IMMUCELL CORP /DE/ 10-K

ITEM 9A — CONTROLS AND PROCEDURES Disclosure Controls and Procedures. Our management, with the participation of the individual who serves as our principal executive and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2021. Based on this evaluation, that officer concluded that our disclosure controls and procedures were effective as of that date. Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our principal executive and principal financial officer, as appropriate to allow timely decisions regarding required disclosures. Management’s Annual Report on Internal Control Over Financial Reporting. The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. We conducted an evaluation of the effectiveness of the internal controls over financial reporting based on the framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. This evaluation included a review of the documentation of controls, evaluation of the design effectiveness of controls, testing the operating effectiveness of the controls and a conclusion on this evaluation. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Management assesses the effectiveness of the Company’s internal control over financial reporting at the end of each quarter. Based on management’s assessment, we believe that our internal control over financial reporting was effective as of December 31, 2021. This Annual Report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s internal control report was not subject to annual or quarterly attestation by the Company’s independent registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s report. Changes in Internal Controls over Financial Reporting. Our principal executive and principal financial officer and our Director of Finance and Administration periodically evaluate any change in internal control over financial reporting which has occurred during the prior fiscal quarter. We have concluded that there was no change in our internal control over financial reporting that occurred during the quarter ended December 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B — OTHER INFORMATION None ITEM 9C — DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS None 36 ImmuCell Corporation PART III ITEM 10 — DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Executive Officers of the Company Our executive officers as of March 18, 2022 were as follows: MICHAEL F. BRIGHAM (Age: 61, Officer since 1991, Director since 1999) was appointed to serve as President and Chief Executive Officer in February 2000, while maintaining the titles of Treasurer and Secretary, and was appointed to serve as a Director of the Company in March 1999. He previously had been elected Vice President of the Company in December 1998 and had served as Chief Financial Officer since October 1991. He has served as Secretary since December 1995 and as Treasurer since October 1991. Prior to that, he served as Director of Finance and Administration since originally joining the Company in September 1989. Mr. Brigham served as a member of the Board of Directors of the United Way of York County from 2012 to 2019, serving as its Treasurer until June 2016 and as Chair of the Board of Directors for one year and as a member of its Executive Committee. Mr. Brigham served as the Treasurer of the Board of Trustees of the Kennebunk Free Library from 2005 to 2011. He re-joined the Finance Committee of the library in 2012. Prior to joining the Company, he was employed as an audit manager for the public accounting firm of Ernst & Young. Mr. Brigham earned his Masters in Business Administration from New York University in 1989 and a Bachelor of Arts degree (with a double major in Economics and Spanish) from Trinity College in Hartford, Connecticut in 1983. BOBBI JO BROCKMANN (Age: 45, Officer since February 2015, Director since January 2018) served as a Director of the Company from March 2017 to September 2017 and from January 2018 to the present. She was promoted to Vice President of Sales and Marketing in February 2015. She joined the Company as Director of Sales and Marketing in January 2010. Prior to that, she had been employed as Director of Sales since May 2008 and Sales Manager from February 2004 to April 2008 at APC, Inc. of Ankeny, Iowa, a developer and marketer of functional protein products for animal health and nutrition. Prior to that, she held other sales and marketing positions at APC, W & G Marketing Company, Inc. of Ames, Iowa, The Council for Agricultural Science and Technology of Ames, Iowa and Meyocks Group Advertising of West Des Moines, Iowa after graduating from Iowa State University. ELIZABETH L. WILLIAMS (Age: 66, Officer since April 2016) joined the Company in April 2016 as Vice President of Manufacturing Operations. Previously, she led the U.S. Region for Zoetis as Vice President, Global Manufacturing and Supply. Prior to that, she held multiple Site Leader positions at Pfizer Animal Health facilities in Lincoln, Nebraska (2008-2011), Conshohocken, Pennsylvania (2006-2008) and Lee’s Summit, Missouri (2003-2006). She led the manufacturing organization (1999-2003) and the Process and Product Development group (1995-1999), achieving registration, approval and successful scale-up of five new products at the Lee’s Summit facility. She earned her Masters of Business Administration from Rockhurst University in Kansas City, Missouri and her Bachelor’s degree in Biology from the University of Missouri. Information with respect to our directors is incorporated herein by reference to the section of our 2022 Proxy Statement titled “Election of the Board of Directors”, which we intend to file with the Securities and Exchange Commission within 120 days after December 31, 2021. There is no family relationship between any director, executive officer, or person nominated or chosen by the Company to become a director or executive officer. ITEM 11 — EXECUTIVE COMPENSATION Information regarding compensation paid to our executive officers is incorporated herein by reference to the section of our 2022 Proxy Statement titled “Executive Officer Compensation”, which we intend to file with the Securities and Exchange Commission within 120 days after December 31, 2021. ITEM 12 — SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS Information regarding ownership of our common stock by certain owners and management is incorporated herein by reference to the section of our 2022 Proxy Statement titled “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters”, which we intend to file with the Securities and Exchange Commission within 120 days after December 31, 2021. ITEM 13 — CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE Information regarding certain relationships and related transactions and director independence is incorporated herein by reference to the section of our 2022 Proxy Statement titled “Certain Relationships and Related Transactions and Director Independence”, which we intend to file with the Securities and Exchange Commission within 120 days after December 31, 2021. ITEM 14 — PRINCIPAL ACCOUNTANT FEES AND SERVICES Information regarding our principal accounting fees and services is incorporated by reference to the section of our 2022 Proxy Statement titled “Principal Accounting Fees and Services”, which we intend to file with the Securities and Exchange Commission within 120 days after December 31, 2021. 37 ImmuCell Corporation PART IV ITEM 15 — EXHIBITS AND FINANCIAL STATEMENT SCHEDULES 3.1 Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 of the Company’s 1987 Registration Statement No. 33-12722 on Form S-1 as filed with the Commission). 3.2 Certificate of Amendment to the Company’s Certificate of Incorporation effective July 23, 1990 (incorporated by reference to Exhibit 3.2 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2008). 3.3 Certificate of Amendment to the Company’s Certificate of Incorporation effective August 24, 1992 (incorporated by reference to Exhibit 3.3 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2008). 3.4 Certificate of Amendment to the Company’s Certificate of Incorporation effective June 16, 2016 (incorporated by reference to Exhibit 3.1 of the Company’s Amended Current Report on Form 8-K/A filed on June 16, 2016). 3.5 Certificate of Amendment to the Company’s Certificate of Incorporation effective June 18, 2018 (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed on June 18, 2018). 3.6 Certificate of Amendment to the Company’s Certificate of Incorporation effective June 11, 2020 (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed on June 11, 2020). 3.7 Bylaws of the Company as amended (incorporated by reference to Exhibit 3.4 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2008). 4.1 Rights Agreement dated as of September 5, 1995, between the Company and American Stock Transfer and Trust Co., as Rights Agent, which includes as Exhibit A thereto the form of Right Certificate and as Exhibit B thereto the Summary of Rights to Purchase Common Stock (incorporated by reference to Exhibit 4.1 of the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2009). 4.1A First Amendment to Rights Agreement dated as of June 30, 2005 (incorporated by reference to Exhibit 4.1A of the Company’s Current Report on Form 8-K filed on July 5, 2005). 4.1B Second Amendment to Rights Agreement dated as of June 30, 2008 (incorporated by reference to Exhibit 4.1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2008). 4.1C Third Amendment to Rights Agreement dated as of August 9, 2011 (incorporated by reference to Exhibit 4.1 of the Company’s Quarterly Report on Form 10-Q for the three-month period ended June 30, 2011). 4.1D Fourth Amendment to Rights Agreement dated as of June 16, 2014 (incorporated by reference to Exhibit 4.1D of the Company’s Current Report on Form 8-K filed on June 17, 2014). 4.1E Fifth Amendment to Rights Agreement dated as of April 15, 2015 (incorporated by reference to Exhibit 4.1 of the Company’s Quarterly Report on Form 10-Q for the three-month period ended March 31, 2015). 4.1F Sixth Amendment to Rights Agreement dated as of August 10, 2017 (incorporated by reference to Exhibit 4.1 of the Company’s Quarterly Report on Form 10-Q for the three-month period ended June 30, 2017). 4.2 Description of Securities Registered Under Section 12 of the Securities Exchange Act of 1934, as amended (incorporated by reference to Exhibit 4.2 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2020). 10.1+ Form of Indemnification Agreement (updated) entered into with each of the Company’s Directors and Officers (incorporated by reference to Exhibit 10.3A of the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2006). 10.2+ Amendment to Employment Agreement between the Company and Michael F. Brigham dated March 26, 2010 (incorporated by reference to Exhibit 10.6 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2009). 10.3+ 2010 Stock Option and Incentive Plan of the Company (incorporated by reference to Exhibit 10.6 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2010). 10.4+ Form of Incentive Stock Option Agreement (incorporated by reference to Exhibit 10.7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2010). 10.5+ 2017 Stock Option and Incentive Plan of the Company (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q for the three-month period ended June 30, 2017). 10.6+ Form of Incentive Stock Option Agreement (incorporated by reference to Exhibit 10.9 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2019). 10.7+ Independent Contractor Agreement between the Company and Joseph H. Crabb dated February 11, 2022 (incorporated by reference to Exhibit 99.1 of the Company’s Current Report on Form 8-K filed on February 11, 2022). 38 ImmuCell Corporation 10.8+* Second Amended and Restated Incentive Compensation Agreement between the Company and Elizabeth L. Williams dated as of March 28, 2022. 10.9+* Amended and Restated Separation and Deferred Compensation Agreement between the Company and Michael F. Brigham dated as of March 28, 2022. 10.10+* Incentive Compensation Agreement between the Company and Michael F. Brigham dated as of March 28, 2022. 10.11+* Second Amended and Restated Incentive Compensation Agreement between the Company and Bobbi Jo Brockmann dated as of March 28, 2022. 10.12 Development Services and Commercial Supply Agreement between the Company and Norbrook Laboratories Limited dated as of September 5, 2019 (incorporated by reference to Exhibit 99.2 of the Company’s Current Report on Form 8-K filed on September 11, 2019) . 