UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 20172023

001-12934

(Commission file number)

ImmuCell Corporation

(Exact name of Registrantregistrant as specified in its charter)

(207) 878-2770

(Registrant’s telephone number: (207) 878-2770number)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: None

Common Stock, par value $0.10 per share

(Title of class)

Indicate by check mark if the Registrantregistrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒☑

Indicate by check mark if the Registrantregistrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒☑

Indicate by check mark whether the Registrantregistrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrantregistrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒☑ No ☐

Indicate by check mark whether the Registrantregistrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrantregistrant was required to submit and post such files). Yes ☒ ☑No ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒

Indicate by check mark whether the Registrantregistrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large

Large accelerated filer” “accelerated ☐ Accelerated filer” “smaller ☐ Non-accelerated filer ☑ Smaller reporting company” and “emerging☑ Emerging growth company” in Rule 12b-2 of the Exchange Act.company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐

Indicate by check mark whether the Registrantregistrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that require a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒☑

The aggregate market value of the voting and non-voting common equity held by non-affiliates at June 30, 20172023 was approximately $29,179,000$31,165,000 based on the closing sales price on June 30, 20172023 of $7.33$5.00 per share.

The number of shares of the Registrant’sregistrant’s common stock outstanding atas of March 20, 20188, 2024 was 5,480,157.7,750,864.

Documents incorporated by reference: Portions of the Registrant’s definitive Proxy Statement to be filed in connection with the 2018 Annual Meeting of Stockholders are incorporated by reference into Part III hereof.

ImmuCell Corporation

TABLE OF CONTENTS

December 31, 20172023

ImmuCell Corporation

PART I

ITEM 1 – BUSINESS

SafeCautionary Note Regarding Forward-Looking Statements (Safe Harbor StatementStatement):

This Annual Report on Form 10-K (Annual Report) contains “forward-looking statements” within the meaning of Section 27A of the Private Securities Litigation Reform Act of 19331995, as amended. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts, and Section 21E of the Securities Exchange Act of 1934.will often include words such as “expects”, “may”, “anticipates”, “aims”, “intends”, “would”, “could”, “should”, “will”, “plans”, “believes”, “estimates”, “targets”, “projects”, “forecasts”, “seeks” and similar words and expressions. Such statements include, but are not limited to, any forward-looking statements relating to: our plans and strategies for our business; projections of future financial or operational performance; projections about depreciation expensethe timing and outcome of pending or anticipated applications for regulatory approvals; future demand for our products; the extent, nature and duration of the COVID-19 pandemic and its consequences, and their direct and indirect impacts on our production activities, operating results and financial condition and on the customers and markets that we serve; the impact of Russia’s unprovoked military invasion of Ukraine (and attack on income for bookits people) and tax return purposes;the war in the Middle East on the world economy including inflation and the price and availability of grain and oil; the impact of the global supply-chain disruptions on our ability to obtain, in a timely and cost-effective fashion, all the supplies and components we need to produce our products; the impact of inflation and rising interest rates on our operating expenses and financial results; the scope and timing of ongoing and future product development work and commercialization of our products; future costs of product development efforts; the estimated prevalence rate of subclinical mastitis;mastitis and producers’ level of interest in treating subclinical mastitis given the current economic and market conditions; the expected efficacy of new products; estimates about the market size for our products; future market share of and revenue generated by current products and products still in development; our ability to increase production output and reduce costs of goods sold associated with our new product,Tri-Shield™First Defense^®;per unit; the future adequacy of our own manufacturing facilities or those of third parties with which we have contractual relationships to meet demand for our products on a timely basis; the impacts of backlogs on customer relationships; the efficacy, success and timeline to complete our contamination remediation efforts; the likelihood, severity or impact of future contamination events; the anticipated costs of (or time to complete) planned expansions of our manufacturing facilities and the adequacy of our funds available for these projects; the robustness of our manufacturing processes and related technical issues; estimates about our production capacity; the future adequacy of our working capitalcapacity, efficiency and the availability and cost of third party financing; the timing and outcome of pending or anticipated applications for regulatory approvals;yield; future regulatory requirements relating to our products; future expense ratios and margins; the efficacy of our investments in our business; future compliance with bank debt covenants; future cost of our variable rate interest expense on most of our bank debt; costs associated with sustaining compliance with current Good Manufacturing Practice (cGMP) regulationsanticipated changes in our current operationsmanufacturing capabilities and attaining such compliance for the facility to produce the Drug Substance; factors that may affect the dairy and beef industries and future demand for our products;efficiencies; our effectiveness in competing against competitors within both our existing and our anticipated product markets; the cost-effectiveness of additional salesprojections about depreciation expense and marketing expendituresits impact on income for book and resources; anticipated changes in our manufacturing capabilities and efficiencies; anticipated competitive and market conditions;tax return purposes; and any other statements that are not historical facts. Forward-lookingThese statements can be identified byare intended to provide management's current expectation of future events as of the usedate of words suchthis earnings release, are based on management's estimates, projections, beliefs and assumptions as “expects”, “may”, “anticipates”, “aims”, “intends”, “would”, “could”, “should”, “will”, “plans”, “believes”, “estimates”, “targets”, “projects”, “forecasts”of the date hereof; and similar words and expressions. In addition, there can be no assurance thatare not guarantees of future developments affecting us will be those that we anticipate.performance. Such statements involve known and unknown risks and uncertainties that may cause the Company's actual results, financial or operational performance or achievements to be materially different from those expressed or implied by these forward-looking statements, including, but not limited to, those risks and uncertainties relating toto: difficulties or delays in development, testing, regulatory approval, production and marketing of our products (including the First Defense^® product line and Re-Tain^®), competition within our anticipated product markets, customer acceptance of our new and existing products, product performance, alignment between our manufacturing resources and product demand (including the uncertaintiesconsequences of backlogs), uncertainty associated with product developmentthe timing and Drug Substance manufacturing,volume of customer orders as we come out of a prolonged backlog, adverse impacts of supply chain disruptions on our potential reliance upon third parties for financial support, productsoperations and services, changes in lawscustomer and regulations, decision making by regulatory authorities, possible dilutive impacts on existing stockholders from any equity financing transactions in which we may engage, currency valuessupplier relationships, commercial and fluctuationsoperational risks relating to our current and planned expansion of production capacity, and other risks and uncertainties detailed from time to time in filings we make with the Securities and Exchange Commission (SEC), including our Quarterly Reports on Form 10-Q, our Annual Reports on Form 10-K and our Current Reports on Form 8-K. Such statements involve risks and uncertainties and are based on our current expectations, but actual results may differ materially due to various factors, including the risk factors summarized underPart I, ItemPART I: ITEM 1A – “Risk Factors”RISK FACTORS of this Annual Report and uncertainties otherwise referred to in this Annual Report. In addition, there can be no assurance that future risks, uncertainties or developments affecting us will be those that we anticipate. We undertake no obligation to update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.

ImmuCell Corporation

OUTLINE TO ITEM 1 – BUSINESS:

Summary

ImmuCell Corporation was founded in 1982 and completed an initial public offering of common stock in 1987. After achieving approval from the Center for Veterinary Biologics, U.S. Department of Agriculture (USDA) to sellFirst Defense^® in 1991, we focused most of our efforts during the 1990’s attempting to develop human product applications of the underlying milk protein purification technology. Beginning in 1999, we re-focused our business strategy on theFirst Defense^®product line and other products that improve the health and productivity of dairy and beef cattle. We support the dairy and beef industries’ purpose to produce nutritious, protein-rich food efficiently while ensuring food quality and safety. Our products help address the growing human health concern about using less antibiotics in food-producing animals. We aim to capitalize on the growth in sales of theFirst Defense^® product line (a product that provides significant immediate immunityImmediate Immunity™ to newborn dairy and beef livestock) and to revolutionize the mastitis treatment paradigm (with with Re-Tain^®, a novel product we are developing to treat this most significant cause of economic loss to the dairy industry).industry.

During 2000, we began the development ofRe-Tain^®, our purified Nisin treatment for subclinical mastitis in lactating dairy cows. No sales of this product can be made without prior approval of our New Animal Drug Application (NADA) by the Center for Veterinary Medicine, U.S. Food and Drug Administration (FDA). We have achieved FDA approval for four out of five of the significant Technical Sections required for product approval, and we have made our third submission of the fifth Technical Section. We expect a response to this third submission from the FDA by May of 2024. Regulatory achievements to date have significantly reduced the product development risks in the areas of safety and effectiveness. Our primary product development focus has now turned to completion of the manufacturing objectives required for FDA approval.

ImmuCell Corporation

Since 2006, we have made ongoing efforts to maintain compliance with current Good Manufacturing Practice (cGMP) regulations in all of our manufacturing operations, which requires a sustained investment that further enhances the quality of all of our products and our operating efficiency. As we make process improvements, we continue to invest in personnel, equipment and facility modifications to increase the efficiency and quality of our operations.

During 2017the eight-year period beginning January 1, 2016 and ended December 31, 2023, we funded our operations, constructed an FDA-regulated Drug Substance (DS) manufacturing facility for Re-Tain^® and invested capital to increase our production capacity for the First Defense^® product line. We have also initiated another capital investment (which investment is currently paused) to bring the formulation and aseptic filling capabilities for Re-Tain^® in house in order to end our present reliance on an outside contractor. From the first quarter of 2016 through the second quarter of 2021, we issued an aggregate of 2,401,4974,553,017 shares of common stock, raising gross proceeds of approximately $13.46$26.7 million in foursix separate transactions. In order to minimize the dilutive effects of these transactions on our existing stockholders, we chose not to issue any form of convertible or preferred securities and issued these common shares without any warrants. During 2017Net of debt issuance and 2016,debt discount costs, we also secured uphad approximately $12 million in outstanding debt as of December 31, 2023 compared to approximately $6.8$3.2 million in newas of December 31, 2015. This equity and debt availability. We are using this new capital has been, and is being, used to increase the production capacity for the First Defense^® product line and complete the development of our purified Nisin productRe-Tain^® without relying on funding from a partner or licensee, thereby retainingkeeping control over all product rights and potentialfuture revenues. During this time, our total assets have increased to $43.8 million as of December 31, 2023 from $14.6 million as of December 31, 2015, and our stockholders’ equity has increased to $25 million as of December 31, 2023 from $10.6 million as of December 31, 2015. This represents a 200%, or $29 million, increase in total assets and a 135%, or $14.4 million, increase in stockholders’ equity over this eight-year period.

Our operations have been generally profitable, except when

ImmuCell Corporation

Production Capacity Increase and Product Contamination

During 2018, it became clear that demand for Tri-Shield First Defense^® was outpacing production. In response to this increasing demand, we began a series of investments during 2019 to increase our production capacity for the First Defense^® product line to approximately $30 million per year. The necessary facility expansions and new equipment needed to increase production capacity were in place by the end of 2022. See PART II: ITEM 7 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, for more detail about our investments to increase production capacity.

As this increased production capacity was coming online, a product contamination event was detected by standard in-process quality control testing around the end of the third quarter of 2022. Scrapped product from contamination events (largely this one around the end of the third quarter) and other production process losses resulted in a total charge to costs of goods sold of approximately $589,000 during 2022. We took immediate steps to address the contamination, and production ran without issue during the balance of the fourth quarter of 2022. Then during the first quarter of 2023, our standard in-process quality control testing detected a second contamination event. We slowed down our production output to take the necessary steps to assess and remediate the issues and perform a deep sanitization of our facilities and process equipment. After several months of processing without further contamination, we experienced a third contamination event during the third quarter of 2023. Scrapped product from contamination events and other production process losses resulted in a total charge to costs of goods sold of approximately $527,000 during 2023. We believe that the ongoing implementation of our capacity expansion plans and the corrective actions being taken in response to these contamination events should allow us to operate at the higher level of production output going forward without further significant contaminations. We worked diligently to address the situation and believe we are taking the appropriate steps to emerge from this problem stronger with the production capacity in place to produce approximately $30 million of product per year going forward, while continuing to ensure that any product that is put to market meets all quality standards.

We believe that our efforts to increase production capacity for the First Defense^® product line are linked to our product contaminations. It was relatively simple to run at lower production capacities for the 30 years between 1991 (the original USDA approval of First Defense^®) and 2021. The contamination events we suffered during 2022 and 2023 were largely the result of us processing more milk (colostrum) than ever before in order to meet increasing customer demand. As we enter 2024, we believe that we have electedmuch improved processes and controls in place to make unusuallybetter support large-scale production from our raw material source farms through liquid processing. Our most important customer-focused objectives going forward are to fulfill the large investments inbacklog of orders and then again be a reliable supplier of a very effective product development expenses for future growth. During the nineteen years in which we have focused on products forto the dairy and beef industries, we have funded our operations and improved our net financial position, as demonstrated in the following table (in thousands, except for percentages):calf market.

Animal Health Products

TheFirst Defense^Ò® product line is manufactured from hyperimmunehyperimmunized cows’ colostrum (the antibody rich milk that a cow produces immediately after giving birth) utilizing our proprietary vaccine and milk protein purification technologies. TheFirst Defense^®product line provides bovine antibodies that newborn calves need but are unable to produce on their own immediately after birth. The target disease, bovine enteritis (calf scours)calf scours (bovine enteritis), causes diarrhea and dehydration in newborn calves and often leads to serious sickness and even death. The First Defense^Ò®product line is the only USDA-licensed, orally delivered scours preventive product on the market for calves with claims againstE. coliK99, coronavirus and coronavirus (tworotavirus (three leading causes of scours). With USDA approval ofTri-Shield^™First Defense^Ò during the fourth quarter of 2017, we can now offer additional protection against rotavirus (a third common scours-causing pathogen). A single dose of our product provides a guaranteedmeasured level of protection proven to reduce mortality and morbidity. Our milkpre-formed antibody products provideImmediate Immunity^™Immunity™ during the first few critical daysweeks of life when calves need this protection most. Studies have shown that calves that scour are more susceptible to other diseases later in life and under-perform calves that do not contract scours. The direct, two-part mode-of-action of theFirst Defense^®product line delivers specific immunoglobulins at the gut level to immediately protect against disease, while also providing additional antibodies that are absorbed into the bloodstream. These circulating antibodies function like a natural timed-release mechanism, as they are re-secreted into the gut later to provide extended protection. TheFirst Defense^®product line is convenient to use. A calf needs to receive only one dose ofFirst Defense^®within the first twelve hours after birth (the earlier the better). The bivalentbirth. Our capsule format of this product, which requires no mixing, is stored at room temperature, and no mixing is required before it is given towhile the calf. The gel tube formatformats of this product does require refrigeration.refrigeration in accordance with product label indications. We are athe market leader in(in terms of both unit volume and dollar sales) when compared to other calf-level scours preventatives and have greater market potential as we gain market share from the scours prevention market with this product.dam-level (pre-calving scour vaccines) competitors. The third quarter of 20172023 marked the 26th32^ndanniversary of the original USDA approval of this product in 1991. During the fourth quarter of 2017, we sold the 20,000,000thdose2023, our cumulative sales ofFirst Defense^Ò®. We believe that these milestones demonstrate the value of our technology and the long-term market acceptance of our product. since inception exceeded 33 million doses.

