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, 2021
001-12934
(Commission file number)
ImmuCell Corporation
(Exact name of registrant as specified in its charter)
Delaware
(State of incorporation)
56 Evergreen Drive, Portland, Maine
(Address of principal executive offices)
01-0382980
(I.R.S. Employer
Identification No.)
04103
(Zip Code)
(207) 878-2770
(Registrant’s telephone number)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
Common Stock, $0.10 par value per share
Trading symbol(s)
ICCC
Name of each exchange on which registered
Nasdaq
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes
No
Indicate by check mark whether the registrant (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 registrant
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 registrant has submitted electronically every Interactive Data File required to be
submitted 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 registrant was required to submit such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer,
a smaller reporting company or an emerging growth company. Large accelerated filer Accelerated filer Non-
accelerated filer Smaller reporting company Emerging growth 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 registrant 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. Yes No
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, 2021 was
approximately $64,209,000 based on the closing sales price on June 30, 2021 of $9.50 per share.
The number of shares of the registrant’s common stock outstanding as of March 18, 2022 was 7,742,864.
Documents incorporated by reference: Portions of the registrant’s definitive Proxy Statement to be filed in
connection with the 2022 Annual Meeting of Stockholders are incorporated by reference into Part III hereof.
ImmuCell Corporation
TABLE OF CONTENTS
December 31, 2021
ITEM 1
PART I
Business………………………………………………………………………………….
ITEM 1A
Risk Factors……………………………………………………………………………...
ITEM 1B
Unresolved Staff Comments……………………………………………………………..
ITEM 2
Properties…………………………………………………………………………….......
ITEM 3
Legal Proceedings………………………………………………………………………..
ITEM 4
ITEM 5
Mine Safety Disclosures…………………………………………………………………
PART II
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities…………………………………………………………..
ITEM 6
[Reserved]………………………………………………………………………………..
ITEM 7
Management’s Discussion and Analysis of Financial Condition and Results of
Operations………………………………………………………………………………..
ITEM 7A
Quantitative and Qualitative Disclosures about Market Risk…………………………...
ITEM 8
Financial Statements and Supplementary Data………………………………………….
ITEM 9
Changes In and Disagreements With Accountants on Accounting and Financial
Disclosure………………………………………………………………………………..
ITEM 9A
Controls and Procedures…………………………………………………………………
ITEM 9B
Other Information………………………………………………………………………..
ITEM 9C
ITEM 10
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections…….…………….
PART III
Directors, Executive Officers and Corporate Governance………………………………
ITEM 11
Executive Compensation………………………………………………………………...
ITEM 12
Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters…………………………………………………………….
ITEM 13
Certain Relationships and Related Transactions, and Director Independence………….
ITEM 14
ITEM 15
Principal Accountant Fees and Services………………………………………………...
PART IV
Exhibits and Financial Statement Schedules...……………………...…………………...
ITEM 16
Form 10-K Summary…………………………………………….……………….……...
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35
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37
37
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40
Audited Financial Statements…………………………………………………………… F-1 to F-28
Signatures
ImmuCell Corporation
PART I
ITEM 1 – BUSINESS
Cautionary Note Regarding Forward-Looking Statements (Safe Harbor Statement):
This Annual Report on Form 10-K contains “forward-looking statements” within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such statements include, but
are not limited to, any statements relating to: our plans and strategies for our business; projections of future financial
or operational performance; the timing and outcome of pending or anticipated applications for regulatory approvals;
factors that may affect the dairy and beef industries and 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 military invasion of Ukraine and attack on its people 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 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 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
anticipated costs of (or time to complete) planned expansions of our manufacturing facilities and the adequacy of
our funds available for these projects; the continuing availability to us on reasonable terms of third-party providers
of critical products or services; the robustness of our manufacturing processes and related technical issues; estimates
about our production capacity, efficiency and yield, which are highly subject to biological variability and the
product format mix of our sales; the future adequacy of our working capital and the availability and cost of third-
party financing; future regulatory requirements relating to our products; future expense ratios and margins; future
compliance with bank debt covenants; costs associated with sustaining compliance with current Good
Manufacturing Practice (cGMP) regulations in our current operations and attaining such compliance for our
facilities to produce the Nisin Drug Substance and Drug Product; our effectiveness in competing against competitors
within both our existing and our anticipated product markets; the cost-effectiveness of additional sales and
marketing expenditures and resources; anticipated changes in our manufacturing capabilities and efficiencies; the
value of our net deferred tax assets; projections about depreciation expense and its impact on income for book and
tax return purposes; and any other statements that are not historical facts. Forward-looking statements can be
identified by the use of words such as “expects”, “may”, “anticipates”, “aims”, “intends”, “would”, “could”,
“should”, “will”, “plans”, “believes”, “estimates”, “targets”, “projects”, “forecasts”, “seeks” and similar words and
expressions. In addition, there can be no assurance that future developments affecting us will be those that we
anticipate. Such statements involve risks and uncertainties, including, but not limited to, those risks and uncertainties
relating to: 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 consequences of backlogs or excess inventory buildup),
uncertainty associated with the timing and volume of customer orders as we come out of a prolonged backlog,
adverse impacts of supply chain disruptions on our operations and customer relationships, our reliance upon third
parties for financial support, products and services, our small size and dependence on key personnel, changes in
laws and regulations, decision making and delays by regulatory authorities, a recurrence of inflation and its impact
on our customers’ order patterns, currency values and fluctuations and other risks 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 under PART I: ITEM 1A – RISK FACTORS of this Annual Report
on Form 10-K and uncertainties otherwise referred to in this Annual Report.
1
Summary
ImmuCell Corporation
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 sell
First 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 the First 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 proteins 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 the First Defense® product line (a product that
provides significant Immediate Immunity™ to newborn dairy and beef livestock) and to revolutionize the mastitis
treatment paradigm with Re-Tain®, a product we are developing to treat this most significant cause of economic loss to
the dairy industry.
During 2000, we began the development of Re-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 made a second submission of the fifth and final Technical Section during the first quarter of 2022. 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.
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.
From the first quarter of 2016 through the second quarter of 2021, we issued an aggregate of 4,553,017 shares
of common stock, raising gross proceeds of approximately $26.7 million in six 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. After refinancing our bank
debt twice during 2020, we had approximately $9.2 million in outstanding debt under five different credit facilities
as of December 31, 2021 compared to $9.5 million as of December 31, 2020. This new equity and debt capital has
been, and is being, used to increase the production capacity for the First Defense® product line and complete the
development of Re-Tain® without relying on funding from a partner or licensee, thereby keeping control over all
product rights and future revenues.
During the past six years, we have funded our operations, constructed an FDA regulated Drug Substance
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 to bring the formulation and aseptic filling
capabilities for Re-Tain® in house in order to end our present reliance on an outside contractor. The following table
displays the changes in the balances of certain accounts over this period (in thousands, except for percentages):
Cash, cash equivalents, short-term investments
As of December 31,
2021
2015
$ Increase
Over
S i x -
Year Period
% Increase
Over
Six-
Year Period
and long-term investments
Net working capital
Total assets
Stockholders’ equity
Market capitalization
Common shares outstanding(1)
$10,185
$13,730
$44,466
$32,577
$61,936
7,742
(1) There were approximately 443,000 and 238,000 shares of common stock reserved for issuance under stock options that
were outstanding as of December 31, 2021 and 2015, respectively.
$3,661
$6,675
$29,865
$21,963
$38,901
4,687
$6,524
$7,056
$14,601
$10,614
$23,035
3,055
56%
95%
205%
207%
169%
153%
2
Animal Health Products
ImmuCell Corporation
The First Defense® product line is manufactured from hyperimmunized cows’ colostrum (the antibody rich
milk that a cow produces immediately after giving birth) utilizing our proprietary vaccine and milk protein
purification technologies. The First Defense® product line provides bovine antibodies that newborn calves need but
are unable to produce on their own immediately after birth. The target disease, calf scours (bovine enteritis), causes
diarrhea and dehydration in newborn calves and often leads to serious sickness and even death. The First Defense®
product line is the only USDA-licensed, orally delivered scours preventive product on the market for calves with
claims against E. coli, coronavirus and rotavirus (three leading causes of scours). A single dose of our product
provides a measured level of protection proven to reduce mortality and morbidity. Our pre-formed antibody
products provide Immediate Immunity™ during the first few critical weeks of life when calves need this
protection most. Studies have shown 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 the First 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. The First
Defense® product line is convenient to use. A calf needs to receive only one dose of First Defense® within the first
twelve hours after birth. Our capsule format of this product, which requires no mixing, is stored at room
temperature. The gel tube formats of this product require refrigeration in accordance with product label indications.
We are the market leader (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 dam-level (pre-calving scour
vaccines) competitors. The third quarter of 2021 marked the 30th anniversary of the original USDA approval of this
product in 1991. During the third quarter of 2021, our cumulative sales of First Defense® since inception exceeded
28,000,000 doses.
The First Defense® product line continues to benefit from wide acceptance by dairy and beef producers as an
effective tool to prevent scours (diarrhea) in newborn calves, which is the leading cause of death in preweaned
calves. Our Beyond Vaccination® marketing campaign focuses on providing antibodies without vaccination. A
100% vaccine protection rate is biologically impossible. The First Defense® 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 any vaccine. We
see this in every batch of First Defense® 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 generate
passive antibody protection and instead protects every calf equally with a measured dose of Immediate
Immunity™ against the most common scour pathogens. Plus, an effectively treated calf is much less likely to
require expensive antibiotic treatments and build antibiotic resistance. We are the only manufacturer within the
scour prevention space offering polyclonal multi-pathogen antibodies. The market is learning that the 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.
The 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 quar-
ter 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 bivalent formats of
the First Defense product line as options for customers.
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 to the newborn. It is generally believed that only 80% of
3
ImmuCell Corporation
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 De-
fense product line, producers can reduce stress-causing injections to the cow. 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. With the First De-
fense product line, 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 improve her immune response to vaccines that are critical to
her health.
Preventing newborn calves from becoming sick helps them to reach their genetic potential and reduces the
need to use treatment antibiotics later in life. 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 market-
ing 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.
First Defense Technology® 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. During 2012, we initiated a limited launch of a gel tube delivery format of
our First Defense Technology® 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 are selling the same concentrated whey proteins in 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 2011, Milk Products, LLC of Chilton, Wisconsin launched commercial sales
of their product, Ultra Start® 150 Plus and certain similar private label products, which are colostrum replacers with
First Defense Technology® Inside.
During 2001, we began to offer our own, internally developed California Mastitis Test (CMT). CMT is
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. CMT products 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 acquired private label manufacturing rights covering a feed supplement product
sold by Genex Cooperative, Inc. of Shawano, Wisconsin. This product was discontinued by mutual agreement
during the first quarter of 2022. Annual sales of this product were less than $170,000 during the years ended
December 31, 2021 and 2020.
Sales and Markets
Our sales and marketing team consists of one vice president, one commercial research and technical services
veterinarian, one director of marketing and customer service and eight regional managers. The First Defense®
product line and CMT are sold primarily through major animal health distributors who, in turn, sell to veterinary
clinics, fleet stores and direct to farms. Sales of the First Defense® 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 in 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. Despite the market volatility affecting both milk prices and feed costs, we continue to
increase our sales.
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 $24 million per year. With the additional claim
for our new product (Tri-Shield First Defense®) against rotavirus, we are 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
4
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 $70 million per year.
ImmuCell Corporation
Based on market share information that we purchase from the leading source of this data for the animal health
sector, we are gaining market share in the United States year after year with our Beyond Vaccination® strategy. We
aim to continue these market share gains in both the dairy and beef segments. Our share of the market (on a unit
volume basis) of scour preventative products administered at the calf-level was approximately:
2017
32%
2018
34%
2019
36%
2020
41%
2021
43%
Our share of the market of calves treated with products administered to calves and those 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:
2017
9.7%
2018
10.3%
2019
11%
2020
12.6%
2021
13.2%
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 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 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 initiating our plan to expand the number of countries to which our First Defense®
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. The statistics above are provided by an industry
compilation of USDA data for 2022. 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,
potentially making it more difficult or costly for us to generate and sustain sales volumes at profitable margins in
these markets.
We introduced First Defense® 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,
California during the fourth quarter of 2016 (sales have been initiated under this contract). We are investigating the
requirements to sell the First Defense® product line in Mexico.
With Re-Tain®, we are working to expand our product offerings to include an intramammary treatment for
subclinical mastitis for the mother cow during lactation. Nisin (the active ingredient in Re-Tain®) is a naturally-
occurring polypeptide antimicrobial that is not used in human medicines and could alleviate some of the social and
public health concerns that the widespread use of antibiotics encourages the growth of antibiotic-resistant bacteria
(“superbugs”). Mastitis (inflammation of the mammary gland) is estimated to cost the U.S. dairy industry
approximately $2 billion in economic harm per year, which makes it the most costly and common disease affecting
the dairy industry. The disease diminishes the saleable quantity and overall value of milk, in addition to causing
other herd health and productivity losses. While the benefit of treating clinical mastitis is widely known, subclinical
mastitis (those cases where cows have infected udders, but still produce saleable milk) is associated with its own
significant economic losses and is recognized as a substantial contributor to clinical mastitis cases. There is a
growing awareness of the cascade of adverse events and conditions associated with subclinical mastitis for both the
dairy producer and the milk processor, including reduced or foregone milk quality premiums, lower milk production
5
ImmuCell Corporation
(some have estimated approximately 1,500 pounds of lost milk, or about $270 at $18.00 per hundredweight, per
infected cow), 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
that subclinical mastitis costs the U.S. dairy industry approximately $1 billion per year. Currently, treatment of
subclinical mastitis is limited because it cannot be visibly detected and treatment requires a milk discard, which is
costly.
The USDA’s National Animal Health Monitoring System through its Dairy 2014 study suggests that 21% of
all dairy cows are treated per year with 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 committed 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 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. More regulatory and private sector 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. This would not be a concern for Re-Tain® because Nisin is not used
for human health. By reducing the risk of antibiotic residues and slowing the development of antibiotic-resistant
organisms, we can improve food quality and preserve medically important antibiotics for human disease treatment.
This current environment is favorable to the introduction of our new product as an alternative to traditional
antibiotics such as penicillin and cephalosporins. We believe that this changing environment of new regulations and
public opinion supports the value of our ongoing development and commercialization efforts for Re-Tain®.
Additionally, we believe that the use of our First Defense® 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 for treatment antibiotics later in a calf’s life.
We believe that Re-Tain® could revolutionize the way that mastitis is treated by making earlier treatment of
subclinically infected cows (while these cows are still producing saleable milk) economically feasible by not
requiring a 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 on the market can offer this value
proposition. It is generally current practice to treat mastitis only when the disease has progressed to the clinical stage
where the milk from an infected cow cannot be sold. Because the milk from cows treated with traditional antibiotics
must be discarded, most dairy producers simply do not treat subclinically infected cows. The ability to treat such
cases without a milk discard could revolutionize the way mastitis is managed in 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. While practices may vary farm-to-farm,
there would be no requirement to move cows treated with our product, allowing this costly drop in production to be
avoided. Our product likely will be priced at a premium to the traditional antibiotic products currently on the market,
which are all sold subject to a milk discard requirement. Common milk discard periods cover the duration of
treatment and extend from 1.5 to 3 days 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 $18.00 per 100 pounds, a cow produces approximately $10.80 to $14.40 worth of milk per day. These estimated
figures would result in milk discard costs ranging from approximately $37.80 (for 3.5 days of milk at 60 pounds per
day) to $158.40 (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. 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 a milk discard cost, we expect producers to be
more motivated to identify and treat cows at the subclinical stage. We believe that the product’s value proposition
demonstrates a return on investment to the dairy producer and the milk processor that will justify a premium over
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other mastitis treatments on the market today.
ImmuCell Corporation
It is difficult to accurately estimate the potential size of the market for the treatment of subclinical mastitis
because presently this disease is largely left untreated. We believe that approximately 20-40% of the U.S. dairy herd
is infected with subclinical mastitis 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 million per year is spent on drug treatments.
Finding candidate cows will require farms to obtain monthly individual cow somatic cell count (SCC) data through
participation in organizations such as the National Dairy Herd Improvement Association (DHIA) or by installing
monitors to indicate high SCC cows or a potential health event. DHIA testing can provide this data monthly, and
emerging technology can provide this data real-time. Testing results at an elevated level could indicate a good
treatment candidate. Likewise, testing results showing a reduced level after treatment could indicate a treatment
success. To reach the portion of the market that does not have access to this data presently, we would need to show
new customers that the benefit of using our product is worth the roughly $2.00 per cow per month test cost. Similar
market opportunities are likely to exist outside the U.S. We believe the use of Re-Tain® could be expanded, with
additional data and regulatory approval, to support treatment late in lactation and possibly for clinical stage mastitis.
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 eighteen months or so after FDA approval, as we seek to revolutionize the
way that mastitis is treated in the dairy industry over the long term. Through our direct sales team, our goal is to
create exceptional customer experiences with first adopters. We believe that the resulting positive customer
testimonials should help create the momentum necessary to optimize product sales over the longer period. 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. We believe that the operational adjustments and
accommodations that dairy farmers will need to make to effectively use Re-Tain® will not be so burdensome as to
deter its adoption and usage. 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 also reduces
the amount of inventory that we would need to build at risk before regulatory approval is achieved, and it reduces
the amount of cash we would need to spend to purchase inventory from our contract manufacturer before our in-
house aseptic filling services are approved by the FDA. This strategic choice means that we have elected not to
pursue an alternative strategy that might have maximized short-term, initial sales quickly through a mass market
approach where we provide product to distribution and let them sell it to as many farms as possible. 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 are developing detailed launch plans, focusing on the
readiness of dairy operators to successfully introduce Re-Tain® to their herds. We believe that these 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 our investment in Re-Tain®.
In the big picture, we are introducing an entirely new class of antimicrobial as an animal drug, a bacteriocin,
that does not promote resistance against antibiotics used in human medicine making it more socially responsible. As
the great NHL hockey player, Wayne Gretzky, is known to have said, “I skate to where the puck is going to be, not
where it has been.” This is motivational to us. We believe our product fits very well with where the industry is going
to be in the coming years. Sustainability objectives of the industry require that less antibiotics be used in food
producing animals, yet a new product to 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 growing
concern of our society and an active issue with the FDA, largely because of the growing evidence that this over-use
contributes to antibiotic resistance and the rise of “super-bugs”. The industry could keep treating this very
significant disease with traditional antibiotics, but it takes innovation to bring a polypeptide antimicrobial like Nisin
to market. Re-Tain® will, when introduced, offer a needed alternative to these traditional antibiotics, while at the
same time improving milk quality and the quantity of milk produced by treated cows. We also know that animals
infected with subclinical mastitis have higher abortion rates and often progress to the clinical disease state. We
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believe that societal animal welfare objectives will put more and more pressure on the industry to treat cows with
subclinical infections.
We expect the Drug Substance production facility that we constructed for approximately $20.8 million to have
initial annual production capacity sufficient to meet at least $10 million in sales of Re-Tain® at current production
yields. This production capacity estimate does not yet reflect any inventory build strategies or ongoing yield
improvement initiatives. Expansion of the estimated annual capacity of the Drug Substance facility beyond
approximately $10 million (without factoring in potential yield improvements) would require relocation of the Drug
Product formulation and aseptic filling module to another facility, or the acquisition and equipping of other Drug
Substance production facilities or adopting alternative manufacturing strategies.
As disclosed in previously filed reports, we have made preliminary assessments and estimates relating to the
market opportunity for Re-Tain®, both during and after its initial launch, and have described the principal
challenges facing the launch of a new product by a company such as ours with limited sales, marketing and financial
resources into a competitive market populated with several global pharmaceutical enterprises. We expect annual
sales to be well below the $36.1 million level that we previously estimated as the potential of the market opportunity
for our product five years after product launch. This is because we are taking a more controlled launch approach,
respecting the challenges of introducing a paradigm changing technology. We are going to be very transparent with
the launch of Re-Tain®. To that end, 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 two components
of our business: i) First Defense® and ii) Re-Tain®. This will allow investors to see our progress with both
products. We generally do not provide financial projections, as we know such projections can prove to be materially
inaccurate. However, in this case, we are providing a high-level projection for Re-Tain® that under this controlled
launch plan strategy, we think we can achieve sales of approximately $1 million in 2023 and then about double that
in 2024. This assumes FDA approval is achieved and that product launch is initiated around the beginning of the
fourth quarter of 2022. If we are successful with this launch strategy, we would aim to grow this curve in 2024 and
after. We believe this strategy lends itself to a more gradual adoption curve but higher and more sustainable sales
over the long-term. Actual sales results will vary from these projections up or down.
Through both continued growth in sales of the First Defense® product line and a successful launch of Re-
Tain® as soon as possible and with a measured approach to expanding our customer-facing staff, it is our objective
to increase our current annual level of total product sales of just over $19 million to approximately $23 million. As
additional resources are dedicated to production, sales, marketing and technical services, our longer-term goal is to
exceed $35 million of annual total product sales as soon as possible during the five-year period after the market
launch of Re-Tain®.
Product Development
The majority of our product development spending has been focused on the development of Re-Tain®, our
purified Nisin treatment for subclinical mastitis in lactating cows. During the 22-year period that began on January
1, 2000 and ended on December 31, 2021, we invested an aggregate of approximately $22.3 million (excluding
depreciation and the capital cost of our Drug Substance production facility) in the development of this product. This
estimation 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 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 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. Our Nisin technology includes patented processing and purification methods to achieve pharmaceutical-grade
purity.
During 2004, we entered into a product development and marketing agreement with Zoetis (formerly Pfizer
Animal Health, a division of Pfizer, Inc.) covering this product. That company elected to terminate the agreement in
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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 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. Further, we believe that such a premium-priced product will be used selectively, which reduces the risk of cheese
interference and is consistent with modern “precision dairying” practices that discourage the indiscriminate use of drug
treatments. Among the measures that we intend to deploy will be detailed guidance on limiting the portion 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 contents in a cheese tank.
Subclinical mastitis, and the study required to achieve an effectiveness claim for it, is defined under the
FDA/Center for Veterinary Medicine Guidance #49: Target Animal Safety and Drug Effectiveness Studies for Anti-
Microbial Bovine Mastitis Products (Lactating and Non-Lactating Cow Products). Trial eligibility requires both
pretreatment samples to be positive for the mastitis pathogen (except for Staphylococcus aureus and Streptococcus
agalactiae, where a single pretreatment sample qualifies a cow for enrollment). For all pathogens, both samples
taken between 14 and 28 days post treatment (and at least 5 days apart) must be negative to be judged a cure. These
conservative criteria generally result in enrolling cows with chronic subclinical disease, which rarely self-resolves.
Milk from cows infected with subclinical mastitis has greater somatic cell counts (SCC), and producers may be paid
less for this lower quality milk. Cows with subclinical mastitis infections are known to produce less milk, and cows
that maintain subclinical mastitis across the dry period have been shown to produce significantly less milk. The
failure to treat subclinical mastitis may result in chronic infections that are unlikely to respond to antibiotic therapy.
Finally, cows with subclinical mastitis maintain a reservoir of infection within the herd and increase exposure of
healthy cows to contagious pathogens.
Our second most important product development initiatives (in terms of dollars invested and, we believe,
potential market impact) have been focused on other improvements, extensions or additions to our First Defense®
product line. During the second quarter of 2009 we entered into a 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. We achieved product license approval and initiated market launch of this product, Tri-Shield First
Defense®, during the fourth quarter of 2017. During the third quarter of 2018, we obtained approval from the
Canadian Food Inspection Agency to sell Tri-Shield® in Canada. We initiated sales in Canada through our in-
country distributor during the fourth quarter of 2019. We achieved USDA approval of our bivalent gel tube
formulation (formerly marketed as First Defense Technology®) during the fourth quarter of 2018 and have re-branded
this product format as Dual-Force First Defense®. We are currently working to establish USDA claims for our bivalent
bulk powder formulation of First Defense Technology®.
We are also working to expand our product development pipeline of antimicrobials that can be used as
alternatives to traditional antibiotics through expansions of our Nisin technology and yield 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.