10.13 Indenture of Lease for Premises Located in Portland, Maine between the Company and TVP, LLC (incorporated by reference to Exhibit 99.2 of the Company’s Current Report on Form 8-K filed on September 17, 2019). 10.14 Term Note for $5,100,000 between the Company and Gorham Savings Bank dated March 11, 2020 (incorporated by reference to Exhibit 99.2 of the Company’s Current Report on Form 8-K filed on March 12, 2020). 10.15 Loan Agreement for $5,100,000 between the Company and Gorham Savings Bank dated March 11, 2020 (incorporated by reference to Exhibit 99.4 of the Company’s Current Report on Form 8-K filed on March 12, 2020). 10.16 Term Note for $3,500,000 between the Company and Gorham Savings Bank dated March 11, 2020 (incorporated by reference to Exhibit 99.3 of the Company’s Current Report on Form 8-K filed on March 12, 2020) . 10.17 Loan Agreement for $3,500,000 between the Company and Gorham Savings Bank dated March 11, 2020 (incorporated by reference to Exhibit 99.5 of the Company’s Current Report on Form 8-K filed on March 12, 2020). 10.18 Line of Credit Agreement for up to $1,000,000 between the Company and Gorham Savings Bank dated March 11, 2020 (incorporated by reference to Exhibit 99.6 of the Company’s Current report on Form 8-K filed on March 12, 2020). 10.19 Promissory Note for $937,700 executed by the Company in favor of Gorham Savings Bank dated April 13, 2020 (incorporated by reference to Exhibit 99.2 of the Company’s Current Report on Form 8-K filed on April 14, 2020). 10.20 Note Purchase Agreement executed by the Company in favor of the Maine Technology Institute dated June 12, 2020 (incorporated by reference to Exhibit 99.2 of the Company’s Current Report on Form 8-K filed on June 16, 2020). 10.21 Subordinated Promissory Note for $500,000 executed by the Company in favor of the Maine Technology Institute dated June 12, 2020 (incorporated by reference to Exhibit 99.3 of the Company’s Current Report on Form 8-K filed on June 16, 2020). 10.22 Note Purchase Agreement executed by the Company in favor of the Maine Technology Institute dated June 30, 2021 (incorporated by reference to Exhibit 99.1 of the Company’s Current Report on Form 8-K filed on July 6, 2021). 10.23 Subordinated Promissory Note for $400,000 executed by the Company in favor of the Maine Technology Institute dated June 30, 2022 (incorporated by reference to Exhibit 99.2 of the Company’s Current Report on Form 8-K filed on July 6, 2021). 10.24 Term Note for $1,500,000 executed by the Company in favor of Gorham Savings Bank dated December 15, 2020 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 17, 2020). 10.25 Loan Agreement for $1,500,000 executed by the Company in favor of Gorham Savings Bank dated December 15, 2020 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on December 17, 2020). 10.26 Allonge to and Amendment of Term Note, dated March 23, 2022, between the Company and Gorham Savings Bank (incorporated by reference to Exhibit 99.1 of the Company’s Current Report on Form 8-K filed on March 24, 2022). 10.27 Mortgage Modification Agreement, dated March 23, 2022, between the Company and Gorham Savings Bank (incorporated by reference to Exhibit 99.2 of the Company’s Current Report on Form 8-K filed on March 24, 2022). 14 Code of Business Conduct and Ethics (incorporated by reference to Exhibit 14 of the Company’s Current Report on Form 8-K filed on March 20, 2014). 23.1* Consent of Independent Registered Public Accounting Firm. 31* Certifications Required by Rule 13a-14(a). 32* Certification Required by Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 . 101.INS XBRL Instance Document-the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. 101.SCH Inline XBRL Taxonomy Extension Schema Document. 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document. 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document. 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document. 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document. 104 Cover Page Interactive Data File-the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. + Management contract or compensatory plan or arrangement. * Filed herewith. ITEM 16 – FORM 10-K SUMMARY None 39 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of ImmuCell Corporation Opinion on the Financial Statements We have audited the accompanying balance sheets of ImmuCell Corporation (the “Company”) as of December 31, 2021 and 2020, and the related statements of operations, comprehensive loss, stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Valuation of Inventory Description of the Matter At December 31, 2021, the Company’s inventory was $3,089,974. As discussed in Note 2 of the financial statements, inventory is recorded at the lower of cost, or net realizable value. Auditing management’s valuation of inventory is complex and highly judgmental because of the estimates and assumptions used by management to determine the cost accounting and because of the variability of the cost per dose due to fluctuations in the biological yield achieved. How We Addressed the Matter In Our Audit The primary procedures we performed to address this critical audit matter included the following. We obtained an understanding of the cost accounting developed by management and the related assumptions and estimates used. We tested the cost accounting by examining the underlying data used by the Company to prepare the cost accounting. We evaluated the effect of the variability of the cost per dose on the inventory value by comparing the biological yield to historical results and by performing a sensitivity analysis of the potential range in inventory value within a corridor of historical results based on minimum and maximum outcomes for the biological yield. /s/ WIPFLI LLP We have served as the Company’s auditor since 2019. South Portland, Maine March 30, 2022 F- 1 ImmuCell Corporation BALANCE SHEETS As of December 31, 2021 2020 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 10,185,468 $ 6,949,937 Short-term investments — 996,495 Trade accounts receivable, net 2,694,229 1,796,801 Inventory 3,089,974 2,092,514 Prepaid expenses and other current assets 295,197 321,261 Total current assets 16,264,868 12,157,008 PROPERTY, PLANT AND EQUIPMENT, net 26,893,599 26,754,975 OPERATING LEASE RIGHT-OF-USE ASSET 1,109,133 1,220,361 GOODWILL 95,557 95,557 INTANGIBLE ASSETS, net 76,416 95,520 OTHER ASSETS 26,115 26,173 TOTAL ASSETS $ 44,465,688 $ 40,349,594 LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES: Current portion of debt obligations $ 812,207 $ 760,337 Current portion of operating lease liability 108,012 100,512 Accounts payable and accrued expenses 1,614,250 1,350,227 Total current liabilities 2,534,469 2,211,076 LONG-TERM LIABILITIES: Debt obligations, net of current portion 8,327,122 8,737,149 Operating lease liability, net of current portion 1,027,157 1,135,169 Total long-term liabilities 9,354,279 9,872,318 TOTAL LIABILITIES 11,888,748 12,083,394 CONTINGENT LIABILITIES AND COMMITMENTS (See Note 11) STOCKHOLDERS’ EQUITY: Common stock, $ 0.10 par value per share, 15,000,000 and 15,000,000 shares authorized, 7,814,165 and 7,299,009 shares issued and 7,741,864 and 7,218,836 shares outstanding, as of December 31, 2021 and 2020, respectively 781,417 729,901 Additional paid-in capital 35,692,388 31,372,093 Accumulated deficit ( 3,738,694 ) ( 3,660,402 ) Treasury stock, at cost, 72,301 and 80,173 shares as of December 31, 2021 and 2020, respectively ( 158,171 ) ( 175,392 ) Total stockholders’ equity 32,576,940 28,266,200 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 44,465,688 $ 40,349,594 The accompanying notes are an integral part of these financial statements. F- 2 ImmuCell Corporation STATEMENTS OF OPERATIONS During the Years Ended December 31, 2021 2020 Product sales $ 19,242,969 $ 15,342,204 Costs of goods sold 10,587,040 8,479,378 Gross margin 8,655,929 6,862,826 OPERATING EXPENSES: Product development expenses 4,168,518 4,354,627 Sales and marketing expenses 2,503,926 2,167,899 Administrative expenses 1,726,100 1,720,653 Operating expenses 8,398,544 8,243,179 NET OPERATING INCOME (LOSS) 257,385 ( 1,380,353 ) Other expenses (income), net 326,512 ( 348,100 ) LOSS BEFORE INCOME TAXES ( 69,127 ) ( 1,032,253 ) Income tax expense (benefit) 9,165 ( 10,136 ) NET LOSS $ ( 78,292 ) $ ( 1,022,117 ) Basic weighted average common shares outstanding 7,592,290 7,213,329 Basic net loss per share $ ( 0.01 ) $ ( 0.14 ) Diluted weighted average common shares outstanding 7,592,290 7,213,329 Diluted net loss per share $ ( 0.01 ) $ ( 0.14 ) STATEMENTS OF COMPREHENSIVE LOSS During the Years Ended December 31, 2021 2020 Net loss $ ( 78,292 ) $ ( 1,022,117 ) Other comprehensive income: Interest rate swaps, before taxes — 58,526 Income tax applicable to interest rate swaps — ( 14,631 ) Other comprehensive income, net of taxes — 43,895 Total comprehensive loss $ ( 78,292 ) $ ( 978,222 ) The accompanying notes are an integral part of these financial statements. F- 3 ImmuCell Corporation STATEMENTS OF STOCKHOLDERS’ EQUITY Common Stock Treasury Stock Shares Amount Additional paid-in capital Accumulated Deficit Shares Amount Accumulated Other Comprehensive (Loss) Income Total Stockholders’ Equity BALANCE, December 31, 2019 7,299,009 $ 729,901 $ 31,131,893 $ ( 2,638,285 ) 86,090 $ ( 188,336 ) $ ( 43,895 ) $ 28,991,278 Net loss — — — ( 1,022,117 ) — — — ( 1,022,117 ) Other comprehensive income, net of taxes — — — — — — 43,895 43,895 Exercise of stock options — — ( 12,935 ) — ( 5,917 ) 12,944 — 9 Stock-based compensation — — 253,135 — — — — 253,135 BALANCE, December 31, 2020 7,299,009 $ 729,901 $ 31,372,093 $ ( 3,660,402 ) 80,173 $ ( 175,392 ) — $ 28,266,200 Net loss — — — ( 78,292 ) — — — ( 78,292 ) Public offering of common stock, net of $ 17,011 of offering costs 515,156 51,516 4,181,510 — — — — 4,233,026 Exercise of stock options — — ( 5,528 ) — ( 7,872 ) 17,221 — 11,693 Stock-based compensation — — 144,313 — — — — 144,313 BALANCE, December 31, 2021 7,814,165 $ 781,417 $ 35,692,388 $ ( 3,738,694 ) 72,301 $ ( 158,171 ) — $ 32,576,940 The accompanying notes are an integral part of these financial statements. F- 4 ImmuCell Corporation STATEMENTS OF CASH FLOWS During the Years Ended December 31, 2021 2020 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ ( 78,292 ) $ ( 1,022,117 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation 2,442,036 2,328,179 Amortization of intangible assets 19,104 19,104 Amortization and write-off of debt issuance costs 7,841 102,724 Forgiveness of debt — ( 937,700 ) Deferred income taxes — ( 14,631 ) Stock-based compensation 144,313 253,135 Loss on disposal of fixed assets 30,963 39,303 Non-cash rent expense 10,716 15,320 Changes in: Trade accounts receivable ( 897,428 ) ( 159,636 ) Accrued interest income 495 27,258 Inventory ( 997,460 ) 425,742 Prepaid expenses and other current assets 26,064 ( 61,695 ) Other assets 58 711 Accounts payable and accrued expenses 245,760 299,881 Net cash provided by operating activities 954,170 1,315,578 CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property, plant and equipment ( 2,608,649 ) ( 4,072,539 ) Maturities of investment 996,000 3,449,000 Purchases of investments — ( 1,992,000 ) Proceeds from sale of assets 15,290 45,600 Net cash used for investing activities ( 1,597,359 ) ( 2,569,939 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from public offering, net 4,233,026 — Proceeds from debt issuance 400,000 11,537,700 Debt principal repayments ( 768,271 ) ( 9,573,568 ) Payments of debt issuance costs 2,272 ( 53,136 ) Proceeds from exercise of stock options 11,693 9 Net cash provided by financing activities 3,878,720 1,911,005 NET INCREASE IN CASH AND CASH EQUIVALENTS 3,235,531 656,644 BEGINNING CASH AND CASH EQUIVALENTS 6,949,937 6,293,293 ENDING CASH AND CASH EQUIVALENTS $ 10,185,468 $ 6,949,937 The accompanying notes are an integral part of these financial statements. F- 5 ImmuCell Corporation STATEMENT OF CASH FLOWS SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION During the Years Ended December 31, 2021 2020 CASH PAID FOR: Income taxes $ 5,110 $ 4,581 Interest expense $ 308,682 $ 481,408 NON-CASH ACTIVITIES: Forgiveness of debt $ — $ ( 937,700 ) Change in capital expenditures included in accounts payable and accrued expenses $ ( 18,263 ) $ ( 170,220 ) Net change in fair value of interest rate swaps, net of taxes $ — $ ( 43,895 ) Surrender of shares to exercise stock options $ 165,337 $ 39,366 The accompanying notes are an integral part of these financial statements. F- 6 ImmuCell Corporation Notes to Audited Financial Statements 1. BUSINESS OPERATIONS ImmuCell Corporation (the “Company”, “we”, “us”, “our”) was originally incorporated in Maine in 1982 and reincorporated in Delaware in 1987, in conjunction with our initial public offering of common stock. We are an animal health company whose purpose is to create scientifically-proven and practical products that improve the health and productivity of dairy and beef cattle. As disclosed in Note 17, “Segment Information”, one of our business segments is dedicated to growing sales of First Defense ® and the other is focused on developing sales of Re-Tain ® . We manufacture and market the First Defense ® product line for the prevention of scours in newborn dairy and beef calves. We have expanded this line into five different products with formulations targeting E. coli and coronavirus pathogens as well as E. coli , coronavirus and rotavirus pathogens. This product line provides Immediate Immunity™ to newborn calves. We are also in the late stages of developing Re-Tain ® , a treatment for lactating dairy cows with subclinical mastitis, mastitis being the most significant cause of economic loss to the dairy industry. These products help reduce the need to use traditional antibiotics in food producing animals. We are subject to certain risks associated with this stage of development including dependence on key individuals and third-party providers of critical goods and services, competition from other larger companies, the successful sale of existing products and the development and acquisition of additional commercially viable products with appropriate regulatory approvals, where applicable. The global COVID-19 pandemic has created, and continues to create, uncertainty for us. The full impact of this viral outbreak on the global economy, and the duration of such impact, is still uncertain at this time. A combination of the conditions, trends and concerns related to or arising from the pandemic could have a corresponding negative effect on our business and operations, including the supply of the colostrum we purchase to produce our First Defense ® product line, the demand for our products in the U.S. market and our ability to penetrate or maintain a profitable presence in international markets. We are experiencing price increases and shortages in key components, supportive services, transportation and other supplies that may cause production slowdowns that affect our ability to consistently deliver our products to market on time in accordance with customer demand. Despite some recent favorable trends and our diligent efforts and intentions, there is a risk that an employee could become infected and could infect others. This could lead to plant shutdowns and production interruptions and have other negative economic and health and safety impacts. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Basis of Presentation We have prepared the accompanying audited financial statements reflecting all adjustments (which are of a normal recurring nature) that are, in our opinion, necessary in order to ensure that the financial statements are not misleading. We follow accounting standards set by the Financial Accounting Standards Board (FASB). The FASB sets Generally Accepted Accounting Principles (GAAP) that we follow to ensure we consistently report our financial condition, results of operations, earnings per share and cash flows. References to GAAP in these footnotes are to the FASB Accounting Standards Codification ™ (Codification). We believe that the disclosures are adequate to ensure that the information presented is not misleading. (b) Cash, Cash Equivalents and Short-Term Investments We consider all highly liquid investment instruments that mature within three months of their purchase dates to be cash equivalents. Cash equivalents are principally invested in securities backed by the U.S. government. Certain cash balances in excess of Federal Deposit Insurance Corporation (FDIC) limits of $ 250,000 per financial institution per depositor are maintained in money market accounts at financial institutions that are secured, in part, by the Securities Investor Protection Corporation. Amounts in excess of these FDIC limits per bank that are not invested in securities backed by the U.S. government aggregated $ 0 and $ 751,050 as of December 31, 2021 and 2020, respectively. Short-term investments are classified as held to maturity and are comprised of certificates of deposit that mature in more than three months from their purchase dates and not more than twelve months from the balance sheet date. Short-term investments are held at different financial institutions that are insured by the FDIC, within the FDIC limits per financial institution. We account for investments in marketable securities in accordance with Codification Topic 320, Investments — Debt and Equity Securities . See Note 3. F- 7 ImmuCell Corporation Notes to Audited Financial Statements (continued) (c) Trade Accounts Receivable, net Accounts receivable are carried at the original invoice amount less an estimate made for doubtful collection when applicable. Management determines the allowance for doubtful accounts on a monthly basis by identifying troubled accounts and by using historical experience applied to an aging of accounts. Accounts receivable are considered to be past due if a portion of the receivable balance is outstanding for more than 30 days. Past due accounts receivable are subject to an interest charge. Accounts receivable are written off when deemed uncollectible. The amount of accounts receivable written off during all periods reported was immaterial. Recoveries of accounts receivable previously written off are recorded as income when received. As of December 31, 2021 and 2020, we determined that no allowance for doubtful accounts was necessary. See Note 4. (d) Inventory Inventory includes raw materials, work-in-process and finished goods and is recorded at the lower of cost, on the first-in, first-out method, or net realizable value (determined as the estimated selling price in the normal course of business, less reasonably predictable costs of completion, disposal and transportation). Work-in-process and finished goods inventories include materials, labor and manufacturing overhead. At each balance sheet date, we evaluate our ending inventories for excess quantities and obsolescence. Inventories that we consider excess or obsolete are written down to estimated net realizable value. Once inventory is written down and a new cost basis is established, it is not written back up if demand increases. We believe that supplies and raw materials for the production of our products are available from more than one vendor or farm. Our policy is to maintain more than one source of supply for the components used in our products when feasible. See Note 5. (e) Property, Plant and Equipment, net We depreciate property, plant and equipment on the straight-line method by charges to operations and costs of goods sold in amounts estimated to expense the cost of the assets from the date they are first put into service to the end of the estimated useful lives of the assets. The facility we have constructed at 33 Caddie Lane to produce the Nisin Drug Substance for Re-Tain ® is being depreciated over 39 years from when a certificate of occupancy was issued during the fourth quarter of 2017. We began depreciating the equipment for our Nisin Drug Substance facility when it was placed in service during the third quarter of 2018. Approximately 87% of these assets are being depreciated over 10 years. We began depreciating the leasehold improvements to our new First Defense ® production facility at 175 Industrial Way over the remainder of the 10-year lease term beginning when a certificate of occupancy was issued during the second quarter of 2020. Significant repairs to fixed assets that benefit more than a current period are capitalized and depreciated over their useful lives. Insignificant repairs are expensed when incurred. See Note 7. (f) Intangible Assets and Goodwill We amortize intangible assets on the straight-line method by charges to costs of goods sold in amounts estimated to expense the cost of the assets from the date they are first put into service to the end of the estimated useful lives of the assets. We have recorded intangible assets related to customer relationships, non-compete agreements and developed technology, each with defined useful lives. We have classified as goodwill the amounts paid in excess of fair value of the net assets (including tax attributes) acquired in purchase transactions. We assess the impairment of intangible assets and goodwill that have indefinite lives at the reporting unit level on an annual basis (as of December 31 st ) and whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. We would record an impairment charge if such an assessment were to indicate that the fair value of such assets was less than the carrying value. Judgment is required in determining whether an event has occurred that may impair the value of goodwill or identifiable intangible assets. Factors that could indicate that an impairment may exist include significant under-performance relative to plan or long-term projections, significant changes in business strategy and significant negative industry or economic trends. Although we believe intangible assets and goodwill are properly stated in the accompanying financial statements, changes in strategy or market conditions could significantly impact these judgments and require an adjustment to the recorded balance. No goodwill impairments were recorded during the years ended December 31, 2021 or 2020. See Notes 2(g) and 8 for additional disclosures. F- 8 ImmuCell Corporation Notes to Audited Financial Statements (continued) (g) Valuation of Long-Lived Assets We periodically evaluate our long-lived assets, consisting principally of fixed assets, operating lease right-of-use asset and amortizable intangible assets, for potential impairment. In accordance with the applicable accounting guidance for the treatment of long-lived assets, we review the carrying value of our long-lived assets or asset group that is held and used, including intangible assets subject to amortization, for impairment whenever events and circumstances indicate that the carrying value of the assets may not be recoverable. Under the held for use approach, the asset or asset group to be tested for impairment should represent the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. We evaluate our long-lived assets whenever events or circumstances suggest that the carrying amount of an asset or group of assets may not be recoverable. No impairment was recognized during the years ended December 31, 2021 or 2020. (h) Fair Value Measurements In determining fair value measurements, we follow the provisions of Codification Topic 820, Fair Value Measurements and Disclosures . Codification Topic 820 defines fair value, establishes a framework for measuring fair value under GAAP and enhances disclosures about fair value measurements. The topic provides a consistent definition of fair value which focuses on an exit price, which is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The topic also prioritizes, within the measurement of fair value, the use of market-based information over entity-specific information and establishes a three-level hierarchy for fair value measurements based on the nature of inputs used in the valuation of an asset or liability as of the measurement date. As of December 31, 2021 and 2020, the carrying amounts of cash and cash equivalents, short-term investments, accounts receivable, inventory, other assets, accounts payable and accrued liabilities approximate fair value because of their short-term nature. The amount outstanding under our bank debt facilities is measured at carrying value in our accompanying balance sheets. Our bank debt facilities are valued using Level 2 inputs. The estimated fair value of our bank debt facilities approximates their carrying value based on similar instruments with similar maturities. The three-level hierarchy is as follows: Level 1 — Pricing inputs are quoted prices available in active markets for identical assets or liabilities as of the