ImmuCell Corporation

We believeThe product line extension, Tri-Shield First Defense^®, is the first calf-level, passive antibody product on the market with USDA-approved disease claims providing Immediate Immunity™ against each of the three leading causes of calf scours (E. coli, coronavirus and rotavirus). This product achieved USDA approval during the fourth quarter of 2017 and was listed with the Organic Materials Research Institute (OMRI) during the first quarter of 2019, which means it can be used on organic farms. Tri-Shield^® combines the E. coli and coronavirus antibodies contained in our bivalent product with rotavirus antibodies in a single-dose gel tube delivery format. This unique breadth of claims further differentiates our product from calf-level competitive products on the market that contain only one or two of these label claims. The unique virus-like particle (VLP) technology that is used in our production process increases rotavirus titers in colostrum to a level much greater than traditional vaccine technology can. Because it is possible that some farms may not have (or perceive to have) a rotavirus problem, we are continuing to sell the long-term growth in salesbivalent formats of theFirst Defense^Ò® product line as options for customers.

The First Defense^® product line may reflect, at leastcontinues to benefit from wide acceptance by dairy and beef producers as an effective tool to prevent scours in part,newborn calves, which is the successleading cause of our strategic decision initiateddeath in 2010 to invest in additional sales andpreweaned calves. Our Beyond Vaccination^® marketing efforts to help us introduce the expandingcampaign focuses on providing antibodies without vaccination. A 100% vaccine protection rate is biologically impossible. The First Defense^Ò® product line removes the variability associated with a scour vaccine response and instead provides a measured level of pre-formed antibodies, protecting each calf with an equal level of scours protection. There is a strong link between how we sell our product and the challenges we face in producing it. We know better than most how variable a cow’s response is to new customers.any vaccine. We launched a communications campaign at the endsee this in every batch of 2010 that continues to emphasize how the unique ability ofFirst Defense^Ò® that we produce. The value in First Defense^® is that we adjust for this variability by standardizing the antibody content, as needed, so the newborn is given a steady, equal level of protection with each dose. This technology removes a producer’s reliance on variable vaccine responses to providegenerate passive antibody protection and instead protects every calf equally with a measured dose of Immediate Immunity^™ generates a dependable and competitive return on investment for dairy and beef producers.against the most common scour pathogens. Preventing newborn calves from becoming sick helps them to reach their genetic potential and reduces the need to use treatment antibiotics later in life. Plus, an effectively treated calf is much less likely to require expensive antibiotic treatments or build antibiotic resistance. We are expanding this message by suggestingthe only manufacturer within the scour prevention space offering polyclonal multi-pathogen antibodies. The market is learning that producers can gothe best preventative for scours may not be a vaccine, and we are continuing to educate the market about the health benefits of a measured dose of pre-formed antibodies.

Historically, the most common tool to help combat scours has been to vaccinate the mother cow (dam) with a scours vaccine and deliver the antibodies that she produces in her milk to the newborn. It is generally believed that only 80% of animals respond to a vaccine, which could leave about 20% of calves unprotected. We believe that the variability in a cow’s immune response to vaccines creates a sales opportunity for our product. Additionally, our research suggests that treatment protocols for dam-level scours vaccine programs are not always followed, leaving even more calves compromised. We are competing effectively against these dam-level vaccine products. Our marketing campaign, Beyond Vaccination^™®, emphasizes that by delivering Immediate Immunity™ directly to the calf via the First Defense^® product line, producers can reduce stress-causing injections to prevent scours with our new product,Tri-Shield^™ First Defense^Ò, which achieved USDA approval during the fourth quarter of 2017. This product enables producers to prevent scours at the calf-level without needingcow. Reliance on a dam-level scours vaccine. By our estimates, in certain cases, when our product replaces all costs associated with dam-level scours vaccination programs,vaccine requires that money be spent before it is known whether the producer can experience an improved return on investment and more consistent calf protection.

We are selling new product applications ofcow is carrying a viable, valued calf. With the First Defense^Ò® underproduct line, that investment can be targeted to the descriptioncalves that are most critical to the operation. This, in turn, can free up space in the cow’s vaccination schedule to improve her immune response to vaccines that are critical to her health.

First Defense Technology^Ò®, which is a unique whey protein concentrate that is processed utilizing our proprietary colostrum (first milk) protein purification methods, for the nutritional and feed supplement markets without the claims of our USDA-licensed product. ThroughDuring 2012, we initiated a limited launch of a gel tube delivery format of ourFirst Defense Technology^Ò® in a gel solution. We achieved USDA claims for this product format during the fourth quarter of 2018 and Canadian approval during the first quarter of 2019, and it is now being sold as Dual-Force First Defense, we^®. We are selling the same concentrated whey proteins in different formats. During 2011, we initiated sales ofFirst Defense Technology^Òin a bulk powder format (no capsule), which is delivered with a scoop and mixed with colostrum for feeding to calves. We are working to achieve USDA claims for this product format during the second half of 2018.format. During 2011, Milk Products, LLC of Chilton, Wisconsin launched commercial sales of their product, Ultra Start^Ò®150 Plus and certain similar private label products, which are colostrum replacers withFirst Defense Technology^Ò®Inside. During 2012, we initiated a limited launch of a tube delivery format of ourFirst Defense Technology^Òin a gel solution. We are working to achieve USDA claims for this product format during the second half of 2018, which will be sold asDual-Force^™ First Defense^Ò.

Other competition for resources that dairy producers allocate to their calf enterprises has been increased by the many new products (principally feed supplements) that have been introduced to the calf market. Our sales are normally seasonal, with higher sales expected during the first quarter. Warm and dry weather reduces the producer’s perception of the need for a disease preventative product like theFirst Defense^Òproduct line. However, heat stress on calves caused by extremely hot summer weather can increase the incidence of scours, just as harsher winter weather benefits our sales. Market conditions in the dairy and beef industries, including milk pricing and prices for calves, weakened during 2016 in comparison to 2015. Milk prices made modest improvements in 2017 over the annual averages for 2016 and 2015 but are projected to decline in 2018. Despite the significant market volatility affecting both milk prices and feed costs, we achieved a record level of product sales during the first quarter of 2017, surpassing the previous high level set during the first quarter of 2015, although the production issues discussed later in this report will likely prevent us from equaling that record level of sales during the first quarter of 2018.

During the first quarter of 2017, based on an extensive review of the topical wipes product line, we discontinued the product line due to its limited sales growth potential and minimal contribution to profits.

During 2001, we began to offer our own, internally developedCalifornia Mastitis Test (CMT).CMTis most often used as a quick on-farm diagnostic to determine which quarter of the udder is mastitic. This test can be performed at cow-side for early detection of mastitis.CMTproducts are also made by other manufacturers and are readily available to the dairy producer.

In connection with our acquisition of certain gel formulation technologies during the first quarter of 2016, we also acquired two feed supplement product lines that we now produce and sell under private label relationships with Ridley, USA Inc. of Mankato, MN and Genex Cooperative Inc. of Shawano, WI. These products do not utilize our proprietary antibody technology.

ImmuCell Corporation

Sales and Markets

We believe that the long-term growth in sales of the First Defense^® product line may reflect, at least in part, the success of our strategic decision to invest in additional sales and marketing efforts to help us introduce the expanding First Defense^® product line to new customers. Our communications campaign continues to emphasize how the unique ability of the First Defense^® product line to provide Immediate Immunity™ generates a dependable and competitive return on investment for dairy and beef producers. Our sales and marketing team consists of one vice president, sevenone commercial research and technical services veterinarian, one commercial leader of stakeholder engagement, one director of marketing and eight regional manager positions and one inside sales and marketing position.managers. TheFirst Defense^Ò®product line andCMTare sold primarily through major animal health distributors who, in turn, sell to veterinary clinics, fleet stores and direct to farms. We have experienced minimal bad debtOur expanded sales and marketing team has proven to be a worthy investment, validating that our message resonates well with respectcustomers. Now that our increased production capacity is in place, we anticipate being able to these products. escalate our growth curve after we recover from the brand damage that can come with an extended duration of short supply.

Sales of theFirst Defense^Ò®product line are normally seasonal, with higher sales expected during the first quarter, largely driven by the beef calving season, which runs primarily from January to April, unlike the dairy industry that tends toin which operations generally calve year round. Warm and dry weather reduces the producer’s perception of the need for a disease preventative product like the First Defense^® product line. However, heat stress on calves caused by extremely hot summer weather can increase the incidence of scours, just as harsher winter weather benefits our sales. Other competition for resources that dairy producers allocate to their calf enterprises has been increased by the many new products (principally feed supplements) that have been introduced to the calf market.

We estimate that the total U.S. market for scours preventative products (including sales of our product) that are given to newborn calves (the calf-level market) is approximately $18$25.6 million annually.per year. With the additional claim for our new product (Tri-Shield^™First Defense^Ò®) against rotavirus, we expect to be able to competeare now also competing against the dam-level vaccine products that are given to the mother cow to increase the antibody level against specific scours-causing pathogens in the colostrum that she produces for her newborn. We estimate that the dam-level product category covers approximately twice as many calves as the calf-level product segment reaches. We estimate that the total domestic addressable market (both calf and dam levels) is approximately $75.4 million per year.

Based on market share information that we purchase from the leading source of this data for the animal health sector, we believe that we are gaining market share in the United States year after year. We aim to continue these market share gains in both the dairy and beef segments. Our share of the dairy and beef market (calculated on the basis of calves treated) of the scour preventative products administered at the calf-level was approximately:

Our share of the dairy and beef market (calculated on the basis of calves treated) of both products administered at the calf-level and vaccines administered to the dam prior to calving (adjusting for two doses of dam-level scour vaccines required for primary vaccination of first-calf heifers) was approximately:

We continue our efforts to grow sales of the First Defense^® product line in North America, where there are approximately 40 million dairy and beef cows in the United States and approximately 4.5 million dairy and beef cows in Canada. We believe that significant market opportunities exist in other international territories. The majority of our international sales are to Canada. We currently price our products in U.S. dollars. To the extent that the value of the dollar declines with respect to any other currency, our competitive position may be enhanced. Conversely, an increase in the value of the dollar in any country in which we sell products may have the effect of increasing the local price of our products, thereby leading to a potential reduction in demand. Generally, our international sales have been generated through relationships with in-country distributors that have knowledge of the local regulatory and marketing requirements. We are developing ainitiating our plan to expand the number of countries to which ourFirst Defense^Ò® product line is approved for export. Generally, it is our intent to be the holder of these product registrations for each country rather than rely on distribution partners to gain and hold these registrations. This is a long regulatory process but allows us to maximize the use of our product label claims and avoid long-term exclusive distribution agreements. We continue our efforts to grow sales of theFirst Defense^Òproduct line in North America, where there are approximately 41,300,000 dairy and beef cows in the United States and 4,795,000 dairy and beef cows in Canada. We believe that even greater market opportunities exist in other international territories. There are estimated to be approximately 67,500,000 dairy and beef cows in China, 35,885,000 in the European Union, 20,023,000 in Australia and New Zealand, 10,900,000 in Mexico, 1,460,000 in South Korea and 1,340,000 in Japan. However, industryclaims. Industry practices, economic conditions, cause of disease, distribution channels and regulatory requirements may differ in these international markets from what we experience in North America.America, potentially making it more difficult or costly for us to generate and sustain sales volumes at profitable margins in these markets.

ImmuCell Corporation

We introducedFirst Defense^Ò®into South Korea in 2005 through Medexx Co., Ltd of Gyeonggi-do, Korea and its equivalent into Japan in 2007 through NYS Co., Ltd of Iwate, Japan. We are working with Medexx to expand our business in South Korea to include the registration of Tri-Shield First Defense^®. The business in Japan is currently not active, but we are working to resume sales in this territory. We entered into distribution contracts covering certain Middle Eastern countries with Triplest for Drugs and Trade of Madaba, Jordan during the first quarter of 2017 (no sales have yet been achieved under this contract) and covering Iran with Senikco, LLC of Laguna Niguel, CACalifornia during the fourth quarter of 2016.2016 (sales have been initiated under this contract). We are investigating the requirements to sell the First Defense^® product line in Mexico, Pakistan and India.

With our purified Nisin technology, Re-Tain^®, we are working to expand our product offeringsportfolio to include an intramammary infusion for the treatment forof subclinical mastitis for the mother cow during lactation.in lactating dairy cows. Mastitis (inflammationis inflammation of the mammary gland) is the most costly and common disease affecting the dairy industry.gland typically associated with a bacterial infection. It is estimated to cost the U.S. dairy industry approximately $2 billion in economic harm per year. TheIt is the most costly and common disease diminishesaffecting the saleable quantity and overall value of milk, in addition to causing other herd health and productivity losses. While the benefit of treatingdairy industry. This illness is categorized as either clinical mastitis is widely known,or subclinical mastitis. Clinical mastitis infections cause visibly abnormal milk which cannot be sold. On the other hand, subclinical mastitis (thoseinfections do not cause any visible changes in milk or udder appearance, making it difficult to detect. Most mastitis cases wheretreated today are those that reach the clinical stage even though it is understood that clinical cases are only the tip of the mastitis iceberg. Milk from cows have infected udders, butwith subclinical mastitis can still produce saleable milk)be sold if not treated with traditional antibiotics. Milk from cows treated with traditional antibiotics must be discarded for the duration of the treatment and for 1.5 to 4 days after the last treatment, depending on the antibiotic that was used. The cost of that milk discard along with the stress and risk in moving the cow to the hospital pen is associated with its own significant economic losses and is recognized asthought to be a substantial contributor to clinicalprimary reason more subclinical mastitis cases. There is a growing awareness ofcases are not treated today. However, the cascade of adversenegative events and conditions associated withtriggered by subclinical mastitis for both the dairy producer and the milk processor including reduced or foregone milk quality premiums,are significant. These include lower milk production (some have estimated approximately 1,500 pounds of lost milk, or about $240$270 at $16.00$18.00 per hundredweight per infected cow)cow per lactation), shorter shelf life for fluid milk, lower yields and less flavor for cheese, higher rates of clinical mastitis, lower conception rates, increased abortions, and increased cull rates. Some industry experts have estimated thatrates, reduced or foregone milk quality premiums, shorter shelf life for fluid milk, and both lower yields and less flavor for cheese. Cows with subclinical mastitis costsmaintain a reservoir of infection within the U.S.herd and increase exposure of healthy cows to contagious pathogens. Subclinical mastitis also increases the risk of various quality defects on a variety of final dairy industry approximately $1 billion per year.products.

