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Item 1A. Risk Factors

2023-03-29 compared with 2022-03-30 · 537 added, 466 removed, 87 unchanged (92% of the section changed)

ITEM 1A— RISK FACTORS

Financial Risks

Gross margin on product sales:

our goals is to achieve a gross margin (before related depreciation expenses) as a percentage of total sales of approximately 50% after

the initial launch of new products.

Depreciation expense will be a larger component of costs of goods sold for Re-Tain ®

than it is for the First Defense ® product line.

Gross margins generally improve over time, but this anticipated

improvement may not be realized for Re-Tain ® .

Many factors discussed in this report (including the COVID-related

cost increases, supply-chain disruptions and the rising price of oil) impact our costs of goods sold.

There is a risk that we are not

1A — RISK FACTORS

margin on product sales:

One of our goals is to achieve a gross margin (before related depreciation expenses) as a percentage of

total sales approaching 50% after the initial launch of new products.

Depreciation expense will be a larger component of costs of goods

sold for Re-Tain ® than it is for the First Defense ® product line.

Gross margins generally

improve over time, but this anticipated improvement may not be realized for Re-Tain ® .

Many factors discussed in

this report (including inflation and the COVID-related and other cost increases, supply-chain disruptions and the rising price of oil

and other commodities and supplies) impact our costs of goods sold.

There is a risk (which was experienced during 2022) that we are not

able to achieve our gross margin goals, which would adversely affect our operating results and could impact our future operating plans.

This concern was realized during the first quarter of 2021 when our gross margin as a percentage of sales dropped to 39%.

There is a risk

that our plans to continue to recover from this decrease may not be realized due to cost increases, inability to raise our selling prices,

Exposure to interest rates and debt service obligations:

Rising interest rates could negatively affect the operating costs of dairy and beef producers and thus put further financial pressure

on an already stressed business sector, which could indirectly affect our business.

We removed the direct aspect of this particular exposure

to our business by refinancing our bank debt to fixed rate notes at 3.50% per annum during the first quarter of 2020.

However, the additional

debt we incurred to fund our growth objectives has significantly increased our debt service costs.

Reflecting the mortgage debt financing

we completed during the first quarter of 2022, we are obligated to make principal and interest payments aggregating approximately $1.2

million during the year ending December 31, 2022 and approximately $1.24 million during the years ending December 31, 2023 and thereafter

during the remainder of the ten-year term.

See Note 10 to the accompanying audited financial statements for more information.

in sales or gross margin, coupled with this debt service burden, could impair our ability to fund our capital and operating needs and

Debt covenants:

Our bank debt is subject

to certain financial covenants.

We are required to meet a minimum debt service coverage (DSC) ratio of 1.35, which is measured annually.

Our actual DSC ratios were 2.68 and 2.03 for the years ended December 31, 2021 and 2020, respectively.

However, based on current projections

of our future financial performance, which includes a high level of ongoing product development expenses to support Re-Tain ® ,

we may not satisfy this annual requirement for the year ending December 31, 2022, and there can be no assurance that we can exceed that

required level in subsequent years.

By negotiation with the bank in connection with a mortgage debt financing during the first quarter

of 2022, the required minimum DSC ratio was reduced to 1.0 for the year ending December 31, 2022.

Projection of net (loss) income:

speaking, our financial performance can differ significantly from management projections, due to numerous factors that are difficult to

predict or that are beyond our control.

Weaker than expected sales of the First Defense ® product line could lead

to less profits or deeper operating losses.

The timing of FDA approval of Re-Tain ® will have a material impact on

our net (loss) income until sufficient commercial sales are initiated.

Additionally, this complexity and uncertainty is magnified by the

risks relating to and arising out of the duration, extent and nature of adverse effects from the COVID-19 pandemic.

ImmuCell Corporation

Risks associated with our funding strategy

for Re-Tain ® :

The inability to maintain adequate cash and liquidity to support the commercialization

of Re-Tain ® is a risk to our business.

Achieving FDA approval of our pharmaceutical-grade Nisin produced at commercial-scale

is the most critical action remaining in front of us on our path to U.S.

regulatory approval of Re-Tain ® .

completed the construction and equipping of the Drug Substance production facility described elsewhere in this report at a cost of approximately

$20.8 million, we will continue to incur product development expenses to operate and maintain this facility until commercialization.

sufficient sales of Re-Tain ® at a profitable gross margin, we would be required to fund all debt service costs from

available cash and sales of the First Defense ® product line, which would reduce, and could eliminate, our expected

profitability going forward and significantly reduce our cash flows.

Uncertainty of market size and product sales

Estimating the size of the total addressable market and future sales growth potential for our First Defense ®

product line is based on our experience and understanding of market dynamics but is inherently subjective.

Estimating the size of the

market for any new product, such as Re-Tain ® , involves more uncertainties than do projections for established products.

We do not know whether, or to what extent, our products will achieve, maintain or increase market acceptance and profitability.

the uncertainties surrounding Re-Tain ® include the product’s effectiveness against currently prevalent pathogens,

market acceptance, the effect of a premium selling price on market penetration, cost of manufacture and competition from new and existing

products sold by substantially larger competitors with greater market reach and promotional resources.

Since Re-Tain ®

is a novel approach to treating mastitis, there are many uncertainties with regards to how quickly and to what extent we can develop the

subclinical mastitis treatment market.

Our belief that peptide antimicrobial technology will be viewed positively (relative to traditional

antibiotics), if realized, may offset some of these risks and result in better overall market acceptance.

Net deferred tax assets:

The realizability

of our net deferred tax assets is a subjective estimate that is contingent upon many variables.

During the second quarter of 2018, we

recorded a full valuation allowance against our net deferred tax assets that significantly increased our net loss in comparison to other

This non-cash expense could be reversed, and this valuation allowance could be reduced or eliminated, if warranted by our actual

and projected profitability in the future.

We will continue to assess the need for the valuation allowance each quarter.

Product Risks

Product risks generally:

The sale of our

products is subject to production, financial, efficacy, regulatory, competitive and other market risks.

Elevated standards to achieve

and maintain regulatory compliance required to sell our products continue to evolve.

Failure to achieve acceptable biological yields from

our production processes can materially increase our costs of goods sold and reduce our production output, leading to lower margins and

an order backlog that could adversely affect our customer relationships and operating results.

First Defense ® is

sold, and we expect Re-Tain ® to be sold, at significant price premiums to competitive products.

There is no assurance

that we will continue to achieve market acceptance of the First Defense ® product line, or achieve market acceptance

of Re-Tain ® , at a profitable price level or that we can continue to manufacture our products at a low enough cost

to result in a sufficient gross margin to justify their continued manufacture and sale.

As we bring Re-Tain ® to

market, these risks could be heightened by the additional uncertainties associated with introducing a new product requiring a shift in

customer behavior.

The impact of Nisin on milk and cheese:

current practice generally is to treat only clinical mastitis, which has the visual indicator of abnormal milk.

In order to gain market

penetration for Re-Tain ® , we will need to change that practice and increase awareness of the importance of treating

subclinical disease.

There is a risk that our plans to maintain or improve our gross margin may not be realized due to cost increases, additional manufacturing

contamination events, the inability to raise our selling prices, or any combination of these factors.

to interest rates and debt service obligations:

Rising interest rates could negatively affect the operating costs of dairy and beef

producers and thus put further financial pressure on an already stressed business sector, which could indirectly, but materially and

adversely, affect our business.

We removed the direct aspect of this particular exposure to our business by refinancing our bank debt

with fixed rate notes at 3.50% per annum during the first quarter of 2020.

