What changed in this filing

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Item 1A. Risk Factors

2024-04-01 compared with 2023-03-29 · 567 added, 478 removed, 146 unchanged (88% of the section changed)

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.

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

ITEM 1A— RISK FACTORS

OUTLINE TO ITEM 1A – RISK FACTORS

- Financial Risks

- Product Risks

- Regulatory Risks

- Economic Risks Pertaining to the Dairy and Beef Industries

- Small Size of the Company

- Global Risks

- Risk Pertaining to Common Stock

- Other Risks

Financial Risks

Gross margin on product sales:

One of our goals is to achieve a gross margin (before related depreciation

expenses) as a percentage of total sales of 45% or more 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 ® .

factors discussed in this Annual Report (including inflation, 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 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.

We missed our gross margin goals in 2023

and 2022 with realized gross margins of 22% and 41%, respectively.

There is also a risk that our plans to maintain or improve our gross

margin may not be realized due to cost increases, additional manufacturing contamination events, production equipment failures, the inability

to raise our selling prices, or any combination of these factors.

In addition, such negative events, depending on their severity, could

deplete our cash resulting in an inability to fund our business.

ImmuCell Corporation

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, but materially and adversely, affect our business.

During the first quarter

of 2020, we removed the direct aspect of this particular exposure to our business by refinancing our bank debt (with the exception of

our line of credit) with fixed rate notes.

Our mortgage debt outstanding as of December 31, 2023 was $5.8 million bearing interest at

the fixed rate of 3.53% per annum.

Our equipment loans outstanding as of December 31, 2023 were $2.6 million bearing interest at the fixed

rate of 3.5% per annum.

The two State of Maine loans aggregating $754,000 as of December 31, 2023 bear interest at the fixed rate of 5%

The $3 million in debt that we secured during the third quarter of 2023 bears interest at the blended fixed rate of 7.33% per

annum with an outstanding balance of $2.9 million as of December 31, 2023.

Our outstanding debt as of December 31, 2023 aggregating $12.1

million bears interest at the blended fixed rate of 4.51% per annum.

Increasing interest rates would negatively impact the cost of any

future borrowings.

This was experienced on the new debt facilities aggregating $3 million that we closed during the third quarter of 2023.

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.

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

We are obligated to make principal and interest payments aggregating approximately $2.0 million during both of the years ending

December 31, 2024 and 2025.

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.

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.

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 our lender 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 lender waived the

required compliance with this rate for the year ended December 31, 2022.

During the first quarter of 2023, the DSC ratio covenant for

the year ending December 31, 2023 was waived by our lender.

Instead, we were 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.

the first quarter of 2024, the DSC ratio covenant for the twelve-month period ending June 30, 2024 was preemptively waived by our lenders.

If we are unable to achieve the required DSC ratio going forward or reach a favorable agreement with our lender 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:

12 unchanged sentences

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.

Inflation and supply disruptions:

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.

The Consumer Price Index for All Urban Consumers (CPI-U) during the year ended December 31, 2023, improved to 3.4% for

all items before seasonal adjustment.

This is down from 6.5% and 7.0% during the years ended December 31, 2022 and 2021, respectively.

We are facing significant production constraints, supply disruptions and inflationary increases which were initially triggered, in large

part directly or indirectly, by the COVID-19 pandemic.

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.

The Class III milk price has

been extremely volatile since the onset of the pandemic.

Market conditions have improved somewhat, but this volatility remains a concern.

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 who work so hard to improve production quality

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

The pandemic created risk and

continues to create uncertainty and challenges for us and has created or contributed to global supply-chain disruptions and has affected

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

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.

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.

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

ImmuCell Corporation

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 generated and sustained.

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 ® .

Having completed the construction and equipping of the DS production facility (as described in more detail in ITEM 7 of this Annual

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.

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, 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 ® ” below.

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.

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:

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.

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.

ImmuCell Corporation

Contamination events and equipment failures

in our production process:

During 2023 and 2022, we experienced certain contamination events and equipment failures in our production

process that resulted in scrapped inventory and a slowdown of our production process and had a significant impact on our operating results.

We are at risk of further such production contaminations or equipment failures resulting in more scrapped inventory if we do not continue

to improve our farm operations and implement other necessary improvements from farms to finished goods.

The realization of this risk following

the above-mentioned contamination events did result in a slowdown of our production output during 2023 to remediate this problem, which

led to less sales and gross margin during the year.

Additional contamination events or equipment failures causing significantly less production

output, depending on their severity, could deplete our cash resulting in an inability to fund our business operations.

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:

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.

cows being treated with Re-Tain ® , when tested randomly

for inhibitors by a milk hauler, which could create legal liability.

2) A failed or stalled cheese tank occurs when

a Nisin susceptible cheese starter culture is impacted by residues in milk that exceed our on-farm treatment recommendations, which aims

to limit concentrations of bulk tanks or tankers to 1% of milk from cows treated with Re-Tain ® or is not effectively

diluted through the milk collection and transportation system.

After we study this potential impact during our Controlled Launch of Re-Tain ® ,

we may decide to seek a post-approval label change requiring a short discard of milk, which may be limited to just the treated quarter

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

5 unchanged sentences

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.

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

for the use of Re-Tain ® .

4) 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

5) 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.

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 and potential legal liability.

7) 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.

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, December 31, 2021 and March 31, 2022 without the gross margin that we earned on sales of the First Defense ®

product line.

Our anticipated return to more consistent profitability is contingent upon the gross margin we earn from First Defense ® .

Concentration of sales:

Sales of the First

Defense ® product line aggregated 99% of our total product sales during both of the years ended December 31, 2023 and

Our primary customers for the majority of our product sales (91% and 92% during the years ended December 31, 2023 and 2022, 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 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 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 ® :

Product sales to international customers, who are also in the dairy and beef industries, aggregated

9% and 8% of our total product sales during the years ended December 31, 2023 and 2022, 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 (79% and 73% during the years ended December 31, 2023 and 2022, respectively) was made to two large distributors.

A large portion

of our trade accounts receivable (79% and 69% as of December 31, 2023 and 2022, respectively) was due from these two distributors.

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.

ImmuCell Corporation

Production capacity constraints:

$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

During 2021, we initiated three additional investments aggregating $4.7 million to increase our estimated annual production capacity

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

making initial plans and investments to further increase our production capacity in 2024 and after.

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

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.

long-term capital 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 facilities at 175 Industrial

Way, as well as assessment of costs, functional obsolescence and reliability of equipment.

This review and assessment could identify a

need to fund unexpected equipment maintenance or replacement costs.

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.

During July 2023,

the USDA issued a Voluntary Stop Distribution and Sale (VSDS) and a Hold Release on First Defense ® preventing us

from shipping product (while not restricting us from continuing to produce inventory) until two inspectional observations were resolved.

We promptly responded to the inspectional observations involved.

On August 1, 2023, the USDA verbally rescinded the VSDS, and on August

4, 2023, the USDA verbally rescinded the Hold Release, allowing us to resume normal shipping during the week of August 7, 2023.

is a risk that we will become subject to similar or additional regulatory actions in the future.

In these cases, the resulting interruption

in sales could have a material and adverse effect on our operating results.

Regulatory requirements for Re-Tain ® :

The commercial introduction of this product in the United States requires

7 unchanged sentences

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.

This clarifies the required path to product

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

of the required validations and DP manufacture and have met with the FDA to clarify filing strategy and requirements.

Our CMC Technical

Section submission is currently under review by the FDA as discussed in greater detail in ITEM 7 of this Annual Report under the

caption, “Product Development Expenses and Strategy” , below.

Early during the first quarter of 2024, the FDA conducted

another pre-approval inspection of our DS facility.

This resulted in the issuance of one deficiency as identified on the FDA’s Form

Since then, we have fully responded with data addressing the inspectional observation.

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.