ImmuCell Corporation

OurThe active ingredient Nisin, in Re-Tain^® is pharmaceutical-grade Nisin-A. FDA approval for this drug would establish an antibacterial peptideentirely new class of anti-infective that has been demonstrated in animal studiesis different from those currently available to treat mastitis. This new class, called bacteriocins, are anti-microbial polypeptides with no resistance risk for human health. Bacteriocins selectively target Gram+ bacteria, the same bacteria that commonly cause mastitis. We expect Re-Tain^® will be the first FDA-approved intramammary treatment for subclinical mastitis without an effective aid in the reduction of mastitis-causing organisms in dairy cows. We believe that our product could revolutionize the way that mastitis is treated by making earlier treatment of subclinically infected cows economically feasible by not requiring aFDA-required milk discard during, or for a period of time after, treatment which would be a significant competitive advantage for our product. No other FDA-approved mastitis treatment product onmeat withhold. This gives us the market can offer this value proposition. Because the milk from cows treated with traditional antibiotics must be discarded, most dairy producers simply do not treat subclinically infected cows. It is generally current practiceopportunity to treat mastitis only when the disease has progressed to the clinical stage where the milk from an infected cow cannot be sold. Common milk discard periods cover the duration of treatment and extend from 36 to 96 hours after last treatment, depending on the antibiotic. On average, a cow produces approximately 60 to 80 pounds of milk per day. While milk prices vary significantly, at an average value of $15.00 per 100 pounds, a cow produces approximately $9 to $12 worth of milk per day. These estimated figures would result in milk discard costs ranging from approximately $32 (for 3.5 days of milk at 60 pounds per day) to $132 (for 11 days of milk at 80 pounds per day) per treated animal. We estimate that the approximate cost to the U.S. dairy industry of this discarded milk may be around $300 million per year. The ability to treat such cases without a milk discard could revolutionize the way mastitis is managed intreated, since Re-Tain^® is specifically designed to treat ahead of clinical signs without an FDA-required milk discard or meat withhold. As a herd. It is common practice to move sick cows from their regular herd group to a sick cow group for treatment and the related milk discard. This movement causes stress on the cow and a reduction in milk production. Cows treated withresult, we believe that our product wouldcan help cows reach their peak milk production and not be sent to the hospital pen.

Referencing the big picture, we are introducing an entirely new class of socially-responsible antimicrobials as an animal drug, a bacteriocin, that does not promote resistance against antibiotics used in human medicine. As the great NHL hockey player, Wayne Gretzky, is known to have said, “I skate to where the puck is going to be, moved, allowing this costly drop in productionnot where it has been.” This is motivational to us. We believe our product fits very well with where the industry is going to be avoided. Ourin the coming years. Sustainability objectives of the industry require that less antibiotics be used in food producing animals, yet a new product likely will be priced atto treat mastitis has not been developed in years (other than new formulations of the same old stuff). The over-use of antibiotics that are medically important to human healthcare is a premiumgrowing concern of our society and an active issue with the FDA, largely because of the growing evidence that this over-use contributes to theantibiotic resistance. The industry could keep treating this very significant disease with traditional antibiotic products currently on the market, which are all sold subjectantibiotics, but it takes innovation to bring a milk discard requirement.bacteriocin like Nisin to market. We believe that societal animal welfare objectives will put more and more pressure on the product’s value proposition demonstrates a return on investmentindustry to the dairy producer and the milk processor that will justify this premium.treat cows with subclinical infections.

The USDA’s National Animal Health Monitoring System through its Dairy 2014 study suggestsBecause Nisin is a naturally occurring bacteriocin that 21%is not used in human medicines, it could alleviate some of all dairy cows are treated withthe social and public health concerns that the widespread use of antibiotics encourages the growth of antibiotic-resistant bacteria. For example, there is a mastitis drug, of which approximately 51% are treated with third generation cephalosporins. Many fear that the possible overuse of antibiotics in livestock undermines the effectiveness of these drugs to combat human illnesses and contributes to a rising number of life-threatening human infections from antibiotic-resistant bacteria, commonly known as “superbugs”. The FDA is committedhas expressed a commitment to addressing this public health risk. Citing concerns about untreatable, life-threatening infections in humans, new FDA and European regulations are aimed at restricting the use of antibiotics (including(such as penicillin and cephalosporins) in food animals and at improving milk quality. Regulators have recently increased their monitoring of antibiotic residues in milk and meat. During the first quarter of 2012, the USDA reduced the allowable level of somatic cell counts (SCC) in milk from 750,000 (cells per milliliter) to 400,000 at the individual farm level (not a blended calculation of comingled milk) in order to qualify for an EU health certification for export.

The FDA’s Veterinary Feed Directive (VFD) became effective January 1, 2017 restricting the use of medically important antibiotics for performance purposes and requiring more oversight of antibiotic usage in food producing animals by a veterinarian, and more changes and restrictions relating to antibiotic usage appear to be likely. Several major food processors and retailers have implemented policies addressing this growing public health concern. By reducing the risk of antibiotic residues and slowing the development of antibiotic-resistant organisms, we believe that we can improve food quality and preserve medically important antibiotics for human disease treatment. This would not be a concern for our purified Nisin product because Nisin is not used for human health. This current environment could beis favorable to the introduction of our new product as an alternative to traditional antibiotics such as penicillin and cephalosporins.antibiotics. We believe that this changing environment of new regulations and public opinion supports the value of our ongoing Nisin product development and commercialization efforts.efforts for Re-Tain^®. Additionally, we believe that the use of ourFirst Defense^Ò®product line is consistent with this trend of reducing the use of antibiotics because the prevention of calf scours early in life with our purified colostrum antibodies can reduce the need forto use treatment antibiotics later in a calf’s life.

ImmuCell Corporation

We estimate that the approximate cost to the U.S. dairy industry of discarded milk associated with the use of traditional antibiotic products currently on the market may be around $300 million per year. These high milk discard costs associated with traditional antibiotic treatments lead producers to only treat mastitis after clinical signs develop. The Re-Tain^®label will be for subclinical mastitis (not clinical). Without an FDA-required milk discard or meat withhold cost, we expect producers to be more motivated to identify and treat cows at the subclinical stage. In addition, we expect thatRe-Tain^® likely will be priced at a premium to the traditional antibiotic products currently on the market, which are all sold subject to milk discard and meat withhold requirements. To validate our confidence in the value proposition of our product, we initiated a stochastic model led by researchers at Michigan State University. This model simulated the dynamics of subclinical mastitis detected during the first week of lactation. The study involved assessing probabilities of events, both production and health related, and their associated costs using a model grounded in pathogen-specific assumptions drawn from peer-reviewed literature. The study indicated that treatment with our product generated a positive economic benefit and was the optimal economic strategy for treating subclinical mastitis in most herds. The extent of the economic benefit varies depending on factors such as bacteriological cure rates, parity of the animal and the cost of Re-Tain^®. These findings, which were subsequently published in the Journal of Dairy Science in January 2024, will guide our pricing strategies.

It is difficult to accurately estimate the potential size of the market for the treatment of subclinical mastitis market because presently this disease is largely left untreated presently.untreated. We believe that approximately 20-30%20% to 40% of the U.S. dairy herd is affected byinfected with subclinical mastitis caused by Gram-positive organisms falling within the claim spectrum of our product.at any given time. This compares to approximately 2% of the U.S. herd that is thought to be infected with clinical mastitis, where approximately $60$65 million per year is spent on drug treatments. Rarely is an industry revolutionized overnight. Getting producers to change protocols to make subclinical mastitis treatment a standard and routine procedure is going to take initiative, but we believe producers are eager for something new and better since the FDA has not approved an intramammary treatment within the last 20 years. Similar market opportunities are likely to exist outside the United States. We believe the use of Re-Tain^® could be expanded, with additional data and regulatory approval, to support treatment late in lactation. We also believe there may be a market for Re-Tain^® in small ruminants, where the majority of mastitis cases are caused by strep-like organisms aligned with our effectiveness data.

Based on consultations with industry experts and key opinion leaders, we have opted to carefully control the launch of this novel product over the first 18 to 24 months after FDA approval, as we seek to transform the way that mastitis is treated in the dairy industry over the long term, which we refer to as our “Controlled Launch” strategy. Our goal is to help early adopters select treatment candidates, develop easy to use protocols, optimize treatment results and realize a positive return on their investment. We intend to limit initial distribution of Re-Tain^® to a level that enables our sales team to select the optimal dairy farms at which to introduce Re-Tain^® and to limit the initial numbers of participating farms so that the desired levels of support and guidance relating to effective usage of Re-Tain^® can be provided with our available resources. Our overarching objective is to minimize the risk of early-stage unsatisfactory outcomes that could harm the longer-term prospects and market acceptance of Re-Tain^®. This strategy is also prudent since our saleable inventory is fixed until an FDA-approved alternative contract manufacturer for aseptic filling is identified or our own aseptic filling capability is developed and approved by the FDA. While we are dedicated to increasing our sales revenue, we must consider the damage a mass market strategy could cause to the long-term value of the product. We have seen products sold by much larger companies that were substantially damaged by such failed market launch strategies. We continue to develop detailed launch plans, focusing on the readiness of dairy operators to successfully introduce Re-Tain^® to their herds. We believe that similar market opportunities also exist outsidethese prudent steps, while potentially leading to lower initial Re-Tain^® revenues, may create a smooth and successful launch and could safeguard the longer-term performance of the United States and for the treatment of dry (non-lactating) cows. our investment in Re-Tain^®.

We expect the NisinDS production facility that we are constructing for approximately $21 millionconstructed to have initial annual production capacity sufficient to meet approximately $10 million in sales. Our new facility is designed to have enough room to add a second fermentation and recovery portion of the production line to be purchased and installed at the cost of approximately $7 million to effectively$10 million in sales of Re-Tain^® at current production yields without factoring in potential yield improvements, but our supply of finished Drug Product (DP) will be limited until we find an alternative aseptic formulation and filling capability, as discussed above. This production capacity estimate does not yet reflect any inventory build strategies or ongoing yield improvement initiatives. We have available space in our existing facilities to double the production output. We would consider makingcapacity by installing a second equipment train. A decision on whether to use this investment only after commercial acceptancespace for a doubling of the DS production capacity or for in-house aseptic formulation and filling DP equipment will be made post-approval. Our objective is to supply initial market launch with approximately 100,000 to 150,000 doses of Re-Tain^® (enough to treat up to 50,000 cows with three doses per cow) that would be aseptically formulated and filled by our DP manufacturer. The expiry dates on this product is demonstrated. If annualwould be 18-24 months after the date of production, meaning that product expiry could be approximately between September of 2025 and March of 2026. We may not reach 50,000 cows during the Controlled Launch. Further, early adopters may be offered discounted or promotional goods as an incentive to collaborate with us on data collection during the Controlled Launch. We are expecting a pause in supply to the market after the Controlled Launch after goods produced by our contract DP manufacturer are consumed and before we obtain FDA approval of an alternative DP manufacturing option. Although these projections are subject to many risks and uncertainties (some of which are detailed in this Annual Report), if executed correctly, we believe this strategy will lend itself to a more gradual adoption curve but higher and more sustainable sales over the long-term. In an effort to provide greater visibility into the launch of Re-Tain^®, we have expanded Note 17, “Segment Information”, to the accompanying audited financial statements to now display a break-out of our financial results among the following three components of our business: i) Scours, ii) Mastitis and iii) Other, in order to allow investors to see our progress with both products.

ImmuCell Corporation

Through our anticipated growth in sales of our mastitisthe First Defense^® product exceed approximately $20 million, we would evaluate all Nisin supply options, factoring in efficienciesline, and yield improvements. Building anas additional Nisinresources are dedicated to production, facility to meet our needs at that time may be the most cost-effective solution.

With a measured approach to expanding our customer-facing staff,sales, marketing and technical services, it is our objective to doubleexceed our current level oftotal product sales toof approximately $20$17.5 million through both continued growth in sales ofachieved during theFirst Defense^Ò product line (including our new product,Tri-Shield^™ First Defense^Ò) and a successful launch of our novel mastitis treatment year ended December 31, 2023 as soon as possible. As market penetration for both new products is achieved and additional resources are dedicated to sales, marketing and technical services, ourOur longer-term goal is to reach the $30exceed $35 million level of annual total product sales as soon as possible during the five-yearfour-year period after the market launch of our new mastitis product.Re-Tain^®.

Product Development

The majorityMost of our product development spending ishas been focused on the development ofRe-Tain^®, our purified Nisin treatment for subclinical mastitis.mastitis in lactating cows. During the eighteen-year24-year period that began on January 1, 2000 (the year we began the development) and ended on December 31, 2017,2023, we invested thean aggregate of approximately $13,722,000$28.1 million (excluding depreciation and the capital cost of our DS production facility) in the development of this product. This estimated allocationestimation reflects only direct expenditures and includes no allocation of product development or administrative overhead expenses. Approximately $2.9 million of this investment was offset by related product licensing revenues and grant income, most of which was earned from 2001 to 2007.

During 2000, we acquired an exclusive license from Nutrition 21, Inc. (formerly Applied Microbiology Inc. or AMBI) to develop and market Nisin-based products for animal health applications, which allowed us to initiate the development of our novel treatment for subclinical mastitis.Re-Tain^®. In 2004, we paid Nutrition 21 approximately $965,000 to buy out this royalty and milestone-based license to Nisin, thereby acquiring control of the animal health applications of Nisin. Nisin, is an antibacterial peptide known to be effective against most Gram-positive and some Gram-negative bacteria. In our pivotal effectiveness study, statistically significant cure rates were associated with a statistically significant reduction in milk somatic cell count, which is an important measure of milk quality. Nisin is a well characterized substance, having been used in food preservation applications for over 50 years. Food-grade Nisin, however, cannot be used in pharmaceutical applications because of its low purity. A much less pure preparation of our active ingredient, Nisin, is commonly used as a food preservative and has been given “Generally Regarded as Safe” (GRAS) status by the FDA. We are also investigating potential applications of Nisin for other animal health applications as well as for humans. Our Nisin technology includes patented processing and purification methods to achieve pharmaceutical-grade purity.

InDuring 2004, we entered into a product development and marketing agreement with Zoetis (formerly Pfizer Animal Health, (now known as Zoetis)a division of Pfizer, Inc.) covering this product. That company elected to terminate the agreement in 2007. We believe that this decision was not based on any unanticipated efficacy or regulatory issues. Rather, we believe the decision was primarily driven by a marketing concern relating to their fear that the milk from treated cows could interfere with the manufacture of certain cultured dairy products. Due to the zero milkzero-milk discard feature, there is a risk that Nisin from the milk of treated cows could interfere with the manufacture of certain (but not all) commercial cultured dairy products, such as some kinds of cheese and yogurt, if a process tank contains a high enough percentage of milk from treated cows. The impact of this potential interference ranges from a delay in the manufacturing process (which does happen at times for other reasons) to the less likely stopping of a cheese starter culture. Milk from cows that have been treated with our product that is sold exclusively for fluid milk products presents no such risk. We worked with scientists and mastitis experts to conduct a formal risk assessment to quantify the impact that milk from treated cows may have on cultured dairy products. This study concluded that the dilution of milk from treated cows through comingling with milk from untreated cows during normal milk hauling and storage practices reduces the risk of interference with commercial dairy cultures to a negligible level when the product is used in accordance with the product label. We do notFurther, we believe that such a premium-priced product will be used as part of a whole herd (“blitz”) treatment protocol,selectively, which reduces the risk of cheese interference. We do not see this as a significant problem asinterference and is consistent with modern “precision dairying” practices support reducingthat discourage the indiscriminate use of drug treatments.

ImmuCell Corporation

The New Animal Drug Application (NADA) for our novel mastitis treatment product is comprised of five principal Technical Sections and one administrative submission Among the measures that are subject to the FDA’s phased review. By statute, each Technical Section submission is generally subject to a six-month review cycle by the FDA. Each Technical Section can be reviewed and approved separately. Upon review and assessment by the FDA that all requirements for a Technical Section have been met, the FDA may issue a Technical Section Complete Letter. The current status of our work on these submissions to the FDA is as follows:

1) Environmental Impact: During the third quarter of 2008, we received the Environmental Impact Technical Section Complete Letter from the FDA.

2) Target Animal Safety: During the second quarter of 2012, we received the Target Animal Safety Technical Section Complete Letter from the FDA.

3) Effectiveness: During the third quarter of 2012, we received the Effectiveness Technical Section Complete Letter from the FDA. The draft product label carries claims for the treatment of subclinical mastitis associated withStreptococcus agalactiae,Streptococcus dysgalactiae,Streptococcus uberis, and coagulase-negative staphylococci in lactating dairy cattle.

4) Human Food Safety (HFS): The HFS Technical Section submission was made during the fourth quarter of 2010. This Technical Section includes several subsections such as: a) toxicology, b) total metabolism, c) effects of drug residues in food on human intestinal microbiology, d) effects on bacteria of human health concern (antimicrobial resistance) and e) pivotal residue chemistry. During the second quarter of 2011, we announced that the FDA had accepted the subsections described above and granted a zero milk discard period and a zero meat withhold period during and after treatment for our product. Before we can obtain this Technical Section Complete Letter, we must transfer our analytical method that measures Nisin residues in milk to a government laboratory. This work is complete. We expect to submit the HFS Technical Section to the FDA at the end of the first quarter of 2018. This submission is subject to a six-month review by the FDA. As a result, we anticipate making a public disclosure about the response from the FDA with respect to this submission late in the third quarter of 2018.

5) Chemistry, Manufacturing and Controls (CMC): Obtaining FDA approval of the CMC Technical Section defines the critical path to FDA approval and to initial commercial sales. During the third quarter of 2014, we completed an investment in facility modifications and processing equipment necessary to produce the Drug Substance (the Active Pharmaceutical Ingredient, which is our pharmaceutical-grade Nisin) at small-scale. This small-scale facility was used to i) expand our process knowledge and controls, ii) establish operating ranges for critical process parameters, iii) optimize process yields and iv) verify the cost of production. We believe these efforts have reduced the risk associated with our $21 million investment in the commercial-scale production facility.

Implementing Nisin production at commercial scale is the most critical action in front of us on our path to regulatory approval. We previously entered into an agreement with a multi-national pharmaceutical ingredient manufacturer for our commercial-scale supplies of Nisin. However, we determined in 2014 that that agreement did not offer us the most advantageous supply arrangement in terms of either cost or long-term dependability. We presented this product development opportunity to a variety of large and small animal health companies. While such a corporate partnership could have provided access to a much larger sales and marketing team and allowed us to avoid the large investment in a commercial-scale production facility, the partner would have taken a large share of the gross margin from all future product sales of our Nisin product. We are encouraged by the regulatory and marketing feedback that we received from prospective partners, following their due diligence, that our novel mastitis treatment can achieve FDA approval and have a significant, positive impact on the dairy industry.

During the fourth quarter of 2015, we acquired land nearby to our existing Portland facility for the construction of a new manufacturing facility that would enable us to generate our own Nisin supply at commercial scale.  During the third quarter of 2016, we commenced construction of this facility.  Construction of the facility was completed during the fourth quarter of 2017.  As anticipated, we began equipment installation during the third quarter of 2017 and expect installation and qualification to be complete during early 2018.  Three registration batches must be produced at commercial scale, a detailed CMC Technical Section must be completed and submitted to the FDA and successful FDA inspection(s) must be achieved.  We anticipate making the first phased Nisin Drug Substance CMC Technical Section submission to the FDA during the middle of 2018.  A second phased submission, which includes responses to the first phased review and detailed information on the sterile Nisin Drug Product, would be filed in the first half of 2019.  Each submission is subject to a six month review by the FDA.  After approval of the CMC section, there is a 60-day administrative review before product license approval can be issued.  We expect to achieve earlier approval of the HFS Technical Section.  Our timeline supports obtaining FDA approval for the Nisin product by late 2019 to early 2020, subject to specific FDA review and requests.  With respect to CMC Technical Section, we intend to disclosedeploy will be detailed guidance on limiting the timingportion of a herd that is treated with Re-Tain^® at any one time in order to avoid concentration levels in the milk that could lead to the rejection of the phased submissions to the FDA and the timing of the responses from the FDA and any revisions to the timeline, as we go forward.contents in a cheese tank.

ImmuCell Corporation

We are party to a long-term, exclusive supply agreement with Plas-Pak Industries, Inc. (now owned by Nordson Corporation) of Norwich, Connecticut covering the proprietary syringe that was developed specifically for treating cows with our mastitis product. These syringes were used for all pivotal studies. During the third quarter of 2017, this agreement was extended to January 1, 2024.

Since 2010, we have been party to a long-term, exclusive Contract Manufacture Agreement with Norbrook Laboratories Limited of Newry, Northern Ireland, an FDA-approved Drug Product (aseptic filled and packaged syringes) manufacturer, covering the formulation and aseptic filling and final packaging of the Nisin Drug Product. Norbrook provided these services for clinical material used in all pivotal studies. During the fourth quarter of 2015, we entered into a revised agreement with Norbrook to support the final development and commercial-scale production of our mastitis product after FDA approval. If we do not achieve FDA approval of the Nisin product by the end of 2019, we would be liable for a $100,000 termination fee under this agreement. We are presently negotiating certain contract modifications and extensions with Norbrook.

Our second most important product development programinitiatives (in terms of dollars invested and, we believe, potential market impact) hashave been an effortfocused on other improvements, extensions or additions to prevent scours in calves caused by rotavirus. In connection with that effort, duringour First Defense^® product line. During the second quarter of 2009, we entered into ana perpetual, exclusive license with the Baylor College of Medicine covering the underlying rotavirus vaccine technology used to generate the specific antibodies for use with animals. This perpetual license (if not terminated for cause) is subject to ongoing royalty payments. Results from pilot studies completed during the first quarter of 2009 justified continued product development. We initiated a second pivotal effectiveness study at Cornell University College of Veterinary Medicine during the second quarter of 2014 and announced positive effectiveness results from this pivotal study during the first quarter of 2015. During the third quarter of 2015, we obtained concurrence from the USDA that we have been granted disease claims against rotavirus for our product. We achieved product license approval and initiated market launch of this product,Tri-Shield^™ First Defense^Ò®, during the fourth quarter of 2017. This isDuring the first calf-level, passive antibody product onthird quarter of 2018, we obtained approval from the market with USDA-approved disease claims providing immediate immunity against eachCanadian Food Inspection Agency to sell Tri-Shield^® in Canada. We initiated sales in Canada through our in-country distributor during the fourth quarter of the three leading causes2019. We achieved USDA approval of calf scours (E. coli, coronavirus and rotavirus). The new product combines theE. coli and coronavirus antibodies contained in our legacy product with a guaranteed minimum level of rotavirus antibody content in one preventative dose. This unique breadth of claims further differentiates our product from competitive products on the market that contain only one or two of these label claims. This new product is now available in abivalent gel tube delivery format. Because it is possible that all farms may not have a prevalent rotavirus problem, we are continuing to sell the bivalent formats offormulation (formerly marketed as First Defense Technology^Ò®) during the fourth quarter of 2018 and have re-branded this product format as options for customers. Historically, the primary tool to help combat scours has been to vaccinate the cow with a dam-level scours vaccine.With this expanded claim set, we can compete more effectively against these dam-level vaccine products that are given to the mother cow to increase the antibody level against specific scours-causing pathogens in the colostrum that she produces for her newborn. It is generally believed thatonly 80% of animals respond to a vaccine, which could leave about 20% of calves unprotected. Additionally, our research suggests that treatment protocols for dam-level scours vaccine programs are not always followed, leaving even more calves compromised. Our new marketing campaign, ‘Beyond Vaccination^™’, suggests that by delivering immediate immunity directly to the calf viaTri-Shield^™Dual-Force First Defense^Ò, producers can reduce stress-causing injections to the cow and save the associated labor for vaccines that are more critical to cow health. Reliance on a dam-level scours vaccine requires that money be spent before it is known whether the cow is carrying a viable, valued calf. WithTri-Shield^™First Defense^®, every calf is equally protected and that investment can be targeted to the calves that are most critical to the operation. This, in turn, can free up space in the cow’s vaccination schedule to optimize her immune response to vaccines that are critical to her health. This variability of a cow’s immune response to vaccines that creates a sales opportunity for our new product also causes a production challenge that can impact our costs of goods sold when we immunize our source cows to produce the antibodies used in our production process.

ImmuCell Corporation

The balance of our product development efforts have been primarily focused on other improvements, extensions or additions to ourFirst Defense. ^Òproduct line.We are currently working to establish USDA claims for our bivalent gel tube and bulk powder (both expected during the second halfformulation of 2018) formulations ofFirst Defense Technology^Ò®, which will then be re-brandedDual-Force^™ First Defense^Ò.

ImmuCell Corporation

We are also investing in additional studies comparingFirst Defense^Òto the competition. At the same time, we are working to expand our product development pipeline of bacteriocinsantimicrobials that can be used as alternatives to traditional antibiotics. During the second quarterantibiotics through expansions of 2015, we entered into an exclusive option agreement to license new bacteriocinour Nisin technology from the University of Massachusetts Amherst. During the fourth quarter of 2017, we extended this exclusive option agreement through March 2019. This technology focuses on bacteriocins having activity against Gram-negative infections for use in combating mastitis in dairy cattle. Subject to the availability of needed financial and other resources, weyield improvements. We intend to begin new development projects that are aligned with our core competencies and market focus. We also remain interested in acquiring, on suitable terms, other new products and technologies that fit with our sales focus on the dairy and beef industries.industries when we have adequate cash reserves.

Competition

Our competition in the animal health market includes other biotechnology companies and major animal health companies. ManyMost, if not all, of these competitors have substantially greater financial, marketing, manufacturing and human resources and more extensive product development capabilities than we do.

There are several other products on the market (some with claims and some without) that are delivered to newborn calves to prevent scours. We believe that the First Defense^® product line offers two significant competitive advantages. First, the First Defense^® product line is the only calf-level product that provides protection against E. coli, coronavirus and rotavirus, three of the leading causes of calf scours. Second, being derived from colostrum, our product offers Immediate Immunity^TM through antibodies that both function at the gut level and are absorbed into the blood stream for future protection. All formats of our product can be administered immediately after birth and are not negatively affected by maternal colostrum.

Zoetis sells a product (Calf-Guard^®) that competes directly with the First Defense^® product line in preventing scours via oral delivery to newborn calves. Their product is a modified-live virus vaccine. Newborn calves respond poorly to vaccines and the immune system must be given time to develop a response to vaccines. Both our product and Calf-Guard^® carry claims against coronavirus and rotavirus infections, but this competing product does not carry a claim against E. coli infections like our product does. It is common practice to delay colostrum feeding when dosing a calf with Calf-Guard^® so that the antibodies in the colostrum do not inactivate this vaccine product. There is no nutritional or health benefit to withholding milk from newborn calves. In contrast, we encourage the feeding of four quarts of high quality colostrum immediately after birth when dosing a calf with our product, which is standard practice for good calf health. Because the antibodies in our product would likely work to inactivate a modified-live virus vaccine, rendering it useless or less useful, our product label historically included a precaution that First Defense^® should not be used within five days of such a vaccine. During the first quarter of 2015, the USDA granted us permission to remove this precaution from our label, and we have done so. We believe that this precaution should be required on the Calf-Guard^® label to prevent inactivation of that product by First Defense^® antibodies or by colostrum. Our product is priced at a premium to Calf-Guard^®.

During the fourth quarter of 2016, Merck launched a new competing product into this market space. This product (BOVILIS^® Coronavirus) is a modified-live virus intranasal vaccine that carries a claim against coronavirus only. Around the end of 2019, Elanco Animal Health gave notice to the market that it had discontinued the manufacture of its competing products, Bovine Ecolizer^® and Bovine Ecolizer + C20, and subsequently exited the market during the first quarter of 2021. This product was the smallest of our three significant calf-level competitors.

When compared to the other USDA-approved calf-level scours preventatives, we lead in both sales dollars and calves treated within the U.S. market. This product category is comprised of the three primary brands discussed above that are given either orally or intranasally to newborn dairy and beef calves immediately after birth. With the rotavirus claim for our product (Tri-Shield First Defense^®), we are now also competing against dam-level vaccine products that are given to the mother cow to increase the antibody level against scours-causing pathogens in the colostrum that she produces for her newborn. Those products are sold by Elanco (Scour Bos™), Merck (Guardian^®) and Zoetis (ScourGuard^®). Despite the best-managed dam vaccine program, colostrum quality is naturally variable and newborn calves do not always get the antibodies they need from maternal colostrum. We believe that the measured dose of antibodies in our product provides more consistent protection than such vaccine products.

We would consider any company that sells an antibiotic to treat mastitis, such as Boehringer Ingelheim, Merck Animal Health and Zoetis, (formerly Pfizer Animal Health, a division of Pfizer, Inc.), to be among the potential competitors for our mastitis product.with respect to Re-Tain^®. We expect the FDA to grant a period of five years of market exclusivity for our product (meaning the FDA would not grant approval to a second NADA with the same active drug for a period of five years after the first NADA approval is granted) under Section 512(c)(2)F of the Federal Food, Drug, and Cosmetic Act.

There are several other products on the market (some Our Nisin A is produced from our high-yielding, proprietary L. lactis strain and purified to a high level, providing us with claims and some without)a level of protection over a competitor that are delivered to newborn calves to prevent scours. We believe that theFirst Defense^Ò product line offers two significant competitive advantages. First, only theFirst Defense^Ò product line provides protection againstE. coli,coronavirus and rotavirus, three of the leading causes of calf scours. Second, being derived from colostrum, our product offersImmediate Immunity^TM through antibodies that function both at the gut level and are absorbed into the blood stream for future protection. All formats of our product can be administered without delaying maternal colostrum.