The $2 million in additional mortgage debt we secured during

the first quarter of 2022 bears interest at the fixed rate of 3.58% per annum.

The two State of Maine loans aggregating $900,000 bear

interest at the fixed rate of 5% per annum.

Increasing interest rates would negatively impact the cost of any future borrowings.

additional debt we incurred to fund our growth objectives has significantly increased our total debt service costs.

We are obligated

to make principal and interest payments aggregating approximately $1.4 million during both of the years ending December 31, 2023 and

See Note 10 to the accompanying audited financial statements for more details about our debt.

A decline in sales or gross margin,

coupled with this debt service burden, could impair our ability to fund our capital and operating needs and objectives.

Our bank debt is subject to certain financial covenants.

We are required to meet a minimum debt service coverage (DSC)

ratio of 1.35, which is measured annually.

Our actual DSC ratios were 0.44, 2.68 and 2.03 for the years ended December 31, 2022, 2021

and 2020, respectively.

There can be no assurance that we can exceed that required level in subsequent years.

By negotiation with the

bank in connection with a mortgage debt financing during the first quarter of 2022, the required minimum DSC ratio was reduced to 1.0

for the year ending December 31, 2022.

Subsequently, our bank waived the required compliance with this rate for the year ended December

During the first quarter of 2023, the DSC ratio covenant for the year ending December 31, 2023 was waived by our bank.

we are required to meet a minimum DSC ratio requirement of 1.35 for the twelve-month periods ending June 30, 2024, September 30, 2024

and December 31, 2024 and then again annually after that.

If we are unable to achieve the required DSC ratio going forward or reach a

favorable agreement with our bank regarding that requirement (including an amendment to or waiver of such requirement), we would be in

violation of that covenant, which could result in unfavorable amendments to the terms of our bank debt or have other adverse impacts

on our business and results of operations.

exchange fluctuation:

We do not believe that currency exchange rates have had a significant effect on our revenues and expenses.

However, future increases in the value of the U.S.

dollar could affect our customers and the demand for our products.

We hope to increase

the level of our future sales of products outside the United States.

The cost of our products to international customers could be affected

by currency fluctuations.

The decline of the U.S.

dollar against other currencies could make our products less expensive to international

Conversely, a stronger U.S.

dollar could make our products more costly for international customers.

The current devaluation

of the dollar makes Euro-based purchases more expensive for us.

Inflation is having a material and adverse impact on almost all supplies we purchase and labor we hire and retain.

Continuing or

increasing inflationary trends could materially reduce our gross margin on product sales if we are unable or unwilling to impose offsetting

price increases on our customers.

According to the Consumer Price Index for All Urban Consumers (CPI-U) during the year ended December

31, 2022, the all items index increased 6.5% before seasonal adjustment.

of net (loss) income:

Generally speaking, our financial performance can differ significantly from management projections, due to

numerous factors that are difficult to predict or that are beyond our control.

Weaker than expected sales of the First Defense ®

product line could lead to less profits or deeper operating losses.

The timing of FDA approval of Re-Tain ®

will have a material impact on our net (loss) income until sufficient commercial sales are generated and sustained.

associated with our funding strategy for Re-Tain ® :

The inability to maintain adequate cash and

liquidity to support the commercialization of Re-Tain ® is a risk to our business.

Achieving FDA approval of our

pharmaceutical-grade Nisin produced at commercial-scale is the most critical action remaining in front of us on our path to U.S.

approval of Re-Tain ® .

Having completed the construction and equipping of the Drug Substance production facility

described elsewhere in this report at a cost of approximately $20.8 million, we will continue to incur product development expenses to

operate and maintain this facility until commercialization.

Absent sufficient sales of Re-Tain ® at a profitable

gross margin, we would be required to fund all debt service costs from available cash and sales of the First Defense ®

product line, which would reduce, and could eliminate, our expected profitability going forward and significantly reduce our cash flows.

of market size and product sales estimates:

Estimating the size of the total addressable market and future sales growth potential

for our First Defense ® product line is based on our experience and understanding of market dynamics but is inherently

Estimating the size of the market for any new product, such as Re-Tain ® , involves more uncertainties

than do projections for established products.

We do not know whether, or to what extent, our products will achieve, maintain or increase

market acceptance and profitability.

Some of the uncertainties surrounding Re-Tain ® include the product’s

effectiveness against currently prevalent pathogens, market acceptance, the effect of a premium selling price on market penetration,

cost of manufacture, competition from new and existing products sold by substantially larger competitors with greater market reach and

promotional resources and other risks described under “Product Risks” – “Sales risks pertaining to Re-Tain ® ”

Since Re-Tain ® is a novel approach to treating mastitis, there are many uncertainties with regards to how

quickly and to what extent we can develop the subclinical mastitis treatment market.

We believe that polypeptide antimicrobial technology

may be viewed positively (relative to traditional antibiotics).

If realized, this may offset some of these risks and result in better

overall market acceptance.

deferred tax assets:

The realizability of our net deferred tax assets is a subjective estimate that is contingent upon many variables.

During the second quarter of 2018, we recorded a full valuation allowance against our net deferred tax assets that significantly increased

our net loss in comparison to other periods.

This non-cash expense could be reversed, and this valuation allowance could be reduced or

eliminated, if warranted by our actual and projected profitability in the future.

We will continue to assess the need for the valuation

allowance each quarter.

risks generally:

We set objectives for our products that we believe we can achieve, but the achievement of such goals is not a certainty.

The sale of our products is subject to production, financial, efficacy, regulatory, competitive and other market risks.

Elevated standards

to achieve and maintain regulatory compliance required to sell our products continue to evolve.

Failure to achieve acceptable biological

yields from our production processes can materially increase our costs of goods sold and reduce our production output, leading to lower

margins and/or an order backlog that could adversely affect our customer relationships and operating results.

First Defense ®

is sold, and we expect Re-Tain ® to be sold, at significant price premiums relative to competitive products.

There is no assurance that we will continue to achieve market acceptance of the First Defense ® product line, or

achieve and sustain market acceptance of Re-Tain ® , at a profitable price level or that we can continue to manufacture

our products at a low enough cost to result in a sufficient gross margin to justify their continued manufacture and sale.

Re-Tain ® to market, these risks could be heightened by the additional uncertainties associated with introducing

a new product requiring a shift in customer behavior.

Contamination

events in our production process:

Around the end of the third quarter of 2022 and during the first quarter of 2023, we experienced

certain contamination events in our production process.

We are at risk of further such production contaminations resulting in more scrapped

inventory if we do not achieve an adequate level of sanitization and quality controls in our production process from farms to finished

These risks could result in a slowdown or shutdown of our production capacity if not managed effectively.

risks pertaining to Re-Tain ® :

Actual or prospective Re-Tain ® customers may decide

to discontinue, reduce or avoid usage of Re-Tain ® due to the following risks:

A rejection of a tank of milk by a positive milk inhibitor test because too much of the milk in a bulk tank is comprised of milk from

cows being treated with Re-Tain ® , when tested randomly for inhibitors by a milk hauler.

A failed or stalled cheese tank occurs when our recommended on-farm limit of 3% to 5% of milk from cows being treated with Re-Tain ®

is exceeded or not effectively diluted through the milk transportation and collection system, if a cheese starter culture is used

that is susceptible to Nisin.

Producers’ current practice generally is to treat only clinical mastitis, which has the visual indicator of abnormal milk.

to gain market penetration for Re-Tain ® , we will need to change that practice and increase awareness of the importance

of treating subclinical disease.