The facility of our contract manufacturer is subject to similar inspectional

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.

ImmuCell Corporation

Regulatory requirements limiting access to

suppliers and customer base :

Maine, where our principal executive office and manufacturing facilities are located, has adopted product

reporting and phase-out requirements for per- and polyfluoroalkyl substances (“PFAS”).

Maine’s statute requires that

effective as of January 1, 2025 manufacturers of products with intentionally-added PFAS report the presence of such substances (and requires

that such products cannot be sold in Maine unless the required reporting is made) and specifies that (subject to certain exceptions to

be promulgated by the Maine Department of Environmental Protection) no product containing intentionally-added PFAS may be sold in Maine

after January 1, 2030.

This reporting requirement may limit our ability to access supplies from companies which are not in compliance

with the state reporting requirements and may limit those customers to whom we may sell our products.

Environmental Protection

Agency also has adopted a PFAS reporting law, which requires that importers of articles that contain PFAS report the presence of such

substances to the extent such information is known or reasonably ascertainable.

This reporting requirement may limit our ability to import

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, 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 as of January 1, 2022 and to 88,800,000 as of January 1, 2023.

count dropped to 87,200,000 as of January 1, 2024.

Reflecting seasonal trends, this figure was equal to 102,000,000, 101,000,000, 98,600,000

and 95,900,000 as of July 1, 2020, 2021, 2022, and 2023, 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.

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

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.

From 1998 through 2021,

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

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

declined to 9,402,000 during the year ended December 31, 2022 and then declined to 9,386,000 during the year ended December 31, 2023.

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

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.

This price for 2022 increased significantly to an average of $1,598,

which is a 17% increase over 2021.

The 2023 average price of $1,763 represents a 10% increase over prior year.

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.

The 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.

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 repeated.

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.

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

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,

This price average increased by 29% to $21.96 during the year ended

December 31, 2022.

The average price decreased by 22% to $17.02 during the year ended December 31, 2023.

The annual fluctuations in this

milk price level are demonstrated in the following table:

ImmuCell Corporation

Average 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.

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.

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 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,

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 2012.

During 2022, this ratio improved

by 10% to 1.91.

This ratio dropped to 1.69 during the year ended December 31, 2023.

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,

(Decrease) Increase

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.

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 ®

and Re-Tain ® ) into the dairy market.

Small Size of the Company

Dependence on key personnel:

small company with approximately 79 employees (including 5 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 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.

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.

ImmuCell Corporation

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 DP contract manufacturer.

Because Norbrook

notified us of its intent to terminate its supply agreement with us, we initiated an investment of approximately $4 million during 2022

to construct and equip our own DP formulation and aseptic filling capability for Re-Tain ® in our existing DS facility.

Due to the loss in gross margin during 2023 caused by the slowdown in production output necessary to remediate product contamination events,

we have decided to defer spending of approximately $2 million of these funds for the near term.

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.

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.

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

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:

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.

We are evaluating alternatives for DP supply going

forward, which include the resumption of the investment in our own in-house DP services (when prudent based on our cash reserves) or another

contract manufacturing agreement or a further extension with Norbrook.

We face a supply interruption and adverse effects on the Controlled

Launch of Re-Tain ® after the DP supply provided from our contract manufacturer is consumed and until new supply

from a new contract manufacturing agreement or our own formulation and aseptic filling facility is implemented.

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 ® , we can compete more effectively against vaccines that are given to the

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

Elanco, Merck and Zoetis provide these

dam vaccine products to the 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 does not carry an FDA-required milk discard

or meat withhold.

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 unprovoked military invasion

of Ukraine and the war in the Middle East:

Russia’s unprovoked military invasion of Ukraine (and attack on its people) and the

war in the Middle East are 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).

Both of these military

actions could cause more stress on the global economy.

Climate change:

Our business, and our

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

Potential physical risks from climate

change may include altered distribution and intensity of rainfall, prolonged droughts or flooding, increased frequency of wildfires and

other natural disasters, rising sea levels, and a rising heat index, any of which could cause negative impacts to our and our customers’

and suppliers’ businesses.

Increased temperatures and rising water levels may negatively impact our dairy and beef livestock customers

by increasing the prevalence of parasites and diseases that affect food animals.

The physical changes caused by climate change may also

prompt changes in regulations or consumer preferences which in turn could have negative consequences for our and our customers’

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.

In addition, concerns regarding greenhouse

gas emissions and other potential environmental impacts of livestock production have led to some consumers opting to limit or avoid consuming

animal products.

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

be negatively impacted.

Climate driven changes could have a material adverse impact on the financial performance of our business and on

our customers.

In addition, increased frequency of natural disasters and adverse weather conditions may disrupt our manufacturing processes

or our supply chain.

These disruptions may have a material adverse effect on our business, financial condition, results of operations

and/or cash flows.

Bovine diseases:

The potential for epidemics

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.

ImmuCell Corporation

Risks Pertaining to Common Stock

valuation and liquidity:

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

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 average daily trading volume (which

was 7,950 shares per day during the 20-day period ended March 8, 2024) 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 8, 2024 was $5.20.

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.

Most companies in the animal health

sector have market capitalization values that greatly exceed our market capitalization of approximately $40 million as of March 8, 2024.

Our product sales during the year ended December 31, 2023 were $17.5 million.

This means that our market capitalization as of March 8,

2024 was equal to approximately 2.3 times our sales during the year ended December 31, 2023.

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.

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:

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factors our Board of Directors deems relevant.

We may need to access the capital markets again and issue additional common stock in order to fund our growth objectives,

as described elsewhere in this report.

Such issuances could have a dilutive effect on our existing stockholders.

Access to raw

materials and contract manufacturing services:

Our objective is to maintain more than one source of supply for the components used

to manufacture and test our products that we obtain from third parties.

However, we are experiencing difficulty in efficiently acquiring

essential supplies.

We have significantly increased the number of farms from which we purchase colostrum for the First Defense ®

product line.

A significant reduction in farm capacity could make it difficult for us to produce enough inventory to meet customer demand.

The specific antibodies that we purify from colostrum for the First Defense ® product line are not readily available

from other sources.

We are and will be dependent on our manufacturing facilities and operations in Portland for the production of the

First Defense ® product line and Re-Tain ® .

We may need to access the capital markets again and issue additional

common stock in order to fund our growth objectives, as described elsewhere in this Annual Report.

Such issuances could have a dilutive

effect on our existing stockholders.

ImmuCell Corporation

Access to raw materials and contract manufacturing

Our objective is to maintain more than one source of supply for the components used to manufacture and test our products

that we obtain from third parties.

However, we are experiencing difficulty in efficiently acquiring essential supplies.

We have significantly

increased the number of farms from which we purchase colostrum for the First Defense ® product line.

A significant

reduction in farm capacity could make it difficult for us to produce enough inventory to meet customer demand.

The specific antibodies

that we purify from colostrum for the First Defense ® product line are not readily available from other sources.

We are and will be dependent on our manufacturing facilities and operations in Portland for the production of the First Defense ®

product line and Re-Tain ® .

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.

We are currently dependent on a contract with Norbrook for the DP formulation and aseptic filling for supply of our Nisin DP through 2024.

The facility we may resume 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 approximately two years from

when this project is restarted.

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 lack of financing, regulatory

issues or non-compliance) would adversely affect the production of inventory and result in significant added expenses and potential loss

of future sales.

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 through

the end of 2024 (with product expiries that could be approximately between September of 2025 and March of 2026) to align with the new

supply from a new contract manufacturing agreement or our own formulation and aseptic filling facility.

Failure to protect intellectual property:

49 unchanged sentences

There are reports of increased activity by hackers and scammers

during the COVID-19 pandemic.

since the COVID-19 pandemic.

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

18 unchanged sentences

larger companies with greater resources may be better able to mitigate this risk than we can.

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