Immucell Corp: Form 10-K for the period ended Dec 31, 2025

Summary

ImmuCell Corporation, founded in 1982 and a SEC-registered public company since 1987, is an animal health biologics company focused on the development, manufacture, and commercialization of products intended to improve the survivability, health, and long-term performance of neonatal dairy and beef calves. The Company's practical, science-based solutions help prevent calf scours, one of the most prevalent diseases in neonatal calves worldwide that accounts for 30-40% of pre-weaning mortality in many production systems. The Company’s primary product line, First Defense®, utilizes hyperimmunized bovine colostrum to provide pathogen-specific antibodies and other bioactive components. First Defense® is designed to provide Immediate Immunity™ through orally delivered antibodies against the principal viral and bacterial causes of neonatal calf diarrhea (scours), including Escherichia coli (E.coli), bovine coronavirus, and bovine rotavirus. First Defense® is administered at, or soon after, birth in multiple formats, including single-dose boluses, gel formulations delivered by syringe, and multi-dose powder configurations. In the United States, First Defense® products are regulated as veterinary biologics by the U.S. Department of Agriculture’s Center for Veterinary Biologics under the Virus-Serum-Toxin Act. In Canada, products are regulated by the Canadian Food Inspection Agency and in other countries, the products are regulated by similar agencies. Certain product formats are marketed as feed supplements regulated by the U.S. Food and Drug Administration under the Federal Food, Drug, and Cosmetic Act. The Company’s manufacturing processes include proprietary vaccine development, dairy herd hyperimmunization management, colostrum sourcing and qualification, antibody concentration and purification processes, blending, fill-finish operations, and final product testing and release. The Company uses third parties to manufacture certain product formats. Products are marketed through the Company’s commercial sales organization in collaboration with a network of international, national and regional animal health distributors.

Key Highlights and Developments in the Year Ended December 31, 2025

We grew our manufacturing capacity from approximately 3 million manufactured units during the year ended December 31, 2023 to 4.1 million manufactured units during the year ended December 31, 2024, and 4.6 million manufactured units during the year ended December 31, 2025. Our current business strategy calls for us to further increase our manufacturing capacity in the future.

We grew product sales by 4.3% during the year ended December 31, 2025 compared to the year ended December 31, 2024, and improved gross margin from 30% to 41% of product sales, including a non-cash write off of certain inventories equal to approximately 2.4% of full-year product sales.

In December 2025, we announced our strategy to focus on First Defense® and paused further investment in manufacturing Re-Tain®, to allow us to focus on the scours market opportunity. Re-Tain®, an innovative new treatment for subclinical mastitis, was a product development initiative that the Company had pursued for some time. As a result of this decision, we recognized a $2.7 million non-cash impairment charge related to property, plant and equipment.

During 2025, we hired a new President and Chief Executive Officer, created and filled a Chief Financial Officer position, and eliminated the Vice President of Operations role.

Strategy

ImmuCell's scours solutions serve the calf health market, which includes commercial dairy operations, specialized calf ranches, and beef producers managing newborn calves during the first weeks of life. The number of calves using scours preventatives is increasing, creating an attractive double-digit growth market that is driven by the rising values of calves and increased awareness of scours solutions. Based on market data we acquire from a market leading animal health data provider, spend on biological scours preventative was more than $90 million in 2025, an increase of approximately 14% from 2024, representing a cumulative average growth rate of 6.9% since 2021. The Company's strategy is to focus on building it's First Defense® franchise in the large, attractive and growing scours and calf health markets. Specifically, the Company plans to (1) increase the share of calves in the U.S. using our products through more frequent and intensive customer outreach, by expanding its commercial team; (2) drive international growth with entry into new international markets, by adding an experienced international market development leader to the commercial team; (3) innovate in the First Defense® franchise, by adding attractive product features and extensions to the portfolio; and (4) increase manufacturing capacity ahead of demand, by improving yields and investing in major capacity expansion leveraging former Re-Tain® assets.

Our Products

The First Defense® product line is manufactured from hyperimmunized bovine colostrum using proprietary vaccination and milk protein purification technologies. These products deliver pathogen-specific antibodies that newborn calves cannot produce on their own immediately after birth, providing Immediate Immunity™ against the leading causes of neonatal calf scours (bovine enteritis), a disease that causes diarrhea, dehydration, illness and death in young calves. Our single-dose calf-level products, marketed as Dual-Force® and Tri-Shield® are the only USDA-licensed, orally delivered scours preventives delivering a guaranteed dose of pathogen-specific antibodies. Dual-Force® products are labeled with claims against E. coli and coronavirus, while Tri-Shield® is labeled to protect against E. coli, coronavirus, and rotavirus. When administered within the first 12 hours after birth, a single dose has been proven to reduce calf morbidity and mortality in USDA sanctioned challenge trials. These products work through a two-part mode of action: antibodies act locally in the gut to neutralize pathogens while additional antibodies are absorbed into the bloodstream and later re-secreted into the gut to provide extended protection during the calf’s most vulnerable early weeks. These single-dose formats in either a bolus or gel tube are also listed by the Organic Materials Review Institute (OMRI), allowing their use in certified organic dairy and beef operations.

In addition to these single-dose formats, the Company also offers bulk powder functional feed ingredients marketed as First Defense Technology® that are also derived from the same hyperimmune colostrum that is used for USDA licensed products. The functional feed products are designed for incorporation into liquid feeding programs and are used for batch mixing to support groups of calves in larger calf-rearing operations. These products are not licensed by the USDA and are regulated by the U.S. Food and Drug Administration under the Federal Food, Drug, and Cosmetic Act.

We also offer a California Mastitis Test (CMT) that is used as a quick on-farm diagnostic to determine which quarter of the udder is mastitic.

Sales and Marketing

ImmuCell competes in a large and growing market for calf health solutions with its First Defense® product line. Calf health has become an increasingly dynamic segment of the livestock industry, with calf values rising significantly in recent years due in part to dairy–beef crossbreeding and a limited supply of calves relative to market demand. Scours is a disease that affects approximately 14–15% of pre-weaning calves and is the leading cause of death during this stage of life. It is estimated to create up to a $1 billion economic burden in the U.S. each year through treatment costs, lost performance and mortality. In the U.S., producers currently spend more than $90 million annually on scours prevention.

