Immucell Corp: Form 10-Q for the period ended Jun 30, 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 an 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®), during December 2025, we reassessed prior estimates of the useful lives of that manufacturing equipment. Because the equipment had seen such limited use since installation, we increased the estimated remaining useful lives on certain equipment by a weighted average of five years. The effect of this change in estimate, effective January 1, 2026, for the three months ended June 30, 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. The effect of this change in estimate for the six months ended June 30, 2026 was a $0.2 million decrease to depreciation expense included in costs of goods sold, and an increase in operating income and net income of $0.2 million, or $0.02 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 hot summer weather and cold stress during the winter months can increase the incidence of scours and the need for our products.

First Defense® Manufacturing Expansion

In late December 2025 and early January 2026, we announced our plan to convert the former Re-Tain® facilities and most of the related equipment for increased production of our First Defense® product line. In June 2026, our Board of Directors authorized a manufacturing capacity expansion program to execute on that strategy.

The first phase, which we have initiated to stay ahead of current and future demand growth, expands drying capacity by renovating the former Re-Tain® facility and adding a new freeze dryer with greater capacity and reliability than our current freeze-drying equipment. This phase is expected to take approximately 12 months and cost approximately $3.5 million.

In a second phase, we plan to repurpose Re-Tain® equipment and add additional equipment and automation to expand our First Defense® colostrum liquid processing capacity. The second phase will involve additional investments, including for detailed engineering work to develop an efficient and scalable process. This phase is expected to take an additional six months and cost approximately $4.5 million.

The goal of these capacity expansion investments is to further strengthen our ability to reliably manufacture First Defense® products to meet expected customer demand.

Results of Operations for the Three Months Ended June 30, 2026, Compared with the Three Months Ended June 30, 2025

NM - Not meaningful

Product Sales

Sales of the First Defense® product line made up approximately 99% of our total sales during the three months ended June 30, 2026 and 2025. 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 three months ended June 30, 2026 were $7.2 million representing a 11.5%, or $0.7 million, increase over product sales of $6.4 million during the three months ended June 30, 2025. The increase was primarily due to higher sales volumes for all product categories of the First Defense® product line, including portfolio expansion, and product price increases.

Domestic sales during the three months ended June 30, 2026 increased by 27.7% (to $6.2 million), and international sales decreased by 38.9% (to $1.0 million), in comparison to the three months ended June 30, 2025. International sales aggregated 13.4% and 24.4% of total sales during the three months ended June 30, 2026 and 2025, respectively.

Costs of Goods Sold

Costs of goods sold during the three months ended June 30, 2026 were $4.7 million representing a 30.9%, or $1.1 million, increase over costs of goods sold during the three months ended June 30, 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, along with $0.2 million in manufacturing inefficiencies and $0.2 million of increased raw material costs during the three months ended June 30, 2026. Costs of goods sold increased at a rate higher than sales due to 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 efforts on obtaining FDA approval of Re-Tain® and instead refit the facility for use in producing First Defense® products, and manufacturing inefficiencies and increased raw material costs in the three months ending June 30, 2026, partially offset by price increases effective January 1, 2026.

Administrative Expenses

During the three months ended June 30, 2026, administrative expenses increased by 76.6%, or $0.6 million, to $1.3 million in comparison to $0.7 million during the three months ended June 30, 2025. The increase was primarily due to a $0.3 million increase in executive compensation (including share-based compensation), coupled with $0.1 million in higher professional services fees.

Sales and Marketing Expenses

During the three months ended June 30, 2026, sales and marketing expenses increased by 59.6%, or $0.4 million, to $1.1 million in comparison to $0.7 million during the three months ended June 30, 2025. This increase was primarily due to expanded commercial efforts in First Defense® leading to higher compensation and expenses associated with new and backfilled sales positions. In the three months ended June 30, 2025, we restricted commercial spending due to tight product supply; however, this tight supply was alleviated in the summer of 2025.