measurement date. Level 2 — Pricing inputs are quoted prices for similar assets or liabilities, or inputs that are observable, either directly or indirectly, for substantially the full term through corroboration with observable market data. Level 3 — Pricing inputs are unobservable for the assets or liabilities, that is, inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level of an asset or liability within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the investment. From time to time, we also hold money market mutual funds in a brokerage account, which are classified as cash equivalents and measured at fair value. The fair value of these investments is based on their closing published net asset value. F- 9 ImmuCell Corporation Notes to Audited Financial Statements (continued) We assess the levels of the investments at each measurement date, and transfers between levels are recognized on the actual date of the event or change in circumstances that caused the transfer in accordance with our accounting policy regarding the recognition of transfers between levels of the fair value hierarchy. During the years ended December 31, 2021 and 2020, there were no transfers between levels. As of December 31, 2021 and 2020, our Level 1 assets measured at fair value by quoted prices in active markets consisted of bank savings accounts and money market funds. As of December 31, 2020, our bank certificates of deposit were classified as Level 2 and were measured by other significant observable inputs. There were no assets or liabilities measured at fair value on a nonrecurring basis as of December 31, 2021 or 2020. As of December 31, 2021 Level 1 Level 2 Level 3 Total Assets: Cash and money market accounts $ 10,185,468 $ — $ — $ 10,185,468 Liabilities: Bank debt $ — $ ( 9,139,329 ) $ — $ ( 9,139,329 ) As of December 31, 2020 Level 1 Level 2 Level 3 Total Assets: Cash and money market accounts $ 6,949,937 $ — $ — $ 6,949,937 Bank certificates of deposit — 996,495 — 996,495 Total $ 6,949,937 $ 996,495 $ — $ 7,946,432 Liabilities: Bank debt $ — $ ( 9,497,486 ) $ — $ ( 9,497,486 ) (i) Concentration of Risk Concentration of credit risk with respect to accounts receivable is principally limited to certain customers to whom we make substantial sales. To reduce risk, we routinely assess the financial strength of our customers and, as a consequence, believe that our accounts receivable credit risk exposure is limited. We maintain an allowance for potential credit losses when deemed necessary, but historically we have not experienced significant credit losses related to an individual customer or groups of customers in any particular industry or geographic area. Sales to significant customers that amounted to 10 % or more of total product sales are detailed in the following table: During the Years Ended December 31, 2021 2020 Company A 46 % 41 % Company B 28 % 30 % Trade accounts receivable due from significant customers amounted to the percentages of total trade accounts receivable as detailed in the following table: As of December 31, 2021 As of December 31, 2020 Company A 38 % 48 % Company B 34 % 27 % F- 10 ImmuCell Corporation Notes to Audited Financial Statements (continued) (j) Revenue Recognition We recognize revenue in accordance with Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers . ASC 606 is a single comprehensive model for companies to use in accounting for revenue arising from contracts with customers. The core principle is that we recognize the amount of revenue to which we expect to be entitled for the transfer of promised goods or services to customers when a customer obtains control of promised goods or services in an amount that reflects the consideration we expect to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. We conduct our business with customers through valid purchase orders or sales orders which are considered contracts and are not interdependent on one another. A performance obligation is a promise in a contract to transfer a distinct product to the customer. The transaction price is the amount of consideration we expect to receive under the arrangement. Revenue is measured based on consideration specified in a contract with a customer. The transaction price of a contract is allocated to each distinct performance obligation and recognized when or as the customer receives the benefit of the performance obligation. Product transaction prices on a purchase or sales order are discrete and stand-alone. We recognize revenue when we satisfy a performance obligation in a contract by transferring control over a product to a customer when product delivery occurs. Amounts due are typically paid approximately 30 days from the time control is transferred. Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost in costs of goods sold. We do not bill for or collect sales tax because our sales are generally made to distributors and thus our sales to them are not subject to sales tax. We generally have experienced an immaterial amount of product returns. We have enhanced disclosures related to disaggregation of revenue sources and accounting policies prospectively as a result of adopting this standard. See Note 14. (k) Expense Recognition We do not incur costs in connection with product sales to customers that are eligible for capitalization. Advertising costs are expensed when incurred, which is generally during the month in which the advertisement is published. Advertising expenses amounted to $ 37,817 and $ 29,083 during the years ended December 31, 2021 and 2020, respectively. All product development expenses are expensed as incurred, as are all related patent costs. We capitalize costs to produce inventory during the production cycle, and these costs are charged to costs of goods sold when the inventory is sold to a customer. (l) Income Taxes We account for income taxes in accordance with Codification Topic 740, Income Taxes , which requires that we recognize a current tax liability or asset for current taxes payable or refundable and a deferred tax liability or asset for the estimated future tax effects of temporary differences and carryforwards to the extent they are realizable. During the second quarter of 2018, we assessed our historical and near-term future profitability and decided to record $ 563,252 in non-cash income tax expense to create a full valuation allowance against our net deferred tax assets (which consist largely of net operating loss carryforwards and federal and state tax credits). At that time, we had incurred a net loss for six consecutive quarters, had not been profitable on a year-to-date basis since the nine-month period ended September 30, 2017 and projected additional net losses for some period going forward before returning to profitability. We consider future taxable income and feasible tax planning strategies in assessing the need for a valuation allowance at each quarter end. If we determine that we would be able to realize our deferred tax assets in the future in excess of the net recorded amount over a reasonably short period of time, a reduction of the valuation allowance would increase income in the period such determination was made. Likewise, if we determine that we would not be able to realize all or part of our net deferred tax asset in the future, an increase to the valuation allowance would be charged to income in the period such determination was made. Codification Topic 740-10 clarifies the accounting for income taxes by prescribing a minimum recognition threshold that a tax position must meet before being recognized in the financial statements. In the ordinary course of business, there are transactions and calculations where the ultimate tax outcome is uncertain. In addition, we are subject to periodic audits and examinations by the Internal Revenue Service and other taxing authorities. With few exceptions, we are no longer subject to income tax examinations by tax authorities for years before 2018. We have evaluated the positions taken on our filed tax returns. We have concluded that no uncertain tax positions existed as of December 31, 2021 or 2020. Although we believe that our estimates are reasonable, actual results could differ from these estimates. See Note 16. F- 11 ImmuCell Corporation Notes to Audited Financial Statements (continued) (m) Stock-Based Compensation We account for stock-based compensation in accordance with Codification Topic 718, Compensation-Stock Compensation , which generally requires us to recognize non-cash compensation expense for stock-based payments using the fair-value-based method. The fair value of each stock option grant has been estimated on the date of grant using the Black-Scholes option pricing model. Accordingly, we recorded compensation expense pertaining to stock-based compensation of $ 144,313 and $ 253,135 during the years ended December 31, 2021 and 2020, respectively. (n) Net Loss Per Common Share Net loss per common share has been computed in accordance with Codification Topic 260-10, Earnings Per Share . The net loss per share has been computed by dividing the net loss by the weighted average number of common shares outstanding during the period. All stock options have been excluded from the denominator in the calculation of dilutive earnings per share when we are in a loss position because their inclusion would be anti-dilutive. Outstanding stock options that were not included in this calculation because the effect would be anti-dilutive amounted to 443,000 and 414,000 during the years ended December 31, 2021 and 2020, respectively. During the Years Ended December 31, 2021 2020 Net loss attributable to stockholders $ ( 78,292 ) $ ( 1,022,117 ) Weighted average common shares outstanding - Basic 7,592,290 7,213,329 Dilutive impact of share-based compensation awards — — Weighted average common shares outstanding - Diluted 7,592,290 7,213,329 Loss per share: Basic $ ( 0.01 ) $ ( 0.14 ) Diluted $ ( 0.01 ) $ ( 0.14 ) (o) Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Although we regularly assess these estimates, actual amounts could differ from those estimates and are subject to change in the near term. Changes in estimates are recorded during the period in which they become known. Significant estimates include our inventory valuation, valuation of goodwill and long-lived assets, valuation of deferred tax assets, accrued expenses, costs of goods sold and useful lives of intangible assets. F- 12 ImmuCell Corporation Notes to Audited Financial Statements (continued) (p) New Accounting Pronouncements Adopted In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) . The guidance in this ASU supersedes the leasing guidance in Topic 840, Leases . Under the new guidance, lessees are required to recognize lease assets and lease liabilities on the balance sheet for all leases with terms longer than 12 months. Leases are classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. This ASU and its amendments became effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption was permitted. We elected to adopt this ASU effective January 1, 2019. In July 2018, the FASB issued ASU 2018-10, Codification improvements to Topic 842, Leases. The amendments in ASU 2018-10 provide more clarification in regard to the application and requirements of Topic 842. In July 2018, the FASB issued ASU 2018-11, Topic 842, Leases - Targeted improvements. The amendments in ASU 2018-11 provide for the option to adopt the standard prospectively and recognize a cumulative-effect adjustment to the opening balance of retained earnings as well as offer a new practical expedient that allows us to elect, by class of underlying asset, to not separate non-lease and lease components in certain circumstances and instead to account for those components as a single item. Based on our current lease agreements and a review of all of our material vendor relationships for potential embedded lease obligations, we concluded that we were not subject to material lease obligations as of December 31, 2019, and the adoption of Topic 842 did not have a material impact on our financial statements as of January 1, 2019. The lease we entered into on September 12, 2019 to expand our production capacity for the First Defense ® product line with a possession date of November 15, 2019 and a commencement date of February 13, 2020 has been accounted for in accordance with Topic 842 since the first quarter of 2020. The only material lease pursuant to which we are the lessee relates to real estate property. All leases are classified as operating leases, and therefore, were previously not recognized on our balance sheets. With the adoption of Topic 842, operating lease agreements are required to be recognized on our balance sheets as a right-of-use (ROU) asset with a corresponding lease liability. If at a lease inception date or at some later date during the term of a lease, we consider the exercising of a renewal option to be reasonably certain, we would include the extended term in the calculation of the ROU asset and lease liability. Regarding the discount rate, Topic 842 requires the use of the rate implicit in the lease whenever this rate is readily determinable. As this rate is rarely determinable, we utilize our incremental borrowing rate at lease inception, on a collateralized basis, over a similar term. See Note 12. We elected the following practical expedients in conjunction with implementation of Topic 842: ● Inclusion of both the lease and non-lease components for all classes of underlying assets as a single component. ● Election to exclude short-term leases (i.e., leases with initial terms of twelve months or less) from capitalization on our balance sheets. In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement , which modifies the disclosure requirements of fair value measurements. Topic 820 is effective for fiscal years beginning after December 15, 2019, and early adoption was permitted. The adoption of Topic 820 did not have a material impact on our financial statements as of January 1, 2020. We adopted ASU 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” effective January 1, 2020, using the modified retrospective transition method. This ASU amends the impairment model to utilize an expected loss methodology in place of the incurred loss methodology for financial instruments, including trade receivables and leased equipment. The amendment requires entities to consider a broader range of information to estimate expected credit losses, which may result in earlier recognition of losses. The adoption of Topic 326 did not have a material impact on our financial statements as of January 1, 2020. In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes . The new guidance is intended to simplify the accounting for income taxes by removing certain exceptions and by updating accounting requirements around goodwill recognized for tax purposes and the allocation of current and deferred tax expense among legal entities, among other minor changes. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Early adoption was permitted. The adoption of ASU 2019-12 did not have a material impact on our financial statements as of January 1, 2021. In March 2020, the FASB issued ASU 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting . ASU 2020-04 is intended to provide optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the discontinuation of the London Interbank Offered Rate (LIBOR) or by another reference rate expected to be discontinued. The relief offered by this guidance, if adopted, is available to companies for the period March 12, 2020 through December 31, 2022. The discontinuation of LIBOR did not have a material impact on our financial statements as of January 1, 2021. F- 13 ImmuCell Corporation Notes to Audited Financial Statements (continued) 3. CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS Cash, cash equivalents and short-term investments (at amortized cost plus accrued interest) consisted of the following: As of December 31, 2021 As of December 31, 2020 Cash and cash equivalents $ 10,185,468 $ 6,949,937 Short-term investments (1) — 996,495 Total $ 10,185,468 $ 7,946,432 (1) Certificates of deposit are carried at amortized cost. 4. TRADE ACCOUNTS RECEIVABLE, net Trade accounts receivable amounted to $ 2,694,229 and $ 1,796,801 as of December 31, 2021 and 2020, respectively. No allowance for bad debt and product returns was recorded as of December 31, 2021 or 2020. 5. INVENTORY Inventory consisted of the following: As of December 31, 2021 As of December 31, 2020 Raw materials $ 971,606 $ 631,019 Work-in-process 1,902,299 1,438,482 Finished goods 216,069 23,013 Total $ 3,089,974 $ 2,092,514 6. PREPAID EXPENSES AND OTHER CURRENT ASSETS Prepaid expenses and other current assets consisted of the following: As of December 31, 2021 As of December 31, 2020 Prepaid expenses $ 268,713 $ 252,840 Other receivables 26,484 67,621 Security deposits — 800 Total $ 295,197 $ 321,261 7. PROPERTY, PLANT AND EQUIPMENT, net Property, plant and equipment consisted of the following: Estimated Useful Lives (in years) As of December 31, 2021 As of December 31, 2020 Laboratory and manufacturing equipment 3 - 10 $ 17,388,757 $ 15,786,620 Buildings and improvements 10 - 39 19,119,698 18,999,500 Office furniture and equipment 3 - 10 869,191 779,720 Construction in progress n/a 2,992,359 2,337,620 Land n/a 516,867 516,867 Property, plant and equipment, gross 40,886,872 38,420,327 Accumulated depreciation ( 13,993,273 ) ( 11,665,352 ) Property, plant and equipment, net $ 26,893,599 $ 26,754,975 F- 14 ImmuCell Corporation Notes to Audited Financial Statements (continued) As of December 31, 2021 and 2020, construction in progress consisted principally of payments toward the First Defense ® production capacity expansion project and equipment needed to bring the formulation and aseptic filling for Re-Tain ® in-house. Property, plant and equipment disposals were $ 160,366 and $ 358,924 during the years ended December 31, 2021 and 2020, respectively. Depreciation expense was $ 2,442,036 and $ 2,328,179 during the years ended December 30, 2021 and 2020, respectively. 8. INTANGIBLE ASSETS Intangible assets of $ 191,040 were valued using the relief from royalty method and are being amortized to costs of goods sold over their useful lives, which are estimated to be 10 years. Intangible amortization expense was $ 19,104 during both of the years ended December 31, 2021 and 2020. The net value of these intangibles was $ 76,416 and $ 95,520 as of December 31, 2021 and 2020, respectively. Intangible asset amortization expense is estimated to be $19,104 per year through December 31, 2025. Intangible assets as of December 31, 2021 consisted of the following: Gross Carrying Value Accumulated Amortization Net Book Value Developed technology $ 184,100 $ ( 110,460 ) $ 73,640 Customer relationships 1,300 ( 780 ) 520 Non-compete agreements 5,640 ( 3,384 ) 2,256 Total $ 191,040 $ ( 114,624 ) $ 76,416 Intangible assets as of December 31, 2020 consisted of the following: Gross Carrying Value Accumulated Amortization Net Book Value Developed technology $ 184,100 $ ( 92,050 ) $ 92,050 Customer relationships 1,300 ( 650 ) 650 Non-compete agreements 5,640 ( 2,820 ) 2,820 Total $ 191,040 $ ( 95,520 ) $ 95,520 9. ACCOUNTS PAYABLE AND ACCRUED EXPENSES Accounts payable and accrued expenses consisted of the following: As of December 31, 2021 As of December 31, 2020 Accounts payable – trade $ 726,781 $ 602,347 Accounts payable – capital 18,263 — Accrued payroll 585,939 525,499 Accrued professional fees 82,050 84,900 Accrued other 199,076 137,481 Income tax payable 2,141 — Total $ 1,614,250 $ 1,350,227 F- 15 ImmuCell Corporation Notes to Audited Financial Statements (continued) 10. BANK DEBT Prior to a refinancing with Gorham Savings Bank (GSB) during the first quarter of 2020, we had in place five different credit facilities and a line of credit with TD Bank N.A. (Loans #1 to #5). During the first quarter of 2020, we closed on a debt financing with GSB aggregating $ 8,600,000 and a $ 1,000,000 line of credit. The debt was comprised of a $ 5,100,000 mortgage note (Loan #6) that bears interest at a fixed rate of 3.50 % per annum (with a 10 -year term and 25 -year amortization schedule and a balloon principal payment of $ 3,145,888 due during the first quarter of 2030) and a $ 3,500,000 note (Loan #7) that bears interest at a fixed rate of 3.50 % per annum (with a 7 -year term and amortization schedule). The line of credit is available as needed through March 11, 2024. Interest on borrowings against the line of credit is variable at the National Prime Rate plus 0.00% per annum. There was no outstanding balance under this line of credit as of December 31, 2021 or 2020. In connection with these three credit facilities, we incurred debt issuance costs of $ 39,789 . The amortization of debt issuance costs is being recorded as a component of interest expense, included with other expenses (income), net, and is being amortized over the underlying terms of the two notes and the line of credit. The proceeds from the debt refinancing were used to repay all bank debt outstanding at the time of closing (Loans #1 to #5) and to provide some additional working capital. We were required by bank debt covenant to maintain $ 1,400,000 in escrow (a non-current asset). During the fourth quarter of 2020, we closed on a $ 1,500,000 note with GSB (Loan #10) that bears interest at a fixed rate of 3.50 % per annum (with a 7 -year term and amortization schedule). In connection with this note, we incurred debt issuance costs of $ 11,075 . The amortization of these debt issuance costs is also being recorded as a component of interest expense, included with other expenses (income), net, and is being amortized over the underlying term of the note. Proceeds of $ 624,167 were used to prepay a portion of the outstanding principal on our mortgage note (Loan #6), which reduced the outstanding balance to 80 % of the most recent appraised value of the property securing the debt, which allowed GSB to release the $ 1,400,000 that had been held in escrow. This resulted in no change in the balloon principal payment of $3,145,888 due during the first quarter of 2030. The remaining proceeds were available for general working capital purposes. These three credit facilities are secured by liens on substantially all of our assets and are subject to certain restrictions and financial covenants. Given the funds we raised through an equity issuance in April 2021, GSB waived the minimum debt service coverage ratio requirement of 1.35 for the year ended December 31, 2021. During the second quarter of 2020, we received $ 937,700 in support from the federal government under the Paycheck Protection Program (PPP) (Loan #8). We used the proceeds only for eligible payroll costs incurred and paid during the 24-week period beginning April 13, 2020. Our obligation to repay the principal was forgiven, and we recognized this amount as part of other expenses (income), net, during the fourth quarter of 2020. This forgiveness of indebtedness, in accordance with the CARES Act, does not give rise to federal or State of Maine taxable income, and the expenses incurred using PPP proceeds are fully deductible for federal and Maine income tax purposes. During the second quarter of 2020, we received a loan from the Maine Technology Institute (MTI) (Loan #9) in the aggregate principal amount of $ 500,000 . The first 27 months of this loan are interest-free with no interest accrual or required principal payments. Principal and interest payments at a fixed rate of 5% per annum are due quarterly over the final five years of the loan, beginning during the fourth quarter of 2022 and continuing through the third quarter of 2027. On June 30, 2021, we executed definitive agreements covering a second loan from the MTI (Loan #11) in the aggregate principal amount of $400,000, which proceeds were received in July 2021. The first 24 months of this loan are interest-free with no interest accrual or required principal payments. Beginning in July 2023, principal and interest payments are due quarterly at a fixed rate of 5% per annum based on a 5.5-year amortization schedule until December 2028.These credit facilities are unsecured and subordinated to our indebtedness to Gorham Savings Bank, which senior indebtedness is secured by mortgages and security interests with respect to substantially all of our assets. Failure to make timely payments of principal and interest, or otherwise to comply with the terms of the agreements with the MTI, would entitle the MTI to accelerate the maturity of such debt and demand repayment in full. These loans may be prepaid without penalty at any time. Debt proceeds received and principal repayments made during the years ended December 31, 2021 and 2020 are reflected in the following table by period and by loan: During the Year Ended December 31, 2021 During the Year Ended December 31, 2020 Proceeds from Debt Issuance Debt Principal Repayments Proceeds from Debt Issuance Debt Principal Repayments Loan #1 $ — $ — $ — $ ( 493,696 ) Loan #2 — — — ( 2,143,771 ) Loan #3 — — — ( 3,236,429 ) Loan #4 — — — ( 2,336,000 ) Loan #5 — — — ( 309,182 ) Loan #6 — ( 115,860 ) 5,100,000 ( 720,001 ) Loan #7 — ( 460,637 ) 3,500,000 ( 334,489 ) Loan #8 (1) — — 937,700 ( 937,700 ) Loan #9 — — 500,000 — Loan #10 — ( 191,774 ) 1,500,000 — Loan #11 400,000 — — — Total $ 400,000 $ ( 768,271 ) $ 11,537,700 $ ( 10,511,268 ) (1) Loan #8 was forgiven by the federal government during the fourth quarter of 2020. F- 16 ImmuCell Corporation Notes to Audited Financial Statements (continued) Principal payments (net of debt issue costs) due under bank loans outstanding as of December 31, 2021 (excluding our $ 1,000,000 line of credit) are reflected in the following table by the year that payments are due: During the Years Ending December 31, 2022 2023 2024 2025 2026 Thereafter Total Loan #6 $ 120,291 $ 124,629 $ 128,725 $ 133,768 $ 138,592 $ 3,618,135 $ 4,264,140 Loan #7 477,221 494,433 512,102 530,738 549,881 140,498 2,704,873 Loan #9 22,160 91,446 96,104 101,000 106,146 83,144 500,000 Loan #10 198,710 205,877 213,217 220,994 228,965 240,463 1,308,226 Loan #11 — 32,017 66,470 69,856 73,415 158,242 400,000 Subtotal 818,382 948,402 1,016,618 1,056,356 1,096,999 4,240,482 9,177,239 Debt issuance costs ( 6,175 ) ( 5,768 ) ( 5,768 ) ( 5,769 ) ( 5,768 ) ( 8,662 ) ( 37,910 ) Total $ 812,207 $ 942,634 $ 1,010,850 $ 1,050,587 $ 1,091,231 $ 4,231,820 $ 9,139,329 11. CONTINGENT LIABILITIES AND COMMITMENTS Our bylaws, as amended, in effect provide that the Company will indemnify its officers and directors to the maximum extent permitted by Delaware law. In addition, we make similar indemnity undertakings to each director through a separate indemnification agreement with that director. The maximum payment that we may be required to make under such provisions is theoretically unlimited and is impossible to determine. We maintain directors’ and officers’ liability insurance, which may provide reimbursement to the Company for payments made to, or on behalf of, officers and directors pursuant to the indemnification provisions. Our indemnification obligations were grandfathered under the provisions of Codification Topic 460 , Guarantees . Accordingly, we have recorded no liability for such obligations as of December 31, 2021. Since our incorporation, we have had no occasion to make any indemnification payment to any of our officers or directors for any reason. The development, manufacturing and marketing of animal health care products entails an inherent risk that liability claims will be asserted against us during the normal course of business. We are aware of no such claims against us as of the date of this filing. We feel that we have reasonable levels of liability insurance to support our operations. We enter into agreements with third parties in the ordinary course of business under which we are obligated to indemnify such third parties from and against various risks and losses. The precise terms of such indemnities vary with the nature of the agreement. In many cases, we limit the maximum amount of our indemnification obligations, but in some cases those obligations may be theoretically unlimited. We have not incurred material expenses in discharging any of these indemnification obligations and based on our analysis of the nature of the risks involved, we believe that the fair value of the liabilities potentially arising under these agreements is minimal. Accordingly, we have recorded no liabilities for such obligations as of December 31, 2021. We are committed to purchasing certain key parts (syringes) and services (formulation, aseptic filling and final packaging of Drug Product) pertaining to Re-Tain ® , our Nisin-based intramammary treatment of subclinical mastitis in lactating dairy cows, exclusively from contractors. We are investing in the necessary equipment to perform the Drug Product formulation and aseptic filling services in-house. During the first quarter of 2020, we entered into a Severance Agreement with our President and CEO. Under the terms of this agreement, we agree to pay this executive (or his estate) nine months of his then current salary plus any accrued and unused paid time off in the event of the involuntary termination of his employment by the Company (except for cause) or in the event of termination by him for good reason. In addition to the commitments discussed above, we had committed $ 1,405,000 to increase our production capacity for the First Defense ® product line, $ 356,000 to construct and equip our own Drug Product formulation and aseptic filling facility for Re-Tain ® , $ 2,605,000 to the purchase of inventory, $ 116,000 to other capital expenditures and $ 453,000 to other obligations as of December 31, 2021. F- 17 ImmuCell Corporation Notes to Audited Financial Statements (continued) 12. OPERATING LEASE On September 12, 2019, we entered into a lease covering approximately 14,300 square feet of office and warehouse space with a possession date of November 15, 2019 and a commencement date of February 13, 2020. The property is located at 175 Industrial Way in Portland, which is a short distance from our headquarters and manufacturing facility at 56 Evergreen Drive. We renovated this space to meet our needs in expanding our production capacity for the First Defense ® product line. The lease term is 10 years with a right to renew for a second 10-year term and a right of first offer to purchase. At this time, we are not reasonably assured that we would exercise this renewal option in place of other real estate options. A 10-year period is reflected in the right-of-use (ROU) asset and lease liability on our balance sheet. The total lease liability over the initial 10-year term (including inflationary adjustments) aggregates approximately $1,313,698 and includes real estate and personal property taxes, utilities, insurance, maintenance and related building and operating expenses. Our lease includes variable lease and non-lease components that are included in the ROU asset and lease liability. Such payments primarily include common area maintenance charges and increases in rent payments that are driven by factors such as future changes in an index, such as the Consumer Price Index. As of December 31, 2021, the balance of the operating lease ROU asset was $ 1,109,133 and the operating lease liability was $ 1,135,169 . The calculated amount of the ROU asset and lease liability is impacted by the length of the lease term and the discount rate used for the present value of the minimum lease payments. As we elected not to separate lease and non-lease components for all classes of underlying assets, and instead to account for them as a single lease component, the variable lease cost primarily represents variable payments such as real estate taxes and common area maintenance. The following table represents lease costs and other lease information: During the Years Ended December 31, 2021 2020 Lease Cost Operating lease cost $ 117,996 $ 104,094 Variable lease cost 41,400 36,523 Total lease cost $ 159,396 $ 140,617 Operating Lease Weighted average remaining lease term (in years) 8.1 9.1 Weighted average discount rate 4.77 % 4.77 % Future lease payments required under non-cancelable operating leases in effect as of December 31, 2021 were as follows: Amount During the Years Ending December 31, 2022 $ 162,102 2023 165,120 2024 168,210 2025 171,383 2026 174,640 Thereafter 559,664 Total lease payments (undiscounted cash flows) 1,401,119 Less: imputed interest (discount effect of cash flows) ( 265,950 ) Total operating liabilities $ 1,135,169 F- 18 ImmuCell Corporation Notes to Audited Financial Statements (continued) 13. STOCKHOLDERS’ EQUITY Common Stock Issuances From February 2016 to April 2021, we issued the aggregate of 4,553,017 shares of common stock in six different transactions raising gross proceeds of approximately $ 26,714,000 . These funds are essential to funding our business growth plans. The details of each transaction are discussed below. On October 28, 2015, we filed a registration statement on Form S-3 (File No. 333-207635) with the Securities and Exchange Commission (SEC) for the potential issuance of up to $ 10,000,000 in equity securities (subject to certain limitations). This registration statement became effective on November 10, 2015. Under this form of registration statement, we were limited within a twelve-month period to raising gross proceeds of no more than one-third of the market capitalization of our common stock (as determined by the high price of our common stock within the preceding 60 days leading up to a sale of securities) held by non-affiliates (non-insiders) of the Company. Having raised $10,000,000 in gross proceeds under the February 2016, July 2017 and December 2017 equity transactions described below, no additional equity securities can be issued under this registration statement. On February 3, 2016, we sold 1,123,810 shares of common stock at a price to the public of $ 5.25 per share in an underwritten public offering pursuant to our effective shelf registration statement on Form S-3, raising gross proceeds of approximately $ 5,900,000 and resulting in net proceeds to the Company of approximately $ 5,313,000 (after deducting underwriting discounts and offering expenses incurred in connection with the equity financing). On October 21, 2016, we closed on a private placement of 659,880 shares of common stock to nineteen institutional and accredited investors at $ 5.25 per share, raising gross proceeds of approximately $ 3,464,000 and resulting in net proceeds to the Company of approximately $ 3,161,000 (after deducting placement agent fees and other expenses incurred in connection with the equity financing). On July 27, 2017, we issued 200,000 shares of our common stock at a price of $ 5.25 per share in a public, registered sale to two related investors pursuant to our effective shelf registration statement on Form S-3, raising gross proceeds of $ 1,050,000 and resulting in net proceeds of approximately $ 1,034,000 (after deducting expenses incurred in connection with the equity financing). On December 21, 2017, we sold 417,807 shares of common stock at a price to the public of $ 7.30 per share in an underwritten public offering pursuant to our effective shelf registration statement on Form S-3, raising gross proceeds of approximately $ 3,050,000 and resulting in net proceeds to the Company of approximately $ 2,734,000 (after deducting underwriting discounts and offering expenses incurred in connection with the equity financing). On November 20, 2018, we filed a registration statement on Form S-3 (File No. 333-228479) with the Securities and Exchange Commission (SEC) for the potential issuance of up to $ 20,000,000 in equity securities (subject to certain limitations). This registration statement became effective on November 29, 2018. Under this form of registration statement, we are limited within a twelve-month period to raising gross proceeds of no more than one-third of the market capitalization of our common stock (as determined by the high price of our common stock within the preceding 60 days leading up to a sale of securities) held by non-affiliates (non-insiders) of the Company. Under SEC rules governing this form of registration statement, this registration statement cannot be utilized subsequent to the third anniversary of its effectiveness. On March 29, 2019, we sold 1,636,364 shares of common stock at a price to the public of $ 5.50 per share in an underwritten public offering pursuant to our effective shelf registration statement on Form S-3, raising gross proceeds of approximately $ 9,000,000 and resulting in net proceeds to the Company of approximately $ 8,303,000 (after deducting underwriting discounts and offering expenses incurred in connection with the equity financing). On April 14, 2021, we issued 515,156 shares of our common stock at a price of $ 8.25 per share in a public, registered sale to seven investors pursuant to our effective shelf registration statement on Form S-3, raising gross proceeds of approximately $ 4,250,000 and resulting in net proceeds of approximately $ 4,233,000 (after deducting expenses incurred in connection with the equity financing). F- 19 ImmuCell Corporation Notes to Audited Financial Statements (continued) Stock Option Plans In June 2010, our stockholders approved the 2010 Stock Option and Incentive Plan (the “2010 Plan”) pursuant to the provisions of the Internal Revenue Code of 1986, under which employees and certain service providers may be granted options to purchase shares of the Company’s common stock at no less than fair market value on the date of grant. At that time, 300,000 shares of common stock were reserved for issuance under the 2010 Plan and subsequently no additional shares have been reserved for the 2010 Plan. Vesting requirements are determined by the Compensation and Stock Option Committee of the Board of Directors on a case-by-case basis. All options granted under the 2010 Plan expire no later than 10 years from the date of grant. The 2010 Plan expired in June 2020, after which date no further options can be granted under the 2010 Plan. However, options outstanding under the 2010 Plan at that time can be exercised in accordance with their terms. As of December 31, 2021, there were 218,500 options outstanding under the 2010 Plan. In June 2017, our stockholders approved the 2017 Stock Option and Incentive Plan (the “2017 Plan”) pursuant to the provisions of the Internal Revenue Code of 1986, under which employees and certain service providers may be granted options to purchase shares of the Company’s common stock at no less than fair market value on the date of grant. At that time, 300,000 shares of common stock were reserved for issuance under the 2017 Plan and subsequently no additional shares have been reserved for the 2017 Plan. Vesting requirements are determined by the Compensation and Stock Option Committee of the Board of Directors on a case-by-case basis. All options granted under the 2017 Plan expire no later than 10 years from the date of grant. The 2017 Plan expires in March 2027, after which date no further options can be granted under the 2017 Plan. However, options outstanding under the 2017 Plan at that time can be exercised in accordance with their terms. As of December 31, 2021, there were 224,500 options outstanding under the 2017 Plan. Activity under the stock option plans described above was as follows: 2010 Plan 2017 Plan Weighted Average Exercise Price Aggregate Intrinsic Value (1) Outstanding as of December 31, 2019 255,000 133,500 $ 6.48 $ ( 516,475 ) Grants 7,000 93,000 $ 5.03 Terminations/forfeitures ( 12,000 ) ( 50,000 ) $ 5.45 Exercises ( 12,500 ) — $ 3.15 Outstanding as of December 31, 2020 237,500 176,500 $ 6.38 $ ( 180,038 ) Grants — 86,000 $ 9.78 Terminations/forfeitures ( 12,000 ) ( 20,000 ) $ 7.26 Exercises ( 7,000 ) ( 18,000 ) $ 7.08 Outstanding as of December 31, 2021 218,500 224,500 $ 6.94 $ 468,425 Vested as of December 31, 2021 184,500 98,500 $ 6.78 $ 345,350 Vested and expected to vest as of December 31, 2021 218,500 224,500 $ 6.94 $ 468,425 Reserved for future grants — 57,500 (1) Intrinsic value is the difference between the fair market value of the underlying common stock as of the date indicated and as of the date of the option grant (which is equal to the option exercise price). F- 20 ImmuCell Corporation Notes to Audited Financial Statements (continued) The following table displays additional information about the stock option plans described above: Number of Shares Weighted Average Fair Value at Grant Date Weighted Average Exercise Price Non-vested stock options as of January 1, 2021 248,000 $ 3.25 $ 6.44 Non-vested stock options as of December 31, 2021 160,000 $ 3.36 $ 7.23 Stock options granted during the year ended December 31, 2021 86,000 $ 4.51 $ 9.78 Stock options that vested during the year ended December 31, 2021 147,000 $ 3.74 $ 7.33 Stock options that were forfeited during the year ended December 31, 2021 32,000 $ 3.81 $ 7.26 During the year ended December 31, 2021, one director and three employees exercised stock options covering 25,000 shares by the surrender of 17,128 shares of common stock with a fair market value of $165,337 at the time of exercise and the payment of $11,693 in cash. During the year ended December 31, 2020, two employees exercised stock options covering 12,500 shares by the surrender of 6,583 stock options with a fair market value of the underlying common stock equal to $39,366 at the time of exercise and the payment of $9 in cash. The weighted average remaining life of the options outstanding under the 2010 Plan and the 2017 Plan as of December 31, 2021 was approximately 5 years. The weighted average remaining life of the options exercisable under these plans as of December 31, 2021 was approximately 4 years and 3 months. The exercise prices of the options outstanding as of December 31, 2021 ranged from $ 4.00 to $ 10.04 per share. The 86,000 stock options granted during the year ended December 31, 2021 had exercise prices between $ 6.10 and $ 10.04 per share. The 100,000 stock options granted during the year ended December 31, 2020 had exercise prices between $ 4.00 and $ 6.37 per share. The aggregate intrinsic value of options exercised during the years ended December 31, 2021 and 2020 approximated $ 64,977 and $ 35,375 , respectively. The weighted-average grant date fair values of options granted during the years ended December 31, 2021 and 2020 were $ 4.51 and $ 2.47 per share, respectively. As of December 31, 2021, total unrecognized stock-based compensation related to non-vested stock options aggregated $349,477, which will be recognized over a weighted average remaining period of 1 year and 10 months. The fair value of each stock option grant has been estimated on the date of grant using the Black-Scholes option pricing model, for the purpose discussed in Note 2(m), with the following weighted-average assumptions: During the Years Ended December 31, 2021 2020 Risk-free interest rate 0.86 % 0.41 % Dividend yield 0 % 0 % Expected volatility 54 % 53 % Expected life 5.0 years 6.1 years The risk-free interest rate is based on U.S. Treasury yields for a maturity approximating the expected option term, while the other assumptions are derived from averages of our historical data. Common Stock Rights Plan In September 1995, our Board of Directors adopted a Common Stock Rights Plan (the “Rights Plan”) and declared a dividend of one common share purchase right (a “Right”) for each of the then outstanding shares of the common stock of the Company. Each Right entitles the registered holder to purchase from the Company one share of common stock at an initial purchase price of $ 70.00 per share, subject to adjustment. The description and terms of the Rights are set forth in a Rights Agreement between the Company and American Stock Transfer & Trust Co., as Rights Agent. F- 21 ImmuCell Corporation Notes to Audited Financial Statements (continued) The Rights (as amended) become exercisable and transferable apart from the common stock upon the earlier of i) 10 days following a public announcement that a person or group (Acquiring Person) has, without the prior consent of the Continuing Directors (as such term is defined in the Rights Agreement), acquired beneficial ownership of 20% or more of the outstanding common stock or ii) 10 days following commencement of a tender offer or exchange offer the consummation of which would result in ownership by a person or group of 20% or more of the outstanding common stock (the earlier of such dates being called the Distribution Date). Upon the Distribution Date, the holder of each Right not owned by the Acquiring Person would be entitled to purchase common stock at a discount to the initial purchase price of $70.00 per share, effectively equal to one half of the market price of a share of common stock on the date the Acquiring Person becomes an Acquiring Person. If, after the Distribution Date, the Company should consolidate or merge with any other entity and the Company were not the surviving company, or, if the Company were the surviving company, all or part of the Company’s common stock were changed or exchanged into the securities of any other entity, or if more than 50% of the Company’s assets or earning power were sold, each Right would entitle its holder to purchase, at the Rights’ then-current purchase price, a number of shares of the acquiring company’s common stock having a market value at that time equal to twice the Right’s exercise price. At any time after a person or group becomes an Acquiring Person and prior to the acquisition by such person or group of 50% or more of the outstanding common stock, the Board of Directors of the Company may exchange the Rights (other than Rights owned by such person or group which have become void), in whole or in part, at an exchange ratio of one share of common stock per Right (subject to adjustment). At any time prior to 14 days following the date that any person or group becomes an Acquiring Person (subject to extension by the Board of Directors), the Board of Directors of the Company may redeem the then outstanding Rights in whole, but not in part, at a price of $0.005 per Right, subject to adjustment. At various times over the years, our Board of Directors has voted to authorize amendments of the Rights Agreement to extend the Final Expiration Date, which is currently September 19, 2022. Our Board of Directors also has voted to authorize amendments to increase the ownership threshold for determining “Acquiring Person” status to 20%. During the second quarter of 2015, our Board of Directors also voted to authorize an amendment to remove a provision that prevented a new group of directors elected following the emergence of an Acquiring Person (an owner of more than 20% of our stock) from controlling the Rights Plan by maintaining exclusive authority over the Rights Plan with pre-existing directors. We did this because such provisions have come to be viewed with disfavor by Delaware courts. Each time that we made such amendments we entered into amendments to the Rights Agreement with the Rights Agent reflecting such extensions, threshold increases or provision changes. No other changes have been made to the terms of the Rights or the Rights Agreement. Authorized Common Stock At the June 14, 2018 Annual Meeting of Stockholders, our stockholders voted to approve an amendment to our Certificate of Incorporation to increase the number of shares of common stock authorized for issuance from 8,000,000 to 11,000,000 . At the June 10, 2020 Annual Meeting of Stockholders, our stockholders voted to approve an amendment to our Certificate of Incorporation to increase the number of shares of common stock authorized for issuance from 11,000,000 to 15,000,000 . 14. REVENUE We primarily offer the First Defense ® product line to dairy and beef producers to prevent scours in newborn calves. Generally, our products are promoted to veterinarians as well as dairy and beef producers by our sales team and then sold through distributors. Our primary market is North America. We do sell into select international regions and may expand this international reach in the future. There were no material changes between the allocation and timing of revenue recognition during the years ended December 31, 2021 or 2020. We do not have any contract assets for which we have satisfied the performance obligations, but do not yet have the right to bill for, or contract liabilities such as customer advances. All trade receivables on our balance sheets are from contracts with customers. We incur no material costs to obtain contracts. F- 22 ImmuCell Corporation Notes to Audited Financial Statements (continued) The following table presents our product sales disaggregated by geographic area: During the Years Ended December 31, 2021 % 2020 % United States $ 16,620,363 86 % $ 13,644,768 89 % Other 2,622,606 14 % 1,697,436 11 % Total Product Sales $ 19,242,969 100 % $ 15,342,204 100 % The following table presents our product sales disaggregated by major product category: During the Years Ended December 31, 2021 % 2020 % First Defense ® product line $ 18,933,092 98 % $ 15,072,446 98 % Other animal health 309,877 2 % 269,758 2 % Total Product Sales $ 19,242,969 100 % $ 15,342,204 100 % Our primary customers for the majority of our product sales ( 86 % and 89 % during the years ended December 31, 2021 and 2020, respectively) are in the U.S. dairy and beef industries. Product sales to international customers, who are also in the dairy and beef industries, aggregated 14 % and 11 % of our total product sales during the years ended December 31, 2021 and 2020, respectively. 15. OTHER EXPENSES (INCOME), NET Other expenses (income), net, consisted of the following: During the Years Ended December 31, 2021 2020 Interest expense (1) $ 314,359 $ 412,687 Interest rate swap termination fee — 165,050 Debt forgiveness — ( 937,700 ) Loss on disposal of fixed assets 30,963 39,303 Interest income ( 18,810 ) ( 27,440 ) Other expenses (income), net $ 326,512 $ ( 348,100 ) (1) Interest expense during the year ended December 31, 2020 included a $ 94,782 write-off of debt issuance costs associated with debt that we repaid during the first quarter of 2020. Interest expense included amortization of debt issuance costs of $ 7,841 and $ 7,942 during the years ended December 31, 2021 and 2020, respectively. 16. INCOME TAXES Our income tax expense (benefit) aggregated $ 9,165 and ($ 10,136 ) (amounting to 13 % and ( 1 %) of our loss before income taxes) during the years ended December 31, 2021 and 2020, respectively. As of December 31, 2021, we had federal net operating loss carryforwards of $14,734,684 of which $13,022,777 do not expire and of which $1,711,907 expire in 2034 through 2037 (if not utilized before then) and state net operating loss carryforwards of $1,440,707 that expire in 2037 through 2038 (if not utilized before then). Additionally, we had federal general business tax credit carryforwards of $557,795 that expire in 2027 through 2042 (if not utilized before then) and state tax credit carryforwards of $775,473 that expire in 2022 through 2042 (if not utilized before then). The provision for income taxes is determined using the asset and liability approach of accounting for income taxes. Under this approach, deferred taxes represent the estimated future tax effects of temporary differences between book and tax treatment of assets and liabilities and carryforwards to the extent they are realizable. During the second quarter of 2018, we assessed our historical and near-term future profitability and recorded $563,252 in non-cash income tax expense to create a full valuation allowance against our net deferred tax assets (which consist largely of net operating loss carryforwards and federal and state credits) based on applicable accounting standards and practices. At that time, we had incurred a net loss for six consecutive quarters, had not been profitable on a year-to-date basis since the nine-month period ended September 30, 2017 and projected additional net losses for some period going forward before returning to profitability. Should future profitability be realized at an adequate level, we would be able to release this valuation allowance (resulting in a non-cash income tax benefit) and realize these deferred tax assets before they expire. We will continue to assess the need for the valuation allowance at each quarter and, in the event that actual results differ from these estimates, or we adjust these estimates in future periods, we may need to adjust our valuation allowance. Adjustments related to the termination of our interest rate swap agreements were recorded during the first quarter of 2020. No subsequent adjustments were recorded. F- 23 ImmuCell Corporation Notes to Audited Financial Statements (continued) Net operating loss carryforwards, credits, and other tax attributes are subject to review and possible adjustment by the Internal Revenue Service. Section 382 of the Internal Revenue Code contains provisions that could place annual limitations on the future utilization of net operating loss carryforwards and credits in the event of a change in ownership of the Company, as defined. We file income tax returns in the U.S. federal jurisdiction and several state jurisdictions. We currently have no tax examinations in progress. We also have not paid additional taxes, interest or penalties as a result of tax examinations nor do we have any unrecognized tax benefits for any of the periods in the accompanying audited financial statements. The income tax provision consisted of the following: During the Years Ended December 31, 2021 2020 Current Federal $ — $ — State 9,165 4,496 Current subtotal 9,165 4,496 Deferred Federal ( 63,097 ) ( 418,295 ) State ( 14,990 ) ( 24,337 ) Deferred subtotal, gross ( 78,087 ) ( 442,632 ) Valuation allowance 78,087 428,000 Deferred subtotal, net — ( 14,632 ) Income tax expense (benefit) $ 9,165 $ ( 10,136 ) The actual income tax expense differs from the expected tax computed by applying the U.S. federal corporate tax rate of 21 % to the loss before income taxes during the years ended December 31, 2021 and 2020 respectively, as follows: During the Years Ended December 31, 2021 2020 $ % $ % Computed expected income tax expense rate $ ( 14,517 ) ( 21.00 )% $ ( 216,773 ) ( 21.00 )% State income taxes, net of federal expense 7,522 10.88 ( 15,674 ) ( 1.52 ) Share-based compensation 13,716 19.84 30,121 2.92 Tax credits ( 79,901 ) ( 115.58 ) ( 55,180 ) ( 5.35 ) Valuation allowance 78,087 112.96 428,000 41.46 Paycheck Protection Program loan forgiveness — — ( 196,917 ) ( 19.08 ) Other 4,258 6.16 16,287 1.59 Income tax expense (benefit)/rate $ 9,165 13.26 % $ ( 10,136 ) ( 0.98 )% F- 24 ImmuCell Corporation Notes to Audited Financial Statements (continued) The significant components of our deferred tax assets, net, consisted of the following: As of December 31, 2021 2020 Product rights $ — $ 444 Property, plant and equipment ( 2,483,145 ) ( 2,482,237 ) Federal general business tax credits 557,795 490,018 Federal net operating loss carryforwards 3,094,283 3,074,882 State tax credits carryover 809,618 826,091 Prepaid expenses and other ( 6,289 ) ( 8,814 ) UNICAP 14,178 11,791 Incentive compensation 57,001 53,179 Valuation allowance ( 2,043,441 ) ( 1,965,354 ) Deferred tax assets, net $ — $ — 17. SEGMENT INFORMATION Our business operations (being the development, acquisition, manufacture and sale of products that improve the health and productivity of dairy and beef cattle) are described in Note 1. Pursuant to Codification Topic 280, Segment Reporting , we operate in the following two reportable business segments: i) First Defense ® and ii) Re-Tain ® . The significant accounting policies of these segments are described in Note 2. Product sales are the primary factor we use in determining our reportable segments. The governing regulatory authority (USDA or FDA) is also a factor in determining our reportable segments. Management monitors and evaluates segment performance from sales to net operating income (loss) closely. We are not organized by geographic region. No segments have been aggregated. The revenues and expenses allocated to each segment are in some cases direct and in other cases involve reasonable and consistent estimations by management. Each operating segment is defined as the component of our business for which financial information is available and evaluated regularly by our chief operating decision-maker in deciding how to allocate resources and in assessing performance. Our chief operating decision-maker is our President and CEO. During the Year Ended December 31, 2021 First Defense ® Re-Tain ® Unallocated Total Product sales $ 18,933,092 $ — $ 309,877 $ 19,242,969 Costs of goods sold 10,411,936 — 175,104 10,587,040 Gross margin 8,521,156 — 134,773 8,655,929 OPERATING EXPENSES: Product development expenses 25,374 3,887,781 255,363 4,168,518 Sales and marketing expenses 1,942,391 561,288 247 2,503,926 Administrative expenses — — 1,726,100 1,726,100 Operating expenses 1,967,765 4,449,069 1,981,710 8,398,544 NET OPERATING INCOME (LOSS) $ 6,553,391 $ ( 4,449,069 ) $ ( 1,846,937 ) $ 257,385 F- 25 ImmuCell Corporation Notes to Audited Financial Statements (continued) During the Year Ended December 31, 2020 First Defense ® Re-Tain ® Unallocated Total Product sales $ 15,072,446 $ — $ 269,758 $ 15,342,204 Costs of goods sold 8,285,073 — 194,305 8,479,378 Gross margin 6,787,373 — 75,453 6,862,826 OPERATING EXPENSES: Product development expenses 106,393 4,022,712 225,522 4,354,627 Sales and marketing expenses 2,119,289 48,600 10 2,167,899 Administrative expenses — — 1,720,653 1,720,653 Operating expenses 2,225,682 4,071,312 1,946,185 8,243,179 NET OPERATING INCOME (LOSS) $ 4,561,691 $ ( 4,071,312 ) $ ( 1,870,732 ) $ ( 1,380,353 ) First Defense ® Re-Tain ® Total Total Assets as of December 31, 2021 $ 22,476,870 $ 21,988,818 $ 44,465,688 Total Assets as of December 31, 2020 $ 18,416,157 $ 21,933,437 $ 40,349,594 Depreciation and amortization expense during the year ended December 31, 2021 $ 1,095,620 $ 1,373,361 $ 2,468,981 Depreciation and amortization expense during the year ended December 31, 2020 $ 1,003,577 $ 1,446,430 $ 2,450,007 Capital Expenditures during the year ended December 31, 2021 $ 1,655,866 $ 952,783 $ 2,608,649 Capital Expenditures during the year ended December 31, 2020 $ 3,454,076 $ 618,463 $ 4,072,539 18. RELATED PARTY TRANSACTIONS David S. Tomsche (Chair of our Board of Directors) is a controlling owner of Leedstone Inc., a domestic distributor of ImmuCell products (the First Defense ® product line and CMT ), and of J-t Enterprises of Melrose, Inc., an exporter. His affiliated companies purchased $ 651,424 and $ 668,308 of products from us during the years ended December 31, 2021 and 2020, respectively, on terms consistent with those offered to other distributors of similar status. We made marketing-related payments of $ 0 and $ 975 to these affiliated companies during the years ended December 31, 2021 and 2020, respectively, which represent amounts similar to those offered to other distributors of similar status. Our accounts receivable (subject to standard and customary payment terms) due from these affiliated companies aggregated $ 55,490 and $ 51,286 as of December 31, 2021 and 2020, respectively. 19. EMPLOYEE BENEFITS We have a 401(k) savings plan (the Plan) in which all employees completing one month of service with the Company are eligible to participate. Participants may contribute up to the maximum amount allowed by the Internal Revenue Service. We currently match 100% of the first 3% of each employee’s salary that is contributed to the Plan and 50% of the next 2% of each employee’s salary that is contributed to the Plan. Under this matching plan, we paid $ 139,401 and $ 131,217 into the Plan for the years ended December 31, 2021 and 2020, respectively. 20. SUBSEQUENT EVENTS We have evaluated subsequent events through the time of filing on March 30, 2022, the date we have issued this Annual Report on Form 10-K. On March 23, 2022, we (a) extended our existing $1.0 million line of credit with Gorham Savings Bank (GSB) until March 11, 2024, and (b) increased our mortgage borrowing from GSB by $2.0 million, resulting in the initial principal balance of $6,233,956 being subject to repayment on the basis of a 20-year amortization schedule payable over a 10-year term at a blended interest rate of 3.53% per annum, under which a balloon payment of $3,682,918 plus accrued interest would become due on March 11, 2032. The revised mortgage note is secured by a mortgage on our premises located at 56 Evergreen Drive and 33 Caddie Lane in Portland, Maine. As of the time of filing on March 30, 2022, there were no other material, reportable subsequent events. F- 26 ImmuCell Corporation Signatures Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ImmuCell Corporation Registrant Date: March 30, 2022 By: /s/ Michael F. Brigham Michael F. Brigham President, Chief Executive Officer and Principal Financial Officer POWER OF ATTORNEY We, the undersigned directors of ImmuCell Corporation, hereby severally constitute and appoint Michael F. Brigham our true and lawful attorney-in-fact and agent with full power of substitution and re-substitution, for us and in our stead, in any and all capacities, to sign any and all amendments to this report and all documents relating thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing necessary or advisable to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Gloria J. Basse Director March 23, 2022 Gloria J. Basse /s/ Michael F. Brigham President, Chief Executive Officer March 23, 2022 Michael F. Brigham Principal Financial Officer and Director /s/ Bobbi Jo Brockmann Vice President of Sales and Marketing and Director March 23, 2022 Bobbi Jo Brockmann /s/ David S. Cunningham Director March 23, 2022 David S. Cunningham /s/ Steven T. Rosgen Director March 23, 2022 Steven T. Rosgen /s/ David S. Tomsche Director March 23, 2022 David S. Tomsche, DVM /s/ Paul R. Wainman Director March 23, 2022 Paul R. Wainman 40