lot.

The CBP also imposes its own regulatory requirements on the import of our products, including inspection and possible sanctions for noncompliance.

Human Capital Resources

As of March 1, 2022, we employed 52 full-time employees.

None of our employees are represented by a labor union or covered by a collective bargaining agreement.

As of March 1, 2023, we emplo yed 62 full -time employees in the US and abroad None of our employees are represented by a labor union or covered by a collective bargaining agreement.

We consider our relationship with our employees to be good.

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Our board of directors and management oversee various employee initiatives.

New employees are provided in dustry-relevant compliance training and are introduced to our Code of Business Conduct and Ethics to which all employees are required to annually confirm compliance.

Employee health and safety in the workplace is one of our core values.

The COVID-19 pandemic has underscored for us the importance of keeping our employees safe and healthy.

The ongoing COVID- 19 pandemic has underscored for us the importance of keeping our employees safe and healthy.

In response to the pandemic, the Company has taken actions aligned with best practices so our employees can continue to safely and effectively perform their work.

For example, since the advent of the pandemic in the first half of 2020, the majority of our employees previously based in our then headquarters in Basking Ridge, NJ have generally conducted business remotely, which has allowed us to reduce our real estate space requirements.

Company History

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The Company is headquartered in New Jersey and has two wholly owned subsidiaries:

electroCore Germany GmbH, and electroCore UK Ltd.

electroCore UK Ltd.

and electroCore Germany GmbH.

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

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Our Internet website address is www.electrocore.com.

The content reflected on our website is not incorporated by reference herein unless expressly noted.

We also maintain websites at www.gammacore.com , www.gammacore.co.uk, and www.truvaga.com .

The content reflected on our websites are not incorporated by reference herein unless expressly noted.

Available Information

6 unchanged sentences

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 1. Business