Zoetis sells a product that competes directly with theFirst Defense^Ò product line in preventing scours via oral delivery to newborn calves. Their product (Calf-Guard^®) is a modified-live virus vaccine. Newborn calves respond poorly to vaccines and the immune system must be given timemight try to develop a response to vaccines. Both our product and Calf-Guard^® carry claims against coronavirus and rotavirus infections, but this competitive product does not carry a claim againstE. coliinfections like our product does. It is common practice to delay colostrum feeding when dosing a calf with Calf-Guard^®so that the antibodies in the colostrum do not inactivate the vaccinesimilar product. There is no nutritional benefit to withholding milk from newborn calves. In contrast, we encourage the feeding of four quarts of high quality colostrum immediately after birth when dosing a calf with our product, which is standard practice for good calf health. Because the antibodies in our product would likely work to inactivate a modified-live vaccine, rendering it useless or less useful, our product label historically included a precaution thatFirst Defense^Ò should not be used within five days of such a vaccine. During the first quarter of 2015, the USDA granted us permission to remove this precaution from our label, and we have done so. We believe that this precaution should be required on the Calf-Guard^®label to prevent inactivation of that product byFirst Defense^Òantibodies or colostrum. Our product is priced at a premium to Calf-Guard^®.

Elanco Animal Health (a division of Eli Lilly and Company) and Boehringer Ingelheim also sell directly competitive products. The Elanco product (Bovine Ecolizer^Òand Bovine Ecolizer^Ò + C20) was acquired through Elanco’s January 2015 acquisition of Novartis Animal Health and carries claims to prevent scours in newborn calves caused byE. coli andC. perfringens. The Boehringer product (Bar-Guard-99^™) carries claims to prevent scours in newborn calves caused byE. coli. These two products are both derived from horse blood rather than the bovine colostrum used for theFirst Defense^Ò product line. Equine antibodies are less efficiently absorbed into the bovine bloodstream, so fewer antibodies are re-secreted for additional protection.

ImmuCell Corporation

During the fourth quarter of 2016, Merck launched a new competitive product into this market space. This product (BOVILIS^®Coronavirus) is a modified-live virus intranasal vaccine that carries a claim against coronavirus only.

When compared to the other UDSA-approved calf-level scour preventatives, we believe we are first in sales dollars and second in volume. This product category is comprised of five (increasing from four until the fourth quarter of 2016) primary brands that are given either orally or intranasal to newborn dairy and beef calves immediately after birth. Market research that we subscribe to suggests that during 2017 our product comprised approximately 33% of the total doses sold in this product category (one dose equates to one calf, according to label administration on all products). This estimate is down from 36% during 2016 and 40% during 2015 when the product category included only 4 primary brands (one of which experienced lack of supply to the market during late 2014 and into the middle of 2015). This market share estimate is slightly up from 32% in 2014 and up from 26% and 22% in 2013 and 2012, respectively, as the total product category has steadily increased. These estimates do not include sales of vaccine products that are given to the dam (mother cow), which is discussed below.

With the new rotavirus claim for our product (Tri-Shield^™First Defense^®) we are now competing against dam-level vaccine products that are given to the mother cow to increase the antibody level against scours-causing pathogens in the colostrum that she produces for her newborn. Those products are sold by Elanco (Scour Bos^™), Merck (Guardian^Ò) and Zoetis (ScourGuard^Ò). Despite the best-managed dam vaccine program, colostrum quality is naturally variable and newborn calves do not always get the antibodies they need from maternal colostrum. We believe that the guaranteed dose of antibodies in our product provides more consistent protection than such vaccine products.

We may not be aware of competition that we face, or may face in the future, from other companies. Our competitive position will be highly influenced by our ability to attract and retain key scientific, manufacturing, managerial and sales and marketing personnel, to develop and effectively produce and market proprietary technologies and products,products. We need to obtain USDA, FDA or foreign approvals for new products to effectively promote and market our products, toproducts. We must have available properly licensed,properly-licensed, efficient and effective raw material and finished product manufacturing resources and to continue to profitably sell our current products. We currently compete on the basis of product performance, price, distribution capability and distribution capability.customer support. We continue to monitor our network of independent distributors to maintain our competitive position.

Patents, Copyrights, Trade Secrets and TrademarksIntellectual Property

We own patents, copyrightsa broad collection of registered and trade secrets as well as substantial know-how and technology (collectively “technology”). This technology generally relatesunregistered intellectual property rights relating to our research, products and processes for processes. These rights include patents, copyrights, trademarks, trade dress, trade secrets, know-how and other intellectual property rights in the United States and other countries. We believe the ownership of our intellectual property rights is an important factor in our business and that our success depends in part on such ownership. We also rely heavily on the innovative skills, technical competence and marketing abilities of our personnel. The Nisin A that is produced from our proprietary strain of L. lactis is an essential component of our Re-Tain^® product production.and related intellectual property. We enter into and rely on confidentiality and proprietary rights agreements with our employees, contractors and business partners to protect our trade secrets, proprietary developments and confidential information.

We own U.S. Patent No. 6,794,18110,023,617 entitled “Method“Methods and Systems of PurifyingProducing Pharmaceutical Grade Lantibiotics” was issued in 2004,, which covers our manufacturing process for preparing pharmaceutical-grade Nisin. During the fourth quarter of 2017, we filed a U.S. patent application covering key, novel and proprietary aspects of our manufacturing process for preparing pharmaceutical-grade Nisin.Nisin and was issued during the third quarter of 2018. In the future, we may file additional patent applications for certain products under development. There can be no assurance that patents will be issued with respect to any pending or future applications. In some cases, we have chosen (and may choose in the future) not to seek patent protection for certain products or processes. In those instances, we have sought (and may seek in the future) to maintain the confidentiality of any relevant intellectual property and other proprietary technologyrights through operational measures and contractual agreements.

We own numerous trademarks and trade dress that are very important to our business.  Webusiness and have several pending trademark and trade dress applications and registrations in the United States, Canada and Canada.Iran. We own the following U.S. trademark registrations for the trademarks we use in connection with our proprietary products and services:registrations: IMMUCELL,FIRST DEFENSE,FD FIRST DEFENSE (& Design), FIRST DEFENSE TECHNOLOGY,TRI-SHIELD FIRST DEFENSE, TRI-SHIELD FIRST DEFENSE (& Design), DUAL-FORCE FIRST DEFENSE, YOUR CALF CREW,andMAST OUT. We own the following U.S. trademark applications for the trademarks and trade dress that we use in connection with our proprietary products and services:BEYOND VACCINATION, BEYOND VACCINATION (& Design), Blue Bolus Trade Dress, Blue Gel Trade DressCALF HERO, DUAL-FORCE, TRI-SHIELD and RE-TAIN. We also own U.S. registrations claiming rights in the color blue for our blue gel and blue bolusFD FIRST DEFENSE (& Design). The United States Patent and Trademark Office issued a determination that ourIMMEDIATE IMMUNITYtrademark, which we use in connection with marketing of all of our products, is generic.  Rather than appeal this finding, we are continuing to build ourproducts. We also own common law rights in the brand.  The FDA issued a determination that the name,MAST OUT, which we had intended to use for our purified Nisin product, is overly promotional. Rather than continuing an appeal of this decision, we have decided to select a new product name before market launch of the purified Nisin product. During the first quarter of 2017, we sold our registeredWIPE OUTIMMEDIATE IMMUNITY trademarkstrademark andTHE ONE STEP COW PREP related to dairy wipes when we discontinued that product line. other trademarks.

ImmuCell Corporation

Government Regulation

We believe that we are in compliance with current regulatory requirements relating to our business and products. The manufacture and sale of animal health biologicals within the United States is generally regulated by the USDA (Center for Veterinary Biologics).USDA. We have received USDA and Canadian Food Inspection Agency approval for the bolus format ofFirst Defense^Ò® and USDA approval for the gel tube formatformats ofTri-Shield^™First Defense^® and Dual-Force First Defense^®. Our purified Nisin productRe-Tain^® is regulated by the FDA, Center for Veterinary Medicine, which regulates veterinary drugs. Regulations in the European Union will likely require that our productRe-Tain^® be sold subject to a milk discard requirement in that territory, although the duration of the milk discard requirement may be shorter than the discard requirement applicable to competitivecompeting antibiotic products in that market. Comparable agencies exist in foreign countries, and foreign sales of our products will be subject to regulation by such agencies. Many countries have laws regulating the production, sale, distribution or use of biological products, and we may have to obtain approvals from regulatory authorities in countries in which we propose to sell our products. Depending upon the product and its applications, obtaining regulatory approvals may be a relatively brief and inexpensive procedure or it may involve extensive clinical tests, incurring significant expenses and an approval process of several years’ duration. We generally rely on in-country experts to assist us with or to perform international regulatory applications.

ImmuCell Corporation

Employees

We currently employ 4779 employees (including 5 part-time employees). in comparison to 74 employees (including 7 part-time employees) approximately a year ago. Approximately 25.551 full-time equivalent employees are engaged in quality and manufacturing operations, 7.513 full-time equivalent employees in sales and marketing, 7 full-time equivalent employees in product development activities (primarily supporting facility maintenance and 4.5operation, regulatory filings and commercial scale-up for Re-Tain^®) and 6 full-time equivalent employees in finance and administration. At times, manufacturing personnel are also utilized, asAs needed, in the production of clinical material for use in product development.we augment our staff with contracted temporary employees. All of our employees are required to execute non-disclosure non-compete and invention assignment agreements (and some are required to execute non-compete agreements) intended to protect our rights in our proprietary products. We are not a party to any collective bargaining agreement and consider our employee relations to be excellent.

Public Information

As a reporting company, we file quarterly and annual reports with the Securities and Exchange Commission (SEC) on Form 10-Q and Form 10-K.10-K, respectively. We also file current reports on Form 8-K, whenever events warrant or require such a filing. The public may read and copy any materials that we file with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an internet site that contains reports, proxy and information statements and other information about us that we file electronically with the SEC at http://www.sec.gov.www.sec.gov. Our internet address is http://www.immucell.com. References to our website in this Annual Report are inactive textual references only and the content of our website should not be deemed incorporated by reference for any purpose.

ImmuCell Corporation

ITEM 1A— RISK FACTORS

OUTLINE TO ITEM 1A – RISK FACTORS

Financial Risks

Gross margin on product sales: One of our goals is to achieve a gross margin (before related depreciation expenses) as a percentage of total sales of 45% or more after the initial launch of new products. Depreciation expense will be a larger component of costs of goods sold for Re-Tain^® than it is for the First Defense^® product line. Gross margins generally improve over time, but this anticipated improvement may not be realized for Re-Tain^®. Many factors discussed in this Annual Report (including inflation, cost increases, supply-chain disruptions and the rising price of oil and other commodities and supplies) impact our costs of goods sold. There is a risk that we are not able to achieve our gross margin goals, which would adversely affect our operating results and could impact our future operating plans. We missed our gross margin goals in 2023 and 2022 with realized gross margins of 22% and 41%, respectively. There is also a risk that our plans to maintain or improve our gross margin may not be realized due to cost increases, additional manufacturing contamination events, production equipment failures, the inability to raise our selling prices, or any combination of these factors. In addition, such negative events, depending on their severity, could deplete our cash resulting in an inability to fund our business.

ImmuCell Corporation

Exposure to interest rates and debt service obligations: Rising interest rates could negatively affect the operating costs of dairy and beef producers and thus put further financial pressure on an already stressed business sector, which could indirectly, but materially and adversely, affect our business. During the first quarter of 2020, we removed the direct aspect of this particular exposure to our business by refinancing our bank debt (with the exception of our line of credit) with fixed rate notes. Our mortgage debt outstanding as of December 31, 2023 was $5.8 million bearing interest at the fixed rate of 3.53% per annum. Our equipment loans outstanding as of December 31, 2023 were $2.6 million bearing interest at the fixed rate of 3.5% per annum. The two State of Maine loans aggregating $754,000 as of December 31, 2023 bear interest at the fixed rate of 5% per annum. The $3 million in debt that we secured during the third quarter of 2023 bears interest at the blended fixed rate of 7.33% per annum with an outstanding balance of $2.9 million as of December 31, 2023. Our outstanding debt as of December 31, 2023 aggregating $12.1 million bears interest at the blended fixed rate of 4.51% per annum. Increasing interest rates would negatively impact the cost of any future borrowings. This was experienced on the new debt facilities aggregating $3 million that we closed during the third quarter of 2023. A decline in sales or gross margin, coupled with this debt service burden, could impair our ability to fund our capital and operating needs and objectives. The additional debt we incurred to fund our growth objectives has significantly increased our total debt service costs. We are obligated to make principal and interest payments aggregating approximately $2.0 million during both of the years ending December 31, 2024 and 2025. See Note 10 to the accompanying audited financial statements for more details about our debt.

Debt covenants: Our bank debt is subject to certain financial covenants. We are required to meet a minimum debt service coverage (DSC) ratio of 1.35. Our actual DSC ratios were 0.44, 2.68 and 2.03 for the years ended December 31, 2022, 2021 and 2020, respectively. There can be no assurance that we can exceed that required level in subsequent years. By negotiation with our lender in connection with a mortgage debt financing during the first quarter of 2022, the required minimum DSC ratio was reduced to 1.0 for the year ending December 31, 2022. Subsequently, our lender waived the required compliance with this rate for the year ended December 31, 2022. During the first quarter of 2023, the DSC ratio covenant for the year ending December 31, 2023 was waived by our lender. Instead, we were required to meet a minimum DSC ratio requirement of 1.35 for the twelve-month periods ending June 30, 2024, September 30, 2024 and December 31, 2024, and then again annually after that. During the first quarter of 2024, the DSC ratio covenant for the twelve-month period ending June 30, 2024 was preemptively waived by our lenders. If we are unable to achieve the required DSC ratio going forward or reach a favorable agreement with our lender regarding that requirement (including an amendment to or waiver of such requirement), we would be in violation of that covenant, which could result in unfavorable amendments to the terms of our bank debt or have other adverse impacts on our business and results of operations.

Currency exchange fluctuation: We do not believe that currency exchange rates have had a significant effect on our revenues and expenses. However, future increases in the value of the U.S. dollar could affect our customers and the demand for our products. We hope to increase the level of our future sales of products outside the United States. The cost of our products to international customers could be affected by currency fluctuations. The decline of the U.S. dollar against other currencies could make our products less expensive to international customers. Conversely, a stronger U.S. dollar could make our products more costly for international customers. The current devaluation of the dollar makes Euro-based purchases more expensive for us.

Inflation and supply disruptions: Inflation is having a material and adverse impact on almost all supplies we purchase and labor we hire and retain. Continuing or increasing inflationary trends could materially reduce our gross margin on product sales if we are unable or unwilling to impose offsetting price increases on our customers. The Consumer Price Index for All Urban Consumers (CPI-U) during the year ended December 31, 2023, improved to 3.4% for all items before seasonal adjustment. This is down from 6.5% and 7.0% during the years ended December 31, 2022 and 2021, respectively. We are facing significant production constraints, supply disruptions and inflationary increases which were initially triggered, in large part directly or indirectly, by the COVID-19 pandemic. The extent and duration of the negative impact of the pandemic on the economics of our customers and on the demand for our products going forward are very difficult to assess. The dairy market, similar to many others, has been unstable as a result of the pandemic. The price paid to producers for milk has been very volatile. The Class III milk price has been extremely volatile since the onset of the pandemic. Market conditions have improved somewhat, but this volatility remains a concern. Additionally, like most input costs, the cost of grain and other feed is rising, which puts a strain on the profitability of our customers. There is also economic uncertainty for beef producers, as the supply chain is interrupted or otherwise adversely affected due to closures of processing plants and reduced throughput. This is a very unusual situation for farmers who work so hard to improve production quality and efficiency in order to help feed a growing population with high-quality and cost-effective proteins. The pandemic created risk and continues to create uncertainty and challenges for us and has created or contributed to global supply-chain disruptions and has affected international trade, while creating a worldwide health and economic crisis. Stock market valuations have declined and recovered somewhat but remain very volatile. Inflation has increased significantly, and tax rates may increase. There is a risk of a period of economic downturn, the severity and duration of which are difficult to know. Prior to the pandemic and the responsive federal economic stimulus programs, many feared the United States had taken on too much national debt. Now the debt load is significantly higher. A combination of the conditions, trends and concerns summarized above could have a corresponding negative effect on our business and operations, including the supply of the colostrum we purchase to produce our First Defense^® product line, the demand for our products in the U.S. market and our ability to penetrate or maintain a profitable presence in international markets. We are experiencing shortages in key components and needed products, backlogs and production slowdowns due to difficulties accessing needed supplies and labor and other restrictions which increase our costs and affect our ability to consistently deliver our products to market in a timely manner. Our exposure to this risk is mitigated to some extent by the fact that our supply chain is not heavily dependent on foreign manufacturers, by our on-going cross-training of our employees, by qualifying alternate suppliers and components and by our early and continued compliance with recommended hygiene.

ImmuCell Corporation

Projection of net (loss) income: Generally speaking, our financial performance can differ significantly from management projections, due to numerous factors that are difficult to predict or that are beyond our control. Weaker than expected sales of theFirst Defense^® product line could lead to less profits or andeeper operating loss. Large investmentslosses. The timing of FDA approval of Re-Tain^® will have a material impact on our net (loss) income until sufficient commercial sales are generated and sustained.

Risks associated with our funding strategy for Re-Tain^®: The inability to maintain adequate cash and liquidity to support the commercialization of Re-Tain^® is a risk to our business. Achieving FDA approval of our pharmaceutical-grade Nisin produced at commercial-scale is the most critical action remaining in front of us on our path to U.S. regulatory approval of Re-Tain^®. Having completed the construction and equipping of the DS production facility (as described in more detail in ITEM 7 of this Annual Report) at a cost of approximately $20.8 million, we will continue to incur product development (or cost overruns) can result in a net loss. We were profitable on a year-to-date basis from the second half of 2014 through the nine-month period ended September 30, 2017. Depreciation expenses related to the Nisin productionoperate and maintain this facility are expected to produce operating losses until and unless product sales increase to offset these non-cash expenses.

Reliance oncommercialization. Absent sufficient sales of theFirst DefenseRe-Tain^®Òproduct line: We are heavily reliant on the market acceptance of theFirst Defense^Òproduct line to generate product sales and fund our operations. Our business would not have been at a profitable during the nine consecutive years in the period ended December 31, 2007 or during the years ended December 31, 2012, 2013, 2015 and 2016 or during the nine-month period ended September 30, 2017 without the gross margin, that we earned onwould be required to fund all debt service costs from available cash and sales of theFirst Defense^®Òproduct line, which accountedwould reduce, and could eliminate, our expected profitability going forward and significantly reduce our cash flows.

Uncertainty of market size and product sales estimates: Estimating the size of the total addressable market and future sales growth potential for 94%our First Defense^® product line is based on our experience and 93%understanding of market dynamics but is inherently subjective. Estimating the size of the market for any new product, such as Re-Tain^®, involves more uncertainties than do projections for established products. We do not know whether, or to what extent, our products will achieve, maintain or increase market acceptance and profitability. Some of the uncertainties surrounding Re-Tain^® include the product’s effectiveness against currently prevalent pathogens, market acceptance, the effect of a premium selling price on market penetration, cost of manufacture, competition from new and existing products sold by substantially larger competitors with greater market reach and promotional resources and other risks described under “Product Risks” – “Sales risks pertaining to Re-Tain^®” below. Since Re-Tain^® is a novel approach to treating mastitis, there are many uncertainties with regards to how quickly and to what extent we can develop the subclinical mastitis treatment market. We believe that polypeptide antimicrobial technology may be viewed positively (relative to traditional antibiotics). If realized, this may offset some of these risks and result in better overall market acceptance.

Net deferred tax assets: The realizability of our total product sales duringnet deferred tax assets is a subjective estimate that is contingent upon many variables. During the years ended December 31, 2017second quarter of 2018, we recorded a full valuation allowance against our net deferred tax assets that significantly increased our net loss in comparison to other periods. This non-cash expense could be reversed, and 2016, respectively.

Gross margin on product sales:It is one ofthis valuation allowance could be reduced or eliminated, if warranted by our goals toactual and projected profitability in the future. We will continue to achieve a gross margin (before related depreciation expenses) as a percentage of total sales consistent with current results (approximately 50%) afterassess the initial launch of new products. Many factors discussed in this report impact our costs of goods sold. There is a risk that we are not able to achieve our gross margin goals, which could impact our future operating plans.need for the valuation allowance each quarter.

Product Risks

Product risks generally: We set objectives for our products that we believe we can achieve, but the achievement of such goals is not a certainty. The sale of our products is subject to production, financial, efficacy, regulatory, competitive and other market risks. Elevated standards to achieve and maintain regulatory compliance required to sell our products continue to evolve. Failure to achieve acceptable biological yields from our production processes can materially increase our costs of goods sold materially.and reduce our production output, leading to lower margins and/or an order backlog that could adversely affect our customer relationships and operating results. First Defense^® is sold, and we expect Re-Tain^® to be sold, at significant price premiums relative to competitive products. There is no assurance that we will continue to achieve market acceptance of the First Defense^® product line, or achieve and sustain market acceptance of Re-Tain^®, at a profitable price level or that we can continue to manufacture our products at a low enough cost to result in a sufficient gross margin to justify their continued manufacture and sale. As we bring Re-Tain^® to market, these risks could be heightened by the additional uncertainties associated with introducing a new product requiring a shift in customer behavior.

ImmuCell Corporation

Contamination events and equipment failures in our production process: During 2023 and 2022, we experienced certain contamination events and equipment failures in our production process that resulted in scrapped inventory and a slowdown of our production process and had a significant impact on our operating results. We are at risk of further such production contaminations or equipment failures resulting in more scrapped inventory if we do not continue to improve our farm operations and implement other necessary improvements from farms to finished goods. The realization of this risk following the above-mentioned contamination events did result in a slowdown of our production output during 2023 to remediate this problem, which led to less sales and gross margin during the year. Additional contamination events or equipment failures causing significantly less production output, depending on their severity, could deplete our cash resulting in an inability to fund our business operations.

Sales risks pertaining to Re-Tain^®: Actual or prospective Re-Tain^® customers may decide to discontinue, reduce or avoid usage of Re-Tain^® due to the following risks:

1) A rejection of a tank of milk by a positive milk inhibitor test because too much of the milk in a bulk tank is comprised of milk from cows being treated with Re-Tain^®, when tested randomly for inhibitors by a milk hauler, which could create legal liability.

2) A failed or stalled cheese tank occurs when a Nisin susceptible cheese starter culture is impacted by residues in milk that exceed our on-farm treatment recommendations, which aims to limit concentrations of bulk tanks or tankers to 1% of milk from cows treated with Re-Tain^® or is not effectively diluted through the milk collection and transportation system. After we study this potential impact during our Controlled Launch of Re-Tain^®, we may decide to seek a post-approval label change requiring a short discard of milk, which may be limited to just the treated quarter of the cow.

3) Producers’ current practice generally is to treat only clinical mastitis, which has the visual indicator of abnormal milk. In order to gain market penetration for Re-Tain^®, we will need to change that practice and increase awareness of the importance of treating subclinical disease. This will require the producers’ ability and willingness to diagnose without visual indicators. Users of Re-Tain^® could have unsatisfactory treatment outcomes if they lack the equipment needed to measure and monitor somatic cell counts (SCC) of the herd or individual cows (for which data is needed). This risk limits our access to treatment cows because about 40% of farms do not presently have access to this kind of testing at the cow level, and thus are not good candidates for the use of Re-Tain^®.

4) Lower than anticipated treatment cure rates could be experienced because the product is administered to cows that we would not identify as the best treatment candidates based on SCC data.

5) Lower than anticipated treatment cure rates could be experienced because the product is administered to cows that are infected with pathogens outside of our label claims.

6) Off-label use of our product in cows infected with clinical mastitis before we have run the required studies and achieved a label claim extension for this disease state, resulting in negative treatment outcomes and potential legal liability.

7) Producers either do not choose to use it or might use it improperly, rather than follow our label instructions to administer one dose after each of three consecutive milkings, or they may limit use within the herd in an abundance of caution to avoid the negative outcomes described above.

Reliance on sales of the First Defense^® product line: We are reliant on the market acceptance of the First Defense^® product line to generate product sales and fund our operations. Our business would not have been profitable during the years ended December 31, 2012, 2013, 2015 and 2016, during the nine-month periods ended September 30, 2017 or during the three-month periods ended March 31, 2019, December 31, 2020, June 30, 2021, September 30, 2021, December 31, 2021 and March 31, 2022 without the gross margin that we earned on sales of the First Defense^® product line. Our anticipated return to more consistent profitability is contingent upon the gross margin we earn from First Defense^®.

Concentration of sales: Sales of the First Defense^® product line aggregated 99% of our total product sales during both of the years ended December 31, 2023 and 2022. Our primary customers for the majority of our product sales (91% and 92% during the years ended December 31, 2023 and 2022, respectively) are in the U.S. dairy and beef industries. Product sales to international customers, who are also in the dairy and beef industries, aggregated 9% and 8% of our total product sales during the years ended December 31, 2023 and 2022, respectively. The concentration of our sales from one product into just two markets (the dairy and beef markets) is a risk to our business. The animal health distribution segment has been aggressively consolidating over the last few years, with larger distributors acquiring smaller distributors. A large portion of our product sales (79% and 73% during the years ended December 31, 2023 and 2022, respectively) was made to two large distributors. A large portion of our trade accounts receivable (79% and 69% as of December 31, 2023 and 2022, respectively) was due from these two distributors. We have a good history with these distributors, but the concentration of sales and accounts receivable with a small number of customers does present a risk to us, including risks related to such customers experiencing financial difficulties or altering the basis on which they do business with us in a manner unfavorable to us.

ImmuCell Corporation

Production capacity constraints: We invested $3.7 million from 2019 to the first quarter of 2022 to increase our production capacity (in terms of annual sales dollars) for the First Defense^® product line from approximately $16.5 million to approximately $23 million based on current selling prices and estimated production yields. During the fourth quarter of 2021, we reached this new, higher level of production output on an annualized basis. During 2021, we initiated three additional investments aggregating $4.7 million to increase our estimated annual production capacity for the First Defense^® product line to approximately $30 million, which we completed at the end of 2022. We are making initial plans and investments to further increase our production capacity in 2024 and after. While this capacity expansion investment has proceeded very close to budget, there is a risk of cost overruns in our ongoing projects and any future production expansions that we may undertake, and a risk that we will not be able to achieve our production capacity growth objectives on a timely basis, resulting in a continuing or increasing shortfall in supply to the market. The inability to meet market demand for our products is a risk to our business. The historically large backlog of orders, as well as any ongoing order backlog, presents a risk that we could lose customers during this period that are not easily regained thereafter, when our production capacity is expected to meet or exceed sales demand. Our long-term capital plan to continue to expand the First Defense^® product line requires ongoing review of equipment capacity and utilization across the manufacturing value stream at the 56 Evergreen Drive facility and our leased facilities at 175 Industrial Way, as well as assessment of costs, functional obsolescence and reliability of equipment. This review and assessment could identify a need to fund unexpected equipment maintenance or replacement costs.

Product liabilityliability:: The manufacture and sale of our products entails a risk of product liability. Our exposure to product liability is mitigated to some extent by the fact that our products are principally directed towards the animal health market. We have maintained product liability insurance in an amount which we believe is reasonable in relation to our potential exposure in this area. We have no history of claims of this nature being made.

Regulatory Risks

Regulatory requirements for theFirst Defense^®Òproduct line:First Defense^®Òis sold in the United States subject to a product license from the Center for Veterinary Biologics, USDA, which was first obtained in 1991.1991, with subsequent approvals of line extensions in 2017 and 2018. As a result, our operations are subject to periodic inspection by the USDA, and we are at risk of an unfavorable outcome from such inspections. The potency of serial lots is directly traceable to the original serial used to obtain the product performance claims (the “Reference Standard”)Reference Standard). Due to the unique nature of theFirst Defense^Òlabel claims, host animal re-testing is not required as long as periodic laboratory analyses continue to support the stability of stored Reference Standard. To date, these analyses have demonstrated strong stability. However, if the USDA were not to approve requalification of the Reference Standard, additional clinical studies could be required to meet regulatory requirements and allow for continued sales of the product. We expect to be subject to similar regulatory oversight risks in territoriesproduct, which could interrupt sales and adversely affect our operating results. Territories outside of the United States wheremay require additional regulatory oversight that we sellmay not be able to meet with our products.current facilities, processes and resources. During July 2023, the USDA issued a Voluntary Stop Distribution and Sale (VSDS) and a Hold Release on First Defense^® preventing us from shipping product (while not restricting us from continuing to produce inventory) until two inspectional observations were resolved. We promptly responded to the inspectional observations involved. On August 1, 2023, the USDA verbally rescinded the VSDS, and on August 4, 2023, the USDA verbally rescinded the Hold Release, allowing us to resume normal shipping during the week of August 7, 2023. There is a risk that we will become subject to similar or additional regulatory actions in the future. In these cases, the resulting interruption in sales could have a material and adverse effect on our operating results.

