IMMUCELL CORP /DE/ 10-K

ITEM 9A — CONTROLS AND PROCEDURES Disclosure Controls and Procedures: Our management, with the participation of the individual who serves as our principal executive and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of December 31, 2023. Based on this evaluation, that officer concluded that our disclosure controls and procedures were effective as of that date. Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our principal executive and principal financial officer, as appropriate to allow timely decisions regarding required disclosures. 38 ImmuCell Corporation Management’s Annual Report on Internal Control Over Financial Reporting: The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. We conducted an evaluation of the effectiveness of the internal controls over financial reporting based on the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. This evaluation included a review of the documentation of controls, evaluation of the design effectiveness of controls, testing the operating effectiveness of the controls and a conclusion on this evaluation. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. This Annual Report does not include an attestation report from our independent registered public accounting firm regarding internal control over financial reporting. Management’s internal control report was not subject to annual or quarterly attestation by our independent registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s report. Material Weaknesses in Internal Controls Over Financial Reporting: Management assesses the effectiveness of the Company’s internal control over financial reporting at the end of each quarter. During our assessment for the second quarter of 2023, we identified one material weakness where we did not properly capitalize non-cash depreciation expense as a component of inventory, which would have understated the value of our inventory as of June 30, 2023 by approximately $387,000 if the error had not been detected before we issued our Quarterly Report on Form 10-Q. This error had no impact on our product sales or cash position. We do believe that the design of our internal controls is effective, but those internal controls were not effectively operating. We have implemented some changes to our internal controls over financial reporting, including seeking additional consulting with subject matter experts on this matter. We remediated this material weakness in internal controls during the third quarter of 2023. Based on our assessment for the fourth quarter of 2023, we have concluded that our internal controls over financial reporting were effective as of December 31, 2023. Changes in Internal Controls over Financial Reporting: Our principal executive and principal financial officer and our Director of Finance and Administration periodically evaluate any change in internal control over financial reporting which has occurred during the prior fiscal quarter. With the exception of the improvements to our internal controls described in the previous paragraph, we have concluded that there was no change in our internal control over financial reporting that occurred during the quarter ended December 31, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B — OTHER INFORMATION None ITEM 9C — DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not applicable 39 ImmuCell Corporation PART III ITEM 10 — DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE LEADERSHIP STRUCTURE OF THE BOARD OF DIRECTORS With approval from the Board of Directors, the Compensation and Stock Option Committee determined that the title of President and CEO should be given to an individual not being the same person holding the title of Chair. The objective of this policy is to avoid a concentration of authority in any one person. Mr. Michael F. Brigham has served as President and CEO since February 2000. He also serves as the Company’s Principal Financial Officer. Mr. Brigham is responsible for the day-to-day operations of the Company and for managing the actions of the two other executive officers, as well as those of several senior managers. Since February 2013, Dr. David S. Tomsche has served as Chair of the Board of Directors, leading the Company as its independent non-executive board chair. Dr. Tomsche works with the CEO in preparing the agenda for each board meeting and presides over all board meetings and meetings of the non-employee directors. He provides advice to the CEO and serves as principal liaison between the board and the CEO. Ms. Bobbi Jo Brockmann has served as Vice President of Sales and Marketing since February 2015. Ms. Elizabeth L. Williams has served as Vice President of Manufacturing Operations since April 2016. Dr. Joseph H. Crabb served as Vice President and Chief Scientific Officer from December 1998 to February 2022, and he also served as Chair of the Board of Directors from June 2009 to February 2013. It is the policy of the Board of Directors to have a portion of the meeting without the presence of the executive officers each time that the board or any of its committees meets to assure that candid discussions of business matters are conducted with and without the influence of the executive officers. The board delegates certain authority and responsibility to its committees, as described below. THE BOARD OF DIRECTORS AND ITS COMMITTEES During the year ended December 31, 2023, the Board of Directors of the Company held four regular meetings and two special meetings and took action by unanimous written consent four times. The committees of the Board of Directors are the Audit Committee, the Compensation and Stock Option Committee and the Nominating Committee. During the year ended December 31, 2023, each director attended at least 75 percent of the aggregate of (i) the total number of meetings of the Board of Directors and (ii) the total number of meetings held by all committees of the board on which he or she served (during the periods that he or she served). The board has not set a formal policy for required meeting attendance. A high level of attendance and participation is expected, and to date directors have fulfilled this expectation. At the first meeting of the board following this year’s Annual Meeting, executive officers will be appointed and, effective upon the election of directors at this year’s Annual Meeting, directors will be appointed to serve on the various board committees until the next Annual Meeting and until their successors are elected. The Board of Directors has established an Audit Committee for the purpose of overseeing the accounting and financial reporting processes of the Company and the audits and reviews of its financial statements. The Audit Committee engages the Company’s Independent Registered Public Accounting Firm, consults with such auditors with regard to audit plans, reviews the annual reports of the independent auditors, oversees the adequacy of the Company’s internal operating procedures and controls, meets with management and the auditors to review quarterly and annual financial results, authorizes the public release of press releases covering financial results, reviews and authorizes quarterly and annual reports filed with the SEC and otherwise oversees compliance with certain legal, ethical and regulatory matters. The development and manufacture of efficacious products with and without regulatory approval is subject to considerable risk. The Audit Committee takes the lead on oversight of credit, liquidity and operational risk, but the entire board, in conjunction with the executive officers, is very involved with reviewing Audit Committee recommendations and making independent assessments of risks in all areas of the Company’s business. The Company does not have a specific risk management department, but the Company’s Director of Finance and Administration and its President and CEO manage and contract for the Company’s insurance coverages in consultation with outside experts, in addition to identifying, managing and monitoring risk in areas not specifically covered by insurance. The Director of Finance and Administration reports to the President and CEO, who reports to the board. The Audit Committee’s current members are Mr. Gathagan, Mr. Rosgen, Dr. Tomsche and Mr. Wainman. Mr. Wainman serves as Chair of the Audit Committee. All members of the Audit Committee meet the heightened independence and expertise requirements for audit committees under applicable SEC and NASDAQ Stock Market rules. The Audit Committee held eight meetings during the year ended December 31, 2023. The Audit Committee Report can be found later in this Annual Report, and the “Charter and Powers of the Audit Committee” has been posted on the Company’s website (http://immucell.com/wp-content/uploads/2017/05/charter.pdf). Information on the Company’s website does not constitute part of this Annual Report. Mr. Paul R. Wainman, who joined our Board of Directors in March of 2014 and currently serves as Chair of the Audit Committee, and Mr. Bryan K. Gathagan, who joined our Board of Directors in June of 2023, both meet the criteria for “audit committee financial expert” as defined by SEC rules. It is the opinion of the Company’s Board of Directors that the Company addresses its audit functions with a depth of penetration and rigor that meets the intent of the requirements of the Sarbanes-Oxley Act for the following reasons: ● All four members of the Audit Committee are independent directors, as defined by the SEC and NASDAQ. ● The four members of the Audit Committee have knowledge of accounting for both their own businesses as well as for the Company. ● Internal audit work of the Company is performed by its Director of Finance and Administration, two Finance and Administrative Associates and one Manager of Administrative Operations. ● The Company also continuously reviews, at its own initiative, the expertise of the members of its Board of Directors and its Audit Committee. 40 ImmuCell Corporation The Board of Directors has established a Compensation and Stock Option Committee (Compensation Committee) for the purpose of reviewing and recommending salary, bonus and other benefits for executive officers and directors of the Company. The Compensation Committee is responsible for administering the Company’s 2010 Stock Option and Incentive Plan and the 2017 Stock Option and Incentive Plan. The Compensation Committee’s current members are Ms. Basse and Mr. Rosgen, each of whom are independent directors. Mr. Rosgen serves as Chair of the Compensation Committee. The Compensation Committee held six meetings during the year ended December 31, 2023. The Compensation Committee does not have a charter but instead operates within the authority provided by the Company’s By-laws and authorizing resolutions adopted by the board. Its recommendations on executive and director compensation are subject to review and final approval by the Board of Directors, a majority of whose members are independent directors. The Compensation Committee considers recommendations from Mr. Brigham, the Company’s President and CEO, relevant to a determination of executive and director compensation, but neither he nor Ms. Brockmann participates in votes of the Compensation Committee or the board in this regard. In recent years, the Compensation Committee has not retained or relied upon outside consultants to assist in its determination of executive or director compensation but does consider available compensation data. During the end of 2021 and beginning of 2022, the Compensation Committee did consider certain information provided by a consultant. The Board of Directors has established a Nominating Committee for the purpose of recommending to the full board the number of directors to serve on the board, criteria for board membership and nominees for election to the board. In doing so, the Nominating Committee considers the integrity and relevant business experience of each nominee. The Nominating Committee values diversity, believing that the Company benefits from decision making that includes a range of opinions, points of view and experience. For instance, the Nominating Committee would not want a board comprised only of directors having principally financial expertise or only of directors whose principal experience is in the dairy and beef industries. Likewise, the Nominating Committee believes that a board consisting of all men or all women would not be as strong as a gender-diverse board. While there is always room for improvement, the Nominating Committee believes that it has made substantial progress towards achieving these board diversity goals. To be considered for nomination to the board, a candidate must meet the following minimum criteria: 1) reputation for integrity and high ethical standards, 2) willingness and ability to contribute positively to the Company’s decision-making process, 3) absence of any conflict of interest, or appearance of conflict of interest and 4) commitment to understanding the Company’s business and associated business risks and to devoting adequate time and effort to create value for the Company and its stockholders. All director nominees are recommended by the Nominating Committee and then approved by a vote of the board. The Committee’s current members are Ms. Basse and Mr. Wainman, each of whom are independent directors. Ms. Basse serves as Chair of the Nominating Committee. The Nominating Committee held three meetings during the year ended December 31, 2023. Upon recommendation of the Nominating Committee, the Board of Directors adopted a charter for the Nominating Committee in December 2012. This charter sets forth the policy to be utilized by the Nominating Committee in considering nominees identified by management to serve as directors for the Company. The Charter of the Nominating Committee has been posted to the Company’s website (http://immucell.com/wp-content/uploads/2019/04/Nominating-Committee-Charter.pdf). The Nominating Committee applies the same evaluation standards in considering nominees for director recommended by stockholders. BOARD OF DIRECTORS GLORIA J. BASSE Age: 63 Director since: June 2020 Ms. Basse was first elected to our Board of Directors at the 2020 Annual Meeting of Stockholders. Ms. Basse has been the senior executive director of Tonisity International, an animal nutrition company with offices in Ireland, Brazil and the United States, from 2017 to the present. Since 2016, Ms. Basse has been a Senior Associate at the Context Network, a business management and strategy consulting firm providing services to agriculture, biotechnology and food companies. She held various positions at Zoetis Inc. (formerly Pfizer Animal Health) from 1985 to 2015 and most recently served as Vice President of its U.S. pork business. Ms. Basse is a graduate of the University of Wisconsin and earned her Masters in Business Administration from the University of Rochester. MICHAEL F. BRIGHAM Age: 63 Officer since: October 1991 Director since: March 1999 Mr. Brigham was appointed to serve as President and Chief Executive Officer in February 2000, while maintaining the titles of Treasurer and Secretary, and was appointed to serve as a Director of the Company in March 1999. He previously had been elected Vice President of the Company in December 1998 and had served as Chief Financial Officer since October 1991. He has served as Secretary since December 1995 and as Treasurer since October 1991. Prior to that, he served as Director of Finance and Administration since originally joining the Company in September 1989. Mr. Brigham served as a member of the Board of Directors of the United Way of York County from 2012 to 2019, serving as its Treasurer until June 2016 and as Chair of the Board of Directors for one year and as a member of its Executive Committee. Mr. Brigham served as the Treasurer of the Board of Trustees of the Kennebunk Free Library from 2005 to 2011. He re-joined the Finance Committee of the library in 2012. Prior to joining the Company, he was employed as an audit manager for the public accounting firm of Ernst & Young in New York City. Mr. Brigham earned his Masters in Business Administration from New York University in 1989 and a Bachelor of Arts degree (with a double major in Economics and Spanish) from Trinity College in Hartford, Connecticut in 1983. BOBBI JO BROCKMANN Age: 48 Officer since: February 2015 Director since: March 2017 Ms. Brockmann served as a Director of the Company from March 2017 to September 2017 and from January 2018 to the present. She was promoted to Vice President of Sales and Marketing in February 2015. She joined the Company as Director of Sales and Marketing in January 2010. Prior to that, she had been employed as Director of Sales since May 2008 and Sales Manager from February 2004 to April 2008 at APC, Inc. of Ankeny, Iowa, a developer and marketer of functional protein products for animal health and nutrition. Prior to that, she held other sales and marketing positions at APC, W & G Marketing Company, Inc. of Ames, Iowa, The Council for Agricultural Science and Technology of Ames, Iowa and Meyocks Group Advertising of West Des Moines, Iowa after graduating from Iowa State University. 