ECOR US Equity☆

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes appearing elsewhere in this Annual Report. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors. We discuss factors that we believe could cause or contribute to these differences below and elsewhere in this Annual Report, including those set forth under Item 1A. “Risk Factors” and under “Forward-Looking Statements” in this Annual Report.

Overview

We are a commercial-stage medical device company with a proprietary non-invasive vagus nerve stimulation, or nVNS, therapy. 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 neurology, and our therapy, gammaCore, is cleared by the FDA for use by adults for the following four neurology indications: the acute treatment of pain associated with each of migraine and eCH, the preventive treatment of migraine headache and adjunctive use for the preventive treatment of cluster headaches, or CH. Recently, the FDA cleared the use of gammaCore for acute and preventive treatment of migraine in adolescents. We are also considering the potential for several additional indications for our nVNS technology, which is being studied through a number of investigator-initiated studies. These indications include COVID-19 respiratory symptoms, stroke, mild traumatic brain injury, post-traumatic stress disorder, opioid use disorders and ileus.

Following our initial FDA clearance in early 2017, our commercial strategy was to establish gammaCore as a first-line treatment option for the acute treatment of episodic CH in adult patients, who have few alternative treatment options available to them. This strategy was supported by a product registry conducted from July 2017 through June 2018 to build advocacy among key opinion leaders in leading headache centers in the United States, and to generate patient demand in the form of prescriptions submitted to payers. With an earlier-than-anticipated FDA clearance for our acute treatment of migraine indication, we leveraged this advocacy during the registry period as we expanded into migraine and prepared for a full commercial launch of gammaCore and gammaCore Sapphire for the acute treatment of pain associated with eCH and migraine in adult patients, which was accomplished in the third quarter of 2018. With the clearance of adjunctive use for the prevention of CH in December 2018, we continued to build upon our existing base of advocacy and patient support. In March 2020, the FDA cleared gammaCore for the preventive treatment of migraine headache in adult patients. In February 2021, gammaCore was cleared by the FDA for the acute and preventive treatment of migraine in adolescents between 12 and 17 years of age.

Recently, we have focused our sales efforts in two channels, the U.S. Department of Veterans Affairs and U.S. Department of Defense, and the United Kingdom. We continue to evaluate strategies to expand commercial adoption of gammaCore, including the potential use of telemedicine and cash pay, direct to consumer approaches.

We incurred net losses of $23.5 million and $45.1 million for the years ended December 31, 2020 and 2019, respectively. As of December 31, 2020, our accumulated deficit was $107.0 million. We expect to continue to incur substantial net losses and negative cash flows from operations for at least the next several years as we commercialize gammaCore. Our prior losses, combined with expected future losses, have had and will continue to have, for the foreseeable future, an adverse effect on our stockholders’ deficit and working capital.

We face a variety of challenges and risks that we will need to address and manage as we pursue our strategy, including our ability to develop and retain an effective sales force, achieve market acceptance of gammaCore among physicians, patients, and third-party payers, and expand the use of gammaCore to additional therapeutic indications.

Because of the numerous risks and uncertainties associated with our commercialization efforts, as well as research and clinical development activities, we are unable to predict the timing or amount of increased expenses, or when, if ever, we will be able to achieve or maintain profitability. Even if we are able to increase sales of gammaCore, we may not become profitable. If we fail to become profitable or are unable to sustain profitability, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.

Our expected cash requirements for the next 12 months and beyond are based on the commercialization success of our products and our ability to control operating expenses. There are significant risks and uncertainties as to our ability to achieve these operating results, including as a result of the potential adverse impact on our business from the ongoing COVID-19 pandemic, Due to these risks and uncertainties, we may need to reduce our activities significantly more than our current operating plan and cash flow projections assume in order to fund operations for the next 12 months. There can be no assurance that we will have sufficient cash flow and liquidity to fund our planned activities, which could force us to significantly reduce or curtail our activities and, ultimately, potentially cease operations. These conditions raise substantial doubt about our ability to continue as a going concern. See “-Liquidity and Capital Resources.”

Funding Activities

During the year ended December 31, 2020, we received aggregate proceeds of approximately $15.5 million through the sales of our common stock to Lincoln Park Capital Fund, LLC, or Lincoln Park.

During the year ended December 31, 2020, we received aggregate proceeds of $2.2 million through sale of our common stock in private placement transactions to certain affiliates and existing shareholders of the Company, including certain members of our board of directors.

In May 2020, we received approximately $1.4 million pursuant to a loan under the Paycheck Protection Program.

On May 6, 2020, we received a net cash amount of approximately $1.2 million from the sale of our New Jersey state net operating losses and research and development tax credits for the year ended December 31, 2018.

On May 14, 2020, we entered into a Securities Purchase Agreement with our legal counsel pursuant to which we issued 1,564,345 shares of common stock. Upon issuance of the shares, certain of our outstanding financial obligations to our legal counsel were deemed paid and satisfied in full.

On July 1, 2020, we entered into a Commercial Insurance Premium Finance and Security Agreement, or the Financing Agreement. The Financing Agreement provides for a single borrowing by us of $1.2 million, with a seven-month term, and an annual interest rate of 2.18%. The proceeds from this transaction were used to partially fund the premiums due under some of the Company’s insurance policies. The amounts payable are secured by the Company’s rights under such policies. As of December 31, 2020, the remaining balance is $164,832.

Research and Development

In April 2020, we terminated early our PREMIUM II clinical trial that was being conducted to further support our label expansion into migraine prevention. In December 2020, we announced positive top-line results from this study.

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

In the second quarter of 2020, two IITs of gammaCore Sapphire CV were launched to study hospitalized patients with a confirmed diagnosis of, or presumed to be, COVID-19, one in Valencia, Spain (referred to as SAVIOR-1) and the other in Pittsburgh, Pennsylvania (referred to as SAVIOR-2). These trials are continuing to enroll patients. Enrollment is SAVIOR-1 is complete and enrollment is ongoing in SAVIOR-2.

Outside the US

In the United Kingdom, NHS England has provided a reimbursement pathway since April 2019 by awarding gammaCore a place on the ITPP, for use in patients with refractory cluster headache. In October 2020, we announced that the ITPP was extended through March 2021. Effective April 1, 2021 gammaCore Sapphire will be included in a new long-term reimbursement policy titled the MedTech Funding Mandate Policy 2021/22, or MTFM, which supports commissioners and providers in the use of selected 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. In January 2021, NHS Scotland adopted the NICE recommendation and recommended gammaCore for use in treatment of CH in NHS Scotland.

We recently entered into distribution agreements in Eastern Europe, Canada, and Australia.

Impact of COVID-19

We are closely monitoring the impact of the COVID-19 pandemic on all aspects of our business and geographies, including how it will impact business partners. In particular, the pandemic has resulted in a significant reduction in non-essential contact between patients and healthcare providers, shifting of focus by healthcare providers to the acute treatment of COVID-19 related illness regardless of specialty. We believe these restrictions have limited our sales force’s ability to generate additional interest in the Company’s products. While we began to experience disruptions from the COVID-19 pandemic during the three months ended March 31, 2020, we are unable to predict the impact that the COVID-19 pandemic may have on our financial condition, results of operations and cash flows due to numerous uncertainties. These uncertainties include the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, the development, rollout and availability of effective treatments and vaccines, and the direct and indirect economic effects of the pandemic and containment measures, among others. The outbreak of COVID-19 in many countries, including the United States, has significantly adversely impacted global economic activity and has contributed to significant volatility and negative pressure in financial markets. The global impact of the outbreak has been rapidly evolving and many countries have reacted by instituting quarantines, mandating business and school closures and restricting travel. Certain states and cities, including those where our principal place of business is located and sales force seeks to operate, have also reacted by instituting quarantines, restrictions on travel, “shelter in place” rules, and restrictions on types of business that may continue to operate. We cannot predict if additional states and cities will implement similar restrictions or when restrictions currently in place will expire. As a result, the COVID-19 pandemic is negatively impacting almost every industry directly or indirectly, including industries in which we operate. Further, the impacts of a potential worsening of global economic conditions and the continued disruptions to, and volatility in, the credit and financial markets, consumer spending as well as other unanticipated consequences remain unknown.

Because the COVID-19 pandemic affected, among other things, our access to prescribing physicians and their access to headache patients, on March 23, 2020 we suspended our earlier full-year revenue guidance until we could better understand the trajectory of our business, as well as announced a reduction in our activities, and adjusted our cash runway expectations in response to the potential adverse impact caused by the COVID-19 pandemic. Compared to our earlier expectations, we believe that our results for the year ended December 31, 2020 reflect a negative impact from, among other things, the global pandemic. Moreover, our expectations for at least the beginning of 2021 have also been adversely affected by both the uncertainty and potential negative impact of the global pandemic. Depending upon the duration and severity of the pandemic, the continuing effect on our results and outlook over the long term remains uncertain.

In July 2020, the Company received an EUA for use of its gammaCore Sapphire CV nVNS therapy for the acute treatment of asthma exacerbations in known or suspected COVID-19 patients. This EUA is expected to remain in effect for the duration of the COVID-19 pandemic justifying emergency use of these devices unless terminated or revoked by the FDA (after which products may no longer be used). The length of the effective period of this EUA is uncertain and the Company may have to incur significant marketing and other expenditures to achieve sales of the gammaCore Sapphire CV. We did not recognize material revenue from the sales of gammaCore Sapphire CV during the year ended December 31, 2020. There can be no assurance as to what impact the EUA and potential sales of gammaCore Sapphire CV will have on us, our business operations and financial condition.

Critical Accounting Policies and Estimates

The significant accounting policies and basis of presentation of our consolidated financial statements are described in Note2“Summary of Significant Accounting Policies” of the consolidated financial statements included with the annual report on Form 10-K.

The preparation of our financial statements is in accordance with U.S. Generally Accepted Accounting Principles, or GAAP, and we are required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and other related disclosures. While we believe our estimates, assumptions and judgments are reasonable, they are based on information presently available. Actual results may differ significantly from these estimates due to changes in judgments, assumptions and conditions as a result of unforeseen events or otherwise, which could have a material impact on our financial position and results of operations.

We believe the judgements estimates and assumptions associated with the following critical accounting policies have the greatest potential impact on the consolidated financial statements:

• Revenue recognition

• Inventories

• Income taxes

• Stock-based compensation

• Loss contingencies

Revenue Recognition

Our principal source of revenue is product sales. Our contracts with customers generally contain a single performance obligation and we recognize revenue from product sales when we have satisfied our performance obligation by transferring control of the product to our customers. Control of the product generally transfers to the customer upon delivery. Revenue is recognized at the amount to which we expect to be entitled in exchange for the sale of our products. Variability in the transaction price for our products pursuant to our contract with customers primarily arises from discounts and rebates. We offer discounts and rebates to certain distributors and customers under our arrangements. In many cases, these amounts are fixed at the time of sale and the transaction price is reduced accordingly.

United States Commercial Revenue Outside of Federal Supply Schedule Channel

Managed care rebates represent our estimated obligations to pharmacy benefit managers. Rebate accruals are recognized in the same period the related revenue is recognized. Co-payment assistance represents financial assistance to qualified patients, to assist them with co-payments for gammaCore therapy. The calculation of the accrual is based on an estimate of claims and the cost per claim that we expect to incur associated with inventory that exists in the distribution channel at period end. Effective March 1, 2020, the amount of monthly co-payment assistance has been reduced to a maximum of $100 per prescription.

For most of 2019 we had a voucher program to provide gammaCore and gammaCore Sapphire promotional units, or “free voucher units,” to our distributor at no charge. These free voucher units had a distinct product item number that enabled ease of tracking and allowed the product to be dispensed to the patient at no cost to the specialty pharmacy. In this way, the voucher program was more like a standard sample program where free voucher units, which provide 31-days of therapy, were issued to the patient, rather than being sold and subject to specialty pharmacy reimbursement and therefore recognized as contra-revenue. The cost to produce the free voucher units given to patients under this modified voucher program was recognized as promotional expense. Our net sales reflect only gammaCore and gammaCore Sapphire units sold either for new patients, or existing patients’ refills, and none of the gammaCore and gammaCore Sapphire units prescribed and dispensed through our voucher program. Our voucher program was terminated in December 2019.

We expense the cost, as incurred, of product damaged as a result of shipping. This expense, historically, has been immaterial. We expect to receive payment on all of our customer receivables within one year and therefore classify all receivables as current assets. In accordance with our policy, damaged or defective products are replaced at no charge under our standard warranty. A cash refund is allowed in our discretion under specific circumstances for undamaged and non-defective returned product.

Accounts receivable are net of an allowance for doubtful accounts, which are accounts from which payment is not expected to be received although product was provided, and revenue was earned. Receivables are written off when deemed uncollectible. Recoveries of receivables previously written off are recorded when received.

Revenue from the Veterans Administration and the Department of Defense

Revenue from sales of our products is recognized under terms of the Federal Supply Schedule, or FSS, and purchase orders from individual VA sites and a distributor who purchases our products on behalf of the DoD. Revenue from the VA includes sales of therapy for up to 93 days.

Sales to the VA and DoD are at a fixed price and are usually paid at the time of delivery.

A cash refund is allowed under specific circumstances for undamaged and non-defective products. Damaged or defective products are replaced at no charge.

United Kingdom Revenue

In the United Kingdom, an award from the Innovation Technology Payment program of the NHS and evidence-based recommendations published in December 2020 by NICE offer the potential for us to generate revenue from the treatment of CH. This is the primary commercial channel from which our United Kingdom revenue is derived. The first 93 days of therapy is free under this program. The cost to produce the free therapy in the 93-day period is recorded as promotional expense within selling, general and administrative expenses.

Effective April 1, 2021, gammaCore Sapphire will be included in the new MTFM long-term reimbursement policy which supports commissioners and providers in the use of selected NICE approved, clinically effective and cost-saving medical devices, diagnostics and digital technologies that will improve patient outcomes.

Sales in the United Kingdom are primarily in increments of 93-day therapy at a fixed price and are paid within 30 days.

Inventories

We value inventory at the lower of cost or net realizable value. Cost is determined on a first in first out basis. This policy requires us to make estimates regarding the net realizable value of our inventory, including an assessment of excess or obsolete inventory. We evaluate inventory for excess quantities and obsolescence based on an estimate of the future demand for our product within a specified timeframe and record an allowance to reduce the carrying value of inventory as determined necessary. The estimates we use for demand are also used for near-term capacity planning and inventory purchasing and are consistent with our revenue forecasts. We evaluate inventory with respect to our operating cycle and classify inventory as either current or long-term on our balance sheet. If our actual demand is less than our forecast demand, we may be required to take additional excess inventory charges, which would decrease gross margin and adversely impact net operating results in the future.

Income taxes

We assess whether a valuation allowance should be established against our deferred tax assets based on consideration of all available evidence, both positive and negative, using a more likely than not standard. This assessment considers, among other matters, the nature, frequency and severity of recent losses; a forecast of future profitability; the duration of statutory carryback and carryforward periods; our experience with tax attributes expiring unused; and tax planning alternatives.

Stock-based compensation

We recognize compensation expense associated with the issuance of equity instruments to employees and non-employees for their services. Based on the type of equity instrument, the fair value is estimated on the date of grant using the Black-Scholes option valuation model and is expensed in the consolidated financial statements over the service period. The input assumptions used in determining fair value are expected life, expected volatility, risk-free rate and expected dividend yield.

Loss contingencies

We are subject to claims and lawsuits in the ordinary course of business, including claims by employees or former employees, with respect to our products and involving commercial disputes, or shareholder actions. We accrue for loss contingencies when it is deemed probable that a loss has been incurred and the loss is estimable. The amounts accrued are based on the full amount of the estimated loss considering insurance proceeds, if applicable, and do not include legal fees expected to be incurred in connection with the loss contingency. Our consolidated financial statements do not reflect any material amounts related to unfavorable outcomes of claims and lawsuits to which we are currently a party because we currently believe that such claims and lawsuits are not expected to result in a material adverse effect on our financial condition. However, it is possible that these contingencies could materially affect our results of operations, financial position and cash flows in a particular period if we change our assessment of the likely outcome of these claims and lawsuits to which we are currently a party.

Emerging Growth Company Status

In April 2012, the JOBS Act was enacted by the federal government. Section107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period for complying with new or revised accounting standards. Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected to “opt out” of this provision and, as a result, we will comply with new or revised accounting standards when they are required to be adopted by public companies that are not emerging growth companies.

In addition, as an emerging growth company, we are not required to provide an auditor’s attestation report on our internal control over financial reporting in future annual reports on Form 10-K.

We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of our IPO (December 31, 2023), (b) in which we have total annual gross revenue of at least $1.07billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700million as of the prior June 30, and (2) the date on which we have issued more than $1.0billion in non-convertible debt during the priorthree-year period.

Results of Operations

Comparison of the years ended December 31, 2020 and 2019

The following table summarizes our results of operations for the years ended December 31, 2020 and 2019 with the changes in those items in dollars.

Years ended December 31,

(in thousands)

Operating expenses:

Restructuring and other severance related charges 464.6 1,997.3 (1,532.7 )

Other (income) expense:

Net Sales

Net sales for the year ended December 31, 2020 increased 46% as compared to 2019. The increase of $1.1 million is due to increased sales to the Department of Veterans Affairs and in the United Kingdom. This increase was partially offset by reduced sales in the U.S. commercial channel. We expect revenue from the Department of Veterans Affairs and United Kingdom to continue to be a majority of our revenue for the year ending December 31, 2021. We expect our revenue to increase during the year ending December 31, 2021.

Gross Profit

Gross profit increased $0.5 million for the year ended December 31, 2020 compared to 2019. This increase was due to the increase in net sales along with the cost of goods sold activity described immediately below. Gross margin was 50% and 52% for the years ended December 31, 2020 and 2019, respectively. This decrease in gross margin was primarily due to an inventory charge of $0.4 million recorded in 2020, which was the result of a book value adjustment of certain inventory components to net realizable value. Excluding the 2020 inventory charge, gross margin for the year ended December 31, 2020 was 63%. The increase in gross margin, excluding the 2020 inventory charge, was largely due to the more favorable absorption of labor and overhead costs, and product mix. We expect revenue to increase in 2021, which would result in a further increase in our gross margin. Our gross margin will also be impacted by product mix.

Research and Development

Research and development expenses of $4.2 million for the year ended December 31, 2020 decreased by $5.7 million, or 58%, as compared to 2019. This reduction was primarily due to significant reductions in near-term investment in research and development, including the early termination of our PREMIUM II clinical trial. We do not expect a material change in our research and development expense for the year ending December 31, 2021. Savings from the 2020 termination of our PREMIUM II clinical trial, may be partially offset, by the targeted expenditures to support research and development activities in other therapeutic indications.

Selling, General and Administrative

Selling, general and administrative expense of $21.8 million for the year ended December 31, 2020 decreased by $13.6 million, or 38%, as compared to 2019. This decrease in expenses was primarily driven by reductions of $5.3 million in personnel costs and $8.7 million in non-personnel costs for sales and marketing activities, partially offset by a $0.6 million write-off of an operating lease right of use asset in 2020.We do not expect a material increase in our selling, general, and administrative expense for the year ending December 31, 2021, however, we may make targeted expenditures to support our commercial efforts.

Restructuring and Other Severance Related Expenses

Restructuring and other severance related costs of $464,606 for the year ended December 31, 2020 primarily consist of severance related expenses in connection with personnel changes in the position of Chief Medical Officer. Restructuring and other related charges for the year ended December 31, 2019 of $1,997,300 were due to our restructuring plan announced on May 29, 2019, and expenses incurred in connection with separation agreements with two of our former officers.

Interest and Other Income

Interest and other income of $84,327 and $970,594 for the years ended December 31, 2020 and 2019, respectively, primarily consisted of interest earned on cash, cash equivalents and marketable securities. Interest income was slightly offset by interest expense related to our loan under the PPP and financing certain of our insurance premiums.

Liquidity and Capital Resources

At December31, 2020 our cash, cash equivalents, and marketable securities was $22.6 million compared to $24.1 million at December 31, 2019.

December 31,

(in millions)

Net cash (used in) provided by

Operating activities $ (20.1 ) $ (45.1 )

Investing activities $ (8.0 ) $ 51.0

Financing activities $ 19.0 $ 0.2

Operating Activities

Net cash used in operating activities was $20.1 million and $45.1 million for the years ended December 31, 2020 and 2019, respectively. This decrease is primarily due to (i) a decrease in our net loss from operations, (ii) less cash being used for working capital components such as inventory and accrued bonuses, and (ii) the sale of our state NOLs, and research and development tax credits for the year ended December 31, 2018 for which we received a net cash amount of approximately $1.2 million in 2020.

Investing Activities

Net cash used in investing activities was $8.0 million and $51.0 million for the years ended December 31, 2020 and 2019, respectively. This decrease reflects the decline in funds received from the maturity of marketable securities, partially offset by a decrease in our purchase of marketable securities.

Financing Activities

Net cash provided by financing activities was $19.0 million for the year ended December 31, 2020, primarily representing cash proceeds of $17.7 million from the issuance of common stock, $1.4 million from our loan under the PPP, and $1.2 million from a debt financing of certain of our insurance premiums. These positive cash flows were slightly offset by $1.1 million in repayments related to the financing of our insurance premiums. During the year ended December 31, 2019, we received proceeds of $0.8 million from the Financing Agreement to fund certain of our insurance premiums of which $0.7 million was repaid as of December 31, 2019.

Liquidity Outlook

Because we have had recurring losses, negative cash flows from operating activities, limited cash on hand and expect to continue to incur losses for the near future, the report of our independent auditors with respect to our financial statements as of December 31, 2020 and for the year ended December 31, 2020 contain an explanatory paragraph as to the factors that raise substantial doubt about the Company’s ability to continue as a going concern.

Our financial statements have been prepared assuming we will continue as a going concern. We have experienced recurring losses since our inception. We incurred net losses of $23.5 million and $45.1 million for the years ended December 31, 2020 and 2019, respectively. As of December 31, 2020, our accumulated deficit was $107.0 million.

As of December 31, 2020, our cash, cash equivalents and marketable securities totaled $22.6 million.

Lincoln Park Purchase Agreement

On March 27, 2020, we entered into a Purchase Agreement with Lincoln Park giving us the right to sell to Lincoln Park shares of common stock having an aggregate value of up to $25,000,000, subject to certain significant limitations of the amount and timing of any such sales due to terms and conditions set forth in the Purchase Agreement.

During 2020, we sold 10,179,676 shares of common stock under the Purchase Agreement, resulting in aggregate proceeds of approximately $15.5 million to the Company. As of December 31, 2020, we had the right to sell under the Purchase Agreement approximately $9.5 million of additional shares of common stock. In January 2021, we sold an additional 2,750,000 shares of common stock under the Purchase Agreement, resulting in aggregate proceeds of approximately $6.9 million to the Company. We terminated the agreement on March 11, 2021.

Paycheck Protection Program Loan (PPP)

In May 2020, we entered into a promissory note, or the Note with Citibank, N.A., or the Lender, evidencing an unsecured loan, or the Loan, in the amount of $1.4 million made to us under the PPP. The loan cash proceeds in this amount were received by us in May 2020. The PPP is a program of the U.S. Small Business Administration or the SBA, established under the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act. Under the PPP, the proceeds of the Loan may be used to pay payroll and make certain covered interest payments, lease payments and utility payments, or Qualifying Expenses. We used the entire Loan amount for Qualifying Expenses under the PPP.

The interest rate on the Loan is 1.0% per annum. The Note matures on February 2, 2023. On September 2, 2021, or the First Payment Date, we are required to pay all accrued interest under the Loan that is not forgiven in accordance with the terms of the PPP. Additionally, on the First Payment Date and on the second day of each month thereafter until February 2, 2023, we must make equal monthly payments of the amount of principal under the Loan that is not forgiven in accordance with the terms of the PPP and related accrued interest thereon. We intend to apply for loan forgiveness under the guidelines set out by the SBA, which would result in a delay or elimination of the repayment period, if accepted in whole or in part by the Lender and SBA. The Note contains events of default and other conditions customary for a Note of this type.

Under the terms of the CARES Act, PPP loan recipients can be granted forgiveness for all or a portion of the loan granted under the PPP, with such forgiveness to be determined, subject to limitations, based on the use of the loan proceeds for payment of Qualifying Expenses, and provided certain payroll thresholds are maintained. The terms of any forgiveness also may be subject to further requirements in any regulations and guidelines the SBA may adopt. No assurance can be provided that we will obtain forgiveness of the Note in whole or in part. Official guidance and interpretations of the requirements of the program have been limited and have been changing over time. Despite our good-faith belief that we properly satisfied all eligibility requirements for the PPP loan, there has been increasing scrutiny of public companies that received loans, and there can be no assurance that we will not become subject to regulatory or other scrutiny and a request for repayment of some or all of the loan.

Sale of Net Operating Losses

We may be eligible, from time to time, to receive cash from the sale of our Net Operating Losses under the State of New Jersey’s NOL Transfer Program. On May 6, 2020 we received a net cash amount of approximately $1.2 million from the sale of our state NOLs and research and development tax credits for the year ended December 31, 2018.

Outlook

We expect to continue to incur substantial negative cash flows from operations for at least the next several years as we commercialize gammaCore. We intend to continue to make targeted investments in building our commercial infrastructure and research and development.

In July 2020, we received an EUA for use of its gammaCore Sapphire CV nVNS therapy for the acute treatment of asthma exacerbations in known or suspected COVID-19 patients. This EUA is expected to remain in effect for the duration of the COVID-19 pandemic justifying emergency use of these devices unless terminated or revoked by the FDA (after which products may no longer be used). The length of the effective period of this EUA is uncertain and the Company may have to incur significant expenditures to achieve sales of gammaCore Sapphire CV. There can be no assurance as to what impact the EUA and potential sales of gammaCore Sapphire CV will have on us, our business operations and financial condition and gammaCore Sapphire CV has not yet generated significant revenue.

Although we expect that our existing capital resources, will enable us to fund our operating expenses and capital expenditure requirements for at least the next 12 months, this estimate is based on assumptions that may prove to be wrong, and could exhaust our available capital resources sooner than we expect. Changes, including those relating to the payer and competitive landscape, our commercialization strategy, our development activities and regulatory matters, may occur beyond our control that would cause us to consume our available capital more quickly.

We may need to reduce our activities significantly more than our current operating plan and cash flow projections assume in order to fund operations for at least the next 12 months. There is no assurance that we will generate sufficient cash flow and funding through our operating results or the sale of securities or from a strategic transaction or otherwise, raising substantial doubt about our ability to continue as a going concern within one year of the date the accompanying financial statements are issued. The inability to generate sufficient cash flow or raise funds through the sources discussed above could have a material adverse effect on our business, results of operations, and financial condition, and could require us to reduce or curtail activities, or cease operations.

Our expected cash requirements for the next 12 months and beyond are based on the commercialization success of our products and our ability to reduce operating expenses. There are significant risks and uncertainties as to our ability to achieve these operating results, including as a result of the potential adverse impact on our business from the ongoing COVID-19 pandemic, Due to these risks and uncertainties, we may need to reduce our activities significantly more than our current operating plan and cash flow projections assume in order to fund operations for the next 12 months. There can be no assurance that we will have sufficient cash flow and liquidity to fund our planned activities, which could force us to significantly reduce or curtail our activities and, ultimately, potentially cease operations. These conditions raise substantial doubt about our ability to continue as a going concern.

Even if we are not required to curtail our activities sooner, our ability to execute our operating plan beyond the next 12 months depends on our ability to increase revenue, reduce operating expenses and obtain additional funding through the sale of equity and or debt securities, a strategic transaction or otherwise. However, these alternatives may not be available to us on attractive terms, or at all. There is no assurance that we will generate sufficient cash flow and funding through our operating results or the sale of securities or from a strategic transaction or otherwise, raising substantial doubt about our ability to continue as a going concern within one year of the date these financial statements are issued. The inability to generate sufficient cash flow or raise funds through the sources discussed above could have a material adverse effect on our business, results of operations, and financial condition, and could require us to reduce or curtail activities, or cease operations.

Off-Balance Sheet Arrangements

We did not have during the periods presented, and we do not have any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.

Impact of Recently Issued Accounting Standards

In the normal course of business, we evaluate all new accounting pronouncements issued by the FASB, SEC, or other authoritative accounting bodies to determine the potential impact they may have on our Consolidated Financial Statements. See Note 2 “Basis of Presentation” of the notes to our consolidated financial statements in this Annual Report for additional information about these recently issued accounting standards and their potential impact on our financial condition or results of operations.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

We develop our products in the United States and sell those products into more than four countries. As a result, our financial results could be affected by factors such as changes in foreign currency exchange rates or weak economic conditions in foreign markets. Most of our sales in Europe are denominated in the U.S.dollar and Euro. As our sales in currencies other than the US dollar increase, our exposure to foreign currency fluctuations may increase. In addition, changes in exchange rates also may affect the end-user prices of our products compared to those of our foreign competitors, who may be selling their products based on local currency pricing. These factors may make our products less competitive in some countries.

If the U.S. dollar uniformly increased or decreased in strength by 10% relative to the currencies in which our sales were denominated, our net income would have correspondingly increased or decreased by an immaterial amount for the year ended December 31, 2020.

Our exposure to market interest rate risk is confined to our cash and cash equivalents and marketable securities. The goals of our investment policy are preservation of capital, fulfillment of liquidity needs and fiduciary control of cash and investments. We also seek to maximize income from our investments without assuming significant risk. To achieve our goals, we may maintain a portfolio of cash equivalents and investments in a variety of securities of high credit quality. The securities in our investment portfolio, if any, are not leveraged, are classified as available for sale and are, due to their very short-term nature, subject to minimal interest rate risk. We currently do not hedge interest rate exposure. Because of the short-term maturities of our cash equivalents, we do not believe that an increase in market rates would have any material negative impact on interest income recognized in our statement of operations. We have no investments denominated in foreign currencies and therefore our investments are not subject to foreign currency exchange risk. We contract with CROs, investigational sites, suppliers and other vendors in Europe and internationally. We are subject to fluctuations in foreign currency rates in connection with these agreements. We do not hedge our foreign currency exchange rate risk.

All of the potential changes noted above are based on sensitivity analyses performed on our financial position as ofDecember 31, 2020.

Item 8. Financial Statements and Supplementary Data.

The financial statements required to be filed pursuant to this Item8 are appended to this Annual Report. An index of those financial statements is found in Item15.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the rules and forms, and that such information is accumulated and communicated to us, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours are designed to do, and we apply our judgment in evaluating whether the benefits of the controls and procedures that we adopt outweigh their costs.

As required by Rule 13a-15(b) of the Exchange Act, an evaluation as of December 31, 2020 was conducted under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures, as of December 31, 2020, were effective for the purposes stated above.

Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rule 13a-15(f) under the Exchange Act. Internal control over financial reporting is a process designed under the supervision and with the participation of our management including our Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets: (ii) provide reasonable assurance (a) transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting policies (b) our receipts and expenditures are being made only in accordance with authorizations of our management and directors: and (c) regarding the prevention or timely detection of the unauthorized acquisition use or disposition of assets that could have a material effect on our financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

As of December 31, 2020, our management conducted an evaluation of the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control – Integrated Framework (2013). Based on this evaluation, our management concluded that, as of December 31, 2020 our internal control over financial reporting was effective.

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the quarter ended December 31, 2020 that has materially affected or is reasonably likely to materially affect our internal control over financial reporting.

Item 9B. Other Information

Effective March 11, 2021, the Company terminated the Purchase Agreement with Lincoln Park. No material termination penalties were incurred. The foregoing information is included in this Annual Report on Form 10-K in lieu of a Current Report on Form 8-K.

PART III

Item 10.Directors, Executive Officers and Corporate Governance

The information required by this Item is incorporated herein by reference to the information that will be contained in our proxy statement related to the 2021 Annual Meeting of Stockholders or an amendment to this Annual Report, which we intend to file with the SEC within 120 days of the end of our fiscal year pursuant to General Instruction G(3) of Form 10-K.

Item 11. Executive Compensation

The information required by this Item is incorporated herein by reference to the information that will be contained in our proxy statement related to the 2021 Annual Meeting of Stockholders or an amendment to this Annual Report, which we intend to file with the SEC within 120 days of the end of our fiscal year pursuant to General Instruction G(3) of Form 10-K.

Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Item 404 of Regulation S-K. The information required by this Item is incorporated herein by reference to the information that will be contained in our proxy statement related to the 2021 Annual Meeting of Stockholders or an amendment to this Annual Report, which we intend to file with the SEC within 120 days of the end of our fiscal year pursuant to General Instruction G(3) of Form 10-K.

Item 13.Certain Relationships and Related Transactions, and Director Independence

The information required by this Item is incorporated herein by reference to the information that will be contained in our proxy statement related to the 2021 Annual Meeting of Stockholders or an amendment to this Annual Report, which we intend to file with the SEC within 120 days of the end of our fiscal year pursuant to General Instruction G(3) of Form 10-K.

Item 14.Principal Accounting Fees and Services

The information required by this Item is incorporated herein by reference to the information that will be contained in our proxy statement related to the 2021 Annual Meeting of Stockholders or an amendment to this Annual Report, which we intend to file with the SEC within 120 days of the end of our fiscal year pursuant to General Instruction G(3) of Form 10-K.

PARTIV

Item 15. Exhibits, Financial Statement Schedules

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

(1) Financial Statements:

​

Reports of Independent Registered Public Accounting Firms F-2

Consolidated Balance Sheets F-4

Consolidated Statements of Operations F-5

Consolidated Statements of Comprehensive Loss F-6

Consolidated Statements of Equity F-7

Consolidated Statements of Cash Flows F-8

Notes to Consolidated Financial Statements F-9

(2) Financial Statement Schedules:

All financial statement schedules have been omitted because they are not applicable, not required or the information required is shown in the financial statements or the notes thereto.

(3) Exhibits. The exhibits filed as part of this Annual Report on Form 10-K are set forth on the Exhibit Index immediately following Item 16. The Exhibit Index is incorporated herein by reference.

Item 16. Form 10-K Summary

None.

Exhibit Number Description

3.1*** Certificate of Incorporation of electroCore, Inc.

3.2*** Bylaws of electroCore, Inc.

4.2* Description of Capital Stock

10.2†** electroCore, Inc. 2018 Omnibus Equity Incentive Plan

10.13†** Form of electroCore, Inc. Management Severance Plan

10.14†* electroCore, Inc. Non-Employee Director Compensation Policy

10.17** Form of Common Unit Warrant

10.18** Form of Series A Warrant

10.19** Form of Bridge Warrant

21.1* List of subsidiaries of electroCore, Inc.

23.1* Consent of Marcum LLP

23.2* Consent of KPMG LLP

101.INS Inline XBRL Instance Document

101.SCH Inline XBRL Taxonomy Extension Schema Document

101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document

* Filed herewith.

† Indicates management agreement

SIGNATURES

Pursuant to the requirements of Section13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

electroCore, Inc.

Date: March 11, 2021 By: /s/ DANIEL S. GOLDBERGER

Daniel S. Goldberger

Chief Executive Officer and Director (Principal Executive Officer)

Date: March 11, 2021 By: /s/ BRIAN M. POSNER

Brian M. Posner

Chief Financial Officer (Principal Financial and Accounting Officer)

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

Name Title Date

/s/ Michael G. Atieh Chairman of the Board March 11, 2021

Michael G. Atieh

/s/ Daniel S. Goldberger Director March 11, 2021

Daniel S. Goldberger

/s/ John Gandolfo Director March 11, 2021

John Gandolfo

/s/ Joseph P. Errico Director March 11, 2021

Joseph P. Errico

/s/ Thomas Patton Director March 11, 2021

Thomas Patton

/s/ Thomas J. Errico, M.D. Director March 11, 2021

Thomas J. Errico, M.D.

/s/ Trevor J. Moody Director March 11, 2021

Trevor J. Moody

/s/ Stephen L. Ondra, M.D. Director March 11, 2021

Stephen L. Ondra, M.D.

/s/ Peter Cuneo Director March 11, 2021

Peter Cuneo

​​

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

​

Reports of Independent Registered Public Accounting Firms F-2

Consolidated Balance Sheets as of December 31, 2020 and 2019 F-4

Notes to Consolidated Financial Statements F-9

.

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors

electroCore, Inc.:

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of electroCore, Inc., Subsidiaries and Affiliate (the “Company”) as of December 31, 2020,the related consolidated statements of operations, comprehensive loss, equity and cash flows for the year ended December 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and the results of its operations and its cash flows for the year ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

Explanatory Paragraph – Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 3, the Company has incurred recurring losses and needs to raise additional funds to meet its obligations and sustain its operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

/s/ Marcum llp

Marcum llp

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

New York, NY

March 11, 2021

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

electroCore, Inc.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of electroCore, Inc., Subsidiaries and Affiliate (the Company) as of December31,2019,therelatedconsolidatedstatementsofoperations,comprehensiveloss,equity, and cash flows for the year ended December 31, 2019, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019, and the results of its operations and its cash flows for the year ended December 31, 2019, in conformity with U.S. generally accepted accountingprinciples.

Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the consolidated financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.

/s/ KPMG LLP

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

Short Hills, New Jersey

March 30, 2020

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

Consolidated Balance Sheets

December 31,

Assets

Current assets:

Liabilities and Equity

Current liabilities:

Note payable, noncurrent 1,097,946 —

Commitments and contingencies (Note 18)

Accumulated other comprehensive loss (251,467 ) (41,295 )

See accompanying notes to the consolidated financial statements.

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

Consolidated Statements of Operations

Years ended December 31,

Operating expenses:

Restructuring and other severance related charges 464,606 1,997,292

Other (income)expense

See accompanying notes to the consolidated financial statements.

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

Consolidated Statements of Comprehensive Loss

Years ended December 31,

Other comprehensive (loss)/income:

Foreign currency translation adjustment (207,012 ) (145,418 )

See accompanying notes to consolidated financial statements.

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

Consolidated Statements of Equity

For the Years Ended December 31, 2020 and 2019

Additional Accumulated other Total electroCore, Inc.,

Shares Amount capital deficit income (loss) equity interest equity

Issuance of warrants in settlement of lawsuit — — 16,692 — — 16,692 — 16,692

Equity financing commitment fee* 692,514 693 (693 ) — — — — —

*Reflects commitment shares issued in accordance with the Company's equity facility purchase agreement with Lincoln Park Capital. For additional information seeNote 12. Stockholders' Equity, Lincoln Park Purchase Agreement.

See accompanying notes to the consolidated financial statements.

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

Consolidated Statements of Cash Flows

Year ended December 31,

Cash flows from operating activities:

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

Amortization of marketable securities premium(discount) 31,096 (530,104 )

Cloud computing arrangement implementation costs — (1,114,568 )

Legal expense settled with stock 156,434 —

Inventory reserve charge 433,918 —

Write-off of right of use operating lease 557,543 —

Noncash portion of litigation settlement — 16,692

Changes in operating assets and liabilities:

Accrued expense and other current liabilities (536,561 ) (1,036,721 )

Operating lease liabilities (486,445 ) —

Cash flows from investing activities:

Purchases of property and equipment — (69,675 )

Cash flows from financing activities:

Proceeds from shares issued, net of related expenses 17,489,563 —

Net (decrease) increase in cash and cash equivalents (9,321,854 ) 5,963,507

Supplemental cash flows disclosures:

Proceeds from sale of state net operating losses $ 1,170,890 $ —

Supplemental schedule of noncash activity:

Accounts payable paid through issuance of common stock $ 1,548,702 $ —

See accompanying notes to consolidated financial statements.

ELECTROCORE,INC., SUBSIDIARIES AND AFFILIATE

Notes to Consolidated Financial Statements

Note 1. The Company

electroCore, Inc. (“electroCore” or the “Company”) isa medical device company,engagedin the commercialization and development of aplatform non-invasiveVagusNerveStimulation (“nVNS”)therapy that can be self-administered by patients.electroCorewasfoundedin 2005and has primarily focused onheadache conditions(migraineandclusterheadache).

electroCore, headquartered in New Jersey, has two wholly owned subsidiaries: electroCore Germany GmbH, and electroCore UK Ltd. The Company has ceased its operations in Germany, although sales to Germany are still supported by electroCore UK Ltd. In addition, an affiliate, electroCore (Aust) Pty Limited (“electroCore Australia”), is subject to electroCore’s control on a basis other than voting interests and is a variable interest entity (“VIE”), for which electroCore is the primary beneficiary. As of May 2017, the VIE ceased operations.

In January 2018, the U.S. Food and Drug Administration ("FDA") cleared the use of gammaCore, the Company's first generation disposable non-invasive vagus nerve stimulator therapy for the treatment of pain associated with migraine headache in adult patients. Previously in April 2017, the FDA cleared the use of gammaCore for the acute treatment of pain associated with episodic cluster headache in adult patients. Effective August 1, 2018, the Company announced gammaCore Sapphire, a rechargeable and reloadable version of the product for multi-year use, was available in the United States. The Company continues to market the non-reloadable disposable version of its gammaCore products in certain markets and to deploy it for use in clinical studies where a rechargeable version is not necessary.

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

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

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

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

Note 2. Summary of Significant Accounting Policies

(a) Basis of Presentation

The accompanying consolidated financial statements were prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), and the rules and regulations of the Securities and Exchange Commission ("SEC").

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

Notes to Consolidated Financial Statements — Continued

(b) Principles of Consolidation

The accompanying consolidated financial statements include the accounts of electroCore and its wholly owned subsidiaries. electroCore (Aust) Pty Limited, a VIE for which electroCore is the primary beneficiary, is also consolidated with the non-controlled equity presented as non-controlling interest. The VIE has ceased its operations. All intercompany balances and transactions have been eliminated in consolidation.

(c) Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include valuation of inventory, stock compensation, and contingencies.

(d) Revenue Recognition

The Company accounts for its revenue transactions under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606,Revenue from Contracts with Customers(“ASC Topic 606”). In accordance with ASC Topic 606, the Company recognizes revenueswhen its customers obtain control of its product for an amount that reflects the consideration it expects to receive from its customers in exchange for that product. To determine revenue recognition for contracts that are determined to be in scope of ASC Topic 606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies the performance obligation. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer.Once the contract is determined to be within the scope of ASC Topic 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct.The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when such performance obligation is satisfied.

The transaction price is based on the consideration that the Company expects to receive in exchange for its products and includes the fixed per-unit price of the product and variable consideration in the form of trade credits, vouchers, rebates, and co-payment assistance. The per-unit price is based on the Company’s established wholesale acquisition cost less a contractually agreed upon distributor discount with the customer.

Trade credits are discounts that are contingent upon a timely remittance of payment and are estimated based on historical experience. Damaged or defective products are replaced at no charge under the Company’s standard warranty. A cash refund is allowed under specific circumstances for undamaged and non-defective returned products.

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

(e) Cash and Cash Equivalents

Cash and cash equivalents include all highly liquid investments with a maturity of three months or less when purchased. The Company’s accounts are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000 per financial institution in the United States, and up to £85,000 by the Financial Services Compensation Scheme (“FSCS”) per financial institution in the United Kingdom.

(f) Marketable Securities

Marketable securities, all of which are available-for-sale, consist of corporate debt securities, U.S. bonds and U.S. sponsored agencies. Marketable securities are carried at fair value, with unrealized gains and losses reported as accumulated other comprehensive income, except for losses from impairments which are determined to be other-than-temporary. Realized gains and losses and declines in value judged to be other-than-temporary are included in the determination of net loss and are included in interest and other income net. Fair values are based on quoted market prices at the reporting date. Interest and dividends on available-for-sale securities are included in Interest and other income.

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

Notes to Consolidated Financial Statements — Continued

(g) Concentration of Credit Risk

Cash, cash equivalents and marketable securities are financial instruments that potentially subject the Company to concentration of credit risk. As of December 31, 2020, the Company's cash equivalents and marketable securities were largely comprised of money market funds and U.S. treasury bonds. The Company has established guidelines relative to diversification and maturities that are designed to help ensure safety and liquidity. These guidelines are periodically reviewed to take advantage of trends in yields and interest rates. As of December 31, 2020, approximately 95.8% of the Company’s cash, cash equivalents and marketable securities was denominated in U.S. Dollars, the balance is subject to foreign exchange risk.

(h) Accounts Receivable

Accounts receivable are recorded at the invoiced amount and do not bear interest. The Company maintains an allowance for doubtful accounts for estimated losses inherent in its accounts receivable portfolio. Management considers an account receivable to be past due when it is not settled under its stated terms. In establishing the required allowance, management considers historical losses adjusted to take into account current market conditions and customers financial condition, the amount of receivables in dispute, and the current receivables aging and current payment patterns. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. During the years ended December 31, 2020 and 2019, the Company's allowance for doubtful accounts was immaterial. The Company does not have any off balance sheet credit exposure related to its customers.

(i) Inventories

Inventory, which consists of raw materials, work-in-process and finished product, is stated at the lower of cost or net realizable value. Inventory is valued on a first-in first-out basis. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.

The Company evaluates inventory with respect to its operating cycle and classifies inventory as current or long-term on its balance sheet. Based upon estimated production needs and current inventory levels, the Company determined the amount of inventory necessary for the next twelve months. Any amounts over this projection are reclassified as Inventories, noncurrent.

In addition, the Company’s product is subject to strict quality control and monitoring which the Company performs throughout the manufacturing process. If certain units of product no longer meet quality specification or become obsolete, the Company records a charge to cost of sales sold to write down such unmarketable inventory to zero.

(j) Property and Equipment

Property and equipment are stated at historical cost.Depreciation is computed by the straight-line method based on the estimated useful lives of the respective assets, as discussed below. Amounts expended for maintenance and repairs are charged to expense as incurred.

Depreciation and leasehold improvement amortization is computed using the following estimated useful lives:

Machinery and equipment 3–15 years

Leasehold improvements Lesser of estimated useful life or term of lease

Furniture and fixtures 5–10 years

Computer equipment 5 years

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

Notes to Consolidated Financial Statements — Continued

(k) Leases

The Company determines if an arrangement is a lease at inception. For each lease, the lease term is determined at the commencement date and includes renewal options and termination options when it is reasonably certain that the Company will exercise that option. Operating leases with the lease terms greater than one year are included in operating lease right-of-use (“ROU”) assets and current and long-term operating lease liabilities in the Company’s consolidated balance sheets.

Operating lease ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term using an estimated rate of interest the Company would have to pay to borrow equivalent funds on a collateralized basis at the lease commencement date. The operating lease ROU assets are based on the liability adjusted for any prepaid or deferred rent and lease incentives. The incremental borrowing rate was utilized to discount lease payments over the expected term given that the Company’s operating leases do not provide an implicit rate. The Company estimates the incremental borrowing rate to reflect the profile of secured borrowing over the expected term of the leases based on the information available at the later of the date of adoption or the lease commencement date. Rent expense for the operating lease is recognized on a straight-line basis over the lease term.

The new lease accounting guidance permits companies to utilize certain practical expedients in their implementation of the new standard. The Company elected this package of practical expedients and was therefore not required to reassess the following upon adoption: (i) whether an expired or existing contract met the definition of a lease; (ii) the lease classification at January 1, 2019 for existing leases; and (iii) whether leasing costs previously capitalized as initial direct costs would continue to be amortized. This allowed the Company to continue to account for its existing office space leases as operating leases. Upon adoption, the Company did not have an adjustment to the opening balance of retained earnings due to the election of these practical expedients.

(l)Cloud Computing Arrangement

Implementation costs for the Company’s cloud computing arrangement (“CCA”) are capitalized and amortized using the straight-line method over the life of the arrangement. The Company has capitalized implementation costs incurred in implementing its cloud computing arrangements, which is a hosting arrangement that is a service contract per FASB Accounting Standards Update (“ASU”) 2018-15. These costs include payroll costs of employees devoting time to the project and external direct costs for materials and services are capitalized.Software maintenance and training costs are expensed in the period in which they are incurred. The capitalized costs are included as a component of other assets.

(m) Impairment of Long-Lived Assets

Long lived assets, such as property, plant, and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or asset group be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying amount. If the carrying amount of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying amount exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values, and third-party independent appraisals, as considered necessary.

(n) Stock-based Compensation

The Company accounts for stock-based compensation in accordance with the ASC Topic 718, Compensation – Stock Compensation. The Company estimates the fair value of stock option awards using the Black-Scholes option pricing model on the date of the grant. Restricted stock unit awards and restricted stock awards without a market condition are valued based on the closing price of the Company’s common stock on the date of the grant. Compensation expense reflects actual forfeitures and is primarily recognized on a straight-line basis over the requisite service period of the individual grants, which typically equals the vesting period.

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

Notes to Consolidated Financial Statements — Continued

(o) Income Taxes

The Company uses the asset and liability method of accounting for income taxes. Under this method, deferred taxes are recognized based on the differences between financial statement and income tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The Company provides a full valuation allowance on substantially all deferred tax assets. The provision for income taxes represents the current state tax payable for the period. The federal tax provision is immaterial given the Company reports losses in all its taxable jurisdictions and is recording a full valuation allowance on the net deferred tax asset. The Company recognizes the effect of an income tax position only if, based on its merits, the position is more likely than not to be sustained on audit by the taxing authorities. Interest and penalties related to uncertain tax positions are recorded as income tax expense.

(p) Research and Development

Research and development costs are expensed as incurred. These costs include, but are not limited to, costs related to clinical trials, and compensation and related overhead for employees and consultants involved in research and development activities.

(q) Foreign Currency Translation and Transactions

The functional currency of the Company’s international operations has been determined to be the respective local currency. The Company translates functional currency assets and liabilities to their U.S. dollar equivalents at exchange rates in effect at the balance sheet date and translates functional currency income and expense amounts to their U.S. dollar equivalents at average exchange rates for the period. The U.S. dollar affects that arise from changing translation rates are recorded in other comprehensive loss. Foreign currency transaction gains and losses related to assets and liabilities that are denominated in a currency other than the functional currency are reported in the Consolidated Statements of Operations in the period they occur.

(r) Segment Information

Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision-maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company views its operations and manages its business as one operating segment.

(s) Recently Adopted Accounting Standards

In August 2018, the FASB issued guidance which modified the disclosure requirements for fair value measurements. The guidance is effective for the year ended December 31, 2020. The Company adopted this guidance, and it was properly reflected in the consolidated financial statements. The impact on the consolidated financial statements was immaterial.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326); Measurement of Credit Losses on Financial Instruments, ASU 2016-13 changes the impairment model for most financial assets, including trade and other receivables, from an incurred loss method to a new forward looking approach based on expected losses. The new approach includes the consideration of historical experience, current conditions, and reasonable and supportable forecasts. The Company adopted this guidance and determined the impact on the consolidated financial statements was immaterial.

(t) Recently Accounting Standards Not Yet Adopted

In December 2019, the FASB issued an update to simplify the accounting for income taxes and improve consistent application by clarifying or amending existing guidance. This guidance is effective for the year ended December 31, 2021. The Company does not expect this guidance to have a material impact on its consolidated financial statements upon adoption.

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

Notes to Consolidated Financial Statements — Continued

Note 3. Significant Risks and Uncertainties

Going Concern

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

The Company has experienced significant net losses, and it expects to continue to incur losses for the near future as it operates its sales and marketing infrastructure, and works to increase market acceptance of its gammaCore therapy for the acute treatment of episodic cluster headache (“eCH”), the prevention of cluster headache, and the preventive and acute treatment of migraine. The Company has never been profitable and has incurred net losses in each year since its inception.

The Company incurred net losses of $23.5 million and $45.1 million for the years ended December 31, 2020 and 2019, respectively. As of December 31, 2020, its accumulated deficit was $107.0 million.

The Company’s expected cash requirements for the next 12 months and beyond are based on the commercial success of its products and its ability to reduce operating expenses. There are significant risks and uncertainties as to its ability to achieve these operating results, including as a result of the adverse impact on its headache business from the COVID-19 pandemic and significant potential investment necessary to generate potential sales of gammaCore SapphireTM CV. Due to these risks and uncertainties, the Company may need to reduce its activities significantly more than in its current operating plan and cash flow projections assume in order to fund its operations beyond one year of the date the accompanying financial statements are issued. There can be no assurance that the Company will have sufficient cash flow and liquidity to fund its planned activities, which could force it to significantly reduce or curtail its activities and, ultimately, potentially cease operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

There is no assurance that the Company will generate sufficient funding through its operating results or financing activity, raising substantial doubt about the Company’s ability to continue as a going concern within one year of the date the accompanying financial statements are issued. The accompanying financial statements do not include any adjustment that might result from the outcome of this uncertainty.

Concentration of Revenue Risks

The Company earns a significant amount of its revenue (i) in the United States from the Department of Veterans Affairs and Department of Defense pursuant to its qualifying contract under the Federal Supply Schedule and open market sales to individual Department of Veterans Affairs facilities and (ii) in the United Kingdom from the National Health Service. In total, net sales from these two channels represented 86.9% and 57.3% of the Company’s net sales for years ended December 31, 2020 and 2019, respectively. Each of these two channels accounted for 10% or more of the Company's net sales as summarized below:

Years ended December 31,

Revenue channel:

Department of Veterans Affairs and Department of Defense 57.9 % 31.1 %

National Health Service 29.0 % 26.2 %

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

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

Foreign Currency Exchange Risks

The Company has foreign currency exchange risk related to revenue and operating expenses in currencies other than the local currencies in which it operates. The Company is exposed to currency risk from the potential changes in functional currency values of its assets, liabilities, and cash flows denominated in foreign currencies.

COVID-19 Risks and Uncertainties

The Company continues to monitor the impact of the COVID-19 pandemic on all aspects of its business and geographies, including how it will impact business partners. While the Company experienced disruptions during the year ended December 31, 2020 from the COVID-19 pandemic, it is unable to predict the full impact that the COVID-19 pandemic may have on its financial condition, results of operations and cash flows due to numerous uncertainties. These uncertainties include the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact and the direct and indirect economic effects of the pandemic and containment measures, among others. The outbreak of COVID-19 in many countries, including the United States, has significantly adversely impacted global economic activity and has contributed to significant volatility and negative pressure in financial markets. Depending upon the duration and severity of the pandemic, the continuing effect on the Company's results and outlook over the long term remains uncertain.

Note 4. Revenue Recognition

Geographical Net Sales

The following table presents net sales disaggregated by geographic area:

Years ended December 31,

Geographic Market

Performance Obligations

Revenue, net of discounts, vouchers, rebates, returns, and co-payment assistance is solely generated from the sales of the gammaCore products. Revenue is recognized when delivery of the product is completed. The Company deems control to have transferred upon the completion of delivery because that is the point in which (1) it has a present right to payment for the product, (2) it has transferred the physical possession of the product, (3) the customer has legal title to the product, (4) the customer has risks and rewards of ownership and (5) the customer has accepted the product. After the products have been delivered and control has transferred, the Company has no remaining unsatisfied performance obligations.

Revenue is measured based on the consideration that the Company expects to receive in exchange for gammaCore, which represents the transaction price.The transaction price includes the fixed per-unit price of the product and variable consideration in the form of trade credits, rebates, and co-payment assistance. The per-unit price is based on the Company’s established wholesale acquisition cost less a contractually agreed upon distributor discount with the customer.

Trade credits are discounts that are contingent upon a timely remittance of payment and are estimated based on historical experience. For the years ended December 31, 2020 and 2019, trade credits and discounts were immaterial.

In October 2018, the Company launched itsPartners for Coverage program that allows eligible commercial insurance patients uninterrupted access to gammaCore for up to two months while insurance coverage is being pursued. In February 2019, this program was modified to provide therapy to patients for up to 12 months while insurance coverage is being pursued. In December 2019, the Company terminated this program.

Reimbursement for co-payments made by patients under the co-payment assistance program is considered variable consideration. Beginning in February 2019, eligible patients could receive a reduction of up to $300 from the cost of co-payments for the first month of therapy and a reduction of up to $250 from the cost of each refill for a maximum of 12 months. Effective March 1, 2020, the amount of monthly co-payment assistance was reduced to a maximum of $100 per prescription. For the years ended December 31, 2020 and 2019, net sales reflect a reduction for the reduced cost of therapy under the co-payment assistance program. The calculation of the accrual is based on an estimate of claims and the cost per claim that the Company expects to incur associated with inventory that exists in the distribution channel at period end.

Managed care rebates represent our estimated obligations to pharmacy benefit managers. Rebate accruals are recognized in the same period the related revenue is recognized. Gross to net accruals based on estimated rebates were determined to bede minimis.

Contract Balances

TheCompany generally invoices the customer and recognizes revenue once its performance obligations are satisfied, at which point payment is unconditional. Accordingly, under ASC606, the Company’s contracts with customers did not give rise to contract assets or liabilities during the year endedDecember 31, 2020and2019.

Agreed upon payment terms with customers are within120days of shipment. Accordingly, contracts with customers do not include a significant financing component.

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

Notes to Consolidated Financial Statements — Continued

Note 5. Cash, Cash Equivalents and Marketable Securities

The following tables summarizes the Company’s cash, cash equivalents and marketable securities as of December 31, 2020 and 2019.

Amortized Cost Unrealized Gain Unrealized (Loss) Fair Value

Amortized Cost Unrealized Gain Unrealized (Loss) Fair Value

The Company’s U.S. treasury bonds mature within one year.

Note 6. Fair Value Measurements

Financial assets and liabilities carried at fair value are classified and disclosed in one of the following three levels of the fair value hierarchy:

• Level 1—Quoted prices in active markets for identical assets or liabilities.

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

Notes to Consolidated Financial Statements — Continued

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

Fair Value Hierarchy

December 31, 2020 Total (Level 1) (Level 2) (Level 3)

Assets

Marketable Securities:

Assets

Marketable Securities:

The Company recognizes transfers between levels of the fair value hierarchy as of the end of the reporting period. There were no transfers within the hierarchy during the years ended December 31, 2020 and 2019. The carrying amount of the Company’s receivables and payables approximate their fair value due to their maturity.

Note 7.Inventory

As of December 31, 2020 and 2019, inventories consisted of the following:

December 31,

As of December 31, 2020 and 2019, the Company reserved $721,462 and $287,544 respectively,for obsolete inventory. The Company records charges for obsolete inventory in cost of goods sold. As of December 31, 2020 and 2019, noncurrent inventory was comprised of approximately $0.7 million and $1.0 million of raw materials, respectively, and $4.2 million and $5.0 million of work in process, respectively.

Note 8.Leases

The Company implemented FASB ASU 2016-02, Leases (Topic 842), which required lessees to recognize most leases on its balance sheet effective January 1, 2019.The Company recognized $3.9 million of right of use assets for leases for office, manufacturing and warehouse space and office equipment.The Company also recognized $4.2 million for lease liabilities.The Company elected not to recognize right of use assets and lease liabilities for short term leases, i.e., leases with a noncancelable period of 12 months or less.

The Company’s leases have remaining lease terms of approximately one to four years, some of which include options to extend the leases for up to an additional five years. For the leases for the office space in Basking Ridge, New Jersey and the manufacturing and warehouse space in Rockaway, New Jersey, the Company recognized the options to renew the leases as part of the right of use asset and the lease liability as the Company deemed that the renewal options were reasonably certain to be exercised.However, due to the Company’s decision to implement a comprehensive redeployment and cost reduction plan implemented in June 2019, the Company determined the renewal option for the office space at the Basking Ridge location was no longer reasonably certain to be exercised. The Company remeasured the Basking Ridge right of use asset and the lease liability beginning June 1, 2019 utilizing the newly expected lease term.

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

Notes to Consolidated Financial Statements — Continued

Consistent with the Company’s 2019 cost reduction plan, it continues to evaluate and implement cost reduction strategies as appropriate. Effective December 31, 2020, the Company relocated its corporate headquarters to the site of its manufacturing facility in Rockaway, New Jersey. Although the Basking Ridge lease agreement provides for sublease, the Company will not elect this option in light of the current economic downturn in commercial real estate due to the pandemic and other factors.In December 2020, the Company informed the Basking Ridge landlord of its intention to vacate the Basking Ridge office space on December 31, 2020. The Company is currently in negotiations with the Basking Ridge landlord.Effective December 31, 2020, the Company vacated the Basking Ridge office space. On December 31, 2020, the Company wrote off the net book value of the operating lease right of use asset in the amount of $534,493 along with the related asset balances totaling $23,050. This charge is reflected in the Company’s Consolidated Statement of Operations for the year ended December 31, 2020, under selling, general and administrative expense.

The incremental borrowing rate used to determine the net present value of the leases at inception was 9.75%.This is the incremental borrowing rate that represents the rate of interest that the Company would expect to pay to borrow an amount equal to the lease payments under similar terms. As the Company does not borrow on a collateralized basis, the non-collateralized borrowing rate is used as an input in deriving the incremental borrowing rate.Following the comprehensive redeployment and cost reduction plan announcement and as required in the lease remeasurement process under Topic 842, the incremental borrowing rate was reassessed and increased to 13.75% at the time of remeasurement. The remeasurement updated the net present value of all operating leases from inception using the new discount rate at June 1, 2019.

For the years ended December 31, 2020 and 2019, the Company recognized lease expense of $573,046 and $787,952, respectively. This expense does not include non-lease components associated with the lease agreements as the Company elected not to include such charges as part of the lease expense.

Supplemental Balance Sheet Information for Operating Leases:

December 31,

Operating leases:

Operating lease liabilities:

Current portion of operating lease liabilities 534,547 486,445

Weighted average remaining lease term (in years) 5.7 5.9

Weighted average discount rate 13.75 % 13.75 %

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

Financial year

Total future minimum lease payments 2,089,034

Less: Amounts representing interest (669,154 )

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

Notes to Consolidated Financial Statements — Continued

Note 9. Cloud Computing Arrangement

In 2018, the Company entered into a contract to obtain a cloud computing arrangement (“CCA”).In accordance with ASU 2018-15, the implementation costs incurred in the CCA were deferred and recognized as other assets and are being amortized to expense over the noncancelable term of the arrangement. The implementation of this CCA was completed on June 30, 2019. Beginning July 1, 2019, the Company went live with the cloud computing Enterprise Resource Planning system and all future related costs are expensed as incurred. In July 2019, the Company began amortizing the related deferred costs over the remaining period of the noncancelable arrangement. Amortization costs for the year ended December 31, 2020 and 2019 were $282,075 and $141,037, respectively. As of December 31, 2020, the remaining term of the lease is approximately three years. The CCA is included under the caption Other assets, net as presented in the Company's balance sheet for the years ended December 31, 2020 and 2019 and is summarized below:

December 31,

Note 10. Accrued Expenses

Accrued expenses as of December 31, 2020 and 2019 consisted of the following:

December 31,

Note 11.Notes Payable

Loan Under the Paycheck Protection Program

On May 4, 2020, the Company received proceeds of $1.4 million in connection with a promissory note (the “Note”) entered into with Citibank, N.A. (the “Lender”) evidencing an unsecured loan (the “Loan”) under the Paycheck Protection Program ("PPP"). The PPP is a program of the SBA established under the CARES Act. Under the PPP, the proceeds of the Loan may be used for payroll and certain covered interest payments, lease payments and utility payments (“Qualifying Expenses”). The Company intends to use the entire Loan amount for Qualifying Expenses under the PPP.

The interest rate on the Loan is 1.0% per annum. The Note matures onFebruary 2, 2023. On September 2, 2021 (the “First Payment Date”), the Company is required to pay all accrued interest under the Loan that is not forgiven in accordance with the terms of the PPP. Additionally, on the First Payment Date and on the second day of each month thereafter until February 2, 2023, the Company must make equal monthly payments of the amount of principal under the Loan that is not forgiven in accordance with the terms of the PPP and related accrued interest thereon. The Company intends to apply for loan forgiveness under the guidelines of the SBA, which would result in a delay or elimination of the repayment period, if accepted in whole or in part by the Lender and SBA. The Note contains events of default and other conditions customary for a Note of this type.

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

Notes to Consolidated Financial Statements — Continued

Under the terms of the CARES Act, PPP loan recipients can be granted forgiveness for all or a portion of the loan granted under the PPP, with such forgiveness to be determined, subject to limitations, based on the use of the loan proceeds for payment of Qualifying Expenses and the recipient maintaining its payroll levels over certain required thresholds under the PPP. The terms of any forgiveness also may be subject to further requirements in any regulations and guidelines the SBA may adopt. No assurance can be provided that the Company will obtain forgiveness of the Note in whole or in part. Official guidance and interpretations of the requirements of the program have been limited and have been changing over time. Despite the Company’s good-faith belief that it properly satisfied all eligibility requirements for the PPP loan, there has been increasing scrutiny of public companies that received loans, and there can be no assurance that the Company will not become subject to regulatory or other scrutiny, including a request or requirement for repayment of some or all of the loan.

The Company has accounted for the Loan in accordance with FASB ASC Topic 470, Debt. Accordingly, the Loan is reflected as a liability on its Consolidated Balance Sheet as of December 31, 2020, $311,604 as a current liability and $1,097,946 and as a noncurrent liability. The Company will record a gain if the Loan is forgiven in whole or in part.

Finance and Security Agreements

On July 1, 2020, the Company entered into a Commercial Insurance Premium Finance and Security Agreement (“the Agreement”). The Agreement provides for a single borrowing by the Company of $1.2 million, with a seven-month term and an annual interest rate of 2.18%. The proceeds from this transaction were used to partially fund the premiums due under some of the Company’s insurance policies. The amounts payable are secured by the Company’s rights under such policies. The Company began to pay monthly installments of approximately $164,800 beginning in July 2020. As of December 31, 2020, the remaining balance under the Agreement was $164,832and during the year ended December 31, 2020, the Company recognized $8,339in interest expense.

On July 1, 2019, the Company entered into a separate Commercial Insurance Premium Finance and Security Agreement (“the 2019 Agreement”). The 2019 Agreement provided for a single borrowing by the Company of $807,347, with a seven-month term, and an annual interest rate of 2.99%. The proceeds from this transaction were used to partially fund the premiums due under some of the Company’s insurance policies. As of December 31, 2020, the balance was fully paid. During the years ended December 31, 2020 and 2019, the Company recognized $341 and $3,457 in interest expense, respectively.

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

Notes to Consolidated Financial Statements — Continued

Note 12. Stockholders’ Equity

Lincoln Park Purchase Agreement

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

Upon entering into the Purchase Agreement with Lincoln Park, the Company issued an aggregate of461,676shares of common stock to Lincoln Park as a commitment fee. The fair value of these shares on the date of issuance was approximately $186,300. During 2020, the Company issued to an additional 230,838 shares of common stock to Lincoln Park as a further commitment fee based on the first $5,000,000 of shares of common stock issued to Lincoln Park under the Purchase Agreement as Purchase Shares (as such term is defined in the Purchase Agreement). The Company did not receive any cash proceeds from the issuance of any of the foregoing commitment shares. No further commitment fee shares remain issuable under the Purchase Agreement. The net proceeds under the Purchase Agreement to the Company will depend on the frequency and prices at which shares of common stock are sold to Lincoln Park. Actual sales of shares of common stock to Lincoln Park under the Purchase Agreement and the amount of such net proceeds will depend on a variety of factors, including market conditions, the trading price of the common stock and determinations by the Company as to other available and appropriate sources of funding for the Company. The Company has and expects to continue to use the proceeds from this agreement for general corporate purposes and working capital.

During 2020, the Company sold 10,179,676 shares of common stock under the Purchase Agreement, resulting in aggregate proceeds of approximately $15.5 million to the Company. As of December 31, 2020, the Company had the right to sell under the Purchase Agreement approximately $9.5million of additional shares of common stock. See Note. 20 Subsequent Events for further discussion of the Purchase Agreement.

Other Securities Purchase Agreements

On April 14, 2020, the Company entered into a Securities Purchase Agreement (“First SPA”) with certain accredited investors pursuant to which the Company agreed to sell an aggregate of 2,058,822 shares of common stock at a purchase price of $0.85 per share for aggregate proceeds to the Company of approximately $1.75 million. Each of the purchasers was an affiliate and/or existing shareholder of the Company, including some members of the Company’s board of directors. In addition, the purchasers were granted customary registration rights as further described in the First SPA.

On May 14, 2020, the Company entered into a Securities Purchase Agreement (“Second SPA”) with its legal counsel pursuant to which the Company agreed to issue 1,564,345 shares of common stock, at a purchase price of $0.99 per share. Upon issuance of the shares, certain outstanding financial obligations of the Company owed to its legal counsel were deemed paid and satisfied in full. In addition, the Company’s legal counsel was granted customary registration rights as further described in the Second SPA. During 2020, the Company recorded a non-cash charge of $156,434 in connection with this transaction.

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

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

Notes to Consolidated Financial Statements — Continued

Note 13.Net Loss Per Share

Basic net loss per share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during the period.Diluted loss per share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding adjusted to give effect to potentially dilutive securities. Restricted stock and unit awards, and stock options have not been included in the diluted loss per share calculation as their inclusion would have had an anti-dilutive effect.

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

December 31,

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

# of Warrants Exercise Price Expiration Date

Note 14.Variable Interest Entity

As discussed in Note 1, electroCore is the primary beneficiary of electroCore (Aust) Pty Limited. electroCore has contributed certain intellectual property rights, all rights to distribute, market and sell specified products in Australia and New Zealand, and other rights outlined in the shareholders’ deed of electroCore (Aust) Pty Limited in return for 50% of the shares of such entity. In addition, electroCore can also appoint two of the four directors and can exercise significant influence. This along with the fact that electroCore is electroCore (Aust) Pty Limited’s only supplier causes electroCore, for accounting purposes, to be the primary beneficiary of electroCore (Aust) Pty Limited. The activities related to electroCore (Aust) Pty Limited are not material to the consolidated financial statements. Effective May 2017, the VIE ceased operations.

Note 15. Income Taxes

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

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

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

Federal $ — $ —

Total deferred — —

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

Notes to Consolidated Financial Statements — Continued

The Company has evaluated the available evidence supporting the realization of its deferred tax assets, including the amount and timing of future taxable income, and has determined that it is more likely than not that its net deferred tax assets will not be realized in the United States and certain foreign jurisdictions. Due to uncertainties surrounding the realization of the deferred tax assets, the Company maintains a full valuation allowance against all of its net deferred tax assets. When the Company determines that it will be able to realize some portion or all of its deferred tax assets, an adjustment to its valuation allowance on its deferred tax assets would have the effect of increasing net income in the period such determination is made. The net change in the valuation allowance was an increase of $7.8 million.

The significant components of the Company’s deferred income tax assets and liabilities after applying enacted corporate tax rates are as follows:

Year ended December 31,

Deferred tax assets

Deferred tax assets, net $ — $ —

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

Year ended December 31,

State tax expected (recovery), net of federal benefit 4.2% 6.7%

Stock compensation 6.8% —%

State tax NOL sale 3.7% —%

Nondeductible expenses 0.5% (0.1)%

Loss incurred as pass-through —% —%

Other 0.1 —

Change in valuation allowance for deferred tax assets (31.6)% (27.6)%

Provision for income taxes 4.7% —%

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

Notes to Consolidated Financial Statements — Continued

As of December 31, 2020 and 2019, the Company had accumulated net operating losses totaling $87.2 million and $65.7 million, respectively, in the U.S. (federal and state), which may be available to carry forward and offset future years' taxable income. U.S. federal losses can be carried forward indefinitely, and state losses expire in various amounts beginning in 2026. The Company also had accumulated losses totaling $3.9 million and $3.5 million in Germany which can be carried forward indefinitely.

However, the NOL carryforwards may be, or become subject to, an annual limitation in the event of certain cumulative changes in the ownership interest of significant stockholders over a three year period in excess of 50%, as defined under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, as well as similar state tax provisions. This could limit the amount of NOLs that the Company can utilize annually to offset future taxable income or tax liabilities. The amount of the annual limitation, if any, will be determined based on the value of the Company immediately prior to an ownership change. Subsequent ownership changes may further affect the limitation in future years. If and when the Company utilizes the NOL carryforwards in a future period, it will perform an analysis to determine the effect, if any, of these loss limitation rules on the NOL carryforward balances.

As of December 31, 2020, the Company had Federal and NJ research and development credits of $282,801 and $191,863 respectively. The Federal R&D credits can be carried forward 20 years and will begin to expire in 2038. The New Jersey R&D credits can be carried forward seven years and will begin to expire in 2025.

Uncertain Tax Positions

The Company has adopted certain provisions of ASC 740, “Income Taxes”, which prescribes a recognition threshold and measurement attribute for the recognition and measurement of tax positions taken or expected to be taken in income tax returns. The provisions also provide guidance on the de-recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, and accounting for interest and penalties associated with tax positions.

The Company files income tax returns in the U.S. federal jurisdiction, and in various state and foreign jurisdictions. The Company’s tax returns are subject to tax examinations by U.S. federal and state tax authorities, or examinations by foreign tax authorities until the expiration of the respective statutes of limitation. The Company currently has no tax years under examination.

As of December 31, 2020, the Company does not have an accrual relating to uncertain tax positions. Interest and penalties, if any, as they relate to income taxes assessed, are included in the income tax provision. It is not anticipated that unrecognized tax benefits would significantly increase or decrease within 12 months of the reporting date.

Coronavirus Aid, Relief, and Economic Security Act

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act, the "CARES Act", was enacted and signed into law, and GAAP requires recognition of the tax effects of new legislation during the reporting period that includes the enactment date. The CARES Act, among other things, includes changes to the tax provisions that benefits business entities and makes certain technical corrections to the 2017 Tax Cuts and Jobs Act, including, permitting net operating losses, or NOLs, carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows NOLs incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. The CARES Act provides other reliefs and stimulus measures. The Company has evaluated the impact of the CARES Act, and does not expect that any provision of the CARES Act would result in a material cash benefit to the Company or have a material impact on its financial statements or internal controls over financial reporting.

Note 16.Stock Based Compensation

On June 21, 2018, the Company adopted the2018Omnibus Equity Incentive Plan (“Plan”). This plan reserved6.2million shares with an increase to be added annually beginning in2019through2028up to4% of the total number of shares of common stock issued and outstanding on a fully diluted basis as of the end of the immediately preceding fiscal year, providing that the aggregate number of additional shares shall not exceed a total of45million shares, and a maximum of40 million shares pursuant to the exercise of stock options. Effective January 1, 2021, the number of shares reserved under the Plan was increased by 2.0 million to approximately 8.9 million. The Company’s policy is to issue new shares of its common stock upon the exercise of stock options, new grants of restricted stock awards, and settlement of restricted stock units. Stock options issued under the plan have a contractual life of10years and are generally forfeited upon separation from the Company.

The following table presents stock compensation expense recognized by the Company for the years ended December 31, 2020 and 2019. Total unrecognized compensation cost related to equity awards as ofDecember 31, 2020 was $5.0million and is expected to be recognized over the next2.3years.

Year ended December 31,

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

Notes to Consolidated Financial Statements — Continued

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

Exercised — —

* de minimis

The intrinsic value is calculated as the difference between the fair market value at December 31, 2020 and the exercise price per share of the stock options. Options awards granted to employees generally vest over a four-year period.

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

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

Number of Shares Weighted Average Grant Date Fair Value

Granted — —

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

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

Number of Shares Weighted Average Grant Date Fair Value

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

Notes to Consolidated Financial Statements — Continued

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

Immediately following the Company’s annual meeting of stockholders, the Company generally grants each non-employee director an equity award that vests over a 12-month period. Upon a non-employee director’s initial appointment or election to the board of directors, the Company grants such non-employee director an equity award subject to vesting as determined by the board of directors.

Valuation Information for Stock-Based Compensation

The fair value of each stock option award granted was estimated on the date of grant using the Black-Scholes model. Expected volatility was based on historical common stock volatility of the Company’s peers. Prior to 2020, expected volatility was based on historical volatility of the Company’s common stock. The risk-free interest rate was based on the average U.S. Treasury rate that most closely resembles the expected life of the related award. The expected term of the award was calculated using the simplified method. No dividend was assumed as the Company does not pay regular dividends on its common stock and does not anticipate paying any dividends in the foreseeable future.

The weighted average assumptions used in the Black-Scholes option pricing model in valuing stock options granted in the periods presented were:

Fair value at grant date $ 0.98 $ 3.39

Risk-free interest rate 0.7% 2.1%

Expected holding period, in years 6.1 5.9

Dividend yield — —

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

Note 17. Employee 401(K) Plan

The Company has a defined contribution 401(k) plan which covers all employees. Employees are eligible upon date of hire. Employee contributions are voluntary and are based on specific percentages of compensation, which may not exceed maximum amounts established by Internal Revenue Code. Employer contributions are discretionary. The maximum Company matching contribution is $0.25 per dollar subject to a limit of 3% of eligible employee compensation. The Company's expense for contributions to its defined contribution plan totaled $15,600 for 2020. There were no employer contributions for the year ended December 31, 2019.

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

Notes to Consolidated Financial Statements — Continued

Note 18.Commitments and Contingencies

Stockholders Litigation

On July 8, 2019 and August 1, 2019, purported stockholders of the Company served putative class action lawsuits in the Superior Court of New Jersey for Somerset County, captioned Paul Kuehl vs. electroCore, Inc., et al., Docket No. SOM-L 000876-19 and Shirley Stone vs. electroCore, Inc., et al., Docket No. SOM-L 001007-19, respectively. In addition to the Company, the defendants included present and past directors and officers, Evercore Group L.L.C., Cantor Fitzgerald & Co., JMP Securities LLC and BTIG, LLC, the underwriters for its IPO; and two of the Company’s stockholders. On August 15, 2019, the Superior Court entered an order consolidating the Kuehl and Stone actions, which proceeded under Docket No. SOM-L 000876-19. Each plaintiff was appointed a co-lead plaintiff. The plaintiffs filed a consolidated amended complaint, which sought certification of a class of stockholders who purchased common stock in the IPO or whose purchases are traceable to that offering. The consolidated amended complaint alleged that the defendants violated Sections 11, 12(a)(2) and 15 of the Securities Act with respect to the registration statement and related prospectus for the IPO. The complaint sought unspecified compensatory damages, interest, costs and attorneys’ fees. On October 31, 2019, the Company and the other defendants filed a motion to dismiss the complaint or in the alternative to stay the action in favor of the pending federal action (discussed below).

On February 21, 2020 the court granted the defendants’ motion to dismiss the consolidated amended complaint with prejudice. On March 2, 2020 the court entered an amended order dismissing the consolidated amended complaint with prejudice. On March 27, 2020, the plaintiffs filed a notice of appeal with the N.J. Superior Court – Appellate Division. The appeal was fully briefed as of July 17, 2020. The date for argument of the appeal has not yet been set.

On September 26, 2019 and October 31, 2019, purported stockholders of the Company served putative class action lawsuits in the United States District Court for the District of New Jersey captioned Allyn Turnofsky vs. electroCore, Inc., et al., Case 3:19-cv-18400, and Priewe vs. electroCore, Inc., et al., Case 1:19-cv-19653, respectively. In addition to the Company, the defendants include present and past directors and officers, and Evercore Group L.L.C., Cantor Fitzgerald & Co., JMP Securities LLC and BTIG, LLC, the underwriters for the IPO. The plaintiffs each seek to represent a class of stockholders who (i) purchased the Company’s common stock in the IPO or whose purchases are traceable to the IPO, or (ii) who purchased common stock between the IPO and September 25, 2019. The complaints each alleged that the defendants violated Sections 11 and 15 of the Securities Act and Sections 10(b) and 20(a) of the Exchange Act, with respect to (i) the registration statement and related prospectus for the IPO, and (ii) certain post-IPO disclosures filed with the SEC. The complaints sought unspecified compensatory damages, interest, costs and attorneys’ fees.

In the Turnofsky case, on November 25, 2019 several plaintiffs and their counsel moved to be selected as lead plaintiff and lead plaintiff’s counsel. On April 24, 2020. the Court granted the motion of Carole Tibbs and the firm Bragar, Eagel & Squire, P.C. On July 17, 2020 the plaintiffs filed an amended complaint in Turnofsky. In addition to the prior claims, the amended complaint added an additional director defendant and two investors as defendants and adds a claim against the Company and the underwriters for violating Section 12(a)(2) of the Securities Act. On September 15, 2020, the Company and the other defendants filed a motion to dismiss the amended complaint for failure to state a claim. On November 6, 2020, the plaintiffs filed their opposition to the motion to dismiss. The Company and the other defendants filed reply papers in support of the motion on December 7, 2020. Argument on the motion to dismiss has not yet been scheduled. The parties have agreed to a non-binding mediation with JAMS, which will occur on March 30, 2021.

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

On March 4, 2021, purported stockholder Richard Martz brought a purported stockholder derivative action in the United States District Court for the District of New Jersey. The action is captioned Richard Maltz, derivatively on behalf of electroCore, Inc., vs. Francis R. Amato, et al., Case 3:21-cv-04135. The defendants include present and past directors and officers of the Company.The plaintiff purports to pursue derivative claims on behalf of the Company in connection with the IPO and actions occurring between the IPO and September 25, 2019.The complaint alleges that demand on the board of directors is excused.The complaint purports to allege claims against the defendants for violating Section 14(a) of the Exchange Act, breaching fiduciary duties, unjust enrichment and waste of corporate assets.The complaint also purports to allege claims for contribution in connection with the Turnofsky case described above, pursuant to Section 11(f) of the Securities Act and Sections 10(b) and 21D of the Exchange Act. The complaint seeks unspecified compensatory damages, interest, costs and attorneys’ fees; declaratory relief; and an order requiring changes to corporate governance and internal procedures and a vote on proposed amendments to the Bylaws and Certificate of Incorporation.On March 8, 2021, purported stockholder Erin Yuson brought a purported stockholder derivative action in the United States District Court for the District of New Jersey. The action is captioned Erwin Yuson, derivatively on behalf of electroCore, Inc., vs. Francis R. Amato, et al., Case 3:21-cv-04481. The defendants include present and past directors and officers of the Company.The plaintiff purports to pursue derivative claims on behalf of the Company in connection with a 2019 proxy statement and actions occurring from the IPO through September 25, 2019.The complaint alleges that demand on the board of directors is excused.The complaint purports to allege claims against the defendants for violating Section 14(a) of the Exchange Act and breaching fiduciary duties. The complaint seeks unspecified compensatory damages, interest, costs and attorneys’ fees; declaratory relief; and an order requiring changes to corporate governance and internal procedures and a vote on proposed amendments to the Bylaws and Certificate of Incorporation.

The Company intends to continue to vigorously defend itself in these matters. However, in light of, among other things, the preliminary stage of these litigation matters, the Company is unable to determine the reasonable probability of loss or a range of potential loss. Accordingly, the Company has not established an accrual for potential losses, if any, that could result from any unfavorable outcome, and there can be no assurance that these litigation matters will not result in substantial defense costs and/or judgments or settlements that could adversely affect the Company’s financial condition.

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

ELECTROCORE, INC., SUBSIDIARIES AND AFFILIATE

Notes to Consolidated Financial Statements — Continued

Settlement Agreement

In January 2019, the Company settled a dispute with one of its former advisors, Madison Global Partners ("Madison Global"), which had filed a complaint against the Company in the Supreme Court of the State of New York, County of New York (Index No. 652329/2018). As part of that settlement, the Company paid Madison Global $325,000 and issued to Madison Global and its representatives warrants to purchase in the aggregate 62,181 shares of its common stock at prices ranging from $5.68 per share to $12.60 per share. In January 2019, 5,192 warrants with an exercise price of $5.68 were issued and the expense was recognized. All other amounts were accrued in prior accounting periods. The warrants issued are shown in the following table:

# Warrants Exercise Price Expiration Dates

Purchase Commitments

The Company enters into contracts in the normal course of business with contract research organizations for its clinical trials, contract manufacturing organizations for the manufacture and supply of its clinical and commercial product needs and other vendors for other research and development and commercial activities, as well as services and products for operating purposes. The Company’s agreements generally provide for termination with notice. Such agreements that are cancelable contracts are not included as purchase commitments. The Company has included as purchase obligations its commitments under agreements to the extent they are quantifiable and are not cancelable.The Company has purchase obligations of approximately $2.3million as of December 31, 2020.

Note 19.Restructuring Charges and Other Related Charges

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

Year ended December 31,

Payment in lieu of severance 175,000 —

Other restructuring costs 18,442 —

As of December 31, 2020, $25,000is payable by the Company in connection with the above described charges. This amount is included under the caption Accrued expenses and other current liabilities in the Company’s Consolidated Balance Sheet as of December 31, 2020

Restructuring charges

On May 29, 2019, the Company announced significant adjustments to the deployment of personnel and resources across the organization. The effort was intended to focus the Company on currently available and near-term revenue opportunities and on clinical programs specifically designed to expand the gammaCore product labeling. To achieve this goal, the Company reduced the size of its organizational structure, including its field sales force and clinical operations.

The costs associated with this initiative primarily represent severance and other costs associated with employee terminations, the majority of which have been settled in cash, and totaled approximately $1,050,000. In June 2019, as part of this process, the Company formally communicated the termination of employment to 32 employees, and as of September 30, 2019, the Company had terminated all of these employees.