Our First Defense® product line is given to newborn calves (the calf-level market) and also competes with scours preventative products that are given to pregnant mother cows (the dam-level market). The dam-level vaccine products are given to the mother cow to increase the antibody level against specific scours-causing pathogens in the colostrum that she produces for her newborn. First Defense® historically competed mostly in the calf-level market and with the additional claim for our Tri-Shield® product against rotavirus, we now compete against the dam-level vaccines. We estimate that the dam-level product category covers approximately twice as many calves as the calf-level product segment reaches. Based on market information that we purchase from a leading source of data for the animal health sector, the Company estimates the number of calves subject to scours preventatives has increased from 13.8 million in 2021 to 14.8 million in 2025, driven by the rapid increase in the value of calves during that period. We estimate that our First Defense® product line represents approximately 29% of total market spend in 2025, which is an increase from 24% in 2021. The Company also estimates that its First Defense® product line is used to protect approximately 15% of the calves that are on preventative programs, which is an increase from 13% in 2021. First Defense® products are priced at approximately 2.5 times those of leading competitors, for reasons discussed below. We estimate that approximately 55% of U.S. calves are not yet protected by a biological scours prevention product, representing significant opportunity for expanded adoption of preventative solutions in addition to market share gains from existing alternatives. This domestic opportunity, combined with continued success addressing the approximately 9.9 million calf market in Canada and expanding our global reach, represents our primary near-term growth focus.

The First Defense® product line continues to be widely adopted by dairy and beef producers as a tool to help prevent scours in newborn calves, the leading cause of death in pre-weaned calves. Unlike vaccines, which rely on a biological response that can vary between animals, First Defense® products provide a measured dose of pre-formed antibodies to deliver Immediate Immunity™ and a consistent level of protection for each calf. We believe the continued growth of this product line reflects both strong customer acceptance and our ongoing investment in sales and marketing efforts to expand awareness and adoption among dairy and beef producers, highlighting the product line's ability to provide reliable protection and an attractive return on investment.

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. With increased production capacity in place, we are in a position to more actively market our products to customers including in new international territories.

Seasonality

Sales of the First Defense® product line are seasonal, with higher sales expected during the first quarter of the calendar year, largely driven by the beef calving season, which runs primarily from January to April, unlike the dairy industry where operations generally calve year-round. Warm and dry weather conditions may reduce the producers' perceived need for disease prevention products such as the First Defense® product line. However, heat stress on calves caused by extremely hot summer weather and cold stress during the winter months can increase the incidence of scours and the need for our products.

Product Development

Re-Tain®

Over the past 25 years, most of our product development spending has been focused on the development of Re-Tain®, a purified Nisin treatment for subclinical mastitis in lactating cows. Between 2000 and 2025, we invested an aggregate of approximately $31.4 million in direct expenditures for the development of this product (excluding depreciation and overhead expenses), plus $21.6 million in capital cost for our Re-Tain® manufacturing facilities. 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.

Approval by the FDA of a New Animal Drug Application (NADA) for Re-Tain® is required before any sales of the product can be initiated. Since 2014, our strategy had been to manufacture the active ingredient in our own facilities and employ an experienced contract manufacturer for filling the active ingredient into final product in order to limit our capital expenditure and reduce our risk. As of June 2024, the Company had received Technical Section Complete Letters for safety, efficacy and four of the five required Technical Sections related to our manufacturing processes, and we had expected that completion of the fifth Technical Section related to our outside contract manufacturer would soon follow. We subsequently learned that the contract manufacturer had again failed an onsite inspection by the FDA, its second in 12 months. On December 23, 2025, we received an Incomplete Letter for Re-Tain® issued by the FDA, which stated that the sole reason the FDA declined to approve our NADA was that the contract manufacturer had still not met necessary Good Manufacturing Practice requirements. The Incomplete Letter from the FDA, combined with our contract manufacturer’s refusal to extend their contract beyond March 2026, left us facing a decision on whether to restart our manufacturing section, and thereby commit to investing a large amount of additional expense over multiple years to do so, before obtaining approval for commercial launch of the product. We decided against this course of action, deciding instead to redeploy most of the manufacturing assets built for Re-Tain® toward expansion of First Defense® capacity.

We intend to complete the Re-Tain® investigational studies that are underway to assess opportunities for an improved set of claims and then will seek to license the product to interested parties or seek to partner with another organization, depending on the outcome of the studies. Our Re-Tain® strategy will not require further capital investment for in-house manufacturing capability, which means we will have increased resources and focus for maximizing the value of our market leading First Defense® franchise.

First Defense®

With our pivot to a new strategy to focus on First Defense®, we plan to develop improvements, extensions and additions to our First Defense® product line. For example, during the year ended December 31, 2025, we initiated commercial sales of a new spray-dried format of our First Defense Technology® in a bulk powder. This product line extension makes use of our existing vaccination and colostrum collection processes and gives us access to a segment of larger-scale operations. We will pursue an innovation strategy and create a project pipeline based on assessments of market demand, technical feasibility, regulatory requirements, and other criteria. We also are investing in optimizing our current First Defense® product manufacturing processes by re-developing or re-designing certain processing steps to improve yields and further improve our productivity.

Competition

The Company operates within a calf health market that includes vaccine manufacturers and nutritional supplement providers. Primary competitive alternatives include vaccines designed to stimulate the animal’s immune system to generate specific anti-scours antibodies. Vaccine manufacturers are generally large, well-capitalized pharmaceutical companies whose products are based on broadly similar active immunization technologies designed to stimulate an endogenous immune response. Our competitors in U.S. and international scours prevention markets are some of the largest animal health companies worldwide, including Zoetis, Elanco, Merck, Boehringer Ingelheim and CEVA, among others.

Vaccine platforms differ fundamentally from the Company’s antibody-based approach, which delivers pre-formed, pathogen-specific antibodies to the calf, as validated by the USDA and other agencies. Vaccination strategies depend on activation of the animal’s immune system and the associated metabolic impact required to generate an antibody response. The First Defense® product line delivers concentrated, pathogen-specific antibodies directly to the calf at birth when its immune system is not yet fully developed and the calf is most vulnerable to viral and bacterial causes of neonatal calf diarrhea. This approach provides more immediate passive immunity during the highest-risk period without reliance on the timing, variability, or biological cost of mounting an active immune response.

Approximately 55% of calves in the U.S. are not using vaccines or First Defense®. In these cases, producers rely on maternal colostrum that contain variable levels of specific antibodies, or producers utilize general immune-support supplements such as probiotics, egg-derived antibodies, or plasma-based products that typically require multi-day feeding regimens.

Our competitive strategy is to educate specific segments of producers about the opportunity to improve scours outcomes on farms with our products. The First Defense® line is distinct from vaccine-based approaches and in studies has been shown to deliver approximately 3.3 times to 5.6 times the level of neutralizing antibodies against major scours pathogens as the market leading vaccine. Because the product line is derived from bovine colostrum, the products also contain additional bioactive components that are found in colostrum that further support calf health. As a result of these differentiated attributes and the guaranteed level of pathogen-specific antibodies delivered in each dose, First Defense® products are the price leader compared to alternatives that rely on variable vaccine responses and do not provide a consistent level of specific antibody protection.

