Immucell Corp: Form 10-Q for the period ended Mar 31, 2026

The following discussion and analysis of our financial condition and results of operations should be read together with our condensed unaudited financial statements and the related notes and other financial information included in this Quarterly Report on Form 10-Q (Quarterly Report). Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly 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 Forward-Looking Statements for a discussion of some of the important factors that could cause actual results to differ materially from the anticipated results, objectives or expectations described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

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.

Change in Accounting Estimate

In connection with the idle status of certain property, plant and equipment, net, (related to the repurposing of certain equipment previously utilized in the manufacturing of Re-Tain®), we reassessed prior estimates of the useful lives of that manufacturing equipment. Because the equipment had seen such limited use during the period since installation, we increased the estimated remaining useful lives on certain equipment by a weighted average of five years effective January 1, 2026. The effect of this change in estimate for the three months ended March 31, 2026 was a $0.1 million decrease to depreciation expense included in costs of goods sold, and an increase in operating income and net income of $0.1 million, or $0.01 per both basic and diluted share.

See Note 5, “Property, Plant and Equipment” of the Notes to Condensed Unaudited Financial Statements included in Part I, Item 1 of this Form 10-Q for further information.

Seasonality of Sales

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.

Results of Operations for the Three Months Ended March 31, 2026, Compared with the Three Months Ended March 31, 2025

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Product Sales

Sales of the First Defense® product line made up 99.5% of our total sales during the three months ended March 31, 2026 and 2025. We also sell our own CMT, which is used to detect somatic cell counts in milk. Sales of CMT aggregated approximately 0.5% of our total product sales during the periods reported.

Product sales during the three months ended March 31, 2026 were $10.4 million representing a 28.4%, or $2.3 million, increase over product sales of $8.1 million during the three months ended March 31, 2025. The increase was primarily due to higher sales volumes of Tri-Shield® and Dual Force® combined with year-over-year product price increases across most product lines.

Domestic sales during the three months ended March 31, 2026 increased by 35.7% (to $9.7 million), and international sales decreased by 30.2% (to $0.6 million), in comparison to the three months ended March 31, 2025. International sales aggregated 6.0% and 11.1% of total sales during the three months ended March 31, 2026 and 2025, respectively.

Costs of Goods Sold

Costs of goods sold during the three months ended March 31, 2026 were $5.7 million representing a 20.9%, or $1.0 million, increase over costs of goods sold of $4.7 million during the three months ended March 31, 2025. The increase was primarily due to higher sales of First Defense® combined with a shift of $0.3 million of costs associated with the former Re-Tain® manufacturing facility from product development expense to costs of goods sold. Cost of goods sold increased at a rate lower than sales due to price increases effective January 1, 2026 and manufacturing efficiencies obtained during the period, partially offset by the shift of depreciation and building related expenses related to our 33 Caddie facility (formerly associated with Re-Tain®) from product development expense as a result of the Company's December 2025 decision to cease its focus on obtaining FDA approval of Re-Tain® and instead refit the facility for use in producing First Defense® products.

Sales and Marketing Expenses

During the three months ended March 31, 2026, sales and marketing expenses increased by 43.9%, or $0.4 million, to $1.2 million in comparison to $0.9 million during the three months ended March 31, 2025. This increase was primarily due to higher wages, including share-based compensation, and expenses associated with new and backfilled sales positions, coupled with increased promotional and tradeshow related expenses. In the three months ended March 31, 2025, we restricted commercial spending due to tight product supply; however, this tight supply was alleviated in the summer of 2025.

Administrative Expenses

During the three months ended March 31, 2026, administrative expenses increased by 82.7%, or $0.5 million, to $1.1 million in comparison to $0.6 million during the three months ended March 31, 2025. The increase was primarily due to a $0.4 million increase in executive compensation (including share-based compensation).