Regulatory requirements for our purified Nisin product:Re-Tain^®: The commercial introduction of this product in the United States will requirerequires us to obtain FDA approval. Completing the development through to the submissionapproval of the administrative NADA toby the FDA involves risk. While threefour of the five required Technical Sections have been approved, and the Human Food Safety Technical Section is near completion, theregulatory development process timeline has been extensive (18 years)(approximately 16 years from when the product rights were returned to us by a former partner in 2007) and has involved multiple commercial production strategies. As a result,strategies and multiple submissions of the Chemistry, Manufacturing and Controls (CMC) Technical Section. Most recently, we received an Incomplete Letter from the FDA regarding this CMC Technical Section (the approvalduring the third quarter of which is a precondition2022. This clarifies the required path to commencement of sales of our mastitis product) has not yet been submitted for the Nisin Drug Substance or the Drug Product.product approval. To reduce the risk associated with this process, we are working with a qualified contract manufacturer (Norbrook) for alignment of the required validations and DP manufacture and have met with the FDA on multiple occasions to align onclarify filing strategy and requirements. WeOur CMC Technical Section submission is currently under review by the FDA as discussed in greater detail in ITEM 7 of this Annual Report under the caption, “Product Development Expenses and Strategy”, below. Early during the first quarter of 2024, the FDA conducted another pre-approval inspection of our DS facility. This resulted in the issuance of one deficiency as identified on the FDA’s Form 483. Since then, we have disclosed a timeline of events that could leadfully responded with data addressing the inspectional observation. However, our efforts continue to potentialbe subject to inspection and approval by late 2019 to early 2020; however,the FDA and other factors outside of our control, and there remains a risk that approvalthe required FDA approvals of our product and facilities could be delayed or not obtained. We are exposedThe facility of our contract manufacturer is subject to additional regulatory compliance risks through the subcontractors that we choose to work with to produce our mastitis product, who also need to satisfy certain regulatory requirements in order to provide us with the products and services we need.similar inspectional obligations. International regulatory approvals would be required for sales of Re-Tain^®outside of the United States. European regulatory authoritiesStates, and there is a risk that these approvals would be or become too costly to pursue or be delayed or not obtained.

ImmuCell Corporation

Regulatory requirements limiting access to suppliers and customer base: Maine, where our principal executive office and manufacturing facilities are located, has adopted product reporting and phase-out requirements for per- and polyfluoroalkyl substances (“PFAS”). Maine’s statute requires that effective as of January 1, 2025 manufacturers of products with intentionally-added PFAS report the presence of such substances (and requires that such products cannot be sold in Maine unless the required reporting is made) and specifies that (subject to certain exceptions to be promulgated by the Maine Department of Environmental Protection) no product containing intentionally-added PFAS may be sold in Maine after January 1, 2030. This reporting requirement may limit our ability to access supplies from companies which are not expectedin compliance with the state reporting requirements and may limit those customers to approvewhom we may sell our products. The U.S. Environmental Protection Agency also has adopted a PFAS reporting law, which requires that importers of articles that contain PFAS report the presence of such substances to the extent such information is known or reasonably ascertainable. This reporting requirement may limit our ability to import supplies.

Economic Risks Pertaining to the Dairy and Beef Industries

The industry data referred to below is compiled from USDA databases.

Cattle count: The January count of all cattle and calves in the United States had steadily declined from 97,000,000 as of January 1, 2007 to 88,500,000 as of January 1, 2014. Then this figure increased each year, reaching 94,800,000 as of January 1, 2019 before declining to 93,800,000 as of both January 1, 2020 and January 1, 2021. This count continued to decline to 92,100,000 as of January 1, 2022 and to 88,800,000 as of January 1, 2023. This count dropped to 87,200,000 as of January 1, 2024. Reflecting seasonal trends, this figure was equal to 102,000,000, 101,000,000, 98,600,000 and 95,900,000 as of July 1, 2020, 2021, 2022, and 2023, respectively. A significant decline in the cattle count could negatively affect the size of our addressable market.

Herd size: Prior to 1957, there were over 20,000,000 cows in the U.S. dairy herd. Prior to 1986, there were over 10,000,000 cows in the U.S. dairy herd. From 1998 through 2021, the size (annual average) of the U.S. dairy herd ranged from the low of 9,011,000 in 2004 to the high of 9,448,000 in 2021. This average declined to 9,402,000 during the year ended December 31, 2022 and then declined to 9,386,000 during the year ended December 31, 2023. A significant decline in the herd size could negatively affect the size of our addressable market.

Milk cow price: The all-time high value (annual average) for a milk cow was $1,993 during 2015. Since then, this annual average value steadily declined to $1,205 during 2019 before increasing to $1,300 during 2020 and to $1,363 during 2021. This price for 2022 increased significantly to an average of $1,598, which is a 17% increase over 2021. The 2023 average price of $1,763 represents a 10% increase over prior year. A significant decline in the milk cow price could negatively affect the size of our addressable market.

Milk price: The dairy market, similar to many others, has been unstable for several reasons including as a result of the pandemic. The price paid to producers for milk has been very volatile. This market volatility, and the resulting impact on our primary end users, could negatively impact our ability to maintain and grow sales at a profitable level. The Class III milk price (an industry benchmark that reflects the value of product withused to make cheese) is an important indicator because it defines our customers’ revenue level. This annual average milk price level (measured in dollars per hundred pounds of milk) reached its highest point (since these prices were first reported in 1980) during 2014 at $22.34 (peaking at $24.60 in September 2014), which price level has never been repeated. During the year ended December 31, 2020, this average milk price was equal to $18.16, but it was extremely volatile during the year due largely to disruption in demand related to the COVID-19 pandemic. The one-month fluctuation of 73% from a zerolow of $12.14 in May 2020 to $21.04 in June 2020 set an all-time record for variability. The average price for 2021 decreased by 6% to $17.08. This price average increased by 29% to $21.96 during the year ended December 31, 2022. The average price decreased by 22% to $17.02 during the year ended December 31, 2023. The annual fluctuations in this milk discard claim,price level are demonstrated in the following table:

ImmuCell Corporation

ITEM 1B –— UNRESOLVED STAFF COMMENTS

None

ITEM 1C – CYBERSECURITY

Risk Management and Strategy

We regularly assess risks from cybersecurity threats, monitor our information systems for potential vulnerabilities and test those systems pursuant to our process. Our cybersecurity risk assessment is part of our overall risk management program. We also regularly engage outside consultants to assess, identify and manage material risks from cybersecurity threats, including those threats associated with our use of third-party service providers. These consultants recommend and help implement systems to protect against cybersecurity threats. Based on the information available as of the filing date of this Annual Report, we are not aware of any risks from cybersecurity threats that have materially affected or are reasonably likely to materially affect our business strategy, results of operations or financial condition. However, despite our cybersecurity risk management processes, there can be no assurance that we, or the third parties with which we interact, will not experience a cybersecurity incident in the future that may materially affect us. Refer to the risk factor captioned “Increasing dependence on the continuous and reliable operation of our information technology systems” under PART I, ITEM 1A – RISK FACTORS for additional description of cybersecurity risks and potential related impacts on the Company.

Governance

Our Board of Directors has overall oversight responsibility with respect to our approach to risk management, including risks relating to cybersecurity. Although the Board of Directors has the ultimate responsibility for risk oversight, our management team, including our President and CEO, has operational responsibility for cybersecurity matters, including the day-to-day management of our cybersecurity risks, and oversees processes for the prevention, detection, mitigation and remediation of any cybersecurity incidents. While our management team does not have cybersecurity expertise, we coordinate with expert consultants to assess and manage risks. Our Board of Directors reviews cybersecurity threats and risk controls at quarterly meetings based on information provided by management and outside consultants.

ITEM 2 –— PROPERTIES

We ownBuilding 56:

During 1993, we purchased a 35,00015,000 square foot (approximately) buildingfacility (that included 5,000 square feet of unfinished office space on the second floor) at 56 Evergreen Drive in Portland, Maine. We currently use this space for substantially all of our: i) office and laboratory needs, ii) vaccine manufacturing operations, iii) liquid processing operations and iv) freeze-drying operations for our office, laboratoryUSDA-regulated product line. All of our powder milling and manufacturing needs. When we originally purchasedfilling operations, gel formulation operations and assembly services have been relocated out of this building in 1993, its size was 15,000 square feet, including 5,000 square feet of unfinished space on the second floor. Inbuilding. During 2001, we completed a construction project that added approximately 5,200 square feet of new manufacturing space on the first floor and approximately 4,100 square feet of storage space on the second floor. InDuring 2007, we built out the 5,000 square feet of unfinished space on the second floor into usable office space. After moving offices from the first floor offices into this new space on the second floor, we modified and expanded the laboratory space on the first floor and added approximately 2,500 additional square feet of storage space on the second floor. During 2009, we added 350 square feet of cold storage space connected to our first floor production area and added an additional 600 square feet to the second floor storage area. During the first quarter of 2015, we completed construction of a two-story addition connected to our facility to provide us with approximately 7,100 additional square feet for cold storage, production and warehouse space for our operations. These additions increased the size of the facility to approximately 34,850 square feet.

Building 33:

During the fourth quarter of 2015, we exercised an option to acquire land at 33 Caddie Lane in Portland, Maine which is nearby tonear our facility at 56 Evergreen Drive, on which we initiated construction of our DS production facility for purified NisinRe-Tain^® during the third quarter of 2016. During the fourth quarter of 2017, we obtained a certificateCertificate of occupancyOccupancy from the City of Portland for our 16,202 square foot (9,803 on the first floor and 6,399 on the second floor) NisinDS production facility. Our FDA-regulated operations are conducted in this building.

ImmuCell Corporation

Building 14:

During the first quarter of 2016,2017, we acquired an option to purchase additional land nearby to the Nisin production facility. We allowed this option to expire as of December 31, 2016 and applied the option amount to the purchase ofpurchased a 4,1144,080 square foot facility adjacent to the NisinDS production facility during the first quarter of 2017.for Re-Tain^® at 14 Wedge Way in Portland, Maine. We intend to use theare using this warehouse space primarily for storage of inventory, materials and equipment. During the middle of 2023, we completed modifications to this facility for packing, shipping and cold storage for Re-Tain^® and other warehousing needs.

Previously,Building 175A:

During 2019, we rentedentered into a lease covering approximately 64014,300 square feet of office and warehouse space at 175 Industrial Way in New YorkPortland, Maine to supportexpand our farmUSDA-regulated manufacturing operations. We have renovated this space (a Certificate of Occupancy was issued during the second quarter of 2020) to help us expand our production capacity and improve quality for the First Defense^® product line. This space is being used for all of our powder milling and filling, gel formulation and assembly services. The original lease term was ten years with a right to renew for a second ten-year term and a right of first offer to purchase. During the firstthird quarter of 2017,2022, we exitedentered into a new 20-year lease covering a facility that has been constructed for us by our landlord (Building 175B, described below), which is adjacent to (and has been connected to) Building 175A. In connection with this propertynew lease, the lease to Building 175A was extended by approximately 13 years to match the expiration of the other lease to Building 175B.

Building 175B:

During 2022, we committed to lease an additional 15,400 square feet of space at 175 Industrial Way in Portland, Maine, which has been constructed and connected to Building 175A, over a 20-year term. The lease commencement date was April 1, 2023. Lease payments began four months after this date. In connection with the lease commitment for space in Building 175B, the term of the original lease for Building 175A was extended by approximately 13 years. We intend to use this space for the following three purposes: 1) improve product quality by moving powder milling out of Building 56, 2) provide much needed additional warehouse space and 3) provide space for additional freeze-drying equipment to increase our production capacity to approximately $40 million per year. Due to the loss in gross margin on product sales during 2023 caused by the slowdown in production output necessary to remediate product contamination events, we reduced the scope of the investment to build out Building 175B at least for the time being. The objective of moving our powder milling operations out of Building 56 has been achieved by moving powder milling to Building 175A for the time being. We have completed Phase I of this build out plan, which included pouring a concrete floor and bringing utilities and heat to the space. Upon issuance of a Certificate of Occupancy by the city, we plan to relocate all shipping and receiving operations from Building 56 to Building 175B and benefit from the new warehouse space. When we have adequate cash, we will initiate Phase II of the build out plan, which includes construction of process rooms and installation of production equipment necessary to further increase our production capacity.

Other:

During March of 2021, we entered into a renewable, two-year lease for approximately 1,3501,300 square feet of office, warehousestorage and garageparking space nearby.

During 2016,in New York. Subsequently, we rentedentered into a new two-year lease to the same property through March of 2025 that includes an option to renew for an additional two-year term. We are renting approximately 3,266960 square feet in Winona, Minnesota onfor a short-term basis, wheresales office. This lease automatically renews with 4% increases for one-year terms unless we formulated our gel tube delivery formator the landlord give 60-days’ notice of a change. The current term expires in June 2024. We do not expect to provide notice of cancellation at this time. We also maintain access to cows (as a source of colostrum used in the production of the First Defense Technology^Ò®and certain private label products. This lease expired during the first quarter of 2017, and we no longer utilize this space. The manufacturing of this product line was transferred to the Portland facility during the first quarter of 2017.

line) through contractual relationships with commercial dairy farms. We maintain property insurance in amounts that approximate replacement cost and a modest amount of business interruption insurance. We also maintain access to certain animals, primarily cows, through contractual relationships with commercial dairy farms.

ITEM 3 –— LEGAL PROCEEDINGS

In the ordinary course of business, we may become subject to periodic lawsuits, investigations and claims. Although we cannot predict with certainty the ultimate resolution of any such lawsuits, investigations and claims against us, we do not believe that any pending or threatened legal proceedings to which we are or could become a party will have a material adverse effect on our business, results of operations, or financial condition.

ITEM 4 –— MINE SAFETY DISCLOSURES

None

ImmuCell Corporation

PART II

ITEM 5 –— MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock trades on The Nasdaq Capital Market tier of The Nasdaq Stock Market under the symbol ICCC. No dividends have been declared or paid on the common stock since the Company’s inception, and we do not anticipate or contemplate the payment of cash dividends in the foreseeable future. As of March 20, 2018,8, 2024, we had 8,000,00015,000,000 common shares authorized and 5,480,1577,750,864 common shares outstanding, and there were approximately 800642 shareholders of record. The last sales price ofWe have not paid dividends on our common stock on March 20, 2018 was $7.00 per share as quoted on The Nasdaq Stock Market. The following table sets forth the high and low sales price informationdo not have any present plan or expectation to pay dividends.

Purchase of Equity Securities

During 2023, we accepted $18,760 in cash in consideration for our common stock as reported by The Nasdaq Stock Market during the period January 1, 2016 through December 31, 2017:

Equity Compensation Plan Information

The table below summarizes the common stock reserved for issuance upon the exercise of 4,000 stock options outstanding asoptions. During 2022, we accepted $30,670 in cash in consideration for the exercise of December 31, 2017 or that could be granted in the future:5,000 stock options. In all cases, new shares were issued from treasury stock.