For accounts that rely on maternal antibodies or immune-support supplements, we educate producers that our products are validated by the USDA to consistently deliver concentrated, pathogen-specific antibodies in single-dose administration.

Intellectual Property

We own a collection of registered and unregistered intellectual property rights relating to our research, products and processes. These rights include patents, copyrights, trademarks, trade dress, trade secrets, know-how and other intellectual property rights in the United States and other countries. We believe the ownership of our intellectual property rights is an important factor in our business and that our success depends in part on such ownership. We also rely heavily on the innovative skills, technical competence and marketing abilities of our personnel. We enter into and rely on confidentiality and proprietary rights agreements with our employees, contractors and business partners to protect our trade secrets, proprietary developments and confidential information.

We own numerous trademarks and trade dress that are very important to our business and have several trademark and trade dress registrations in the United States, Canada and Iran. 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), DUAL-FORCE, TRI-SHIELD, and RE-TAIN. We also own U.S. trademark registrations claiming rights in the color blue for our blue gel and blue bolus FIRST DEFENSE products. We also own common law rights in the IMMEDIATE IMMUNITY trademark and other trademarks.

We own 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. The patent expires October 31, 2034.

In some cases, we have chosen (and may choose in the future) not to seek patent protection for certain products or processes. In those instances, we have sought (and may seek in the future) to maintain the confidentiality of any relevant intellectual property and other proprietary rights through operational measures and contractual agreements.

Government Regulation

The manufacture and sale of animal health biologicals within the United States is 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® and Dual-Force®. 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. We have passed an in-depth USDA inspection in August of 2025. We are not currently commercializing Re-Tain®, which is regulated by the FDA.

Human Capital

We currently have 73 employees who are engaged primarily in quality and manufacturing operations, sales and marketing, product development and finance and administration. As needed, we augment our staff with contracted temporary employees. Our employees are central to the success of our business, and we are committed to attracting, developing, and retaining a highly skilled workforce capable of supporting our growth strategy. 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.

Available Information

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

We caution you that our business and operations are subject to a number of risks and uncertainties. The factors listed below are important factors that could cause our actual results to differ materially from our historical results and from projections in forward-looking statements contained in this report. Other factors that we do not anticipate, or that we do not consider material based on currently available information, may also have an adverse effect on our results.

Financial Risks

Gross margin on product sales: We consider gross profit as a percentage of product sales (gross margin) to be a key measure of our overall efficiency of production and of our ability to maintain favorable pricing of our products. Between 2024 and 2025, we saw a substantial recovery of gross margin, from 30% to 41% of product sales, with the latter percentage materially affected by a non-cash write-down of inventories representing approximately 2.4% of product sales for the year ended December 31, 2025. Many factors affect our costs of goods sold and therefore impact gross margin. There is a risk that efforts to maintain or improve our gross margin may not be realized due to distributor or end-customer price inelasticity, lack of colostrum supply or increased colostrum costs, other cost increases, production yield losses, in-process contamination events, equipment failures, or any combination of these factors.

Product sales: We will seek to expand our First Defense® product sales by increasing the share of calves in the U.S. using our products and by seeking to enter non-U.S. markets where we presently have little or no presence. We have increased our investment in our commercial staff. The markets for calf scours preventatives and treatments are highly competitive. First Defense® typically has a higher price per application than vaccine products against which we compete, reflecting what we consider to a higher level of efficacy. There is no assurance that our increased sales efforts in domestic markets or our attempts to enter new international markets will result in higher product sales. Our efforts to expand into international markets also may be constrained by difficulties in achieving necessary regulatory approvals for our products in that country.

Net income (loss): In 2025 we achieved a significant increase in net operating income, amounting to $1.6 million versus a $1.6 million net operating loss for 2024. Our future financial performance can be affected by numerous factors that are difficult to predict or that are beyond our control.

Exposure to interest rates and debt service obligations: Rising interest rates could negatively affect the operating costs of distributors and producers and put financial pressure on dairy and beef business sectors, which could indirectly, but materially and adversely, affect our business. Our aggregate outstanding debt as of December 31, 2025 totaled $9.1 million (without counting debt issuance and debt discount costs) bearing interest at the blended fixed rate of 4.31% per annum. Increasing interest rates would negatively impact the cost of any future borrowings. The additional debt we incurred to fund our growth objectives has increased our total debt service costs. We are obligated to make principal and interest payments aggregating approximately $2 million and $1.5 million during the years ending December 31, 2026 and 2027, respectively. See Note 9 to the accompanying audited financial statements for more details about our debt.

Debt covenants: Our debt with Maine Community Bank is subject to certain financial covenants. We are required to meet a minimum debt service coverage (DSC) ratio of 1.35. Our actual DSC ratios were 2.65 and 0.73 for the years ended December 31, 2025 and 2024, respectively. The DSC ratio covenant was preemptively waived by our lenders for the twelve months periods ended June 30, 2024, September 30, 2024 and December 31, 2024. There is no assurance that we will be able to achieve the required DSC ratio going forward. If we are unable to do so or reach a favorable agreement with our lenders regarding that requirement (including an amendment to or waiver of such requirement), we would be in violation of that covenant, which could result in unfavorable amendments to the terms of our bank debt (including a possible bank requirement to prepay our debt) or have other adverse impacts on our business and results of operations.

Currency exchange fluctuation: We do not believe that currency exchange rates have had a significant effect on our revenues and expenses. However, particularly if we expand non-U.S. sales of First Defense® future increases in the value of the U.S. dollar could make our products more expensive for our non-U.S. customers and affect demand for our products. Conversely, decline of the U.S. dollar against other currencies could make our products less expensive to international customers.

Inflation, supply disruptions, tax rates and economic downturns: Cumulative inflation over the past five years has materially increased the price of almost all supplies we purchase and the labor we hire and retain. The cost of grain and other inputs for our customers has risen over that period, putting strain on the profitability of our customers. On the other hand, calf prices have increased significantly since 2020, which we believe makes spending on scours prevention more attractive. If the U.S. economy were to experience an extended period of economic downturn, we expect this 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.

Business interruption and business continuity: Our business interruption insurance may not be adequate to cover our potential losses, liabilities and damages. Furthermore, we may be subject to business continuity risk in the event of an unexpected loss of a material facility or operation. Our product operations are concentrated at a single location, which exposes us to significant business interruption risk if that facility is damaged or otherwise unavailable. Although we maintain insurance coverage intended to protect against certain losses; waiting periods, deductibles, and exceptions could materially reduce or eliminate recovery for certain events. We pursue risk mitigation measures and periodically review our insurance programs, but these steps may not be sufficient to eliminate the risks described above or to prevent a material adverse effect on our business.

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 First Defense Technology®, 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 First Defense Technology® include the product’s effectiveness against currently prevalent pathogens, market acceptance, the effect of our selling price on market penetration, the potential cannibalization effect on other First Defense® products, competition from new and existing products sold by substantially larger competitors with greater market reach and promotional resources and other risks.

Net deferred tax assets: The realizability of our net deferred tax assets is a subjective estimate that is contingent 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 projected profitability in the future. We will continue to assess the need for the valuation allowance each quarter.

Product Risks

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

Reliance on sales of the First Defense® product line: We presently are reliant on the market acceptance of the First Defense® product line to generate product sales and fund our operations. Our business would not be profitable without the gross margin that we earn on sales of the First Defense® product line. Our ability to achieve net operating income in 2025 was largely driven by gross margin we earned from First Defense® and prudent management of product development expenses.

Concentration of sales: Sales of the First Defense® line of products aggregated 99% of our total product sales during both the years ended December 31, 2025 and 2024. The majority of our product sales is from the U.S. dairy and beef industries (approximately 88% and 86% during the years ended December 31, 2025 and 2024, respectively), and the concentration of our sales into the dairy and beef markets is a risk to our business. The animal health distribution segment has been consolidating over the last few years, with larger distributors acquiring smaller distributors. A large portion of our product sales (approximately 72% and 77% during the years ended December 31, 2025 and 2024, respectively), was made to two large distributors and a large portion of our trade accounts receivable (approximately 69% and 78% as of December 31, 2025 and 2024, 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: The inability to meet market demand for our products is a risk to our business. We invested $11.0 million from 2019 to December 31, 2025 to increase our annual production capacity for the First Defense® product line from approximately 2.2 million manufactured units in 2018 to approximately 4.6 million manufactured units in 2025. Our future plans call for increases of our production capacity through yield improvements and by redeploying assets previously slated for production of Re-Tain®. Expanding manufacturing capacity involves practical and technical risks affecting efficiency of production, risks of contamination, and risks of not being able to access sufficient high-quality colostrum needed for this process. There is a risk of cost overruns in our projects and any future production expansions that we may undertake, and a risk that we will not be able to achieve our production capacity growth objectives on a timely basis, resulting in a continuing or increasing shortfall in supply to the market. A backlog of orders presents a risk that we could lose customers that are not easily regained. Our long-term capital plan to continue to expand the First Defense® product line requires ongoing review of equipment capacity and utilization and assessment of costs, functional obsolescence and reliability of equipment. This review and assessment could identify a need to fund unexpected equipment maintenance or replacement costs.

Contamination events, equipment failures and gross margin from our production process: During the first three and a half months of 2024, as well as during 2023 and late 2022, we experienced certain contamination events and equipment failures in our production process that resulted in scrapped inventory and a slowdown of our production process, which had a significant negative impact on our operating results. The realization of this risk following the contamination events discussed above did result in a slowdown of our production output during 2023 to remediate this problem, which led to less sales and gross margin during the year. We are at risk of further such production contaminations or equipment failures resulting in more scrapped inventory. Additional contamination events or equipment failures causing significantly less production output, depending on their severity, could deplete our cash resulting in an inability to fund our business operations. Recent losses incurred from contamination events in 2022 through early 2024 were only partially offset by business interruption insurance recoveries in 2023 and 2025.

Colostrum collection: There is a risk that the farms that participate in our vaccination and colostrum collection process no longer wish to continue supplying us with colostrum or participating in our vaccination program, due to the need to use all or part of the colostrum for their own calves and concerns with the increasing cost of colostrum-replacement. There is a risk that our supply farms, which are almost entirely located in one state, are subject to a disease outbreak that inhibits their ability to supply the colostrum. There is a risk that other companies will offer higher premiums for colostrum for use in human or other animal health markets. There is a risk that the quality of the colostrum collected will not be suitable for our production requirements.

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.

Risks pertaining to Re-Tain®: In late 2025 we made the decision not to pursue manufacture of Re-Tain® and to attempt to license this technology to other companies, or to sell to or partner with other companies. There is no assurance that we will be able to find third parties who have an interest to in-license, acquire or partner with us related to Re-Tain®. Parties may not be interested if they perceive that (1) completing the process of obtaining FDA and international regulatory approvals is too burdensome, too costly, or takes too much time, (2) positive milk inhibitor tests involve risk of rejection of bulk tanks of milk comprised of milk from cows being treated with Re-Tain®, (3) cheese tanks fail or stall when a Nisin susceptible cheese starter culture is impacted by residues in milk that exceed on-farm treatment recommendations, (4) dairy farms will choose not to screen for subclinical mastitis (instead focusing on treating clinical mastitis that can be identified visually), (5) dairy farms are unable to judge satisfactory treatment outcomes due to lack of equipment to measure and monitor somatic cell counts (SCC) of the herd or individual cows, (6) cure rates established in scientific trials prove less than desired, or (7) dairy farms choose not to use Re-Tain® or use it improperly, rather than follow label instructions.

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 if periodic laboratory analyses continue to support the stability of the 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 have additional regulatory requirements that we may not be able to meet with our current facilities, processes and resources. There is a risk that we will become subject to regulatory actions in the future, including actions that result in our inability to ship product. In these cases, the resulting interruption in sales could have a material and adverse effect on our operating results.

Regulatory requirements limiting access to suppliers and customer base: Maine, where our principal executive office and manufacturing facilities are located, has adopted product reporting and phase-out requirements for per- and polyfluoroalkyl substances (“PFAS”). Maine’s statute establishes a phased ban for products that contain intentionally added PFAS, with all products (subject to certain exceptions) other than cooling, heating, ventilation, air conditioning or refrigeration equipment being banned by 2032 unless the Maine Department of Environmental Protection (“DEP”) has determined that the use of PFAS within the product is a “currently unavoidable use.” Beginning January 1, 2032, the sale of products containing intentionally added but “currently unavoidable” PFAS also is banned if the manufacturer of such products has failed to report to the DEP information concerning the presence of PFAS in those products. The phased bans may limit our ability to access supplies and may limit those customers to whom we may sell our products. The U.S. Environmental Protection Agency also has adopted a PFAS reporting law, which requires that importers of articles that contain PFAS report the presence of such substances to the extent such information is known or reasonably ascertainable. This reporting requirement may limit our ability to import supplies.

Economic Risks Pertaining to the Dairy and Beef Industries

Dairy Staffing: The U.S. government is stepping up immigration enforcement efforts. Colostrum suppliers to our manufacturing process or customers of our products may be challenged to recruit, train and retain employees who are critical for our colostrum supply process and use of our product in the field. Significant deportations of these individuals could have a negative impact on the operations of our customers and of our source farms.

Industry: We define our addressable market for First Defense® as the number of calves currently or potentially protected by scours preventative products multiplied by the value paid for such products. A significant decline in the cattle count would negatively affect the size of our addressable market by reducing the number of animals that would benefit from scours preventatives. A significant decline in the value of newborn or pre-weaning calves would negatively affect the size of our addressable market by reducing the interest of producers to invest in calf health solutions, including scours preventatives. A multitude of factors can contribute to changes in the number of cattle or changes in the value of calves in any particular geography, including government decisions affecting trade of live animals, disease outbreaks and containment statuses, supply and demand imbalances for specific sources of protein such as milk and beef, changes in breeding and genetics practices, and other factors. Changes in milk and beef prices and feed costs may also impact producers' ability to pay for premium calf health products such as First Defense®.

Volatility of the dairy market: While the number of cows in the U.S. herd and the production of milk per cow directly 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 our premium-priced animal health products into the dairy market.

Small Size of the Company

Dependence on key personnel: We are a small company with 73 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 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. The cost of attracting and retaining the needed additional personnel in this current job market and inflationary environment could adversely affect our margins and profitability.

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. Elanco, Merck, Zoetis, Boehringer Ingelheim and CEVA, 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®, we can 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 U.S. market and other competitors are active in international markets. 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.

Ability to hire: Our competitive position will be highly influenced by our ability to attract and retain key scientific, manufacturing, managerial, sales and marketing personnel, to develop, produce and commercialize proprietary technologies and products. We need to obtain USDA, FDA or foreign approvals for new products to effectively promote and sell 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.

Global Risks

Tariffs and Trade Policies: Changes in tariffs or cross-border trade policies could affect our ability to expand sales of our products into foreign markets. The businesses of some of our U.S. dairy and beef customers could be significantly affected by changes in tariffs or trade policies, thus negatively affecting demand for our products. Additionally, tariffs on products and materials that we import could increase our costs of goods sold.

International Conflicts: International conflicts give rise to uncertainties and stress on the global economy, which in turn can affect the demand for our products and our costs of operation. We have formerly done business in Iran. Although our ability to do so in the future is unclear, a cessation of sales to Iran would not materially affect our revenues or profitability.

Climate change: Our business, and our activities and the activities of our customers and suppliers, could be disrupted by climate change. Potential physical risks from climate change may include altered distribution and intensity of rainfall, prolonged droughts or flooding, increased frequency of wildfires and other natural disasters, rising sea levels, and a rising heat index, any of which could cause negative impacts to our and our customers’ and suppliers’ businesses. Increased temperatures and rising water levels may negatively impact our dairy and beef livestock customers by increasing the prevalence of parasites and diseases that affect food animals. The physical changes caused by climate change may also prompt changes in regulations or consumer preferences which in turn could have negative consequences for our and our customers’ businesses. Climate change may negatively impact our customers’ operations. In addition, concerns regarding greenhouse gas emissions and other potential environmental impacts of livestock production have led to some consumers opting to limit or avoid consuming animal products. If such events affect our customers’ businesses, they may purchase fewer of our products, and our revenues may be negatively impacted. Climate driven changes could have a material adverse impact on the financial performance of our business and on our customers. In addition, increased frequency of natural disasters and adverse weather conditions may disrupt our manufacturing processes or our supply chain. These disruptions may have a material adverse effect on our business, financial condition, results of operations and/or cash flows.

Bovine diseases: The potential for epidemics and outbreaks of bovine diseases presents a risk to our suppliers and to our customers. United States policy for the prevention of certain diseases has led to an overall tightening of regulations pertaining to ingredients of animal origin, especially bovine. The First Defense® product line is manufactured from concentrated bovine colostrum, which is not considered a 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 Capital Market (Nasdaq: ICCC). Our average daily trading volume (which was 16,939 shares per day during the 20-day period ended March 20, 2026) is lower, our bid/ask stock price spread can be larger and our share price can be more volatile than what other companies experience. Those factors could result in investors facing difficulty selling their stock for proceeds that they may expect or desire. Our share price as of March 20, 2026 was $6.07. Most companies in the animal health sector have market capitalization values that greatly exceed our market capitalization of approximately $54.9 million as of March 20, 2026. Our product sales during the year ended December 31, 2025 were $27.6 million. This means that our market capitalization as of March 20, 2026 was equal to approximately two times our sales during the year ended December 31, 2025. Before adequate gross margin from the sale of existing and new products is achieved, our market capitalization may be heavily dependent on the perceived potential for margin expansion and revenue growth 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 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;
• advance notice requirements for stockholder proposals and nominations;
• the ability of our Board of Directors to alter or repeal our bylaws;
• Section 203 of the Delaware General Corporation Law, which prohibits a publicly-held Delaware corporation 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 adversely affect 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 disfavored by our Board of Directors.

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. 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 or repurchase stock 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 have accessed the capital markets and issued additional common stock, from time to time, under an At-the-Market (ATM) Offering to fund our operations, as described elsewhere in this Annual Report. Such issuances have a dilutive effect on our existing stockholders and may occur again in the future.

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 may experience 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, Maine for the production of the First Defense® product line. Any significant damage to or other disruption in the services at our leased facilities or our owned facilities (including due to lack of financing, 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: The protection and enforcement of our intellectual property rights may require the expenditure of significant financial, managerial and operational resources. We rely on trademark, copyright and patent law, trade secret protection, agreements and other methods with our employees and others to protect our proprietary rights. However, we may be unable to adequately protect our intellectual property rights or prevent third parties from infringing or misappropriating our intellectual property rights. We may not be able to obtain registration for all intellectual property we seek to register, and effective intellectual property protection may not be available in every country in which our products are sold. 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 maintain the confidentiality of any relevant proprietary technology through trade secrets, operational safeguards and contractual agreements. Reliance upon trade secrets, rather than patent protection may cause us to be vulnerable to competitors who successfully replicate (knock off) our manufacturing techniques and processes. Further, our confidentiality agreements may not effectively prevent disclosure of our proprietary information, technologies and processes and may not provide an adequate remedy in the event of unauthorized disclosure of such information. Others may independently develop similar trade secrets or technology or obtain access to our unpatented trade secrets or proprietary technology. Others 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. Any of our intellectual property rights may be challenged by others or invalidated through administrative process or litigation. Third parties may claim in the future, that we have infringed their intellectual property rights, which could result in significant costs and potential damages and license requirements. We may initiate claims or litigation against others for infringement, misappropriation or violation of our intellectual property rights or other proprietary rights or to establish the validity of such rights. However, we may be unable to discover or determine the extent of any infringement, misappropriation or other violation of our intellectual property rights and other proprietary rights. In addition, we may be unable to prevent third parties from infringing upon, misappropriating or otherwise violating our intellectual property rights and other proprietary rights.

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 since the COVID-19 pandemic. 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. See also PART I, ITEM 1C — CYBERSECURITY below.

Risk Management and Strategy

We regularly assess risks from cybersecurity threats, monitor our information systems for potential vulnerabilities and test those systems pursuant to our process. Our cybersecurity risk assessment is part of our overall risk management program. We also regularly engage outside consultants to assess, identify and manage material risks from cybersecurity threats, including those threats associated with our use of third-party service providers. These consultants recommend, implement and monitor systems to protect against cybersecurity threats. Based on the information available to us through the time of this filing on March 30, 2026, we are not aware of any risks from cybersecurity threats that have materially affected or are reasonably likely to materially affect our business strategy, results of operations or financial condition. However, despite our cybersecurity risk management processes, there can be no assurance that we, or the third parties with which we interact, will not experience a cybersecurity incident in the future that may materially affect us. Refer to the risk factor captioned “Increasing dependence on the continuous and reliable operation of our information technology systems” under Part I, Item 1A — Risk Factors above for additional description of cybersecurity risks and potential related impacts on the Company.

Governance

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

(1) At the end of December 2025, the Company made the decision to cease further investment in its Re-Tain® manufacturing operations. As a result, we intend on refitting this building to meet the manufacturing needs of our First Defense® product line.

In addition to the properties above, we also lease office, storage and parking space in New York and a small sales office in Winona, Minnesota. We maintain property insurance in amounts that approximate replacement cost and a modest amount of business interruption insurance.

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.

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. 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 the Cautionary Note Regarding Forward-Looking Statements before Part I: Item 1 — Business and 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.

Overview

ImmuCell Corporation is an animal‑health biologics company that develops, manufactures, and commercializes products designed to improve the survival, health, and long‑term performance of newborn dairy and beef calves. The Company's practical, science-based solutions help prevent calf scours, one of the most prevalent diseases in neonatal calves worldwide that accounts for 30-40% of pre-weaning mortality in many production systems. The Company’s primary product line, First Defense® utilizes hyperimmunized bovine colostrum to provide pathogen-specific antibodies and other bioactive components. First Defense® is designed to provide Immediate Immunity™ through orally delivered antibodies against the principal viral and bacterial causes of neonatal calf diarrhea (scours), including Escherichia coli (E.coli), bovine coronavirus, and bovine rotavirus. First Defense® is available in several formats—single‑dose boluses, gel syringes, and multi‑dose powder options—to fit different calf‑management needs. The Company’s manufacturing platform includes proprietary vaccine development, dairy herd hyperimmunization management, colostrum sourcing and qualification, antibody concentration and purification processes, blending, fill-finish operations, and final product testing and release. The Company markets its products through its commercial sales team, in partnership with national and regional animal‑health distributors. Its primary customers are U.S. and Canadian dairy operations, calf ranches, and beef producers, all of whom must manage calves during the critical first weeks of life—a period in which scours and other early‑life health issues can materially affect survival of the calf, farm labor inputs, growth rates, and lifetime productivity per head of cattle. Although our commercial presence outside North America is currently limited, the Company is pursuing international expansion by seeking additional regulatory approvals and building distributor partnerships. The Company has recently increased its focus on and resources for global business development as part of its long‑term growth strategy.

Key Highlights and Developments in the Year Ended December 31, 2025

We expanded our manufacturing capacity from approximately 3 million manufactured units during the year ended December 31, 2023 to 4.1 million manufactured units during the year ended December 31, 2024, and 4.6 million manufactured units during the year ended December 31, 2025. We eliminated a production contamination related backlog by the end of June 2025. We are currently identifying additional opportunities to further increase our manufacturing capacity in the future. See Item 1 — Business for further discussion about the Company's strategy for expanding production.

For the year ended December 31, 2025 compared to the year ended December 31, 2024, we grew revenue by 4.3%, and improved gross margin from 30% to 41% of product sales.

In December of 2025, we announced a strategy pivot to focus on First Defense® and pause further investment in manufacturing Re-Tain®, to allow us to focus on the scours market opportunity. Re-Tain® was a product development initiative that the Company had pursued for some time. As a result of this decision, we recognized a $2.7 million non-cash impairment charge related to property, plant and equipment, which is included in other expenses, net. Beginning in 2026, we expect that certain product development expenses formerly associated with Re-Tain® manufacturing, including depreciation expense for manufacturing facilities and equipment that we plan to repurpose for the production of First Defense®, as well as other costs including employee-related expenses, will be included in First Defense® costs of goods sold. Furthermore, depreciation expense for idle assets, which were formerly associated with Re-Tain®, that we plan to refit for the purpose of manufacturing First Defense®, may fluctuate as a result of re-evaluating the useful life of the assets.

Fiscal 2025 also saw significant realignments in company management. We hired a new President and Chief Executive Officer, created and filled a Chief Financial Officer position, and eliminated the Vice President of Operations role.

Results of Operations for the Year Ended December 31, 2025, Compared with the Year Ended December 31, 2024

10

Product Sales

Sales of the First Defense® product line made up 99% of our total product sales during both of the years ended December 31, 2025 and 2024. We also sell our own CMT, which is used to detect somatic cell counts in milk. Sales of CMT aggregated approximately 1% of our total product sales during the periods reported.

Product sales during the year ended December 31, 2025 were $27.6 million representing a 4%, or $1.2 million, increase over product sales of $26.5 million during the year ended December 31, 2024. The increase was primarily due to an additional $4.2 million of sales of our Tri-Shield® product as a result of higher purchasing volume from existing customers and new dairy and beef customers seeking protection for their calves. The increase was partly offset by an anticipated migration from Dual-Force® products of $2.6 million, as well as $0.4 million decrease in our First Defense Technology® product. We had an order backlog heading into 2024, which benefited product sales in the year ended December 31, 2024 as compared to the year ended December 31, 2025. We entered 2024 with $9.4 million of order backlog, reducing it to $4.4 million by December 31, 2024. By the end of June 2025, we had substantially eliminated the order backlog but still managed to post this increase in product sales for the year ended December 31, 2025. We ended 2025 with no material order backlog. While there is always uncertainty in manufacturing with biological materials, we do not anticipate recurrence of significant future order backlog at this time.

Domestic sales during the year ended December 31, 2025 increased by 6.5%, and international sales decreased by 9.6%, in comparison to the year ended December 31, 2024. The decrease in international sales was primarily driven by order timing in Canada. International sales aggregated 12% and 14% of total sales during the years ended December 31, 2025 and 2024, respectively.

Costs of Goods Sold

Costs of goods sold during the year ended December 31, 2025 were $16.2 million representing a 13%, or $2.4 million, decrease over costs of goods sold of $18.6 million during the year ended December 31, 2024. The decrease was primarily due to manufacturing volumes and efficiencies, partly offset by approximately $0.7 million of inventory write-downs on a portion of the Company's colostrum inventory.

Product Development Expenses

The majority of our product development expenses pertain to the development of Re-Tain®, our purified Nisin treatment for subclinical mastitis in lactating cows. During the year ended December 31, 2025, product development expenses decreased by 22%, or $0.9 million, to $3.0 million in comparison to $3.9 million during the year ended December 31, 2024. This decrease was driven by a reduction in product development expenses related to Re-Tain® as part of an aggressive idle of product development expenses as we awaited what we believed would be the fifth and final Technical Section Complete Letter from the FDA. As discussed under "Key Highlights and Developments in the Year Ended December 31, 2025" above, we made the decision to no longer pursue the fifth Technical Section Complete Letter from the FDA during December 2025.

Sales and Marketing Expenses

During the year ended December 31, 2025, sales and marketing expenses increased by 3%, or $0.1 million, to $3.6 million in comparison to $3.5 million during the year ended December 31, 2024. This increase was primarily due to $0.4 million higher marketing and consulting as a result of increased commercial activity and inflation. Exiting the backorder situation led us to increase commercial activity generally during 2025. This increase was almost fully offset by a $0.4 million decrease in salaries and wages as a result of open positions during the year ended December 31, 2025. We are planning investments to support increased sales capacity in the year ended December 31, 2026 in both the U.S. and international markets. Sales and marketing expenses amounted to approximately 13% of product sales in both of the years ended December 31, 2025 and 2024.

Administrative Expenses

During the year ended December 31, 2025, administrative expenses increased by 44%, or $1.0 million, to $3.2 million in comparison to $2.2 million during the year ended December 31, 2024. The increase was primarily due to $0.8 million of costs associated with executive officer changes and additions. On April 7, 2025, we added a chief financial officer to the administrative team. On November 1, 2025, we hired a new President and CEO because of the pending retirement of our former President and CEO. In connection with this hire, we incurred certain one-time expenses, including recruiting fees, a signing bonus and overlapping transitional wages for two months with our former President and CEO. These one-time items contributed to $0.3 million of the $0.8 million costs associated with the executive officer changes and additions. Also contributing to the administrative expense increase was an additional $0.1 million of information technology costs as compared to the prior year. This increasing level of investment in executive staff and infrastructure is intended to support our anticipated growth. In 2026, we anticipate higher administrative expenses associated with the full-year impact of increased headcount and higher wages, much of which is non-cash share-based compensation and other incentive accruals.

Other Expenses, Net

During the year ended December 31, 2025, other expenses, net, increased by 429%, or $2.2 million, to $2.7 million in comparison to $0.5 million during the year ended December 31, 2024. The increase was primarily due a $2.7 million non-cash impairment charge related to property, plant and equipment, formally related to the Re-Tain® product line. Partly offsetting the increase was insurance recoveries related to inventory damages occurring in prior periods of $0.4 million.

Income Tax Expense

During both of the years ended December 31, 2025 and 2024, we recorded insignificant income tax expense.

We have substantial net operating loss carryforwards that will largely offset future income tax liabilities. As of December 31, 2025, our federal net operating loss carryforward was $17.5 million. As of December 31, 2025, our state net operating loss carryforward was $7.7 million.

The Tax Cuts and Jobs Act of 2017 reduced the U.S. corporate income tax rate to 21% and modified rules governing net operating loss carryforwards and carrybacks, among other changes. On July 4, 2025, the One Big Beautiful Bill Act was enacted, which permanently extends and modifies certain provisions of the Tax Cuts and Jobs Act. Key provisions include 100% bonus depreciation for qualified property, immediate expensing of domestic research and experimental expenditures under IRC Section 174A, and restoration of an Earnings Before Interest Taxes Depreciation and Amortization (EBITDA)-based calculation for the business interest expense limitation under IRC Section 163(j). The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. The legislation did not have a material impact on our effective tax rate for the year ended December 31, 2025 or our financial statements. We continue to evaluate the impact of these provisions on our tax position, including their effect on our deferred tax assets and related valuation allowance.

Our effective income tax rate differs from the statutory U.S. corporate tax rate primarily because we continue to provide a full valuation allowance against our deferred tax assets. While this valuation allowance remains in place, we are not recognizing the benefit of our tax losses. We evaluate the realizability of our deferred tax assets at each reporting date, considering all available positive and negative evidence, and will reduce the valuation allowance to the extent it becomes more likely than not that some or all of the deferred tax assets will be realized.

Liquidity and Capital Resources

Our sources of liquidity and capital resources are cash flows from operations, proceeds from our sale of common stock under our At-The-Market Agreement with Craig-Hallum Capital Group LLC (ATM Agreement), and borrowings available under our bank line of credit.

In April of 2024, we entered into our ATM Agreement, which allows us to offer and sell up to $11 million of shares of our common stock. Proceeds, net of upfront legal, accounting and other fees, less sales commissions during the year ended December 31, 2025 and December 31, 2024 were $0.3 million and $4.4 million, respectively. Particularly in 2024, this provided a financial bridge to fund our operations during a backlog situation that lasted from 2022 to mid-2025. As of December 31, 2025, we have the capacity to sell $6 million of shares under the ATM Agreement but no pending plan to issue additional shares under that arrangement.

We had aggregate debt outstanding (net of debt issuance and debt discount costs) of $9.1 million and $10.5 million as of December 31, 2025 and 2024, respectively. Recurring debt principal repayments (excluding the line of credit) aggregated $1.5 million during both the years ended December 31, 2025 and 2024. We anticipate that recurring debt principal repayments will aggregate approximately $1.6 million and $1.2 million during the years ending December 31, 2026 and 2027, respectively. During the third quarter of 2025, the availability of our $1.0 million line of credit, which bears interest at the National Prime Rate per annum, was extended until September 11, 2026. No draw on our line of credit was outstanding as of December 31, 2025, or December 31, 2024. See Part II: Item 8 — Financial Statements and Supplementary Data: Note 9, "Bank Debt" for more information about our bank debt.