Competition
Our competition in the animal health market includes other biotechnology companies and major animal health
companies. Most, if not all, of these competitors have substantially greater financial, marketing, manufacturing and
human resources and more extensive product development capabilities than we do.
We would consider any company that sells an antibiotic to treat mastitis, such as Boehringer Ingelheim, Merck
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Animal Health and Zoetis, to be among the potential competitors 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. Our Nisin A is produced from our high-yielding,
proprietary L. lactis strain and purified to a high level, providing us with a level of protection over a competitor that
might try to develop a similar product.
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 ImmunityTM 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 that competes directly with the First Defense® 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 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
new 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 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. We need to obtain USDA, FDA or foreign approvals for new products to effectively
promote and market our products. We must have available properly licensed, efficient and effective raw material
and finished product manufacturing resources to continue to profitably sell our current products. We currently
compete on the basis of product performance, price, distribution capability and customer support. We continue to
monitor our network of independent distributors to maintain our competitive position.
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Intellectual Property
ImmuCell Corporation
We own a broad collection of intellectual property rights relating to our research, products and processes. This
includes: 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 innova-
tive 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 intellectual property covering Re-Tain®.
We own: (a) U.S. Patent No. 6,794,181 entitled “Method of Purifying Lantibiotics”, which covers a manufac-
turing process for preparing pharmaceutical-grade Nisin, which was issued in 2004; and (b) U.S. Patent No.
10,023,617 entitled “Methods and Systems of Producing Pharmaceutical Grade Lantibiotics”, which covers key,
novel and proprietary aspects of our manufacturing process for preparing pharmaceutical-grade 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 applica-
tions. In some cases, we have chosen (and may choose in the future) not to seek patent protection for certain prod-
ucts 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 rights through operational measures and contractual agree-
ments.
We own numerous trademarks and trade dress that are very important to our business, and have several
trademark and trade dress applications and registrations in the United States, Canada, Iran and Turkey. We own the
following U.S. trademark registrations: IMMUCELL, FIRST DEFENSE, FD FIRST DEFENSE (& Design),
FIRST DEFENSE TECHNOLOGY, TRI-SHIELD FIRST DEFENSE, TRI-SHIELD FIRST DEFENSE (&
Design), YOUR CALF CREW, BEYOND VACCINATION, BEYOND VACCINATION (& Design), CALF
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 bolus FIRST DEFENSE products. The United States Patent and Trademark
Office refused registration of our IMMEDIATE IMMUNITY trademark, which we use extensively in connection
with marketing of all of our products, on the grounds that the mark is generic. Rather than appeal this finding, we
are continuing to build our 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 selected a new product name, RE-TAIN, which was approved by the FDA during the
first quarter of 2019.
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. We have received USDA and Canadian Food Inspection Agency approval for the bolus format of First
Defense® and for the gel tube formats of Tri-Shield First Defense® and Dual-Force First Defense®. Re-Tain® is
regulated by the FDA, which regulates veterinary drugs. Regulations in the European Union will likely require that
Re-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 competing 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.
Employees
We currently employ 67 employees (including 7 part-time employees) in comparison to 61 employees
(including 5 part-time employees) approximately a year ago. Approximately 38.9 full-time equivalent employees are
engaged in manufacturing operations, 12.5 full-time equivalent employees in sales and marketing, 6.6 full-time
equivalent employees in product development activities (primarily supporting facility maintenance and operation,
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regulatory filings and commercial scale-up for Re-Tain®) and 5.5 full-time equivalent employees in finance and
administration. As needed, we augment our staff with contracted temporary employees. All of our employees are
required to execute non-disclosure 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. 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. Our internet address is http://www.immucell.com.
ITEM 1A— RISK FACTORS
Financial Risks
Gross margin on product sales: One of our goals is to achieve a gross margin (before related depreciation ex-
penses) as a percentage of total sales of approximately 50% 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 report (including the COVID-related cost increases, supply-chain disruptions
and the rising price of oil) 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. This
concern was realized during the first quarter of 2021 when our gross margin as a percentage of sales dropped to
39%. There is a risk that our plans to continue to recover from this decrease may not be realized due to cost in-
creases, inability to raise our selling prices, or both.
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 affect our business. We removed the direct aspect of this particular exposure to our
business by refinancing our bank debt to fixed rate notes at 3.50% per annum during the first quarter of 2020.
However, the additional debt we incurred to fund our growth objectives has significantly increased our debt service
costs. Reflecting the mortgage debt financing we completed during the first quarter of 2022, we are obligated to
make principal and interest payments aggregating approximately $1.2 million during the year ending December 31,
2022 and approximately $1.24 million during the years ending December 31, 2023 and thereafter during the
remainder of the ten-year term. See Note 10 to the accompanying audited financial statements for more information.
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.
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, which is measured annually. Our actual DSC ratios were 2.68 and 2.03
for the years ended December 31, 2021 and 2020, respectively. However, based on current projections of our future
financial performance, which includes a high level of ongoing product development expenses to support Re-Tain®,
we may not satisfy this annual requirement for the year ending December 31, 2022, and there can be no assurance
that we can exceed that required level in subsequent years. By negotiation with the bank 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.
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 the First Defense® product line could lead to less profits or deeper operating losses. The timing
of FDA approval of Re-Tain® will have a material impact on our net (loss) income until sufficient commercial sales
are initiated. Additionally, this complexity and uncertainty is magnified by the risks relating to and arising out of the
duration, extent and nature of adverse effects from the COVID-19 pandemic.
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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 Drug
Substance production facility described elsewhere in this report at a cost of approximately $20.8 million, we will
continue to incur product development expenses to operate and maintain this facility until commercialization.
Absent sufficient sales of Re-Tain® at a profitable gross margin, we would be required to fund all debt service costs
from available cash and sales of the First Defense® product line, which would 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 our First Defense® product line is based on our experience and 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 and competition
from new and existing products sold by substantially larger competitors with greater market reach and promotional
resources. 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. Our belief that peptide
antimicrobial technology will be viewed positively (relative to traditional antibiotics), if realized, may offset some of
these risks and result in better overall market acceptance.
Net deferred tax assets: The realizability of our net deferred tax assets is a subjective estimate that is contin-
gent upon many variables. During the second 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 this valuation allowance could be reduced or eliminated, if warranted by our actual and pro-
jected profitability in the future. We will continue to assess the need for the valuation allowance each quarter.
Product Risks
Product risks generally: 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 and reduce our production output, leading to lower margins and 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 to competitive products. There is no assurance
that we will continue to achieve market acceptance of the First Defense® product line, or achieve 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.
The impact of Nisin on milk and cheese: 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. In recognition of the safety data that we
presented to the FDA for our highly purified preparation of Nisin, the FDA granted us the zero milk discard and zero
meat withhold claims that we sought. However, there is a risk that dairy producers and processors will not accept
this new technology because of the risk that a tank of milk could be discarded if it is comprised of more than 1% of
milk from treated cows when tank contents are tested for inhibitors through random testing by milk haulers and the
risk that our product may negatively affect cheese making if present in a high enough concentration in any cheese
batch that utilizes a starter culture that is susceptible to Nisin. If treatment rates exceed our usage recommendation,
there is a risk that milk from treated cows will not be diluted adequately with milk from non-treated cows to keep
the tank average below this sensitivity level.
Market launch risks pertaining to Re-Tain®: Actual or prospective Re-Tain® customers may decide to
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discontinue, reduce or avoid usage of Re-Tain® due to the following risks:
ImmuCell Corporation
1) A rejection of a tank of milk by a positive milk inhibitor test because more than 1% of the milk in a bulk
tank is comprised of milk from treated cows, when tested randomly by a milk hauler. See the Risk Factor above for
more detail.
2) A failed or stalled cheese tank occurs when our recommended on-farm limit of 3% to 5% of milk from
treated cows is exceeded or not effectively diluted through the milk transportation and collection system, if a cheese
starter culture is used that is susceptible to Nisin. See the Risk Factor above for more detail.
3) 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 access this kind of testing at the
cow level.
4) Lower than anticipated treatment cure rates are 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 are 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.
7) Producers either do not bother to use it or might use it improperly, rather than follow our label instructions
to administer one dose after each of three consecutive milkings, resulting in negative treatment outcomes, and to
limit use within the herd 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 and December 31, 2021 without the gross margin that we earned on sales of the First Defense®
product line.
Concentration of sales: Sales of the First Defense® product line aggregated 98% of our total product sales
during both of the years ended December 31, 2021 and 2020. Our primary customers for the majority of our product
sales (86% and 89% during the years ended December 31, 2021 and 2020, 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
14% and 11% of our total product sales during the years ended December 31, 2021 and 2020, respectively. The
concentration of our sales from one product into one market 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 (73% and 71% during the years ended December 31, 2021 and
2020, respectively) was made to two large distributors. A large portion of our trade accounts receivable (72% and
75% as of December 31, 2021 and 2020, 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.
Production capacity constraints: We invested approximately $3.6 million 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. While this capacity expansion
investment has proceeded very close to budget, there is a risk of cost overruns in 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 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
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production capacity is expected to meet or exceed sales demand. During the third quarter of 2021, we initiated
additional investments to increase our annual production capacity for the First Defense® product line to
approximately $35 million which we intend to complete by the end of 2022. Our 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 facility at 175 Industrial Way, as well as assessment of
functional obsolescence and reliability of equipment. This review and assessment could identify a need to fund
unexpected equipment maintenance or replacement costs.
Product liability: 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 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 the First Defense® product line: First Defense® is sold in the United States
subject to a product license from the Center for Veterinary Biologics, USDA, which was first obtained in 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). Due to the unique nature of the label 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, which could interrupt sales and adversely affect our operating results. Territories outside of the United
States may require additional regulatory oversight that we may not be able to meet with our current facilities,
processes and resources.
Regulatory requirements for Re-Tain®: The commercial introduction of this product in the United States requires
us to obtain FDA approval. We have disclosed a timeline of events that could lead to product approval during the
fourth quarter of 2022. Completing the development through to approval of the NADA by the FDA involves risk.
While four of the five required Technical Sections have been approved, the regulatory development process timeline
has been extensive (approximately 13 years from the first FDA submission) and has involved multiple commercial
production strategies. The first-phased Chemistry, Manufacturing and Controls Technical Section was submitted for the
Nisin Drug Substance during the first quarter of 2019, and the FDA response was received during the third quarter of
2019. We filed the second-phased Drug Substance and Drug Product submission during the first quarter of 2021 and
received a Technical Section Incomplete Letter from the FDA during the third quarter of 2021. We made a new
submission during the first quarter of 2022 and expect to have the FDA’s response six months later. To reduce the risk
associated with this process, we worked with a qualified contract manufacturer for alignment of the required
validations and Drug Product manufacture and have met with the FDA to clarify filing strategy and requirements. Our
efforts are subject to inspection and approval by the FDA. There remains a risk that the required FDA approvals of
our product and facilities could be delayed or not obtained. International regulatory approvals would be required for
sales of Re-Tain® outside of the United States.
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 to reach 94,800,000 as
of January 1, 2019 before declining to 93,800,000 as of both January 1, 2020 and January 1, 2021. As of January 1,
2022, this figure decreased to 91,900,000. Reflecting seasonal trends, this figure was equal to 101,000,000 and
102,000,000 as of July 1, 2021 and 2020, respectively.
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 approximately the low of 9,011,000 in 2004 to the high of 9,448,000 in 2021.
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Milk price and feed costs: 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. Milk was dumped on farms during the first half
of 2020 largely because of the loss of demand for dairy products from closed restaurants and school lunch programs
and other negative impacts of the pandemic, but conditions have improved since then. The Class III milk price (an
industry benchmark that reflects the value of product used 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 2019, this milk price average increased by
16% over 2018 to $16.96. The low price level during 2018 and into the beginning of 2019 was very challenging to the
profitability of our customers. 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 low 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 average price increased significantly during the
first two months of 2022 to $20.65. The annual fluctuations in this milk price level are demonstrated in the following
table:
Average Class III Milk Price During
the Years Ended December 31,
(Decrease)
Increase
2014
2015
2016
2017
2018
2019
2020
2021
$22.34
$15.80
$14.87
$16.17
$14.61
$16.96
$18.16
$17.08
(29%)
(6%)
9%
(10%)
16%
7%
(6%)
The actual level of milk prices may be less important than its level relative to feed costs. One measure of this
relationship is known as the milk-to-feed price ratio, which represents the amount of feed that one pound of milk can
buy. An increase in feed costs also has a negative impact on the beef industry. This ratio varies farm-to-farm based on
individual operating parameters. The highest annual average this ratio has reached since this ratio was first reported in
1985 was 3.64 in 1987. The annual average for this ratio of 1.52 in 2012 was the lowest recorded since it was first re-
ported in 1985. Since this ratio reached 3.24 in 2005, it has not exceeded 3.00. The annual average of 2.54 for 2014
was the highest this ratio has been since it was 2.81 in 2007. This ratio averaged 1.76 for 2021, amounting to a sig-
nificant decline of 22% from the 2020 average of 2.31. This average has not been lower since 2013. During January
of 2022, this ratio improved to 2.18. The following table demonstrates the annual volatility and the low values of this
ratio recently:
Average Milk-To-Feed Price Ratio During
the Years Ended December 31,
(Decrease)
Increase
2014
2015
2016
2017
2018
2019
2020
2021
2.54
2.14
2.26
2.42
2.05
2.25
2.31
1.76
(16%)
6%
7%
(15%)
10%
3%
(22%)
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.
Market volatility: While the number of cows in the U.S. herd and the production of milk per cow directly
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influence the supply of milk, the price for milk is also influenced by very volatile international demand for milk
products. Given our focus on the dairy and beef industries, the volatile market conditions and the resulting financial
insecurities of our primary end users are risks to our ability to maintain and grow sales at a profitable level. These
factors also heighten the challenge of selling premium-priced animal health products (such as Tri-Shield First
Defense® and Re-Tain®) into the dairy market.
Small Size of Company
Dependence on key personnel: We are a small company with 67 employees (including 7 part-time employees).
As such, we rely on certain key employees to support multiple operational functions, with limited redundancy in
capacity. The loss of any of these key employees could adversely affect our operations until a qualified replacement is
hired and trained, which could be even more challenging in the present very difficult labor market. Our competitive
position will be highly influenced by our ability to attract, retain and motivate key scientific, manufacturing,
managerial and sales and marketing personnel. With increased manufacturing staffing required to operate our
expanded First Defense® production capacity and to operate our Re-Tain® production facility, we anticipate that our
employment level could grow to approximately 80 employees during 2022.
Reliance on outside party to provide certain services under contract for us: We are exposed to additional
regulatory compliance risks through the subcontractors that we choose to work with to produce Re-Tain®, who also
need to satisfy certain regulatory requirements in order to provide us with the products and services we need. One
example of this outside reliance is Norbrook, our Drug Product (DP) contract manufacturer. We face the risk of
potential supply interruption and adverse effects on the market launch of Re-Tain® if we do not effectively manage the
end of the DP supply provided from our contract manufacturer for orders scheduled for delivery during 2022 to align
with the new supply from our own formulation and aseptic filling facility, which we currently expect to be operational
during the fourth quarter of 2023 or the second quarter of 2024. Because Norbrook has elected to terminate this supply
agreement effective as of the end of 2022, we are investing approximately $4 million of the additional capital we
raised during the first quarter of 2019 to construct and equip our own DP formulation and aseptic filling capability for
Re-Tain® inside our existing Drug Substance facility. The objective of this investment is to end our reliance on an
outside party to perform these services for us. Actual project costs could exceed our current estimates. Completion of
this project could be delayed due to a number of factors outside our control, including delays in equipment
fabrication, equipment delivery or facility construction. In addition, there is a risk that we fail to achieve regulatory
approval of the new facility.
Competition from others: Many of our competitors are significantly larger and more diversified in the relevant
markets than we are and have substantially greater financial, marketing, manufacturing and human resources and
more extensive product development and sales/distribution capabilities than we do, including greater ability to
withstand adverse economic or market conditions and declining revenues and/or profitability. Merck and Zoetis,
among other companies, sell products that compete directly with the First Defense® product line in preventing
scours in newborn calves. The scours product sold by Zoetis sells for approximately half the price of our product,
although it does not have an E. coli claim (which ours does). With Tri-Shield First Defense®, we can now compete
more effectively against vaccines that are given to the mother cow (dam) to improve the quality of the colostrum
that she produces for the newborn calf. Elanco, Merck and Zoetis provide these dam vaccine products to the market.
There are many companies competing in the mastitis treatment market, most notably Boehringer Ingelheim, Merck
and Zoetis. The subclinical mastitis products sold by these large companies are well established in the market and
are priced lower than what we expect for Re-Tain®, but all of them involve traditional antibiotics and are sold
subject to a requirement to discard milk during and for a period of time after treatment (unlike our product which
carries zero milk discard and zero milk withhold claims). There is no assurance that our products will compete
successfully in these markets. We may not be aware of other companies that compete with us or intend to compete
with us in the future.
Global Risks
Russia’s military invasion of Ukraine: Russia’s military invasion of Ukraine and attack on its people is already
having a significant negative impact on the world economy. Among other exposures, the increasing price of oil is
already impacting our transportation-related expenses materially, and we expect this supply stress to increase the
cost of petroleum-based products that we purchase (most plastics etc.). Further, the increasing cost of grain is a risk
to our customers’ profitability.
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Global COVID-19 pandemic (novel coronavirus, technically known as SARS-CoV-2): The global COVID-19
pandemic has created, and continues to create, uncertainty and challenges for us. The emergence of the Delta and
Omicron variants and the resulting rising number of positive cases during the latter part of 2021 and into early 2022
has been a more recent concern. The COVID-19 pandemic has created or contributed to global supply-chain
disruptions and has affected international trade, while creating a worldwide health and economic crisis. While
presently there are some indications that suggest the situation may be improving, the full impact of this viral outbreak
on the global economy, and the duration of such impact, is very uncertain at this time. Stock market valuations have
declined and recovered and remain volatile. Inflation has begun to increase 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. 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. 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 caused by, among other things, restaurants closing or curtailing
their operations. This is a very unusual situation for farmers that work so hard to improve production quality and
efficiency in order to help feed a growing population with high-quality and cost-effective proteins. 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 our implementation of remote work practices (where feasible)
and by our early and continued compliance with recommended hygiene and social distancing practices. Despite our
best efforts and intentions, there is a risk that an employee could become infected and could infect others.
Bovine diseases: The potential for epidemics of bovine diseases such as Foot and Mouth Disease, Bovine
Tuberculosis, Brucellosis and Bovine Spongiform Encephalopathy (BSE) presents a risk to us and our customers.
Documented cases of BSE in the United States have led to an overall tightening of regulations pertaining to
ingredients of animal origin, especially bovine. The First Defense® product line is manufactured from bovine milk
(colostrum), which is not considered a BSE risk material. Future regulatory action to increase protection of the human
food supply could affect the First Defense® product line, although presently we do not anticipate that this will be the
case.
Risks Pertaining to Common Stock
Stock market valuation and liquidity: Our common stock trades on The Nasdaq Stock Market (Nasdaq:
ICCC). Our average daily trading volume is lower, our bid/ask stock price spread can be larger and our share price
can be more volatile than what other companies experience, which could result in investors facing difficulty selling
their stock for proceeds that they may expect or desire. Our share price as of March 18, 2022 was $8.88. Most
companies in the animal health sector have market capitalization values that greatly exceed our current market
capitalization of approximately $68.8 million as of March 18, 2022. Our product sales during the year ended
December 31, 2021 were $19.2 million. This means that our market valuation as of March 18, 2022 was equal to
approximately 3.57 times our sales during the year ended December 31, 2021. Before gross margin from the sale of
new products is achieved, our market capitalization may be heavily dependent on the perceived potential for growth
from our product under development and may therefore be negatively affected by the related uncertainties and risks.
Certain provisions might discourage, delay or prevent a change in control of our Company or changes in our
management: Provisions of our certificate of incorporation, our bylaws, our Common Stock Rights Plan or Delaware
law may discourage, delay or prevent a merger, acquisition or other change in control that stockholders may consider
favorable, including transactions in which stockholders might otherwise receive a premium for their shares of our
common stock. These provisions may also prevent or frustrate attempts by our stockholders to replace or remove our
management. These provisions include:
•
limitations on the removal of directors;
18
•
•
•
advance notice requirements for stockholder proposals and nominations;
ImmuCell Corporation
the ability of our Board of Directors to alter or repeal our bylaws;
the ability of our Board of Directors to refuse to redeem rights issued under our Common Stock Rights
Plan or otherwise to limit or suspend its operation that would work to dilute the stock ownership of a
potential hostile acquirer, potentially preventing acquisitions that have not been approved by our
Board of Directors; and
• Section 203 of the Delaware General Corporation Law, which prohibits a publicly-held Delaware cor-
poration from engaging in a business combination with an interested stockholder (generally defined as
a person which together with its affiliates owns, or within the last three years has owned, 15% of our
voting stock, for a period of three years after the date of the transaction in which the person became an
interested stockholder) unless the business combination is approved in a prescribed manner.
The existence of the foregoing provisions and anti-takeover measures could depress the trading price of our
common stock or limit the price that investors might be willing to pay in the future for shares of our common stock.
They could also deter potential acquirers of our Company, thereby reducing the likelihood of obtaining a premium
for our common stock in an acquisition.
No expectation to pay any dividends or repurchase stock for the foreseeable future: We do not anticipate
paying any dividends to, or repurchasing stock from, our stockholders for the foreseeable future. Instead, we expect
to use cash to fund product development costs and investments in our facilities and production equipment, and to
increase our working capital and to reduce debt. Stockholders must be prepared to rely on market sales of their
common stock after price appreciation to earn an investment return, which may never occur. Any determination to
pay dividends in the future will be made at the discretion of our Board of Directors and will depend on our financial
condition, results of operations, contractual restrictions, restrictions imposed by applicable laws, current and
anticipated needs for liquidity and other factors our Board of Directors deems relevant.
Possible dilution: We may need to access the capital markets again and issue additional common stock in
order to fund our growth objectives, as described elsewhere in this report. Such issuances could have a dilutive
effect on our existing stockholders.
Other Risks
Access to raw materials and contract manufacturing services: Our objective is to maintain more than one
source of supply for the components used to manufacture and test our products that we obtain from third parties.
However, we are experiencing difficulty in efficiently acquiring essential supplies. We have significantly increased
the number of farms from which we purchase colostrum for the First Defense® product line. A significant reduction
in farm capacity could make it difficult for us to produce enough inventory to meet customer demand. The specific
antibodies that we purify from colostrum for the First Defense® product line are not readily available from other
sources. We are and will be dependent on our manufacturing facilities and operations in Portland for the production of
the First Defense® product line and Re-Tain®. We are currently dependent on one manufacturer for the supply of the
syringes used for our gel tube formats of Dual-Force First Defense® and Tri-Shield First Defense®. We are actively
investigating a second supplier. We will be dependent on one other manufacturer for the supply of syringes for Re-
Tain®. We are dependent on a contract with Norbrook for the Drug Product formulation and aseptic filling of our
Nisin Drug Substance for orders scheduled for delivery in 2022. We expect to complete the investment to perform
these services in-house during 2022 and achieve the required regulatory approval for use by the fourth quarter of 2023
or the second quarter of 2024. The facility we are constructing to perform these services in-house will be subject to
FDA inspection and approval, the outcome and timing of which are not within our control. The potential alternative
options for these services are narrowed considerably because our product cannot be formulated or filled in a facility
that also processes traditional antibiotics (i.e., beta lactams). Any significant damage to or other disruption in the
services at any of these third-party facilities or our own facilities (including due to regulatory issues or non-
compliance) would adversely affect the production of inventory and result in significant added expenses and potential
loss of future sales.
Failure to protect intellectual property: In some cases, we have chosen (and may choose in the future) not to
seek patent protection for certain products or processes. Instead, we have sought (and may seek in the future) to
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ImmuCell Corporation
maintain the confidentiality of any relevant proprietary technology through trade secrets, operational safeguards and
contractual agreements. Reliance upon trade secret, rather than patent, protection may cause us to be vulnerable to
competitors who successfully replicate (knock off) our manufacturing techniques and processes. Additionally, there
can be no assurance that others may not independently develop similar trade secrets or technology or obtain access to
our unpatented trade secrets or proprietary technology. Other companies may have filed patent applications and may
have been issued patents involving products or technologies potentially useful to us or necessary for us to
commercialize our products or achieve our business goals. If that were to be the case, there can be no assurance that
we will be able to obtain licenses to such patents on terms that are acceptable to us. There is also a risk that
competitors could challenge the claims in patents that have been issued to us.
Increasing dependence on the continuous and reliable operation of our information technology systems: We
rely on information systems throughout our company. Any disruption of these systems or significant security
breaches could adversely affect our business. Although we maintain information security policies and employ
system backup measures and engage in information system redundancy planning and processes, such policies,
measures, planning and processes, as well as our current disaster recovery plan may be ineffective or inadequate to
address all eventualities. As information systems and the use of software and related applications by us, our business
partners, suppliers, and customers become more cloud-based, we become inherently more susceptible to
cyberattacks. There has been an increase in global cybersecurity vulnerabilities and threats, including more
sophisticated and targeted cyber-related attacks that pose a risk to the security of our information systems and
networks and the confidentiality, availability and integrity of data and information. There are reports of increased
activity by hackers and scammers during the COVID-19 pandemic. Russia’s military invasion of Ukraine may
elevate the risk of such cyberattacks. Any such attack or breach could compromise our networks and the information
stored thereon could be accessed, publicly disclosed, lost, or stolen. While we have invested in our data and
information technology infrastructure (including working with an information security technology consultant to
assess and enhance our security systems and procedures, and periodically training our employees in such systems
and procedures), there can be no assurance that these efforts will prevent a system disruption, attack, or security
breach and, as such, the risk of system disruptions and security breaches from a cyberattack remains. We have not
experienced any material adverse effect on our business or operations as a consequence of any such attack or breach
but may incur increasing costs in performing the tasks described above. Given the unpredictability of the timing,
nature and scope of such disruptions and the evolving nature of cybersecurity threats, which vary in technique and
sources, if we or our business partners or suppliers were to experience a system disruption, attack or security breach
that impacts any of our critical functions, or our customers were to experience a system disruption, attack or security
breach via any of our connected products and services, we could potentially be subject to production downtimes,
operational delays or other detrimental impacts on our operations. Furthermore, any access to, public disclosure of,
or other loss of data or information, including any of our (or our customers’ or suppliers’) confidential or proprietary
information or personal data or information, as a result of an attack or security breach could result in governmental
actions or private claims or proceedings, which could damage our reputation, cause a loss of confidence in our
products and services, damage our ability to develop (and protect our rights to) our proprietary technologies and
have a material adverse effect on our business, financial condition, results of operations or prospects. While this
exposure is common to all companies, larger companies with greater resources may be better able to mitigate this
risk than we can.
ITEM 1B — UNRESOLVED STAFF COMMENTS
None
ITEM 2 — PROPERTIES
We own a 35,000 square foot (approximately) building at 56 Evergreen Drive in Portland, Maine. We
currently use this space for substantially all of our office and laboratory needs and some of our liquid processing and
vaccine manufacturing needs for our USDA-regulated product line. All of our powder filling, gel formulation and
assembly services have been relocated out of this building, and this space continues to be used for all of our vaccine
production, liquid processing and freeze-drying operations. When we originally purchased this building in 1993, its
size was 15,000 square feet, including 5,000 square feet of unfinished space on the second floor. In 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. In 2007, we built out the 5,000
square feet of unfinished space on the second floor into usable office space. After moving first floor offices into this
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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.
During the fourth quarter of 2015, we exercised an option to acquire land at 33 Caddie Lane in Portland,
Maine which is near our facility at 56 Evergreen Drive, on which we initiated construction of our Drug Substance
production facility for Re-Tain® during the third quarter of 2016. During the fourth quarter of 2017, we obtained a
Certificate of Occupancy from the City of Portland for our 16,202 square foot (9,803 on the first floor and 6,399 on
the second floor) Drug Substance production facility. Our FDA-regulated operations are conducted in this building.
During the first quarter of 2017, we purchased a 4,080 square foot facility adjacent to the Drug Substance
production facility for Re-Tain®. We are using this warehouse space primarily for storage of inventory, materials
and equipment. We intend to modify this facility to conduct cold storage, assembly and pack & ship services for Re-
Tain®.
During the first quarter of 2017, we entered into a renewable, two-year lease for approximately 1,350 square
feet of office, warehouse and garage space in New York to support our farm operations. This lease was extended
through and terminated at the end of March of 2021. During March of 2021, we entered into a renewable, two-year
lease for approximately 1,300 square feet of office, storage and parking space in New York.
We are renting approximately 960 square feet in Minnesota for a sales office through at least June 2022. This
lease automatically renews for one-year terms unless we or the landlord give 60-days’ notice of a change.
On September 12, 2019, we entered into a lease covering approximately 14,300 square feet of office and
warehouse space with a lease possession date of November 15, 2019 and a lease commencement date of February
13, 2020 for some of our USDA-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 for the First
Defense® product line. This space is being used for all of our powder filling, gel formulation and assembly services.
The lease term is ten years with a right to renew for a second ten-year term and a right of first offer to purchase.
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 as a source of colostrum
used in the production of the First Defense® product line, 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
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. As of March 18, 2022, we had 15,000,000 common shares authorized and 7,742,864 common shares
outstanding, and there were approximately 673 shareholders of record. We have not paid dividends on our common
stock and do not have any present plan or expectation to pay dividends.
21
Equity Compensation Plan Information
ImmuCell Corporation
The table below summarizes the common stock reserved for issuance upon the exercise of stock options
outstanding as of December 31, 2021 or that could be granted in the future:
Number of shares
to be issued upon exercise of
outstanding options
Weighted-average
exercise price of
outstanding options
Number of shares
remaining available for future issuance
under stock-based compensation plans
(excluding shares reflected in first
column of this table)
443,000
—
443,000
$6.94
—
$6.94
57,500
—
57,500
Equity compensation plans
approved by stockholders
Equity compensation plans not
approved by stockholders
Total
Purchase of Equity Securities
During 2021, we accepted cash and the surrender of 17,128 stock options with a fair market value ranging from
$9.52 to $10.09 per share at the time of exercise in consideration for the exercise of stock options. During 2020, we
accepted cash and the surrender of 6,583 stock options with a fair market value ranging from $5.94 to $5.99 per share
at the time of exercise in consideration for the exercise of stock options. In all cases, new shares were issued from
treasury stock.
ITEM 6 — [RESERVED]
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 in Part
II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K. 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, includes forward-looking statements that involve
risks and uncertainties. One should review Part I, Item 1A — “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.
Liquidity and Capital Resources
Net cash provided by operating activities was $954,000 during the year ended December 31, 2021 in
comparison to net cash provided by operating activities of $1.3 million during the year ended December 31, 2020.
The $361,000 decrease in cash provided by operating activities from period to period was largely the result of a
$944,000 decrease in our net loss, no debt forgiveness in 2021, a $1.4 million increase (changing from a source of
cash to a use of cash) in cash used for inventory and a $738,000 increase in cash used for accounts receivable. As we
increase our production capacity to fill the backlog of orders, our inventory balance increased by $997,000 from
December 31, 2020 to December 31, 2021. Approximately 46% of this increase was work-in-process inventory. Our
total depreciation expense was approximately $2.4 million and $2.3 million during the years ended December 31,
2021 and 2020, respectively. We anticipate that depreciation expense, while not affecting our cash flows from
operations, will result in net operating losses until and unless product sales increase sufficiently to offset these non-
cash expenses. Cash used for investing activities was $1.6 million and $2.6 million during the years ended
December 31, 2021 and 2020, respectively. Cash paid for capital expenditures was $2.6 million and $4.1 million
during the years ended December 31, 2021 and 2020, respectively, which payments were largely related to our
ongoing investments to expand our manufacturing facilities. Cash provided by financing activities increased to $3.9
million during the year ended December 31, 2021 in comparison to $1.9 million during the year ended December
31, 2020. The $4.2 million equity raise we completed during the second quarter of 2021 was the largest cause of this
change. Going forward, repayments of the indebtedness incurred to fund these capital expenditures and acquire these
assets will reduce our cash flows. Debt principal payments (exclusive of the $8.3 million used to repay our
22
ImmuCell Corporation
refinanced bank debt during the first quarter of 2020 and the $624,000 used to pay down our mortgage debt during
the fourth quarter of 2020) were $768,000 and $633,000 during the years ended December 31, 2021 and 2020,
respectively. Reflecting the mortgage debt financing we completed during the first quarter of 2022, we are obligated
to make debt principal repayments of approximately $875,000 and $925,000 under these loans during the years
ending December 31, 2022 and 2023, respectively, and we anticipate that our interest expense will be approximately
$325,000 and $317,000 during the years ending December 31, 2022 and 2023, respectively.
We have funded most of our business operations principally from the gross margin on our product sales and
equity and debt financings. 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 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):
As of
December 31, 2021
As of
December 31, 2020
Increase
Amount
%
Cash, cash equivalents and short-term
investments
Net working capital
Total assets
Stockholders’ equity
Common shares outstanding(1)
$10,185
$13,730
$44,466
$32,577
7,742
$7,946
$9,946
$40,350
$28,266
7,219
$2,239
$3,784
$4,116
$4,311
523
28%
38%
10%
15%
7%
(1)
There were approximately 443,000 and 414,000 shares of common stock reserved for issuance for stock options that were
outstanding as of December 31, 2021 and 2020, respectively.
During the first quarter of 2020, we closed on a debt refinancing aggregating $8.6 million plus a line of credit
in the amount of $1.0 million with Gorham Savings Bank (GSB). This new debt was comprised of a $5.1 million
mortgage note that bears interest at a fixed rate of 3.50% per annum (with a 10-year term and 25-year amortization
schedule, resulting in a balloon principal payment of $3.1 million due during the first quarter of 2030) and a $3.5
million note that bears interest at a fixed rate of 3.50% per annum (with a 7-year term and amortization schedule).
The refinancing proceeds were used to provide some additional working capital, but mostly to refinance $8.3 million
of then outstanding bank debt and pay off an interest rate swap termination liability of $165,000. This debt
refinancing improved our liquidity by lowering our interest expense, spreading our principal payments out over a
longer time period and eliminating pending balloon principal payments that existed under some of the repaid debt.
Under this GSB debt, we were required to hold $1.4 million in escrow (a non-current asset), which reduced the
effective availability of our liquid assets for operational needs by that amount. During the fourth quarter of 2020, we
closed on a $1.5 million note with GSB that bears interest at a fixed rate of 3.50% per annum (with a 7-year term
and amortization schedule). We used $624,000 of the proceeds to prepay a portion of the then outstanding principal
on our mortgage note, which reduced the then outstanding balance to 80% of the most recent appraised value of the
property securing the debt, which allowed GSB to release the $1.4 million of funds held in escrow. During the first
quarter of 2022, we closed on a mortgage debt financing that added $2 million in new funds to the $4.2 million of
mortgage debt outstanding at the time of closing. The amended mortgage principal of $6.2 million bears interest at
the weighted-average blended fixed rate of 3.53% per annum (with a 10-year term and 20-year amortization
schedule, resulting in a balloon principal payment of $3.68 million due during the first quarter of 2032). Also during
the first quarter of 2022, the availability of our $1.0 million line of credit, which bears interest at the National Prime
Rate plus 0.00% per annum, was extended until March 11, 2024. We may use some of these proceeds to repay two
loans from the Maine Technology Institute (MTI) aggregating $900,000 (described below) when they become
interest bearing at the fixed rate of 5% per annum during the fourth quarter of 2022 and the third quarter of 2023.
These GSB credit facilities are secured by substantially all of our assets, including our facility at 56 Evergreen Drive
in Portland (which was independently appraised at $6.3 million in connection with the 2022 financing, at $3 million
in connection with the 2020 refinancing and at $4.2 million in connection with the 2015 financing) and our facility
at 33 Caddie Lane in Portland (which was independently appraised at $3.2 million in connection with a 2017
financing and at $2.5 million in connection with the 2020 refinancing). These credit facilities are subject to certain
restrictions and financial covenants. We are required to meet a minimum debt service coverage ratio set by GSB of
23
ImmuCell Corporation
1.35. Our actual debt service coverage (DSC) ratio was equal to 2.68, 2.03 and 1.57 during the years ended
December 31, 2021, 2020 and 2019, respectively. However, based on current projections of our future financial
performance, which includes a high level of ongoing product development expenses to support Re-Tain®, we may
not satisfy this annual requirement for the year ending December 31, 2022. By negotiation with the bank 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.
During June 2020, we received a $500,000 loan from the MTI. The first 2.25 years of this loan are interest-
free with no interest accrual or required principal payments. Principal and interest payments at a fixed rate of 5% per
annum are due quarterly over the final 5 years of the loan, beginning during the fourth quarter of 2022 and
continuing through the third quarter of 2027. During July 2021, we received an additional $400,000 loan from the
MTI. The first 2 years of this second loan are interest-free with no interest accrual or required principal payments.
Principal and interest payments at a fixed rate of 5% per annum are due quarterly over the final 5.5 years of the loan,
beginning during the third quarter of 2023 and continuing through the fourth quarter of 2028. Both loans are
unsecured and subordinated to all other bank debt and may be prepaid without penalty at any time. This support
from the State of Maine through the MTI helps us move forward aggressively with our investments while increasing
our total employee count.
From the first quarter of 2016 through the second quarter of 2021, we raised gross proceeds of approximately
$26.7 million (net proceeds were approximately $24.8 million) from six different common equity transactions priced
between $5.25 and $8.25 per share. No warrants were issued in connection with any of these transactions, and no
convertible or preferred securities were issued. The net proceeds have been and are being used to fund the
expenditures described under PROJECT B to PROJECT G in the tables and footnotes below as well as to provide
additional working capital. Additionally, we are using a portion of this new equity funding to pay for our routine and
miscellaneous capital expenditures. Our approved capital expenditure budget for the year ending December 31, 2022
is $550,000. These expenditures amounted to $260,000, $554,000 and $574,000 during the years ended December
31, 2021, 2020 and 2019, respectively.
From 2014 to 2019, we initiated four capital expenditure investments, as described in the following table (in
thousands):
Year Ended December 31, 2014
Year Ended December 31, 2015
Year Ended December 31, 2016
Year Ended December 31, 2017
Year Ended December 31, 2018
Year Ended December 31, 2019
Year Ended December 31, 2020
Year Ended December 31, 2021
Total Paid through December 31, 2021
Estimate to Complete
Total Project Cost
Cash Paid on Projects Initiated before 2021 During the
A
$1,041
1,991
1,173
—
—
—
—
—
4,205
—
$4,205
B
$—
265
2,093
17,686
1,596
—
—
—
21,640
—
$21,640
C
D
Total
$—
—
—
—
—
279
2,938
432
3,649
4
$3,653
$—
—
—
—
—
538
581
886
2,005
1,995
$4,000
$1,041
2,256
3,266
17,686
1,596
817
3,519
1,318
31,499
1,999
$33,498
PROJECT A included a 7,100 square foot facility addition at 56 Evergreen Drive and related equipment and
cold storage capacity to increase the production capacity for the First Defense® product line. During the first quarter
of 2016, we completed this investment, 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. The actual value of our production output varies based on production
yields, selling price, product format mix and other factors. This investment also included the construction and
equipping of a pilot plant for small-scale Drug Substance production for Re-Tain® within our First Defense®
production facility at 56 Evergreen Drive. After PROJECT B was completed, this space was converted for use in
the production of the gel tube formats of the First Defense® product line. One of the objectives of PROJECT C
was a relocation of these gel tube operations to 175 Industrial Way, vacating production space at 56 Evergreen Drive
for use in doubling our liquid processing capacity.
24
ImmuCell Corporation
PROJECT B was related to the Drug Substance production facility for Re-Tain® at 33 Caddie Lane. During
the fourth quarter of 2017, we completed construction of the Drug Substance production facility. We began
equipment installation during the third quarter of 2017, and we completed this installation during the third quarter of
2018. The total cost of this investment for the Drug Substance 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, which will be used for cold storage of Re-Tain® inventory and other warehousing needs.
PROJECT C (Phase I of our investments to increase our production capacity for the First Defense® product
line) consists of significant renovations to a 14,300 square foot leased facility at 175 Industrial Way, some facility
modifications at 56 Evergreen Drive and the necessary production equipment to increase 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. The actual value of our production output varies based on production yields, selling
price, product format mix and other factors. This project was completed at the end of 2021 at approximately 4%, or
$153,000, over its budget of $3.5 million. This expansion involves a 40% increase in our freeze drying capacity and
a 100% increase in our liquid processing capacity. Renovations to our leased facility at 175 Industrial Way to enable
this expansion were completed during the second quarter of 2020. By moving our powder filling and assembly
services from 56 Evergreen Drive into this new space at 175 Industrial Way, we created space at 56 Evergreen Drive
for the installation of the expanded freeze drying capacity. The new facilities are built to contemporary cGMP
standards with good material and people flows. A site license approval for this new facility at 175 Industrial Way
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 175 Industrial Way, creating space for the
doubling of our liquid processing capacity at 56 Evergreen Drive. As part of this investment, we also have made the
facility modifications at 56 Evergreen Drive necessary for a future expansion of our freeze drying capacity by an
additional 35%, which would increase our annual production capacity from approximately $23 million to
approximately $30 million or more (see PROJECT F below). We obtained site license approval of the expanded
freeze drying capacity at 56 Evergreen Drive from the USDA during the third quarter of 2021, and we obtained
temporary (subject to final USDA review and approval) site license approval of the expanded liquid processing
capacity at 56 Evergreen Drive from the USDA during the first quarter of 2022.
PROJECT D is a $4 million budgeted investment to bring the formulation and aseptic filling capabilities for
Re-Tain® Drug Product in-house to end our reliance on third-party Drug Product manufacturing services. We began
equipment installation during the first quarter of 2022, and we expect to have our facility qualified by the end of
2022. We anticipate FDA approval of this facility (which is a requirement for commercial manufacturing) during the
fourth quarter of 2023 or the second quarter of 2024.
With the additional equity funding of approximately $4.3 million that we raised during the second quarter of
2021, we initiated three more capital expenditure investments, as described in the following table (in thousands):
During the Year Ended December 31, 2021
Estimate to Complete
Total Project Cost
Cash Paid on Projects Initiated in 2021
E
F
G
Total
$452
98
$550
$296
629
$925
$282
2,238
$2,520
$1,030
2,965
$3,995
PROJECT E represents an original budget of $500,000 for equipment and vehicle investments necessary to
expand and improve our colostrum collection capabilities and logistics. During the second quarter of 2021, this
budget was increased from $500,000 to $550,000.
PROJECT F (Phase II of our investments to increase our production capacity for the First Defense® product
line) represents a budget estimate of $925,000 for freeze drying equipment to expand on PROJECT C to further
increase the annual production capacity of the First Defense® product line (in terms of annual sales dollars) from
approximately $23 million to approximately $30 million or more by increasing our freeze drying capacity by an
additional 33%. The actual value of our production output varies based on production yields, selling price, product
format mix and other factors. We initiated PROJECT F during the third quarter of 2021, and we anticipate
completing this investment during the third quarter of 2022.
PROJECT G first represented an initial estimate of $1 million for equipment and facility modifications costs
25
ImmuCell Corporation
to scale-up and upgrade our vaccine manufacturing capacity. During the third quarter of 2021, the scope of this
project was changed to cover less money for vaccine equipment and more money for pack & ship facilities for Re-
Tain®, improvements to our quality offices and laboratories and new equipment for our gel filling operations. We
estimate the additional investments in our gel filling equipment will increase our annual production capacity for the
First Defense® product line (in terms of annual sales dollars) further from approximately $30 million to
approximately $35 million. The actual value of our production output varies based on production yields, selling
price, product format mix and other factors. As a result of these scope changes, the preliminary project budget was
increased to $2.52 million.
We have set aside approximately $5.5 million of the $10.2 million of the cash we had on hand as of December
31, 2021 to complete PROJECT D to PROJECT G as well as to pay for our other routine and miscellaneous capital
expenditures during 2022, leaving the remaining cash balance of approximately $4.7 million available for general
working capital purposes including anticipated inventory builds for both First Defense® and Re-Tain®.
During the third quarter of 2016, the City of Portland approved a Tax Increment Financing (TIF) credit
enhancement package that reduces the real estate taxes on our Drug Substance production facility for Re-Tain® by
65% over the eleven-year period beginning on July 1, 2017 and ending June 30, 2028 and by 30% during the year
ending June 30, 2029, at which time the rebate expires. During the second quarter of 2017, the TIF was approved by
the Maine Department of Economic and Community Development. The value of the tax savings will increase
(decrease) in proportion to any increases (decreases) in the assessment of the building for city real estate tax purposes
or the City’s tax rate. The following table discloses how much of the new taxes we have generated is being relieved by
the TIF and how much is being paid by ImmuCell:
Twelve-Month
Period Ended
Total New Taxes
Generated by the
Project
Less:
TIF Credit
Net Amount
Paid by
ImmuCell
June 30, 2018
June 30, 2019
June 30, 2020
June 30, 2021
June 30, 2022
$36,000
$90,000
$94,000
$94,000
$55,000
$22,000
$58,000
$60,000
$60,000
$36,000
$13,000
$32,000
$34,000
$34,000
$20,000
Assessed Value
$1.7 million @ April 1, 2017
$4.0 million @ April 1, 2018
$4.0 million @ April 1, 2019
$4.0 million @ April 1, 2020
$4.3 million @ April 1, 2021
Results of Operations
Business Segments
As detailed in Note 17, “Segment Information”, to the accompanying audited financial statements, we operate
in two business segments. The First Defense® segment is dedicated to manufacturing and selling First Defense®, a
product used to prevent scours in newborn calves, which is regulated by the USDA. The Re-Tain® segment is
focused on developing and commercializing Re-Tain®, a product to treat subclinical mastitis in lactating dairy cows,
which is regulated by the FDA.
Product Sales
Sales of the First Defense® product line aggregated 98% of our total sales during both of the years ended
December 31, 2021 and 2020, and we set records for high sales during the second, third and fourth quarters of 2021
in comparison to the same quarters of the prior year. Sales of the First Defense® product line increased from
approximately $4,473,000 during the quarter ended June 30, 2021 to $5,033,000 during the quarter ended September
30, 2021 to $5,403,000 during the quarter ended December 31, 2021. Most of our growth (when not limited by the
backlog) is being realized through increased demand and a deliberate strategy to prioritize production capacity
towards Tri-Shield® (the trivalent format of our product delivered via a gel tube), which provides broader protection
to calves. The compound annual growth rate of our total product sales during the ten years ended December 31,
2021 was approximately 15%. The compound annual growth rate of our total product sales during the three years
ended December 31, 2021 was approximately 18%.
26
ImmuCell Corporation
(In thousands, except for percentages)
Total product sales
During the Three-Month
Periods Ended December 31,
2020
2021
Increase
Amount
%
$5,444
$3,743
$1,700
45%
Sales increased by 45%, or $1.7 million, during the three-month period ended December 31, 2021, in
comparison to the three-month period ended December 31, 2020. Domestic sales increased by 34%, and
international sales increased by 136%, in comparison to the three-month period ended December 31, 2020.
International sales aggregated 18% and 11% of total sales during the three-month periods ended December 31, 2021
and 2020, respectively.
(In thousands, except for percentages)
Total product sales
During the Years Ended December 31,
Increase
2021
2020
Amount
%
$19,243
$15,342
$3,901
25%
Sales increased by 25%, or $3.9 million, during the year ended December 31, 2021, in comparison to the
year ended December 31, 2020. Domestic sales increased by 22%, and international sales increased by 55%, in
comparison to the year ended December 31, 2020. International sales aggregated 14% and 11% of total sales during
the years ende December 31, 2021 and 2020, respectively.
Starting in the third quarter of 2016 and through most of 2017, we had sufficient available inventory and were
shipping in accordance with the demand of our distributors. However, we quickly sold out of our initial launch
quantities of Tri-Shield First Defense® (which added a valuable rotavirus claim to our legacy E. coli and
coronavirus product) soon after regulatory approval was obtained during the fourth quarter of 2017. Tri-Shield® has
changed our capacity models significantly because it requires almost twice as much production capacity to produce
each finished dose and demand for this product format has increased each year. During most of 2018 and into the
first half of 2019, we could only accept purchase orders from customers for Tri-Shield® to match available
inventory, which required a careful allocation of product supply directly to certain end-users and veterinary clinics.
Initially, production of this new product format did not keep pace with demand primarily because of our inability to
produce enough of the new, complex rotavirus vaccine that is used to immunize our source cows. Work on
production improvements in our vaccine laboratory throughout 2018 led to significant improvements in vaccine
yield and process repeatability. Allowing for the five to six month production cycle from the manufacture of our
proprietary vaccine to the production of a finished dose, we were able to return to a mass market selling approach
through distribution for Tri-Shield® during the second half of 2019, and we ended the year with no backlog as of
December 31, 2019. Sales of the First Defense® product line during the years ended December 31, 2021 and 2020
have continued to increase, creating a backlog of orders at the end of each quarter during this two-year period.
Valuation of the backlog is a non-GAAP estimate that is based on purchase orders on hand at the time that could not
be met because of a lack of available inventory. The backlog was worth approximately $2.4 million as of December
31, 2021 and approximately $2.8 million as of March 18, 2022. However, quantification of the backlog during the
current periods has become far less comparable to prior periods. We believe our customers are now placing orders
for more than a month’s worth of their demand, perhaps in reaction to our ongoing backlog situation, whereas in the
past they ordered more closely in line with their more current demand. Additionally, we believe that our distributors
are reacting to this global economic challenge by ordering in more product for their inventory, which is a very
different cash management strategy from the recent past, when they were much more likely to invest less money in
their inventory and order from us more often to meet just current demand (“just-in-time” cash management). The
growth in our sales (which are seasonal) and the expansion of our production capacity (which is generally delivered
approximately evenly across the four quarters of the year) are described in the following table:
27
Estimated production capacity before current expansion
Quarterly
$4,125,000
Annualized
$16,500,000
ImmuCell Corporation
Estimated production capacity as of December 31, 2021
$5,750,000
$23,000,000(1)
Estimated production capacity by September 30, 2022
$7,500,000
$30,000,000
Estimated production capacity by December 31, 2022
$8,750,000
$35,000,000
(1) When factoring in changes in beginning and ending inventory balances, the fourth quarter of 2021 annualized
manufacturing output of $22.9 million almost reached the $23 million target.
We have largely completed the critical objectives of our investment to increase our First Defense® production
capacity from approximately $16.5 million to approximately $23 million in terms of annual sales value. These
capacity estimates are subject to biological yield variance, product format mix, selling price and other factors.
Equipment modifications and relocations of this nature require a shutdown of operations for weeks to months to
install and validate the modified equipment and achieve USDA approval for its use in its new location. The
qualification and implementation of the final two pieces of equipment required to complete this project were delayed
past our June 30, 2021 target. We have worked around this setback to meet our increased production requirements
by utilizing our expanded manufacturing staff to extend shifts and temporarily produce more product from the
existing equipment. We obtained site license approval of our expanded freeze drying capacity from the USDA
during the third quarter of 2021, and we anticipate obtaining site license approval of our expanded liquid processing
capacity from the USDA during the first quarter of 2022. During the third quarter of 2021, we initiated an additional
investment of approximately $925,000 to increase our annual production capacity for the First Defense® product
line further from approximately $23 million to approximately $30 million or more per year by the third quarter of
2022. Then, during the fourth quarter of 2021, we initiated an additional investment to further increase our annual
production capacity to approximately $35 million.
The significant global supply-chain disruptions that almost all industries are experiencing presently are a
challenge to us and contribute to our order backlog. Most prices for certain essential raw materials and critical
supplies are increasing significantly, and it is more and more difficult to obtain timely delivery of the orders that we
place. Therefore, we have little choice but to pay the higher prices and try to take on more months of supply than we
would have held previously if we could get our orders fulfilled.
While our backlog is a very positive indication about the strong demand for our First Defense® product line,
we missed some business during 2021 as a result of the backlog. Not being able to timely meet the needs of our
customers could result in the loss of some customers who seek alternative scours management products during this
period of short supply and who may not resume purchasing our product when we have eliminated the backlog.
While backlog is a better problem to have than seeing product expiring on our shelves, it is nonetheless a significant
challenge when we do not get our customers everything that they want. Our sales team is resuming more normal
sales growth initiatives with more available inventory on hand during the fourth quarter of 2021 and into peak
season during the first quarter of 2022. We are working to regain customers that we may have lost while we were
short on product. As we emerge from an extended period of time on backlog, we anticipate higher than normal sales
fluctuations quarter to quarter. As we emerge from the backlog, what is most important to us is that we achieve sales
growth over the longer periods of time, even if we experience some quarter-to-quarter fluctuations.
Effective January 1, 2022, we increased our selling price of the First Defense® product line by approximately
5%. Effective January 1, 2021, we increased our selling price of the First Defense® product line in the domestic
market by approximately 1.6% to 3%, depending on product format, and we increased our selling price of CMT by
almost 4%. Effective February 1, 2020, we implemented a price increase of approximately 2% on the First
Defense® product line (except for Tri-Shield® and the 90-dose bulk powder format) and CMT. Effective January 1,
2019, we implemented a 2% price increase for Dual-Force®.
Sales of products other than the First Defense® product line increased by 15%, or $40,000, to $310,000 during
the year ended December 31, 2021 in comparison to the year ended December 31, 2020. Sales of these other
products aggregated approximately 2% of our total product sales during both of the years ended December 31, 2021
and 2020. We acquired a private label product (our second leading source of product sales during 2021) in
28
connection with our January 2016 acquisition of certain gel formulation technology. We sell our own CMT (our
third leading source of product sales during 2021), which is used to detect somatic cell counts in milk.
ImmuCell Corporation
Impact of Global COVID-19 Pandemic
The extent of the negative impact of the COVID-19 pandemic on the economics of our customers and on the
demand for our products going forward is very difficult to assess. The Class III milk price has been extremely
volatile during the pandemic. Initially, stay at home orders disrupted the food service supply system as schools
closed and restaurants were shut down. In response, producers were forced to reduce the supply of milk to the
market by drying off cows early, culling cows from the herd and dumping milk, among other tactics. Market
conditions are better now, but this volatility remains a concern. Additionally, like most input costs, the cost of feed
is rising, which puts a strain on the profitability of our customers. The $938,000 in funding that we received from
the federal government through the Paycheck Protection Program (PPP) under the CARES Act (which loan was
forgiven by the federal government during 2020) helped us maintain full employment without furloughs or layoffs
and continue executing our growth plans. The PPP funding created some needed financial liquidity, allowing us to
move forward with our investments even though we did not achieve the level of sales anticipated in our 2020
budget.
Gross Margin
Changes in our gross margin (product sales less costs of goods sold) are summarized in the following table for
the respective periods (in thousands, except for percentages):
Gross margin
Percent of product sales
Gross margin
Percent of product sales
During the Three-Month
Periods Ended December 31,
2020
2021
Increase
Amount
%
$2,561
47%
$1,621
43%
$940
4%
58%
9%
During the Years
Ended December 31,
Increase
2021
2020
Amount
%
$8,656
45%
$6,863
45%
$1,793
—
26%
1%
The gross margin as a percentage of product sales was 45%, 45%, 49%, 47% and 50% during the years ended
December 31, 2021, 2020, 2019, 2018 and 2017, respectively. During the first quarter of 2021, the gross margin of
39% was lower than what we normally expect. This gross margin improved to 46% during the second quarter of
2021 and further to 47% during both the third and fourth quarters of 2021, as we began to spread these fixed costs
over increasing production output. As we fully integrate and utilize our increased capacity, we expect to be able to
achieve an annual gross margin in excess of 46%. The costs of most of our supplies, components, raw materials and
services increased significantly during 2021. The Tri-Shield® product format is more complex (i.e., three antibodies
versus two antibodies for Dual-Force®) making it more costly to produce, and both the bivalent and trivalent gel
product formats are more expensive to produce than the bolus format. These new formats are creating sales growth
for us, and we are focused on increasing total gross margin dollars (after we fulfill the backlog) even if that is
accomplished with a lower gross margin as a percentage of sales. We are investing significantly in equipment,
infrastructure and operating expenses to increase our annual production capacity from approximately $16.5 million
to approximately $35 million. Increased labor and other upfront costs were necessary to benefit from the scale-up of
our production output going forward. A number of other factors contribute to the variability in our costs, resulting in
some fluctuations in gross margin percentages from quarter to quarter and from year to year. Like most U.S.
manufacturers, we have also been experiencing increases in the cost of labor and raw materials. We also invest to
sustain compliance with current Good Manufacturing Practices (cGMP) in our production processes. Increasing
production can be more expensive in the initial stages. To achieve our inventory production growth objectives, we
are acquiring more raw material (colostrum) from many more cows at many new farms. As is the case with any
vaccine program, animals respond less effectively to their first exposure to a new vaccine, and thereafter the
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ImmuCell Corporation
effectiveness of their immune response improves in response to subsequent immunizations. During this expansion
phase, colostrum quality can be more variable. Additionally, the biological yields from our raw material are always
variable, which impacts our costs of goods sold in a similar way. Just as our customers’ cows respond differently to
commercial dam-level vaccines, depending on time of year and immune competency, our source cows have similar
biological variances in response to our proprietary vaccines. The value of our First Defense® product line is that we
compensate for the variability in a cow’s immune response by standardizing each dose of finished product. This
ensures that every calf is equally protected, which is something that dam-level commercial scours vaccines cannot
offer. We continue to work on processing and yield improvements and other opportunities to reduce costs, while
enhancing process knowledge and robustness. Over time, we have been able to reduce the impact of cost increases
by implementing yield improvements. As we evaluate our product costs and selling price, one of our goals is to
achieve a gross margin (before related depreciation and amortization expenses) as a percentage of total sales
approaching 50%.
Product Development Expenses
Overview: During the year ended December 31, 2021, product development expenses decreased by 4%, or
$186,000, to $4.2 million in comparison to $4.4 million during the year ended December 31, 2020. Product
development expenses aggregated 22% and 28% of product sales during the years ended December 31, 2021 and
2020, respectively. Product development expenses included approximately $1,495,000 and $1,608,000 of non-cash
depreciation and stock-based compensation expenses during the years ended December 31, 2021 and 2020,
respectively. We do expect our product development expenses to decrease further after Re-Tain® is commercialized
and most of the costs incurred to maintain and run our Drug Substance production facility become part of our costs
of goods sold.
Development objective: We aim to demonstrate that our peptide antimicrobial, Nisin A, can play a productive
role in the treatment of subclinical mastitis in today’s dairy industry by providing a novel alternative to traditional
antibiotics. Because label requirements of all intramammary drugs on the market require that milk be discarded and
that meat be withheld during treatment and for a period of time thereafter, it is common practice in the dairy industry
today to not treat sick cows that are still producing saleable milk. Re-Tain® provides an animal welfare benefit by
removing this economic disincentive to treating subclinical mastitis and allows sick cows to be treated without the
milk discard and meat withhold penalties. In addition to improved animal welfare, Re-Tain® enhances food safety
and sustainability by utilizing a peptide antimicrobial that is not used in human medicine. The overuse of traditional
antibiotics is thought to create antibiotic resistance, which is a growing public health concern. By treating mastitis
early at the subclinical level, producers could preserve peak milk yields and reduce the number of infections that
develop into clinical cases requiring antibiotic treatment and milk discard. Re-Tain® could increase the lifetime
profitability of a cow and reduce disease transfer to herd mates. As with all new products, the market determines the
value. Our objective is to gain market acceptance of this new product concept as we develop a new product
category. Despite those exciting benefits, it will take time to change this longstanding treatment paradigm and
develop this new market. It will take time for the market to understand, evaluate, implement and adapt to the
benefits of Re-Tain®. As we prepare for market launch after we receive the anticipated and required FDA approval
of this product, we are carefully considering our best go-to-market strategy in consultation with industry-leading
consultants, veterinarians, dairy producers and others. We believe that the primary market for Re-Tain® (at least
initially) may be limited to the approximately half of farms that have somatic cell count data at the cow or quarter
level, since that is the most common and efficient way to identify subclinical infections and to assess the
effectiveness of treatment. We are making plans for a controlled launch where our sales team can work directly with
first adopters to help ensure that the best candidate cows are selected and that the product is properly administered in
accordance with its label. We believe that developing a solid foundation of in-the-field successes early on will give
our product the best opportunity for success.
Development status of Re-Tain®: The majority of our product development spending has been focused on the
development of Re-Tain®, our purified Nisin treatment for subclinical mastitis in lactating dairy cows. Approval by
the Center for Veterinary Medicine, U.S. Food and Drug Administration (FDA) of the New Animal Drug
Application (NADA) for Re-Tain® is required before any sales of the product can be initiated. The NADA is
comprised of five principal Technical Sections that are generally subject to one or more six-month review cycle(s)
by the FDA and a sixty-day administrative review at the end. 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,
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ImmuCell Corporation
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. During the second quarter of 2021, we received further clarification through
a new Environmental Impact Technical Section Complete Letter covering the current dosage regimen and labeling.
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 anticipated product label (which remains subject to FDA approval) carries claims for the
treatment of subclinical mastitis associated with Streptococcus agalactiae, Streptococcus dysgalactiae,
Streptococcus uberis, and coagulase-negative staphylococci in lactating dairy cattle.
4) Human Food Safety: During the third quarter of 2018, we received the Human Food Safety Technical Section
Complete Letter from the FDA confirming, among other things, a zero milk discard period and a zero meat withhold
period during and after treatment with our product. During the second quarter of 2021, we updated this Technical
Section Complete Letter with FDA approval of the official analytical method to measure Nisin in milk.
5) Chemistry, Manufacturing and Controls (CMC): The CMC Technical Section is very complex and
comprehensive. Having previously achieved the four different Technical Section Complete Letters from the FDA
discussed above, approval of the CMC Technical Section is the fifth and final significant step required before Re-
Tain® product sales can be initiated in the United States. Implementing Nisin Drug Substance (the active
pharmaceutical ingredient) production, which is a required component of the CMC Technical Section, has been the
most expensive and lengthy part of this project. We previously entered into an agreement with a multi-national
pharmaceutical ingredient manufacturer for our commercial-scale supplies of Nisin. However, we determined during
2014 that the 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, we concluded that a
partner would have taken an unduly large share of the gross margin from all future product sales of Re-Tain®, but
the regulatory and marketing feedback that we received from prospective partners, following their due diligence,
was positive. During the third quarter of 2014, we completed an investment in facility modifications and processing
equipment necessary to produce the Nisin Drug Substance at small-scale at our 56 Evergreen Drive facility. This
small-scale facility was used to: i) expand our process knowledge and controls, ii) establish operating ranges for
critical process parameters, iii) conduct product stability studies, iv) optimize process yields and v) verify the cost of
production. We believe these efforts have reduced the risks associated with our investment in the commercial-scale
Drug Substance production facility, discussed below. Having raised equity during 2016 and 2017, we were able to
move away from these earlier strategies and assume control over the commercial-scale manufacturing process in our
own facility. During the fourth quarter of 2015, we acquired land near our existing Portland facility for the
construction of a new commercial-scale Drug Substance production facility. We commenced construction of this
facility during the third quarter of 2016 and completed construction during the fourth quarter of 2017. Equipment
installation and qualification was initiated during the third quarter of 2017 and completed during the third quarter of
2018. Total construction and equipment costs aggregated approximately $20.8 million.
Under the FDA’s phased submission process, we made a first-phased submission covering just the Nisin Drug
Substance (DS) during the first quarter of 2019, which was followed by a second-phased submission covering both
the DS and the formulated DS filled in a syringe, or Re-Tain® Drug Product (DP) during the first quarter of 2021.
This process allowed us to respond to identified queries and/or deficiencies from the first-phased DS submission at
the time of the second-phased combined DS and DP submission. The first-phased DS submission included data from
the DS Registration Batches produced at commercial scale in our new DS manufacturing facility. The second-
phased DS and DP submission responded to comments raised by the FDA regarding the first-phased DS submission
and included detailed information about the manufacturing process and controls for DP. One of the key components
of the second-phased DS and DP submission was also demonstrating stability of the product through expiration
dating. During the third quarter of 2021, the FDA issued a Technical Section Incomplete Letter with regard to this
second-phased DS and DP submission. This response was not unexpected as it is common for the FDA to issue
queries and comments, especially related to an aseptic DP submission with associated sterilization validation
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ImmuCell Corporation
information. We made a second submission of the DS and DP Technical Section during the first quarter of 2022.
Allowing time for the six-month review by the FDA and for the final sixty-day administrative review at the end of
the process, we could achieve market launch during the third quarter of 2022 if the FDA approves our second DS
and DP submission. It is up to the FDA to determine if it will issue a Technical Section Complete or Incomplete
Letter. Because we cannot predict the FDA’s responses, we cannot project the probability of success with this DS
and DP submission. We intend to be completely transparent about the FDA’s response (positive or negative) around
August 2022. While being prudent with how much cash we invest into inventory that would have short expiry dating
if market launch is not achieved by the third quarter of 2022, we plan to continue to build more inventory during
2022 to bridge the transition between DP supply from Norbrook, our contract manufacturer, to our own in-house
services, as discussed further below.
We have always believed that the fastest route to FDA approval and market launch is with the services of
Norbrook Laboratories Limited of Newry, Northern Ireland (an FDA-approved DP manufacturer) (Norbrook),
reducing our risk by benefiting from their demonstrated expertise in aseptic filling. From 2010 to 2015, we were a
party to an exclusive product development and contract manufacturing agreement with Norbrook covering the DP
formulation, aseptic filling and final packaging services. Norbrook provided services to us under this contract
throughout the FDA process for use in all of our pivotal studies. During the fourth quarter of 2015, this agreement
was amended and restated to create a Product Development and Contract Manufacture Agreement (the 2015
Agreement) to, among other things, extend the term of the agreement to January 1, 2024 provided that FDA
approval for commercial sales of Re-Tain® in the United States was obtained by December 19, 2019. It had been
our expectation that we would have these services available through both the remainder of the development process
to FDA approval and for approximately the first four years of commercial sales of Re-Tain®. Due to unexpected
difficulties and delays encountered by Norbrook and the statutory FDA timeline for processing CMC Technical
Sections, this December 2019 product approval target date was not achieved. During the third quarter of 2019, we
entered into a Development Services and Commercial Supply Agreement (the 2019 Agreement) with Norbrook. The
2019 Agreement replaced and superseded the 2015 Agreement in its entirety. Under the 2019 Agreement, Norbrook
provided the formulation, aseptic filling and final packaging services as required in order for us to submit the CMC
Technical Section to the FDA. The 2019 Agreement also provides for Norbrook to perform formulation, aseptic
filling and final packaging services in accordance with purchase orders that we submit from time to time for
inventory build and subsequent product sales worth up to approximately $7 million for orders placed through
December 31, 2021 with deliveries extending into the first half of 2022. Under an amendment to this agreement,
Norbrook has agreed to provide a supply of product during 2022 that we believe will enable us to commence sales
of Re-Tain® without delay upon receipt of the anticipated FDA approval and provide us with a supply bridge until
our own formulation and aseptic filling capacity is available.
Our potential alternative third-party options for the formulation and aseptic filling services that are presently
being performed by Norbrook are narrowed considerably because our product cannot be formulated or filled in a
facility that also processes traditional antibiotics (i.e., beta lactams). Consequently, we have decided to perform
these services internally. Through a public offering of our common stock in March of 2019, we received net
proceeds of approximately $8.3 million, of which approximately $4 million has been allocated to the equipping and
commencement of operations of our own DP formulation and aseptic filling facility. We began equipment
installation at the beginning of 2022, and we expect to have our facility operational during the middle of 2022. We
anticipate FDA approval of this facility (which is a requirement for commercial manufacturing) during the second
half of 2023, subject to the timing of our installation and validation work and whether the FDA requires more than
one six-month review cycle. This new facility will be subject to FDA inspection and approval and will have enough
formulation and aseptic filling capacity to exceed the expected production capacity of our DS facility, which is at
least $10 million in annual sales. This production capacity estimate is based on our assumptions as to product
pricing and does not yet reflect inventory build strategies in advance of product approval or ongoing yield
improvement initiatives. Establishing our own DP formulation and aseptic filling capability provides us with the
longer-term advantage of controlling the manufacturing process for Re-Tain® in one facility, thereby potentially
reducing our manufacturing costs and eliminating international cold chain shipping logistics and costs. The DP
formulation and aseptic filling operation will be located in existing facility space that we had intended to utilize to
double our DS production capacity if warranted by sales volumes following market launch. As a result, we would
need to explore alternative strategies (in parallel with ongoing DS yield improvement initiatives) to expand our DS
production capacity. This integrated manufacturing capability for Re-Tain® will substantially reduce our
dependence on third parties. Upon completion of our formulation and aseptic filling facility, the only significant
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ImmuCell Corporation
third‐party input for Re-Tain® will be the DP syringes. It is anticipated that Hubert De Backer of Belgium (HDB)
will supply these syringes in accordance with purchase orders that we submit. HDB is a syringe supplier for many of
the largest participants in the human and veterinary medical industries, and with whom Norbrook presently works.
Based on HDB’s performance history and reputation in the industry, we are confident that HDB will be a
dependable supplier of syringes in the quantity and of the quality needed for Re-Tain®.
Our DS manufacturing facility and that of our DP contract manufacturer are subject to ongoing FDA
inspections. During the third quarter of 2019, the FDA conducted a pre-approval inspection of our DS facility. This
resulted in the issuance of certain deficiencies as identified on the FDA’s Form 483. We submitted responses and
data summaries in a phased manner over the fourth quarter of 2019 and first quarter of 2020. We anticipate a
reinspection by the FDA prior to approval. This inspection process has been managed without significant cost.
Other product development initiatives: Our second most important product development initiative has been
focused on other improvements, extensions or additions to our First Defense® product line. We are currently
working to establish USDA claims for our bivalent bulk powder formulation of First Defense Technology®. At the
same time, we are working with outside parties to investigate improvements to our Nisin DS production yields as
well as potential efficacy enhancements. Subject to the availability of resources, 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, subject to the availability of the needed funding.
Sales and Marketing Expenses
During the year ended December 31, 2021, sales and marketing expenses increased by approximately 16%, or
$336,000, to $2.5 million in comparison to $2.2 million during the year ended December 31, 2020, amounting to
13% and 14% of product sales during the years ended December 31, 2021 and 2020, respectively. Sales and
marketing expenses included approximately $70,000 and $91,000 of non-cash depreciation and stock-based
compensation expenses during the years ended December 31, 2021 and 2020, respectively. We do expect these
expenses to increase to approximately 20% of total product sales during 2022 as we begin to invest in the anticipated
market launch of Re-Tain® before any new sales are realized and as in-person marketing opportunities, such as
industry events, return with the lifting of COVID restrictions. Our budgetary guideline for 2022 and after is to keep
these expenses under 20% of total sales. We continue to leverage the efforts of our small sales force by using animal
health distributors.
Administrative Expenses
During the year ended December 31, 2021, administrative expenses increased by less than 1%, or
approximately $5,000, to $1.726 million in comparison to $1.721 million during the year ended December 31, 2020.
Administrative expenses included approximately $122,000 and $156,000 of non-cash depreciation and stock-based
compensation expenses during the years ended December 31, 2021 and 2020, respectively. We strive to be efficient
with these expenses while funding costs associated with complying with the Sarbanes-Oxley Act of 2002 and all the
legal, audit and other costs associated with being a publicly-held company. Prior to 2014, we had limited our
investment in investor relations spending. Beginning in the second quarter of 2014, we initiated an investment in a
more active investor relations program. Given travel restrictions related to the COVID-19 pandemic, this initiative has
pivoted to a virtual meeting format, which is less expensive. At the same time, we continue to provide full disclosure
of the status of our business and financial condition in three quarterly reports and one annual report each year, as well
as in Current Reports on Form 8-K when legally required or deemed appropriate by management. These efforts may
have helped us access the capital markets to fund our growth objectives.