ImmuCell Corporation

ITEM 6 – SELECTED FINANCIAL DATA— [RESERVED]

You should read the following consolidated financial data in connection withPart II, Item 7– “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and the related notes appearing inPart II, Item 8– “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K. We prepare our financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

We derived the statements of operations and statements of cash flows data for the years ended December 31, 2017 and 2016 and the balance sheet data as of December 31, 2017 and 2016 from our audited financial statements appearing inPart II, Item 8 – “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K. We derived the statements of operations and statements of cash flows data for the years ended December 31, 2015, 2014, and 2013 and the balance sheet data as of December 31, 2015, 2014, and 2013 from our audited financial statements that are not included in this Annual Report on Form 10-K. Our historical results are not necessarily indicative of the results to be expected in any future period.

The following tables present certain unaudited quarterly financial information for the years ended December 31, 2017 and 2016, respectively (in thousands, except per share amount):

ImmuCell Corporation

The following tables present certain audited financial information for the years ended and as of December 31, 2017 through 2013, respectively (in thousands, except per share amounts):

ImmuCell Corporation

ITEM 7 –— MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read together with our audited financial statements and the related notes and other financial information included inPart II, ItemII: ITEM 8– “Financial Statements and Supplementary Data” — FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA of this Annual Report on Form 10-K.Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report, including information with respect to our plans and strategy for our business, and related financing, includes forward-looking statements that involve risks and uncertainties. One should reviewPart II: ITEM 1A ,— Item 1ARISK FACTORS – “Risk Factors” of this Annual Report for a discussion of some of the important factors that could cause actual results to differ materially from the results, objectives or expectations described in or implied by the forward-looking statements contained in the following discussion and analysis.

OUTLINE TO ITEM 7 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTES OF OPERATIONS

Liquidity and Capital Resources

We have funded most of our operations principally from our gross margin on product sales and equity and debt financings. We were profitableNet cash used for operating activities was $4.7 million during the six-month periodyear ended December 31, 20142023 in comparison to net cash used for operating activities of $1.5 million during the year ended December 31, 2022. The $3.1 million increase in cash used for operating activities during the year ended December 31, 2023 compared to the year ended December 31, 2022 was largely caused by the $3.3 million increase in the net loss which was, in turn, largely the result of $3.8 million less gross margin being earned during 2023, due to the production contamination events discussed below. Approximately $1.4 million less cash was received from the collection of accounts receivable, which was largely offset by $1.2 million less cash being invested in inventory during the year ended December 31, 2023 compared to the prior year. Our inventory balance increased by $1.8 million to $7.8 million as of December 31, 2023 from $6 million as of December 31, 2022. Our total depreciation and amortization expense was approximately $2.7 million and $2.5 million during the years December 31, 2023 and 2022, respectively. We anticipate that depreciation expense, while not affecting our cash flows from operations, will be a significant factor in creating annual net operating losses until and unless product sales increase sufficiently to offset these non-cash expenses. Net cash used for investing activities was $1.9 million during the year ended December 31, 2023 in comparison to net cash used for investing activities of $4 million during the year ended December 31, 2022 consisting primarily of cash spent to fund the purchase of property, plant and equipment.

Net cash provided by financing activities increased to $1.8 million during the year ended December 31, 2023 in comparison to net cash provided by financing activities of $1.1 million during the year ended December 31, 2022. We received gross debt proceeds of $3 million and $2 million during the years ended December 31, 20152023 and 20162022, respectively. We had aggregate debt outstanding (net of debt issuance and debt discount costs) of approximately $12 million and $10.2 million as of December 31, 2023 and 2022, respectively. This debt bears interest at fixed rates. The blended interest rate on the debt outstanding as of December 31, 2023 and 2022 is 4.51% and 3.65% per annum, respectively. Debt principal repayments aggregated $1.2 million and $897,000 during the unaudited nine-monthyears ended December 31, 2023 and 2022, respectively. We anticipate that debt principal repayments will aggregate approximately $1.5 million during both of the years ending December 31, 2024 and 2025. Interest expense (including amortization of debt issuance and debt discount costs) was $476,000 and $349,000 during the years ended December 31, 2023 and 2022, respectively. We anticipate that interest expense (including amortization of debt issuance and debt discount costs) will be $563,000 and $492,000 during the years ending December 31, 2024 and 2025, respectively. During the first quarter of 2024, the availability of our $1.0 million line of credit, which bears interest at the National Prime Rate per annum, was extended until September 11, 2025. There was no outstanding balance under this line of credit as of December 31, 2023 or 2022. See Note 10 to the accompanying audited financial statements for more information about our bank debt.

ImmuCell Corporation

From the first quarter of 2016 through the second quarter of 2021, we raised gross proceeds of $26.7 million (net proceeds were $24.8 million) from six different common equity transactions priced between $5.25 and $8.25 per share with a weighted average price of $5.87 per share. No warrants were issued in connection with any of these transactions, and no convertible or preferred securities were issued. This capital, together with our bank debt and gross margin from product sales, has allowed us to transform the Company. Based on our best estimates and projections, we believe that our cash and cash equivalents, together with gross margin anticipated to be earned from ongoing product sales will be sufficient to meet our currently planned working capital and capital expenditure requirements and to finance our ongoing business operations for at least 12 months (which is the period ended September 30, 2017.of time required to be addressed for such purposes by accounting disclosure standards) from the date of this filing. The table below summarizes the changes in selected, key accounts (in thousands, except for percentages):

Net cash provided by operating activities amountedWe have invested and continue to $1.18invest in several different capital expenditure projects to increase our estimated annual full production capacity for the First Defense^® product line from approximately $16.5 million duringto approximately $40 million and to complete the yeardevelopment of Re-Tain^®. When we describe the production capacity for the First Defense^® product line in this Annual Report, it should be noted that the actual value of this capacity varies based on biological and process yields, product format mix, selling price and other factors.

During the three-year period ended December 31, 20172016, we invested the aggregate of $4.2 million to construct a 7,100 square foot facility addition at 56 Evergreen Drive and related equipment (primarily Freeze-Dryer #2) and cold storage capacity increasing our freeze-drying capacity by 100% and making other improvements to our liquid processing capacity, which increased our annual production capacity (in terms of annual sales dollars) to approximately $16.5 million. During the first quarter of 2016, we completed this investment, which also included the construction and equipping of a pilot plant for small-scale DS production for Re-Tain^® within our First Defense^® production facility at 56 Evergreen Drive. After construction of the DS production facility for Re-Tain^® at 33 Caddie Lane (described in comparisonthe next paragraph) was completed, this space was converted for use in the production of the gel tube formats of the First Defense^® product line. After construction of Building 175A (described below) was completed, this space was converted to net cash (used for) operating activities of ($222,000) duringdouble our liquid processing capacity.

During the yearfour-year period ended December 31, 2016. Cash paid for capital expenditures totaled $17.76 million during2018, we invested the year ended December 31, 2017 in comparison to capital expenditures of $3.6 million (which amount did not include approximately $465,000 related to a business acquisition) during the year ended December 31, 2016.

During 2017 and 2016, we raised net proceeds of approximately $12.24 million (gross proceeds were approximately $13.46 million) from four different common equity transactions. During the first and fourth quarters of 2016, we issued an aggregate of approximately 1.8$21.6 million shares of common stock, raising net proceeds of approximately $8.5 million in two separate transactions. During the third quarter of 2017, we issued 200,000 shares of common stock, raising net proceeds of just over $1.0 million.to construct a DS production facility for Re-Tain^® at 33 Caddie Lane. During the fourth quarter of 2017, we issued 417,807 shares of common stock, raising net proceeds of approximately $2.73 million. Had we not decided to raise this money during the fourth quarter of 2017, our balance of cash and cash equivalents would have been approximately $1.06 million as of December 31, 2017.

During 2017 and 2016, we secured debt financing aggregating up to $6.84 million from TD Bank N.A. This debt is in addition to two mortgage loans entered into during 2010 and 2015 aggregating $3.5 million at inception, also with TD Bank N.A. As of December 31, 2017, $9,085,000 was outstanding under these five facilities and approximately $694,000 was available to be drawn. We also have a $500,000 line of credit that is available as needed through May 31, 2020 and subject to extension by the bank after that date. No amounts were outstanding under the line of credit as of December 31, 2017. These credit facilities are subject to certain restrictions and financial covenants and are secured by substantially all of our assets, including our corporate headquarters and production and research facility at 56 Evergreen Drive in Portland, which was independently appraised at $4.2 million in connection with the 2015 financing (prior to commencement of construction of our new Nisin production facility). We are in compliance with all applicable covenants as of December 31, 2017.

During the third quarter of 2016, we initiated construction of our Nisin production facility. We completed construction of the building during the fourth quarter of 2017 and began depreciating these construction costs at that time.DS production facility. We began equipment installation during the third quarter of 2017. These costs are being capitalized on our balance sheet2017, and we completed this installation during the third quarter of 2018. The total cost of this investment for the DS production facility and related processing equipment was $20.8 million plus $331,000 for the land and $472,000 for the acquisition of an adjacent 4,080 square foot warehouse facility at 14 Wedge Way, which will be used for packing, shipping and cold storage of Re-Tain^® and other warehousing needs.

During 2019, we initiated several additional capital expenditure investments in First Defense^® and Re-Tain^® as constructiondetailed in progress. Depreciationthe following table (in thousands):

ImmuCell Corporation

The primary purpose of these costs is expected to begin when the equipment is placed into service for its intended purpose (whichadditional investment in First Defense^® is to produce Nisin)fulfill the current backlog and materially reduce the risk of another order backlog. Operating at very close to 100% of available capacity is not efficient or sustainable. Our objective is to be in position to operate without significant contaminations at the capacity level we choose to cover sales with adequate buffer stock, which would allow more time for necessary preventative maintenance, and to have redundancy in place for when equipment failures occur. In addition to running without significant product contaminations or equipment failures, we need to meet or exceed our production yield assumptions to succeed.

The first phase of the additional investments in First Defense^® included significant renovations to a 14,300 square foot leased facility at 175 Industrial Way (Building 175A), which will likely besome facility modifications at 56 Evergreen Drive and the necessary production equipment (including Freeze-Dryer #3) to increase our freeze-drying capacity by 50% and our liquid processing capacity by 100%. This resulted in increasing the annual production capacity of the First Defense^® product line (in terms of annual sales dollars) from approximately $16.5 million to approximately $23 million. Renovations of Building 175A to enable this expansion were completed during the second quarter of 2018.2020. By moving our powder and gel filling and assembly services from 56 Evergreen Drive into this new space, we created space at 56 Evergreen Drive for the installation of the expanded freeze-drying capacity. The new facilities are built to contemporary current Good Manufacturing Practices (cGMP) standards with efficient material and people flows. A site license approval for this new facility was issued by the USDA during the third quarter of 2020. During the second quarter of 2021, we completed the relocation of our gel formulation equipment from 56 Evergreen Drive to Building 175A, which created the space necessary to double our liquid processing capacity at 56 Evergreen Drive. We anticipate that depreciation expense, whileobtained site license approval of the expanded freeze-drying capacity (Freeze-Dryer #3) at 56 Evergreen Drive from the USDA during the third quarter of 2021, and we obtained site license approval of the expanded liquid processing capacity at 56 Evergreen Drive from the USDA during the third quarter of 2022. This investment also included equipment and vehicle investments necessary to expand and improve our colostrum collection capabilities and logistics.

The second phase of the additional investments in First Defense^® included the installation of Freeze-Dryer #4 to further increase the estimated annual production capacity of the First Defense^® product line (in terms of annual sales dollars) by an additional 33% from approximately $23 million to approximately $30 million. Due to supply disruptions affecting key components and equipment, this investment was not affectingcompleted until the end of 2022. This investment also includes equipment and facility modifications to scale-up and upgrade our cash flowsvaccine manufacturing capacity, improve our quality laboratories and install new equipment for our gel filling operations for First Defense^® at 56 Evergreen Drive and Building 175A. This phase included the automation of our gel filling operations.

The third phase of the additional investments in First Defense^® involves the initiation of a new investment in building modifications and equipment to further increase our estimated annual First Defense^® production capacity from operations, will result in net operating losses until product sales increase sufficientlyapproximately $30 million to offset these non-cash expenses. The following table detailsapproximately $40 million with options for further expansion. Given the expected amountlong lead time required for investments like this, we initiated this project by entering into a lease amendment during the third quarter of 2022 covering a to-be-constructed 15,400 square foot building shell connected to Building 175A for approximately $250,000 per year. Construction of the building shell by our landlord was substantially complete as of April 1, 2023, and timingrent payments commenced as of August 1, 2023. We made this lease commitment because of the unique proximity of the land adjacent to our currently leased space and the high level of demand for properties of this investment:type in the Portland market. We did not want to risk losing this opportunity to others. The anticipated benefits to us from this new lease include: i) space for the potential to install Freeze-Dryers #5, #6, #7 and #8 if justified by market demand in the future, ii) improved space and quality for our powder milling operations by separating our upstream processes (liquid processing) at 56 Evergreen Drive from our clean downstream processes (milling, formulation, filling and packaging) and iii) much needed additional warehouse space. Freeze-Dryer #5 is the key piece of equipment required to allow us to increase our estimated annual production capacity to above $30 million. Based on past experience, we are planning for approximately 18 to 24 months of lead time for fabrication, installation, qualification and implementation of Freeze-Dryer #5. We have been running our equipment and staff close to 100% of capacity in order to fill the backlog of orders. One of our objectives is to create a more sustainable production schedule. However, due to the loss in gross margin during 2023 caused by the slowdown in production output necessary to remediate the product contamination events discussed below, we have decided to defer most of this investment, for the time being. During the third quarter of 2023, we initiated the initial steps of this project with a budget of approximately $700,000. We completed this work during the first quarter of 2024, which will provide additional warehousing space and allow us to move all shipping and receiving functions out of 56 Evergreen Drive to create more space for liquid processing. In consideration for our landlord agreeing to pay for the cost of those certain tenant improvements, we are obligated to make additional rent payments of $20,000 per month from November 2023 through June 2024 and a one-time additional rent payment of $488,743 in July 2024.

ImmuCell Corporation

Our capital expenditures from January 1, 2014 through December 31, 2017 have been larger thanThe purpose of the additional investments in Re-Tain^® is to bring the formulation and aseptic filling capabilities for Re-Tain^® DP into available space in our historical norm dueDS facility to investmentsend our reliance on third-party DP manufacturing services as well as to increasebuild out warehouse space at 14 Wedge Way for packing and shipping facilities for Re-Tain^®. We began initial installation of the filling equipment during the first quarter of 2022. Then we paused this installation work pending concurrence with the FDA pertaining to our production capacity forthird submission of theFirst Defense^Òproduct line Chemistry, Manufacturing and to construct and equip our Nisin production facility, as detailed in the following table: