10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2004

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

0-15507

(Commission file number)

IMMUCELL CORPORATION

(Exact name of Registrant as specified in its charter)

Delaware	01-0382980
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
56 Evergreen Drive, Portland, Maine	04103
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (207) 878-2770

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, par value $0.10 per share

(Title of class)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes x    No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    ¨

Indicate by a check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).    Yes ¨    No x

The aggregate market value of the Common Stock held by non-affiliates of the Registrant at June 30, 2004 was approximately $10,415,000.

The number of shares of the Registrant’s Common Stock outstanding at March 21, 2005 was 2,794,650.

Documents incorporated by reference: Portions of the Registrant’s definitive Proxy Statement to be filed in connection with the 2005 Annual Meeting of Shareholders are incorporated by reference into Part III hereof.

TABLE OF CONTENTS

PART I
ITEM 1.	Business	1
ITEM 2.	Properties	9
ITEM 3.	Legal Proceedings	9
ITEM 4.	Submission of Matters to a Vote of Security Holders	9
PART II
ITEM 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	10
ITEM 6.	Selected Financial Data	11
ITEM 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
ITEM 7A.	Quantitative and Qualitative Disclosures About Market Risk	19
ITEM 8.	Financial Statements and Supplementary Data	19
ITEM 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	19
ITEM 9A.	Controls and Procedures	19
ITEM 9B.	Other Information	20
PART III
ITEM 10.	Directors and Executive Officers of the Registrant	20
ITEM 11.	Executive Compensation	20
ITEM 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	20
ITEM 13.	Certain Relationships and Related Transactions	20
ITEM 14.	Principal Accountant Fees and Services	20
PART IV
ITEM 15.	Exhibits and Financial Statement Schedules	21
SIGNATURES

PART I

ITEM 1—BUSINESS

General

ImmuCell Corporation is a biotechnology company serving veterinarians and producers in the dairy and beef industries with innovative and proprietary products that improve animal health and productivity. From inception in 1982, we have been engaged in the research and development, manufacture and sales of diagnostic tests and products for therapeutic and preventive use against certain infectious diseases in animals and humans. Prior to 1999, we invested significant funds in the development of products utilizing our core technologies for human health product applications. Since 1999, we have focused the majority of our product development efforts on products that improve animal health and productivity for the dairy and beef industries.

One benefit of this shift in strategic focus to animal health products, which are generally less expensive to develop than human health products, is that we have recorded consecutive net income for each of the six years in the period ended December 31, 2004. This profitability, together with the divestiture of certain non-core assets, has improved our financial position and funded our operations. As of December 31, 2004, we had cash, cash equivalents and short-term investments of $4,450,000 (in comparison to $1,539,000 as of December 31, 1998), total assets of $9,530,000 (in comparison to $3,145,000 as of December 31, 1998) and shareholders’ equity of $7,729,000 (in comparison to $2,248,000 as of December 31, 1998). This growth, a measurable result of our change in strategic focus, has been accomplished with limited dilution to shareholders. We had approximately 2,429,000 shares of common stock outstanding as of December 31, 1998 in comparison to 2,795,000 shares as of December 31, 2004.

In December 2004, we entered into a product development and marketing agreement with Pfizer Animal Health, a division of Pfizer, Inc. for Mast Out^®, a Nisin-based treatment for mastitis in lactating dairy cows. We granted Pfizer a worldwide, exclusive, long-term license to sell the product. In return, we received an up front payment of $1,500,000 from Pfizer and are eligible to receive contingent milestone payments and royalties on sales. Pfizer will be responsible for clinical, regulatory and commercial manufacturing development. We will supply product for efficacy trials that are expected to begin in the first half of 2005.

Primary Animal Health Products for the Dairy and Beef Industries

Scours Prevention

In 1991, we obtained approval from the U.S. Department of Agriculture (“USDA”) to sell First Defense^®, which we manufacture from cows’ colostrum using our proprietary vaccine and milk protein purification technologies. First Defense^® is the only USDA-licensed, orally delivered scours preventive product on the market for calves with claims against two leading causes of scours (E. coli and coronavirus). The target disease, “calf scours”, causes diarrhea and dehydration in newborn calves and often leads to serious sickness and even death. Calf scours is seasonal, with the highest incidence in the winter calving months. We are a leader in the scours prevention market with this product.

Mastitis Management

We are selling and developing several products designed to aid in the management of mastitis (inflammation of the mammary gland) caused by bacterial infections. Mastitis is estimated to cost dairy producers approximately $1.7 to $2 billion dollars per year in the U.S. These losses include the cost of treatment products, reduced milk production, discarded milk and lost cows.

In 1999, we acquired Wipe Out^® Dairy Wipes from Nutrition 21, Inc. The transaction included the purchase of certain equipment, trademarks and a license of intellectual property, including several issued patents, covering the product and rights to develop skin and environmental sanitizing applications of the

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Nisin technology. Wipe Out^® Dairy Wipes consist of pre-moistened, biodegradable towelettes that are impregnated with Nisin to prepare the teat area of a cow in advance of milking. Nisin is a natural antibacterial peptide that has been demonstrated in clinical studies to be an effective aid in the reduction of mastitis-causing organisms in dairy cows. Milking regulations require that the teat area of cows be prepared for each milking. Some dairy producers wash the cows as they approach the milking parlor. Other producers use a variety of methods including dips with paper or cloth towels. Our wipes are made from a non-woven fabric that is strong enough to allow for a vigorous cleaning but still be biodegradable for disposal with the manure waste. Prepping the cow with Wipe Out^® is a form of forestripping, which is known to be good for udder health.