Net Operating Income (Loss)
During the year ended December 31, 2021, our net operating income of $257,000 was in contrast to a net
operating (loss) of ($1.4 million) during the year ended December 31, 2020. The $1.8 million increase in gross
margin during the year ended December 31, 2021 compared to the year ended December 31, 2020 was the largest
contributor to this swing from loss to income.
Other Expenses (Income), net
During the year ended December 31, 2021 other expenses, net, aggregated $327,000 in contrast to other
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ImmuCell Corporation
income, net, of $348,000 during the year ended December 31, 2020. The 2020 results benefited from a $938,000
debt forgiveness from the federal government. Interest expense decreased to $314,000 during the year ended
December 31, 2021 from $413,000 during the year ended December 31, 2020. Non-cash amortization of debt
issuance costs (which is included as a component of interest expense) was $8,000 during both of the years ended
December 31, 2021 and 2020. During the year ended December 31, 2020, interest expense also included the non-
cash write-off of $95,000 in debt issuance costs associated with our bank debt refinancing during the first quarter of
2020. Excluding the amortization and write-off of debt issuance costs, cash-based interest expense decreased
slightly to $307,000 during the year ended December 31, 2021 from $310,000 during the year ended December 31,
2020. Other expenses, net, during the year ended December 31, 2020 included an expense of $165,000 to terminate
our interest rate swap agreements associated with our bank debt refinancing during the first quarter of 2020.
Reflecting the mortgage debt financing we completed during the first quarter of 2022, we anticipate that our interest
expense will be approximately $325,000, $317,000 and $285,000 during the years ending December 31, 2022, 2023,
and 2024, respectively. Interest income was $19,000 and $27,000 during the years ended December 31, 2021 and
2020, respectively. Less interest income was earned during 2021 largely because we had less cash and short-term
investments on hand and a lower interest rate environment. The annual results included a net loss of $31,000 and
$39,000 related to the non-cash write-offs of fixed assets during the years ended December 31, 2021 and 2020,
respectively.
Loss Before Income Taxes
During the year ended December 31, 2021, our loss before income taxes decreased by 93%, or $963,000, to
($69,000) in comparison to a loss before income taxes of ($1 million) during the year ended December 31, 2020.
Income Taxes and Net Loss
During the years ended December 31, 2021 and 2020, we recorded income tax expense (benefit) of $9,000 and
($10,000), respectively. Our net loss of ($78,000), or ($0.01) per basic share, during the year ended December 31,
2021 was in comparison to a net loss of ($1 million), or ($0.14) per basic share, during the year ended December 31,
2020.
For tax return purposes only, our depreciation expense for the Nisin Drug Substance production facility and
equipment was approximately $492,000, $464,000, $639,000, $9.2 million and $1.5 million for the years ended
December 31, 2021, 2020, 2019, 2018 and 2017, respectively. The significant increase during 2018 was largely
related to accelerated depreciation allowed for tax purposes. As of December 31, 2021, our federal net operating loss
carryforward was approximately $14.7 million, which will be available to offset future taxable income. On
December 22, 2017, the Tax Cuts and Jobs Act was signed into law. This legislation makes significant changes in
the U.S. tax laws, including a reduction in the corporate tax rates, changes to net operating loss carryforwards and
carrybacks, and a repeal of the corporate alternative minimum tax. The legislation reduced the U.S. corporate tax
rate from 34% to 21%. Our income tax rate differs from this standard tax rate primarily because we are currently
providing for a full valuation allowance against our deferred tax assets. While we are recording this full valuation
allowance, we are not recognizing the benefit of our tax losses.
In addition to the above results from our Statements of Operations, we believe it is important to consider our
Statements of Cash Flows in the accompanying audited financial statements to assess the cash generating ability of
our operations.
Critical Accounting Policies
The financial statements are presented on the basis of accounting principles that are generally accepted in the
United States. All professional accounting standards that were effective and applicable to us as of December 31,
2021 have been taken into consideration in preparing the financial statements. The preparation of financial
statements requires that we make estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate
our estimates, including those related to revenue recognition, income taxes, contingencies and the useful lives and
carrying values of intangible and long-lived assets. We base our estimates on historical experience and on various
other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates under different assumptions or conditions. We have chosen to
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ImmuCell Corporation
highlight certain policies that we consider critical to the operations of our business and understanding our financial
statements.
We sell products that provide Immediate Immunity™ to newborn dairy and beef cattle. We recognize revenue
in accordance with the five step model in ASC 606. These include the following: i) identification of the contract with the
customer, ii) identification of the performance obligations in the contract, iii) determination of the transaction price,
iv) allocation of the transaction price to the separate performance obligations in the contract and v) recognition of
revenue associated with performance obligations as they are satisfied. We recognize revenue at the time of shipment
(including to distributors) for substantially all products, as title and risk of loss pass to the customer on delivery to the
common carrier after concluding that collectability is reasonably assured. We do not bill for or collect sales tax be-
cause our sales are generally made to distributors and thus our sales to them are not subject to sales tax. We generally
have experienced an immaterial amount of product returns.
Inventory includes raw materials, work-in-process and finished goods and is recorded at the lower of cost, on the
first-in, first-out method, or net realizable value (determined as the estimated selling price in the normal course of busi-
ness, less reasonably predictable costs of completion, disposal and transportation). Work-in-process and finished goods
inventories include materials, labor and manufacturing overhead.
ITEM 7A — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We do not believe that inflation, interest rates or currency exchange rates have had a significant effect on our
revenues and expenses. However, future increases in inflation or interest rates or 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. We had
outstanding bank debt totaling approximately $9.1 million as of December 31, 2021 that bears interest at the fixed
rate of 3.50% per annum. Also, as of December 31, 2021, we had two subordinated loans from the State of Maine
outstanding aggregating $900,000. The first loan bears no interest until the fourth quarter of 2022, at which time it
bears interest at a fixed rate of 5% per annum, unless it is repaid. The second loan bears no interest until the third
quarter of 2023, at which time it bears interest at a fixed rate of 5%, per annum, unless it is repaid. See Note 10 to
the accompanying audited financial statements for more details about our debt.
ITEM 8 — FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our financial statements, together with the notes thereto and the reports of the independent registered public
accounting firms thereon, are set forth on Pages F-1 through F-28 at the end of this report. The index to these
financial statements is as follows:
Report of Wipfli LLP, Independent Registered Public Accounting Firm
Balance Sheets as of December 31, 2021 and 2020
Statements of Operations during the years ended December 31, 2021 and 2020
Statements of Comprehensive Loss during the years ended December 31, 2021 and 2020
Statements of Stockholders’ Equity during the years ended December 31, 2020 and 2021
Statements of Cash Flows during the years ended December 31, 2021 and 2020
Notes to Audited Financial Statements
F-1 to F-2
F-3
F-4
F-4
F-5
F-6 to F-7
F-8 to F-28
ITEM 9 — CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
ITEM 9A — CONTROLS AND PROCEDURES
Disclosure Controls and Procedures. Our management, with the participation of the individual who serves as
our principal executive and principal financial officer, evaluated the effectiveness of our disclosure controls and
procedures as of December 31, 2021. Based on this evaluation, that officer concluded that our disclosure controls
and procedures were effective as of that date. Disclosure controls and procedures are designed to ensure that
35
ImmuCell Corporation
information required to be disclosed by us in the reports that we file or submit under the Exchange Act is (i)
recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and
(ii) accumulated and communicated to our management, including our principal executive and principal financial
officer, as appropriate to allow timely decisions regarding required disclosures.
Management’s Annual Report on Internal Control Over Financial Reporting. The management of the
Company is responsible for establishing and maintaining adequate internal control over financial reporting. The
Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. We conducted an evaluation of the effectiveness of the internal controls
over financial reporting based on the framework in Internal Control - Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission. This evaluation included a review of the
documentation of controls, evaluation of the design effectiveness of controls, testing the operating effectiveness of
the controls and a conclusion on this evaluation. Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can
provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management assesses the effectiveness of the Company’s internal control over financial reporting at the end of each
quarter. Based on management’s assessment, we believe that our internal control over financial reporting was
effective as of December 31, 2021. This Annual Report does not include an attestation report of the Company’s
independent registered public accounting firm regarding internal control over financial reporting. Management’s
internal control report was not subject to annual or quarterly attestation by the Company’s independent registered
public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to
provide only management’s report.
Changes in Internal Controls over Financial Reporting. Our principal executive and principal financial officer
and our Director of Finance and Administration periodically evaluate any change in internal control over financial
reporting which has occurred during the prior fiscal quarter. We have concluded that there was no change in our
internal control over financial reporting that occurred during the quarter ended December 31, 2021 that has
materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B — OTHER INFORMATION
None
ITEM 9C — DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
None
PART III
ITEM 10 — DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Executive Officers of the Company
Our executive officers as of March 18, 2022 were as follows:
MICHAEL F. BRIGHAM (Age: 61, Officer since 1991, Director since 1999) was appointed to serve as
President and Chief Executive Officer in February 2000, while maintaining the titles of Treasurer and Secretary, and
was appointed to serve as a Director of the Company in March 1999. He previously had been elected Vice President
of the Company in December 1998 and had served as Chief Financial Officer since October 1991. He has served as
Secretary since December 1995 and as Treasurer since October 1991. Prior to that, he served as Director of Finance
and Administration since originally joining the Company in September 1989. Mr. Brigham served as a member of
the Board of Directors of the United Way of York County from 2012 to 2019, serving as its Treasurer until June
2016 and as Chair of the Board of Directors for one year and as a member of its Executive Committee. Mr. Brigham
served as the Treasurer of the Board of Trustees of the Kennebunk Free Library from 2005 to 2011. He re-joined the
36
ImmuCell Corporation
Finance Committee of the library in 2012. Prior to joining the Company, he was employed as an audit manager for
the public accounting firm of Ernst & Young. Mr. Brigham earned his Masters in Business Administration from
New York University in 1989 and a Bachelor of Arts degree (with a double major in Economics and Spanish) from
Trinity College in Hartford, Connecticut in 1983.
BOBBI JO BROCKMANN (Age: 45, Officer since February 2015, Director since January 2018) served as a
Director of the Company from March 2017 to September 2017 and from January 2018 to the present. She was
promoted to Vice President of Sales and Marketing in February 2015. She joined the Company as Director of Sales
and Marketing in January 2010. Prior to that, she had been employed as Director of Sales since May 2008 and Sales
Manager from February 2004 to April 2008 at APC, Inc. of Ankeny, Iowa, a developer and marketer of functional
protein products for animal health and nutrition. Prior to that, she held other sales and marketing positions at
APC, W & G Marketing Company, Inc. of Ames, Iowa, The Council for Agricultural Science and Technology of
Ames, Iowa and Meyocks Group Advertising of West Des Moines, Iowa after graduating from Iowa State
University.
ELIZABETH L. WILLIAMS (Age: 66, Officer since April 2016) joined the Company in April 2016 as Vice
President of Manufacturing Operations. Previously, she led the U.S. Region for Zoetis as Vice President, Global
Manufacturing and Supply. Prior to that, she held multiple Site Leader positions at Pfizer Animal Health facilities in
Lincoln, Nebraska (2008-2011), Conshohocken, Pennsylvania (2006-2008) and Lee’s Summit, Missouri (2003-
2006). She led the manufacturing organization (1999-2003) and the Process and Product Development group (1995-
1999), achieving registration, approval and successful scale-up of five new products at the Lee’s Summit facility.
She earned her Masters of Business Administration from Rockhurst University in Kansas City, Missouri and her
Bachelor’s degree in Biology from the University of Missouri.
Information with respect to our directors is incorporated herein by reference to the section of our 2022 Proxy
Statement titled “Election of the Board of Directors”, which we intend to file with the Securities and Exchange
Commission within 120 days after December 31, 2021. There is no family relationship between any director,
executive officer, or person nominated or chosen by the Company to become a director or executive officer.
ITEM 11 — EXECUTIVE COMPENSATION
Information regarding compensation paid to our executive officers is incorporated herein by reference to the
section of our 2022 Proxy Statement titled “Executive Officer Compensation”, which we intend to file with the
Securities and Exchange Commission within 120 days after December 31, 2021.
ITEM 12 — SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
Information regarding ownership of our common stock by certain owners and management is incorporated
herein by reference to the section of our 2022 Proxy Statement titled “Security Ownership of Certain Beneficial
Owners and Management and Related Stockholder Matters”, which we intend to file with the Securities and
Exchange Commission within 120 days after December 31, 2021.
ITEM 13 — CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
Information regarding certain relationships and related transactions and director independence is incorporated
herein by reference to the section of our 2022 Proxy Statement titled “Certain Relationships and Related
Transactions and Director Independence”, which we intend to file with the Securities and Exchange Commission
within 120 days after December 31, 2021.
ITEM 14 — PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information regarding our principal accounting fees and services is incorporated by reference to the section of
our 2022 Proxy Statement titled “Principal Accounting Fees and Services”, which we intend to file with the
Securities and Exchange Commission within 120 days after December 31, 2021.
37
ImmuCell Corporation
PART IV
ITEM 15 — EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
3.1
3.2
3.3
3.4
3.5
3.6
3.7
4.1
4.1A
4.1B
4.1C
4.1D
4.1E
4.1F
4.2
Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 of the Company’s
1987 Registration Statement No. 33-12722 on Form S-1 as filed with the Commission).
Certificate of Amendment to the Company’s Certificate of Incorporation effective July 23, 1990
(incorporated by reference to Exhibit 3.2 of the Company’s Annual Report on Form 10-K for the year
ended December 31, 2008).
Certificate of Amendment to the Company’s Certificate of Incorporation effective August 24, 1992
(incorporated by reference to Exhibit 3.3 of the Company’s Annual Report on Form 10-K for the year
ended December 31, 2008).
Certificate of Amendment to the Company’s Certificate of Incorporation effective June 16, 2016
(incorporated by reference to Exhibit 3.1 of the Company’s Amended Current Report on Form 8-K/A
filed on June 16, 2016).
Certificate of Amendment to the Company’s Certificate of Incorporation effective June 18, 2018
(incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed on June 18,
2018).
Certificate of Amendment to the Company’s Certificate of Incorporation effective June 11, 2020
(incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed on June 11,
2020).
Bylaws of the Company as amended (incorporated by reference to Exhibit 3.4 of the Company’s Annual
Report on Form 10-K for the year ended December 31, 2008).
Rights Agreement dated as of September 5, 1995, between the Company and American Stock Transfer
and Trust Co., as Rights Agent, which includes as Exhibit A thereto the form of Right Certificate and as
Exhibit B thereto the Summary of Rights to Purchase Common Stock (incorporated by reference to
Exhibit 4.1 of the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31,
2009).
First Amendment to Rights Agreement dated as of June 30, 2005 (incorporated by reference to
Exhibit 4.1A of the Company’s Current Report on Form 8-K filed on July 5, 2005).
Second Amendment to Rights Agreement dated as of June 30, 2008 (incorporated by reference to Exhibit
4.1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2008).
Third Amendment to Rights Agreement dated as of August 9, 2011 (incorporated by reference to Exhibit
4.1 of the Company’s Quarterly Report on Form 10-Q for the three-month period ended June 30, 2011).
Fourth Amendment to Rights Agreement dated as of June 16, 2014 (incorporated by reference to Exhibit
4.1D of the Company’s Current Report on Form 8-K filed on June 17, 2014).
Fifth Amendment to Rights Agreement dated as of April 15, 2015 (incorporated by reference to Exhibit
4.1 of the Company’s Quarterly Report on Form 10-Q for the three-month period ended March 31, 2015).
Sixth Amendment to Rights Agreement dated as of August 10, 2017 (incorporated by reference to Exhibit
4.1 of the Company’s Quarterly Report on Form 10-Q for the three-month period ended June 30, 2017).
Description of Securities Registered Under Section 12 of the Securities Exchange Act of 1934, as
amended (incorporated by reference to Exhibit 4.2 of the Company’s Annual Report on Form 10-K for
the year ended December 31, 2020).
10.1+ Form of Indemnification Agreement (updated) entered into with each of the Company’s Directors and
Officers (incorporated by reference to Exhibit 10.3A of the Company’s Annual Report on Form 10-KSB
for the year ended December 31, 2006).
10.2+ Amendment to Employment Agreement between the Company and Michael F. Brigham dated March 26,
10.3+
2010 (incorporated by reference to Exhibit 10.6 of the Company’s Annual Report on Form 10-K for the
year ended December 31, 2009).
2010 Stock Option and Incentive Plan of the Company (incorporated by reference to Exhibit 10.6 of the
Company’s Annual Report on Form 10-K for the year ended December 31, 2010).
10.4+ Form of Incentive Stock Option Agreement (incorporated by reference to Exhibit 10.7 of the Company’s
10.5+
Annual Report on Form 10-K for the year ended December 31, 2010).
2017 Stock Option and Incentive Plan of the Company (incorporated by reference to Exhibit 10.1 of the
Company’s Quarterly Report on Form 10-Q for the three-month period ended June 30, 2017).
10.6+ Form of Incentive Stock Option Agreement (incorporated by reference to Exhibit 10.9 of the Company’s
10.7+
Annual Report on Form 10-K for the year ended December 31, 2019).
Independent Contractor Agreement between the Company and Joseph H. Crabb dated February 11, 2022
38
ImmuCell Corporation
(incorporated by reference to Exhibit 99.1 of the Company’s Current Report on Form 8-K filed on
February 11, 2022).
10.8+* Second Amended and Restated Incentive Compensation Agreement between the Company and Elizabeth
L. Williams dated as of March 28, 2022.
10.9+* Amended and Restated Separation and Deferred Compensation Agreement between the Company and
Michael F. Brigham dated as of March 28, 2022.
10.10+* Incentive Compensation Agreement between the Company and Michael F. Brigham dated as of March
28, 2022.
10.11+* Second Amended and Restated Incentive Compensation Agreement between the Company and Bobbi Jo
Brockmann dated as of March 28, 2022.
10.12 Development Services and Commercial Supply Agreement between the Company and Norbrook
10.13
Laboratories Limited dated as of September 5, 2019 (incorporated by reference to Exhibit 99.2 of the
Company’s Current Report on Form 8-K filed on September 11, 2019).
Indenture of Lease for Premises Located in Portland, Maine between the Company and TVP, LLC
(incorporated by reference to Exhibit 99.2 of the Company’s Current Report on Form 8-K filed on
September 17, 2019).
10.14 Term Note for $5,100,000 between the Company and Gorham Savings Bank dated March 11, 2020
(incorporated by reference to Exhibit 99.2 of the Company’s Current Report on Form 8-K filed on March
12, 2020).
10.15 Loan Agreement for $5,100,000 between the Company and Gorham Savings Bank dated March 11, 2020
(incorporated by reference to Exhibit 99.4 of the Company’s Current Report on Form 8-K filed on March
12, 2020).
10.16 Term Note for $3,500,000 between the Company and Gorham Savings Bank dated March 11, 2020
(incorporated by reference to Exhibit 99.3 of the Company’s Current Report on Form 8-K filed on March
12, 2020).
10.17 Loan Agreement for $3,500,000 between the Company and Gorham Savings Bank dated March 11, 2020
(incorporated by reference to Exhibit 99.5 of the Company’s Current Report on Form 8-K filed on March
12, 2020).
10.18 Line of Credit Agreement for up to $1,000,000 between the Company and Gorham Savings Bank dated
10.19
March 11, 2020 (incorporated by reference to Exhibit 99.6 of the Company’s Current report on Form 8-K
filed on March 12, 2020).
Promissory Note for $937,700 executed by the Company in favor of Gorham Savings Bank dated April
13, 2020 (incorporated by reference to Exhibit 99.2 of the Company’s Current Report on Form 8-K filed
on April 14, 2020).
10.20 Note Purchase Agreement executed by the Company in favor of the Maine Technology Institute dated
10.21
June 12, 2020 (incorporated by reference to Exhibit 99.2 of the Company’s Current Report on Form 8-K
filed on June 16, 2020).
Subordinated Promissory Note for $500,000 executed by the Company in favor of the Maine Technology
Institute dated June 12, 2020 (incorporated by reference to Exhibit 99.3 of the Company’s Current Report
on Form 8-K filed on June 16, 2020).
10.22 Note Purchase Agreement executed by the Company in favor of the Maine Technology Institute dated
10.23
June 30, 2021 (incorporated by reference to Exhibit 99.1 of the Company’s Current Report on Form 8-K
filed on July 6, 2021).
Subordinated Promissory Note for $400,000 executed by the Company in favor of the Maine Technology
Institute dated June 30, 2022 (incorporated by reference to Exhibit 99.2 of the Company’s Current Report
on Form 8-K filed on July 6, 2021).
10.24 Term Note for $1,500,000 executed by the Company in favor of Gorham Savings Bank dated December
15, 2020 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed
on December 17, 2020).
10.25 Loan Agreement for $1,500,000 executed by the Company in favor of Gorham Savings Bank dated
December 15, 2020 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form
8-K filed on December 17, 2020).
10.26 Allonge to and Amendment of Term Note, dated March 23, 2022, between the Company and Gorham
Savings Bank (incorporated by reference to Exhibit 99.1 of the Company’s Current Report on Form 8-K
filed on March 24, 2022).
10.27 Mortgage Modification Agreement, dated March 23, 2022, between the Company and Gorham Savings
Bank (incorporated by reference to Exhibit 99.2 of the Company’s Current Report on Form 8-K filed on
March 24, 2022).
39
ImmuCell Corporation
14
Code of Business Conduct and Ethics (incorporated by reference to Exhibit 14 of the Company’s Current
Report on Form 8-K filed on March 20, 2014).
23.1* Consent of Independent Registered Public Accounting Firm.
31*
32*
Certifications Required by Rule 13a-14(a).
Certification Required by Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
101.INS XBRL Instance Document-the instance document does not appear in the Interactive Data File because its
XBRL tags are embedded within the Inline XBRL document.
101.SCH Inline XBRL Taxonomy Extension Schema Document.
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104
Cover Page Interactive Data File-the cover page interactive data file does not appear in the Interactive
Data File because its XBRL tags are embedded within the Inline XBRL document.
+
*
Management contract or compensatory plan or arrangement.
Filed herewith.
ITEM 16 – FORM 10-K SUMMARY
None
40
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of ImmuCell Corporation
Opinion on the Financial Statements
We have audited the accompanying balance sheets of ImmuCell Corporation (the “Company”) as of
December 31, 2021 and 2020, and the related statements of operations, comprehensive loss, stockholders’
equity, and cash flows for each of the two years in the period ended December 31, 2021, and the related notes
(collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in
all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results
of its operations and its cash flows for each of the two years in the period ended December 31, 2021, in
conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to
express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm
registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to
be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged
to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain
an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on
the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such
opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Our audits also included evaluating the accounting principles used and significant estimates made by management,
as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a
reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the
financial statements that was communicated or required to be communicated to the audit committee and that:
(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially
challenging, subjective or complex judgments. The communication of the critical audit matter does not alter
in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the
critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or
disclosures to which it relates.
Valuation of Inventory
Description of the Matter
At December 31, 2021, the Company’s inventory was $3,089,974. As discussed
in Note 2 of the financial statements, inventory is recorded at the lower of cost,
or net realizable value.
F-1
How We Addressed the
Matter In Our Audit
Auditing management’s valuation of inventory is complex and highly
judgmental because of the estimates and assumptions used by management to
determine the cost accounting and because of the variability of the cost per dose
due to fluctuations in the biological yield achieved.
The primary procedures we performed to address this critical audit
matter included the following. We obtained an understanding of the cost
accounting developed by management and the related assumptions and estimates
used. We tested the cost accounting by examining the underlying data used by
the Company to prepare the cost accounting. We evaluated the effect of the
variability of the cost per dose on the inventory value by comparing the
biological yield to historical results and by performing a sensitivity analysis of
the potential range in inventory value within a corridor of historical results based
on minimum and maximum outcomes for the biological yield.
/s/ WIPFLI LLP
We have served as the Company’s auditor since 2019.
South Portland, Maine
March 30, 2022
F-2
ImmuCell Corporation
BALANCE SHEETS
As of December 31,
2021
2020
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
Short-term investments
Trade accounts receivable, net
Inventory
Prepaid expenses and other current assets
Total current assets
PROPERTY, PLANT AND EQUIPMENT, net
OPERATING LEASE RIGHT-OF-USE ASSET
GOODWILL
INTANGIBLE ASSETS, net
OTHER ASSETS
TOTAL ASSETS
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Current portion of debt obligations
Current portion of operating lease liability
Accounts payable and accrued expenses
Total current liabilities
LONG-TERM LIABILITIES:
Debt obligations, net of current portion
Operating lease liability, net of current portion
Total long-term liabilities
$10,185,468
—
$6,949,937
996,495
2,694,229 1,796,801
3,089,974 2,092,514
321,261
12,157,008
295,197
16,264,868
26,893,599
1,109,133
95,557
76,416
26,115
$44,465,688
26,754,975
1,220,361
95,557
95,520
26,173
$40,349,594
$812,207
108,012
1,614,250
2,534,469
8,327,122
1,027,157
9,354,279
$760,337
100,512
1,350,227
2,211,076
8,737,149
1,135,169
9,872,318
TOTAL LIABILITIES
11,888,748
12,083,394
CONTINGENT LIABILITIES AND COMMITMENTS (See Note 11)
STOCKHOLDERS’ EQUITY:
Common stock, $0.10 par value per share, 15,000,000 and 15,000,000 shares
authorized, 7,814,165 and 7,299,009 shares issued and 7,741,864 and
7,218,836 shares outstanding, as of December 31, 2021 and 2020,
respectively
Additional paid-in capital
Accumulated deficit
Treasury stock, at cost, 72,301 and 80,173 shares as of December 31, 2021
and 2020, respectively
Total stockholders’ equity
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
781,417
35,692,388
(3,738,694)
(158,171)
32,576,940
$44,465,688
729,901
31,372,093
(3,660,402)
(175,392)
28,266,200
$40,349,594
The accompanying notes are an integral part of these financial statements.
F-3
ImmuCell Corporation
STATEMENTS OF OPERATIONS
Product sales
Costs of goods sold
Gross margin
OPERATING EXPENSES:
Product development expenses
Sales and marketing expenses
Administrative expenses
Operating expenses
NET OPERATING INCOME (LOSS)
Other expenses (income), net
LOSS BEFORE INCOME TAXES
Income tax expense (benefit)
NET LOSS
Basic weighted average common shares outstanding
Basic net loss per share
Diluted weighted average common shares outstanding
Diluted net loss per share
During the Years Ended December 31,
2021
$19,242,969
10,587,040
8,655,929
2020
$15,342,204
8,479,378
6,862,826
4,168,518
2,503,926
1,726,100
8,398,544
4,354,627
2,167,899
1,720,653
8,243,179
257,385
(1,380,353)
326,512
(69,127)
(348,100)
(1,032,253)
9,165
($78,292)
(10,136)
($1,022,117)
7,592,290
($0.01)
7,592,290
($0.01)
7,213,329
($0.14)
7,213,329
($0.14)
STATEMENTS OF COMPREHENSIVE LOSS
Net loss
Other comprehensive income:
Interest rate swaps, before taxes
Income tax applicable to interest rate swaps
Other comprehensive income, net of taxes
Total comprehensive loss
During the Years Ended December 31,
2021
($78,292)
2020
($1,022,117)
—
—
—
($78,292)
58,526
(14,631)
43,895
($978,222)
The accompanying notes are an integral part of these financial statements.
F-4
ImmuCell Corporation
STATEMENTS OF STOCKHOLDERS’ EQUITY
Common Stock
Treasury Stock
Shares
Amount
Additional
paid-in
capital
Accumulated
Deficit
Shares
Amount
Accumulated
Other
Comprehensive
(Loss) Income
Total
Stockholders’
Equity
BALANCE,
December 31, 2019
Net loss
Other comprehensive
income, net of taxes
Exercise of stock options
Stock-based
compensation
—
—
—
—
7,299,009 $729,901 $31,131,893 ($2,638,285)
(1,022,117)
—
—
86,090
—
($188,336)
—
($43,895) $28,991,278
(1,022,117)
—
—
—
43,895
43,895
—
—
—
—
(12,935)
253,135
—
—
—
(5,917)
12,944
—
—
BALANCE,
December 31, 2020
7,299,009
$729,901
$31,372,093
($3,660,402)
80,173
($175,392)
—
—
—
(78,292)
—
Net loss
Public offering of
common stock, net of
$17,011 of offering
costs
Exercise of stock options
Stock-based
compensation
BALANCE,
515,156
51,516
4,181,510
—
—
—
—
(5,528)
144,313
—
—
—
—
(7,872)
17,221
—
—
—
—
—
—
—
—
—
9
253,135
$28,266,200
(78,292)
4,233,026
11,693
144,313
—
—
December 31, 2021
7,814,165
$781,417
$35,692,388
($3,738,694)
72,301
($158,171)
—
$32,576,940
The accompanying notes are an integral part of these financial statements.
F-5
ImmuCell Corporation
STATEMENTS OF CASH FLOWS
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss
Adjustments to reconcile net loss to net cash provided by operating activities:
During the Years Ended December 31,
2021
2020
($78,292)
($1,022,117)
Depreciation
Amortization of intangible assets
Amortization and write-off of debt issuance costs
Forgiveness of debt
Deferred income taxes
Stock-based compensation
Loss on disposal of fixed assets
Non-cash rent expense
Changes in:
Trade accounts receivable
Accrued interest income
Inventory
Prepaid expenses and other current assets
Other assets
Accounts payable and accrued expenses
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment
Maturities of investment
Purchases of investments
Proceeds from sale of assets
Net cash used for investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from public offering, net
Proceeds from debt issuance
Debt principal repayments
Payments of debt issuance costs
Proceeds from exercise of stock options
Net cash provided by financing activities
NET INCREASE IN CASH AND CASH EQUIVALENTS
BEGINNING CASH AND CASH EQUIVALENTS
ENDING CASH AND CASH EQUIVALENTS
2,442,036
19,104
7,841
—
—
144,313
30,963
10,716
(897,428)
495
(997,460)
26,064
58
245,760
954,170
(2,608,649)
996,000
—
15,290
(1,597,359)
4,233,026
400,000
(768,271)
2,272
11,693
3,878,720
3,235,531
6,949,937
$10,185,468
2,328,179
19,104
102,724
(937,700)
(14,631)
253,135
39,303
15,320
(159,636)
27,258
425,742
(61,695)
711
299,881
1,315,578
(4,072,539)
3,449,000
(1,992,000)
45,600
(2,569,939)
—
11,537,700
(9,573,568)
(53,136)
9
1,911,005
656,644
6,293,293
$6,949,937
The accompanying notes are an integral part of these financial statements
F-6
ImmuCell Corporation
STATEMENT OF CASH FLOWS
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
CASH PAID FOR:
Income taxes
Interest expense
NON-CASH ACTIVITIES:
Forgiveness of debt
Change in capital expenditures included in accounts payable and accrued
expenses
Net change in fair value of interest rate swaps, net of taxes
Surrender of shares to exercise stock options
During the Years Ended December 31,
2021
2020
$5,110
$308,682
$—
($18,263)
$—
$165,337
$4,581
$481,408
($937,700)
($170,220)
($43,895)
$39,366
The accompanying notes are an integral part of these financial statements.
F-7
ImmuCell Corporation
Notes to Audited Financial Statements
1. BUSINESS OPERATIONS
ImmuCell Corporation (the “Company”, “we”, “us”, “our”) was originally incorporated in Maine in 1982 and
reincorporated in Delaware in 1987, in conjunction with our initial public offering of common stock. We are an
animal health company whose purpose is to create scientifically-proven and practical products that improve the
health and productivity of dairy and beef cattle. As disclosed in Note 17, “Segment Information”, one of our
business segments is dedicated to growing sales of First Defense® and the other is focused on developing sales of
Re-Tain®. We manufacture and market the First Defense® product line for the prevention of scours in newborn
dairy and beef calves. We have expanded this line into five different products with formulations targeting E. coli and
coronavirus pathogens as well as E. coli, coronavirus and rotavirus pathogens. This product line provides
Immediate Immunity™ to newborn calves. We are also in the late stages of developing Re-Tain®, a treatment for
lactating dairy cows with subclinical mastitis, mastitis being the most significant cause of economic loss to the dairy
industry. These products help reduce the need to use traditional antibiotics in food producing animals. We are
subject to certain risks associated with this stage of development including dependence on key individuals and third-
party providers of critical goods and services, competition from other larger companies, the successful sale of
existing products and the development and acquisition of additional commercially viable products with appropriate
regulatory approvals, where applicable.
The global COVID-19 pandemic has created, and continues to create, uncertainty for us. The full impact of this
viral outbreak on the global economy, and the duration of such impact, is still uncertain at this time. A combination of
the conditions, trends and concerns related to or arising from the pandemic 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 price increases and shortages in key components, supportive
services, transportation and other supplies that may cause production slowdowns that affect our ability to consistently
deliver our products to market on time in accordance with customer demand. Despite some recent favorable trends
and our diligent efforts and intentions, there is a risk that an employee could become infected and could infect others.
This could lead to plant shutdowns and production interruptions and have other negative economic and health and
safety impacts.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Presentation
We have prepared the accompanying audited financial statements reflecting all adjustments (which are of a
normal recurring nature) that are, in our opinion, necessary in order to ensure that the financial statements are not
misleading. We follow accounting standards set by the Financial Accounting Standards Board (FASB). The FASB
sets Generally Accepted Accounting Principles (GAAP) that we follow to ensure we consistently report our
financial condition, results of operations, earnings per share and cash flows. References to GAAP in these footnotes
are to the FASB Accounting Standards Codification™ (Codification). We believe that the disclosures are adequate
to ensure that the information presented is not misleading.
(b) Cash, Cash Equivalents and Short-Term Investments
We consider all highly liquid investment instruments that mature within three months of their purchase dates
to be cash equivalents. Cash equivalents are principally invested in securities backed by the U.S. government.
Certain cash balances in excess of Federal Deposit Insurance Corporation (FDIC) limits of $250,000 per financial
institution per depositor are maintained in money market accounts at financial institutions that are secured, in part,
by the Securities Investor Protection Corporation. Amounts in excess of these FDIC limits per bank that are not
invested in securities backed by the U.S. government aggregated $0 and $751,050 as of December 31, 2021 and
2020, respectively. Short-term investments are classified as held to maturity and are comprised of certificates of
deposit that mature in more than three months from their purchase dates and not more than twelve months from the
balance sheet date. Short-term investments are held at different financial institutions that are insured by the FDIC,
F-8
ImmuCell Corporation
Notes to Audited Financial Statements (continued)
within the FDIC limits per financial institution. We account for investments in marketable securities in accordance
with Codification Topic 320, Investments — Debt and Equity Securities. See Note 3.
(c) Trade Accounts Receivable, net
Accounts receivable are carried at the original invoice amount less an estimate made for doubtful collection
when applicable. Management determines the allowance for doubtful accounts on a monthly basis by identifying
troubled accounts and by using historical experience applied to an aging of accounts. Accounts receivable are
considered to be past due if a portion of the receivable balance is outstanding for more than 30 days. Past due
accounts receivable are subject to an interest charge. Accounts receivable are written off when deemed
uncollectible. The amount of accounts receivable written off during all periods reported was immaterial.
Recoveries of accounts receivable previously written off are recorded as income when received. As of December
31, 2021 and 2020, we determined that no allowance for doubtful accounts was necessary. See Note 4.
(d) Inventory
Inventory includes raw materials, work-in-process and finished goods and is recorded at the lower of cost, on
the first-in, first-out method, or net realizable value (determined as the estimated selling price in the normal course
of business, less reasonably predictable costs of completion, disposal and transportation). Work-in-process and
finished goods inventories include materials, labor and manufacturing overhead. At each balance sheet date, we
evaluate our ending inventories for excess quantities and obsolescence. Inventories that we consider excess or
obsolete are written down to estimated net realizable value. Once inventory is written down and a new cost basis is
established, it is not written back up if demand increases. We believe that supplies and raw materials for the
production of our products are available from more than one vendor or farm. Our policy is to maintain more than
one source of supply for the components used in our products when feasible. See Note 5.
(e) Property, Plant and Equipment, net
We depreciate property, plant and equipment on the straight-line method by charges to operations and costs of
goods sold in amounts estimated to expense the cost of the assets from the date they are first put into service to the
end of the estimated useful lives of the assets. The facility we have constructed at 33 Caddie Lane to produce the
Nisin Drug Substance for Re-Tain® is being depreciated over 39 years from when a certificate of occupancy was
issued during the fourth quarter of 2017. We began depreciating the equipment for our Nisin Drug Substance facility
when it was placed in service during the third quarter of 2018. Approximately 87% of these assets are being
depreciated over 10 years. We began depreciating the leasehold improvements to our new First Defense®
production facility at 175 Industrial Way over the remainder of the 10-year lease term beginning when a certificate
of occupancy was issued during the second quarter of 2020. Significant repairs to fixed assets that benefit more than
a current period are capitalized and depreciated over their useful lives. Insignificant repairs are expensed when
incurred. See Note 7.
(f) Intangible Assets and Goodwill
We amortize intangible assets on the straight-line method by charges to costs of goods sold in amounts
estimated to expense the cost of the assets from the date they are first put into service to the end of the estimated
useful lives of the assets. We have recorded intangible assets related to customer relationships, non-compete
agreements and developed technology, each with defined useful lives. We have classified as goodwill the amounts
paid in excess of fair value of the net assets (including tax attributes) acquired in purchase transactions. We assess
the impairment of intangible assets and goodwill that have indefinite lives at the reporting unit level on an annual
basis (as of December 31st) and whenever events or changes in circumstances indicate that the carrying value of the
asset may not be recoverable. We would record an impairment charge if such an assessment were to indicate that the
fair value of such assets was less than the carrying value. Judgment is required in determining whether an event has
occurred that may impair the value of goodwill or identifiable intangible assets. Factors that could indicate that an
impairment may exist include significant under-performance relative to plan or long-term projections, significant
changes in business strategy and significant negative industry or economic trends. Although we believe intangible
F-9
ImmuCell Corporation
Notes to Audited Financial Statements (continued)
assets and goodwill are properly stated in the accompanying financial statements, changes in strategy or market
conditions could significantly impact these judgments and require an adjustment to the recorded balance. No
goodwill impairments were recorded during the years ended December 31, 2021 or 2020. See Notes 2(g) and 8 for
additional disclosures.
(g) Valuation of Long-Lived Assets
We periodically evaluate our long-lived assets, consisting principally of fixed assets, operating lease right-of-
use asset and amortizable intangible assets, for potential impairment. In accordance with the applicable accounting
guidance for the treatment of long-lived assets, we review the carrying value of our long-lived assets or asset group
that is held and used, including intangible assets subject to amortization, for impairment whenever events and
circumstances indicate that the carrying value of the assets may not be recoverable. Under the held for use approach,
the asset or asset group to be tested for impairment should represent the lowest level for which identifiable cash
flows are largely independent of the cash flows of other groups of assets and liabilities. We evaluate our long-lived
assets whenever events or circumstances suggest that the carrying amount of an asset or group of assets may not be
recoverable. No impairment was recognized during the years ended December 31, 2021 or 2020.
(h) Fair Value Measurements
In determining fair value measurements, we follow the provisions of Codification Topic 820, Fair Value
Measurements and Disclosures. Codification Topic 820 defines fair value, establishes a framework for measuring
fair value under GAAP and enhances disclosures about fair value measurements. The topic provides a consistent
definition of fair value which focuses on an exit price, which is the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between market participants at the measurement date. The topic
also prioritizes, within the measurement of fair value, the use of market-based information over entity-specific
information and establishes a three-level hierarchy for fair value measurements based on the nature of inputs used in
the valuation of an asset or liability as of the measurement date. As of December 31, 2021 and 2020, the carrying
amounts of cash and cash equivalents, short-term investments, accounts receivable, inventory, other assets, accounts
payable and accrued liabilities approximate fair value because of their short-term nature. The amount outstanding
under our bank debt facilities is measured at carrying value in our accompanying balance sheets. Our bank debt
facilities are valued using Level 2 inputs. The estimated fair value of our bank debt facilities approximates their
carrying value based on similar instruments with similar maturities. The three-level hierarchy is as follows:
Level 1 — Pricing inputs are quoted prices available in active markets for identical assets or liabilities as of the
measurement date.
Level 2 — Pricing inputs are quoted prices for similar assets or liabilities, or inputs that are observable, either
directly or indirectly, for substantially the full term through corroboration with observable market
data.
Level 3 — Pricing inputs are unobservable for the assets or liabilities, that is, inputs that reflect the reporting
entity’s own assumptions about the assumptions market participants would use in pricing the asset
or liability.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy.
In such cases, the level of an asset or liability within the fair value hierarchy is based on the lowest level of input
that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair
value measurement in its entirety requires judgment and considers factors specific to the investment. From time to
time, we also hold money market mutual funds in a brokerage account, which are classified as cash equivalents and
measured at fair value. The fair value of these investments is based on their closing published net asset value.
We assess the levels of the investments at each measurement date, and transfers between levels are recognized
on the actual date of the event or change in circumstances that caused the transfer in accordance with our accounting
policy regarding the recognition of transfers between levels of the fair value hierarchy. During the years ended
December 31, 2021 and 2020, there were no transfers between levels. As of December 31, 2021 and 2020, our Level
1 assets measured at fair value by quoted prices in active markets consisted of bank savings accounts and money
F-10
ImmuCell Corporation
Notes to Audited Financial Statements (continued)
market funds. As of December 31, 2020, our bank certificates of deposit were classified as Level 2 and were
measured by other significant observable inputs. There were no assets or liabilities measured at fair value on a
nonrecurring basis as of December 31, 2021 or 2020.
Assets:
Cash and money market accounts
$10,185,468
$—
$—
$10,185,468
As of December 31, 2021
Level 1
Level 2
Level 3
Total
Liabilities:
Bank debt
Assets:
$—
($9,139,329)
$—
($9,139,329)
As of December 31, 2020
Level 1
Level 2
Level 3
Total
Cash and money market accounts
Bank certificates of deposit
Total
$6,949,937
—
$6,949,937
$—
996,495
$996,495
$—
—
$—
$6,949,937
996,495
$7,946,432
Liabilities:
Bank debt
(i) Concentration of Risk
$— ($9,497,486)
$—
($9,497,486)
Concentration of credit risk with respect to accounts receivable is principally limited to certain customers to
whom we make substantial sales. To reduce risk, we routinely assess the financial strength of our customers and, as
a consequence, believe that our accounts receivable credit risk exposure is limited. We maintain an allowance for
potential credit losses when deemed necessary, but historically we have not experienced significant credit losses
related to an individual customer or groups of customers in any particular industry or geographic area. Sales to
significant customers that amounted to 10% or more of total product sales are detailed in the following table:
Company A
Company B
During the Years Ended December 31,
2021
2020
46%
28%
41%
30%
Trade accounts receivable due from significant customers amounted to the percentages of total trade accounts
receivable as detailed in the following table:
Company A
Company B
(j) Revenue Recognition
As of
December 31, 2021
38%
34%
As of
December 31, 2020
48%
27%
We recognize revenue in accordance with Accounting Standards Codification (ASC) 606, Revenue from
Contracts with Customers. ASC 606 is a single comprehensive model for companies to use in accounting for revenue
arising from contracts with customers. The core principle is that we recognize the amount of revenue to which we
F-11
ImmuCell Corporation
Notes to Audited Financial Statements (continued)
expect to be entitled for the transfer of promised goods or services to customers when a customer obtains control of
promised goods or services in an amount that reflects the consideration we expect to receive in exchange for those goods
or services. In addition, the standard requires disclosure of the nature, amount, timing and uncertainty of revenue and cash
flows arising from contracts with customers. We conduct our business with customers through valid purchase orders or sales
orders which are considered contracts and are not interdependent on one another. A performance obligation is a promise in a
contract to transfer a distinct product to the customer. The transaction price is the amount of consideration we expect to
receive under the arrangement. Revenue is measured based on consideration specified in a contract with a customer. The
transaction price of a contract is allocated to each distinct performance obligation and recognized when or as the customer
receives the benefit of the performance obligation. Product transaction prices on a purchase or sales order are discrete and
stand-alone. We recognize revenue when we satisfy a performance obligation in a contract by transferring control over a
product to a customer when product delivery occurs. Amounts due are typically paid approximately 30 days from the time
control is transferred. Shipping and handling costs associated with outbound freight after control over a product has
transferred to a customer are accounted for as a fulfillment cost in costs of goods sold. We do not bill for or collect sales tax
because our sales are generally made to distributors and thus our sales to them are not subject to sales tax. We
generally have experienced an immaterial amount of product returns. We have enhanced disclosures related to
disaggregation of revenue sources and accounting policies prospectively as a result of adopting this standard. See Note
14.
(k) Expense Recognition
We do not incur costs in connection with product sales to customers that are eligible for capitalization. Advertising
costs are expensed when incurred, which is generally during the month in which the advertisement is published.
Advertising expenses amounted to $37,817 and $29,083 during the years ended December 31, 2021 and 2020,
respectively. All product development expenses are expensed as incurred, as are all related patent costs. We
capitalize costs to produce inventory during the production cycle, and these costs are charged to costs of goods sold
when the inventory is sold to a customer.
(l) Income Taxes
We account for income taxes in accordance with Codification Topic 740, Income Taxes, which requires that
we recognize a current tax liability or asset for current taxes payable or refundable and a deferred tax liability or
asset for the estimated future tax effects of temporary differences and carryforwards to the extent they are realizable.
During the second quarter of 2018, we assessed our historical and near-term future profitability and decided to
record $563,252 in non-cash income tax expense to create a full valuation allowance against our net deferred tax
assets (which consist largely of net operating loss carryforwards and federal and state tax credits). At that time, we
had incurred a net loss for six consecutive quarters, had not been profitable on a year-to-date basis since the nine-
month period ended September 30, 2017 and projected additional net losses for some period going forward before
returning to profitability. We consider future taxable income and feasible tax planning strategies in assessing the
need for a valuation allowance at each quarter end. If we determine that we would be able to realize our deferred tax
assets in the future in excess of the net recorded amount over a reasonably short period of time, a reduction of the
valuation allowance would increase income in the period such determination was made. Likewise, if we determine
that we would not be able to realize all or part of our net deferred tax asset in the future, an increase to the valuation
allowance would be charged to income in the period such determination was made.
Codification Topic 740-10 clarifies the accounting for income taxes by prescribing a minimum recognition
threshold that a tax position must meet before being recognized in the financial statements. In the ordinary course of
business, there are transactions and calculations where the ultimate tax outcome is uncertain. In addition, we are
subject to periodic audits and examinations by the Internal Revenue Service and other taxing authorities. With few
exceptions, we are no longer subject to income tax examinations by tax authorities for years before 2018. We have
evaluated the positions taken on our filed tax returns. We have concluded that no uncertain tax positions existed as
of December 31, 2021 or 2020. Although we believe that our estimates are reasonable, actual results could differ
from these estimates. See Note 16.
F-12
ImmuCell Corporation
Notes to Audited Financial Statements (continued)
(m) Stock-Based Compensation
We account for stock-based compensation in accordance with Codification Topic 718, Compensation-Stock
Compensation, which generally requires us to recognize non-cash compensation expense for stock-based payments
using the fair-value-based method. The fair value of each stock option grant has been estimated on the date of grant
using the Black-Scholes option pricing model. Accordingly, we recorded compensation expense pertaining to stock-
based compensation of $144,313 and $253,135 during the years ended December 31, 2021 and 2020, respectively.
(n) Net Loss Per Common Share
Net loss per common share has been computed in accordance with Codification Topic 260-10, Earnings Per
Share. The net loss per share has been computed by dividing the net loss by the weighted average number of
common shares outstanding during the period. All stock options have been excluded from the denominator in the
calculation of dilutive earnings per share when we are in a loss position because their inclusion would be anti-
dilutive. Outstanding stock options that were not included in this calculation because the effect would be anti-
dilutive amounted to 443,000 and 414,000 during the years ended December 31, 2021 and 2020, respectively.
Net loss attributable to stockholders
Weighted average common shares outstanding - Basic
Dilutive impact of share-based compensation awards
Weighted average common shares outstanding - Diluted
Loss per share:
Basic
Diluted
(o) Use of Estimates
During the Years Ended December 31,
2021
2020
($78,292)
($1,022,117)
7,592,290
—
7,592,290
($0.01)
($0.01)
7,213,329
—
7,213,329
($0.14)
($0.14)
The preparation of financial statements in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the
period. Although we regularly assess these estimates, actual amounts could differ from those estimates and are
subject to change in the near term. Changes in estimates are recorded during the period in which they become
known. Significant estimates include our inventory valuation, valuation of goodwill and long-lived assets, valuation
of deferred tax assets, accrued expenses, costs of goods sold and useful lives of intangible assets.
(p) New Accounting Pronouncements Adopted
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The guidance in this ASU supersedes
the leasing guidance in Topic 840, Leases. Under the new guidance, lessees are required to recognize lease assets
and lease liabilities on the balance sheet for all leases with terms longer than 12 months. Leases are classified as
either finance or operating, with classification affecting the pattern of expense recognition in the income statement.
This ASU and its amendments became effective for fiscal years beginning after December 15, 2018, including
interim periods within those fiscal years. Early adoption was permitted. We elected to adopt this ASU effective
January 1, 2019. In July 2018, the FASB issued ASU 2018-10, Codification improvements to Topic 842, Leases.
The amendments in ASU 2018-10 provide more clarification in regard to the application and requirements of Topic
842. In July 2018, the FASB issued ASU 2018-11, Topic 842, Leases - Targeted improvements. The amendments in
ASU 2018-11 provide for the option to adopt the standard prospectively and recognize a cumulative-effect
adjustment to the opening balance of retained earnings as well as offer a new practical expedient that allows us to
elect, by class of underlying asset, to not separate non-lease and lease components in certain circumstances and
instead to account for those components as a single item. Based on our current lease agreements and a review of all
F-13
ImmuCell Corporation
Notes to Audited Financial Statements (continued)
of our material vendor relationships for potential embedded lease obligations, we concluded that we were not subject to
material lease obligations as of December 31, 2019, and the adoption of Topic 842 did not have a material impact on our
financial statements as of January 1, 2019. The lease we entered into on September 12, 2019 to expand our production
capacity for the First Defense® product line with a possession date of November 15, 2019 and a commencement date
of February 13, 2020 has been accounted for in accordance with Topic 842 since the first quarter of 2020. The only
material lease pursuant to which we are the lessee relates to real estate property. All leases are classified as operating
leases, and therefore, were previously not recognized on our balance sheets. With the adoption of Topic 842, operating
lease agreements are required to be recognized on our balance sheets as a right-of-use (ROU) asset with a
corresponding lease liability. If at a lease inception date or at some later date during the term of a lease, we consider
the exercising of a renewal option to be reasonably certain, we would include the extended term in the calculation of
the ROU asset and lease liability. Regarding the discount rate, Topic 842 requires the use of the rate implicit in the
lease whenever this rate is readily determinable. As this rate is rarely determinable, we utilize our incremental
borrowing rate at lease inception, on a collateralized basis, over a similar term. See Note 12. We elected the
following practical expedients in conjunction with implementation of Topic 842:
•
Inclusion of both the lease and non-lease components for all classes of underlying assets as a single
component.
• Election to exclude short-term leases (i.e., leases with initial terms of twelve months or less) from
capitalization on our balance sheets.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure
Framework-Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure
requirements of fair value measurements. Topic 820 is effective for fiscal years beginning after December 15, 2019,
and early adoption was permitted. The adoption of Topic 820 did not have a material impact on our financial
statements as of January 1, 2020.
We adopted ASU 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses
on Financial Instruments,” effective January 1, 2020, using the modified retrospective transition method. This ASU
amends the impairment model to utilize an expected loss methodology in place of the incurred loss methodology for
financial instruments, including trade receivables and leased equipment. The amendment requires entities to
consider a broader range of information to estimate expected credit losses, which may result in earlier recognition of
losses. The adoption of Topic 326 did not have a material impact on our financial statements as of January 1, 2020.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for
Income Taxes. The new guidance is intended to simplify the accounting for income taxes by removing certain
exceptions and by updating accounting requirements around goodwill recognized for tax purposes and the allocation
of current and deferred tax expense among legal entities, among other minor changes. ASU 2019-12 is effective for
fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Early adoption
was permitted. The adoption of ASU 2019-12 did not have a material impact on our financial statements as of January
1, 2021.
In March 2020, the FASB issued ASU 2020-04, Facilitation of the Effects of Reference Rate Reform on
Financial Reporting. ASU 2020-04 is intended to provide optional expedients and exceptions to the U.S. GAAP
guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the
discontinuation of the London Interbank Offered Rate (LIBOR) or by another reference rate expected to be
discontinued. The relief offered by this guidance, if adopted, is available to companies for the period March 12, 2020
through December 31, 2022. The discontinuation of LIBOR did not have a material impact on our financial
statements as of January 1, 2021.
3. CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
Cash, cash equivalents and short-term investments (at amortized cost plus accrued interest) consisted of the
following:
F-14
ImmuCell Corporation
Notes to Audited Financial Statements (continued)
As of
December 31, 2021
As of
December 31, 2020
$6,949,937
996,495
$7,946,432
$10,185,468
—
$10,185,468
Cash and cash equivalents
Short-term investments(1)
Total
(1) Certificates of deposit are carried at amortized cost.
4. TRADE ACCOUNTS RECEIVABLE, net
Trade accounts receivable amounted to $2,694,229 and $1,796,801 as of December 31, 2021 and 2020,
respectively. No allowance for bad debt and product returns was recorded as of December 31, 2021 or 2020.
5. INVENTORY
Inventory consisted of the following:
Raw materials
Work-in-process
Finished goods
Total
As of
December 31, 2021
As of
December 31, 2020
$631,019
1,438,482
23,013
$2,092,514
$971,606
1,902,299
216,069
$3,089,974
6. PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets consisted of the following:
Prepaid expenses
Other receivables
Security deposits
Total
7. PROPERTY, PLANT AND EQUIPMENT, net
Property, plant and equipment consisted of the following:
As of
December 31, 2021
As of
December 31, 2020
$252,840
$268,713
67,621
26,484
800
—
$295,197 $321,261
Laboratory and manufacturing equipment
Buildings and improvements
Office furniture and equipment
Construction in progress
Land
Property, plant and equipment, gross
Accumulated depreciation
Property, plant and equipment, net
Estimated Useful
Lives
(in years)
3-10
10-39
3-10
n/a
n/a
As of
December 31, 2021
As of
December 31, 2020
$15,786,620
18,999,500
779,720
2,337,620
516,867
38,420,327
(11,665,352)
$26,754,975
$17,388,757
19,119,698
869,191
2,992,359
516,867
40,886,872
(13,993,273)
$26,893,599
As of December 31, 2021 and 2020, construction in progress consisted principally of payments toward the
First Defense® production capacity expansion project and equipment needed to bring the formulation and aseptic
filling for Re-Tain® in-house. Property, plant and equipment disposals were $160,366 and $358,924 during the
years ended December 31, 2021 and 2020, respectively. Depreciation expense was $2,442,036 and $2,328,179
during the years ended December 30, 2021 and 2020, respectively.
F-15
ImmuCell Corporation
Notes to Audited Financial Statements (continued)
8. INTANGIBLE ASSETS
Intangible assets of $191,040 were valued using the relief from royalty method and are being amortized to
costs of goods sold over their useful lives, which are estimated to be 10 years. Intangible amortization expense was
$19,104 during both of the years ended December 31, 2021 and 2020. The net value of these intangibles was
$76,416 and $95,520 as of December 31, 2021 and 2020, respectively. Intangible asset amortization expense is
estimated to be $19,104 per year through December 31, 2025.
Intangible assets as of December 31, 2021 consisted of the following:
Developed technology
Customer relationships
Non-compete agreements
Total
Gross Carrying
Value
Accumulated
Amortization
Net Book
Value
$184,100
1,300
5,640
$191,040
($110,460)
(780)
(3,384)
($114,624)
$73,640
520
2,256
$76,416
Intangible assets as of December 31, 2020 consisted of the following:
Developed technology
Customer relationships
Non-compete agreements
Total
Gross Carrying
Value
Accumulated
Amortization
Net Book
Value
$184,100
1,300
5,640
$191,040
($92,050)
(650)
(2,820)
($95,520)
$92,050
650
2,820
$95,520
9. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consisted of the following:
Accounts payable – trade
Accounts payable – capital
Accrued payroll
Accrued professional fees
Accrued other
Income tax payable
Total
10. BANK DEBT
As of
December 31, 2021
As of
December 31, 2020
$602,347
—
525,499
84,900
137,481
—
$1,350,227
$726,781
18,263
585,939
82,050
199,076
2,141
$1,614,250
Prior to a refinancing with Gorham Savings Bank (GSB) during the first quarter of 2020, we had in place five
different credit facilities and a line of credit with TD Bank N.A. (Loans #1 to #5). During the first quarter of 2020,
we closed on a debt financing with GSB aggregating $8,600,000 and a $1,000,000 line of credit. The debt was
comprised of a $5,100,000 mortgage note (Loan #6) that bears interest at a fixed rate of 3.50% per annum (with a
10-year term and 25-year amortization schedule and a balloon principal payment of $3,145,888 due during the first
quarter of 2030) and a $3,500,000 note (Loan #7) that bears interest at a fixed rate of 3.50% per annum (with a 7-
year term and amortization schedule). The line of credit is available as needed through March 11, 2024. Interest on
borrowings against the line of credit is variable at the National Prime Rate plus 0.00% per annum. There was no
outstanding balance under this line of credit as of December 31, 2021 or 2020. In connection with these three credit
facilities, we incurred debt issuance costs of $39,789. The amortization of debt issuance costs is being recorded as a
component of interest expense, included with other expenses (income), net, and is being amortized over the
underlying terms of the two notes and the line of credit. The proceeds from the debt refinancing were used to repay
all bank debt outstanding at the time of closing (Loans #1 to #5) and to provide some additional working capital. We
were required by bank debt covenant to maintain $1,400,000 in escrow (a non-current asset). During the fourth
quarter of 2020, we closed on a $1,500,000 note with GSB (Loan #10) that bears interest at a fixed rate of 3.50% per
F-16
ImmuCell Corporation
Notes to Audited Financial Statements (continued)
annum (with a 7-year term and amortization schedule). In connection with this note, we incurred debt issuance costs
of $11,075. The amortization of these debt issuance costs is also being recorded as a component of interest expense,
included with other expenses (income), net, and is being amortized over the underlying term of the note. Proceeds of
$624,167 were used to prepay a portion of the outstanding principal on our mortgage note (Loan #6), which reduced
the outstanding balance to 80% of the most recent appraised value of the property securing the debt, which allowed
GSB to release the $1,400,000 that had been held in escrow. This resulted in no change in the balloon principal
payment of $3,145,888 due during the first quarter of 2030. The remaining proceeds were available for general
working capital purposes. These three credit facilities are secured by liens on substantially all of our assets and are
subject to certain restrictions and financial covenants. Given the funds we raised through an equity issuance in April
2021, GSB waived the minimum debt service coverage ratio requirement of 1.35 for the year ended December 31,
2021.
During the second quarter of 2020, we received $937,700 in support from the federal government under the
Paycheck Protection Program (PPP) (Loan #8). We used the proceeds only for eligible payroll costs incurred and
paid during the 24-week period beginning April 13, 2020. Our obligation to repay the principal was forgiven, and
we recognized this amount as part of other expenses (income), net, during the fourth quarter of 2020. This
forgiveness of indebtedness, in accordance with the CARES Act, does not give rise to federal or State of Maine
taxable income, and the expenses incurred using PPP proceeds are fully deductible for federal and Maine income tax
purposes.
During the second quarter of 2020, we received a loan from the Maine Technology Institute (MTI) (Loan #9)
in the aggregate principal amount of $500,000. The first 27 months of this loan are interest-free with no interest
accrual or required principal payments. Principal and interest payments at a fixed rate of 5% per annum are due
quarterly over the final five years of the loan, beginning during the fourth quarter of 2022 and continuing through
the third quarter of 2027. On June 30, 2021, we executed definitive agreements covering a second loan from the
MTI (Loan #11) in the aggregate principal amount of $400,000, which proceeds were received in July 2021. The
first 24 months of this loan are interest-free with no interest accrual or required principal payments. Beginning in
July 2023, principal and interest payments are due quarterly at a fixed rate of 5% per annum based on a 5.5-year
amortization schedule until December 2028.These credit facilities are unsecured and subordinated to our
indebtedness to Gorham Savings Bank, which senior indebtedness is secured by mortgages and security interests
with respect to substantially all of our assets. Failure to make timely payments of principal and interest, or otherwise
to comply with the terms of the agreements with the MTI, would entitle the MTI to accelerate the maturity of such
debt and demand repayment in full. These loans may be prepaid without penalty at any time.
Debt proceeds received and principal repayments made during the years ended December 31, 2021 and 2020
are reflected in the following table by period and by loan:
Loan #1
Loan #2
Loan #3
Loan #4
Loan #5
Loan #6
Loan #7
Loan #8(1)
Loan #9
Loan #10
Loan #11
Total
During the Year
Ended December 31, 2021
During the Year
Ended December 31, 2020
Proceeds from
Debt Issuance
Debt Principal
Repayments
Proceeds from
Debt Issuance
Debt Principal
Repayments
$—
—
—
—
—
—
—
—
—
—
400,000
$400,000
$—
—
—
—
—
(115,860)
(460,637)
—
—
(191,774)
—
($768,271)
$—
—
—
—
—
5,100,000
3,500,000
937,700
500,000
1,500,000
—
$11,537,700
($493,696)
(2,143,771)
(3,236,429)
(2,336,000)
(309,182)
(720,001)
(334,489)
(937,700)
—
—
—
($10,511,268)
F-17
ImmuCell Corporation
Notes to Audited Financial Statements (continued)
(1) Loan #8 was forgiven by the federal government during the fourth quarter of 2020.
Principal payments (net of debt issue costs) due under bank loans outstanding as of December 31, 2021
(excluding our $1,000,000 line of credit) are reflected in the following table by the year that payments are due:
During the Years Ending December 31,
2022
2023
2024
2025
$120,291 $124,629 $128,725 $133,768
530,738
477,221
512,102
101,000
22,160
96,104
220,994
198,710
213,217
69,856
—
66,470
948,402 1,016,618 1,056,356
818,382
494,433
91,446
205,877
32,017
Loan #6
Loan #7
Loan #9
Loan #10
Loan #11
Subtotal
Debt issuance
costs
Total
2026
$138,592
549,881
106,146
228,965
73,415
1,096,999
Thereafter
Total
$3,618,135 $4,264,140
2,704,873
500,000
1,308,226
400,000
9,177,239
140,498
83,144
240,463
158,242
4,240,482
(8,662)
(37,910)
$4,231,820 $9,139,329
(6,175)
(5,768)
(5,768)
$812,207 $942,634 $1,010,850 $1,050,587 $1,091,231
(5,769)
(5,768)
11. CONTINGENT LIABILITIES AND COMMITMENTS
Our bylaws, as amended, in effect provide that the Company will indemnify its officers and directors to the
maximum extent permitted by Delaware law. In addition, we make similar indemnity undertakings to each director
through a separate indemnification agreement with that director. The maximum payment that we may be required to
make under such provisions is theoretically unlimited and is impossible to determine. We maintain directors’ and
officers’ liability insurance, which may provide reimbursement to the Company for payments made to, or on behalf
of, officers and directors pursuant to the indemnification provisions. Our indemnification obligations were
grandfathered under the provisions of Codification Topic 460, Guarantees. Accordingly, we have recorded no
liability for such obligations as of December 31, 2021. Since our incorporation, we have had no occasion to make
any indemnification payment to any of our officers or directors for any reason.
The development, manufacturing and marketing of animal health care products entails an inherent risk that
liability claims will be asserted against us during the normal course of business. We are aware of no such claims
against us as of the date of this filing. We feel that we have reasonable levels of liability insurance to support our
operations.
We enter into agreements with third parties in the ordinary course of business under which we are obligated to
indemnify such third parties from and against various risks and losses. The precise terms of such indemnities vary
with the nature of the agreement. In many cases, we limit the maximum amount of our indemnification obligations,
but in some cases those obligations may be theoretically unlimited. We have not incurred material expenses in
discharging any of these indemnification obligations and based on our analysis of the nature of the risks involved,
we believe that the fair value of the liabilities potentially arising under these agreements is minimal. Accordingly,
we have recorded no liabilities for such obligations as of December 31, 2021.
We are committed to purchasing certain key parts (syringes) and services (formulation, aseptic filling and final
packaging of Drug Product) pertaining to Re-Tain®, our Nisin-based intramammary treatment of subclinical
mastitis in lactating dairy cows, exclusively from contractors. We are investing in the necessary equipment to
perform the Drug Product formulation and aseptic filling services in-house.
During the first quarter of 2020, we entered into a Severance Agreement with our President and CEO. Under
the terms of this agreement, we agree to pay this executive (or his estate) nine months of his then current salary plus
any accrued and unused paid time off in the event of the involuntary termination of his employment by the Company
(except for cause) or in the event of termination by him for good reason.
In addition to the commitments discussed above, we had committed $1,405,000 to increase our production
capacity for the First Defense® product line, $356,000 to construct and equip our own Drug Product formulation
F-18
ImmuCell Corporation
Notes to Audited Financial Statements (continued)
and aseptic filling facility for Re-Tain®, $2,605,000 to the purchase of inventory, $116,000 to other capital
expenditures and $453,000 to other obligations as of December 31, 2021.
12. OPERATING LEASE
On September 12, 2019, we entered into a lease covering approximately 14,300 square feet of office and
warehouse space with a possession date of November 15, 2019 and a commencement date of February 13, 2020.
The property is located at 175 Industrial Way in Portland, which is a short distance from our headquarters and
manufacturing facility at 56 Evergreen Drive. We renovated this space to meet our needs in expanding our
production capacity for the First Defense® product line. The lease term is 10 years with a right to renew for a
second 10-year term and a right of first offer to purchase. At this time, we are not reasonably assured that we would
exercise this renewal option in place of other real estate options. A 10-year period is reflected in the right-of-use
(ROU) asset and lease liability on our balance sheet. The total lease liability over the initial 10-year term (including
inflationary adjustments) aggregates approximately $1,313,698 and includes real estate and personal property taxes,
utilities, insurance, maintenance and related building and operating expenses. Our lease includes variable lease and
non-lease components that are included in the ROU asset and lease liability. Such payments primarily include
common area maintenance charges and increases in rent payments that are driven by factors such as future changes
in an index, such as the Consumer Price Index. As of December 31, 2021, the balance of the operating lease ROU
asset was $1,109,133 and the operating lease liability was $1,135,169. The calculated amount of the ROU asset and
lease liability is impacted by the length of the lease term and the discount rate used for the present value of the
minimum lease payments. As we elected not to separate lease and non-lease components for all classes of
underlying assets, and instead to account for them as a single lease component, the variable lease cost primarily
represents variable payments such as real estate taxes and common area maintenance. The following table represents
lease costs and other lease information:
Lease Cost
Operating lease cost
Variable lease cost
Total lease cost
Operating Lease
Weighted average remaining lease term
(in years)
Weighted average discount rate
During the Years Ended December 31,
2021
2020
$117,996
41,400
$159,396
$104,094
36,523
$140,617
8.1
4.77%
9.1
4.77%
Future lease payments required under non-cancelable operating leases in effect as of December 31, 2021 were as
follows:
During the Years Ending December 31,
2022
2023
2024
2025
2026
Thereafter
Total lease payments (undiscounted cash flows)
Less: imputed interest (discount effect of cash flows)
Total operating liabilities
F-19
Amount
$162,102
165,120
168,210
171,383
174,640
559,664
1,401,119
(265,950)
$1,135,169
ImmuCell Corporation
Notes to Audited Financial Statements (continued)
13. STOCKHOLDERS’ EQUITY
Common Stock Issuances
From February 2016 to April 2021, we issued the aggregate of 4,553,017 shares of common stock in six
different transactions raising gross proceeds of approximately $26,714,000. These funds are essential to funding our
business growth plans. The details of each transaction are discussed below.
On October 28, 2015, we filed a registration statement on Form S-3 (File No. 333-207635) with the Securities
and Exchange Commission (SEC) for the potential issuance of up to $10,000,000 in equity securities (subject to
certain limitations). This registration statement became effective on November 10, 2015. Under this form of
registration statement, we were limited within a twelve-month period to raising gross proceeds of no more than one-
third of the market capitalization of our common stock (as determined by the high price of our common stock within
the preceding 60 days leading up to a sale of securities) held by non-affiliates (non-insiders) of the Company.
Having raised $10,000,000 in gross proceeds under the February 2016, July 2017 and December 2017 equity
transactions described below, no additional equity securities can be issued under this registration statement.
On February 3, 2016, we sold 1,123,810 shares of common stock at a price to the public of $5.25 per share in
an underwritten public offering pursuant to our effective shelf registration statement on Form S-3, raising gross
proceeds of approximately $5,900,000 and resulting in net proceeds to the Company of approximately $5,313,000
(after deducting underwriting discounts and offering expenses incurred in connection with the equity financing).
On October 21, 2016, we closed on a private placement of 659,880 shares of common stock to nineteen
institutional and accredited investors at $5.25 per share, raising gross proceeds of approximately $3,464,000 and
resulting in net proceeds to the Company of approximately $3,161,000 (after deducting placement agent fees and
other expenses incurred in connection with the equity financing).
On July 27, 2017, we issued 200,000 shares of our common stock at a price of $5.25 per share in a public,
registered sale to two related investors pursuant to our effective shelf registration statement on Form S-3, raising
gross proceeds of $1,050,000 and resulting in net proceeds of approximately $1,034,000 (after deducting expenses
incurred in connection with the equity financing).
On December 21, 2017, we sold 417,807 shares of common stock at a price to the public of $7.30 per share in
an underwritten public offering pursuant to our effective shelf registration statement on Form S-3, raising gross
proceeds of approximately $3,050,000 and resulting in net proceeds to the Company of approximately $2,734,000
(after deducting underwriting discounts and offering expenses incurred in connection with the equity financing).
On November 20, 2018, we filed a registration statement on Form S-3 (File No. 333-228479) with the Securities
and Exchange Commission (SEC) for the potential issuance of up to $20,000,000 in equity securities (subject to certain
limitations). This registration statement became effective on November 29, 2018. Under this form of registration
statement, we are limited within a twelve-month period to raising gross proceeds of no more than one-third of the market
capitalization of our common stock (as determined by the high price of our common stock within the preceding 60
days leading up to a sale of securities) held by non-affiliates (non-insiders) of the Company. Under SEC rules
governing this form of registration statement, this registration statement cannot be utilized subsequent to the third
anniversary of its effectiveness.
On March 29, 2019, we sold 1,636,364 shares of common stock at a price to the public of $5.50 per share in
an underwritten public offering pursuant to our effective shelf registration statement on Form S-3, raising gross
proceeds of approximately $9,000,000 and resulting in net proceeds to the Company of approximately $8,303,000
(after deducting underwriting discounts and offering expenses incurred in connection with the equity financing).
On April 14, 2021, we issued 515,156 shares of our common stock at a price of $8.25 per share in a public,
registered sale to seven investors pursuant to our effective shelf registration statement on Form S-3, raising gross
proceeds of approximately $4,250,000 and resulting in net proceeds of approximately $4,233,000 (after deducting
expenses incurred in connection with the equity financing).
F-20
ImmuCell Corporation
Notes to Audited Financial Statements (continued)
Stock Option Plans
In June 2010, our stockholders approved the 2010 Stock Option and Incentive Plan (the “2010 Plan”) pursuant
to the provisions of the Internal Revenue Code of 1986, under which employees and certain service providers may
be granted options to purchase shares of the Company’s common stock at no less than fair market value on the date
of grant. At that time, 300,000 shares of common stock were reserved for issuance under the 2010 Plan and
subsequently no additional shares have been reserved for the 2010 Plan. Vesting requirements are determined by the
Compensation and Stock Option Committee of the Board of Directors on a case-by-case basis. All options granted
under the 2010 Plan expire no later than 10 years from the date of grant. The 2010 Plan expired in June 2020, after
which date no further options can be granted under the 2010 Plan. However, options outstanding under the 2010
Plan at that time can be exercised in accordance with their terms. As of December 31, 2021, there were 218,500
options outstanding under the 2010 Plan.