Product Development Expenses

During the three months ended June 30, 2026, product development expenses decreased by 85.6%, or $0.7 million, to $0.1 million in comparison to $0.8 million during the three months ended June 30, 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 our December 2025 decision to cease our efforts on obtaining FDA approval of Re-Tain® and instead refit the facility for use in producing First Defense® products, coupled with a $0.2 million reduction of wages and lab supplies associated with Re-Tain® product development and $0.1 million lower licenses and fees related expense.

Other Operating Income

During the three months ended June 30, 2026, the Company recorded a $2.0 million settlement with a former contract manufacturer that compensated the Company for operating costs incurred in product development and contract performance related to the development of the Company’s Re-Tain® product. The settlement resolved claims for operating costs the Company incurred in developing the product. The settlement agreement fully released the parties with no further material obligations. There are no remaining material contingent amounts related to this settlement.

Other Expenses, Net

During both the three months ended June 30, 2026 and 2025, other expenses, net was insignificant.

Income Tax Expense

During the three months ended June 30, 2026, we recorded $45,950 of income tax expense as compared to $1,904 during the three months ended June 30, 2025. We anticipate having some amount of tax liability for profits we may realize moving forward, as certain NOLs carried forward no longer 100% offset taxable income, but 80% instead.

Results of Operations for the Six Months Ended June 30, 2026, Compared with the Six Months Ended June 30, 2025

NM - Not meaningful

Product Sales

Sales of the First Defense® product line made up more than 99% of our total sales during the six months ended June 30, 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 six months ended June 30, 2026 were $17.5 million representing a 20.9%, or $3.0 million, increase over product sales of $14.5 million during the six months ended June 30, 2025. The increase was primarily due to higher sales volumes for all product categories of the First Defense® product line, including portfolio expansion, and product price increases.

Domestic sales during the six months ended June 30, 2026 increased by 32.5% (to $16.0 million), and international sales decreased by 35.7% (to $1.6 million), in comparison to the six months ended June 30, 2025. International sales aggregated 9.0% and 17.0% of total sales during the six months ended June 30, 2026 and 2025, respectively.

Costs of Goods Sold

Costs of goods sold during the six months ended June 30, 2026 were $10.4 million representing a 25.3%, or $2.1 million, increase over costs of goods sold of $8.3 million during the six months ended June 30, 2025. The increase was primarily due to higher sales of First Defense® combined with a shift of $0.6 million of costs associated with the former Re-Tain® manufacturing facility from product development expense to costs of goods sold, and $0.4 million of increased raw material costs. Costs of goods sold increased at a rate higher than sales due to 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 efforts on obtaining FDA approval of Re-Tain® and instead refit the facility for use in producing First Defense® products, and higher raw material costs, partially offset by price increases effective January 1, 2026.

Administrative Expenses

During the six months ended June 30, 2026, administrative expenses increased by 79.4%, or $1.1 million, to $2.4 million in comparison to $1.3 million during the six months ended June 30, 2025. The increase was primarily due a $0.7 million increase in executive compensation (including share-based compensation), coupled with $0.2 million additional legal and professional service fees.

Other Operating Income

During the six months ended June 30, 2026, the Company recorded a $2.0 million settlement with a former contract manufacturer that compensated the Company for operating costs incurred in product development and contract performance related to the development of the Company’s Re-Tain® product. The settlement resolved claims for operating costs the Company incurred in developing the product. The settlement agreement fully released the parties with no further material obligations. There are no remaining material contingent amounts related to this settlement.

Sales and Marketing Expenses

During the six months ended June 30, 2026, sales and marketing expenses increased by 50.9%, or $0.8 million, to $2.3 million in comparison to $1.6 million during the six months ended June 30, 2025. This increase was primarily due to expanded commercial efforts in First Defense® leading to $0.6 million in higher compensation and expenses associated with new and backfilled sales positions, coupled with $0.1 million in increased promotional and tradeshow related expenses. In the six months ended June 30, 2025, we restricted commercial spending due to tight product supply; however, this tight supply was alleviated in the summer of 2025.

Product Development Expenses

During the six months ended June 30, 2026, product development expenses decreased by 72.5%, or $1.2 million, to $0.4 million in comparison to $1.6 million during the six months ended June 30, 2025. This decrease was driven by the $0.6 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 our December 2025 decision to cease our efforts on obtaining FDA approval of Re-Tain® and instead refit the facility for use in producing First Defense® products, coupled with a $0.4 million reduction of wages and lab supplies associated with Re-Tain® product development and $0.1 million lower licenses and fees.

Other (Expenses) Income, Net

During the six months ended June 30, 2026, other (expenses) income, net was ($0.1) million in comparison to $0.3 million of other (expenses) income, net during the six months ended June 30, 2025. The year-over-year expenses increase of 126.2% or $0.3 million was primarily due to a one-time insurance recovery which occurred in the six months ended June 30, 2025.

Income Tax Expense

During the six months ended June 30, 2026, we recorded $58,472 of income tax expense as compared to $3,809 during the six months ended June 30, 2025. As mentioned above, we anticipate having some amount of tax liability for profits we may realize moving forward, as certain NOLs carried forward no longer 100% offset taxable income, but 80% offset instead.

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 $8.3 million and $9.1 million as of June 30, 2026 and December 31, 2025, respectively. Recurring debt principal repayments (excluding the line of credit) aggregated $0.8 million during both the six months ended June 30, 2026 and 2025. We anticipate that recurring debt principal repayments will aggregate $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 June 30, 2026, or December 31, 2025.

Interest expense (excluding amortization of debt issuance and debt discount costs) was $189,027 and $231,110 during the six months ended June 30, 2026 and 2025, respectively. Our debt bears interest at fixed rates, which on a blended basis amounts to 4.29% per annum as of June 30, 2026. 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 June 30, 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:

Net cash provided by operating activities increased $3.4 million during the six months ended June 30, 2026 as compared to the six months ended June 30, 2025. The increase was primarily due to a $1.8 million increase in net income, which benefitted from a $2.0 million settlement as the result of a contract dispute with a prior contract manufacturer for Re-Tain®. Working capital changes also contributed to the increase, including i) $1.4 million less cash used for inventory as finished goods were built up in 2025, ii) cash outflows for accounts payable and accrued expenses decreased by $0.8 million primarily due to timing of payroll and executive bonus payments, and iii) $0.9 million less cash provided by accounts receivable due to timing of order fulfillment.

Net cash used for investing activities increased $0.4 million during the six months ended June 30, 2026 as compared to the six months ended June 30, 2025. The increase was primarily due to spending on capital expenditures related to investments supporting the first phase of the First Defense® planned production increase. See “First Defense® Manufacturing Expansion” section above for further information.

Net cash used for financing activities increased $0.2 million during the six months ended June 30, 2026 as compared to the six months ended June 30, 2025 primarily due to the absence of $0.3 million proceeds from the ATM Agreement that were received in the six months ended June 30, 2025, partly offset by $0.2 million of proceeds from the exercise of stock options during the six months ended June 30, 2026.

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 officer 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 June 30, 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 June 30, 2026 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Except as set forth below, there have been no material changes from 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.

Production capacity constraints: The inability to meet market demand for our products is a risk to our business. Our plans call for increases of our production capacity through yield improvements, redeploying assets previously slated for production of Re-Tain® and investing approximately $3.5 million in incremental freeze drying capacity and approximately $4.5 million in colostrum processing capacity over the next 12 to 18 months. Expanding manufacturing capacity involves practical and technical risks affecting efficiency of production including contamination and yields, and risks of not being able to access sufficient high-quality colostrum or other raw materials. There is a risk of cost overruns in our production expansion project, and a risk that we will not be able to achieve our production capacity growth objectives on a timely basis, resulting in a 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.

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, due to the need to use all or part of the colostrum for their own calves, or concerns with the increasing cost of colostrum-replacement products, or higher prices offered by other companies that use colostrum to develop human or animal health products. 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 the quality of the colostrum collected will not be suitable for our production requirements.