In 2000, we acquired the product MASTiK^®, Mastitis Antibiotic Susceptibility Test Kit. Once mastitis is detected, the dairy producer has different treatment options. MASTiK^® helps veterinarians and producers quickly select the antibiotic most likely to be effective in the treatment of individual cases of mastitis. MASTiK^® can usually provide this answer in less than one day, which is faster than the other commonly used antibiotic susceptibility tests. It is common practice for producers using the competitive mastitis antibiotic susceptibility testing technology to treat mastitis based on the availability of antibiotics on-farm while they wait several days for susceptibility test results to arrive from a laboratory. A quicker test result allows producers to begin treatment sooner with an antibiotic that is more likely to be effective.

In 2001, we initiated commercial sales of our own, internally developed California Mastitis Test (“CMT”). This test can be performed at cow-side for early detection of mastitis. CMT can be used for bulk tank as well as individual cow sample monitoring and can be used to determine which quarter of the udder is mastitic. CMT is made by other manufacturers and is readily available to the dairy producer. Our product is priced at a discount to the competitive products that were already on the market when we initiated commercial sales.

Other Animal Health Products for the Dairy and Beef Industries

In 1987, we obtained approval from the USDA to sell rjt^™ (Rapid Johne’s Test). This test can rapidly identify cattle with symptomatic Johne’s Disease in a herd with 100% specificity and greater than 85% sensitivity. Before sales can be initiated in any state, the USDA approval is subject to the further approval of each state veterinarian. We also market rpt^™ (also formerly sold as Accufirm^™), a milk progesterone test used by dairy producers to monitor the reproductive status of their cows. Sales of these products have been limited since their commercial introduction.

Research and Development

Beginning in 1999, we shifted the primary focus of our research and development efforts to products for the dairy and beef industries. This focus continued through 2004 and is expected to continue in 2005 and beyond. In April 2000, we acquired an exclusive license to develop and market Nisin-based products for animal health applications from Nutrition 21, Inc. and initiated the development of Mast Out^®.

In January 2004, we achieved positive results from an experimental field trial of Mast Out^® in 139 cows with subclinical mastitis. The placebo-controlled, blinded, multi-farm study was conducted in collaboration with researchers at Cornell University. Mast Out^® demonstrated a statistically significant overall cure rate in two separate dosage groups as compared to the placebo group. This preliminary study helped us define several important trial parameters relevant to the design of an optimal pivotal efficacy trial. We have selected a strategic treatment that demonstrated a 58% efficacy rate in eliminating infection in lactating cows with high somatic cell counts (a measure of the degree of mastitis infection). This efficacy rate represents a blended average of results from cows with mastitis caused by several different pathogens. For example, we achieved a 100% efficacy rate in Streptococcus agalactiae cases, where antibiotics are commonly used, and 28% against Staphylococcus aureus cases, where antibiotics are generally not effective. The demonstration of efficacy against clinical mastitis cases is required for FDA approval.

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In November 2004, we paid approximately $965,000 to buy out certain future milestone and royalty payment obligations to Nutrition 21. In December 2004, we entered into a product development and marketing agreement with Pfizer covering Mast Out^®, under which Pfizer agreed to fund future clinical, regulatory and commercial manufacturing development costs in return for global marketing rights. We will supply product for efficacy trials that are expected to be initiated in the first half of 2005. The commercial introduction of Mast Out^® in the United States is subject to approval by the FDA, which approval cannot be assured. Demonstration of efficacy in a pivotal study and the approval of several additional “Technical Sections” under the FDA’s phased review of a New Animal Drug Application (“NADA”) are required before any U.S. product sales would be allowed. Included among the Technical Sections required for NADA final approval are Target Animal Safety, Human Food Safety and several administrative requirements. The Human Food Safety data will determine the milk discard period. These studies are presently underway. Commercial-scale manufacturing must comply with cGMP Regulations. The chemistry and manufacturing aspects underlying this commercial production process are also subject to FDA approval. Foreign regulatory approvals will be subject to some similar and some different requirements.

Nisin, the same active ingredient contained in Wipe Out^® Dairy Wipes, is a natural antibacterial peptide that is commonly used as a preservative in dairy products. Nisin is a peptide with activity against most gram positive and some gram negative bacteria. Mast Out^®, an intramammary infusion product, is being developed as an alternative to traditional antibiotics used in the treatment of mastitis in lactating dairy cows. The safety profile of Nisin and its long history as a food preservative may allow for the milk discard period to be eliminated. Such a product claim could be a significant competitive advantage in comparison to the traditional antibiotic products currently on the market that are sold subject to a requirement to discard milk from treated cows during the course of and for a period following antibiotic treatment. The use of antibiotics in food-producing animals is a contributing factor to the rising human public health problem of bacterial drug resistance. Mast Out^® could potentially reduce the need for use of traditional antibiotics in the treatment of mastitis. There may be additional animal disease indications for Nisin that we could pursue using the pharmaceutical-grade Nisin that is being developed for Mast Out^®. For example, we are investigating a dry cow application of this technology, meaning treatment during the period that a cow is not lactating.

While we continue our efforts with internally and externally funded product development programs, we also actively seek to acquire new products and technologies that fit with our sales focus on the dairy and beef industries. We are actively exploring further improvements, extensions or additions to our current product line. For example, we are investigating the potential to prevent scours in calves caused by pathogens other than E. coli and coronavirus. We are also exploring the potential to use our First Defense^® technology to produce a colostrum supplement product for newborn calves. Lastly, we are also evaluating new formulations for the preparation and sanitization of udders before and after milking.