41 ImmuCell Corporation BRYAN K. GATHAGAN Age: 56 Director since: June 2023 Mr. Gathagan is the owner and a managing member of broad Thinking, LLC, a management consulting firm and has 25 years of animal health experience. He is a founding member of Animalytix LLC and has served as its Chief Financial and Chief Technology Officer since it began operations in 2010. Prior to Animalytix, he was a senior executive and Vice President of IT and Finance for Intervet, Inc. and oversaw various finance, IT, and general business functions between 1998 to 2008, including 3 years in a global role based in The Netherlands. Before entering the animal health industry, he served as a Vice President at MBNA and Norwest Bank responsible for various IT functions and started his career in IT roles at the University of Maryland, Baltimore County (UMBC). He holds a BS in Information Systems Management from UMBC and an MS in Business from Johns Hopkins University. STEVEN T. ROSGEN Age: 58 Director since: January 2018 Mr. Rosgen joined the Board of Directors in January 2018 and the Audit Committee of the Board of Directors effective April 1, 2018. He is President of Strategem Research Inc., founded in 2005. Strategem’s mission is to capture and leverage customer insights when launching new technologies and revitalizing brands that have struggled in the market. Mr. Rosgen specializes in value proposition development and pricing strategy. He has worked with global brands across a range of industries including multiple agricultural sectors (ag informatics, animal health, biotechnology, crop protection, fertilizer, equipment, finance, grain marketing, livestock production, retail and seed technology). Before founding Strategem, Mr. Rosgen was a senior partner with Street Smart Strategic Planning and Research Coordinator for Baker Lovick/BBDO Advertising. He holds a Bachelor of Commerce Degree from the University of Calgary. David S. Tomsche, D.V.M. Age: 67 Director since: December 2006 Dr. Tomsche was appointed to serve as Chair of the Board of Directors in February 2013. He served on the Nominating Committee of the Board of Directors until September 2017. He served on the Audit Committee from February 2014 through March 2014 and rejoined this committee in June 2021. He is a large animal veterinarian and owner of Leedstone Inc. (formerly Stearns Veterinary Outlet, Inc., an animal health distribution and milking system installation company) and of J-t Enterprises of Melrose, Inc., an exporter of ImmuCell products. He also is a dairy producer. He obtained his degrees from the University of Minnesota. PAUL R. WAINMAN Age: 59 Director since: March 2014 Mr. Wainman was appointed to the Board of Directors on March 31, 2014 and is a member of the Audit and Nominating Committees and serves as Chair of the Audit Committee. He qualifies to serve as a “financial expert” given his background in accounting and finance. Mr. Wainman served as Chief Financial Officer of Hancock Lumber, a 725-employee lumber and building products company located in Casco, Maine, from February 2016 and its President and CFO from January 2020 until, most recently, becoming President and CEO in January 2023. From April 2015 until February 2016, he was a business strategy and financial consultant specializing in the paper and greeting card industry. Prior to that, he was President of Kleinfeld, a personalized wedding stationery company, from September 2013 until April 2015. From 2005 to 2012, he was President and CEO of William Arthur, Inc., a division of Hallmark Cards, where he led a 275-employee manufacturer of luxury stationery products. Prior to that, he served another division of Hallmark Cards as CFO and COO from 1998 to 2004. He obtained a degree in Accounting and Financial Control from Sheffield City University in England and qualified as a Chartered Accountant of England and Wales in 1990. Each of these individuals brings distinct skills, perspectives and attributes to the Board of Directors. Ms. Basse has extensive animal health marketing experience. Mr. Brigham is an executive officer who has been employed by the Company since 1989 and has a financial and accounting background. Ms. Brockmann is an executive officer who has been employed by the Company since 2010 and has extensive experience in the sales and marketing of products to the dairy and beef industries. Mr. Gathagan has significant experience with information systems and finance as well as relevant animal health industry experience. Mr. Rosgen has a depth of experience in sales and marketing and product branding. Dr. Tomsche is a veterinarian and owner of a distribution outlet of products and services for animals, as well as an investor in and owner of dairy farms, and brings to the board substantial expertise in our industry. Mr. Wainman has extensive managerial and financial training and expertise. Our executive officers as of March 8, 2024 were as follows: MICHAEL F. BRIGHAM See Biography above. BOBBI JO BROCKMANN See Biography above. ELIZABETH L. WILLIAMS (Age: 68, Officer since April 2016) joined the Company in April 2016 as Vice President of Manufacturing Operations. Previously, she led the U.S. Region for Zoetis as Vice President, Global Manufacturing and Supply. Prior to that, she held multiple Site Leader positions at Pfizer Animal Health facilities in Lincoln, Nebraska (2008-2011), Conshohocken, Pennsylvania (2006-2008) and Lee’s Summit, Missouri (2003-2006). She led the manufacturing organization (1999-2003) and the Process and Product Development group (1995-1999), achieving registration, approval and successful scale-up of five new products at the Lee’s Summit facility. She earned her Masters of Business Administration from Rockhurst University in Kansas City, Missouri and her Bachelor’s degree in Biology from the University of Missouri. 42 ImmuCell Corporation EXECUTIVE OFFICERS OF THE COMPANY There is no family relationship between any director, executive officer or person nominated or chosen by the Company to become a director or executive officer. Except for Mr. Brigham and Ms. Brockmann (both of whom are Company employees), each of the Company’s existing directors or nominees qualifies as an “independent director” as defined under applicable NASDAQ Stock Market rules. In evaluating the independence of directors, the board did consider related party transactions described elsewhere in this Annual Report. Any vacancies that may occur during the year may be filled by the Board of Directors to serve until the next Annual Meeting. CODE OF BUSINESS CONDUCT AND ETHICS In December 2003, the Board of Directors of the Company adopted a Code of Business Conduct and Ethics (the Code) that applies to all employees of the Company, including the Company’s President and CEO and Director of Finance and Administration. This Code is a set of written standards that are designed to deter wrongdoing and to promote: (i) honest and ethical conduct, (ii) full, fair, accurate, timely and understandable disclosure in reports filed with the SEC, (iii) compliance with applicable laws, (iv) prompt internal reporting of violations of the Code and (v) accountability for adherence to the Code. On March 19, 2014, the Board of Directors approved several minor revisions to this Code. This Code has been posted on the Company’s website (http://immucell.com/wp-content/uploads/2017/05/2014-Code-of-Business-Conduct-and-Ethics-revision.pdf) and was filed as Exhibit 14 to the Company’s Current Report on Form 8-K dated March 20, 2014. The Company will mail a copy of its Code of Business Conduct and Ethics to any interested party without charge, upon request. Such requests may be made by mail to the Company’s Secretary at ImmuCell Corporation, 56 Evergreen Drive, Portland, Maine 04103. SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16 of the Securities Exchange Act of 1934 requires the Company’s directors, executive officers and persons who own more than ten percent of a registered class of the Company’s equity securities to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and other equity securities of the Company. Officers, directors and greater than ten percent stockholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) reports they file. To the best of the Company’s knowledge, based solely on review of the copies of such reports furnished to the Company and written representations that no other reports were required, during the year ended December 31, 2023, the Company’s directors, executive officers and greater than ten percent beneficial owners complied on a timely basis with all applicable Section 16(a) filing requirements. 43 ITEM 11 — EXECUTIVE COMPENSATION The following table contains information as to the compensation paid by the Company to its non-executive directors for services rendered during the year ended December 31, 2023: Name Fees Earned or Paid in Cash Stock Option Awards (1)(2) All Other Compensation Total Gloria J. Basse $ 28,000 $ 0 $ 0 $ 28,000 David S. Cunningham $ 14,000 $ 0 $ 0 $ 14,000 Bryan K. Gathagan $ 15,000 $ 35,700 $ 0 $ 50,700 Steven T. Rosgen $ 30,000 $ 0 $ 0 $ 30,000 David S. Tomsche, D.V.M. $ 42,000 $ 0 $ 0 $ 42,000 Paul R. Wainman $ 30,000 $ 0 $ 0 $ 30,000 (1) This amount represents the total non-cash compensation expense related to stock options granted during the year ended December 31, 2023, which is being expensed over the three-year vesting period from grant date. (2) As of December 31, 2023, Ms. Basse had 35,000 stock options outstanding; Mr. Cunningham had no stock options outstanding; Mr. Gathagan had 15,000 stock options outstanding; Mr. Rosgen had 20,000 stock options outstanding; Dr. Tomsche had 20,000 stock options outstanding; and Mr. Wainman had 20,000 stock options outstanding. Officers of the Company, who are also directors, do not receive additional compensation for attendance at Board of Directors’ meetings or committee meetings (and no such employee directors are members of any of the Company’s Committees). Effective January 1, 2022, this annual fee paid to non-employee directors was increased from $24,000 to $28,000. Effective January 1, 2022, compensation for members of the Audit Committee was set at $2,000 per year. Effective January 1, 2013, the additional compensation for the Chair of the Board of Directors was set at $12,000 per year (Dr. Tomsche served as Chair during 2023). All fees paid to directors are paid quarterly. Historically, fees paid to directors were payable on the first day of the quarter during which they were earned. However, beginning in the first quarter of 2023 fees paid to directors become payable at the end of the quarter during which they are earned. No other increases in these fees have been made since those noted above. On March 19, 2018, each of the then serving outside directors were granted non-qualified stock options to purchase 15,000 shares of common stock under the 2017 Stock Option and Incentive Plan. These options had an exercise price equal to $7.08 per share, which was the fair market value of the common stock on the date of grant, and they vested on March 18, 2021. These options expired March 18, 2023. At the time first appointed to the board, Ms. Basse was granted a non-qualified stock option to purchase 15,000 shares of common stock under the 2017 Stock Option and Incentive Plan with terms similar to those previously granted to all other directors. Ms. Basse’s options have an exercise price equal to $4.81 per share, which was the fair market value of the common stock on the date of grant (June 29, 2020), and vest on June 28, 2023. These options expire if not exercised by June 28, 2025 or, if earlier, within one month (twelve months if in the case of death or disability) after termination of service as a director. On June 17, 2021, each of the then serving outside directors were granted non-qualified stock options to purchase 10,000 shares of common stock under the 2017 Stock Option and Incentive Plan. These options have an exercise price equal to $10.04 per share, which was the fair market value on the date of grant, and they vest on June 16, 2024. These options expire if not exercised by June 16, 2026 or, if earlier, within one month (twelve months in the case of death or disability) after termination of service as a director. On December 15, 2022, each of the then serving outside directors were granted non-qualified stock options to purchase 10,000 shares of common stock under the 2017 Stock Option and Incentive Plan. These options have an exercise price equal to $6.52 per share, which was the fair market value on the date of grant, and they vest on December 14, 2025. These options expire if not exercised by December 14, 2027 or, if earlier, within one month (twelve months in the case of death or disability) after termination of service as a director. At the time first appointed to the board, Mr. Gathagan was granted a non-qualified stock option to purchase 15,000 shares of common stock under the 2017 Stock Option and Incentive Plan with terms similar to those previously granted to all other directors. Mr. Gathagan’s options have an exercise price equal to $5.11 per share, which was the fair market value of the common stock on the date of grant (June 28, 2023), and vest on June 27, 2026. These options expire if not exercised by June 27, 2028 or, if earlier, within one month (twelve months if in the case of death or disability) after termination of service as a director. 44 ImmuCell Corporation INDEMNIFICATION AGREEMENTS The Company has entered into indemnification agreements with its directors and executive officers in substantially the form approved by the stockholders at the 1989 Annual Meeting, as recently updated. The agreements include procedures for reimbursement by the Company of certain liabilities and expenses which may be incurred in connection with service as a director or executive officer. The Company expects to enter into indemnification agreements with individuals who become directors in the future, as well as such executive officers of the Company as the Board of Directors may from time to time determine. EXECUTIVE COMPENSATION Under the By-laws, executive officers are elected by the Board of Directors at its first meeting following each Annual Meeting of Stockholders of the Company, and each serves for a one-year term and until his or her successor is chosen and qualified, but all officers are employees of the Company “at will”, and their service may be terminated at any time without payment of severance or similar benefits, except as described under EMPLOYMENT AGREEMENTS below. SUMMARY COMPENSATION TABLE The following table contains information as to the total compensation paid by the Company to its named executive officers for services rendered during the years ended December 31, 2023 and 2022: Name and Principal Position Year Salary Bonus (1) Stock Option Awards (2) All Other Compensation (3) Total Michael F. Brigham 2023 $ 355,267 $ 0 $ 0 $ 39,968 $ 395,235 President, Chief Executive Officer, Treasurer and Secretary 2022 $ 342,944 $ 0 $ 4,500 $ 252,500 $ 599,944 Bobbi Jo Brockmann 2023 $ 268,846 $ 25,000 $ 0 $ 29,675 $ 323,521 Vice President of Sales and Marketing 2022 $ 259,522 $ 0 $ 0 $ 28,159 $ 287,681 Elizabeth L. Williams 2023 $ 264,173 $ 25,000 $ 0 $ 22,899 $ 312,072 Vice President of Manufacturing Operations 2022 $ 254,678 $ 0 $ 4,500 $ 20,760 $ 279,938 (1) Bonus (or variable compensation) is reported in the year earned, even if paid in the beginning of the next year. (2) This amount represents the total non-cash compensation expense related to stock option awards granted during the year that they were earned, which is being expensed over the three-year vesting period from grant date. (3) This amount includes Company-paid contributions to a 401(k) Plan, health insurance premiums and life insurance premiums that are available to all employees of similar employment status, if elected. For Mr. Brigham, this amount includes approximately $8,000 and $222,000 worth of earned and unused paid time off described under EMPLOYMENT AGREEMENTS below that was accrued during the first quarter of 2023 and 2022, respectively, and is due to be paid to Mr. Brigham upon his separation from the Company. For Ms. Brockmann, this amount also includes the personal use of a Company-owned vehicle. Generally during the first quarter of each year, annual salaries and bonuses for these named executive officers are determined at the discretion of the Compensation and Stock Option Committee. Effective January 30, 2021, the annual salary for Mr. Brigham was increased by 2% to $332,212. Effective February 26, 2022, the annual salary for Mr. Brigham was increased by 4% to $345,500. Effective February 25, 2023, the annual salary for Mr. Brigham was increased by 3.5% to $357,592. No such annual increase was provided to Mr. Brigham for 2024. Effective January 30, 2021, the annual salary for Ms. Brockmann was increased by 2% to $251,400, and she was paid $12,645 in variable compensation related to her 2020 performance. Effective February 26, 2022, the annual salary for Ms. Brockmann was increased by 4% to $261,456, and she was paid $22,500 and awarded 18,000 stock options with an exercise price of $8.15 per share in variable compensation related to her 2021 performance. Effective February 25, 2023, the annual salary for Ms. Brockmann was increased by 3.5% to $270,606, and she was paid a discretionary bonus of $25,000 on March 1, 2023. Effective February 10, 2024, the annual salary for Ms. Brockmann was increased by 4% to $281,430. Effective January 30, 2021, the annual salary for Ms. Williams was increased by 4% to $246,707. Effective February 26, 2022, the annual salary for Ms. Williams was increased by 4% to $256,575. Effective February 25, 2023, the annual salary for Ms. Williams was increased by 3.5% to $265,555, and she was paid a performance bonus of $25,000 on August 30, 2023. Effective February 10, 2024, the annual salary for Ms. Williams was increased by 4% to $276,177. 