This will require the producers’ ability and willingness to diagnose without visual indicators.

In recognition

of the safety data that we presented to the FDA for our highly purified preparation of Nisin, the FDA granted us the zero milk discard

and zero meat withhold claims that we sought.

However, there is a risk that dairy producers and processors will not accept this new technology

because of the risk that a tank of milk could be discarded if it is comprised of more than 1% of milk from treated cows when tank contents

are tested for inhibitors through random testing by milk haulers and the risk that our product may negatively affect cheese making if

present in a high enough concentration in any cheese batch that utilizes a starter culture that is susceptible to Nisin.

rates exceed our usage recommendation, there is a risk that milk from treated cows will not be diluted adequately with milk from non-treated

cows to keep the tank average below this sensitivity level.

ImmuCell Corporation

launch risks pertaining to Re-Tain ® :

or prospective Re-Tain ® customers may decide to

discontinue, reduce or avoid usage of Re-Tain ® due

to the following risks:

1) A rejection of a tank of milk by a positive

milk inhibitor test because more than 1% of the milk in a bulk tank is comprised of milk from treated cows, when tested randomly by a

See the Risk Factor above for more detail.

2) A failed or stalled cheese tank occurs when

our recommended on-farm limit of 3% to 5% of milk from treated cows is exceeded or not effectively diluted through the milk transportation

and collection system, if a cheese starter culture is used that is susceptible to Nisin.

See the Risk Factor above for more detail.

3) Users of Re-Tain ® could

have unsatisfactory treatment outcomes if they lack the equipment needed to measure and monitor somatic cell counts (SCC) of the herd

or individual cows (for which data is needed).

This risk limits our access to treatment cows because about 40% of farms do not presently

access this kind of testing at the cow level.

4) Lower than anticipated treatment cure rates

are experienced because the product is administered to cows that we would not identify as the best treatment candidates based on SCC data.

5) Lower than anticipated treatment cure rates

are experienced because the product is administered to cows that are infected with pathogens outside of our label claims.

6) Off-label use of our product in cows infected

with clinical mastitis before we have run the required studies and achieved a label claim extension for this disease state, resulting

in negative treatment outcomes.

7) Producers either do not bother to use it or

might use it improperly, rather than follow our label instructions to administer one dose after each of three consecutive milkings, resulting

in negative treatment outcomes, and to limit use within the herd to avoid the negative outcomes described above.

Reliance on sales of the First Defense ®

product line:

We are reliant on the market acceptance of the First Defense ® product line to generate product

sales and fund our operations.

Our business would not have been profitable during the years ended December 31, 2012, 2013, 2015 and 2016,

during the nine-month periods ended September 30, 2017 or during the three-month periods ended March 31, 2019, December 31, 2020, June

30, 2021, September 30, 2021 and December 31, 2021 without the gross margin that we earned on sales of the First Defense ®

product line.

Concentration of sales:

Sales of the First

Defense ® product line aggregated 98% of our total product sales during both of the years ended December 31, 2021 and

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.

Users of Re-Tain ® could have unsatisfactory treatment outcomes if they lack the equipment needed to measure and

monitor somatic cell counts (SCC) of the herd or individual cows (for which data is needed).

This risk limits our access to treatment

cows because about 40% of farms do not presently access this kind of testing at the cow level, and thus are not good candidates for the

use of Re-Tain ® .

Lower than anticipated treatment cure rates could be experienced because the product is administered to cows that we would not identify

as the best treatment candidates based on SCC data.

Lower than anticipated treatment cure rates could be experienced because the product is administered to cows that are infected with pathogens

outside of our label claims.

Off-label use of our product in cows infected with clinical mastitis before we have run the required studies and achieved a label claim

extension for this disease state, resulting in negative treatment outcomes.

Producers either do not choose to use it or might use it improperly, rather than follow our label instructions to administer one dose

after each of three consecutive milkings, or they may limit use within the herd in an abundance of caution to avoid the negative outcomes

described above.

on sales of the First Defense ® product line:

We are reliant on the market acceptance of the First Defense ®

product line to generate product sales and fund our operations.

Our business would not have been profitable during the years

ended December 31, 2012, 2013, 2015 and 2016, during the nine-month periods ended September 30, 2017 or during the three-month periods

ended March 31, 2019, December 31, 2020, June 30, 2021, September 30, 2021, December 31, 2021 and March 31, 2022 without the gross margin

that we earned on sales of the First Defense ® product line.

Concentration

Sales of the First Defense ® product line aggregated 99% and 98% of our total product sales during

the years ended December 31, 2022 and 2021, respectively.

Our primary customers for the majority of our product sales (92% and 86% during

the years ended December 31, 2022 and 2021, 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.

The concentration of our sales

from one product into one market is a risk to our business.

The animal health distribution segment has been aggressively consolidating

over the last few years with larger distributors acquiring smaller distributors.

A large portion of our product sales (73% and 71% during

the years ended December 31, 2021 and 2020, respectively) was made to two large distributors.

A large portion of our trade accounts receivable

(72% and 75% as of December 31, 2021 and 2020, respectively) was due from these two distributors.

We have a good history with these distributors,

but the concentration of sales and accounts receivable with a small number of customers does present a risk to us, including risks related

to such customers experiencing financial difficulties or altering the basis on which they do business with us in a manner unfavorable

Production capacity constraints:

approximately $3.6 million to increase our production capacity (in terms of annual sales dollars) for the First Defense ®

product line from approximately $16.5 million to approximately $23 million based on current selling prices and estimated production yields.

During the fourth quarter of 2021, we reached this new, higher level of production output on an annualized basis.

While this capacity

expansion investment has proceeded very close to budget, there is a risk of cost overruns in any future production expansions that we

may undertake, and a risk that we will not be able to achieve our production capacity growth objectives on a timely basis, resulting in

a continuing or increasing shortfall in supply to the market.

Product sales to international customers,

who are also in the dairy and beef industries, aggregated 8% and 14% of our total product sales during the years ended December 31, 2022

and 2021, respectively.

The concentration of our sales from one product into just two markets (the dairy and beef markets) is a risk

to our business.

The animal health distribution segment has been aggressively consolidating over the last few years, with larger distributors

acquiring smaller distributors.

A large portion of our product sales (73% during both of the years ended December 31, 2022 and 2021)

was made to two large distributors.

A large portion of our trade accounts receivable (69% and 72% as of December 31, 2022 and 2021, respectively)

was due from these two distributors.

We have a good history with these distributors, but the concentration of sales and accounts receivable

with a small number of customers does present a risk to us, including risks related to such customers experiencing financial difficulties

or altering the basis on which they do business with us in a manner unfavorable to us.

capacity constraints:

We invested approximately $3.7 million from 2019 to the first quarter of 2022 to increase our production capacity

(in terms of annual sales dollars) for the First Defense ® product line from approximately $16.5 million to approximately

$23 million based on current selling prices and estimated production yields.

During the fourth quarter of 2021, we reached this new,

higher level of production output on an annualized basis.

While this capacity expansion investment has proceeded very close to budget,

there is a risk of cost overruns in our ongoing projects and any future production expansions that we may undertake, and a risk that

we will not be able to achieve our production capacity growth objectives on a timely basis, resulting in a continuing or increasing shortfall

in supply to the market.

The inability to meet market demand for our products is a risk to our business.

The large backlog of orders, as well as any ongoing order backlog, presents a risk that we could lose customers during this period that

are not easily regained thereafter, when our production capacity is expected to meet or exceed sales demand.

