UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2024

001-12934

(Commission file number)

ImmuCell Corporation

(Exact name of registrant as specified in its charter)

Delaware

01-0382980

(State of Incorporation)

(I.R.S. Employer

Identification No.)

56 Evergreen Drive, Portland, ME		04103
(Address of principal executive office)		(Zip Code)

(207) 878-2770

(Registrant’s telephone number)

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of each class		Trading symbol(s)		Name of each exchange on which registered
Common Stock, $0.10 par value per share		ICCC		The Nasdaq Capital Market

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 and posted pursuant to Rule 405 of Regulation S-T 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, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of the registrant’s common stock outstanding as of August 2, 2024 was 7,833,080.

ImmuCell Corporation

TABLE OF CONTENTS

June 30, 2024

PART I: FINANCIAL INFORMATION

ITEM 1.	Unaudited Financial Statements

	Balance Sheets as of June 30, 2024 and December 31, 2023	1

	Statements of Operations during the three-month and six-month periods ended June 30, 2024 and 2023	2

	Statements of Stockholders’ Equity during the three-month and six-month periods ended June 30, 2024 and 2023	3

	Statements of Cash Flows during the six-month periods ended June 30, 2024 and 2023	4-5

	Notes to Unaudited Financial Statements	6-25

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26-45

ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	45

ITEM 4.	Controls and Procedures	45

PART II: OTHER INFORMATION

ITEM 1 THROUGH 6.		46-55

	Signature	56

ImmuCell Corporation

Part 1. FINANCIAL INFORMATION

ITEM 1. UNAUDITED FINANCIAL STATEMENTS

BALANCE SHEETS

(Unaudited)

	As of June 30, 2024			As of December 31, 2023
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	1,324,285		$	978,741
Trade accounts receivable		1,950,450			2,185,383
Inventory		7,299,606			7,811,841
Prepaid expenses and other current assets		219,571			493,885
Total current assets		10,793,912			11,469,850

Property, plant and equipment, net		26,397,059			27,575,683
Operating lease right-of-use asset		4,502,595			4,571,149
Goodwill		95,557			95,557
Intangible assets, net		28,656			38,208
Other assets		37,679			57,655
TOTAL ASSETS	$	41,855,458		$	43,808,102

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Current portion of debt obligations	$	1,461,216		$	1,428,807
Current portion of operating lease liability		533,315			644,276
Accounts payable and accrued expenses		2,562,571			2,124,337
Total current liabilities		4,557,102			4,197,420

LONG-TERM LIABILITIES:
Debt obligations, net of current portion		9,798,247			10,540,496
Operating lease liability, net of current portion		4,044,646			4,077,109
Total long-term liabilities		13,842,893			14,617,605

TOTAL LIABILITIES		18,399,995			18,815,025

CONTINGENT LIABILITIES AND COMMITMENTS (See Note 11)

STOCKHOLDER’ EQUITY:
Common stock, $0.10 par value per share, 15,000,000 and 15,000,000 shares authorized, 7,896,381 and 7,814,165 shares issued and 7,833,080 and 7,750,864 shares outstanding, as of June 30, 2024 and December 31, 2023, respectively.		789,639			781,417
Additional paid-in capital		36,780,897			36,357,239
Accumulated deficit		(13,976,591	)		(12,007,097	)
Treasury stock, at cost, 63,301 shares as of both June 30, 2024 and December 31, 2023		(138,482	)		(138,482	)
TOTAL STOCKHOLDERS’ EQUITY		23,455,463			24,993,077

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	41,855,458		$	43,808,102

The accompanying notes are an integral part of these unaudited financial statements.

ImmuCell Corporation

STATEMENTS OF OPERATIONS

(Unaudited)

	During the Three-Month Periods Ended June 30,						During the Six-Month Periods Ended June 30,
	2024			2023			2024			2023
Product sales	$	5,472,890		$	3,532,681		$	12,730,467		$	6,979,207
Costs of goods sold		4,242,404			2,488,793			9,204,622			5,634,544
Gross margin		1,230,486			1,043,888			3,525,845			1,344,663

Product development expenses		1,030,502			1,099,538			2,293,053			2,209,907
Sales and marketing expenses		984,957			719,789			1,785,880			1,599,216
Administrative expenses		601,634			529,056			1,133,572			1,096,074
Operating expenses		2,617,093			2,348,383			5,212,505			4,905,197

NET OPERATING LOSS		(1,386,607	)		(1,304,495	)		(1,686,660	)		(3,560,534	)

Other expenses, net		143,679			73,694			280,154			131,183

LOSS BEFORE INCOME TAXES		(1,530,286	)		(1,378,189	)		(1,966,814	)		(3,691,717	)

Income tax expense		1,340			1,525			2,680			3,050

NET LOSS	$	(1,531,626	)	$	(1,379,714	)	$	(1,969,494	)	$	(3,694,767	)

Basic weighted average common shares outstanding		7,810,037			7,746,864			7,780,450			7,746,864
Basic net loss per share	$	(0.20	)	$	(0.18	)	$	(0.25	)	$	(0.48	)
Diluted weighted average common shares outstanding		7,810,037			7,746,864			7,780,450			7,746,864
Diluted net loss per share	$	(0.20	)	$	(0.18	)	$	(0.25	)	$	(0.48	)

The accompanying notes are an integral part of these unaudited financial statements.

ImmuCell Corporation

STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

	Common Stock									Treasury Stock
	Shares		Amount		Additional paid-in capital		Accumulated Deficit			Shares		Amount			Total Stockholders’ Equity
During the Three-Month Period Ended June 30, 2024:
BALANCE, March 31, 2024		7,814,165	$	781,417	$	36,438,349	$	(12,444,965	)		63,301	$	(138,482	)	$	24,636,319
Net loss		—		—		—		(1,531,626	)		—		—			(1,531,626	)
At-The-Market Offering of common stock, net of $164,802 of offering costs		82,216		8,222		244,527		—			—		—			252,749
Stock-based compensation		—		—		98,021		—			—		—			98,021
BALANCE, June 30, 2024		7,896,381	$	789,639	$	36,780,897	$	(13,976,591	)		63,301	$	(138,482	)	$	23,455,463

During the Three-Month Period Ended June 30, 2023:
BALANCE, March 31, 2023		7,814,165	$	781,417	$	36,074,480	$	(8,547,552	)		67,301	$	(147,233	)	$	28,161,112
Net loss		—		—		—		(1,379,714	)		—		—			(1,379,714	)
Stock-based compensation		—		—		75,657		—			—		—			75,657
BALANCE, June 30, 2023		7,814,165	$	781,417	$	36,150,137	$	(9,927,266	)		67,301	$	(147,233	)	$	26,857,055

During the Six-Month Period Ended June 30, 2024:
BALANCE, December 31, 2023		7,814,165	$	781,417	$	36,357,239	$	(12,007,097	)		63,301	$	(138,482	)	$	24,993,077
Net loss		—		—		—		(1,969,494	)		—		—			(1,969,494	)
At-The-Market Offering of common stock, net of $164,802 of offering costs		82,216		8,222		244,527		—			—		—			252,749
Stock-based compensation		—		—		179,131		—			—		—			179,131
BALANCE, June 30, 2024		7,896,381	$	789,639	$	36,780,897	$	(13,976,591	)		63,301	$	(138,482	)	$	23,455,463

During the Six-Month Period Ended June 30, 2023:
BALANCE, December 31, 2022		7,814,165	$	781,417	$	35,978,364	$	(6,232,499	)		67,301	$	(147,233	)	$	30,380,049
Net loss		—		—		—		(3,694,767	)		—					(3,694,767	)
Stock-based compensation		—		—		171,773		—			—		—			171,773
BALANCE, June 30, 2023		7,814,165	$	781,417	$	36,150,137	$	(9,927,266	)		67,301	$	(147,233	)	$	26,857,055

The accompanying notes are an integral part of these unaudited financial statements.

ImmuCell Corporation

STATEMENTS OF CASH FLOWS

(Unaudited)

	During the Six-Month Periods Ended June 30,
	2024			2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(1,969,494	)	$	(3,694,767	)
Adjustments to reconcile net loss to net cash provided by (used for) operating activities:
Depreciation		1,328,659			1,332,153
Amortization of intangible assets		9,552			9,552
Amortization of debt issuance costs		10,608			3,838
Amortization of debt discounts		10,446			—
Stock-based compensation		179,131			171,773
Loss on disposal of property, plant and equipment		14,557			8,167
Non-cash rent (benefit) expense		(74,871	)		28,901
Changes in:
Trade accounts receivable		234,933			259,752
Inventory		512,235			(1,497,442	)
Prepaid expenses and other current assets		274,314			(50,325	)
Other assets		19,976			(5,831	)
Accounts payable and accrued expenses		450,239			(9,182	)
Net cash provided by (used for) operating activities		1,000,285			(3,443,411	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment		(181,097	)		(1,390,654	)
Proceeds from sale of property, plant and equipment		4,500			91
Net cash used for investing activities		(176,597	)		(1,390,563	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from At-The-Market Offering, net		252,749			—
Proceeds from line of credit		—			1,000,000
Debt principal repayments		(725,856	)		(503,277	)
Payments of debt issuance costs		(5,037	)		—
Net cash (used for) provided by financing activities		(478,144	)		496,723

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		345,544			(4,337,251	)

BEGINNING CASH AND CASH EQUIVALENTS		978,741			5,791,562

ENDING CASH AND CASH EQUIVALENTS	$	1,324,285		$	1,454,311

The accompanying notes are an integral part of these unaudited financial statements.

ImmuCell Corporation

STATEMENTS OF CASH FLOWS

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

(Unaudited)

	During the Six-Month Periods Ended June 30,
	2024			2023
CASH PAID FOR:
Income taxes	$	5,905		$	7,205
Interest expense	$	270,068		$	176,451

NON-CASH ACTIVITIES:
Decrease (increase) in capital expenditures included in accounts payable and accrued expenses	$	12,005		$	(58,835	)
(Decrease) increase in operating lease right-of-use asset and operating lease liability	$	(17,012	)	$	2,090,298

The accompanying notes are an integral part of these unaudited financial statements.

ImmuCell Corporation

Notes to Unaudited 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 an 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. We focus on the two most critical stages of dairy productivity, those being the first 30 days of life and the first 30 days of lactation. Our concentrated colostrum and purified Nisin technologies offer unique animal health solutions during these periods when immunity is at its most vulnerable. As disclosed in Note 17, “Segment Information”, one of our business segments is dedicated to Scours and the other is focused on Mastitis. We manufacture and market the First Defense^® product line, providing Immediate Immunity™ to prevent scours in newborn dairy and beef calves. We have expanded this line into four different products with formulations targeting E. coli, coronavirus and rotavirus pathogens. We are also in the late stages of developing Re-Tain^®, a treatment for lactating dairy cows with subclinical mastitis. Mastitis is 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 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 of new viable products with appropriate regulatory approvals, where applicable. A combination of the conditions, trends and concerns related to or arising from inflation, rising interest rates and potential recessionary conditions in the United States and/or internationally, could have a corresponding negative effect on our business and operations. We are experiencing price increases in key components, supportive services, transportation and other supplies that are causing our costs of goods sold to increase. We have historically experienced some contamination events in our production process, as disclosed previously. We implemented a production slowdown during 2023 to remediate this problem, which led to the recognition of lower sales and gross margin.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of Presentation

We have prepared the accompanying unaudited 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 accurately 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 and Cash Equivalents

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. We hold no cash or cash equivalents in excess of Federal Deposit Insurance Corporation (FDIC) limits of $250,000 per financial institution per depositor. See Note 3.

(c) Trade Accounts Receivable

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 and other relevant factors. 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. It was not necessary to charge interest on past due accounts during the six-month periods ended June 30, 2024 or 2023 because the time past due was not significant, and there was no accrual for such interest charges as of June 30, 2024 or December 31, 2023. Accounts receivable are written off when deemed uncollectible. No accounts receivable were written off during the six-month periods ended June 30, 2024 or 2023. Recoveries of accounts receivable previously written off are recorded as income when received. No such recoveries were recorded during the six-month periods ended June 30, 2024 or 2023. As of June 30, 2024 and December 31, 2023, 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.

ImmuCell Corporation

Notes to Unaudited Financial Statements (continued)

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. 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 (DS) for Re-Tain^® (Building 33) 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 DS facility when it was placed in service during the third quarter of 2018. Approximately 86% 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 (Building 175A) over the remainder of the 10-year lease term beginning when a Certificate of Occupancy was issued during the second quarter of 2020. During August of 2022, this lease term was extended to January of 2043 in connection with a new lease covering additional space at 175 Industrial Way (Building 175B). As a result, the net book value of these leasehold improvements as of August 31, 2022 is now being depreciated over the remainder of the extended lease term. Significant repairs to property, plant and equipment that benefit more than a current period are capitalized and depreciated over their useful lives. Insignificant repairs are expensed when incurred. See Notes 2(h) and 7 for additional information.

(f) Operating Leases

We account for our real estate leases using a right-of-use model, which recognizes that at the date of commencement, a lessee has a financial obligation to make lease payments to the lessor for the right to use the underlying asset during the lease term and recognizes a corresponding right-of-use (ROU) asset related to this right. ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of the future lease payments over the expected lease term. The ROU asset is also adjusted for any lease prepayments made, lease incentives received and initial direct costs incurred. For operating leases with lease payments that fluctuate over the lease term, the total lease costs are recognized on a straight-line basis over the lease term. Our leases, at times, may include options to extend the term of the lease. When it is reasonably certain that we will exercise the option, we include the impact of the option in the lease term for purposes of determining future lease payments. For all underlying classes of assets, we made an accounting policy election to not recognize assets or liabilities for leases with a term of twelve months or less and to account for all components in a lease arrangement as a single combined lease component. Short-term lease payments are recognized on a straight-line basis. Certain of our lease agreements include variable rent payments, consisting primarily of amounts paid to the lessor based on cost or consumption, such as maintenance and real estate taxes. These costs are recognized in the period in which the obligation is incurred. Because our leases do not specify an implicit rate, we use an incremental borrowing rate based on information available at the lease commencement date to determine the present value of the lease payments. We evaluate our ROU asset for impairment when events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. See Notes 2(h) and 12 for additional information.

(g) 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. Amounts paid in excess of the fair value of the net assets (including tax attributes) are recorded as goodwill under the acquisition method of accounting. We assess the impairment of intangible assets that have indefinite lives (when applicable) and goodwill (at the reporting unit level) on an annual basis (as of December 31^st) 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 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 in the future. No goodwill impairments were recorded during the six-month periods ended June 30, 2024 or 2023. See Notes 2(h) and 8 for additional information.

ImmuCell Corporation

Notes to Unaudited Financial Statements (continued)

(h) Valuation of Long-Lived Assets

We periodically evaluate our long-lived assets, consisting principally of property, plant and equipment, 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. No impairment was recognized during the six-month periods ended June 30, 2024 or 2023.

(i) 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 June 30, 2024 and December 31, 2023, the carrying amounts of cash and cash equivalents, accounts receivable, inventory, prepaid expenses and other current assets, other assets, accounts payable and accrued expenses 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 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. We also hold money market accounts in our bank 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 six-month periods ended June 30, 2024 and 2023, there were no transfers between levels. As of June 30, 2024 and December 31, 2023, our Level 1 assets measured at fair value by quoted prices in active markets consisted of cash and money market accounts. There were no assets or liabilities measured at fair value on a nonrecurring basis as of June 30, 2024 or December 31, 2023. The carrying values of our cash and money market accounts as of June 30, 2024 or December 31, 2023 approximated their fair market values. Due to inflation and the changing interest rate environment, the carrying values of our fixed rate bank debt as of June 30, 2024 and December 31, 2023 differed from their fair market values. These values are reflected in the following tables:

	As of June 30, 2024
	Level 1		Level 2		Level 3		Total
Assets:
Cash and money market accounts	$	1,324,285	$	—	$	—	$	1,324,285

Liabilities:
Bank debt	$	—	$	9,854,011	$	—	$	9,854,011

ImmuCell Corporation

Notes to Unaudited Financial Statements (continued)

	As of December 31, 2023
	Level 1		Level 2		Level 3		Total
Assets:
Cash and money market accounts	$	978,741	$	—	$	—	$	978,741

Liabilities:
Bank debt	$	—	$	10,431,817	$	—	$	10,431,817

(j) Concentration of Risk

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:

	During the Three-Month Periods Ended June 30,						During the Six-Month Periods Ended June 30,
	2024			2023			2024			2023
Company A		44	%		47	%		45	%		47	%
Company B		33	%		33	%		34	%		32	%

Trade accounts receivable due from significant customers that amounted to 10% or more of our total trade accounts receivable are detailed in the following table:

As of

June 30,
2024

As of
December 31,
2023

Company A

Company B

(k) Revenue Recognition

We recognize revenue in accordance with Codification Topic 606, Revenue from Contracts with Customers (ASC 606). 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 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 ships to a customer. Amounts due are typically paid approximately 30 days from the time control is transferred. Shipping and handling costs associated with outbound freight 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. See Note 14 for additional information.

(l) 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. 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 or is deemed to be in excess or obsolete.

ImmuCell Corporation

Notes to Unaudited Financial Statements (continued)

(m) 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. We consider future taxable income and feasible tax planning strategies in assessing the need for a valuation allowance against our deferred tax assets at the end of each quarter. If we determine that it is more likely than not that we will 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 it is more likely than not that we will not 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 2021. We have evaluated the positions taken on our filed tax returns and have concluded that no uncertain tax positions existed as of June 30, 2024 or December 31, 2023. Although we believe that our estimates are reasonable, actual results could differ from these estimates. See Note 16.

(n) 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 $98,021 and $75,657 during the three-month periods ended June 30, 2024 and 2023, respectively, and $179,131 and $171,773 during the six-month periods ended June 30, 2024 and 2023, respectively. See Note 13.

(o) 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 618,000 and 624,000 during the three-month periods ended June 30, 2024 and 2023, respectively, and 618,000 and 624,000 during the six-month periods ended June 30, 2024 and 2023, respectively.

	During the Three-Month Periods Ended June 30,						During the Six-Month Periods Ended June 30,
	2024			2023			2024			2023
Net loss attributable to stockholders	$	(1,531,626	)	$	(1,379,714	)	$	(1,969,494	)	$	(3,694,767	)

Weighted average common shares outstanding - Basic		7,810,037			7,746,864			7,780,450			7,746,864
Dilutive impact of share-based compensation awards		—			—			—			—
Weighted average common shares outstanding - Diluted		7,810,037			7,746,864			7,780,450			7,746,864

Net loss per share:
Basic	$	(0.20	)	$	(0.18	)	$	(0.25	)	$	(0.48	)
Diluted	$	(0.20	)	$	(0.18	)	$	(0.25	)	$	(0.48	)

(p) Use of Estimates

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 valuation of inventory, deferred tax assets and costs of goods sold.

ImmuCell Corporation

Notes to Unaudited Financial Statements (continued)

(q) New Accounting Pronouncements Not Yet Adopted

In November of 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant expenses. The amendments will require disclosure of significant segment expenses that are regularly provided to our chief operating decision-maker and included within segment profit and loss. The amendments are effective for annual periods beginning after December 15, 2023, and interim periods beginning after December 15, 2024, with early adoption permitted, and will be applied retrospectively to all prior periods presented in the financial statements. We are currently evaluating ASU 2023-07 to determine its impact on our financial statements.

In December of 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which includes amendments that further enhance income tax disclosures, primarily through standardization and disaggregation of income tax rate reconciliation categories and income taxes paid by jurisdiction. The amendments are effective for annual periods beginning after December 15, 2024, with early adoption permitted, and may be applied either prospectively or retrospectively. We are currently evaluating ASU 2023-09 to determine its impact on our financial statements.

3. CASH AND CASH EQUIVALENTS

Cash and cash equivalents amounted to $1,324,285 and $978,741 as of June 30, 2024 and December 31, 2023, respectively.

4. TRADE ACCOUNTS RECEIVABLE

Trade accounts receivable amounted to $1,950,450 and $2,185,383 as of June 30, 2024 and December 31, 2023, respectively. No allowance for bad debt or product returns was recorded as of June 30, 2024 or December 31, 2023. We anticipate no future events or conditions that would impact our ability to collect our accounts receivable. Because of the generally short duration from the balance sheet date to the date of collection, our collection rate is not expected to be significantly impacted by events occurring after the balance sheet date. The trade accounts receivable balances included $34,576 and $42,507 due from a related party as of June 30, 2024 and December 31, 2023, respectively. See Note 18.

5. INVENTORY

Inventory consisted of the following:

	As of June 30, 2024		As of December 31, 2023
Raw materials	$	1,249,703	$	1,594,028
Work-in-process		5,609,045		5,815,194
Finished goods		440,858		402,619
Total	$	7,299,606	$	7,811,841

These inventory figures are net of write-offs of scrapped inventory in the amounts of $433,122 and $527,133 during the six-month period ended June 30, 2024 and the year ended December 31, 2023, respectively, that resulted principally from contamination events and other production process losses.

6. PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consisted of the following:

	As of June 30, 2024		As of December 31, 2023
Prepaid expenses	$	196,181	$	454,152
Other receivables		23,390		39,733
Total	$	219,571	$	493,885

ImmuCell Corporation

Notes to Unaudited Financial Statements (continued)

7. PROPERTY, PLANT AND EQUIPMENT, net

Property, plant and equipment consisted of the following:

	Estimated Useful Lives (in years)	As of June 30, 2024		As of December 31, 2023
Laboratory and manufacturing equipment	3-10	$	21,128,526	$	20,953,601
Buildings and improvements	10-39		20,861,288		20,784,565
Office furniture and equipment	3-10

SEC Form 10-Q filed by ImmuCell Corporation