45 ImmuCell Corporation Effective December 1, 2022 through November 30, 2023, the Company contributed approximately $18,400 per year towards the cost of family health insurance coverage for each full-time employee electing this coverage. Effective December 1, 2023 through November 30, 2024, this annual contribution is $20,755. Mr. Brigham and Ms. Brockmann elected this coverage. Effective December 1, 2022 through November 30, 2023, the Company contributed approximately $12,600 per year towards the cost of employee and spouse health insurance coverage for each full-time employee electing this coverage. Effective December 1, 2023 through November 30, 2024, this annual contribution is $14,250. Ms. Williams elected this coverage. EMPLOYMENT AGREEMENTS We enter into compensation agreements (which are publicly filed) with our three executive officers. Effective March 28, 2022, we entered into an Amended and Restated Separation and Deferred Compensation Agreement (the “Deferred Compensation Agreement”) with Mr. Brigham (our President and CEO) that superseded and replaced in its entirety a March 2020 severance agreement between the Company and Mr. Brigham. Upon separation from the Company for any reason, Mr. Brigham’s Deferred Compensation Agreement allows Mr. Brigham to be paid, among other amounts, all earned and unused paid time off (which expense totaling $222,379 was accrued during the first quarter of 2022 and $230,162 and $222,379 was included in accounts payable and accrued expenses on the accompanying balance sheets as of December 31, 2023 and 2022, respectively) and to receive up to an additional $300,000 in deferred compensation (which amount is being accrued over the three-year period ending in January 2025). This deferred compensation payment vested as to $100,000 on January 1, 2023 and an additional $100,000 on January 1, 2024. An additional $100,00 will vest on January 1, 2025, provided that Mr. Brigham is employed by the Company as of January 2025. The vested amounts would be paid upon the earlier of January 31, 2025 or within thirty (30) days following his separation from the Company. As of December 31, 2023 and 2022, $200,000 and $100,000, respectively, was included in accounts payable and accrued expenses on the accompanying balance sheets. In addition, upon termination of Mr. Brigham’s employment (a) by the Company other than for cause, (b) due to death or disability or (c) by Mr. Brigham for good reason, in each case as described and defined in the Deferred Compensation Agreement, the Company agrees to pay Mr. Brigham 100% of his then current annual base salary and a lump sum payment equal to the employer portion of the costs of continued health benefits for Mr. Brigham and his covered dependents for a twelve-month period following termination, and certain equity incentive awards granted to Mr. Brigham would continue to vest following such termination in accordance with the terms of the Deferred Compensation Agreement. Incentive Compensation Agreements with Mr. Brigham, Ms. Brockmann (our Vice President of Sales and Marketing) and Ms. Williams (our Vice President of Manufacturing Operations) allow these executives to earn incentive compensation if certain regulatory and financial objectives are met during the year to which the agreement relates, as specified in their agreements. Amounts related to these incentive compensation agreements are accrued over the period they are earned (when it is probable that the amounts will be earned) based on our best estimate of the amounts expected to be earned. OUTSTANDING EQUITY AWARDS Stock options are the only outstanding form of equity awards to the Company’s employees and directors. The following table contains information on stock options held by the Company’s named executive officers that were outstanding as of December 31, 2023: Name Number of Shares Underlying Unexercised Stock Options - Exercisable Number of Shares Underlying Unexercised Stock Options - Unexercisable (1) Stock Option Exercise Price Date of Grant Expiration Date Michael F. Brigham 25,000 0 $ 5.84 02/10/2017 02/09/2027 20,000 0 $ 7.80 01/08/2018 01/07/2028 0 1,000 $ 8.15 06/15/2022 06/14/2032 Bobbi Jo Brockmann 10,000 0 $ 7.54 12/16/2015 12/15/2025 10,000 0 $ 5.84 02/10/2017 02/09/2027 7,500 0 $ 7.80 01/08/2018 01/07/2028 10,000 0 $ 5.18 12/11/2019 12/10/2029 0 18,000 $ 8.15 01/31/2022 01/30/2032 Elizabeth L. Williams 25,000 0 $ 6.70 04/04/2016 04/03/2026 10,000 0 $ 5.84 02/10/2017 02/09/2027 7,500 0 $ 7.80 01/08/2018 01/07/2028 10,000 0 $ 5.18 12/11/2019 12/10/2029 0 1,000 $ 8.15 06/15/2022 06/14/2032 (1) These stock options become exercisable three years after the date of grant. 46 ImmuCell Corporation ITEM 12 — SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The following table sets forth certain information known to the Company regarding beneficial ownership of the Company’s common stock as of April 15, 2024 of (i) each person known to the Company to be the beneficial owner of more than five percent of the Company’s common stock, (ii) each of the Company’s directors, (iii) each of the Company’s executive officers named in the “ SUMMARY COMPENSATION TABLE ” above, (iv) the five largest stockholders listed in this table as a group and (v) all directors and executive officers of the Company as a group: Name of Beneficial Owner Shares of the Company’s Common Stock Beneficially Owned (1) Percent of the Company’s Common Stock Beneficially Owned Sandra F., Norman H. and Brian L. Pessin (2) 1,182,720 15.3 % Jonathan E. Rothschild (3) 514,003 6.6 % Michael F. Brigham (4) 260,752 3.3 % Joseph H. Crabb. Ph.D. (5) 142,845 1.8 % David S. Tomsche D.V.M. (6) 113,606 1.5 % Elizabeth Williams (7) 52,500 0.7 % Bobbi Jo Brockmann (8) 46,021 0.6 % Gloria J. Basse (9) 25,000 0.3 % Paul R. Wainman (10) 16,269 0.2 % Steven T. Rosgen (11) 10,000 0.1 % Bryan K. Gathagan (12) 0 0.0 % Directors and executive officers as a group (8 persons) (13) 524,148 6.6 % The five largest stockholders listed in this table as a group (14) 2,213,926 28.4 % (1) The persons named in the table have sole voting and investment power with respect to all shares of common stock shown to be beneficially owned by them, subject to the information contained in the footnotes to this table. The figures in the table include shares of common stock covered by stock options which are currently exercisable or will become exercisable on June 16, 2024. (2) The address for the Pessins is 400 East 51 st Street, PH31, New York, NY 10022. The Pessins have indicated that each of them has sole voting and dispositive/investment power with respect to the shares of common stock owned by them individually: Norman H. Pessin–644,019 shares (8.3%), Sandra F. Pessin–401,819 shares (5.2%) and Brian L. Pessin–136,882 shares (1.8%). (3) The address for Mr. Rothschild is c/o Arterio, Inc., 1061-B Shary Circle, Concord, CA 94518. This figure includes 226,416 shares of common stock held by Arterio Inc., a corporation owned solely by Mr. Rothschild. (4) This figure includes 45,000 vested stock options that are described in the “ OUTSTANDING EQUITY AWARDS ” table and 11,000 shares of common stock held by the mother of Mr. Brigham. Mr. Brigham also holds 1,000 unvested stock options that were granted during 2022. (5) Dr. Crabb holds these shares of common stock jointly with his former spouse. He is listed in this table for informational purposes because he is one of the five largest stockholders. (6) This figure includes 6,987 shares of common stock held by immediate family members of Dr. Tomsche. This figure includes 10,000 stock options that vest on June 16, 2024. Dr. Tomsche also holds 10,000 unvested stock options. (7) This figure is comprised of 52,500 vested stock options that are described in the “ OUTSTANDING EQUITY AWARDS ” table. Ms. Williams also holds 1,000 unvested stock options that were granted during 2022. (8) This figure includes 7,466 shares of common stock held by Ms. Brockmann and 1,055 shares of common stock held jointly with her spouse and 37,500 vested stock options that are described in the “OUTSTANDING EQUITY AWARDS” table. Ms. Brockmann also holds 18,000 unvested stock options that were granted during 2022. (9) This figure is comprised of 15,000 vested stock options and 10,000 stock options that vest on June 16, 2024. Ms. Basse also holds 10,000 unvested stock options. (10) This figure includes 10,000 stock options that vest on June 16, 2024. Mr. Wainman also holds 10,000 unvested stock options. (11) This figure includes 10,000 stock options that vest on June 16, 2024. Mr. Rosgen also holds 10,000 unvested stock options. (12) Mr. Gathagan holds 15,000 unvested stock options. (13) This figure includes 150,000 vested stock options and 40,000 stock options that vest on June 16, 2024. (14) This figure includes 45,000 vested stock options and 10,000 stock options that vest on June 16, 2024. 47 ImmuCell Corporation The Company does not permit employees or directors to engage in hedging transactions with respect to the Company’s stock. Equity Compensation Plan Information The table below summarizes the common stock reserved for issuance upon the exercise of stock options outstanding as of December 31, 2023 or that could be granted in the future: Number of shares to be issued upon exercise of outstanding options Weighted-average exercise price of outstanding options Number of shares remaining available for future issuance under stock-based compensation plans (excluding shares reflected in first column of this table) Equity compensation plans approved by stockholders 618,500 $ 6.82 202,000 Equity compensation plans not approved by stockholders — — — Total 618,500 $ 6.82 202,000 ITEM 13 — CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE David S. Tomsche (Chair of our Board of Directors) is a controlling owner of Leedstone Inc., a domestic distributor of our products (the First Defense Ò product line and CMT ). His affiliated company purchased $231,405 and $587,677 of products from us during the years ended December 2023 and 2022, respectively, all on terms consistent with those offered to other distributors of similar status. Our accounts receivable (subject to standard and customary payment terms) due from this affiliated company aggregated $42,507 and $46,426 as of December 31, 2023 and 2022, respectively. The President and CEO of the Company is responsible for reviewing related party transactions. To assist with this process, each director is asked to complete an annual questionnaire covering transactions of this nature and other related matters. Regardless of dollar value, all related party transactions are reviewed with the relevant director and with the entire Board of Directors, if necessary. Except for Mr. Brigham and Ms. Brockmann (both of whom are Company employees), each of the Company’s existing directors qualifies as an “independent director” as defined under the applicable NASDAQ Stock Market rules. Each member of the Company’s Audit Committee, Nominating Committee, and Compensation and Stock Option Committee are independent under the applicable NASDAQ Stock Market rules. ITEM 14 — PRINCIPAL ACCOUNTANT FEES AND SERVICES Principal Accounting Fees and Services On April 12, 2019, the Company engaged Wipfli LLP for the first time as its Independent Registered Public Accounting Firm (IRPAF) for the year ended December 31, 2019 beginning with a customary review of the Company’s financial statements as of and for the quarter ended March 31, 2019. On March 20, 2020, the Company engaged Wipfli LLP as its IRPAF for the year ended December 31, 2020. On March 23, 2021, the Company engaged Wipfli as its IRPAF for the year ended December 31, 2021. On March 23, 2022, the Company engaged Wipfli as its IRPAF for the year ended December 31, 2022. On March 22, 2023, the Company engaged Wipfli as its IRPAF for the year ending December 31, 2023. Set forth below is a summary of the fees incurred for services rendered by the Company’s Independent Registered Public Accounting Firm, Wipfli LLP, for the years ended December 31, 2023 and 2022: 2023 2022 Audit Fees (1) $ 140,000 $ 130,000 Audit-Related Fees (2) 550 19,000 Total $ 140,550 $ 149,000 (1) The Audit Fees include fees billed by or accrued for the auditors for their reviews of the quarterly financial statements included in the Company’s Quarterly Reports on Form 10-Q for the first three quarters of each year and their audits of the annual financial statements included in the Company’s Annual Reports on Form 10-K and incidental expenses. (2) Audit-Related Fees include fees paid to Wipfli LLP related to the issuance of a consent for a registration statement during 2023 and related to the restatement of the Company’s Quarterly Reports on Form 10-Q for the three-month periods ended June 30, 2022 and March 31, 2022 during 2022. 48 ImmuCell Corporation Pre-Approval Policy In accordance with the procedures set forth in its charter, the Audit Committee pre-approves all auditing services and permitted non-audit services (including the fees and other terms of those services) to be performed for the Company by its Independent Registered Public Accounting Firm. Such approval may be accomplished by approving the terms of the engagement prior to the engagement of the Independent Registered Public Accounting Firm with respect to such services or by establishing detailed pre-approval policies and procedures to govern such engagement. The Audit Committee authorizes management to spend up to $5,000 per year for services that are not anticipated at the time of the engagement, provided that the Audit Committee is promptly informed of such services. AUDIT COMMITTEE REPORT The Audit Committee of the Board of Directors reviews the financial reporting process, the system of internal controls, the audit process and the process for monitoring compliance with certain applicable laws and regulations. The Audit Committee is responsible for selecting and hiring the Independent Registered Public Accounting Firm and meets with those accountants (in person or by telephone) before each quarterly press release concerning the Company’s financial results. The Audit Committee approves the public disclosure and filing with the SEC of the related press releases. After reviewing the quarterly and annual reports that are prepared by management, the Audit Committee authorizes the filing of such reports with the SEC. All members of the Audit Committee meet the heightened independence and expertise requirements for audit committees under applicable NASDAQ Stock Market rules. Mr. Wainman joined the Audit Committee in March of 2014 and serves as its Chair. Mr. Rosgen joined the Audit Committee in April of 2018. Dr. Tomsche joined the Audit Committee in June of 2021. Mr. Gathagan joined the Audit Committee in June of 2023. The Audit Committee currently operates under a charter adopted by the board in 2004. The Company has a January 1st to December 31st fiscal year. The Audit Committee met eight times during 2023. 49 ImmuCell Corporation The Audit Committee has reviewed the Company’s audited financial statements for the year ended December 31, 2023 and discussed such statements with management and Wipfli LLP, the Company’s independent registered public accounting firm for 2023. The Audit Committee has discussed with Wipfli LLP various communications that Wipfli LLP is required to provide to the Audit Committee including the matters required to be discussed by Public Company Accounting Oversight Board (PCAOB) Auditing Standards No. 1301 (Communication with Audit Committees). The Audit Committee received from Wipfli LLP the written disclosures and the letter required by applicable requirements of the PCAOB concerning independence and has discussed the auditor’s independence with them. Based on the review and discussions noted above, the Audit Committee recommended to the board that the Company’s audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 and be filed with the SEC. This report of the Audit Committee shall not be deemed incorporated by reference by any general statement into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the Company specifically incorporates this information by reference and shall not otherwise be deemed filed under such Acts. Submitted by: Audit Committee Bryan K. Gathagan Steven T. Rosgen David S. Tomsche, D.V.M. Paul R. Wainman, Chair 50 ImmuCell Corporation PART IV ITEM 15 — EXHIBITS AND FINANCIAL STATEMENT SCHEDULES 3.1 Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 of the Company’s 1987 Registration Statement No. 33-12722 on Form S-1 as filed with the Commission). 3.2 Certificate of Amendment to the Company’s Certificate of Incorporation effective July 23, 1990 (incorporated by reference to Exhibit 3.2 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2008). 3.3 Certificate of Amendment to the Company’s Certificate of Incorporation effective August 24, 1992 (incorporated by reference to Exhibit 3.3 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2008). 3.4 Certificate of Amendment to the Company’s Certificate of Incorporation effective June 16, 2016 (incorporated by reference to Exhibit 3.1 of the Company’s Amended Current Report on Form 8-K/A filed on June 16, 2016). 3.5 Certificate of Amendment to the Company’s Certificate of Incorporation effective June 18, 2018 (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed on June 18, 2018). 3.6 Certificate of Amendment to the Company’s Certificate of Incorporation effective June 11, 2020 (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed on June 11, 2020). 3.7 Bylaws of the Company as amended (incorporated by reference to Exhibit 3.4 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2008). 4.1 Rights Agreement dated as of September 5, 1995, between the Company and American Stock Transfer and Trust Co., as Rights Agent, which includes as Exhibit A thereto the form of Right Certificate and as Exhibit B thereto the Summary of Rights to Purchase Common Stock (incorporated by reference to Exhibit 4.1 of the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2009). 4.1A First Amendment to Rights Agreement dated as of June 30, 2005 (incorporated by reference to Exhibit 4.1A of the Company’s Current Report on Form 8-K filed on July 5, 2005). 4.1B Second Amendment to Rights Agreement dated as of June 30, 2008 (incorporated by reference to Exhibit 4.1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2008). 4.1C Third Amendment to Rights Agreement dated as of August 9, 2011 (incorporated by reference to Exhibit 4.1 of the Company’s Quarterly Report on Form 10-Q for the three-month period ended June 30, 2011). 4.1D Fourth Amendment to Rights Agreement dated as of June 16, 2014 (incorporated by reference to Exhibit 4.1D of the Company’s Current Report on Form 8-K filed on June 17, 2014). 4.1E Fifth Amendment to Rights Agreement dated as of April 15, 2015 (incorporated by reference to Exhibit 4.1 of the Company’s Quarterly Report on Form 10-Q for the three-month period ended March 31, 2015). 4.1F Sixth Amendment to Rights Agreement dated as of August 10, 2017 (incorporated by reference to Exhibit 4.1 of the Company’s Quarterly Report on Form 10-Q for the three-month period ended June 30, 2017). 4.1G Seventh Amendment to Rights Agreement dated as of August 10, 2022 (incorporated by reference to Exhibit 4.1 of the Company’s Amended Quarterly Report on Form 10-Q/A filed on November 21, 2022). 4.1H Eighth Amendment to Rights Agreement dated as of August 9, 2023 (incorporated by reference to Exhibit 4.1 of the Company’s Quarterly Report on Form 10-Q filed on August 10, 2023). 4.2 Description of Securities Registered Under Section 12 of the Securities Exchange Act of 1934, as amended (incorporated by reference to Exhibit 4.2 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2020). 10.1+ Form of Indemnification Agreement (updated) entered into with each of the Company’s Directors and Officers (incorporated by reference to Exhibit 10.3A of the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2006). 10.2+ Amendment to Employment Agreement between the Company and Michael F. Brigham dated March 26, 2010 (incorporated by reference to Exhibit 10.6 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2009). 10.3+ 2010 Stock Option and Incentive Plan of the Company (incorporated by reference to Exhibit 10.6 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2010). 10.4+ Form of Incentive Stock Option Agreement (incorporated by reference to Exhibit 10.7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2010). 10.5+ 2017 Stock Option and Incentive Plan of the Company (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q for the three-month period ended June 30, 2017). 10.6+ Form of Incentive Stock Option Agreement (incorporated by reference to Exhibit 10.9 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2019). 10.7+ Amendment to the 2017 Stock Option and Incentive Plan of the Company (incorporated by reference to Exhibit 10.7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022). 51 ImmuCell Corporation 10.8+* Fifth Amended and Restated Incentive Compensation Agreement between the Company and Elizabeth L. Williams dated as of March 27, 2024. 10.9+ Amended and Restated Separation and Deferred Compensation Agreement between the Company and Michael F. Brigham dated as of March 28, 2022 (incorporated by reference to Exhibit 10.9 of the Company’s Annual Report on Form 10-K filed on March 30, 2022). 10.10+ Amended and Restated Incentive Compensation Agreement between the Company and Michael F. Brigham dated as of March 28, 2023 (incorporated by reference to Exhibit 10.13 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022). 10.11+* Fourth Amended and Restated Incentive Compensation Agreement between the Company and Bobbi Jo Brockmann dated as of March 27, 2024. 10.12 Development Services and Commercial Supply Agreement between the Company and Norbrook Laboratories Limited dated as of September 5, 2019 (incorporated by reference to Exhibit 99.2 of the Company’s Current Report on Form 8-K filed on September 11, 2019). 10.13 Amending Agreement between the Company and Norbrook Laboratories dated as of March 4, 2024 (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed March 6, 2024). 10.14 Indenture of Lease for Premises Located in Portland, Maine between the Company and TVP, LLC (incorporated by reference to Exhibit 99.2 of the Company’s Current Report on Form 8-K filed on September 17, 2019). 10.15 Second Amendment of Indenture of Lease for Premises Located in Portland, Maine between the Company and TVP, LLC dated as of August 15, 2022 (incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on August 17, 2022). 10.16 Third Amendment of Indenture of Lease for Premises Located in Portland, Maine between the Company and TVP, LLC dated as of November 14, 2023 (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on November 16, 2023). 10.17 Term Note for $5,100,000 between the Company and Gorham Savings Bank dated March 11, 2020 (incorporated by reference to Exhibit 99.2 of the Company’s Current Report on Form 8-K filed on March 12, 2020). 10.18 Loan Agreement for $5,100,000 between the Company and Gorham Savings Bank dated March 11, 2020 (incorporated by reference to Exhibit 99.4 of the Company’s Current Report on Form 8-K filed on March 12, 2020). 10.19 Allonge to and Amendment of Term Note, dated March 23, 2022, between the Company and Gorham Savings Bank (incorporated by reference to Exhibit 99.1 of the Company’s Current Report on Form 8-K filed on March 24, 2022). 10.20 Mortgage Modification Agreement, dated March 23, 2022, between the Company and Gorham Savings Bank (incorporated by reference to Exhibit 99.2 of the Company’s Current Report on Form 8-K filed on March 24, 2022). 10.21 Term Note for $3,500,000 between the Company and Gorham Savings Bank dated March 11, 2020 (incorporated by reference to Exhibit 99.3 of the Company’s Current Report on Form 8-K filed on March 12, 2020). 10.22 Loan Agreement for $3,500,000 between the Company and Gorham Savings Bank dated March 11, 2020 (incorporated by reference to Exhibit 99.5 of the Company’s Current Report on Form 8-K filed on March 12, 2020). 10.23 Line of Credit Agreement for up to $1,000,000 executed by ImmuCell Corporation in favor of Gorham Savings Bank dated March 11, 2020 (incorporated by reference to Exhibit 99.2 of the Company’s Current Report on Form 8-K filed on March 12, 2020). 10.24 Allonge to and Amendment of Line of Credit Loan for up to $1,000,000 between the Company and Gorham Savings Bank dated March 23, 2022 (incorporated by reference to Exhibit 10.23 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022). 10.25 Allonge to and Amendment of Line of Credit between the Company and Gorham Savings Bank, dated February 22, 2024 (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on February 27, 2024). 10.26 Note Purchase Agreement executed by the Company in favor of the Maine Technology Institute dated June 12, 2020 (incorporated by reference to Exhibit 99.2 of the Company’s Current Report on Form 8-K filed on June 16, 2020). 10.27 Subordinated Promissory Note for $500,000 executed by the Company in favor of the Maine Technology Institute dated June 12, 2020 (incorporated by reference to Exhibit 99.3 of the Company’s Current Report on Form 8-K filed on June 16, 2020). 10.28 Note Purchase Agreement executed by the Company in favor of the Maine Technology Institute dated June 30, 2021 (incorporated by reference to Exhibit 99.1 of the Company’s Current Report on Form 8-K filed on July 6, 2021). 10.29 Subordinated Promissory Note for $400,000 executed by the Company in favor of the Maine Technology Institute dated June 30, 2022 (incorporated by reference to Exhibit 99.2 of the Company’s Current Report on Form 8-K filed on July 6, 2021). 52 ImmuCell Corporation 10.30 Term Note for $1,500,000 executed by the Company in favor of Gorham Savings Bank dated December 15, 2020 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 17, 2020). 10.31 Loan Agreement for $1,500,000 executed by the Company in favor of Gorham Savings Bank dated December 15, 2020 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on December 17, 2020). 10.32 Term Note for $2,000,000 executed by ImmuCell Corporation in favor of Gorham Savings Bank dated July 17, 2023 (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on July 21, 2023). 10.33 Loan Agreement, by and between ImmuCell Corporation and Gorham Savings Bank dated July 17, 2023 (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed on July 21, 2023). 10.34 Economic Recovery/SSBCI Program Loan Promissory Note for $1,000,000 executed by ImmuCell Corporation in favor of the Finance Authority of Maine dated July 17, 2023 (incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed on July 21, 2023). 10.35 Economic Recovery Loan Program Loan Agreement, by and between ImmuCell Corporation and the Finance Authority of Maine dated July 17, 2023 (incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K filed on July 21, 2023). 14 Code of Business Conduct and Ethics (incorporated by reference to Exhibit 14 of the Company’s Current Report on Form 8-K filed on March 20, 2014). 23.1* Consent of Independent Registered Public Accounting Firm . 24.1 Power of Attorney (incorporated by reference to the signature page of this Form 10-K). 31* Certification Pursuant to Rule 13a-14(a). 32* Certification Pursuant to Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 97.1* ImmuCell Corporation Clawback Policy. 101.INS XBRL Instance Document-the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. 101.SCH Inline XBRL Taxonomy Extension Schema Document. 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document. 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document. 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document. 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document. 104 Cover Page Interactive Data File-the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. + Management contract or compensatory plan or arrangement. * Filed herewith. ITEM 16 – FORM 10-K SUMMARY None 53 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of ImmuCell Corporation Opinion on the Financial Statements We have audited the accompanying balance sheets of ImmuCell Corporation (the “Company”) as of December 31, 2023 and 2022, and the related statements of operations, stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Valuation of Inventory Description of the Matter At December 31, 2023, the Company’s inventory was $7,811,841. As discussed in Note 2 of the financial statements, inventory is recorded at the lower of cost or net realizable value. Auditing management’s valuation of inventory is complex and highly judgmental because of the estimates and assumptions used by management to determine the cost accounting and because of the variability of the cost per dose due to fluctuations in the biological yield achieved. How We Addressed the Matter In Our Audit The primary procedures we performed to address this critical audit matter included the following. We obtained an understanding of the cost accounting developed by management and the related assumptions and estimates used. We tested the cost accounting by examining the underlying data used by the Company to prepare the cost accounting. We evaluated the effect of the variability of the cost per dose on the inventory value by comparing the biological yield to historical results and by performing a sensitivity analysis of the potential range in inventory value within a corridor of historical results based on minimum and maximum outcomes for the biological yield. /s/ WIPFLI LLP We have served as the Company’s auditor since 2019. Radnor, Pennsylvania April 1, 2024 F- 1 ImmuCell Corporation BALANCE SHEETS As of December 31, 2023 2022 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 978,741 $ 5,791,562 Trade accounts receivable 2,185,383 1,758,600 Inventory 7,811,841 6,038,539 Prepaid expenses and other current assets 493,885 406,055 Total current assets 11,469,850 13,994,756 Property, plant and equipment, net 27,575,683 28,441,726 Operating lease right-of-use asset 4,571,149 2,194,670 Goodwill 95,557 95,557 Intangible assets, net 38,208 57,312 Other assets 57,655 76,628 TOTAL ASSETS $ 43,808,102 $ 44,860,649 LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES: Current portion of debt obligations $ 1,428,807 $ 1,039,447 Current portion of operating lease liability 644,276 31,764 Accounts payable and accrued expenses 2,124,337 2,000,862 Total current liabilities 4,197,420 3,072,073 LONG-TERM LIABILITIES: Debt obligations, net of current portion 10,540,496 9,191,109 Operating lease liability, net of current portion 4,077,109 2,217,418 Total long-term liabilities 14,617,605 11,408,527 TOTAL LIABILITIES 18,815,025 14,480,600 CONTINGENT LIABILITIES AND COMMITMENTS (See Note 11) STOCKHOLDERS’ EQUITY: Common stock, $ 0.10 par value per share, 15,000,000 shares authorized and 7,814,165 shares issued as of both December 31, 2023 and 2022 and 7,750,864 and 7,746,864 shares outstanding as of December 31, 2023 and 2022, respectively 781,417 781,417 Additional paid-in capital 36,357,239 35,978,364 Accumulated deficit ( 12,007,097 ) ( 6,232,499 ) Treasury stock, at cost, 63,301 and 67,301 shares as of December 31, 2023 and 2022, respectively ( 138,482 ) ( 147,233 ) Total stockholders’ equity 24,993,077 30,380,049 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 43,808,102 $ 44,860,649 The accompanying notes are an integral part of these financial statements. F- 2 ImmuCell Corporation STATEMENTS OF OPERATIONS During the Years Ended December 31, 2023 2022 Product sales $ 17,471,669 $ 18,567,962 Costs of goods sold 13,602,385 10,919,183 Gross margin 3,869,284 7,648,779 Product development expenses 4,394,852 4,493,872 Sales and marketing expenses 3,088,215 3,190,033 Administrative expenses 2,134,295 2,263,817 Operating expenses 9,617,362 9,947,722 NET OPERATING LOSS ( 5,748,078 ) ( 2,298,943 ) Other expenses, net 21,893 187,190 LOSS BEFORE INCOME TAXES ( 5,769,971 ) ( 2,486,133 ) Income tax expense 4,627 7,672 NET LOSS $ ( 5,774,598 ) $ ( 2,493,805 ) Basic weighted average common shares outstanding 7,747,686 7,745,122 Basic net loss per share $ ( 0.75 ) $ ( 0.32 ) Diluted weighted average common shares outstanding 7,747,686 7,745,122 Diluted net loss per share $ ( 0.75 ) $ ( 0.32 ) The accompanying notes are an integral part of these financial statements. F- 3 ImmuCell Corporation STATEMENTS OF STOCKHOLDERS’ EQUITY Common Stock Treasury Stock Shares Amount Additional paid-in capital Accumulated Deficit Shares Amount Total Stockholders’ Equity BALANCE, December 31, 2021 7,814,165 $ 781,417 $ 35,692,388 $ ( 3,738,694 ) 72,301 $ ( 158,171 ) $ 32,576,940 Net loss — — — ( 2,493,805 ) — — ( 2,493,805 ) Exercise of stock options — — 19,732 — ( 5,000 ) 10,938 30,670 Stock-based compensation — — 266,244 — — — 266,244 BALANCE, December 31, 2022 7,814,165 $ 781,417 $ 35,978,364 $ ( 6,232,499 ) 67,301 $ ( 147,233 ) $ 30,380,049 Net loss — — — ( 5,774,598 ) — — ( 5,774,598 ) Exercise of stock options — — 10,009 — ( 4,000 ) 8,751 18,760 Stock-based compensation — — 368,866 — — — 368,866 BALANCE, December 31, 2023 7,814,165 $ 781,417 $ 36,357,239 $ ( 12,007,097 ) 63,301 $ ( 138,482 ) $ 24,993,077 The accompanying notes are an integral part of these financial statements. F- 4 ImmuCell Corporation STATEMENTS OF CASH FLOWS During the Years Ended December 31, 2023 2022 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ ( 5,774,598 ) $ ( 2,493,805 ) Adjustments to reconcile net loss to net cash used for operating activities: Depreciation 2,697,897 2,468,479 Amortization of intangible assets 19,104 19,104 Amortization of debt issuance costs 13,072 7,658 Amortization of debt discounts 9,547 — Stock-based compensation 368,866 266,244 Loss (gain) on disposal of property, plant and equipment 8,099 ( 7,334 ) Non-cash rent expense 95,724 28,476 Changes in: Trade accounts receivable ( 426,783 ) 935,629 Inventory ( 1,773,302 ) ( 2,948,565 ) Prepaid expenses and other current assets ( 87,830 ) ( 110,858 ) Other assets 18,973 ( 50,513 ) Accounts payable and accrued expenses 156,995 341,614 Net cash used for operating activities ( 4,674,236 ) ( 1,543,871 ) CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property, plant and equipment ( 1,892,513 ) ( 3,975,274 ) Proceeds from sale of property, plant and equipment 2,474 11,000 Net cash used for investing activities ( 1,890,039 ) ( 3,964,274 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from debt issuance 3,000,000 2,000,000 Proceeds from line of credit 2,000,000 — Debt principal repayments ( 1,185,774 ) ( 897,125 ) Line of credit repayments ( 2,000,000 ) — Payments of debt issuance costs ( 35,425 ) ( 19,306 ) Payments of debt discounts ( 46,107 ) — Proceeds from exercise of stock options 18,760 30,670 Net cash provided by financing activities 1,751,454 1,114,239 NET DECREASE IN CASH AND CASH EQUIVALENTS ( 4,812,821 ) ( 4,393,906 ) BEGINNING CASH AND CASH EQUIVALENTS 5,791,562 10,185,468 ENDING CASH AND CASH EQUIVALENTS $ 978,741 $ 5,791,562 The accompanying notes are an integral part of these financial statements. F- 5 ImmuCell Corporation STATEMENT OF CASH FLOWS SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION During the Years Ended December 31, 2023 2022 CASH PAID FOR: Income taxes $ 6,466 $ 4,923 Interest expense $ 444,954 $ 338,516 NON-CASH ACTIVITIES: Change in capital expenditures included in accounts payable and accrued expenses $ 50,086 $ ( 44,998 ) Change in payments of debt discounts included in accounts payable and accrued expenses $ 16,566 $ — Operating lease right-of-use asset and operating lease liability $ 2,472,203 $ 1,184,727 The accompanying notes are an integral part of these financial statements. F- 6 ImmuCell Corporation Notes to Audited Financial Statements 1. BUSINESS OPERATIONS ImmuCell Corporation (the “Company”, “we”, “us”, “our”) was originally incorporated in Maine in 1982 and reincorporated in Delaware in 1987, in conjunction with an initial public offering of common stock. We are an animal health company whose purpose is to create scientifically proven and practical products that improve the health and productivity of dairy and beef cattle. As disclosed in Note 17, “Segment Information”, one of our business segments is dedicated to Scours and the other is focused on Mastitis. We manufacture and market the First Defense ® product line, providing Immediate Immunity™ to prevent scours in newborn dairy and beef calves. We have expanded this line into four different products with formulations targeting E. coli , coronavirus and rotavirus pathogens. We are also in the late stages of developing Re-Tain ® , a treatment for lactating dairy cows with subclinical mastitis. Mastitis is the most significant cause of economic loss to the dairy industry. These products help reduce the need to use traditional antibiotics in food producing animals. We are subject to certain risks including dependence on key individuals and third-party providers of critical goods and services, competition from other larger companies, the successful sale of existing products and the development of new viable products with appropriate regulatory approvals, where applicable. A combination of the conditions, trends and concerns related to or arising from inflation, rising interest rates and potential recessionary conditions in the United States and/or internationally, could have a corresponding negative effect on our business and operations. We are experiencing price increases in key components, supportive services, transportation and other supplies that are causing our costs of goods sold to increase. We have experienced some contamination events in our production process. We implemented a production slowdown to remediate this problem, which led to the recognition of lower sales and gross margin during the first ten months of 2023. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Basis of Presentation We have prepared the accompanying audited financial statements reflecting all adjustments (which are of a normal recurring nature) that are, in our opinion, necessary in order to ensure that the financial statements are not misleading. We follow accounting standards set by the Financial Accounting Standards Board (FASB). The FASB sets Generally Accepted Accounting Principles (GAAP) that we follow to ensure we accurately report our financial condition, results of operations, earnings per share and cash flows. References to GAAP in these footnotes are to the FASB Accounting Standards Codification ™ (Codification). We believe that the disclosures are adequate to ensure that the information presented is not misleading. (b) Cash and Cash Equivalents We consider all highly liquid investment instruments that mature within three months of their purchase dates to be cash equivalents. Cash equivalents are principally invested in securities backed by the U.S. government. We hold no cash or cash equivalents in excess of Federal Deposit Insurance Corporation (FDIC) limits of $ 250,000 per financial institution per depositor. See Note 3. (c) Trade Accounts Receivable Accounts receivable are carried at the original invoice amount less an estimate made for doubtful collection when applicable. Management determines the allowance for doubtful accounts on a monthly basis by identifying troubled accounts and by using historical experience applied to an aging of accounts and other relevant factors. Accounts receivable are considered to be past due if a portion of the receivable balance is outstanding for more than 30 days. Past due accounts receivable are subject to an interest charge. It was not necessary to charge interest on past due accounts during the years ended December 31, 2023 or 2022 because the time past due was not significant. There was no accrual for such interest charges as of December 31, 2023 or 2022. Accounts receivable are written off when deemed uncollectible. No accounts receivable were written off during the years ended December 31, 2023 or 2022. Recoveries of accounts receivable previously written off are recorded as income when received. No such recoveries were recorded during the years ended December 31, 2023 or 2022. As of December 31, 2023 and 2022, we determined that no allowance for doubtful accounts was necessary. See Note 4. F- 7 ImmuCell Corporation Notes to Audited Financial Statements (continued) (d) Inventory Inventory includes raw materials, work-in-process and finished goods and is recorded at the lower of cost, on the first-in, first-out method, or net realizable value (determined as the estimated selling price in the normal course of business, less reasonably predictable costs of completion, disposal and transportation). Work-in-process and finished goods inventories include materials, labor and manufacturing overhead. At each balance sheet date, we evaluate our ending inventories for excess quantities and obsolescence. Inventories that we consider excess or obsolete are written down to estimated net realizable value. Once inventory is written down and a new cost basis is established, it is not written back up. We believe that supplies and raw materials for the production of our products are available from more than one vendor or farm. Our policy is to maintain more than one source of supply for the components used in our products when feasible. See Note 5. (e) Property, Plant and Equipment, net We depreciate property, plant and equipment on the straight-line method by charges to operations and costs of goods sold in amounts estimated to expense the cost of the assets from the date they are first put into service to the end of the estimated useful lives of the assets. The facility we have constructed at 33 Caddie Lane to produce the Nisin Drug Substance (DS) for Re-Tain ® is being depreciated over 39 years from when a Certificate of Occupancy was issued during the fourth quarter of 2017. We began depreciating the equipment for our Nisin DS facility when it was placed in service during the third quarter of 2018. Approximately 87 % of these assets are being depreciated over 10 years. We began depreciating the leasehold improvements to our new First Defense ® production facility at 175 Industrial Way ( Building 175A ) over the remainder of the 10 -year lease term beginning when a Certificate of Occupancy was issued during the second quarter of 2020. During August of 2022, this lease term was extended to January of 2043 in connection with a new lease covering additional space at 175 Industrial Way ( Building 175B ). As a result, the net book value of these leasehold improvements as of August 31, 2022 is now being depreciated over the remainder of the extended lease term. Significant repairs to property, plant and equipment that benefit more than a current period are capitalized and depreciated over their useful lives. Insignificant repairs are expensed when incurred. See Notes 2(h) and 7 for additional disclosures. (f) Operating Leases We account for our real estate leases using a right-of-use model, which recognizes that at the date of commencement, a lessee has a financial obligation to make lease payments to the lessor for the right to use the underlying asset during the lease term and recognizes a corresponding right-of-use (ROU) asset related to this right. ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of the future lease payments over the expected lease term. The ROU asset is also adjusted for any lease prepayments made, lease incentives received and initial direct costs incurred. For operating leases with lease payments that fluctuate over the lease term, the total lease costs are recognized on a straight-line basis over the lease term. Our leases, at times, may include options to extend the term of the lease. When it is reasonably certain that we will exercise the option, we include the impact of the option in the lease term for purposes of determining future lease payments. For all underlying classes of assets, we made an accounting policy election to not recognize assets or liabilities for leases with a term of twelve months or less and to account for all components in a lease arrangement as a single combined lease component. Short-term lease payments are recognized on a straight-line basis. Certain of our lease agreements include variable rent payments, consisting primarily of amounts paid to the lessor based on cost or consumption, such as maintenance and real estate taxes. These costs are recognized in the period in which the obligation is incurred. Because our leases do not specify an implicit rate, we use an incremental borrowing rate based on information available at the lease commencement date to determine the present value of the lease payments. We evaluate our ROU asset for impairment when events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. See Notes 2(h) and 12 for additional disclosures. (g) Intangible Assets and Goodwill We amortize intangible assets on the straight-line method by charges to costs of goods sold in amounts estimated to expense the cost of the assets from the date they are first put into service to the end of the estimated useful lives of the assets. We have recorded intangible assets related to customer relationships, non-compete agreements and developed technology, each with defined useful lives. Amounts paid in excess of fair value of the net assets (including tax attributes) are recorded as goodwill under the acquisition method of accounting. We assess the impairment of intangible assets that have indefinite lives (when applicable) and goodwill (at the reporting unit level) on an annual basis (as of December 31 st ) and whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. We would record an impairment charge if such an assessment were to indicate that the fair value of such assets was less than the carrying value. Judgment is required in determining whether an event has occurred that may impair the value of goodwill or identifiable intangible assets. Factors that could indicate that an impairment may exist include significant under-performance relative to plan or long-term projections, significant changes in business strategy and significant negative industry or economic trends. Although we believe intangible assets and goodwill are properly stated in the accompanying financial statements, changes in strategy or market conditions could significantly impact these judgments and require an adjustment to the recorded balance in the future. No goodwill impairments were recorded during the years ended December 31, 2023 or 2022. See Notes 2(h) and 8 for additional disclosures. F- 8 ImmuCell Corporation Notes to Audited Financial Statements (continued) (h) Valuation of Long-Lived Assets We periodically evaluate our long-lived assets, consisting principally of property, plant and equipment, operating lease right-of-use asset and amortizable intangible assets, for potential impairment. In accordance with the applicable accounting guidance for the treatment of long-lived assets, we review the carrying value of our long-lived assets or asset group that is held and used, including intangible assets subject to amortization, for impairment whenever events and circumstances indicate that the carrying value of the assets may not be recoverable. Under the held for use approach, the asset or asset group to be tested for impairment should represent the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. No impairment was recognized during the years ended December 31, 2023 or 2022. (i) Fair Value Measurements In determining fair value measurements, we follow the provisions of Codification Topic 820, Fair Value Measurements and Disclosures . Codification Topic 820 defines fair value, establishes a framework for measuring fair value under GAAP and enhances disclosures about fair value measurements. The topic provides a consistent definition of fair value which focuses on an exit price, which is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The topic also prioritizes, within the measurement of fair value, the use of market-based information over entity-specific information and establishes a three-level hierarchy for fair value measurements based on the nature of inputs used in the valuation of an asset or liability as of the measurement date. As of December 31, 2023 and 2022, the carrying amounts of cash and cash equivalents, accounts receivable, inventory, prepaid expenses and other current assets, accounts payable and accrued expenses approximate fair value because of their short-term nature. The amount outstanding under our bank debt facilities is measured at carrying value in our accompanying balance sheets. Our bank debt facilities are valued using Level 2 inputs. The three-level hierarchy is as follows: Level 1 — Pricing inputs are quoted prices available in active markets for identical assets or liabilities as of the measurement date. Level 2 — Pricing inputs are quoted prices for similar assets or liabilities, or inputs that are observable, either directly or indirectly, for substantially the full term through corroboration with observable market data. Level 3 — Pricing inputs are unobservable for the assets or liabilities, that is, inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level of an asset or liability within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the investment. We also hold money market accounts in our bank account, which are classified as cash equivalents and measured at fair value. The fair value of these investments is based on their closing published net asset value. F- 9 ImmuCell Corporation Notes to Audited Financial Statements (continued) We assess the levels of the investments at each measurement date, and transfers between levels are recognized on the actual date of the event or change in circumstances that caused the transfer in accordance with our accounting policy regarding the recognition of transfers between levels of the fair value hierarchy. During the years ended December 31, 2023 and 2022, there were no transfers between levels. As of December 31, 2023 and 2022, our Level 1 assets measured at fair value by quoted prices in active markets consisted of cash and money market accounts. There were no assets or liabilities measured at fair value on a nonrecurring basis as of December 31, 2023 or 2022. The carrying values of our cash and money market accounts as of December 31, 2023 or 2022 approximated their fair market values. Due to inflation and the changing interest rate environment, the carrying values of our fixed rate bank debt as of December 31, 2023 and 2022 differed from their fair market values. These values are reflected in the following tables: As of December 31, 2023 Level 1 Level 2 Level 3 Total Assets: Cash and money market accounts $ 978,741 $ — $ — $ 978,741 Liabilities: Bank debt $ — $ 10,431,817 $ — $ 10,431,817 As of December 31, 2022 Level 1 Level 2 Level 3 Total Assets: Cash and money market accounts $ 5,791,562 $ — $ — $ 5,791,562 Liabilities: Bank debt $ — $ 8,897,197 $ — $ 8,897,197 (j) Concentration of Risk Concentration of credit risk with respect to accounts receivable is principally limited to certain customers to whom we make substantial sales. To reduce risk, we routinely assess the financial strength of our customers and, as a consequence, believe that our accounts receivable credit risk exposure is limited. We maintain an allowance for potential credit losses when deemed necessary, but historically we have not experienced significant credit losses related to an individual customer or groups of customers in any particular industry or geographic area. Sales to significant customers that amounted to 10% or more of total product sales are detailed in the following table: During the Years Ended December 31, 2023 2022 Company A 47 % 40 % Company B 32 % 33 % Trade accounts receivable due from significant customers that amounted to 10% or more of our total trade accounts receivable are detailed in the following table: As of December 31, 2023 As of December 31, 2022 Company A 43 % 41 % Company B 36 % 28 % Company C * 12 % * This amount is less than 10 %. F- 10 ImmuCell Corporation Notes to Audited Financial Statements (continued) (k) Revenue Recognition We recognize revenue in accordance with Codification Topic 606, Revenue from Contracts with Customers (ASC 606) . ASC 606 is a single comprehensive model for companies to use in accounting for revenue arising from contracts with customers. The core principle is that we recognize the amount of revenue to which we expect to be entitled for the transfer of promised goods or services to customers when a customer obtains control of promised goods or services in an amount that reflects the consideration we expect to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. We conduct our business with customers through valid purchase orders or sales orders which are considered contracts and are not interdependent on one another. A performance obligation is a promise in a contract to transfer a distinct product to the customer. The transaction price is the amount of consideration we expect to receive under the arrangement. Revenue is measured based on consideration specified in a contract with a customer. The transaction price of a contract is allocated to each distinct performance obligation and recognized when or as the customer receives the benefit of the performance obligation. Product transaction prices on a purchase or sales order are discrete and stand-alone. We recognize revenue when we satisfy a performance obligation in a contract by transferring control over a product to a customer when product ships to a customer. Amounts due are typically paid approximately 30 days from the time control is transferred. Shipping and handling costs associated with outbound freight are accounted for as a fulfillment cost in costs of goods sold. We do not bill for or collect sales tax because our sales are generally made to distributors and thus our sales to them are not subject to sales tax. We generally have experienced an immaterial amount of product returns. See Note 14 for additional disclosures. (l) Expense Recognition We do not incur costs in connection with product sales to customers that are eligible for capitalization. Advertising costs are expensed when incurred, which is generally during the month in which the advertisement is published. All product development expenses are expensed as incurred, as are all related patent costs. We capitalize costs to produce inventory during the production cycle, and these costs are charged to costs of goods sold when the inventory is sold to a customer or is deemed to be in excess or obsolete. (m) Income Taxes We account for income taxes in accordance with Codification Topic 740, Income Taxes , which requires that we recognize a current tax liability or asset for current taxes payable or refundable and a deferred tax liability or asset for the estimated future tax effects of temporary differences and carryforwards to the extent they are realizable. We consider future taxable income and feasible tax planning strategies in assessing the need for a valuation allowance against our deferred tax assets at the end of each quarter. If we determine that it is more likely than not that we will realize our deferred tax assets in the future in excess of the net recorded amount over a reasonably short period of time, a reduction of the valuation allowance would increase income in the period such determination was made. Likewise, if we determine that it is more likely than not that we will not realize all or part of our net deferred tax asset in the future, an increase to the valuation allowance would be charged to income in the period such determination was made. Codification Topic 740-10 clarifies the accounting for income taxes by prescribing a minimum recognition threshold that a tax position must meet before being recognized in the financial statements. In the ordinary course of business, there are transactions and calculations where the ultimate tax outcome is uncertain. In addition, we are subject to periodic audits and examinations by the Internal Revenue Service and other taxing authorities. With few exceptions, we are no longer subject to income tax examinations by tax authorities for years before 2020. We have evaluated the positions taken on our filed tax returns and have concluded that no uncertain tax positions existed as of December 31, 2023 or 2022. Although we believe that our estimates are reasonable, actual results could differ from these estimates. See Note 16. (n) Stock-Based Compensation We account for stock-based compensation in accordance with Codification Topic 718, Compensation-Stock Compensation , which generally requires us to recognize non-cash compensation expense for stock-based payments using the fair-value-based method. The fair value of each stock option grant has been estimated on the date of grant using the Black-Scholes option pricing model. Accordingly, we recorded compensation expense pertaining to stock-based compensation of $ 368,866 and $ 266,244 during the years ended December 31, 2023 and 2022, respectively. See Note 13. (o) Net Loss Per Common Share Net loss per common share has been computed in accordance with Codification Topic 260-10, Earnings Per Share . The net loss per share has been computed by dividing the net loss by the weighted average number of common shares outstanding during the period. All stock options have been excluded from the denominator in the calculation of dilutive earnings per share when we are in a loss position because their inclusion would be anti-dilutive. Outstanding stock options that were not included in this calculation because the effect would be anti-dilutive amounted to 618,500 and 605,000 during the years ended December 31, 2023 and 2022, respectively. F- 11 ImmuCell Corporation Notes to Audited Financial Statements (continued) During the Years Ended December 31, 2023 2022 Net loss attributable to stockholders $ ( 5,774,598 ) $ ( 2,493,805 ) Weighted average common shares outstanding - Basic 7,747,686 7,745,122 Dilutive impact of share-based compensation awards — — Weighted average common shares outstanding - Diluted 7,747,686 7,745,122 Net loss per share: Basic $ ( 0.75 ) $ ( 0.32 ) Diluted $ ( 0.75 ) $ ( 0.32 ) (p) Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Although we regularly assess these estimates, actual amounts could differ from those estimates and are subject to change in the near term. Changes in estimates are recorded during the period in which they become known. Significant estimates include our valuation of inventory, long-lived assets, deferred tax assets and costs of goods sold. (q) New Accounting Pronouncement Adopted In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments , which was effective for us as of January 1, 2023, using the modified retrospective transition method. This ASU amends the impairment model to utilize an expected loss methodology in place of the incurred loss methodology for financial instruments, including trade receivables. The amendment requires entities to consider a broader range of information to estimate expected credit losses, which may result in earlier recognition of losses. Historically, we have experienced a very low level of bad debt expense, and most of our trade receivables are collected by the due date or within a few days of the due date. Because of this experience, the adoption of ASU 2016-13 did not have a material impact on our financial statements. (r) New Accounting Pronouncements Not Yet Adopted In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant expenses. The amendments will require disclosure of significant segment expenses that are regularly provided to our chief operating decision-maker and included within segment profit and loss. The amendments are effective for annual periods beginning after December 15, 2023, and interim periods beginning after December 15, 2024, with early adoption permitted, and will be applied retrospectively to all prior periods presented in the financial statements. We are currently evaluating ASU 2023-07 to determine its impact on our financial statements. In December 2023, the FASB issued ASU 2023-09 , Income Taxes (Topic 740): Improvements to Income Tax Disclosures , which includes amendments that further enhance income tax disclosures, primarily through standardization and disaggregation of income tax rate reconciliation categories and income taxes paid by jurisdiction. The amendments are effective for annual periods beginning after December 15, 2024, with early adoption permitted, and may be applied either prospectively or retrospectively. We are currently evaluating ASU 2023-09 to determine its impact on our financial statements. 3. CASH AND CASH EQUIVALENTS Cash and cash equivalents amounted to $ 978,741 and $ 5,791,562 as of December 31, 2023 and 2022, respectively. 4. TRADE ACCOUNTS RECEIVABLE Trade accounts receivable amounted to $ 2,185,383 and $ 1,758,600 as of December 31, 2023 and 2022, respectively. No allowance for bad debt or product returns was recorded as of December 31, 2023 or 2022. We anticipate no future events or conditions that would impact our ability to collect our accounts receivable. Because of the generally short duration from the balance sheet date to the date of collection, our collection rate is not expected to be significantly impacted by events occurring after the balance sheet date. The trade accounts receivable balances included $ 42,507 and $ 46,426 due from a related party as of December 31, 2023 or 2022, respectively. See Note 18. F- 12 ImmuCell Corporation Notes to Audited Financial Statements (continued) 5. INVENTORY Inventory consisted of the following: As of December 31, 2023 As of December 31, 2022 Raw materials $ 1,594,028 $ 2,419,982 Work-in-process 5,815,194 3,468,702 Finished goods 402,619 149,855 Total $ 7,811,841 $ 6,038,539 These inventory figures are net of a $ 527,133 and $ 589,204 write-off of scrapped inventory during the years ended December 31, 2023 and 2022, respectively, that resulted principally from contamination events and other production process losses. 6. PREPAID EXPENSES AND OTHER CURRENT ASSETS Prepaid expenses and other current assets consisted of the following: As of December 31, 2023 As of December 31, 2022 Prepaid expenses $ 454,152 $ 363,877 Other receivables 39,733 42,178 Total $ 493,885 $ 406,055 7. PROPERTY, PLANT AND EQUIPMENT, net Property, plant and equipment consisted of the following: Estimated Useful Lives (in years) As of December 31, 2023 As of December 31, 2022 Laboratory and manufacturing equipment 3 - 10 $ 20,953,601 $ 19,181,960 Buildings and improvements 10 - 39 20,784,565 20,050,167 Office furniture and equipment 3 - 10 1,036,374 900,306 Construction in progress n/a 2,768,224 3,668,046 Land n/a 516,867 516,867 Property, plant and equipment, gross 46,059,631 44,317,346 Accumulated depreciation ( 18,483,948 ) ( 15,875,620 ) Property, plant and equipment, net $ 27,575,683 $ 28,441,726 As of December 31, 2023 and 2022, construction in progress consisted principally of payments toward the First Defense ® production capacity expansion project and equipment needed to bring the formulation and aseptic filling for Re-Tain ® in-house. Property, plant and equipment disposals were $ 100,142 and $ 127,127 during the years ended December 31, 2023 and 2022, respectively. Depreciation expense was $ 2,697,897 and $ 2,468,479 during the years ended December 31, 2023 and 2022, respectively. 8. INTANGIBLE ASSETS Intangible assets of $ 191,040 were valued using the relief from royalty method and are being amortized to costs of goods sold over their useful lives, which are estimated to be 10 years. Intangible amortization expense was $ 19,104 during both of the years ended December 31, 2023 and 2022. The net value of these intangibles was $ 38,208 and $ 57,312 as of December 31, 2023 and December 31, 2022, respectively. Intangible asset amortization expense is estimated to be $ 19,104 per year through December 31, 2025. F- 13 ImmuCell Corporation Notes to Audited Financial Statements (continued) Intangible assets as of December 31, 2023 consisted of the following: Gross Carrying Value Accumulated Amortization Net Book Value Developed technology $ 184,100 $ ( 147,280 ) $ 36,820 Customer relationships 1,300 ( 1,040 ) 260 Non-compete agreements 5,640 ( 4,512 ) 1,128 Total $ 191,040 $ ( 152,832 ) $ 38,208 Intangible assets as of December 31, 2022 consisted of the following: Gross Carrying Value Accumulated Amortization Net Book Value Developed technology $ 184,100 $ ( 128,870 ) $ 55,230 Customer relationships 1,300 ( 910 ) 390 Non-compete agreements 5,640 ( 3,948 ) 1,692 Total $ 191,040 $ ( 133,728 ) $ 57,312 9. ACCOUNTS PAYABLE AND ACCRUED EXPENSES Accounts payable and accrued expenses consisted of the following: As of December 31, 2023 As of December 31, 2022 Accounts payable – trade $ 874,558 $ 726,736 Accounts payable – capital 13,175 63,261 Accrued payroll 942,999 966,553 Accrued professional fees 97,800 95,550 Accrued other 192,754 143,872 Income tax payable 3,051 4,890 Total $ 2,124,337 $ 2,000,862 10. BANK DEBT Loans #1 and #2 : During the first quarter of 2020, we closed on a debt financing with Gorham Savings Bank (GSB) aggregating $ 8,600,000 , which was comprised of a $ 5,100,000 mortgage note (Loan #1) that bears interest at a fixed rate of 3.50 % per annum (with a 10 -year term and 25 -year amortization schedule and a balloon principal payment of $ 3,145,888 due during the first quarter of 2030) and a $ 3,500,000 note (Loan #2) that bears interest at a fixed rate of 3.50 % per annum (with a 7 -year term and amortization schedule). The proceeds from the 2020 debt refinancing were used to repay all bank debt outstanding at the time of closing and to provide some additional working capital. During the first quarter of 2022, we closed on an additional $ 2,000,000 in mortgage debt, which bears interest at the fixed rate of 3.58 % per annum. This was accomplished through an amendment of the original mortgage note (Loan #1) that increased the then outstanding principal balance from $ 4,233,957 to $ 6,233,957 bearing interest at the blended fixed rate of 3.53 % per annum. This increased the balloon payment from $ 3,145,888 to $ 3,687,479 and extended the due date of the balloon payment from the first quarter of 2030 to the first quarter of 2032. Line of Credit (LOC) : Also during the first quarter of 2020, GSB extended a $ 1,000,000 LOC to us that is available, as needed, through September 11, 2025. Interest on borrowings against the LOC is variable at the National Prime Rate per annum. There was no outstanding balance under this LOC as of December 31, 2023 or 2022. Loan #3 : During the second quarter of 2020, we received a loan from the Maine Technology Institute (MTI) in the aggregate principal amount of $ 500,000 . The first 2.25 years of this loan were interest-free with no interest accrual or required principal payments. Beginning during the fourth quarter of 2022, Loan #3 became subject to quarterly principal and interest payments at a fixed rate of 5 % per annum over the final five years of the loan, through the third quarter of 2027 if not repaid before then. F- 14 ImmuCell Corporation Notes to Audited Financial Statements (continued) Loan #4 : During the fourth quarter of 2020, we closed on a $ 1,500,000 note with GSB that bears interest at a fixed rate of 3.50 % per annum (with a 7 -year term and amortization schedule). Proceeds of $ 624,167 were used to prepay a portion of the outstanding principal on our mortgage note (Loan #1), which reduced the outstanding balance to 80 % of the most recent appraised value of the property securing the debt, which allowed GSB to release the $ 1,400,000 that had been held in escrow. The remaining proceeds were available for general working capital purposes. Loan #5 : On June 30, 2021, we executed definitive agreements covering a second loan from the MTI in the aggregate principal amount of $ 400,000 , proceeds from which were received in July 2021. The first two years of this loan were interest-free with no interest accrual or required principal payments. Principal and interest payments at a fixed rate of 5 % per annum are due quarterly over the final 5.5 years of the loan, beginning during the third quarter of 2023 and continuing through the fourth quarter of 2028 if not repaid before then. Loan #6: During the third quarter of 2023, we closed on a $ 2,000,000 term loan bearing interest at a fixed rate of 7 % per annum from GSB. The Finance Authority of Maine (FAME) provided $ 1,000,000 of loan insurance to GSB. This loan is repayable under a 7 -year amortization schedule with a balloon payment of $ 1,285,072 due during the third quarter of 2026. Loan #7: Also during the third quarter of 2023, we closed on a $ 1,000,000 term loan bearing interest at a fixed rate of 8 % per annum from FAME. The loan is repayable under a 7 -year amortization schedule with a balloon payment of $ 649,235 due during the third quarter of 2026. Loans #1, #2, #4, #6 and #7 are secured by liens on substantially all of our assets and are subject to certain restrictions and financial covenants. Loan #7 is subordinated to Loans #1, #2, #4 and #6. Reflecting our poor financial performance during 2023, the debt covenant requirements for the twelve-month periods ended December 31, 2023 and June 30, 2024 were waived pre-emptively by our bank. We are required to meet a minimum debt service coverage (DSC) ratio of 1.35 for the twelve-month period ending September 30, 2024 and then annually after that beginning with the year ending December 31, 2024. In connection with these credit facilities, we incurred aggregate debt issuance and debt discount costs of $ 168,268 ($ 98,098 and $ 19,306 of which were incurred during the years ended December 31, 2023 and 2022, respectively). The amortization of these debt issuance and debt discount costs is being recorded as a component of interest expense, included in other expenses, net, and is being amortized on a straight-line basis over the underlying terms of the notes. Loans #3 and #5 are unsecured and subordinated to our indebtedness to GSB and FAME. Failure to make timely payments of principal and interest, or otherwise to comply with the terms of the agreements of Loans #3 and #5, would entitle the MTI to accelerate the maturity of such debt and demand repayment in full. These loans may be prepaid without penalty at any time. Debt proceeds received and principal repayments made (excluding our $ 1,000,000 line of credit) during the years ended December 31, 2023 and 2022 are reflected in the following table by period and by loan: During the Year Ended December 31, 2023 During the Year Ended December 31, 2022 Proceeds from Debt Issuance Debt Principal Repayments Proceeds from Debt Issuance Debt Principal Repayments Loan #1 $ — $ 223,222 $ 2,000,000 $ 199,013 Loan #2 — 494,455 — 477,237 Loan #3 — 91,446 — 22,160 Loan #4 — 205,884 — 198,715 Loan #5 — 32,017 — — Loan #6 2,000,000 93,054 — — Loan #7 1,000,000 45,696 — — Total $ 3,000,000 $ 1,185,774 $ 2,000,000 $ 897,125 F- 15 ImmuCell Corporation Notes to Audited Financial Statements (continued) Principal payments (net of debt issuance and debt discount costs) due under bank loans outstanding as of December 31, 2023 (excluding our $ 1,000,000 line of credit) are reflected in the following table by the year that payments are due: During the Years Ending December 31, 2024 2025 2026 2027 2028 Thereafter Total Loan #1 $ 230,879 $ 239,876 $ 248,604 $ 257,649 $ 266,537 $ 4,598,360 $ 5,841,905 Loan #2 512,103 530,738 549,881 140,458 — — 1,733,180 Loan #3 96,104 101,001 106,146 83,143 — — 386,394 Loan #4 213,217 220,994 228,965 240,452 — — 903,628 Loan #5 66,470 69,856 73,415 77,156 81,086 — 367,983 Loan #6 235,369 253,003 1,418,574 — — — 1,906,946 Loan #7 114,632 124,364 715,308 — — — 954,304 Subtotal 1,468,774 1,539,832 3,340,893 798,858 347,623 4,598,360 12,094,340 Debt issuance cost ( 19,076 ) ( 18,976 ) ( 13,579 ) ( 5,420 ) ( 3,513 ) ( 11,347 ) ( 71,911 ) Debt discount cost ( 20,891 ) ( 20,891 ) ( 11,344 ) — — — ( 53,126 ) Total $ 1,428,807 $ 1,499,965 $ 3,315,970 $ 793,438 $ 344,110 $ 4,587,013 $ 11,969,303 11. CONTINGENT LIABILITIES AND COMMITMENTS Our bylaws, as amended, in effect provide that the Company will indemnify its officers and directors against any liability arising from their responsibilities as officers and directors to the maximum extent permitted by Delaware law. In addition, we make similar indemnity undertakings with each director through a separate indemnification agreement with that director. The maximum payment that we may be required to make under such provisions is theoretically unlimited and is impossible to determine. We maintain directors’ and officers’ liability insurance, which may provide reimbursement to the Company for payments made to, or on behalf of, officers and directors pursuant to the indemnification provisions. Our indemnification obligations were grandfathered under the provisions of Codification Topic 460 , Guarantees . Accordingly, we have recorded no liability for such obligations as of December 31, 2023 or 2022. Since our incorporation, we have had no occasion to make any indemnification payment to any of our officers or directors for any reason. The development, manufacturing and marketing of animal health care products entails an inherent risk that liability claims will be asserted against us during the normal course of business. We are aware of no such claims against us as of the date of this filing. We believe that we have reasonable levels of liability insurance to support our operations. We enter into agreements with third parties in the ordinary course of business under which we are obligated to indemnify such third parties from and against various risks and losses. The precise terms of such indemnities vary with the nature of the agreement. In many cases, we limit the maximum amount of our indemnification obligations, but in some cases those obligations may be theoretically unlimited. We have not incurred material expenses in discharging any of these indemnification obligations and based on our analysis of the nature of the risks involved, we believe that the fair value of the liabilities potentially arising under these agreements is minimal. Accordingly, we recorded no liabilities for such obligations as of December 31, 2023 or 2022. We plan to purchase certain key parts (syringes) and services (formulation, aseptic filling and final packaging) pertaining to Re-Tain ® Drug Product (DP), our Nisin-based intramammary treatment of subclinical mastitis in lactating dairy cows, exclusively from contractors. The contract for formulation, aseptic filling and final packaging of DP is scheduled to terminate after the supply of product for our initial controlled market launch. We initiated an investment in the necessary equipment to perform the DP formulation and aseptic filling services in-house, but this investment has been paused at the present time. F- 16 ImmuCell Corporation Notes to Audited Financial Statements (continued) We enter into compensation agreements (which are publicly filed) with our three executive officers. Effective March 28, 2022, we entered into an Amended and Restated Separation and Deferred Compensation Agreement (the “Deferred Compensation Agreement”) with Mr. Brigham (our President and CEO) that superseded and replaced in its entirety a March 2020 severance agreement between the Company and Mr. Brigham. Upon separation from the Company for any reason, Mr. Brigham’s Deferred Compensation Agreement allows Mr. Brigham to be paid, among other amounts, all earned and unused paid time off (which expense totaling $ 222,379 was accrued during the first quarter of 2022 and $ 230,162 and $ 222,379 was included in accounts payable and accrued expenses on the accompanying balance sheets as of December 31, 2023 and 2022, respectively) and to receive up to an additional $ 300,000 in deferred compensation (which amount is being accrued over the three-year period ending in January 2025). This deferred compensation payment vested as to $ 100,000 on January 1, 2023 and an additional $ 100,000 on January 1, 2024. An additional $ 100,00 will vest on January 1, 2025, provided that Mr. Brigham is employed by the Company as of January 2025. The vested amounts would be paid upon the earlier of January 31, 2025 or within thirty (30) days following his separation from the Company. As of December 31, 2023 and 2022, $ 200,000 and $ 100,000 , respectively, was included in accounts payable and accrued expenses on the accompanying balance sheets. In addition, upon termination of Mr. Brigham’s employment (a) by the Company other than for cause, (b) due to death or disability or (c) by Mr. Brigham for good reason, in each case as described and defined in the Deferred Compensation Agreement, the Company agrees to pay Mr. Brigham 100 % of his then current annual base salary and a lump sum payment equal to the employer portion of the costs of continued health benefits for Mr. Brigham and his covered dependents for a twelve-month period following termination, and certain equity incentive awards granted to Mr. Brigham would continue to vest following such termination in accordance with the terms of the Deferred Compensation Agreement. Incentive Compensation Agreements with Mr. Brigham, Ms. Brockmann (our Vice President of Sales and Marketing) and Ms. Williams (our Vice President of Manufacturing Operations) allow these executives to earn incentive compensation if certain regulatory and financial objectives are met during the year to which the agreement relates, as specified in their agreements. Amounts related to these incentive compensation agreements are accrued over the period they are earned (when it is probable that the amounts will be earned) based on our best estimate of the amounts expected to be earned. In addition to the commitments discussed above, we had committed $ 41,000 to increase our production capacity for the First Defense ® product line, $ 2,345,000 to the purchase of inventory, $ 7,000 related to the commercial manufacture of Re-Tain ® and $ 307,000 to other obligations as of December 31, 2023. F- 17 ImmuCell Corporation Notes to Audited Financial Statements (continued) 12. OPERATING LEASES On September 12, 2019, we entered into a lease covering approximately 14,300 square feet of office and warehouse space with a possession date of November 15, 2019 and a commencement date of February 13, 2020. The property is located at 175 Industrial Way in Portland ( Building 175A ), which is a short distance from our headquarters and manufacturing facility at 56 Evergreen Drive. We renovated this space to meet our needs in expanding our production capacity for the First Defense ® product line. The original lease term was ten years with a right to renew for a second 10 -year term and a right of first offer to purchase. At the time we entered into this lease, we were not reasonably assured that we would exercise this renewal option in place of other real estate options. For that reason, a 10-year period was reflected in the right-of-use (ROU) asset and lease liability on our balance sheet. During the third quarter of 2022, we committed to lease an additional 15,400 square feet of space at 175 Industrial Way ( Building 175B ), which is connected to the original space, over a 20 -year term. The ROU asset and lease liability for the committed space at Building 175B was recorded as of April 1, 2023 after construction of the building shell was completed in accordance with the lease agreement. Monthly lease payments commenced as of August 1, 2023. In connection with the lease commitment for space at Building 175B, the term of the original lease for Building 175A was extended by approximately 13 years. On November 14, 2023, we amended this lease further to provide for certain tenant improvements on the leased premises to be paid for by our landlord. These improvements will provide heat to an unfinished space, provide additional warehouse space, and create a new primary shipping and receiving facility. In consideration for the landlord agreeing to pay for the cost of those certain tenant improvements, we are obligated to make additional rent payments of $ 20,000 per month from November 2023 through June 2024 and a one-time additional rent payment of $ 488,743 in July 2024. The total lease liability for both leases over the amended terms (including inflationary adjustments) aggregates $ 4,739,077 as of November 14, 2023. Because of this modification to the lease payments, the ROU asset and lease liability associated with the space at Building 175B were remeasured as of the modification date. Our leases include variable non-lease components. Such payments primarily include common area maintenance charges. As of December 31, 2023, the balance of the operating lease ROU asset was $ 4,571,149 and the operating lease liability was $ 4,721,385 . As of December 31, 2022, the balance of the operating lease ROU asset was $ 2,194,670 and the operating lease liability was $ 2,249,182 . The calculated amount of the ROU asset and lease liability is impacted by the length of the lease term and the discount rate used for the present value of the minimum lease payments. We elected not to separate lease and non-lease components for all classes of underlying assets, and instead to account for them as a single lease component. Variable lease cost primarily represents variable payments such as real estate taxes and common area maintenance. The following tables describe our lease costs and other lease information: During the Years Ended December 31, 2023 2022 Lease Cost Operating lease cost $ 348,929 $ 149,176 Variable lease cost 36,774 36,404 Total lease cost $ 385,703 $ 185,580 Operating Leases Cash paid for operating lease liabilities $ 248,595 $ 148,302 Weighted average remaining lease term (in years) 19.1 20.1 Weighted average discount rate 7.11 % 5.54 % Future lease payments required under non-cancelable operating leases in effect as of December 31, 2023 were as follows: During the years ending December 31, Amount 2024 $ 946,003 2025 342,880 2026 349,744 2027 356,732 2028 363,870 Thereafter 5,949,488 Total lease payments (undiscounted cash flows) 8,308,717 Less: imputed interest (discount effect of cash flows) ( 3,587,332 ) Total operating liabilities $ 4,721,385 F- 18 ImmuCell Corporation Notes to Audited Financial Statements (continued) 13. STOCKHOLDERS’ EQUITY Common Stock Issuances From February 2016 to April 2021, we sold the aggregate of 4,553,017 shares of common stock in six different transactions raising gross proceeds of $ 26,714,403 at the weighted average price of $ 5.87 per share. These funds have been essential to funding our business growth plans. The details of each transaction are discussed below: 1) During February of 2016, we sold 1,123,810 shares of common stock at a price to the public of $ 5.25 per share in an underwritten public offering pursuant to our effective shelf registration statement on Form S-3, raising gross proceeds of $ 5,900,003 and resulting in net proceeds to the Company of $ 5,313,224 (after deducting underwriting discounts and offering expenses incurred in connection with the equity financing). 2) During October of 2016, we sold, in a private placement, 659,880 shares of common stock to nineteen institutional and accredited investors at $ 5.25 per share, raising gross proceeds of $ 3,464,370 and resulting in net proceeds to the Company of $ 3,160,923 (after deducting placement agent fees and other expenses incurred in connection with the equity financing). 3) During July of 2017, we sold 200,000 shares of our common stock at a price of $ 5.25 per share in a public, registered sale to two related investors pursuant to our effective shelf registration statement on Form S-3, raising gross proceeds of $ 1,050,000 and resulting in net proceeds of $ 1,034,164 (after deducting expenses incurred in connection with the equity financing). 4) During December of 2017, we sold 417,807 shares of common stock at a price to the public of $ 7.30 per share in an underwritten public offering pursuant to our effective shelf registration statement on Form S-3, raising gross proceeds of $ 3,049,991 and resulting in net proceeds to the Company of $ 2,734,173 (after deducting underwriting discounts and offering expenses incurred in connection with the equity financing). 5) During March of 2019, we sold 1,636,364 shares of common stock at a price to the public of $ 5.50 per share in an underwritten public offering pursuant to our effective shelf registration statement on Form S-3, raising gross proceeds of $ 9,000,002 and resulting in net proceeds to the Company of $ 8,303,436 (after deducting underwriting discounts and offering expenses incurred in connection with the equity financing). 6) During April of 2021, we sold 515,156 shares of our common stock at a price of $ 8.25 per share in a public, registered sale to seven investors pursuant to our effective shelf registration statement on Form S-3, raising gross proceeds of $ 4,250,038 and resulting in net proceeds of $ 4,233,026 (after deducting expenses incurred in connection with the equity financing). Stock Option Plans In June 2010, our stockholders approved the 2010 Stock Option and Incentive Plan (the “2010 Plan”) pursuant to the provisions of the Internal Revenue Code of 1986, under which employees and certain service providers may be granted options to purchase shares of the Company’s common stock at no less than fair market value on the date of grant. At that time, 300,000 shares of common stock were reserved for issuance under the 2010 Plan and subsequently no additional shares have been reserved for the 2010 Plan. Vesting requirements are determined by the Compensation and Stock Option Committee of the Board of Directors on a case-by-case basis. All options granted under the 2010 Plan expire no later than 10 years from the date of grant. The 2010 Plan expired in June 2020, after which date no further options can be granted under the 2010 Plan. However, options outstanding under the 2010 Plan at that time can be exercised in accordance with their terms. There were 188,500 and 202,500 options outstanding under the 2010 Plan as of December 31, 2023 and 2022, respectively. In June 2017, our stockholders approved the 2017 Stock Option and Incentive Plan (the “2017 Plan”) pursuant to the provisions of the Internal Revenue Code of 1986, under which employees and certain service providers may be granted options to purchase shares of the Company’s common stock at no less than fair market value on the date of grant. At that time, 300,000 shares of common stock were reserved for issuance under the 2017 Plan. An amendment to the 2017 Plan increasing the number of shares reserved for issuance under the 2017 Plan from 300,000 shares to 650,000 shares was approved by a vote of stockholders at the Annual Meeting of Stockholders in June 2022. Vesting requirements are determined by the Compensation and Stock Option Committee of the Board of Directors on a case-by-case basis. All options granted under the 2017 Plan expire no later than 10 years from the date of grant. The 2017 Plan expires in March 2027, after which date no further options can be granted under the 2017 Plan. However, options outstanding under the 2017 Plan at that time can be exercised in accordance with their terms. As of December 31, 2023 and 2022, there were 430,000 and 402,500 options outstanding under the 2017 Plan, respectively. F- 19 ImmuCell Corporation Notes to Audited Financial Statements (continued) Activity under the stock option plans described above was as follows: 2010 Plan 2017 Plan Weighted Average Exercise Price Aggregate Intrinsic Value (1) Outstanding as of December 31, 2021 218,500 224,500 $ 6.94 $ 468,425 Grants — 210,500 $ 7.73 Terminations/forfeitures (2) ( 11,000 ) ( 32,500 ) $ 7.34 Exercises ( 5,000 ) — $ 6.13 Outstanding as of December 31, 2022 202,500 402,500 $ 7.19 $ ( 661,310 ) Grants — 122,000 $ 5.16 Terminations/forfeitures (2) ( 10,000 ) ( 94,500 ) $ 7.12 Exercises ( 4,000 ) — $ 4.69 Outstanding as of December 31, 2023 188,500 430,000 $ 6.82 $ ( 1,071,121 ) Vested as of December 31, 2023 188,500 92,500 $ 6.43 $ ( 377,712 ) Vested and expected to vest as of December 31, 2023 188,500 430,000 $ 6.82 $ ( 1,071,121 ) Reserved for future grants — 202,000 (1) Intrinsic value is the difference between the fair market value of the underlying common stock as of the date indicated and as of the date of the option grant (which is equal to the option exercise price). (2) Terminations and forfeitures are recognized when they occur. The following table displays additional information about the stock option plans described above: Number of Shares Weighted Average Fair Value at Grant Date Weighted Average Exercise Price Non-vested stock options as of January 1, 2023 307,000 $ 3.80 $ 7.71 Non-vested stock options as of December 31, 2023 337,500 $ 3.66 $ 7.14 Stock options granted during the year ended December 31, 2023 122,000 $ 2.80 $ 5.16 Stock options that vested during the year ended December 31, 2023 57,000 $ 2.23 $ 5.59 Stock options that were terminated or forfeited during the year ended December 31, 2023 104,500 $ 3.30 $ 7.12 During the year ended December 31, 2023, 4,000 stock options were exercised by one employee with $ 18,760 in cash. During the year ended December 31, 2022, one former employee and two employees exercised stock options covering 5,000 shares with $ 30,670 in cash. The aggregate intrinsic value of options exercised during the years ended December 31, 2023 and 2022 was $ 1,040 and $ 10,525 , respectively. The weighted average remaining life of the options outstanding under the 2010 Plan and the 2017 Plan as of December 31, 2023 was approximately 5 years and 8 months. The weighted average remaining life of the options exercisable under these plans as of December 31, 2023 was approximately 3 years and 6 months. The exercise prices of the options outstanding as of December 31, 2023 ranged from $ 4.00 to $ 10.04 per share. The 122,000 stock options granted during the year ended December 31, 2023 had exercise prices between $ 4.61 and $ 5.22 per share. The 210,500 stock options granted during the year ended December 31, 2022 had exercise prices between $ 6.52 and $ 9.39 per share. The weighted-average grant date fair values of options granted during the year ended December 31, 2023 and 2022 were $ 2.80 and $ 4.03 per share, respectively. As of December 31, 2023, total unrecognized stock-based compensation related to non-vested stock options aggregated $ 619,845 , which will be recognized over a weighted average remaining period of approximately 1 year and 8 months. The fair value of each stock option grant has been estimated on the date of grant using the Black-Scholes option pricing model, for the purpose discussed in Note 2(n), with the following weighted-average assumptions: During the Years Ended December 31, 2023 2022 Risk-free interest rate (1) 3.59 % 3.04 % Dividend yield (2) 0 % 0 % Expected volatility (2) 54 % 53 % Expected life (3) 6.2 years 5.9 years (1) The risk-free interest rate is based on U.S. Treasury yields for a maturity approximating the expected option term. (2) The dividend yield and expected volatility are derived from averages of our historical data. (3) The expected life is calculated utilizing the simplified method, which uses the mid-point between the vesting period and the contractual term as the expected life. F- 20 ImmuCell Corporation Notes to Audited Financial Statements (continued) Common Stock Rights Plan In September 1995, our Board of Directors adopted a Common Stock Rights Plan (the “Rights Plan”) and declared a dividend of one common share purchase right (a “Right”) for each of the then outstanding shares of the common stock of the Company. Each Right entitles the registered holder to purchase from the Company one share of common stock at an initial purchase price of $ 70.00 per share, subject to adjustment. The description and terms of the Rights are set forth in a Rights Agreement between the Company and Equiniti Trust Company, LLC, as Rights Agent. The Rights (as amended) become exercisable and transferable apart from the common stock upon the earlier of i) 10 days following a public announcement that a person or group (Acquiring Person) has, without the prior consent of the Continuing Directors (as such term is defined in the Rights Agreement), acquired beneficial ownership of 20% or more of the outstanding common stock or ii) 10 days following commencement of a tender offer or exchange offer the consummation of which would result in ownership by a person or group of 20% or more of the outstanding common stock (the earlier of such dates being called the Distribution Date). Upon the Distribution Date, the holder of each Right not owned by the Acquiring Person would be entitled to purchase common stock at a discount to the initial purchase price of $ 70.00 per share, effectively equal to one half of the market price of a share of common stock on the date the Acquiring Person becomes an Acquiring Person. If, after the Distribution Date, the Company should consolidate or merge with any other entity and the Company were not the surviving company, or, if the Company were the surviving company, all or part of the Company’s common stock were changed or exchanged into the securities of any other entity, or if more than 50 % of the Company’s assets or earning power were sold, each Right would entitle its holder to purchase, at the Rights’ then-current purchase price, a number of shares of the acquiring company’s common stock having a market value at that time equal to twice the Right’s exercise price. At any time after a person or group becomes an Acquiring Person and prior to the acquisition by such person or group of 50 % or more of the outstanding common stock, the Board of Directors of the Company may exchange the Rights (other than Rights owned by such person or group which have become void), in whole or in part, at an exchange ratio of one share of common stock per Right (subject to adjustment). At any time prior to 14 days following the date that any person or group becomes an Acquiring Person (subject to extension by the Board of Directors), the Board of Directors of the Company may redeem the then outstanding Rights in whole, but not in part, at a price of $ 0.005 per Right, subject to adjustment. During the third quarter of 2011, our Board of Directors voted to authorize an amendment to the Rights Plan to increase the ownership threshold for determining “Acquiring Person” status to 20 %. During the second quarter of 2015, our Board of Directors also voted to authorize an amendment to remove a provision that prevented a new group of directors elected following the emergence of an Acquiring Person (an owner of more than 20 % of our stock) from controlling the Rights Plan by maintaining exclusive authority over the Rights Plan with pre-existing directors. We did this because such provisions have come to be viewed with disfavor by Delaware courts. Each time that we made such amendments we entered into amendments to the Rights Agreement with the Rights Agent reflecting such extensions, threshold increases or provision changes. No other changes have been made to the terms of the Rights or the Rights Plan. At various times over the years, our Board of Directors, which has the authority to amend the Rights Plan, has voted to authorize amendments to the Rights Plan to extend the expiration date of the Rights Plan. Our Board of Directors decided to seek an advisory vote by stockholders at the Annual Meeting of Stockholders held in June 2022, as to whether to extend the Rights Plan by one year to September 19, 2023. Of the votes actually cast on this proposal, 65% voted in favor, 32% voted against and 3% abstained. On the basis of this vote, our Board of Directors voted to extend the Rights Plan by one year to September 19, 2023. Our Board of Directors decided to seek another advisory vote by stockholders at the Annual Meeting of Stockholders held in June 2023, as to whether to extend the Rights Plan by another year to September 19, 2024. Of the votes actually cast on this proposal, 65.10% voted in favor, 34.60% voted against and 0.30% abstained. On the basis of this vote, our Board of Directors voted to extend the Rights Plan by one year to September 19, 2024. Recognizing that there might be a substantial number of broker non-votes, our Board of Directors disclosed that it would be guided by the votes actually cast on these proposals in deciding whether to extend the expiration date of such plan by one year. Authorized Common Stock At the June 14, 2018 Annual Meeting of Stockholders, our stockholders voted to approve an amendment to our Certificate of Incorporation to increase the number of shares of common stock authorized for issuance from 8,000,000 to 11,000,000 . At the June 10, 2020 Annual Meeting of Stockholders, our stockholders voted to approve an amendment to our Certificate of Incorporation to increase the number of shares of common stock authorized for issuance from 11,000,000 to 15,000,000 . F- 21 ImmuCell Corporation Notes to Audited Financial Statements (continued) 14. REVENUE We primarily offer the First Defense ® product line to dairy and beef producers to prevent scours in newborn calves. Generally, our products are promoted to veterinarians as well as dairy and beef producers by our sales team and then sold through distributors. Our primary market is North America. We do sell into select international regions and may expand this international reach in the future. There were no material changes between the allocation and timing of revenue recognition during the years ended December 31, 2023 or 2022. We do not have any contract assets for which we have satisfied the performance obligations, but do not yet have the right to bill for, or contract liabilities such as customer advances. All trade receivables on our balance sheet are from contracts with customers. We incur no material costs to obtain contracts. The following table presents our product sales disaggregated by geographic area: During the Years Ended December 31, 2023 % 2022 % United States $ 15,949,382 91 % $ 17,020,797 92 % Other 1,522,287 9 % 1,547,165 8 % Total Product Sales $ 17,471,669 100 % $ 18,567,962 100 % The following table presents our product sales disaggregated by major product category: During the Years Ended December 31, 2023 % 2022 % First Defense ® product line $ 17,293,933 99 % $ 18,411,949 99 % Other animal health 177,736 1 % 156,013 1 % Total Product Sales $ 17,471,669 100 % $ 18,567,962 100 % 15. OTHER EXPENSES, NET Other (income) expenses net, consisted of the following: During the Years Ended December 31, 2023 2022 Interest expense (1) $ 475,598 $ 348,536 Loss (gain) on disposal of property, plant and equipment 8,099 ( 7,334 ) Interest income ( 96,570 ) ( 153,100 ) Insurance recovery (2) ( 365,127 ) — Income-other ( 107 ) ( 912 ) Other expenses, net $ 21,893 $ 187,190 (1) Interest expense includes amortization of debt issuance and debt discount costs of $ 22,619 and $ 7,658 during the years ended December 31, 2023 or 2022, respectively. (2) The insurance recovery income resulted from insurance benefit proceeds paid to us under our business interruption policy related to the product contamination losses and a recovery from a vendor’s policy related to an equipment malfunction. F- 22 ImmuCell Corporation Notes to Audited Financial Statements (continued) 16. INCOME TAXES Our income tax expense aggregated $ 4,627 and $ 7,672 (amounting to less than 1 % of our loss before income taxes) during the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, we had federal net operating loss carryforwards of $ 17,759,519 of which $ 16,047,612 do not expire and of which $ 1,711,907 expire in 2034 through 2037 (if not utilized before then) and state net operating loss carryforwards of $ 4,681,644 that expire in 2037 through 2038 (if not utilized before then). Additionally, we had federal general business tax credit carryforwards of $ 726,474 that expire in 2027 through 2042 (if not utilized before then) and state tax credit carryforwards of $ 775,473 that expire in 2024 through 2042 (if not utilized before then). The provision for income taxes is determined using the asset and liability approach of accounting for income taxes. Under this approach, deferred taxes represent the estimated future tax effects of temporary differences between book and tax treatment of assets and liabilities and carryforwards to the extent they are realizable. During the second quarter of 2018, we assessed our historical and near-term future profitability and recorded $ 563,252 in non-cash income tax expense to create a full valuation allowance against our net deferred tax assets (which consist largely of net operating loss carryforwards and federal and state credits) based on applicable accounting standards and practices. At that time, we had incurred a net loss for six consecutive quarters, had not been profitable on a year-to-date basis since the nine-month period ended September 30, 2017 and projected additional net losses for some period going forward before returning to profitability. Should future profitability be realized at an adequate level, we would be able to release this valuation allowance (resulting in a non-cash income tax benefit) and realize these deferred tax assets before they expire. We will continue to assess the need for the valuation allowance at each quarter and, in the event that actual results differ from these estimates, or we adjust these estimates in future periods, we may need to adjust our valuation allowance. Currently, we adjust the valuation allowance at the end of each quarter to reduce the value of our deferred tax assets to zero . Net operating loss carryforwards, credits, and other tax attributes are subject to review and possible adjustment by the Internal Revenue Service. Section 382 of the Internal Revenue Code contains provisions that could place annual limitations on the future utilization of net operating loss carryforwards and credits in the event of a change in ownership of the Company, as defined. We file income tax returns in the U.S. federal jurisdiction and several state jurisdictions. We currently have no tax examinations in progress. We also have not paid additional taxes, interest or penalties as a result of tax examinations nor do we have any unrecognized tax benefits for any of the periods in the accompanying audited financial statements. The income tax provision consisted of the following: During the Years Ended December 31, 2023 2022 Current Federal $ — $ — State 4,627 7,672 Current subtotal 4,627 7,672 Deferred Federal ( 1,179,474 ) ( 576,780 ) State ( 145,802 ) ( 88,533 ) Deferred subtotal, gross ( 1,325,276 ) ( 665,313 ) Valuation allowance 1,325,276 665,313 Deferred subtotal, net — — Income tax expense $ 4,627 $ 7,672 The actual income tax expense differs from the expected tax computed by applying the U.S. federal corporate tax rate of 21 % to the loss before income taxes during the years ended December 31, 2023 and 2022 respectively, as follows: During the Years Ended December 31, 2023 2022 $ % $ % Computed expected income tax expense rate $ ( 1,211,694 ) ( 21.00 ) % $ ( 522,088 ) ( 21.00 )% State income taxes, net of federal expense ( 117,149 ) ( 2.03 ) ( 47,643 ) ( 1.92 ) Share-based compensation 56,214 0.97 36,652 1.48 Tax credits ( 53,241 ) ( 0.92 ) ( 131,361 ) ( 5.28 ) Valuation allowance 1,325,276 0.09 665,313 26.76 Other 5,221 22.97 6,799 0.27 Income tax expense/rate $ 4,627 0.08 % $ 7,672 0.31 % F- 23 ImmuCell Corporation Notes to Audited Financial Statements (continued) The significant components of our deferred tax assets, net, consisted of the following: As of December 31, 2023 2022 Property, plant and equipment $ ( 2,121,940 ) $ ( 2,530,472 ) Federal general business tax credits 726,474 673,233 Federal net operating loss carryforwards 3,729,500 3,258,395 State tax credits and net operating loss carryforwards 886,428 817,617 §174 R & D expenditures 592,915 341,683 Deferred compensation 50,722 23,370 Prepaid expenses and other 37,124 15,587 UNICAP 32,607 32,787 Incentive compensation 100,200 76,554 Valuation allowance ( 4,034,030 ) ( 2,708,754 ) Deferred tax assets, net $ — $ — 17. SEGMENT INFORMATION Our business operations (being the development, acquisition, manufacture and sale of products that improve the health and productivity of dairy and beef cattle) are described in Note 1. Pursuant to Codification Topic 280, Segment Reporting , we operate in the following two reportable business segments: i) Scours and ii) Mastitis. The Scours segment consists of the First Defense ® product line. The core technology underlying the Scours segment is derived around polyclonal antibodies. The Mastitis segment includes our products, CMT and Re-Tain ® . Re-Tain ® is projected to be the driver of this segment when approved for sale. The core technology underlying the Mastitis segment is derived around a bacteriocin called Nisin. The category we define as “Other” includes unallocated administrative and overhead expenses and other products. The significant accounting policies of these segments are described in Note 2. Product sales are the primary factor we use in determining our reportable segments. The governing regulatory authority (USDA for First Defense ® or FDA for Re-Tain ® ) is also a factor in determining our reportable segments. Management monitors and evaluates segment performance from sales to net operating income (loss) closely. We are not organized by geographic region. No segments have been aggregated. The revenues and expenses allocated to each segment are in some cases direct and in other cases involve reasonable and consistent estimations by management. Each operating segment is defined as the component of our business for which financial information is available and evaluated regularly by our chief operating decision-maker in deciding how to allocate resources and in assessing performance. Our chief operating decision-maker is our President and CEO. During the Year Ended December 31, 2023 Scours Mastitis Other Total Product sales $ 17,293,933 $ 177,736 $ — $ 17,471,669 Costs of goods sold 13,453,514 148,871 — 13,602,385 Gross margin 3,840,419 28,865 — 3,869,284 Product development expenses 11,103 4,242,329 141,420 4,394,852 Sales and marketing expenses 2,447,137 641,078 — 3,088,215 Administrative expenses — — 2,134,295 2,134,295 Operating expenses 2,458,240 4,883,407 2,275,715 9,617,362 NET OPERATING INCOME (LOSS) $ 1,382,179 $ ( 4,854,542 ) $ ( 2,275,715 ) $ ( 5,748,078 ) During the Year Ended December 31, 2022 Scours Mastitis Other Total Product sales $ 18,411,949 $ 154,558 $ 1,455 $ 18,567,962 Costs of goods sold 10,754,189 136,347 28,647 10,919,183 Gross margin 7,657,760 18,211 ( 27,192 ) 7,648,779 Product development expenses 66,346 4,317,921 109,605 4,493,872 Sales and marketing expenses 1,871,926 1,318,107 — 3,190,033 Administrative expenses — — 2,263,817 2,263,817 Operating expenses 1,938,272 5,636,028 2,373,422 9,947,722 NET OPERATING INCOME (LOSS) $ 5,719,488 $ ( 5,617,817 ) $ ( 2,400,614 ) $ ( 2,298,943 ) F- 24 ImmuCell Corporation Notes to Audited Financial Statements (continued) Scours Mastitis Other Total Total Assets as of December 31, 2023 $ 24,735,413 $ 17,827,839 $ 1,244,850 $ 43,808,102 Total Assets as of December 31, 2022 $ 20,539,523 $ 18,315,492 $ 6,005,634 $ 44,860,649 Depreciation and amortization expense during the year ended December 31, 2023 $ 1,365,988 $ 1,287,600 $ 86,032 $ 2,739,620 Depreciation and amortization expense during the year ended December 31, 2022 $ 1,169,011 $ 1,263,318 $ 62,912 $ 2,495,241 Capital Expenditures during the year ended December 31, 2023 $ 1,096,819 $ 795,694 $ — $ 1,892,513 Capital Expenditures during the year ended December 31, 2022 $ 3,513,336 $ 414,486 $ 47,452 $ 3,975,274 18. RELATED PARTY TRANSACTIONS David S. Tomsche (Chair of our Board of Directors) is a controlling owner of Leedstone Inc., a domestic distributor of our products (the First Defense ® product line and CMT ). His affiliated company purchased $ 231,405 and $ 587,677 of products from us during the years ended December 2023 and 2022, respectively, all on terms consistent with those offered to other distributors of similar status. Our accounts receivable (subject to standard and customary payment terms) due from this affiliated company aggregated $ 42,507 and $ 46,426 as of December 31, 2023 and 2022, respectively. 19. EMPLOYEE BENEFITS We have a 401(k) savings plan (the Plan) in which all employees completing one month of service with the Company are eligible to participate. Participants may contribute up to the maximum amount allowed by the Internal Revenue Service. We currently match 100 % of the first 3 % of each employee’s salary that is contributed to the Plan and 50 % of the next 2 % of each employee’s salary that is contributed to the Plan. Under this matching plan, we paid $ 178,150 and $ 159,058 into the Plan for the years ended December 31, 2023 and 2022, respectively. 20. SUBSEQUENT EVENTS We have evaluated subsequent events through the time of filing on the date we have issued this Annual Report on Form 10-K. As of the time of filing, there were no material, reportable subsequent events. F- 25 ImmuCell Corporation Signatures Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ImmuCell Corporation Registrant Date: April 1, 2024 By: /s/ Michael F. Brigham Michael F. Brigham President, Chief Executive Officer and Principal Financial Officer POWER OF ATTORNEY We, the undersigned directors and employees of ImmuCell Corporation, hereby severally constitute and appoint Michael F. Brigham our true and lawful attorney-in-fact and agent with full power of substitution and re-substitution, for us and in our stead, in any and all capacities, to sign any and all amendments to this report and all documents relating thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing necessary or advisable to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Gloria J. Basse Director March 29, 2024 Gloria J. Basse /s/ Michael F. Brigham President, Chief Executive Officer March 29, 2024 Michael F. Brigham Principal Financial Officer and Director /s/ Bobbi Jo Brockmann Vice President of Sales and Marketing and Director March 29, 2024 Bobbi Jo Brockmann /s/ Bryan K. Gathagan Director March 29, 2024 Bryan K. Gathagan /s/ Steven T. Rosgen Director March 29, 2024 Steven T. Rosgen /s/ David S. Tomsche Director March 29, 2024 David S. Tomsche, DVM /s/ Elizabeth S. Toothaker Controller March 29, 2024 Elizabeth S. Toothaker /s/ Paul R. Wainman Director March 29, 2024 Paul R. Wainman