During the third quarter

of 2021, we initiated additional investments to increase our annual production capacity for the First Defense ® product

line to approximately $35 million which we intend to complete by the end of 2022.

Our plan to continue to expand the First Defense ®

product line requires ongoing review of equipment capacity and utilization across the manufacturing value stream at the 56 Evergreen Drive

facility and our leased facility at 175 Industrial Way, as well as assessment of functional obsolescence and reliability of equipment.

This review and assessment could identify a need to fund unexpected equipment maintenance or replacement costs.

ImmuCell Corporation

Product liability:

The manufacture and

sale of our products entails a risk of product liability.

Our exposure to product liability is mitigated to some extent by the fact that

our products are directed towards the animal health market.

We have maintained product liability insurance in an amount which we believe

is reasonable in relation to our potential exposure in this area.

We have no history of claims of this nature being made.

Regulatory Risks

Regulatory requirements for the First Defense ®

product line:

First Defense ® is sold in the United States subject to a product license from the Center for Veterinary

Biologics, USDA, which was first obtained in 1991, with subsequent approvals of line extensions in 2017 and 2018.

As a result, our operations

are subject to periodic inspection by the USDA, and we are at risk of an unfavorable outcome from such inspections.

The potency of serial

lots is directly traceable to the original serial used to obtain the product performance claims (the Reference Standard).

Due to the unique

nature of the label claims, host animal re-testing is not required as long as periodic laboratory analyses continue to support the stability

of stored Reference Standard.

To date, these analyses have demonstrated strong stability.

However, if the USDA were not to approve requalification

of the Reference Standard, additional clinical studies could be required to meet regulatory requirements and allow for continued sales

of the product, which could interrupt sales and adversely affect our operating results.

Territories outside of the United States may require

additional regulatory oversight that we may not be able to meet with our current facilities, processes and resources.

Regulatory requirements for Re-Tain ® :

The commercial introduction of this product in the United States requires us to obtain FDA approval.

We have disclosed a timeline

of events that could lead to product approval during the fourth quarter of 2022.

Completing the development through to approval of the

NADA by the FDA involves risk.

While four of the five required Technical Sections have been approved, the regulatory development process

timeline has been extensive (approximately 13 years from the first FDA submission) and has involved multiple commercial production strategies.

The first-phased Chemistry, Manufacturing and Controls Technical Section was submitted for the Nisin Drug Substance during the first quarter

of 2019, and the FDA response was received during the third quarter of 2019.

We filed the second-phased Drug Substance and Drug Product

submission during the first quarter of 2021 and received a Technical Section Incomplete Letter from the FDA during the third quarter of

We made a new submission during the first quarter of 2022 and expect to have the FDA’s response six months later.

the risk associated with this process, we worked with a qualified contract manufacturer for alignment of the required validations and

Drug Product manufacture and have met with the FDA to clarify filing strategy and requirements.

Our efforts are subject to inspection

and approval by the FDA.

There remains a risk that the required FDA approvals of our product and facilities could be delayed or not obtained.

International regulatory approvals would be required for sales of Re-Tain ® outside of the United States.

Economic Risks Pertaining to the Dairy and Beef Industries

The industry data referred to below is compiled

from USDA databases.

Cattle count:

The January count of all

cattle and calves in the United States had steadily declined from 97,000,000 as of January 1, 2007 to 88,500,000 as of January 1, 2014.

Then this figure increased each year to reach 94,800,000 as of January 1, 2019 before declining to 93,800,000 as of both January 1, 2020

and January 1, 2021.

As of January 1, 2022, this figure decreased to 91,900,000.

Reflecting seasonal trends, this figure was equal to

101,000,000 and 102,000,000 as of July 1, 2021 and 2020, respectively.

ImmuCell Corporation

Prior to 1957, there were over

20,000,000 cows in the U.S.

The historically large backlog

of orders, as well as any ongoing order backlog, presents a risk that we could lose customers during this period that are not easily

regained thereafter, when our production capacity is expected to meet or exceed sales demand.

During 2021, we initiated three additional

investments aggregating approximately $4.7 million to increase our annual production capacity for the First Defense ®

product line to approximately $30 million, which we completed at the end of 2022.

We are making initial plans and investments to further

increase our production capacity in 2024 and after.

Our plan to continue to expand the First Defense ® product line

requires ongoing review of equipment capacity and utilization across the manufacturing value stream at the 56 Evergreen Drive facility

and our leased facility at 175 Industrial Way, as well as assessment of functional obsolescence and reliability of equipment.

and assessment could identify a need to fund unexpected equipment maintenance or replacement costs.

The manufacture and sale of our products entails a risk of product liability.

Our exposure to product liability is mitigated

to some extent by the fact that our products are directed towards the animal health market.

We have maintained product liability insurance

in an amount which we believe is reasonable in relation to our potential exposure in this area.

We have no history of claims of this

nature being made.

requirements for the First Defense ® product line:

First Defense ® is sold in the United

States subject to a product license from the Center for Veterinary Biologics, USDA, which was first obtained in 1991, with subsequent

approvals of line extensions in 2017 and 2018.

As a result, our operations are subject to periodic inspection by the USDA, and we are

at risk of an unfavorable outcome from such inspections.

The potency of serial lots is directly traceable to the original serial used

to obtain the product performance claims (the Reference Standard).

Due to the unique nature of the label claims, host animal re-testing

is not required as long as periodic laboratory analyses continue to support the stability of stored Reference Standard.

To date, these

analyses have demonstrated strong stability.

However, if the USDA were not to approve requalification of the Reference Standard, additional

clinical studies could be required to meet regulatory requirements and allow for continued sales of the product, which could interrupt

sales and adversely affect our operating results.

Territories outside of the United States may require additional regulatory oversight

that we may not be able to meet with our current facilities, processes and resources.

requirements for Re-Tain ® :

The commercial introduction of this product in the United States requires

us to obtain FDA approval.

Completing the development through to approval of the NADA by the FDA involves risk.

While four of the five

required Technical Sections have been approved, the regulatory development process timeline has been extensive (approximately 15 years

from when the product rights were returned to us by a former partner in 2007) and has involved multiple commercial production strategies

and multiple submissions of the Chemistry, Manufacturing and Controls (CMC) Technical Section.

Most recently, we received an Incomplete

Letter from the FDA regarding this CMC Technical Section during the third quarter of 2022.

The principal issue remaining is a successful

pre-approval re-inspection of our manufacturing facility.

We are completing preparations for this re-inspection.

This clarifies the required

path to product approval.

To reduce the risk associated with this process, we are working with a qualified contract manufacturer (Norbrook)

for alignment of the required validations and Drug Product manufacture and have met with the FDA to clarify filing strategy and requirements.

Our CMC Technical Section submission will be subject to a statutory six-month review period by the FDA.

We believe we can successfully

complete the pre-approval re-inspection inside of this time frame.

However, our efforts continue to be subject to inspection and approval

by the FDA and other factors outside of our control, and there remains a risk that the required FDA approvals of our product and facilities

could be delayed or not obtained.

International regulatory approvals would be required for sales of Re-Tain ® outside

of the United States, and there is a risk that these approvals would be or become too costly to pursue or be delayed or not obtained.

Sales in these international territories would also be subject to milk discard and meat withhold restrictions, thereby reducing the competitive

advantage of Re-Tain ® in those territories.

Risks Pertaining to the Dairy and Beef Industries

industry data referred to below is compiled from USDA databases.

The January count of all cattle and calves in the United States had steadily declined from 97,000,000 as of January 1, 2007

to 88,500,000 as of January 1, 2014.

Then this figure increased each year, reaching 94,800,000 as of January 1, 2019 before declining

to 93,800,000 as of both January 1, 2020 and January 1, 2021.

This count continued to decline to 92,100,000 and to 89,300,000 as of January

1, 2022 and 2023, respectively.

Reflecting seasonal trends, this figure was equal to 102,000,000, 101,000,000 and 98,800,000 as of July

1, 2020, 2021 and 2022, respectively.

A significant decline in the cattle count could negatively affect the size of our addressable market.

Prior to 1957, there were over 20,000,000 cows in the U.S.

From 1998 through 2021,

the size (annual average) of the U.S.

dairy herd ranged from approximately the low of 9,011,000 in 2004 to the high of 9,448,000 in 2021.

Milk price and feed costs:

The dairy market,

similar to many others, has been unstable as a result of the pandemic.

The price paid to producers for milk has been very volatile.

was dumped on farms during the first half of 2020 largely because of the loss of demand for dairy products from closed restaurants and

school lunch programs and other negative impacts of the pandemic, but conditions have improved since then.

The Class III milk price (an

industry benchmark that reflects the value of product used to make cheese) is an important indicator because it defines our customers’

revenue level.

This annual average milk price level (measured in dollars per hundred pounds of milk) reached its highest point (since

these prices were first reported in 1980) during 2014 at $22.34 (peaking at $24.60 in September 2014), which price level has never been

During 2019, this milk price average increased by 16% over 2018 to $16.96.

The low price level during 2018 and into the beginning

of 2019 was very challenging to the profitability of our customers.

During the year ended December 31, 2020, this average milk price was

equal to $18.16, but it was extremely volatile during the year due largely to disruption in demand related to the COVID-19 pandemic.

one-month fluctuation of 73% from a low of $12.14 in May 2020 to $21.04 in June 2020 set an all-time record for variability.

price for 2021 decreased by 6% to $17.08.

This average price increased significantly during the first two months of 2022 to $20.65.

annual fluctuations in this milk price level are demonstrated in the following table:

Average Class III Milk Price During the Years Ended December 31,

The actual level of milk prices may be less important

than its level relative to feed costs.

One measure of this relationship is known as the milk-to-feed price ratio, which represents the

amount of feed that one pound of milk can buy.

An increase in feed costs also has a negative impact on the beef industry.

This ratio varies

farm-to-farm based on individual operating parameters.

The highest annual average this ratio has reached since this ratio was first reported

in 1985 was 3.64 in 1987.

The annual average for this ratio of 1.52 in 2012 was the lowest recorded since it was first reported in 1985.

Prior to 1986, there were over 10,000,000 cows in the

From 1998 through 2021, the size (annual average) of the U.S.

dairy herd ranged from approximately the low of 9,011,000

in 2004 to the high of 9,448,000 in 2021.

This average declined to 9,402,000 during the year ended December 31, 2022.

A significant decline

in the herd size could negatively affect the size of our addressable market.

The all-time high value (annual average) for a milk cow was $1,993 during 2015.

Since then, this annual average value

steadily declined to $1,205 during 2019 before increasing to $1,300 during 2020 and to $1,363 during 2021.

This price for 2022 increased

significantly to an average of $1,598, which is a 17% increase over 2021.

This price as of January 2023 increased by another 8% to $1,720.

A significant decline in the milk cow price could negatively affect the size of our addressable market.

The dairy market, similar to many others, has been unstable for several reasons including as a result of the pandemic.

price paid to producers for milk has been very volatile.

This market volatility, and the resulting impact on our primary end users, could

negatively impact our ability to maintain and grow sales at a profitable level.

The Class III milk price (an industry benchmark that

reflects the value of product used to make cheese) is an important indicator because it defines our customers’ revenue level.

annual average milk price level (measured in dollars per hundred pounds of milk) reached its highest point (since these prices were first

reported in 1980) during 2014 at $22.34 (peaking at $24.60 in September 2014), which price level has never been repeated.

year ended December 31, 2020, this average milk price was equal to $18.16, but it was extremely volatile during the year due largely

to disruption in demand related to the COVID-19 pandemic.

The one-month fluctuation of 73% from a low of $12.14 in May 2020 to $21.04

in June 2020 set an all-time record for variability.

The average price for 2021 decreased by 6% to $17.08.

This price average increased

by 29% to $21.96 during the year ended December 31, 2022.

The average price decreased by 15% to $18.61 during the first two months of

The annual fluctuations in this milk price level are demonstrated in the following table:

Class III Milk Price During the Years Ended December 31,

(Decrease) Increase

The actual level of milk prices may be less important than its level relative to feed costs.

One measure of this relationship

is known as the milk-to-feed price ratio, which represents the amount of feed that one pound of milk can buy.

An increase in feed costs

also has a negative impact on the beef industry and therefore could have a resulting negative impact on our business and results of operations.

This ratio varies farm-to-farm based on individual operating parameters.

Since this ratio reached 3.24 in 2005, it has not exceeded 3.00.

The annual average of 2.54 for 2014 was the highest this ratio has been

since it was 2.81 in 2007.

This ratio averaged 1.74 for 2021, amounting to a significant decline of 25% from the 2020 average of 2.32.

This average has not been lower since 2013.

During January of 2022, this ratio improved to 2.18.

The following table demonstrates the

annual volatility and the low values of this ratio recently:

Average Milk-To-Feed Price Ratio During the Years Ended December 31,

This average has not been

lower since 2012.

During 2022, this ratio improved by 10% to 1.92.

This ratio dropped to 1.73 in January 2023.

The following table demonstrates

the annual volatility and the low values of this ratio recently:

Milk-To-Feed Price Ratio During the Years Ended December 31,

(Decrease) Increase

Milk cow price:

The all-time high value

(annual average) for a milk cow was $1,993 during 2015.

Since then, this annual average value steadily declined to $1,205 during 2019

before increasing to $1,300 during 2020 and to $1,363 during 2021.

ImmuCell Corporation

Market volatility :

While the number of

cows in the U.S.

herd and the production of milk per cow directly influence the supply of milk, the price for milk is also influenced

by very volatile international demand for milk products.

Given our focus on the dairy and beef industries, the volatile market conditions

and the resulting financial insecurities of our primary end users are risks to our ability to maintain and grow sales at a profitable

These factors also heighten the challenge of selling premium-priced animal health products (such as Tri-Shield First Defense ®

and Re-Tain ® ) into the dairy market.

Small Size of Company

Dependence on key personnel:

small company with 67 employees (including 7 part-time employees).

As such, we rely on certain key employees to support multiple operational

functions, with limited redundancy in capacity.

The loss of any of these key employees could adversely affect our operations until a qualified

replacement is hired and trained, which could be even more challenging in the present very difficult labor market.

Our competitive position

will be highly influenced by our ability to attract, retain and motivate key scientific, manufacturing, managerial and sales and marketing

With increased manufacturing staffing required to operate our expanded First Defense ® production capacity

and to operate our Re-Tain ® production facility, we anticipate that our employment level could grow to approximately

80 employees during 2022.

Reliance on outside party to provide certain

services under contract for us:

We are exposed to additional regulatory compliance risks through the subcontractors that we choose

to work with to produce Re-Tain ® , who also need to satisfy certain regulatory requirements in order to provide us

with the products and services we need.

One example of this outside reliance is Norbrook, our Drug Product (DP) contract manufacturer.

We face the risk of potential supply interruption and adverse effects on the market launch of Re-Tain ® if we do

not effectively manage the end of the DP supply provided from our contract manufacturer for orders scheduled for delivery during 2022

to align with the new supply from our own formulation and aseptic filling facility, which we currently expect to be operational during

the fourth quarter of 2023 or the second quarter of 2024.

Because Norbrook has elected to terminate this supply agreement effective as

of the end of 2022, we are investing approximately $4 million of the additional capital we raised during the first quarter of 2019 to

construct and equip our own DP formulation and aseptic filling capability for Re-Tain ® inside our existing Drug

Substance facility.

The objective of this investment is to end our reliance on an outside party to perform these services for us.

project costs could exceed our current estimates.

Completion of this project could be delayed due to a number of factors outside our control,

including delays in equipment fabrication, equipment delivery or facility construction.

In addition, there is a risk that we fail to achieve

regulatory approval of the new facility.

Competition from others:

Many of our competitors

are significantly larger and more diversified in the relevant markets than we are and have substantially greater financial, marketing,

manufacturing and human resources and more extensive product development and sales/distribution capabilities than we do, including greater

ability to withstand adverse economic or market conditions and declining revenues and/or profitability.

Merck and Zoetis, among other

companies, sell products that compete directly with the First Defense ® product line in preventing scours in newborn

The scours product sold by Zoetis sells for approximately half the price of our product, although it does not have an E.

claim (which ours does).

With Tri-Shield First Defense ® , we can now compete more effectively against vaccines that

are given to the mother cow (dam) to improve the quality of the colostrum that she produces for the newborn calf.

Elanco, Merck and Zoetis

provide these dam vaccine products to the market.

There are many companies competing in the mastitis treatment market, most notably Boehringer

Ingelheim, Merck and Zoetis.

The subclinical mastitis products sold by these large companies are well established in the market and are

priced lower than what we expect for Re-Tain ® , but all of them involve traditional antibiotics and are sold subject

to a requirement to discard milk during and for a period of time after treatment (unlike our product which carries zero milk discard and

zero milk withhold claims).

There is no assurance that our products will compete successfully in these markets.

We may not be aware of

other companies that compete with us or intend to compete with us in the future.

Russia’s military invasion of Ukraine:

Russia’s military invasion of Ukraine and attack on its people is already having a significant negative impact on the world economy.

Among other exposures, the increasing price of oil is already impacting our transportation-related expenses materially, and we expect

this supply stress to increase the cost of petroleum-based products that we purchase (most plastics etc.).

Further, the increasing cost

of grain is a risk to our customers’ profitability.

ImmuCell Corporation

Global COVID-19 pandemic (novel coronavirus,

technically known as SARS-CoV-2):

The global COVID-19 pandemic has created, and continues to create, uncertainty and challenges for

The emergence of the Delta and Omicron variants and the resulting rising number of positive cases during the latter part of 2021 and

into early 2022 has been a more recent concern.

The COVID-19 pandemic has created or contributed to global supply-chain disruptions and

has affected international trade, while creating a worldwide health and economic crisis.

While presently there are some indications that

suggest the situation may be improving, the full impact of this viral outbreak on the global economy, and the duration of such impact,

is very uncertain at this time.

Stock market valuations have declined and recovered and remain volatile.

Inflation has begun to increase

significantly, and tax rates may increase.

There is a risk of a period of economic downturn, the severity and duration of which are difficult

Prior to the pandemic and the responsive federal economic stimulus programs, many feared the United States had taken on too much

national debt.

Now the debt load is significantly higher.

The dairy market, similar to many others, has been unstable as a result of the

While the number of cows in the U.S.

herd and the production of milk per cow directly influence the supply of milk, the

price for milk is also influenced by very volatile international demand for milk products.

Given our focus on the dairy and beef industries,

the volatile market conditions and the resulting financial insecurities of our primary end users are risks to our ability to maintain

and grow sales at a profitable level.

These factors also heighten the challenge of selling premium-priced animal health products (such

as Tri-Shield ® and Re-Tain ® ) into the dairy market.

Size of Company

on key personnel:

We are a small company with 74 employees (including 7 part-time employees).

As such, we rely on certain key employees

to support multiple operational functions, with limited redundancy in capacity.

The loss of any of these key employees could adversely

affect our operations until a qualified replacement is hired and trained, which could be even more challenging in the present very difficult

labor market.

Our competitive position will be highly influenced by our ability to attract, retain and motivate key scientific, manufacturing,

managerial and sales and marketing personnel.

We will require increased staffing levels to operate our expanded First Defense ®

production capacity and to operate our Re-Tain ® production facility.

The cost of attracting and retaining

the needed additional personnel in this current job market and inflationary environment could adversely affect our margins and profitability.

on outside party to provide certain services under contract for us:

We are exposed to additional regulatory compliance risks through

the subcontractors that we choose to work with to produce Re-Tain ® , who also need to satisfy certain regulatory

requirements in order to provide us with the products and services we need.

One example of this outside reliance is Norbrook, our Drug

Product (DP) contract manufacturer.

Because Norbrook has elected to terminate its supply agreement with us effective as of the end of

2022 (with final deliveries anticipated during the middle of 2023), we are investing approximately $4 million to construct and equip

our own DP formulation and aseptic filling capability for Re-Tain ® inside our existing Drug Substance facility.

Due to the loss in gross margin during the first quarter of 2023 caused by the slowdown in production output necessary to remediate a

product contamination event, we have decided to defer spending of approximately 42% of these funds for the time being.

We face the risk

of potential supply interruption and adverse effects on the market launch of Re-Tain ® if we do not effectively

manage the end of the DP supply provided from our contract manufacturer for orders scheduled for delivery during the second half of 2023

(with product expiries during the second half of 2025) to align with the new supply from our own formulation and aseptic filling facility,

which we currently expect to be operational during 2025.

The objective of this investment is to end our reliance on an outside party

to perform these services for us.

Actual project costs could exceed our current estimates.

Completion of this project could be delayed

due to a number of factors outside our control, including delays in equipment fabrication, equipment delivery or facility construction.

In addition, there is a risk that we fail to achieve regulatory approval of the new facility or that such approval is delayed or requires

significant additional expenditures to obtain.

Many of our competitors are significantly larger and more diversified in the relevant markets than we are and have substantially

greater financial, marketing, manufacturing and human resources and more extensive product development and sales/distribution capabilities

than we do, including greater ability to withstand adverse economic or market conditions and declining revenues and/or profitability.

Merck and Zoetis, among other companies, sell products that compete directly with the First Defense ® product line

in preventing scours in newborn calves.

The scours product sold by Zoetis sells for approximately half the price of our product, although

it does not have an E.

coli claim (which ours does).

With Tri-Shield ® , we can now compete more effectively

against vaccines that are given to the mother cow (dam) to improve the quality of the colostrum that she produces for the newborn calf.

Elanco, Merck and Zoetis provide these dam vaccine products to the market.

There are many companies competing in the mastitis treatment

market, most notably Boehringer Ingelheim, Merck and Zoetis.

The subclinical mastitis products sold by these large companies are well

established in the market and are priced lower than what we expect for Re-Tain ® , but all of them involve traditional

antibiotics and are sold subject to a requirement to discard milk during and for a period of time after treatment (unlike our product

which carries zero milk discard and zero milk withhold claims).

There is no assurance that our products will compete successfully in

these markets.

We may not be aware of other companies that compete with us or intend to compete with us in the future.

of global COVID-19 pandemic and Russia’s unprovoked military invasion of Ukraine:

We are facing significant production constraints,

supply disruptions and inflationary increases which appear to have been caused, in large part directly or indirectly, by the pandemic

and Russia’s unprovoked military invasion of Ukraine.

The extent and duration of the negative impact of the pandemic on the economics

of our customers and on the demand for our products going forward are very difficult to assess.

The dairy market, similar to many others,

has been unstable as a result of the pandemic.

The price paid to producers for milk has been very volatile.

There is also economic uncertainty for beef producers, as the supply

chain is interrupted or otherwise adversely affected due to closures of processing plants and reduced throughput caused by, among other

things, restaurants closing or curtailing their operations.

The Class III milk price

has been extremely volatile during the pandemic.

Initially, stay at home orders disrupted the food service supply system as schools closed

and restaurants were shut down.

In response, producers were forced to reduce the supply of milk to the market by drying off cows early,

culling cows from the herd and dumping milk, among other tactics.

Market conditions have improved somewhat, but this volatility remains

Additionally, like most input costs, the cost of grain and other feed is rising, which puts a strain on the profitability

of our customers.

There is also economic uncertainty for beef producers, as the supply chain is interrupted or otherwise adversely affected

due to closures of processing plants and reduced throughput.

This is a very unusual situation for farmers that work so hard to improve

production quality and efficiency in order to help feed a growing population with high-quality and cost-effective proteins.

A combination

of the conditions, trends and concerns summarized above 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

has created risk and continues to create uncertainty and challenges for us.

The emergence of the Delta and Omicron variants and the resulting

rising number of positive cases during the latter part of 2021 and into 2022 has been a more recent concern.

The pandemic has created

or contributed to global supply-chain disruptions and has affected international trade, while creating a worldwide health and economic

While presently there are some indications that suggest the situation may be improving, the full impact of this viral outbreak

on the global economy, and the duration of such impact, remains very uncertain at this time.

Stock market valuations have declined and

recovered somewhat but remain very volatile.

Inflation has increased significantly, and tax rates may increase.

There is a risk of a

period of economic downturn, the severity and duration of which are difficult to know.

Prior to the pandemic and the responsive federal

economic stimulus programs, many feared the United States had taken on too much national debt.

Now the debt load is significantly higher.

A combination of the conditions, trends and concerns summarized above 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 shortages

in key components and needed products, backlogs and production slowdowns due to difficulties accessing needed supplies and labor and other

restrictions which increase our costs and affect our ability to consistently deliver our products to market in a timely manner.

to this risk is mitigated to some extent by the fact that our supply chain is not heavily dependent on foreign manufacturers, by our on-going

cross-training of our employees, by our implementation of remote work practices (where feasible) and by our early and continued compliance

with recommended hygiene and social distancing practices.

Despite our best efforts and intentions, there is a risk that an employee could

become infected and could infect others.

Bovine diseases:

The potential for epidemics

of bovine diseases such as Foot and Mouth Disease, Bovine Tuberculosis, Brucellosis and Bovine Spongiform Encephalopathy (BSE) presents

a risk to us and our customers.

Documented cases of BSE in the United States have led to an overall tightening of regulations pertaining

to ingredients of animal origin, especially bovine.

The First Defense ® product line is manufactured from bovine

milk (colostrum), which is not considered a BSE risk material.

Future regulatory action to increase protection of the human food supply

could affect the First Defense ® product line, although presently we do not anticipate that this will be the case.

Risks Pertaining to Common Stock

valuation and liquidity:

We are experiencing

shortages in key components and needed products, backlogs and production slowdowns due to difficulties accessing needed supplies and

labor and other restrictions which increase our costs and affect our ability to consistently deliver our products to market in a timely

Our exposure to this risk is mitigated to some extent by the fact that our supply chain is not heavily dependent on foreign manufacturers,

by our on-going cross-training of our employees, by qualifying alternate suppliers and components and by our early and continued compliance

with recommended hygiene.

Despite our best efforts and intentions, there is a risk that an employee could become infected and could infect

Russia’s unprovoked military invasion of Ukraine and attack on its people is having a significant negative impact on the

world economy, worsening trends that were already moving in an unfavorable direction.

Among other exposures, the increasing price of

oil is already impacting our transportation-related expenses materially, and we expect this supply stress to increase the cost of petroleum-based

products that we purchase (mostly plastics).

Our business, and our activities and the activities of our customers and suppliers, could be disrupted by climate change.

Potential physical risks from climate change may include altered distribution and intensity of rainfall, prolonged droughts or flooding,

increased frequency of wildfires and other natural disasters, rising sea levels, and a rising heat index, any of which could cause negative

impacts to our and our customers’ and suppliers’ businesses.

Increased temperatures and rising water levels may negatively

impact our dairy and beef livestock customers by increasing the prevalence of parasites and diseases that affect food animals.

changes caused by climate change may also prompt changes in regulations or consumer preferences which in turn could have negative consequences

for our and our customers’ businesses.

Climate change may negatively impact our customers’ operations, through climate-related

impacts such as increased air and water temperatures, rising water levels and increased incidence of disease in livestock.

concerns regarding greenhouse gas emissions and other potential environmental impacts of livestock production have led to some consumers

opting to limit or avoid consuming animal products.

If such events affect our customers’ businesses, they may purchase fewer of

our products, and our revenues may be negatively impacted.

Climate driven changes could have a material adverse impact on the financial

performance of our business and on our customers.

In addition, increased frequency of natural disasters and adverse weather conditions

may disrupt our manufacturing processes or our supply chain.

These disruptions may have a material adverse effect on our business, financial

condition, results of operations and/or cash flows.

The potential for epidemics of bovine diseases such as Foot and Mouth Disease, Bovine Tuberculosis, Brucellosis and Bovine

Spongiform Encephalopathy (BSE) presents a risk to us and our customers.

Documented cases of BSE in the United States have led to an

overall tightening of regulations pertaining to ingredients of animal origin, especially bovine.

The First Defense ®

product line is manufactured from bovine milk (colostrum), which is not considered a BSE risk material.

Future regulatory action to increase

protection of the human food supply could affect the First Defense ® product line, although presently we do not

anticipate that this will be the case.

Pertaining to Common Stock

market valuation and liquidity:

Our common stock trades on The Nasdaq Stock Market (Nasdaq:

Our average daily trading volume is lower,

our bid/ask stock price spread can be larger and our share price can be more volatile than what other companies experience, which could

result in investors facing difficulty selling their stock for proceeds that they may expect or desire.

Our share price as of March 18,

2022 was $8.88.

Most companies in the animal health sector have market capitalization values that greatly exceed our current market capitalization

of approximately $68.8 million as of March 18, 2022.

Our product sales during the year ended December 31, 2021 were $19.2 million.

means that our market valuation as of March 18, 2022 was equal to approximately 3.57 times our sales during the year ended December 31,

Before gross margin from the sale of new products is achieved, our market capitalization may be heavily dependent on the perceived

potential for growth from our product under development and may therefore be negatively affected by the related uncertainties and risks.

Certain provisions might discourage, delay

or prevent a change in control of our Company or changes in our management:

Provisions of our certificate of incorporation, our bylaws,

our Common Stock Rights Plan or Delaware law may discourage, delay or prevent a merger, acquisition or other change in control that stockholders

may consider favorable, including transactions in which stockholders might otherwise receive a premium for their shares of our common

These provisions may also prevent or frustrate attempts by our stockholders to replace or remove our management.

These provisions

Our average daily trading volume

(which was approximately 6,612 shares per day during the 20-day period ended March 10, 2023) is lower, our bid/ask stock price spread

can be larger and our share price can be more volatile than what other companies experience, which could result in investors facing difficulty

selling their stock for proceeds that they may expect or desire.

Our share price as of March 10, 2023 was $5.49.

Most companies in the

animal health sector have market capitalization values that greatly exceed our current market capitalization of approximately $43 million

as of March 10, 2023.

Our product sales during the year ended December 31, 2022 were approximately $19 million.

This means that our market

valuation as of March 10, 2023 was equal to approximately 2 times our sales during the year ended December 31, 2022.

Before gross margin

from the sale of new products is achieved, our market capitalization may be heavily dependent on the perceived potential for growth from

our product under development and may therefore be negatively affected by the related uncertainties and risks.

provisions might discourage, delay or prevent a change in control of our Company or changes in our management:

Provisions of our

certificate of incorporation, our bylaws, our Common Stock Rights Plan or Delaware law may discourage, delay or prevent a merger, acquisition

or other change in control that stockholders may consider favorable, including transactions in which stockholders might otherwise receive

a premium for their shares of our common stock.

These provisions may also prevent or frustrate attempts by our stockholders to replace

or remove our management.

These provisions include:

● limitations

on the removal of directors;

ImmuCell Corporation

notice requirements for stockholder proposals and nominations;

40 unchanged sentences

First Defense ® product line and Re-Tain ® .

We are currently dependent on one manufacturer for the supply of the syringes used for our gel tube formats of Dual-Force First Defense ®

and Tri-Shield First Defense ® .

We are actively investigating a second supplier.

We will be dependent on one other

manufacturer for the supply of syringes for Re-Tain ® .

We are dependent on a contract with Norbrook for the Drug

Product formulation and aseptic filling of our Nisin Drug Substance for orders scheduled for delivery in 2022.

We expect to complete the

investment to perform these services in-house during 2022 and achieve the required regulatory approval for use by the fourth quarter of

2023 or the second quarter of 2024.

The facility we are constructing to perform these services in-house will be subject to FDA inspection

and approval, the outcome and timing of which are not within our control.

The potential alternative options for these services are narrowed

considerably because our product cannot be formulated or filled in a facility that also processes traditional antibiotics (i.e., beta

Any significant damage to or other disruption in the services at any of these third-party facilities or our own facilities (including

due to regulatory issues or non-compliance) would adversely affect the production of inventory and result in significant added expenses

and potential loss of future sales.

ImmuCell Corporation

We will be dependent on one manufacturer for the supply of syringes for Re-Tain ® .

We are currently dependent on

a contract with Norbrook for the Drug Product (DP) formulation and aseptic filling of our Nisin DP for orders scheduled for delivery during

the second half of 2023.

The facility we are constructing to perform these services in-house will be subject to FDA inspection and approval,

the outcome and timing of which are not within our control.

We expect to achieve FDA approval for use of our DP facility during 2025.

The potential alternative options for these services are narrowed considerably because our product cannot be formulated or filled in a

facility that also processes traditional antibiotics (i.e., beta lactams).

Any significant damage to or other disruption in the services

at any of these third-party facilities or our own facilities (including due to regulatory issues or non-compliance) would adversely affect

the production of inventory and result in significant added expenses and potential loss of future sales.

Failure to protect intellectual property:

In some cases, we have chosen (and may choose in the future) not to seek patent protection for certain products or processes.

we have sought (and may seek in the future) to maintain the confidentiality of any relevant proprietary technology through trade secrets,

operational safeguards and contractual agreements.

Reliance upon trade secret, rather than patent, protection may cause us to be vulnerable

to competitors who successfully replicate (knock off) our manufacturing techniques and processes.

Additionally, there can be no assurance

that others may not independently develop similar trade secrets or technology or obtain access to our unpatented trade secrets or proprietary

Other companies may have filed patent applications and may have been issued patents involving products or technologies potentially

useful to us or necessary for us to commercialize our products or achieve our business goals.

If that were to be the case, there can be

no assurance that we will be able to obtain licenses to such patents on terms that are acceptable to us.

There is also a risk that competitors

could challenge the claims in patents that have been issued to us.

The protection and enforcement of our intellectual property rights may require the expenditure of significant financial, managerial

and operational resources.

We rely on trademark, copyright and patent law, trade secret protection, agreements and other methods with

our employees and others to protect our proprietary rights.

However, we may be unable to adequately protect our intellectual property

rights or prevent third parties from infringing or misappropriating our intellectual property rights.

We may not be able to obtain registration

for all intellectual property we seek to register, and effective intellectual property protection may not be available in every country

in which our products are sold.

In some cases, we have chosen (and may choose in the future) not to seek patent protection for certain

products or processes.

Instead, we have sought (and may seek in the future) to maintain the confidentiality of any relevant proprietary

technology through trade secrets, operational safeguards and contractual agreements.

Reliance upon trade secret, rather than patent, protection

may cause us to be vulnerable to competitors who successfully replicate (knock off) our manufacturing techniques and processes.

our confidentiality agreements may not effectively prevent disclosure of our proprietary information, technologies and processes and may

not provide an adequate remedy in the event of unauthorized disclosure of such information.

Others may independently develop similar trade

secrets or technology or obtain access to our unpatented trade secrets or proprietary technology.

Others may have filed patent applications

and may have been issued patents involving products or technologies potentially useful to us or necessary for us to commercialize our

products or achieve our business goals.

If that were to be the case, there can be no assurance that we will be able to obtain licenses

to such patents on terms that are acceptable to us.

Any of our intellectual property rights may be challenged by others or invalidated

through administrative process or litigation.

Third parties may claim in the future, that we have infringed their intellectual property

rights, which could result in significant costs and potential damages and license requirements.

We may initiate claims or litigation against

others for infringement, misappropriation or violation of our intellectual property rights or other proprietary rights or to establish

the validity of such rights.

However, we may be unable to discover or determine the extent of any infringement, misappropriation or other

violation of our intellectual property rights and other proprietary rights.

In addition, we may be unable to prevent third parties from

infringing upon, misappropriating or otherwise violating our intellectual property rights and other proprietary rights.

Increasing dependence on the continuous and

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during the COVID-19 pandemic.

Russia’s military invasion of Ukraine may elevate the risk of such cyberattacks.

Any such attack or

breach could compromise our networks and the information stored thereon could be accessed, publicly disclosed, lost, or stolen.

we have invested in our data and information technology infrastructure (including working with an information security technology consultant

to assess and enhance our security systems and procedures, and periodically training our employees in such systems and procedures), there

can be no assurance that these efforts will prevent a system disruption, attack, or security breach and, as such, the risk of system disruptions

and security breaches from a cyberattack remains.

We have not experienced any material adverse effect on our business or operations as

a consequence of any such attack or breach but may incur increasing costs in performing the tasks described above.

Russia’s unprovoked military invasion of Ukraine may elevate the risk of such cyberattacks.

attack or breach could compromise our networks and the information stored thereon could be accessed, publicly disclosed, lost, or stolen.

While we have invested in our data and information technology infrastructure (including working with an information security technology

consultant to assess and enhance our security systems and procedures, and periodically training our employees in such systems and procedures),

there can be no assurance that these efforts will prevent a system disruption, attack, or security breach and, as such, the risk of system

disruptions and security breaches from a cyberattack remains.

We have not experienced any material adverse effect on our business or operations

as a consequence of any such attack or breach but may incur increasing costs in performing the tasks described above.

Given the unpredictability

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ITEM 1B — UNRESOLVED STAFF COMMENTS

ImmuCell Corporation

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors