electroCore, Inc. Income Taxes Disclosure

Note 13. Income Taxes

 

The benefit for income taxes for the years ended December 31, 2025 and 2024 consisted of foreign taxes, state minimum taxes 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:

 Schedule of Loss Before Provision For Income Taxes

(in thousands)		December 31, 2025				December 31, 2024
Domestic		$	(13,724	)		$	(11,338	)
Foreign			(239	)			(641	)
Total		$	(13,963	)		$	(11,979	)

 

 

ELECTROCORE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — Continued

 

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

 Schedule of Income Tax Provision/(Benefit)

(in thousands)		December 31, 2025				December 31, 2024
Federal		$	—			$	—
State			(21	)			(116	)
Foreign			24				23
Total current expense (benefit)			3				(93	)
Total deferred			—				—
Total income tax provision (benefit)		$	3			$	(93	)

 

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 for the years ended December 31, 2025 and 2024 was an increase of $9.8 million and $3.7 million, respectively.

 

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

 Schedule of Deferred income tax Assets and Liabilities

(in thousands)		2025				2024
		Year ended December 31,
(in thousands)		2025				2024
Deferred tax assets
Net operating loss carryforwards		$	46,378			$	35,856
Accrued expenses			500				429
Fixed assets			42				-
Intangibles			2,889				2,634
Inventory			171				158
Inventory reserve			60				-
Allowance for credit losses			139				12
Charitable contributions			-				10
R&D credit			2,683				2,074
Lease liabilities			668				1,033
Stock compensation			1,503				3,251
Deferred tax assets			55,083				45,457
Less valuation allowance			(54,143	)			(44,310	)
Total deferred tax assets			890				1,147
Prepaid expenses			(277	)			(207	)
Other			-				(6	)
Right of use asset			(613	)			(934	)
Total deferred tax liabilities			(890	)			(1,147	)
Deferred tax assets, net		$	—			$	—

 

 

ELECTROCORE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — Continued

 

A reconciliation of the income tax benefit computed at the U.S. federal statutory income tax rate of 21% and the reported income tax provision for the year ended December 31, 2025 after the adoption of ASU 2023-09 is as follows:

 Schedule of reconciliation of Income Tax Benefit

		2025				2024
		Year ended December 31, 2025
(in thousands)		Amount				Rate
U.S. federal statutory rate		$	(2,932	)			(21.0	)%
Current state and local income taxes, net of federal income tax effect (1)			21				0.2
Deferred state and local income taxes			-				-
Foreign tax effect:
Germany:
Statutory tax rate difference			(1	)			(0.0	)
Changes in valuation allowance			3				0.0
United Kingdom:
Statutory tax rate difference			(3	)			(0.0	)
Foreign eliminations			(163	)			(1.2	)
Tax credits:
Research and development tax credits			(364	)			(2.6	)
Other			480				3.4
Changes in valuation allowance			8,127				58.2
Nontaxable or nondeductible items
IRC 162(m)			138				1.0
Meals and entertainment			33				0.2
Stock based compensation			1,530				11.0
Sale of New Jersey NOL and R&D tax credits			(38	)			(0.3	)
Other:
Acquisition of Nuro			(6,881	)			(49.3	)
Other			53				0.4
Income tax provision		$	3				0.0	%

 

(1)	The state and local jurisdictions that contribute to the majority (greater than 50%) of the tax effect in this category is Texas.

 

A reconciliation of the income tax benefit computed at the U.S. federal statutory income tax rate of 21% and the reported income tax benefit for the year ended December 31, 2024 before the adoption of ASU 2023-09 is as follows:

 Schedule of Income Tax Benefit

		Year ended December 31, 2024
Statutory rate			(21.0	)%
State tax recovery, net of federal benefit			(5.8	)
State tax rate change			(1.5	)
Stock compensation			1.1
State tax NOL sale			(0.8	)
Nondeductible expenses			0.4
Credits			(4.0	)
Change in valuation allowance for deferred tax assets			30.8
Income tax benefit			(0.8	)%

 

As of December 31, 2025 and 2024, the Company had accumulated Federal net operating losses totaling $184.5 million and $143.6 million, respectively. Also, as of December 31, 2025 and 2024, the Company had post-apportioned net operating losses totaling $90.3 million and $61.2 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 $4.3 million for each of the years ended December 31, 2025 and 2024, 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 3 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.

 

The Company may be eligible, from time to time, to receive cash from the sale of its net operating losses under New Jersey’s Department of the Treasury - Division of Taxation NOL Transfer Program. During the year ended December 31, 2025 and 2024, the Company sold New Jersey NOL carry forwards, resulting in the receipt of net cash payments of $0.05 million and $0.1 million, respectively. There can be no assurance as to the continuation or magnitude of this program in the future.

 

As of December 31, 2025, the Company had an aggregate of Federal, New Jersey and Massachusetts research and development credits of $2.2 million. The Federal R&D credits can be carried forward 20 years and will begin to expire in 2038. The Massachusetts R&D tax credit can be carried forward indefinitely. The New Jersey R&D credits can be carried forward seven years and will begin to expire in 2031.

 

 

ELECTROCORE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — Continued

 

The amount of cash income taxes paid by the Company were as follows:

 

 Schedule of Cash Income Taxes Paid

(in thousands)		December 31, 2025
Federal		$	-
State			11
Foreign			-
Cash tax payments		$	11

 

The amount of cash income taxes paid by the Company during the year ended December 31, 2024 was approximately $6,000.

 

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, 2025, 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.