Interest expense (excluding amortization of debt issuance and debt discount costs) was approximately $439,000 and $526,000 during the years ended December 31, 2025, and 2024, respectively. Our debt bears interest at fixed rates, which on a blended basis amounts to 4.31% per annum. We anticipate that interest expense (excluding amortization of debt issuance and debt discount costs) will be $367,000 and $297,000 during the years ending December 31, 2026 and 2027, respectively.

The table below summarizes the changes in selected key accounts:

(1) There were 801,760 and 664,000 shares of common stock reserved for stock option issuance that were outstanding as of December 31, 2025 and 2024, respectively.

We continuously assess sources and uses of cash for our business. In addition to normal working capital requirements, we anticipate that our short-term and long-term cash requirements consist primarily of general corporate needs, capital expenditures, debt requirements, amounts due under operating lease agreements, and other commitments. Based on our current best estimates, we believe that our existing cash and cash equivalents, together with cash flows from operations and our bank line of credit, will be sufficient to meet our currently planned working capital, capital expenditure, and debt requirements and to finance our ongoing business operations for at least the next 12 months and the foreseeable future.

Cash Flows

Net cash provided by operating activities increased $2.1 million during the year ended December 31, 2025 as compared to the year ended December 31, 2024. This increase was primarily due to $1.9 million less cash being used for accounts receivable and a $1.1 million decrease in net loss, which included a $2.7 million increase in non-cash adjustments. These factors were partly offset by a $2.9 million increase in cash used for inventory as a result of our efforts to replenish after periods of high backlog.

Net cash used for investing activities increased $0.8 million during the year ended December 31, 2025, as compared to the year ended December 31, 2024, primarily due to cash spent to fund the purchase of property, plant and equipment primarily for manufacturing. Cash used on property, plant and equipment represents more normalized spend levels than 2024, when there was a significant effort to conserve cash.

Net cash used for financing activities increased $4.0 million during the year ended December 31, 2025 as compared to the year ended December 31, 2024. The increase in net cash used was primarily due to an approximate reduction of $4.3 million in proceeds from sales of common stock under the ATM Agreement, partly offset by lower payments of equity offering costs. During the year ended December 31, 2025, we refinanced a portion of our bank debt, resulting in borrowings and repayments in approximately the same amount. During the year ended December 31, 2025, we also made standard mandatory repayments on our bank debt of approximately $1.5 million, which were generally consistent with the same payments in the prior year.

Covenants and Restrictions

Our debt with Maine Community Bank is subject to certain financial covenants. We are required to meet a minimum debt service coverage (DSC) ratio of 1.35. Our actual DSC ratios were 2.65 and 0.73 for the years ended December 31, 2025, and 2024, respectively. In the second, third and fourth quarters of 2024, the bank preemptively waived the DSC waiver. There is no assurance that we will be able to achieve the required DSC ratio going forward. If we are unable to do so or reach a favorable agreement with our lenders regarding that requirement (including an amendment to or waiver of such requirement), we would be in violation of that covenant, which could result in unfavorable amendments to the terms of our bank debt (including a possible bank requirement to prepay our debt) or have other adverse impacts on our business and results of operations.

Commitments and Contingencies

See Part II: Item 8 — Financial Statements and Supplementary Data: Note 10, "Commitments and Contingencies" for disclosure of the Company's commitments and contingencies as of December 31, 2025.

Critical Accounting Policies and Estimates

The audited 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, 2025 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. See Part II: Item 8 — Financial Statements and Supplementary Data: Note 2, "Basis of Presentation and Use of Estimates and Significant Accounting Policies", for a complete discussion of recently issued accounting standards adopted and not yet adopted.

On an on-going basis, we evaluate our estimates. Significant estimates include our valuation of inventory valuation, long-lived assets, and deferred tax 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 highlight certain policies that we consider critical to the operations of our business and understanding of our financial statements. These critical accounting estimates have been consistently applied.

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. Inventory valuations is a critical accounting policy because of the estimates and assumptions used by management to determine its cost accounting and because of the variability of the cost per dose due to fluctuations in the biological yield.

We evaluate inventory for excess, slow moving, and obsolete items and record an adjustment when the cost of inventory exceeds its estimated net realizable value. The inventory valuation adjustment to net realizable value establishes a new cost basis of the inventory that cannot be subsequently reversed. The effect of any inventory adjustment is recorded in costs of goods sold, as appropriate.

In developing inventory adjustments for excess, slow moving, and obsolete inventory, we are required to use judgment and make estimates of future sales demand and production requirements compared with current inventory levels. Our estimate of projected sales demand and production requirements is primarily based on actual orders received, historical demand, product life cycle changes, product pricing, economic trends, and competitive factors, such as market and pricing trends for similar products. Projecting sales demand and production requirements involves significant management judgment regarding future events. Future events that could significantly influence our judgments and related estimates include general economic conditions within the specific markets in which we operate, changes in demand for our products and customer preference, price fluctuations, and actions of our competitors, including the introduction of new products, technological advances, and pricing changes. Projected sales demand and production requirements can also be affected by the significant redesign of our existing products or the replacement of an existing product by an entirely new generation of product. It is possible that an unfavorable adjustment to our inventory for excess, slow moving, and obsolete inventory may be required in the future if there is a change in any of the aforementioned factors that adversely impacts our estimates of future demand for our products and we do not modify our purchases or production schedule accordingly.

Long-lived Assets

We periodically evaluate our long-lived assets, consisting principally of property, plant and equipment, net, operating lease ROU 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. If the carrying amount of a long-lived asset group exceeds the related undiscounted future cash flows, we recognize an impairment loss by the amount that the carrying value of the asset exceeds fair value.

Income Taxes

We account for income taxes in accordance with ASC 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.

ASC 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 2022. We have evaluated the positions taken on our filed tax returns and have concluded that no uncertain tax positions existed as of December 31, 2025 or 2024. Although we believe that our estimates are reasonable, actual results could differ from these estimates. See Part II: Item 8 — Financial Statements and Supplementary Data: Note 15, "Income Taxes".

Disclosure Controls and Procedures: Disclosure controls and procedures are designed to ensure that 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. 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. Our management, with the participation of the individuals who serves as our principal executive and principal financial officers, evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of December 31, 2025. Based on this evaluation, those officers concluded that our disclosure controls and procedures were effective as of that date.

Management’s Annual Report on Internal Control over Financial Reporting: Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our 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. 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. This Annual Report does not include an attestation report from our 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 our 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, 2025 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.