In June 2017, our stockholders approved the 2017 Stock Option and Incentive Plan (the “2017 Plan”) pursuant
to the provisions of the Internal Revenue Code of 1986, under which employees and certain service providers may
be granted options to purchase shares of the Company’s common stock at no less than fair market value on the date
of grant. At that time, 300,000 shares of common stock were reserved for issuance under the 2017 Plan and
subsequently no additional shares have been reserved for the 2017 Plan. Vesting requirements are determined by the
Compensation and Stock Option Committee of the Board of Directors on a case-by-case basis. All options granted
under the 2017 Plan expire no later than 10 years from the date of grant. The 2017 Plan expires in March 2027, after
which date no further options can be granted under the 2017 Plan. However, options outstanding under the 2017
Plan at that time can be exercised in accordance with their terms. As of December 31, 2021, there were 224,500
options outstanding under the 2017 Plan.
Activity under the stock option plans described above was as follows:
Outstanding as of December 31, 2019
Grants
Terminations/forfeitures
Exercises
Outstanding as of December 31, 2020
Grants
Terminations/forfeitures
Exercises
Outstanding as of December 31, 2021
Vested as of December 31, 2021
Vested and expected to vest as of
December 31, 2021
Reserved for future grants
(1)
2010 Plan
2017 Plan
Weighted
Average
Exercise Price
Aggregate
Intrinsic
Value(1)
($516,475)
255,000
7,000
(12,000)
(12,500)
237,500
—
(12,000)
(7,000)
218,500
184,500
133,500
93,000
(50,000)
—
176,500
86,000
(20,000)
(18,000)
224,500
98,500
$6.48
$5.03
$5.45
$3.15
$6.38
$9.78
$7.26
$7.08
$6.94
$6.78
($180,038)
$468,425
$345,350
218,500
—
224,500
57,500
$6.94
$468,425
Intrinsic value is the difference between the fair market value of the underlying common stock as of the date
indicated and as of the date of the option grant (which is equal to the option exercise price).
F-21
ImmuCell Corporation
Notes to Audited Financial Statements (continued)
The following table displays additional information about the stock option plans described above:
Non-vested stock options as of January 1, 2021
Non-vested stock options as of December 31, 2021
Stock options granted during the year ended December 31, 2021
Stock options that vested during the year ended December 31, 2021
Stock options that were forfeited during the year ended December 31,
2021
Weighted
Average
Fair Value at
Grant Date
Weighted
Average
Exercise
Price
Number of
Shares
248,000
160,000
86,000
147,000
$3.25
$3.36
$4.51
$3.74
32,000
$3.81
$6.44
$7.23
$9.78
$7.33
$7.26
During the year ended December 31, 2021, one director and three employees exercised stock options covering
25,000 shares by the surrender of 17,128 shares of common stock with a fair market value of $165,337 at the time of
exercise and the payment of $11,693 in cash. During the year ended December 31, 2020, two employees exercised
stock options covering 12,500 shares by the surrender of 6,583 stock options with a fair market value of the underly-
ing common stock equal to $39,366 at the time of exercise and the payment of $9 in cash.
The weighted average remaining life of the options outstanding under the 2010 Plan and the 2017 Plan as of
December 31, 2021 was approximately 5 years. The weighted average remaining life of the options exercisable
under these plans as of December 31, 2021 was approximately 4 years and 3 months. The exercise prices of the
options outstanding as of December 31, 2021 ranged from $4.00 to $10.04 per share. The 86,000 stock options
granted during the year ended December 31, 2021 had exercise prices between $6.10 and $10.04 per share. The
100,000 stock options granted during the year ended December 31, 2020 had exercise prices between $4.00 and
$6.37 per share. The aggregate intrinsic value of options exercised during the years ended December 31, 2021 and
2020 approximated $64,977 and $35,375, respectively. The weighted-average grant date fair values of options
granted during the years ended December 31, 2021 and 2020 were $4.51 and $2.47 per share, respectively. As of
December 31, 2021, total unrecognized stock-based compensation related to non-vested stock options aggregated
$349,477, which will be recognized over a weighted average remaining period of 1 year and 10 months. The fair
value of each stock option grant has been estimated on the date of grant using the Black-Scholes option pricing
model, for the purpose discussed in Note 2(m), with the following weighted-average assumptions:
Risk-free interest rate
Dividend yield
Expected volatility
Expected life
During the Years Ended December 31,
2021
2020
0.86%
0%
54%
5.0 years
0.41%
0%
53%
6.1 years
The risk-free interest rate is based on U.S. Treasury yields for a maturity approximating the expected option
term, while the other assumptions are derived from averages of our historical data.
Common Stock Rights Plan
In September 1995, our Board of Directors adopted a Common Stock Rights Plan (the “Rights Plan”) and
declared a dividend of one common share purchase right (a “Right”) for each of the then outstanding shares of the
common stock of the Company. Each Right entitles the registered holder to purchase from the Company one share
of common stock at an initial purchase price of $70.00 per share, subject to adjustment. The description and terms of
the Rights are set forth in a Rights Agreement between the Company and American Stock Transfer & Trust Co., as
Rights Agent.
The Rights (as amended) become exercisable and transferable apart from the common stock upon the earlier
of i) 10 days following a public announcement that a person or group (Acquiring Person) has, without the prior
consent of the Continuing Directors (as such term is defined in the Rights Agreement), acquired beneficial
F-22
ImmuCell Corporation
Notes to Audited Financial Statements (continued)
ownership of 20% or more of the outstanding common stock or ii) 10 days following commencement of a tender
offer or exchange offer the consummation of which would result in ownership by a person or group of 20% or more
of the outstanding common stock (the earlier of such dates being called the Distribution Date).
Upon the Distribution Date, the holder of each Right not owned by the Acquiring Person would be entitled to
purchase common stock at a discount to the initial purchase price of $70.00 per share, effectively equal to one half
of the market price of a share of common stock on the date the Acquiring Person becomes an Acquiring Person. If,
after the Distribution Date, the Company should consolidate or merge with any other entity and the Company were
not the surviving company, or, if the Company were the surviving company, all or part of the Company’s common
stock were changed or exchanged into the securities of any other entity, or if more than 50% of the Company’s
assets or earning power were sold, each Right would entitle its holder to purchase, at the Rights’ then-current
purchase price, a number of shares of the acquiring company’s common stock having a market value at that time
equal to twice the Right’s exercise price.
At any time after a person or group becomes an Acquiring Person and prior to the acquisition by such person
or group of 50% or more of the outstanding common stock, the Board of Directors of the Company may exchange
the Rights (other than Rights owned by such person or group which have become void), in whole or in part, at an
exchange ratio of one share of common stock per Right (subject to adjustment). At any time prior to 14 days
following the date that any person or group becomes an Acquiring Person (subject to extension by the Board of
Directors), the Board of Directors of the Company may redeem the then outstanding Rights in whole, but not in part,
at a price of $0.005 per Right, subject to adjustment.
At various times over the years, our Board of Directors has voted to authorize amendments of the Rights
Agreement to extend the Final Expiration Date, which is currently September 19, 2022. Our Board of Directors also
has voted to authorize amendments to increase the ownership threshold for determining “Acquiring Person” status to
20%. During the second quarter of 2015, our Board of Directors also voted to authorize an amendment to remove a
provision that prevented a new group of directors elected following the emergence of an Acquiring Person (an owner of
more than 20% of our stock) from controlling the Rights Plan by maintaining exclusive authority over the Rights Plan
with pre-existing directors. We did this because such provisions have come to be viewed with disfavor by Delaware
courts. Each time that we made such amendments we entered into amendments to the Rights Agreement with the
Rights Agent reflecting such extensions, threshold increases or provision changes. No other changes have been made
to the terms of the Rights or the Rights Agreement.
Authorized Common Stock
At the June 14, 2018 Annual Meeting of Stockholders, our stockholders voted to approve an amendment to our
Certificate of Incorporation to increase the number of shares of common stock authorized for issuance from 8,000,000
to 11,000,000. At the June 10, 2020 Annual Meeting of Stockholders, our stockholders voted to approve an
amendment to our Certificate of Incorporation to increase the number of shares of common stock authorized for
issuance from 11,000,000 to 15,000,000.
14. REVENUE
We primarily offer the First Defense product line to dairy and beef producers to prevent scours in newborn
calves. Generally, our products are promoted to veterinarians as well as dairy and beef producers by our sales team
and then sold through distributors. Our primary market is North America. We do sell into select international regions
and may expand this international reach in the future. There were no material changes between the allocation and
timing of revenue recognition during the years ended December 31, 2021 or 2020. We do not have any contract as-
sets for which we have satisfied the performance obligations, but do not yet have the right to bill for, or contract lia-
bilities such as customer advances. All trade receivables on our balance sheets are from contracts with customers.
We incur no material costs to obtain contracts.
F-23
ImmuCell Corporation
Notes to Audited Financial Statements (continued)
The following table presents our product sales disaggregated by geographic area:
United States
Other
Total Product Sales
During the Years Ended December 31,
2021
$16,620,363
2,622,606
$19,242,969
%
86%
14%
100%
2020
$13,644,768
1,697,436
$15,342,204
%
89%
11%
100%
The following table presents our product sales disaggregated by major product category:
First Defense® product line
Other animal health
Total Product Sales
During the Years Ended December 31,
2021
$18,933,092
309,877
$19,242,969
%
98%
2%
100%
2020
$15,072,446
269,758
$15,342,204
%
98%
2%
100%
Our primary customers for the majority of our product sales (86% and 89% during the years ended December
31, 2021 and 2020, 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 14% and 11% of our total product sales during the years
ended December 31, 2021 and 2020, respectively.
15. OTHER EXPENSES (INCOME), NET
Other expenses (income), net, consisted of the following:
Interest expense(1)
Interest rate swap termination fee
Debt forgiveness
Loss on disposal of fixed assets
Interest income
Other expenses (income), net
During the Years Ended December 31,
2021
2020
$314,359
—
—
30,963
(18,810)
$326,512
$412,687
165,050
(937,700)
39,303
(27,440)
($348,100)
(1) Interest expense during the year ended December 31, 2020 included a $94,782 write-off of debt issuance
costs associated with debt that we repaid during the first quarter of 2020. Interest expense included amortization of
debt issuance costs of $7,841 and $7,942 during the years ended December 31, 2021 and 2020, respectively.
16. INCOME TAXES
Our income tax expense (benefit) aggregated $9,165 and ($10,136) (amounting to 13% and (1%) of our loss
before income taxes) during the years ended December 31, 2021 and 2020, respectively. As of December 31, 2021,
we had federal net operating loss carryforwards of $14,734,684 of which $13,022,777 do not expire and of which
$1,711,907 expire in 2034 through 2037 (if not utilized before then) and state net operating loss carryforwards of
$1,440,707 that expire in 2037 through 2038 (if not utilized before then). Additionally, we had federal general
business tax credit carryforwards of $557,795 that expire in 2027 through 2042 (if not utilized before then) and state
tax credit carryforwards of $775,473 that expire in 2022 through 2042 (if not utilized before then).
The provision for income taxes is determined using the asset and liability approach of accounting for income
taxes. Under this approach, deferred taxes represent the estimated future tax effects of temporary differences
between book and tax treatment of assets and liabilities and carryforwards to the extent they are realizable. During
the second quarter of 2018, we assessed our historical and near-term future profitability and recorded $563,252 in non-cash
income tax expense to create a full valuation allowance against our net deferred tax assets (which consist largely of net
operating loss carryforwards and federal and state credits) based on applicable accounting standards and practices. At that
time, we had incurred a net loss for six consecutive quarters, had not been profitable on a year-to-date basis since the nine-
F-24
ImmuCell Corporation
Notes to Audited Financial Statements (continued)
month period ended September 30, 2017 and projected additional net losses for some period going forward before returning
to profitability. Should future profitability be realized at an adequate level, we would be able to release this valuation
allowance (resulting in a non-cash income tax benefit) and realize these deferred tax assets before they expire. We will
continue to assess the need for the valuation allowance at each quarter and, in the event that actual results differ from these
estimates, or we adjust these estimates in future periods, we may need to adjust our valuation allowance. Adjustments related
to the termination of our interest rate swap agreements were recorded during the first quarter of 2020. No subsequent
adjustments were recorded.
Net operating loss carryforwards, credits, and other tax attributes are subject to review and possible
adjustment by the Internal Revenue Service. Section 382 of the Internal Revenue Code contains provisions that
could place annual limitations on the future utilization of net operating loss carryforwards and credits in the event of
a change in ownership of the Company, as defined.
We file income tax returns in the U.S. federal jurisdiction and several state jurisdictions. We currently have no
tax examinations in progress. We also have not paid additional taxes, interest or penalties as a result of tax
examinations nor do we have any unrecognized tax benefits for any of the periods in the accompanying audited
financial statements.
The income tax provision consisted of the following:
Current
Federal
State
Current subtotal
Deferred
Federal
State
Deferred subtotal, gross
Valuation allowance
Deferred subtotal, net
Income tax expense (benefit)
During the Years Ended December 31,
2021
2020
$—
9,165
9,165
(63,097)
(14,990)
(78,087)
78,087
—
$9,165
$—
4,496
4,496
(418,295)
(24,337)
(442,632)
428,000
(14,632)
($10,136)
The actual income tax expense differs from the expected tax computed by applying the U.S. federal corporate
tax rate of 21% to the loss before income taxes during the years ended December 31, 2021 and 2020 respectively, as
follows:
Computed expected income tax expense rate
State income taxes, net of federal expense
Share-based compensation
Tax credits
Valuation allowance
Paycheck Protection Program loan forgiveness
Other
Income tax expense (benefit)/rate
During the Years Ended December 31,
2021
2020
$
%
$
%
($14,517)
7,522
13,716
(21.00%)
10.88
19.84
(79,901) (115.58)
112.96
78,087
—
—
4,258
6.16
$9,165 13.26%
($216,773)
(15,674)
30,121
(55,180)
428,000
(196,917)
16,287
($10,136)
(21.00%)
(1.52)
2.92
(5.35)
41.46
(19.08)
1.59
(0.98%)
F-25
ImmuCell Corporation
Notes to Audited Financial Statements (continued)
The significant components of our deferred tax assets, net, consisted of the following:
Product rights
Property, plant and equipment
Federal general business tax credits
Federal net operating loss carryforwards
State tax credits carryover
Prepaid expenses and other
UNICAP
Incentive compensation
Valuation allowance
Deferred tax assets, net
17. SEGMENT INFORMATION
As of December 31,
2021
$—
(2,483,145)
557,795
3,094,283
809,618
(6,289)
14,178
57,001
(2,043,441)
$—
2020
$444
(2,482,237)
490,018
3,074,882
826,091
(8,814)
11,791
53,179
(1,965,354)
$—
Our business operations (being the development, acquisition, manufacture and sale of products that improve
the health and productivity of dairy and beef cattle) are described in Note 1. Pursuant to Codification Topic 280,
Segment Reporting, we operate in the following two reportable business segments: i) First Defense® and ii) Re-
Tain®. The significant accounting policies of these segments are described in Note 2. Product sales are the primary
factor we use in determining our reportable segments. The governing regulatory authority (USDA or FDA) is also a
factor in determining our reportable segments. Management monitors and evaluates segment performance from sales
to net operating income (loss) closely. We are not organized by geographic region. No segments have been
aggregated. The revenues and expenses allocated to each segment are in some cases direct and in other cases involve
reasonable and consistent estimations by management. Each operating segment is defined as the component of our
business for which financial information is available and evaluated regularly by our chief operating decision-maker
in deciding how to allocate resources and in assessing performance. Our chief operating decision-maker is our
President and CEO.
Product sales
Costs of goods sold
Gross margin
OPERATING EXPENSES:
Product development expenses
Sales and marketing expenses
Administrative expenses
Operating expenses
During the Year Ended December 31, 2021
First Defense®
$18,933,092
10,411,936
8,521,156
Re-Tain®
Unallocated
$—
—
—
$309,877
175,104
134,773
Total
$19,242,969
10,587,040
8,655,929
25,374
1,942,391
—
1,967,765
3,887,781
561,288
—
4,449,069
255,363
247
1,726,100
1,981,710
4,168,518
2,503,926
1,726,100
8,398,544
NET OPERATING INCOME (LOSS)
$6,553,391
($4,449,069)
($1,846,937)
$257,385
F-26
ImmuCell Corporation
Notes to Audited Financial Statements (continued)
Product sales
Costs of goods sold
Gross margin
OPERATING EXPENSES:
Product development expenses
Sales and marketing expenses
Administrative expenses
Operating expenses
During the Year Ended December 31, 2020
First Defense®
$15,072,446
8,285,073
6,787,373
Re-Tain®
Unallocated
$—
—
—
$269,758
194,305
75,453
Total
$15,342,204
8,479,378
6,862,826
106,393
2,119,289
—
2,225,682
4,022,712
48,600
—
4,071,312
225,522
10
1,720,653
1,946,185
4,354,627
2,167,899
1,720,653
8,243,179
NET OPERATING INCOME (LOSS)
$4,561,691
($4,071,312)
($1,870,732)
($1,380,353)
Total Assets as of December 31, 2021
Total Assets as of December 31, 2020
Depreciation and amortization expense
during the year ended December 31, 2021
Depreciation and amortization expense
during the year ended December 31, 2020
Capital Expenditures
First Defense®
Re-Tain®
$22,476,870
$18,416,157
$21,988,818
$21,933,437
Total
$44,465,688
$40,349,594
$1,095,620
$1,373,361
$2,468,981
$1,003,577
$1,446,430
$2,450,007
during the year ended December 31, 2021
$1,655,866
$952,783
$2,608,649
Capital Expenditures
during the year ended December 31, 2020
$3,454,076
$618,463
$4,072,539
18. RELATED PARTY TRANSACTIONS
David S. Tomsche (Chair of our Board of Directors) is a controlling owner of Leedstone Inc., a domestic
distributor of ImmuCell products (the First Defense product line and CMT), and of J-t Enterprises of Melrose, Inc.,
an exporter. His affiliated companies purchased $651,424 and $668,308 of products from us during the years ended
December 31, 2021 and 2020, respectively, on terms consistent with those offered to other distributors of similar
status. We made marketing-related payments of $0 and $975 to these affiliated companies during the years ended
December 31, 2021 and 2020, respectively, which represent amounts similar to those offered to other distributors of
similar status. Our accounts receivable (subject to standard and customary payment terms) due from these affiliated
companies aggregated $55,490 and $51,286 as of December 31, 2021 and 2020, respectively.
19. EMPLOYEE BENEFITS
We have a 401(k) savings plan (the Plan) in which all employees completing one month of service with the
Company are eligible to participate. Participants may contribute up to the maximum amount allowed by the Internal
Revenue Service. We currently match 100% of the first 3% of each employee’s salary that is contributed to the Plan
and 50% of the next 2% of each employee’s salary that is contributed to the Plan. Under this matching plan, we paid
$139,401 and $131,217 into the Plan for the years ended December 31, 2021 and 2020, respectively.
20. SUBSEQUENT EVENTS
We have evaluated subsequent events through the time of filing on March 30, 2022, the date we have issued
this Annual Report on Form 10-K. On March 23, 2022, we (a) extended our existing $1.0 million line of credit with
Gorham Savings Bank (GSB) until March 11, 2024, and (b) increased our mortgage borrowing from GSB by $2.0
million, resulting in the initial principal balance of $6,233,956 being subject to repayment on the basis of a 20-year
amortization schedule payable over a 10-year term at a blended interest rate of 3.53% per annum, under which a
F-27
ImmuCell Corporation
Notes to Audited Financial Statements (continued)
balloon payment of $3,682,918 plus accrued interest would become due on March 11, 2032. The revised mortgage
note is secured by a mortgage on our premises located at 56 Evergreen Drive and 33 Caddie Lane in Portland,
Maine. As of the time of filing on March 30, 2022, there were no other material, reportable subsequent events.
F-28
ImmuCell Corporation
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
ImmuCell Corporation
Registrant
Date: March 30, 2022
By:
/s/ Michael F. Brigham
Michael F. Brigham President, Chief Executive Officer and
Principal Financial Officer
POWER OF ATTORNEY
We, the undersigned directors of ImmuCell Corporation, hereby severally constitute and appoint Michael F.
Brigham our true and lawful attorney-in-fact and agent with full power of substitution and re-substitution, for us and
in our stead, in any and all capacities, to sign any and all amendments to this report and all documents relating
thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do
and perform each and every act and thing necessary or advisable to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact
and agent, or his substitute or substitutes, may lawfully do or to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Gloria J. Basse
Gloria J. Basse
Director
/s/ Michael F. Brigham
Michael F. Brigham
President, Chief Executive Officer
Principal Financial Officer and Director
March 23, 2022
March 23, 2022
/s/ Bobbi Jo Brockmann
Bobbi Jo Brockmann
/s/ David S. Cunningham
David S. Cunningham
/s/ Steven T. Rosgen
Steven T. Rosgen
/s/ David S. Tomsche
David S. Tomsche, DVM
/s/ Paul R. Wainman
Paul R. Wainman
Vice President of Sales and Marketing and Director
March 23, 2022
Director
Director
Director
Director
March 23, 2022
March 23, 2022
March 23, 2022
March 23, 2022
ImmuCell Corporation
EXHIBIT 31
CERTIFICATIONS REQUIRED BY RULE 13a-14(a)
I, Michael F. Brigham, certify that:
1.
I have reviewed this Annual Report on Form 10-K of ImmuCell Corporation (the Company);
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit
2.
to state a material fact necessary to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition, results of operations and cash flows of
the Company as of, and for, the periods presented in this report;
4.
I am responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Ex-
change Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under my supervision, to ensure that material information relating to the Company is made known to
me by others within the Company, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial re-
porting to be designed under my supervision, to provide reasonable assurance regarding the reliability of fi-
nancial reporting and the preparation of financial statements for external purposes in accordance with gener-
ally accepted accounting principles;
c) evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report
my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
d) disclosed in this report any change in the Company’s internal control over financial reporting that occurred
during the Company’s most recent fiscal quarter (the Company’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the Company’s internal control
over financial reporting; and
5.
I have disclosed, based on my most recent evaluation of internal control over financial reporting, to
the Company’s auditors and the audit committee of the Company’s Board of Directors (or persons perform-
ing the equivalent function):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over fi-
nancial reporting which are reasonably likely to adversely affect the Company’s ability to record, process,
summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant
role in the Company’s internal control over financial reporting.
Date: March 30, 2022
/s/ Michael F. Brigham
Michael F Brigham
President, Chief Executive Officer and Principal Financial Officer
ImmuCell Corporation
EXHIBIT 32
CERTIFICATION PURSUANT TO SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES- OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-K of ImmuCell Corporation (the “Company”) for the period
ended December 31, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”),
I, Michael F. Brigham, President, Chief Executive Officer and Principal Financial Officer of the Company, certify,
pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Ex-
change Act of 1934, as amended (the “Exchange Act”); and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition, results of
operations and cash flows of the Company.
This certification is provided pursuant to 18 U.S.C. Section 1350 and Item 601(b)(32) of Regulation S-K (“Item
601(b)(32)”) promulgated under the Securities Act of 1933, as amended (the “Securities Act”), and the Exchange
Act. In accordance with clause (ii) of Item 601(b)(32), this certification (A) shall not be deemed “filed” for the pur-
poses of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and (B) shall not be
deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the
extent that the Company specifically incorporates it by reference.
/s/ Michael F. Brigham
Michael F. Brigham
President, Chief Executive Officer and Principal Financial Officer
March 30, 2022
A signed original of this written statement required by Section 906 has been provided to ImmuCell Corporation and
will be retained by ImmuCell Corporation and furnished to the Securities and Exchange Commission or its staff
upon request.