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.

Note: Information concerning the shares of our common stock and related share prices in this Item 7 has been adjusted to reflect the 1-for-15 reverse split of our common stock that was made effective on February 15, 2023. (See, “Item 8 – Notes to consolidated financial statements – Note 2 - Basis of Presentation”).

Overview

We are a commercial stage bioelectronic medicine and wellness company dedicated to improving health through our non-invasive vagus nerve stimulation (“nVNS”) technology platform. Our focus is the commercialization of medical devices for the management and treatment of certain medical conditions and consumer product offerings utilizing nVNS to promote general wellbeing and human performance in the United States and select overseas markets.

nVNS is a platform bioelectronic technology that modulates neurotransmitters and immune function through its effects on both the peripheral and central nervous systems. Our nVNS treatment is delivered through a proprietary high-frequency burst waveform that safely and comfortably passes through the skin and stimulates therapeutically relevant fibers in the vagus nerve. Various scientific publications suggest that VNS works through several mechanistic pathways including the modulation of neurotransmitters.

Historically, vagus nerve stimulation or VNS, required an invasive surgical procedure to implant a costly medical device. This limitation has generally limited VNS from being used by anyone other than the most severe patients. Our medical devices and wellness products are self-administered and intended for regular or intermittent use over many years.

Our business is supported by our in-house capabilities spanning research and development, regulatory affairs and compliance, sales and marketing, product testing, assembly, fulfillment, and customer support. We derive revenues from the sale of medical devices and wellness products in the United States and select overseas markets. We have two principal product categories:

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

Our goal is to be a leader in non-invasive neuromodulation by using our proprietary nVNS platform technology to deliver better health. To achieve this, we offer multiple propositions:

• Truvaga for the support of general health and wellbeing; and

Our flagship model, gammaCore Sapphire, is a prescription medical device currently FDA cleared for a variety of primary headache conditions. gammaCore is available by prescription only and Sapphire is a portable, reusable, rechargeable and reloadable personal use option for patients to use at home or on the go. Prescriptions are written by a health care provider and dispensed from a specialty pharmacy, through the patient’s healthcare system, or fulfilled directly to certain patients directly from our facility in Rockaway, NJ. After the initial prescription is filled, access to additional therapy can be refilled for certain of our gammaCore products periodically through the input of a prescription-only authorization.

Truvaga is a personal use consumer electronics wellness product that does not require a prescription and is available direct-to-consumer from electroCore at www.truvaga.com. Truvaga is not intended for medical use. TAC-STIM is a form of nVNS for human performance and has been developed in collaboration with the United States Department of Defense Biotech Optimized for Operational Solutions and Tactics, or BOOST program. We are exploring strategies to make this product offering available to other branches of the active-duty military and certain human performance professionals in the United States and abroad.

TAC-STIM is available as a Commercial Off the Shelf (COtS) solution to professional organizations and is the subject of ongoing research at the United States Air Force Research Laboratory. TAC-STIM is not intended for medical use.

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

The United States Department of Veteran Affairs comprised 60.8 % of our revenue during the year ended December 31, 2022. We expect that a majority of our 2023 sales will be made pursuant to our qualifying contract under the Federal Supply Schedule or FSS, which was secured by us in December 2018, as well as open market sales to individual facilities within the government channels. The FSS is scheduled to expire on January 15, 2024. We intend to request an extension of the FSS from the United States Department of Veteran Affairs, but there is no assurance the FSS will be renewed, and if at all renewed at terms favorable to us. Our sales function in this channel is comprised of employees and independent contractors.

Sales under the MTFM program for cluster headache in the UK comprised 15.1% of our revenue during the year ended December 31, 2022. In 2023, we plan on continued expansion under this program, as well as continue to utilize distribution partners to commercialize our nVNS technology in territories outside the United States and United Kingdom. In 2023, we expect NICE to review the guidance document and any changes in recommendation or pricing may adversely impact our ability to work with NHS England on the MTFM program.

We believe there may be significant opportunities beyond these areas. In 2023, therefore, we plan to continue our investment in expanded commercial adoption of gammaCore with cash pay, physician dispense, and direct-to-consumer approaches, and continue our early efforts to begin building wellness and human performance propositions through Truvaga and TAC-STIM.

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

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 our products, 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.”

Capital Activities

On January 18, 2022, we filed a Form S-3 registration statement, or the 2022 Shelf Registration Statement, with the SEC, for the issuance of common stock, preferred stock, warrants, rights, debt securities and units, up to an aggregate amount of $75 million. The 2022 Shelf Registration Statement was declared effective on January 25, 2022.The proposed maximum offering price per unit and the proposed maximum aggregate offering price per class of security will be determined from time to time by us in connection with the issuance by us of the securities registered under the 2022 Shelf Registration Statement. Until such time as the aggregate market value of our securities held by non-affiliates equals or exceeds $75 million, the aggregate maximum offering price of all securities issued by the us in any given 12-calendar month period pursuant to this and any of our other registration statements may not exceed one-third of the aggregate market value of our securities held by non-affiliates. If we raise additional funds by issuing equity or debt securities, either through the sale of securities pursuant to a registration statement or by other means, our existing stockholders may experience dilution, and the new equity or debt securities may have rights, preferences and privileges senior to those of our existing stockholders.

On July 2, 2021, we completed a public offering of 1,380,000 shares of our common stock at a purchase price of $15.00 per share. The net proceeds of the offering to us were approximately $18.8 million, after deducting the underwriting discounts and commissions and other estimated offering expenses. We intend to use the net proceeds of the offering for sales and marketing, working capital, and general corporate purposes. In addition, we believe that opportunities may exist from time to time to expand our current business through acquisitions or in-licenses of, or investments in, complementary companies, medicines, intellectual property, or technologies. While we have no current agreements or commitments for any specific acquisitions, in-licenses or investments at this time, we may use a portion of the net proceeds for these purposes.

On August 30, 2021, we entered into a Securities Purchase Agreement with our legal counsel pursuant to which we issued 63,479 shares of common stock, at a purchase price of $15.75 per share. Upon issuance of the shares, certain of our outstanding financial obligations to our legal counsel were deemed paid and satisfied in full.

On October 4, 2021, we issued 13,333 shares of our common stock in connection with the lease termination related to our former headquarters located in Basking Ridge, NJ.

Outside the US

In August 2011, we received a CE Certificate of Conformity for gammaCore for the treatment of primary headache from the British Standards Institution, a European Union notified body. This CE Certificate of Conformity allowed us to affix the CE Mark on gammaCore and to commercialize it in the European Economic Area and other countries that recognize the European CE Mark. In addition to the CE Certificate of Conformity for primary headache, between September 2011 and October 2013 we received CE Certificates of Conformity on gammaCore covering four other indications for use, including reactive airway disease and gastric motility disorders. In 2019, the National Institute for Health and Care Excellence, or NICE published a Medical Technology Guidance document recommending the use of gammaCore for Cluster Headache or CH within the National Health Service, or NHS, of England and Wales. On January 2021, NHS Scotland adopted the NICE recommendation and recommended gammaCore for use in the treatment of CH in Scotland.

NHS England awarded gammaCore a place on the Innovation Technology Payment, or ITP, program for treatment of patients with reflectory cluster headache, a reimbursement pathway that opened in April 2019. In October 2020, we announced that the ITP program was extended through March 2021. Effective April 1, 2021, gammaCore Sapphire was included in a new long-term, reimbursement policy, titled the MedTech Funding Mandate Policy 2021/22, or MTFM.

In August 2021, we announced the release of an article entitled “gammaCore for Cluster Headaches: A NICE Medical Technologies Guidance” in the journal PharmacoEconomics highlighting the cost impact of gammaCore’s non-invasive vagus nerve stimulation therapy platform for patients with cluster headaches. The paper is part of a series that provides insight into the development of NICE medical technologies guidance for new or innovative medical devices or diagnostics. The aim of the guidance is to support the adoption of clinically effective and cost-saving technologies in the UK National Health Service. The paper validated that gammaCore both reduces the frequency and severity of cluster headaches when used with standard of care and provides a £450 per patient savings in the first year of therapy versus standard of care alone.

In October 2021, we announced the publication of a peer-reviewed paper entitled “Non-invasive vagus nerve stimulation for treatment of cluster headache: a retrospective review of prescribing in England,” in the British Journal of Healthcare Management. The paper reviews the prescribing trends of gammaCore in England from April 2019 through the end of 2020 and is one of the largest clinical audits of patients with cluster headache. The paper highlights that of the 655 patients who started on gammaCore, 46.3% of patients were prescribed at least one refill and 30.9% were prescribed two or more refills. These real-world results suggest a durable benefit for patients utilizing gammaCore’s non-invasive vagus nerve stimulation (nVNS) for cluster headache in England.

In April 2021, we announced that Health Canada has granted regulatory approval for the promotion and sale of the gammaCore Sapphire family of products in Canada for prevention and therapeutic treatment of migraine and cluster headache, as outlined in the registration application with Health Canada. Later in the year, the company received an amended Medical Device License from Health Canada to expand the label of gammaCore nVNS to include the acute and preventive treatment of migraine in adolescents between 12 and 17 years of age. gammaCore is now cleared for most forms of primary headache including the acute and preventive treatment of migraine in adolescents and adults, as well as the acute and preventive treatment of cluster headache in adults.

In December 2022, we announced the launch of an ecommerce shop for patients residing in the United Kingdom. The site, which can be found at www.gammacore.co.uk, requires patients to complete a healthcare questionnaire in order to purchase a gammaCore SapphireTM, non-invasive vagus nerve stimulator (nVNS) device online. The first product launched on the platform is designed to treat menstrual migraine, supporting the 60% of women who report migraine symptoms associated with their menstrual cycle. This platform will allow patients to experience a fully virtual experience by completing an online clinical assessment, having product delivered to their door, and being trained via video calls with a member of the UK customer service team.

In 2022, we continued executing on the plan to expand international distribution by onboarding exclusive distribution partners outside the United States and United Kingdom. On March 29, 2022, we entered into an agreement with Teijin Limited (Teijin), to license certain exclusive rights to its nVNS technology for commercialization in Japan for a range of primary headache disorders. Under the agreement, we received a non-refundable, upfront payment for the licenses and rights granted to Teijin. We began to recognize revenue for this upfront payment ratably over a period of one year commencing in the second quarter of 2022.The financial terms of the Teijin license agreement contain milestone payments, payable upon the decision by Teijin to commercialize the licensed product for specific indications. We will also receive an annual license fee commencing on the first anniversary of the agreement and payable annually until the first commercial sale on any approved indication. Upon favorable regulatory and payor coverage decisions in Japan, the parties plan to enter into an exclusive commercial supply agreement for gammaCore nVNS. The agreement contains customary terms and conditions, including renewal and termination provisions, as well as minimum purchase commitments once a commercial supply agreement is in place. Furthermore, Teijin is responsible for all costs associated with regulatory approval by the Pharmaceuticals and Medical Devices Agency (PMDA), the Japanese FDA equivalent. As part of the agreement, Teijin will have the right of first negotiation for a license to additional indications in Japan.

Impact of COVID-19

The ongoing coronavirus pandemic has impacted, and may continue to impact, our headquarters, manufacturing, and warehousing and ecommerce facilities, as well as those of our third-party vendors, including through the effects of facility closures, employee furloughs, reductions in operating hours, staggered shifts and other social distancing efforts, labor shortages, decreased productivity and unavailability of materials or components. The ongoing coronavirus pandemic may also impact our ability to sell our product, ship our product on a timely basis and may increase our costs.

The spread of coronavirus caused us to modify certain of our business practices (including social distancing practices, requiring non-essential production related team members to work remotely where possible, restricting business travel, cancelling certain events, and limiting visitor access to our facilities), and we may relax, extend, modify, or take further actions that may be required by government authorities or that we determine are necessary or advisable. Work-from-home and other measures introduce additional operational risks, including cybersecurity risks, and have affected the way we conduct our business, which could have an adverse effect on our operations. There is no certainty that such measures will be sufficient to mitigate the risks posed by the virus, and illness and workforce disruptions could lead to unavailability of key personnel and harm our ability to perform critical functions. In addition, work-from-home and related business practice modifications present significant challenges to maintaining our corporate culture, including employee engagement and productivity, both during the immediate pandemic crisis and as we make additional adjustments in the eventual transition from it. Implementing new business practices in order to protect employees, vendors and other parties with whom we interact may result in increased costs. Furthermore, even if we follow what we believe to be best practices, there can be no assurance that our measures will prevent the transmission of COVID-19 between employees. Any incidents of actual or perceived transmission may expose us to liability claims, adversely impact employee productivity and morale, and result in negative publicity and reputational harm.

Additionally, our sales and marketing efforts are, and may from time to time be, adversely affected by protocols for screening and restricting outside visitors and vendors that have been adopted by the Department of Veterans Affairs, commercial prescribers and other third parties. Officially imposed quarantines and self-quarantines could also interfere with patients’ ability to see a health care provider and obtain our gammaCore therapy.

Critical Accounting Policies and Estimates

The significant accounting policies and basis of presentation of our consolidated financial statements are described in Note 2 “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

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 or as 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.

We have a standardized approach to estimate the amount of consideration that we expect to be entitled to, including the impact of discounts and rebates. Our historical collection is an integral part of the estimation process related to revenues and receivables. Further adjustments to the allowances, based on actual receipts, may be recorded upon settlement.

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, as well as purchase orders for open market sales to 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 36 months.

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 2022 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 was 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 health.

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

Recently, product offering in the United Kingdom has expanded to 10-day therapy at a fixed price for menstrual migraine patients purchasing product through our UK ecommerce store. All revenue associated with the menstrual migraine product are paid prior to product being shipped.

United States Commercial Revenue Outside of Federal Supply Schedule Channel

Revenue from our cash pay models through direct-to-physician and direct-to-consumer channels and our ecommerce channel are usually recognized at the time of product shipment or delivery dependent on specific contractual terms, less any discounts or rebates.

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. The amount of monthly co-payment assistance is up to a maximum of $100 per prescription.

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.

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. We further consider inventory shelf life in our estimates regarding the net realizable value of our inventory. 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.

Licensed Products

We license a portion of our devices through our cash pay channels. The cost of these licensed devices is capitalized and included in Other Assets in our Balance Sheet at December 31, 2022 and 2021, and is being recognized as cost of goods sold over the estimated useful life of the device. If certain licensed devices are returned and no longer meet quality specifications or the carrying amount of certain licensed devices are no longer deemed to be recoverable, we record a charge to cost of goods sold to write down such licensed devices to zero.

Income Taxes

We routinely 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. The assessment of the realizability of deferred tax assets requires management to make numerous estimates and assumptions. Factors that are considered in this assessment include 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. Compensation expense is determined based on the grant date fair value and is expensed over the vesting period. The grant date fair value of stock options is measured using the Black-Scholes option valuation model. The input assumptions used in determining the fair value of options are expected life, expected volatility, risk-free interest rate and expected dividend yield. These input assumptions are based on management’s estimates, and these estimates are evaluated periodically for reasonability. The expected life of the option represents the period the stock-based awards are expected to be outstanding. We use the simplified method for estimating the expected life of the options. The fair value of each stock option award granted was estimated on the date of grant using the Black-Scholes model. Since our common stock was not publicly traded until June 2018 there has been insufficient volatility data available. Accordingly, we have used an expected volatility based on historical common stock volatility of our peers. Beginning in December 2022, we began incorporating our historical common stock volatility at a weighting of 50% of the total composite volatility rate. During 2023, the Company will continue to evaluate the volatility rate used to value stock options. Since we currently do not intend to pay dividends on our common stock, we estimate the dividend yield percentage to be zero. We base the risk-free interest rate on the U.S. Treasury constant maturity interest rate whose term is consistent with the expected life of the stock options being valued.

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. The process of analyzing, assessing, and establishing reserve estimates relative to legal proceedings involves a high degree of judgment. 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. Management estimates that its current insurance coverage is sufficient to meet the potential liabilities of pending legal proceedings. Changes in facts and circumstances related to such proceedings could lead to significant adjustments to reserve estimates for such matters and could have a material impact on our results of operations, cash flows and financial condition in the period that reserve estimates are adjusted or paid.

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 $1.235billion, 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, 2022 and 2021

The following table summarizes our results of operations for the years ended December 31, 2022 and 2021 with the changes in those items in dollars.

Years ended December 31,

Operating expenses:

Other (income) expense:

Gain on extinguishment of debt — (1,422 ) 1,422

Gain on termination of joint venture — (549 ) 549

Interest and other income (287 ) (11 ) (276 )

Other expense 6 8 (2 )

Net Sales

Net sales for the year ended December 31, 2022 increased 58% as compared to the year ended December 31, 2021. The increase of $3.1 million is due to an increase in net sales across all major channels including the U.S. Department of Veteran Affairs, U.S. commercial channel, and sales from outside the U.S. which includes licensing revenue of $139,000.There was no licensing revenue in the comparable prior year. Revenue from outside the U.S. was adversely impacted due to the strengthening of the U.S. dollar during the last half of 2022. We expect that the majority of 2023 fiscal year revenue will continue to come from the U.S. Department of Veterans Affairs and United Kingdom. Additionally, we expect revenues to expand from our cash pay propositions which includeecommerce stores, direct to physician models for traditional neurology headache specialists, as well as the wide range of medical providers who manage patients' headache conditions including primary care physicians, women's health, pain management, sports medicine, functional and integrative medicine professionals, as well as chiropractors, and PharmDs (Doctors of Pharmacy). In addition, we believe we may generate additional revenue from sales of our Truvaga and TAC-STIM products.

Gross Profit

Gross profit increased $2.9 million for the year ended December 31, 2022 compared to the year ended December 31, 2021. Gross margin was 81% and 75% for the years ended December 31, 2022 and 2021, respectively. Our evolving commercial strategy has resulted in the launch of cash payment models under which we license a portion of our devices. The cost of the licensed device is being recognized as cost of goods sold over the estimated useful life of the device. The increase in gross margin was primarily due to the favorable impact on gross margin associated with the licensing of a portion of our devices in the year ended December 31, 2022. Moreover, in 2022, we sold an increasing amount of longer duration therapy, resulting in a higher average selling price, as well as selling an increased number of refill kits with a lower cost of goods. These factors, including Teijin license revenue with no associated cost of goods, contributed to the increase in gross margin. Gross profit and gross margin in 2023 will be largely dependent on revenue levels, product mix, and any changes in the estimated useful lives of licensed devices.

Research and Development

Research and development expense of $5.5 million for the year endedDecember 31, 2022 increased by $3.0 million. This increase was primarily due to targeted investments to support the future iterations of our therapy delivery platform, including the use of our intellectual property around the delivery of smart phone-integrated and smart phone-connected non-invasive therapies. In 2023, we plan to continue to invest in the next generation of our therapy delivery platform.

Selling, General and Administrative

Selling, general and administrative expense of $24.3 million for the year ended December 31, 2022 increased by $2.8 million as we continued to make targeted investments to support our commercial efforts, particularly around sales and marketing efforts for our cash pay propositions which include ecommerce stores, direct to physician models for traditional neurology headache specialists, as well as the wide range of medical providers who manage patients' headache conditions including primary care physicians, women's health, pain management, sports medicine, functional and integrative medicine professionals, as well as chiropractors, and PharmDs (Doctors of Pharmacy). In 2023, we plan on continuing to make targeted investments in sales and marketing to support our commercial efforts.

Other (Income) Expense

Other (income) expense for the year ended December 31, 2021 primarily represents the gain of $1.4 million related to the forgiveness of the Paycheck Protection Program loan and the gain of $0.5 million recorded related to the termination of the joint venture in Australia. The increase in Interest and other income is primarily due rising interest rates.

Benefit from Income Taxes

The Benefit from income taxes of $0.4 million and $0.9 million for the years ended December 31, 2022 and 2021, respectively, primarilyrepresent the sale of our state net operating lossesand research and development tax credits under the State of New Jersey’s NOL Transfer Program.

Liquidity and Capital Resources

At December 31, 2022 our cash, cash equivalents, and restricted cash was $18.0 million compared to $34.7 million at December 31, 2021.

December 31,

Net cash (used in) provided by

Investing activities $ — $ 18,217

Financing activities $ — $ 25,682

Operating Activities

Net cash used in operating activities was $16.6 million and $13.6 million for the years ended December 31, 2022 and 2021, respectively. This increase is primarily due to the increase in our net loss from operations.

Investing Activities

No cash was provided by investing activities during the year ended December 31, 2022. For the year ended December 31, 2021, net cash provided by investing activities was $18.2 million reflecting funds received from the maturity of marketable securities partially offset by our purchases of marketable securities.

Financing Activities

No cash was provided by financing activities during the year ended December 31, 2022. For the year ended December 31, 2021, net cash provided by financing activities was $25.7 million representing proceeds from the sale of our common stock.

Liquidity Outlook

In 2023, we expect to continue to incur substantial negative cash flows from operations. We intend to continue to make targeted investments in sales and marketing, as well as the next generation of our therapy delivery platform.

As a result, we will need to seek additional funds in the future or curtail or forgo some or all such activities. If we seek to and are unable to raise funds on favorable terms, or at all, we may not be able to support our commercialization efforts or research and development activities, and the growth of our business may be negatively impacted. As a result, we may be unable to compete effectively.

We expect that a majority of our 2023 sales will be made pursuant to our qualifying contract under the Federal Supply Schedule, or FSS, as well as open market sales to individual facilities within the government channels. The FSS is scheduled to expire on January 15, 2024. We intend to request an extension of the FSS from the United States Department of Veteran Affairs, but there is no assurance the FSS agreement will be renewed, if at all, or at terms favorable to us. In addition, other possible 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.

Even if we are not required to curtail our activities sooner, our ability to execute our operating plan beyond the next 12 months from the date these financial statements are issued depends on our ability to increase revenue, control operating expenses and obtain additional funding from 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.

On January 18, 2022, we filed a Form S-3 registration statement, or the 2022 Shelf Registration Statement, with the SEC, for the issuance of common stock, preferred stock, warrants, rights, debt securities and units, which we refer to collectively as the Shelf Securities, up to an aggregate amount of $75 million. The 2022 Shelf Registration Statement was declared effective on January 25, 2022. The proposed maximum offering price per unit and the proposed maximum aggregate offering price per class of security will be determined from time to time by us in connection with the issuance by us of the securities registered under the 2022 Shelf Registration Statement. Until such time as the aggregate market value of our securities held by non-affiliates equals or exceeds $75 million, the aggregate maximum offering price of all securities issued by the us in any given 12-calendar month period pursuant to this and any of our other registration statements may not exceed one-third of the aggregate market value of our securities held by non-affiliates.

On February 13, 2023, we held a special meeting (the “Special Meeting”) of our stockholders. At the Special Meeting, our shareholders voted to approve an amendment to our Certificate of Incorporation as amended to effect a Reverse Stock Split of our ordinary shares (the “Reverse Stock Split”) at a ratio of not less than 1-for 5 and not more than 1-for-50, with such ratio and the implementation and timing of the Reverse Stock Split to be determined by the our board of directors in its sole discretion. Following the Special Meeting, our board of directors approved a 1-for-15 Reverse Stock Split and our Certificate of Incorporation, as amended was amended accordingly. The Reverse Stock Split became effective on February 15, 2023. The purpose of the Reverse Stock Split was to increase the per share trading price of our common stock on the Nasdaq Capital Market to regain compliance with the Bid Price Rule. On March 6, 2023, we received a letter from Nasdaq confirming that our common stock had regained compliance with the Bid Price Rule, and as a result, our common stock continues to trade on the Nasdaq Capital Market. If in the future we fail to satisfy the continued listing requirements of Nasdaq, such as the corporate governance requirements or the Bid Price Rule, Nasdaq may take steps to delist our common stock.

The Reverse Stock Split of our common stock had the effect of reducing the number of shares of common stock outstanding. There can be no assurance that the value and liquidity of our common stock will not be adversely affected by the Reverse Stock Split, which in turn could have a material adverse effect on our ability to raise the additional capital that we may require or increase the dilutive impact of any such financing.

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 several 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 British Pound Sterling. As our sales in currencies other than the U.S. 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, 2022.

Our exposure to market interest rate risk is confined to our cash and cash equivalents and restricted cash. 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 investigational sites, suppliers, customers, 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, 2022.

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, 2022, 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, 2022, 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, 2022, 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, 2022 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, 2022 that has materially affected or is reasonably likely to materially affect our internal control over financial reporting.

Item 9B. Other Information

Annual Meeting Matters

On March 3, 2023, our Board of Directors determined that the date of our 2023 Annual Meeting of Stockholders (the “2023 Annual Meeting”) will be Monday, August 4, 2023. The 2023 Annual Meeting is expected to be a virtual-only meeting conducted via remote communications. The record date, time, and meeting website information for the 2023 Annual Meeting will be set forth in a proxy statement for the 2023 Annual Meeting, which will be filed prior to the 2023 Annual Meeting with the Securities and Exchange Commission.

Due to the fact that the meeting date for the 2023 Annual Meeting is advanced more than 30 days prior to the anniversary of our 2022 Annual Meeting which was held on December 2, 2022, we are providing the timelines for stockholder proposals and director nominations for the 2023 Annual Meeting.

Any of the foregoing proposals or nominations must be delivered to, or mailed and received by, the Company’s Corporate Secretary at the principal executive offices of the Company at 200 Forge Way, Suite 205, Rockaway, NJ 07866, in writing and in proper form, and must set forth the information required by the Company’s amended and restated bylaws and applicable requirements under the Exchange Act rules.

Elimination of Series A Preferred Stock.

On March 6, 2023, we filed a certificate of elimination (the “Certificate of Elimination”), with the Secretary of State of the State of Delaware with respect to the Series A Preferred Stock, par value $0.001 per share (“Series A Preferred Stock”), that had been authorized and designated for issuance by our board on December 2, 2022. At the time of filing of the Certificate of Elimination, no shares of Series A Preferred Stock were outstanding. All previously issued shares of Series A Preferred Stock were redeemed pursuant to their terms on February 13, 2023. The Certificate of Elimination eliminated the previous designation of 80,000 shares of Series A Preferred Stock from our certificate of incorporation, and caused such previously designated shares to resume their status as authorized but unissued and non-designated shares of preferred stock.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not applicable.

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 2023 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

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 2023 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

Item 14. Principal Accountant Fees and Services

PART IV

Item 15. Exhibits and Financial Statement Schedules

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

(1) Financial Statements:

Report of Independent Registered Public Accounting Firm (PCAOB ID # 688) F-2

Consolidated Balance Sheets F-3

Consolidated Statements of Operations F-4

Consolidated Statements of Comprehensive Loss F-5

Consolidated Statements of Equity F-6

Consolidated Statements of Cash Flows F-7

Notes to Consolidated Financial Statements F-8

(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

Not applicable.

ExhibitNumber Description

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

3.2***** Amended and Restated 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

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 8, 2023 By: /s/ DANIEL S. GOLDBERGER

Daniel S. Goldberger

Chief Executive Officer and Director(Principal Executive Officer)

Date: March 8, 2023 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/ Peter Cuneo Chairman of the Board March 8, 2023

Peter Cuneo

/s/ Julie A. Goldstein Director March 8, 2023

Julie A. Goldstein

/s/ Daniel S. Goldberger Director March 8, 2023

Daniel S. Goldberger

/s/ John Gandolfo Director March 8, 2023

John Gandolfo

/s/ Joseph P. Errico Director March 8, 2023

Joseph P. Errico

/s/ Thomas Patton Director March 8, 2023

Thomas Patton

/s/ Thomas J. Errico, M.D. Director March 8, 2023

Thomas J. Errico, M.D.

/s/ Patricia Wilber Director March 8, 2023

Patricia Wilber

/s/ Trevor J. Moody Director March 8, 2023

Trevor J. Moody

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm (PCAOB ID # 688) F-2

Consolidated Balance Sheets as of December 31, 2022 and 2021 F-3

Notes to Consolidated Financial Statements F-8

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of

electroCore, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of electroCore, Inc. (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive loss, equity, and cash flows for each of the two years in the period ended December 31, 2022, 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, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, 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 experienced significant losses and cash used in operations and expects to continue to incur net losses. 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 audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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

Our audits included performing procedures to assess the risks of material misstatement of the 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 audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Marcum LLP

Marcum LLP

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

New York, NY

March 8, 2022

ELECTROCORE, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(in thousands, except share data)

December 31,

Assets

Current assets:

Restricted cash 250 —

Accounts receivable, net 401 438

Prepaid expenses and other current assets 828 1,053

Property and equipment, net 50 147

Operating lease right of use assets, net 565 613

Liabilities and Equity

Current liabilities:

Accrued expenses and other current liabilities 4,842 4,486

Current portion of operating lease liabilities 74 61

Noncurrent liabilities:

Operating lease liabilities, noncurrent 625 700

Commitments and contingencies (see Note 13) — —

Mezzanine equity:

Stockholders' equity:

Accumulated other comprehensive (loss) income (69 ) 13

See accompanying notes to the consolidated financial statements.

ELECTROCORE, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(in thousands, except per share data)

Years ended December 31,

Operating expenses:

Other (income) expense:

Gain on extinguishment of debt — (1,422 )

Gain on termination of joint venture — (549 )

Interest and other income (287 ) (11 )

Other expense 6 8

Benefit from income taxes 431 851

Preferred stock dividend — —

Net loss available for common shareholders $ (22,162 ) $ (17,218 )

See accompanying notes to the consolidated financial statements.

ELECTROCORE, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Loss

(in thousands)

Years ended December 31,

Other comprehensive income (loss):

Foreign currency translation adjustment (82 ) 176

Foreign currency translation adjustment - deconsolidation — 86

Unrealized gain on marketable securities, net of taxes as applicable — 2

Other comprehensive (loss) income (82 ) 264

Preferred dividend — —

Comprehensive loss available to common shareholders $ (22,244 ) $ (16,954 )

See accompanying notes to consolidated financial statements.

ELECTROCORE, INC. AND SUBSIDIARIES

Consolidated Statements of Equity

(in thousands)

Mezzanine Equity Stockholders' Equity

Additional Accumulated other Total electroCore

Shares Amount Shares Amount capital deficit income (loss) equity interest equity

Other comprehensive income — — — — — — 264 264 — 264

Reverse stock split — — — (66 ) 66 — — — — —

Termination of joint venture — — — — — — — — (635 ) (635 )

Other comprehensive loss — — — — — — (82 ) (82 ) — (82 )

Dividend preferred (see Note 8) 71 — — — — — — — — —

See accompanying notes to the consolidated financial statements.

ELECTROCORE, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(in thousands)

Year ended December 31,

Cash flows from operating activities:

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

Depreciation and amortization 548 382

Amortization of marketable securities premium — 142

Gain on extinguishment of debt — (1,422 )

Gain on termination of joint venture — (549 )

Gain on lease settlement — (57 )

Increase in allowance for doubtful accounts — 49

(Gain) loss on legal fee obligation settled with stock — (9 )

Noncash lease expense 48 55

Inventory reserve charge 196 70

Changes in operating assets and liabilities:

Accounts receivable 37 (217 )

Prepaid expenses and other assets 225 716

Accrued expense and other current liabilities 356 425

Right of use operating lease assets — (151 )

Operating lease liabilities (62 ) 20

Net cash used in operating activities (16,645 ) (13,627 )

Cash flows from investing activities:

Purchase of marketable securities — (5,083 )

Proceeds from maturities of marketable securities — 23,300

Net cash provided by investing activities — 18,217

Cash flows from financing activities:

Proceeds from shares issued, net of related expenses — 25,682

Net cash provided by financing activities — 25,682

Effect of changes in exchange rates on cash and cash equivalents (82 ) 175

Net (decrease) increase in cash and cash equivalents (16,727 ) 30,447

Cash and cash equivalents – beginning of year 34,689 4,242

Cash and cash equivalents, and restricted cash – end of year $ 17,962 $ 34,689

Supplemental cash flows disclosures:

Proceeds from sale of state net operating losses $ 445 $ 877

Income taxes paid $ — $ 39

Interest paid $ 6 $ 10

Supplemental schedule of noncash activity:

Insurance premium financing $ 522 $ 874

Settlement of certain obligations through issuance of common stock $ — $ 1,275

See accompanying notes to consolidated financial statements.

ELECTROCORE,INC. ANd SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 1. The Company

electroCore, Inc. and its subsidiaries (“electroCore” or the “Company”) is a commercial stage bioelectronic medicine and wellness company dedicated to improving health through its non-invasive vagus nerve stimulation (“nVNS”) technology platform. The Company’s focus is the commercialization of medical devices for the management and treatment of certain medical conditions and consumer product offerings utilizing nVNS to promote general wellbeing and human performance in the United States and select overseas markets.

electroCore, headquartered in Rockaway, NJ, has two wholly owned subsidiaries: electroCoreUK Ltd and electroCore Germany GmbH. The Company has paused operations in Germany, with sales into the country and the rest of Europe being managed by electroCore UK Ltd. On November 2, 2021, the Company formally terminated its agreement with electroCore (Aust) Pty Limited (“electroCoreAustralia”). Prior to this termination, electroCoreAustralia was subject to electroCore’s control on a basis other than voting interests and was a variable interest entity (“VIE”), for which electroCore was the primary beneficiary. As of May 2017, the VIE had ceased operations. (see Note 10)

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 the regulations of the Securities and Exchange Commission ("SEC").

At a special stockholders meeting held on February 13, 2023, the Company's stockholders approved an amendment to the Company's certificate of incorporation to effect of a reverse stock split of the Company's common stock at a ratio between 1-for-5 to 1-for-50 in order to achieve a minimum bid price of $1.00 per share for a minimum of 10 consecutive trading days, as required for continuing listing of the common stock on the Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2). The board of directors authorized a 1-for-15 ratio for the reverse stock split, which became effective on February 15, 2023. The accompanying consolidated financial statements and notes to consolidated financial statements give retroactive effect to the reverse stock split for all periods presented.

(b) Principles of Consolidation

The accompanying consolidated financial statements include the accounts of electroCore and its wholly owned subsidiaries. electroCore Australia was consolidated with the non-controlled equity presented as non-controlling interest in the Company's consolidated financial statements for the year ended December 31, 2020. As described in Note 1, the Company terminated its affiliation with electroCore Australia on November 2, 2021 and, as such, this dormant entity was not included in the Company's subsequent consolidated financial statements. All intercompany balances and transactions have been eliminated in consolidation.

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 allowances for doubtful accounts, trade credits, rebates, co-payment assistance and sales returns, valuation of inventory, estimated useful life of licensed product and cloud computing arrangements, stock compensation, incremental borrowing rate and contingencies.

ELECTROCORE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — Continued

(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. For the years endedDecember 31, 2022and2021, trade credits and discounts were immaterial.

(e) Cash, Cash Equivalents and Restricted Cash

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

The following table provides a reconciliation of cash, cash equivalents and restricted cash to the balance reflected on the Consolidated Statement of Cash Flow for the year ended December 31, 2022:

(in thousands) Year Ended December 31, 2022

Cash and cash equivalents $ 17,712

Restricted cash 250

Total cash, cash equivalents and restricted cash $ 17,962

(f) Restricted Cash

The Company's restricted cash consists of cash that the Company is contractually obligated to maintain in accordance with the terms of its corporate credit card arrangement with Citibank.

ELECTROCORE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — Continued

(g) Concentration of Credit Risk

Cash equivalents are financial instruments that potentially subject the Company to concentration of credit risk. As of December 31, 2022, the Company's cash equivalents securities were largely comprised of money market funds. The Company has established guidelines relative to diversification and maturities that are designed to help ensure safety and liquidity. These guidelines are periodically reviewed to take advantage of trends in yields and interest rates. As of December 31, 2022, 95% of the Company’s cash and cash equivalents were denominated in U.S. Dollars, the balance is subject to foreign exchange risk. The Company’s accounts are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000per 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.

(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, 2022 and 2021, 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 goods 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

Furniture and fixtures 5–10 years

Computer equipment 5 years

ELECTROCORE, INC. AND SUBSIDIARIES

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 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.

(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. The accompanying Consolidated balance sheet as of December 31, 2022 includes a total of $1.2 million of such capitalized costs and the corresponding net amortized asset totaled $235,000.

(m) Licensed Products

The Company licenses a portion of its devices through its cash pay channels. The cost of these licensed devices is capitalized and included in Other Assets in the accompanying Consolidated Balance Sheets at December 31, 2022 and 2021, and is being recognized as cost of goods sold on the straight-line method over the estimated 12-36 month useful life of the devices. If certain licensed devices are returned and no longer meet quality specifications or the carrying amount of certain licensed devices are no longer deemed to be recoverable, the Company records a charge to cost of goods soldto write down such licensed devices to zero. During the year ended December 31, 2022, the Company recorded a charge to costs of goods sold of $239,000 related to such assets. The accompanying Consolidated balance sheet as of December 31, 2022 includes a total of $931,000 of capitalized licensed device costs and the corresponding net amortized assets totaled $538,000.Cash flows from licensed devices are included in Inventory in the accompanying Consolidated Statements of Cash Flows for the years ended December 31, 2022 and 2021.

(n) Impairment of Long-Lived Assets

Long lived assets, such as property 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.

(o) 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. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — Continued

(p) Income Taxes

The Company follows the asset and liability method of accounting for income taxes under ASC 740, "Income Taxes." Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax provisions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company is currently not aware of any issues under review that could result in significant payments, accruals or deviation from its position during the next twelve months.

(q) 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.

(r) 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.

(s) 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.

(t) Prior year presentation

Prior year presentation has been conformed to current year presentation.

(u) Recently Adopted Accounting Standards

There are no recent accounting pronouncements that are expected to have a material impact on the Company’s consolidated financial statements or related disclosures.

ELECTROCORE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — Continued

Note 3. Significant Risks and Uncertainties

Going Concern

The Company has experienced significant net losses and cash used in operations, and it expects to continue to incur net losses and cash used in operations for the near future as it works to increase market acceptance of its medical devices and wellness products. The Company has never been profitable and has incurred net losses and cash used in operations in each year since its inception.

The United States Department of Veteran Affairs comprised 60.8 % of the Company's revenue during the year ended December 31, 2022. The Company expects that a majority of our 2023 sales will be made pursuant to its qualifying contract under the Federal Supply Schedule, or FSS, which was secured by the Company in December 2018, as well as open market sales to individual facilities within the government channels. The FSS is scheduled to expire on January 15, 2024. The Company intends to request an extension of the FSS from the United States Department of Veteran Affairs, but there is no assurance the FSS will be renewed, and if at all renewed at terms favorable to the Company. The Company's sales function in this channel is comprised of employees and independent contractors.

The Company’s expected cash requirements for the next 12 months and beyond are largely based on the commercial success of its products. There are significant risks and uncertainties as to its ability to achieve these operating results. Due to the risks and uncertainties, the Company may need to reduce its activities significantly more than 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 funds 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 of 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 ("VA/DoD") pursuant to its qualifying contract under the Federal Supply Schedule and open market sales to individual Department of Veterans Affairs facilities, and (ii) in the United Kingdom from the National Health Service. The VA/DoD and National Health Service were the Company’s sole customers accounting for 10% or more of total net sales during the years ended December 31, 2022 and 2021. The following table reflects the respective concentration as a percentage of the Company's net sales:

Years ended December 31,

Revenue channel:

National Health Service 15.1 % 24.1 %

During the years ended December 30, 2022 and 2021, one and two facilities accounted for more than 10% of total VA/DOD net sales, respectively. During the years ended December 31, 2022 and 2021, one facility accounted for more than 10% of net sales from the National Health Service.

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

ELECTROCORE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — Continued

The Company continues to monitor the impact of the ongoing coronavirus pandemic on all aspects of its business and geographies, including how it will impact business partners, customers, and the global supply chain. While the Company experienced disruptions during the years ended December 31, 2022 and 2021 from the coronavirus pandemic, it is unable to predict the full impact that the coronavirus pandemic may have on its financial condition, results of operations and cash flows due to numerous uncertainties. These uncertainties include the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact and the direct and indirect economic effects of the ongoing pandemic and containment measures, the emergence of new viral strains that are not responsive to the vaccines, among others. The coronavirus pandemic has significantly adversely impacted global economic activity and has contributed to significant volatility and negative pressure in financial markets. Depending upon the duration and severity of the pandemic, the continuing effect on the Company's results and outlook over the long term remains uncertain.

Note 4. Revenue Recognition

Geographical Net Sales

The following table presents net sales disaggregated by geographic area:

Years ended December 31,

Product revenue

License revenue

Contract Balances

TheCompany generally invoices the customer and recognizes revenue once its performance obligations are satisfied, at which point payment is unconditional. In March 2022, the Company entered into an agreement with Teijin Limited (Teijin), to license certain exclusive rights to its nVNS technology for commercialization in Japan for a range of primary headache disorders. Under the agreement, the Company received a non-refundable, upfront payment for the licenses and rights granted to Teijin. The Company began to recognize revenue for this upfront payment ratably over a period of one year commencing in the second quarter of 2022. As of December 31, 2022, the Company's Consolidated balance sheet included a contract liability related to the Teijin agreement in the amount of $152,000 which is included in Accrued expenses and other current liabilities. No further contracts with customers gave rise to contract assets or liabilities during the year endedDecember 31, 2022and2021. See Note 7 Accrued Expenses and other current liabilities.

Agreed upon payment terms with customers are within30days of shipment. Accordingly, contracts with customers do not include a significant financing component.

Note 5.Inventory

As of December 31, 2022 and 2021, inventories consisted of the following:

December 31,

As of December 31, 2022 and 2021, the Company reserved $668,000 and $821,000 respectively,for obsolete inventory. During the year ended December 31, 2022, the Company disposed of $110,000 of inventory which was previously reserved against. The Company records charges for obsolete inventory in cost of goods sold. As of December 31, 2022 and 2021, noncurrent inventory was comprised of approximately $0.1 million and $0.9million of raw materials, respectively, and $2.1 million and $3.0million of work in process, respectively. Inventory classified under the category Work in process consists of prefabricated assembled product.

ELECTROCORE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — Continued

Note 6.Leases

The Company accounts for leases in accordance with FASB ASU 2016-02, Leases (Topic 842), and its operating leases consist of manufacturing/warehouse space and office equipment. The Company elected not to recognize right of use assets and lease liabilities for short term leases, i.e., leases with a noncancelable period of 12 months or less. The Company recognized the option to renew its manufacturing/warehouse space ("Rockaway space") as part of the right of use asset and the lease liability as the Company deemed that the renewal option was reasonably certain to be exercised.

In connection with its cost reduction strategies, the Company vacated its New Jersey corporate headquarters ("Basking Ridge office space") and relocated its corporate headquarters to the Rockaway space effective December 31, 2021. Although the Basking Ridge lease agreement provided for sublease, the Company did not elect this option in light of the economic downturn in commercial real estate due to the pandemic and other factors. In December 2020, the Company informed the Basking Ridge landlord of its intention to vacate the Basking Ridge office space on December 31, 2021.

On September 27, 2021, the Company entered into the Termination and Settlement Agreement ("Agreement") with the lessor of the Basking Ridge office space. The Agreement provided for the immediate termination of the Basking Ridge lease in its entirety. In consideration for the lease termination, the Company agreed to pay the lessor a total of $500,000 in cash and issue to the lessor 13,333 shares of its common stock. As of December 31, 2021, such payments were satisfied by the Company. The Company recorded a gain of $57,000 connection with the termination of the Agreement which is included in the accompanying Consolidated Statement of Operations for the year ended December 31, 2021 under the caption Operating expenses - Selling, general and administrative.

For the years ended December 31, 2022 and 2021, the Company recognized lease expense of $153,000 and $146,000, 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 right of use assets $ 565 $ 613

Operating lease liabilities:

Current portion of operating lease liabilities 74 61

Noncurrent operating lease liabilities 625 700

Total operating lease liabilities $ 699 $ 761

Weighted average remaining lease term (in years) 6.1 6.9

Weighted average discount rate 13.8 % 13.8 %

Future minimum lease payments under non-cancellable operating leases as of December 31, 2022:

Financial year (in thousands)

Total future minimum lease payments 1,037

Less: Amounts representing interest (338 )

ELECTROCORE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — Continued

Note 7. Accrued Expenses and Other Current Liabilities

Accrued expenses as of December 31, 2022 and 2021 consisted of the following:

December 31,

Accrued professional fees $ 524 $ 468

Accrued bonuses and incentive compensation 2,042 1,849

Accrued litigation legal fees expense 1,001 605

Accrued insurance expense 264 499

Accrued vacation and other employee related expenses 534 455

Accrued valued-added tax 133 263

Deferred Revenue 152 —

Finance and Security Agreements

On July 5, 2022, the Company entered into a Commercial Insurance Premium Finance and Security Agreement (“the 2022 Agreement”). The 2022 Agreement provides for a single borrowing by the Company of approximately $783,000 with a nine-month term and an annual interest rate of 2.49%. The proceeds from this transaction were used to partially fund the premiums due under certain 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 $87,900beginning in July 2022. As ofDecember 31, 2022, the remaining balance under the Agreement was $264,000and during the year ended December 31, 2022, the Company recognized $4,000in interest expense.

On July 2, 2021, the Company entered into a Commercial Insurance Premium Finance and Security Agreement (“the 2021 Agreement”). The 2021 Agreement provides for a single borrowing by the Company of $1.2million, with a ten-month term and an annual interest rate of1.55%. 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 $124,800beginning in July 2021. As ofDecember 31, 2021, the remaining balance under the Agreement was $499,000and during the year ended December 31, 2021, the Company recognized $5,000in interest expense.

Paycheck Protection Program

On May 4, 2020, the Company received proceeds of $1.4 million in connection with a promissory note (the “Note”) entered into with Citibank, N.A. (the “Lender”) evidencing an unsecured loan (the “Loan”) under the Paycheck Protection Program ("PPP"). The PPP is a program of the SBA established under the CARES Act. Under the PPP, the proceeds of the Loan may be used for payroll and certain covered interest payments, lease payments and utility payments (“Qualifying Expenses”). The Company used the entire Loan amount for Qualifying Expenses under the PPP. On May 18, 2021, the Company received notification from the Lender of SBA's approval of the Company's application for loan forgiveness. Accordingly, the Company was not required to repay the loan. The Company recorded the loan forgiveness as a gain in the accompanying Consolidated Statements of Operations for the year ended December 31, 2021 under the caption Gain on extinguishment of debt.

ELECTROCORE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — Continued

Note 8. Stockholders’ Equity

All common stock share and per share data reflects the reverse stock split effective February 15, 2023, as described in Note 14. Subsequent Events, Reverse stock split.

Dividend Preferred

On December 2, 2022, the Company's board of directors declared a dividend of one one-thousandth of a share of Series A Preferred Stock, par value $0.001 per share (“Series A Preferred Stock”), for each outstanding share of the Company’s common stock, to stockholders of record on December 19, 2022.

Each share of Series A Preferred Stock entitled the holder thereof to 1,000,000 votes per share, and each fraction of a share of Series A Preferred Stock had a ratable number of votes. Thus, each one-thousandth of a share of Series A Preferred Stock was entitled to 1,000 votes. The outstanding shares of Series A Preferred Stock voted together with the outstanding shares of the Company's common stock as a single class exclusively with respect to the proposal to adopt an amendment to the Company’s Certificate of Incorporation, as amended, to reclassify the outstanding shares of the Company's Common Stock into a smaller number of shares of common stock at a ratio specified in or determined in accordance with the terms of such amendment (the “Reverse Stock Split”).

The Company was not solely in control of the redemption of the shares of Series A Preferred Stock since the holders had the option of deciding whether to vote in respect of the above described Reverse Stock Split, which determined whether a given holder’s shares of Series A Preferred Stock were redeemed in the Initial Redemption or the Subsequent Redemption. Since the redemption of the Series A Preferred Stock was not solely in the control of the Company, the shares of Series A Preferred Stock were classified within mezzanine equity in the Company’s audited consolidated balance sheet. The shares of Series A Preferred Stock were measured at redemption value. The value of the shares of Series A Preferred Stock as of December 31, 2022 was $71. See Note 14. Subsequent Events, Redemption and Elimination of Series A Preferred Stock.

ELECTROCORE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — Continued

Public Offering of CommonStock

On July 2, 2021, the Company completed a public offering of 1,380,000 shares of its common stock at a purchase price of $15.00 per share. The net proceeds of the offering to the Company were approximately $18.8 million, after deducting the underwriting discounts, commissions, and other offering expenses.

Other 2021 Securities Purchase Agreements

On August 30, 2021, the Company entered into a Securities Purchase Agreement with its legal counsel pursuant to which the Company issued 63,492 shares of common stock, at a purchase price of $15.75 per share. Upon issuance of the shares, certain of the Company's outstanding financial obligations to its legal counsel were deemed paid and satisfied in full.

Settlement of Lease Liability

During 2021, the Company agreed to issue 13,333 shares of its common stock in connection with the lease termination related to its former headquarters located in Basking Ridge, NJ.

Settlement of Accrued Bonus

In January 2021, the Company issued 11,028 shares of its common stock as payment for certain executive incentive bonuses accrued in 2020.

Stock Purchase Warrants

The following table presents a summary of stock purchase warrants outstanding as ofDecember 31, 2022:

Granted — — $ —

Exercised — — $ —

Note 9.Net Loss Per Share

All common stock share data reflects the reverse stock split effective February 15, 2023, as described in Note 14. Subsequent Events, Reverse stock split.

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,

Outstanding stock options 440 342

Nonvested restricted stock and unit awards 127 72

Stock purchase warrants 1 14

ELECTROCORE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — Continued

Note 10.Variable Interest Entity

As discussed in Note 1, electroCore was the primary beneficiary of electroCore (Aust) Pty Limited ("electroCoreAustralia"). 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 had the right to appoint two of the four directors and exercise significant influence. This along with the fact that electroCore was electroCoreAustralia’s only supplier caused electroCore, for accounting purposes, to be the primary beneficiary of electroCoreAustralia. The activities related to electroCoreAustralia were not material to the Company's consolidated financial statements. Effective May 2017, the VIE had ceased operations. On November 2, 2021, the Company terminated its interest in electroCoreAustralia and recorded the related a gain of $0.5 million in the accompanying Consolidated Statement of Operations for the year ended December 31, 2021 under the caption Gain on termination of joint venture.

Note 11. Income Taxes

The benefit for income taxes for the years ended December 31, 2022 and 2021 consisted of foreign taxes, state minimum tax and a benefit from the sale of state net operating losses.

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

The income tax (benefit)/expense from continuing operations contains the following components:

Federal $ — $ —

Total current (benefit)/expense (431 ) (851 )

Total deferred — —

Total income tax (benefit)/expense $ (431 ) $ (851 )

ELECTROCORE, INC. AND SUBSIDIARIES

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 $4.18 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

Fixed assets 5 (6 )

Allowance for bad debt 3 3

Charitable contributions 10 11

Deferred FICA Tax — 7

Total deferred tax assets 306 395

Right of use asset (139 ) (161 )

Total deferred tax liabilities (306 ) (395 )

Deferred tax assets, net $ — $ —

A reconciliation of the income tax expense (benefit) computed at the U.S. federal statutory income tax rate of 21% and the reported income tax expense (benefit) for the years ended December 31, 2022 and 2021 is as follows:

Year ended December 31,

Statutory rate (21.0 )% (21.0 )%

State tax expected (recovery), net of federal benefit (7.3 )% 5.7 %

State tax rate change 9.5 % — %

Stock compensation (0.2 )% (5.7 )%

State tax NOL sale (1.6 )% (3.8 )%

Nondeductible expenses 0.2 % 2.1 %

PPP loan forgiveness — % (1.7 )%

Unrealized gain from termination of joint venture — % (1.8 )%

Change in valuation allowance for deferred tax assets 18.5 % 21.5 %

Income tax benefit (1.9 )% (4.7 )%

ELECTROCORE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — Continued

As of December 31, 2022 and 2021, the Company had accumulated Federal net operating losses totaling $119.7 million and $103.9 million, respectively. Also, as of December 31, 2022 and 2021, the Company had state post-apportioned net operating losses totaling $47.0 million and $40.5 million, respectively. The net operating losses 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 $3.4 million and $3.6 million for the years ended December 31, 2022 and 2021, respectively, 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.

During the year ended December 31, 2022 in accordance with the State of New Jersey's Technology Business Tax Certificate Program, which allowed certain high technology and biotechnology companies to sell unused NOL carry forwards to other New Jersey based corporate taxpayers, the Company sold New Jersey NOL carry forwards, resulting in the recognition of $445,000 of income tax benefit, net of transaction costs. The Company recognized $877,000 of income tax benefit from the sale of New Jersey carry forwards in 2021. There can be no assurance as to the continuation or magnitude of this program in the future.

As of December 31, 2022, the Company had Federal and NJ research and development credits of $283,000 and $192,000 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’s U.S. federal and state net operating losses have occurred since inception in 2018 and as such, tax years subject to potential tax examinations could apply from that date because the utilization of net operating losses from prior years opens the relevant year to audit by the IRS and/or state taxing authorities. The Company currently has no tax years under examination.

As of December 31, 2022, 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.

ELECTROCORE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — Continued

Note 12.Stock Based Compensation

All common stock share and per share data reflects the reverse stock split effective February 15, 2023, as described in Note 14. Subsequent Events, Reverse stock split.

On June 21, 2018, the Company adopted the2018Omnibus Equity Incentive Plan (“Plan”). This plan reserved0.4million 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 of3.0million shares, and a maximum of2.7 million shares pursuant to the exercise of stock options. Effective January 1, 2023, the number of shares reserved under the Plan was increased by 0.2 million to approximately 0.9 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, 2022 and 2021. Total unrecognized compensation cost related to equity awards as ofDecember 31, 2022 was $2.8million and is expected to be recognized over the next1.5years.

Year ended December 31,

Selling, general and administrative $ 2,319 $ 2,902

Research and development 335 332

Cost of goods sold 28 68

The following table presents a summary of stock option award activity during the year ended December 31, 2022:

Exercised — — $ —

The intrinsic value is calculated as the difference between the fair market value at December 31, 2022 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, 2022:

ELECTROCORE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — Continued

The following table presents a summary of restricted and deferred stock unit (“Unit” or "Units") activity during the year ended December 31, 2022:

Number of Shares (in thousands) Weighted Average Grant Date Fair Value

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. Beginning in December 2022, the Company began incorporating its historical common stock volatility at a weighting of 50% of the total composite volatility rate. During 2023, the Company will continue to evaluate the volatility rate used to value stock options. 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 $ 7.20 $ 19.80

Expected volatility 90.6% 80.2%

Risk-free interest rate 2.1% 0.7%

Expected holding period, in years 5.8 6.0

Dividend yield — —

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

ECOR US Equity

ECOR · 10-K · period ended 2022-12-31

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

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

Item 8. Financial Statements and Supplementary Data.

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

Item 9A. Controls and Procedures

Item 9B. Other Information

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Item 10. Directors, Executive Officers and Corporate Governance

Item 11. Executive Compensation

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

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

Item 14. Principal Accountant Fees and Services

Item 15. Exhibits and Financial Statement Schedules

Item 16. Form 10-K Summary

ECOR US Equity☆

ECOR · 10-K · period ended 2022-12-31

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

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

Item 8. Financial Statements and Supplementary Data.

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

Item 9A. Controls and Procedures

Item 9B. Other Information

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Item 10. Directors, Executive Officers and Corporate Governance

Item 11. Executive Compensation

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

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

Item 14. Principal Accountant Fees and Services

Item 15. Exhibits and Financial Statement Schedules

Item 16. Form 10-K Summary

ECOR US Equity