Product Development Expenses

During the three months ended March 31, 2026, product development expenses decreased by 58.0%, or $0.4 million, to $0.3 million in comparison to $0.8 million during the three months ended March 31, 2025. This decrease was driven by the $0.3 million shift to costs of goods sold of depreciation and building related expenses related to our 33 Caddie facility (formerly associated with Re-Tain®) as part of our recently announced strategy to utilize the facility for the production of First Defense® as a result of the Company's December 2025 decision to cease its focus on obtaining FDA approval of Re-Tain® and instead refit the facility for use in producing First Defense® products, coupled with a reduction of wages associated with Re-Tain® product development.

Other (Expense) Income, Net

During the three months ended March 31, 2026, other expense, net was $15,187 in comparison to $0.3 million of other income, net during the three months ended March 31, 2025. The year-over-year net shift of 104.6% or $0.3 million was primarily due to a one-time insurance settlement of $0.4 million which occurred in the three months ended March 31, 2025.

Income Tax Expense

During both the three months ended March 31, 2026 and 2025, we recorded insignificant amounts of income tax expense.

Liquidity and Capital Resources

Our sources of liquidity and capital resources are cash flows from operations, proceeds from our sale of common stock, and borrowings available under our bank line of credit.

We had aggregate debt outstanding (net of debt issuance and debt discount costs) of $8.7 million and $9.1 million as of March 31, 2026 and December 31, 2025, respectively. Recurring debt principal repayments (excluding the line of credit) aggregated $0.4 million during both the three months ended March 31, 2026 and 2025. We anticipate that recurring debt principal repayments will aggregate approximately $1.6 million during the year ending December 31, 2026. Our $1.0 million line of credit, which bears interest at the National Prime Rate per annum, is currently available until September 11, 2026. No draw on our line of credit was outstanding as of March 31, 2026, or December 31, 2025.

Interest expense (excluding amortization of debt issuance and debt discount costs) was approximately $97,000 and $117,000 during the three months ended March 31, 2026, and 2025, respectively. Our debt bears interest at fixed rates, which on a blended basis amounts to 4.3% per annum. We anticipate that interest expense (excluding amortization of debt issuance and debt discount costs) will be $367,000 during the year ending December 31, 2026.

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. As of March 31, 2026, 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.

The table below summarizes the changes in selected key accounts:

(1) There were 1,076,260 and 801,760 shares of common stock reserved for issuance for stock options that were outstanding as of March 31, 2026 and December 31, 2025, respectively.

Net cash provided by operating activities increased $2.0 million during the three months ended March 31, 2026 as compared to the three months ended March 31, 2025. The increase was primarily due to a $0.5 million increase in net income, $0.8 million less cash used for inventory, $0.4 million less cash used for accounts payable and accrued expenses, and $0.3 million additional cash provided by accounts receivable.

Net cash used for investing activities decreased $0.2 million during the three months ended March 31, 2026 as compared to the three months ended March 31, 2025. The decrease was primarily due to a reduction in capital expenditures.

Net cash used for financing activities decreased an insignificant amount during the three months ended March 31, 2026 as compared to the three months ended March 31, 2025.

Commitments, Contingencies and Contractual Obligations

For disclosures on contingencies, see Note 9 “Commitments and Contingencies,” of the Notes to Condensed Unaudited Financial Statements included in Part I, Item 1 of this Form 10-Q.

Critical Accounting Policies and Estimates

Our Financial Statements are prepared in accordance with U.S. GAAP, which require us to make certain complex estimates in the application of our accounting policies based on the best assumptions, judgments, and opinions of our management. There have been no significant changes to our critical accounting policies and estimates. For a description of our critical accounting policies, see Item 7., “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on Form 10-K for the year ended December 31, 2025.

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 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 March 31, 2026. Based on this evaluation, management concluded that our disclosure controls and procedures were effective as of that date.

Changes in Internal Controls over Financial Reporting: Our Chief Financial Officer, other members of management, and our accounting team 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 March 31, 2026 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

There have been no material changes to the risk factors identified in our Annual Report on Form 10-K for the year ended December 31, 2025, in response to Item 1A., “Risk Factors,” of Part I of the Annual Report.