We maintain relationships with several scientific advisors who have particular expertise in the areas of strategic interest to us. Our research and development activities are conducted primarily internally and at times through contracts with third parties depending upon the availability of staff, the technical skills required, the nature of the particular project and other considerations. As additional opportunities to commercialize our technology, or technology that we can effectively acquire rights to, become apparent, we may begin new research and development projects. We spent approximately $1,053,000, $1,350,000 and $1,092,000 on research and development activities during the years ended December 31, 2002, 2003 and 2004, respectively. These expenditures were supported, in part, by grant income totaling approximately $303,000, $112,000 and $67,000 during the years ended December 31, 2002, 2003 and 2004, respectively.

Sales and Markets

The manner in which we sell and distribute our products depends, in large measure, upon the nature of the particular product, its intended users and the country in which it is sold. The distribution channel selected is intended to address the particular characteristics of the marketplace for a given product. First Defense^® is sold

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primarily through major veterinarian distributors by two of our employees engaged directly in the selling of our products. We sell Wipe Out^® Dairy Wipes directly to the dairy producer. MASTiK^® and CMT are also sold directly to the dairy producer as well as to bovine veterinarians. Sales of rjt^™ are made principally to state veterinary laboratories. We invested 23%, 16% and 11% of product sales in selling expenses in the years ended December 31, 2002, 2003 and 2004, respectively. Going forward, we expect to invest less than 15% of product sales in selling expenses.

Our management estimates that the potential U.S. market for Mast Out^® in lactating cows is approximately $20,000,000 per year and that similar market opportunities also exist outside the U.S. If Mast Out^® is approved by the U.S. Food and Drug Administration as the first treatment for mastitis without a milk discard requirement, we believe it could compete effectively against the traditional antibiotic products currently on the market, which are all sold subject to a milk discard. Currently, the loss of milk revenue is a disincentive to the early treatment of disease by dairy producers. The ability to treat without a milk discard could change practices to allow for the treatment of earlier subclinical cases, which might increase the market. Pfizer has licensed worldwide sales and marketing rights to this product. We would receive royalties on their sales if and when applicable FDA or other regulatory approvals are obtained. We believe that similar potential markets also exist for a dry cow application of the product, which would be subject to a separate regulatory approval. Pfizer has a first right to negotiate a license to any such dry cow product that we develop.

Foreign Sales

Foreign product sales represented approximately 29%, 7% and 10% of our total product sales for the years ended December 31, 2002, 2003 and 2004, respectively. The majority of these foreign sales were to Canada, Australia and New Zealand in 2002 and to Canada in 2003 and 2004. The October 1, 2002 termination of our license to the Kamar Heatmount Detector, which had comprised a significant portion of foreign sales, was the principal cause for the lower ratio of foreign sales after 2002.

We currently price our products in U.S. dollars. An increase in the value of the dollar in any foreign country in which we sell products may have the effect of increasing the local price of such products, thereby leading to a reduction in demand. We have made price adjustments on occasion to mitigate these effects. Conversely, to the extent that the value of the dollar may decline with respect to a foreign currency, our competitive position may be enhanced.

Competition

Our competition in the animal health market includes other biotechnology companies and major animal health companies. Many of these competitors have substantially greater financial, marketing, manufacturing and human resources and more extensive research and development capabilities than we do. All of our employees are required to execute non-disclosure, non-compete and invention assignment agreements intended to protect our rights in our proprietary products. Many of our competitors may develop technologies and/or products which are superior to ours, or may be more successful in developing production capability or in obtaining required regulatory approvals.

We believe that First Defense^® offers two significant competitive advantages over other oral antibody products on the market: 1) its capsule form does not require refrigeration and provides ease of administration and 2) competitive products currently on the market provide protection only against one leading cause of calf scours (E. coli), while First Defense^® provides this protection and additional protection against another leading cause of the disease (coronavirus). In addition to direct competition from oral antibody products, First Defense^® also competes for market share against vaccine products that are used to increase the mother cow’s production of antibodies that can then be transferred through the mother’s milk to the calf and against vaccine products that are administered to the newborn calf. The immediate and direct immunity that First Defense^® provides to the calf is a competitive advantage over the vaccine products.

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There are many products on the market that may be used in place of Wipe Out^® Dairy Wipes. These products include teat dips, teat sprays and other disposable and washable towel products offered by several different companies. Competitive advantages of Wipe Out^® Dairy Wipes include the following: 1) they are easy to use, 2) they do not irritate the udder or the skin of the milking personnel and 3) they do not adulterate the milk.

We would consider any company that sells an antibiotic to treat mastitis, such as Pfizer, Schering and Wyeth, to be potential competitors for Mast Out^®. We believe that Novatreat, DMV International Nutritionals and Mucovax have interests in developing immune milk products for use in the treatment or prevention of diseases in humans including Clostridium difficile-associated diarrhea. See Product Opportunities Outside of the Dairy and Beef Industries, below. We may not be aware of competition that we face from other companies.

Our competitive position will be highly influenced by our ability to attract and retain key scientific and managerial personnel, to develop proprietary technologies and products, to obtain USDA or FDA approval for new products and to continue to profitably sell our current products. We currently compete on the basis of product performance, price and distribution capability. We continue to monitor our network of independent distributors to maintain our competitive position.

Patents and Proprietary Information

In connection with the December 1999 acquisition of Wipe Out^® Dairy Wipes from Nutrition 21, we acquired a license to several patents covering the use of Nisin in antibacterial wipes as well as certain proprietary know-how used in the production of Nisin. In April 2000, we acquired from Nutrition 21 an additional license to several patents covering the use of Nisin in specific antimicrobial formulations in the veterinary field of use. In September 2004, we were issued U.S. Patent No. 6,794,181 entitled “Method of Purifying Lantibiotics” covering a key step in the manufacturing process for pharmaceutical-grade Nisin. We also have exclusive license rights, in the field of animal vaccines, to certain cloned antigens of Cryptosporidium parvum from the Regents of the University of California, for which two U.S. patents have been issued to the Regents. This license covers vaccine product applications for animals, and we sublicensed those rights exclusively to AgriVax Inc. in 1999. These rights were subsequently sublicensed to Agri-Laboratories, Ltd in 2001 in return for a royalty on any related product sales. In conjunction with the December 2000 acquisition of MASTiK^®, we acquired the related U.S. Patent No. 5,026,638 entitled “Antibiotic Sensitivity Test for Pathogenic Organisms Present in Mastitic Milk” covering the test procedure.

In 1998, we were issued U.S. Patent No. 5,747,031 entitled “Process for Isolating Immunoglobulins in Whey” covering certain aspects of our proprietary manufacturing process to separate antibodies from cows’ milk used in the production of DiffGAM^™. In 2000, we were issued U.S. Patent No. 6,074,689 entitled “Colonic Delivery of Protein or Peptide Compositions” covering the method of formulation responsible for colonic delivery used in DiffGAM^™ and for other proteins. In 1999, we obtained an exclusive license for pharmaceutical applications to U.S. Patent No. 5,773,000 entitled “Therapeutic Treatment of Clostridium difficile Associated Diseases” from GalaGen, Inc. In October 2002, we acquired ownership of this patent from the court administering the bankruptcy proceedings of GalaGen.

In the future, we may file additional patent applications for certain products under development. There can be no assurance that patents will be issued with respect to any pending or future applications.

In some cases, we have chosen (and may choose in the future) not to seek patent protection for certain products or processes. Instead, we have sought (and may seek in the future) to maintain the confidentiality of any relevant proprietary technology through contractual agreements. Reliance upon trade secret, rather than patent protection, may cause us to be vulnerable to competitors who successfully replicate our manufacturing techniques and processes. Additionally, there can be no assurance that others may not independently develop similar trade secrets or technology or obtain access to our unpatented trade secrets or proprietary technology.

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Other companies may have filed patent applications and may have been issued patents involving products or technologies potentially useful to us or necessary for us to commercialize our products or achieve our business goals. There can be no assurance that we will be able to obtain licenses to such patents on terms that are acceptable.

Product Trademarks

We have registered certain trademarks with the U.S. Patent and Trademark Office in connection with the sale of our products. We own federal trademark registrations of the following trademarks: First Defense^®, our calf scours preventive product; Wipe Out^® Dairy Wipes and the related design and the trademark “One Step Cow Prep^®”, our pre-milking wipe product; MASTiK^®, our antibiotic susceptibility test; and Mast Out^®, which we have licensed to Pfizer. In addition, we sell two animal health products under the trademarks, rjt^™ and rpt^™. We also own the federal trademark registration Crypto-Scan^®, for our water diagnostic test.

Government Regulation

The manufacture and sale of animal health biologicals within the United States is generally regulated by the USDA. However, Mast Out^® is regulated by the FDA, Center for Veterinary Medicine, which regulates veterinary drugs. The manufacture and sale of disease treatment and prevention products for human health applications and for certain animal health products within the United States is subject to regulation by the FDA. Comparable agencies exist in foreign countries and foreign sales of our products will be subject to regulation by such agencies. Many states (including Maine where our facilities are located) have laws regulating the production, sale, distribution or use of biological products, and we may have to obtain approvals from regulatory authorities in states in which we propose to sell our products. Depending upon the product and its applications, obtaining regulatory approvals may be a relatively brief and inexpensive procedure or it may involve extensive clinical tests, incurring significant expenses and an approval process of several years’ duration.

We have received USDA approval for First Defense^® (our scours preventive product) and rjt^™ (our Johne’s Disease diagnostic test). We believe that we are in compliance with current regulatory requirements relating to our business and products.

Product Liability

The manufacture and sale of certain of our products entails a risk of product liability. Our exposure to product liability is mitigated to some extent by the fact that our products are principally directed towards the animal health market. We have maintained product liability insurance in an amount which we believe is reasonable in relation to our potential exposure in this area.

Product Opportunities Outside of the Dairy and Beef Industries

1) Milk Antibody Products Under Development

During the 1990’s, we conducted several trials investigating the use of milk antibodies to prevent gastrointestinal infections caused by Cryptosporidium parvum, enterotoxigenic E. coli and Clostridium difficile in humans. Similar to First Defense^®, we immunize cows under contract from commercial dairy herds and source antibodies specific to the pathogens of interest from their milk. After we purify the antibodies from the milk, the product is dried and formulated for oral administration. We discontinued internal funding of the last of these products in 2000.

In 2003, we became part of a consortium with the Naval Medical Research Center and John Hopkins University which received funding under the Department of Defense Peer Reviewed Medical Research Program to study the development of a bovine milk immunoglobulins supplement to prevent diarrhea in humans. We received approximately $67,000 in 2004 and expect to receive an additional $72,000 in 2005

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under this grant to supply TravelGAM^™ anti-E. coli milk immunoglobulins for in vitro and in vivo trials during the two year period ending in December 2005. We also hope to benefit from a long-term supply agreement should the technology be successfully commercialized.

Under an Investigational New Drug application filed with the FDA in March 1997, we conducted a clinical trial in mid-1997 demonstrating the safety of DiffGAM^™ anti-Clostridium difficile milk immunoglobulins and the colonic bioavailability of our patented oral formulation. We completed a multi-site, open label Phase I/II clinical trial of this product in 2000. The results of this trial demonstrated the preliminary safety and efficacy of DiffGAM^™ in the treatment of Clostridium difficile associated diarrhea, a debilitating gastrointestinal disease that can be precipitated by the use of broad-spectrum antibiotics. While the participation of another partner would be required to pursue FDA approval of a pharmaceutical claim for this product, the available scientific literature and the product’s safety profile may be sufficient to allow for sales of DiffGAM^™ as a nutritional supplement.

In addition to its role in human gastrointestinal disease, Clostridium difficile has been implicated as a cause of significant disease in horses and pigs. A preliminary safety study of DiffGAM^™ in horses has been completed with no adverse reactions. We remain interested in exploring potential uses of DiffGAM^™ in the treatment of these diseases.

2) Milk Protein Purification Technology for Nutritional Applications

In 1996, we formed a joint venture with Agri-Mark Inc. of Methuen, Massachusetts known as AgriCell Company, LLC to produce and sell a nutritional protein derived from cheese whey, known as lactoferrin. We licensed certain rights to a patented purification system to AgriCell for use in the production of lactoferrin. Agri-Mark funded a capital investment by AgriCell in excess of $1,000,000 principally in working capital, fixed assets and production facility modifications. In August 2001, we entered into an option agreement under which DMV International Nutritionals of the Netherlands paid us $100,000 for an option to buy our interest in this joint venture. DMV principally funded the operations of the joint venture during the option period. In March 2003, DMV exercised this option by paying us $1,100,000 for our interest in the joint venture. We have no ongoing interest in or obligations to this operation.

In 1997, we licensed certain rights to the same patented protein purification system described above to Murray Goulburn Co-operative Co., Limited of Australia for the production of whey protein isolate and certain other milk proteins (excluding high purity lactoferrin). In consideration for the license, we received a $250,000 payment in 1997 and are entitled to a royalty on the sales of whey protein isolate and any other milk proteins manufactured under this license. In early 2000, Murray Goulburn launched commercial sales of whey protein isolate. We earned approximately $41,000, $81,000 and $85,000 in royalty income in 2002, 2003 and 2004, respectively, under this agreement.

3) Skin and Environment Sanitizing Products

In connection with the December 1999 acquisition of Wipe Out^® Dairy Wipes, we acquired certain exclusive rights to develop Nisin as a skin and environment sanitizer. These rights do not cover drug claims for specific indications or food preservation. There is significant published scientific literature that supports the broad-spectrum, antibacterial activity of Nisin. The expertise being developed in the manufacture of Nisin for our animal health products, Wipe Out^® Dairy Wipes and Mast Out^®, may benefit us in developing and selling Nisin formulations for skin and environment sanitizing applications.

In February 2002, we were awarded a one-year grant aggregating $191,000 from the National Institutes of Health to investigate, in collaboration with Clemson University, the effectiveness of Nisin alone and in combination with another bacteriocin as a topical skin sanitizer. The principal aims of the grant were focused on manufacturing issues pertaining to both bacteriocins. This work furthered our capability to produce Nisin for Wipe Out^® Dairy Wipes and Mast Out^®. The participation of a marketing partner would be required to further develop and commercialize this potential product opportunity.

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During 2002, we collaborated with the U.S. Army’s Edgewood Chemical Biological Center to investigate the effectiveness of Nisin against Bacillus anthracis. The major conclusions of this work were that: 1) Nisin formulations containing excipients selected from certain classes of detergents and chelators, kill vegetative cells and germinating spores of B. anthracis, megaterium and cereus, 2) Nisin alone has potent killing activity against B. cereus and megaterium, but not B. anthracis and 3) Nisin in the formulations tested does not kill spores of any species of Bacillus. This work was accepted and presented at the Biodefense Research Meeting of the American Society for Microbiology in March 2003. The participation of a marketing partner would be required to further develop and commercialize this potential product opportunity.

4) Product to Detect Cryptosporidium in Drinking Water

Capitalizing on certain scientific knowledge gained while working on a milk antibody product to prevent Cryptosporidium parvum infections in humans during the early 1990’s, we developed Crypto-Scan^® water diagnostic test. This non-animal health product utilizes our immunomagnetic separation technology. Despite gaining U.K. regulatory approval in November 2000, sales of this product have been insignificant.

Former Animal Health Products for the Dairy and Beef Industries

In 1988, we entered into an exclusive worldwide license to purchase from Kamar, Inc. of Steamboat Springs, Colorado and to market and sell an animal health care product known as the Kamar Heatmount Detector. This license, as amended, was set to expire on December 31, 2004, but on October 1, 2002, we accepted $930,000 from Kamar in consideration of the early termination of the product license. The $930,000 approximated our estimate of the net present value of the expected profits from the product over the final 27 months of the license term, had it not been terminated. As a result of the termination of this license, our product sales, costs and selling expenses were reduced beginning October 1, 2002. Sales of this product aggregated 42% of total product sales during the year ended December 31, 2002.

In 1999, we obtained approval from the USDA to sell Tip-Test: Johne’s, which is a rapid, on-site immunodiagnostic test for the detection of Johne’s Disease. This sensitive product delivered on-site results from a blood or serum sample in about 20 minutes, which could have been a significant advantage to dairy and beef producers in comparison to the existing diagnostic technology that is performed only in veterinary diagnostic laboratories. Sales of this product were limited, in part, due to: 1) regulatory restrictions that significantly limit on-site testing for certain diseases and 2) the state and federal subsidies for serology testing in veterinary diagnostic laboratories. Despite our belief that frequent, rapid, on-site testing could play a useful role in reducing the rate of incidence of this costly disease, we discontinued this product in 2003 due to limited sales.

In 2001, we obtained approval from the USDA to sell Tip-Test: BLV, which is a rapid, on-site immunodiagnostic test for the detection of Bovine Leukemia Virus (“BLV”) infections. We discontinued this product in 2003 due to limited sales.

Employees and Executive Officers

We currently employ 24 employees, including 3 part-time employees. Approximately 12 employees (including 3 part-time employees) are engaged in manufacturing operations, 6 in research and development activities, 4 in finance and administration and 2 in sales. At times, manufacturing personnel is also utilized, as needed, in the production of clinical material for use in research and development. We are not a party to any collective bargaining agreement and consider our employee relations to be excellent. Our executive officers as of March 22, 2005 were as follows:

MICHAEL F. BRIGHAM (Age: 44, Officer Since: October 1991, Director Since: March 1999) was appointed to serve as President and Chief Executive Officer in February 2000, while maintaining the titles

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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 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 serves on the Board of Directors of the Maine Biotechnology Information Bureau. Prior to joining the Company, he was employed as an audit manager for the public accounting firm of Ernst & Young. Mr. Brigham earned his Masters in Business Administration from New York University in 1989.

JOSEPH H. CRABB, Ph.D. (Age: 50, Officer Since: March 1996, Director Since: March 2001) was appointed to serve as a Director of the Company in March 2001, having previously served in that capacity during the period from March 1999 until February 2000, and was elected Vice President of the Company in December 1998, while maintaining the title of Chief Scientific Officer. Effective January 1, 2005, Dr. Crabb reduced the time commitment to his job duties at the Company from full-time to half-time. He has served as Chief Scientific Officer since September 1998. Prior to that, he served as Vice President of Research and Development since March 1996. Prior to that, he served as Director of Research and Development and Senior Scientist since originally joining the Company in November 1988. Dr. Crabb currently serves on advisory committees at the National Institutes of Health and is a reviewer for several peer-reviewed journals. Prior to joining the Company in 1988, Dr. Crabb earned his Ph.D. in Biochemistry from Dartmouth Medical School and completed postdoctoral studies in microbial pathogenesis at Harvard Medical School, where he also served on the faculty.

ITEM 2—PROPERTIES

We own a 15,300 square foot building at 56 Evergreen Drive in Portland, Maine. We currently use this space for substantially all of our office, laboratory and manufacturing needs. In May 2001, we completed a construction project that added approximately 5,300 square feet of new manufacturing space to the original 10,000 square foot building to increase the production capacity of First Defense^® and to provide in-house production capability for Wipe Out^® Dairy Wipes. The facility addition also provides a storage mezzanine of approximately 2,000 square feet. In addition, our building has 5,000 square feet of unfinished space available for potential future expansion on the second floor.

We also maintain access to certain animals, primarily cows, through contractual relationships with several farms.

ITEM 3—LEGAL PROCEEDINGS

None

ITEM 4—SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

9

PART II

ITEM 5—MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock trades on the Nasdaq SmallCap Market tier of The Nasdaq Stock Market^® under the symbol: ICCC. No dividends have been declared or paid on the common stock since its inception, and we do not contemplate the payment of cash dividends in the foreseeable future. The following table sets forth the high and low sales price information for our common stock as reported by The Nasdaq Stock Market during the period January 1, 2003 through December 31, 2004:

	2003								2004
	Three Months Ended								Three Months Ended
	March 31		June 30		September 30		December 31		March 31		June 30		September 30		December 31
High	$	2.35	$	2.98	$	4.86	$	4.10	$	4.72	$	4.89	$	4.91	$	9.65
Low	$	1.69	$	1.87	$	2.24	$	2.45	$	3.55	$	3.72	$	4.11	$	4.07

As of March 22, 2005, we had 8,000,000 common shares authorized and 2,794,650 common shares outstanding, and there were approximately 1,300 shareholders of record. The last sales price of our common stock on March 21, 2005 was $4.50 as quoted on The Nasdaq Stock Market.

On April 3, 2003, we announced that our Board of Directors had approved a plan to repurchase up to 100,000 shares of our common stock as market conditions warrant. Repurchases under the plan are to be made from time to time at the discretion of management. There is no fixed number of shares to be repurchased and no time limit for the completion of the repurchase plan. Our present intention is to hold repurchased shares as treasury stock to be used for general corporate purposes. During the three months ended June 30, 2003, we repurchased 5,900 shares of our common stock at a total cost of approximately $12,267 under this plan. We have repurchased no additional shares since then.

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, 2004 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 shareholders	488,639	$	2.74	291,167
Equity compensation plans not approved by shareholders	—		—	—
Total	488,639	$	2.74	291,167

10

ITEM 6—SELECTED FINANCIAL DATA

The selected financial data set forth below has been derived from our audited financial statements. The information should be read in conjunction with the audited financial statements and related notes appearing elsewhere in this Form 10-K. In particular, see Note 10(d) for an explanation of the difference between the 2003 and 2004 results in comparison to the prior years.

	Year Ended December 31,
	2000		2001		2002		2003		2004
Statement of Operations Data:
Product sales	$	5,485,003	$	6,395,140	$	5,301,313	$	3,144,512	$	3,523,982
Total revenues		5,635,985		6,676,766		6,184,704		3,357,342		3,696,280
Research & development expenses		922,347		849,174		1,052,783		1,350,164		1,091,836
Net interest and other income		62,514		26,156		948,243		1,145,408		56,422
Income before income taxes		475,888		697,040		1,481,384		716,377		177,193
Net income		2,222,046		420,435		886,237		411,216		143,519
Per Common Share:
Basic net income		0.84		0.15		0.32		0.15		0.05
Diluted net income		0.79		0.15		0.32		0.15		0.05
Cash dividend		—		—		—		—		—
Statement of Cash Flows Data:
Net cash provided by operating activities		81,505		914,347		1,898,385		1,403,933		1,358,036
Balance Sheet Data:
Cash, cash equivalents and short-term investments		1,895,149		1,883,090		3,143,016		4,245,062		4,450,163
Total assets		6,443,916		7,117,217		7,513,393		8,186,632		9,529,669
Current liabilities		490,745		564,432		258,784		416,180		814,492
Net working capital		2,894,249		2,942,658		4,227,642		4,965,262		4,997,907
Long-term liabilities		414,178		507,131		300,000		400,000		986,301
Shareholders’ equity	$	5,538,993	$	6,045,654	$	6,954,609	$	7,370,452	$	7,728,876

ITEM 7—MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Operations

Fiscal 2004 Compared to Fiscal 2003

Product sales for the year ended December 31, 2004 increased by $379,000 (12%) to $3,524,000 from $3,145,000 in 2003, primarily due to growth in sales of First Defense^®. We believe that sales of our products are influenced by the price of milk sold by our primary customers. After declining in 2002 to price levels common in the 1970’s, the price of milk has increased. A common index used in the industry to measure this trend is known as the Class III milk price, which indicates the value of 100 pounds of milk sold into the cheese market. The average Class III milk price for 2004 was $15.39 per 100 pounds, which represents a 35% increase from the $11.42 average for 2003. The average Class III milk price for 2002 was $10.42. We have generally held our product selling prices without increase. Sales of First Defense^® increased by 17% during the year ended December 31, 2004 in comparison to the same period in 2003. This increase was principally driven by higher sales volume rather than higher selling prices. Sales of First Defense^® are normally seasonal with highest sales expected in the first quarter and lower sales expected during the summer months. Sales of Wipe Out^® Dairy Wipes decreased by 8% during the twelve month period ended December 31, 2004 in comparison to the same period in 2003. Sales of Wipe Out^® Dairy Wipes were first recorded in 2000 following the December 1999 acquisition of the product. We believe the drop in sales in 2004 was largely due to the continued financial

11

pressures that are forcing many small dairy producers out of business. Wipe Out^® Dairy Wipes are more often used on small dairies than larger ones.

Total revenues for the year ended December 31, 2004 increased by $339,000 (10%) to $3,696,000 from $3,357,000 in 2003. Grant income decreased by $45,000 (40%) to $67,000 in 2004, comprising 2% of total revenues in 2004 and 3% of total revenues in 2003. Most of the grant income supported work on the development of Mast Out^®. Royalty income increased by $4,000 (5%) to $85,000 in 2004. The $21,000 in revenue that we recognized from the sale of technology rights in 2004 represents approximately 1% of the $1,500,000 up front payment that Pfizer made to us under a product development and marketing agreement that we entered into in December 2004. The balance of this payment was recorded as deferred revenue at December 31, 2004 and is expected to be recognized over the period ending December 31, 2007. In 2003, we earned $20,000 in revenue from the sale of technology rights.

Product costs amounted to 41% of product sales in 2004 as compared to 43% in 2003. Internally developed products tend to have higher gross margin percentages than acquired products. A moderately lower gross margin percentage is anticipated initially as new products are developed and acquired. Over time, as these products are fully integrated into our manufacturing and selling operations, we expect to be able to improve the gross margin percentage. This is the case, for example, with Wipe Out^® Dairy Wipes, a product that we acquired in December 1999. In 2001, we invested in the necessary facility addition and production equipment required to process the wipe stock and perform the filling operations for this product internally, which has caused an improvement in the gross margin. In 2004, we invested in the necessary facility modifications and production equipment required to produce nonpharmaceutical-grade Nisin internally.

We decreased our expenditures for research and development by approximately $258,000 (19%) to $1,092,000 in 2004 as compared to $1,350,000 in 2003. The higher costs in 2003 were due principally to the expenses incurred in connection with the experimental field trial of Mast Out^® that we completed with positive results in 2003. Research and development expenses aggregated 30% and 40% of total revenues in 2004 and 2003, respectively. Research and development expenses exceeded grant income by approximately $1,025,000 in 2004 and by $1,238,000 in 2003. These “net” research and development expenses decreased to 29% of product sales in 2004 from 39% of product sales in 2003. The majority of our research and development budget from 2000 through 2004 has been focused on the development of Mast Out^®. We are obligated to supply product for U.S. clinical trials of Mast Out^® in 2005, and Pfizer is responsible for most of the other product development expenses going forward.

Product selling expenses decreased by approximately $92,000 (19%) to $401,000 in 2004, aggregating 11% of product sales in 2004, compared to 16% in 2003. We continue to leverage the efforts of our small sales force through veterinary distribution channels. General and administrative expenses increased by approximately $38,000 (6%) to $634,000 in 2004 as compared to $596,000 in 2003. A portion of our general and administrative expenses reflects the necessary expenses associated with being a publicly held company.

Interest income increased by approximately $10,000 to $56,000 in 2004 in comparison to 2003 due principally to the increased amount of invested funds and a moderate increase in interest rates in 2004. We have not incurred interest expense since we repaid our outstanding bank debt in May 2002. In 2003, other income included the $1,100,000 payment earned through the sale of our interest in AgriCell, a non-core joint venture.

Income before income taxes of $177,000 for the year ended December 31, 2004 compares to $716,000 for the year ended December 31, 2003 principally due to other income earned in 2003 through the sale of our joint venture interest that was offset by the beneficial effects of increased revenues and decreased expenses in 2004. We recorded tax expense at an effective tax rate of 19.0% and 42.6% in 2004 and 2003, respectively, resulting in net income of $144,000 and $411,000 for the years ended December 31, 2004 and 2003, respectively. Income tax expense included deferred taxes of $6,000 and $281,000 for the years ended December 31, 2004 and 2003, respectively, which consisted primarily of the utilization of prior year net operating loss carryforwards. The 2004

12

income tax expense includes a tax benefit of approximately $35,000 due to a change in the valuation allowance pertaining to certain deferred tax assets.

Fiscal 2003 Compared to Fiscal 2002

Total product sales decreased by 41% in 2003 in comparison to 2002 due principally to the termination of a product license effective as of October 1, 2002, as further discussed below. The effect of the termination of this product license on the current period-to-period comparison of our performance is now behind us. Going forward as we compare the results for 2004 to 2003, we will be looking at the results of our proprietary products. Sales of our proprietary products (principally First Defense^® and Wipe Out^® Dairy Wipes) increased by 2% in 2003 in comparison to 2002. We believe that sales of our products are influenced by the price of milk sold by our primary customers. After declining in 2002 to price levels common in the 1970’s, the price of milk has recently begun to improve. A common index used in the industry to measure this trend is known as the Class III milk price, which indicates the value of 100 pounds of milk sold into the cheese market. The average Class III milk price for 2003 was $11.42 per 100 pounds, which represents a 10% increase from the $10.42 average for 2002. The average Class III milk price for 2001 was $13.10. This upward trend could have a positive impact on our sales if it continues in the future.

Research and development expenses increased by 28% in 2003 in comparison to 2002 due principally to the expenses incurred in connection with the experimental field trial of Mast Out^® that we completed with positive results. The $1,100,000 in other income earned from the sale of a non-core joint venture in the first quarter of 2003 enabled us to pay for this study and report a fifth consecutive profitable year in 2003. Given the potential sales levels for Mast Out^® if it is successfully developed, manufactured and approved for sale by the FDA, we believe the increased level of research and development spending is warranted.

Total revenues for the year ended December 31, 2003 decreased by $2,827,000 (46%) to $3,357,000 from $6,185,000 in 2002. Product sales for the year ended December 31, 2003 decreased by $2,157,000 (41%) to $3,145,000 from $5,301,000 in 2002, primarily due to the termination of the license to market the Kamar Heatmount Detector. We have generally held our product selling prices without increase in consideration of the difficult economic times being experienced by our primary customers, dairy producers. Sales of First Defense^® increased by 7% during the year ended December 31, 2003 in comparison to the same period in 2002. Sales have benefited from the withdrawal of a competitive product from the market and from a significant increase in the value of calves. However, this positive effect was, in part, offset by negative pressures relating to a decline in milk prices. The sales of First Defense^® are normally seasonal with highest sales expected in the first quarter and lower sales expected during the summer months. Sales of Wipe Out^® Dairy Wipes decreased by 16% during the twelve month period ended December 31, 2003 in comparison to the same period in 2002. Sales of Wipe Out^® Dairy Wipes were first recorded in 2000 following the December 1999 acquisition of the product. We believe the drop in sales in 2003 was largely due to the drop in milk prices which is forcing many small dairy producers out of business. Wipe Out^® Dairy Wipes are more often used on small dairies than larger ones.

Grant income decreased by $191,000 (63%) to $112,000 in 2003, comprising 3% of total revenues in 2003 and 5% of total revenues in 2002. Most of the grant income supported work on the development of Mast Out^® and new approaches to the diagnosis of Johne’s Disease. Royalty income increased by $40,000 (100%) to $81,000 in 2003. In 2003, we earned $20,000 in revenue from the sale of technology rights. In 2002, revenue from the sale of technology rights included $400,000 earned upon the termination of a license covering certain of the DiffGAM^™ technology rights, $55,000 earned under this license before it was cancelled, $60,000 from an option to the lactoferrin technology and $25,000 from a different license to the DiffGAM^™ technology.

On October 1, 2002, we accepted a payment of $930,000 from Kamar, Inc. of Steamboat Springs, Colorado in consideration of the early termination of our rights to market the Kamar Heatmount Detector. Since 1988, the Company had marketed Kamar’s product under an exclusive license that was set to expire on December 31, 2004 when we negotiated the receipt of $930,000 in return for its termination twenty-seven months ahead of schedule.

13

The $930,000 approximated the net present value of the expected net contribution from the product over the final twenty-seven months of the license term, had it not been terminated. As this license had no book value, the full amount of the proceeds was recorded as a pre-tax gain of $930,000. The $930,000 was recorded as other income in the fourth quarter of 2002. As a result of the termination of this license, the Company’s product sales, product costs and sales and marketing expenses were reduced beginning October 1, 2002.

The following unaudited, pro forma, condensed financial information gives effect to this transaction as if it had occurred as of the beginning of the twelve month periods ended December 31, 2002 and 2003:

	Year Ended December 31, 2002		Adjustments			2002 Pro forma Adjusted		Year Ended December 31, 2003			Adjustments	2003 Pro forma Adjusted
Product sales	$	5,301,313	$	(2,204,077	)	$	3,097,236	$	3,144,512		—	$	3,144,512
Product costs		2,799,429		(1,347,861	)		1,451,568		1,347,289		—		1,347,289
Product selling expenses		1,227,598		(566,922	)		660,676		493,151		—		493,151
Net operating income (loss)		533,141		(289,294	)		243,847		(429,031	)	—		(429,031	)
Net interest and other income		948,243		(930,000	)		18,243		1,145,408		—		1,145,408
Income before income taxes		1,481,384		(1,219,294	)		262,090		716,377		—		716,377
Tax expense		595,147		(489,865	)		105,282		305,161		—		305,161
Net income	$	886,237	$	(729,429	)	$	156,808	$	411,216		—	$	411,216
Diluted net income per common share	$	0.32	$	(0.26	)	$	0.06	$	0.15		—	$	0.15

Product costs amounted to 43% of product sales in 2003 as compared to 53% in 2002. Internally developed products tend to have higher gross margin percentages than licensed-in products. A moderately lower gross margin percentage is anticipated as new products initially are developed and acquired. Over time, as these products are fully integrated into our manufacturing and selling operations, we expect to be able to improve the gross margin percentage. This is the case, for example, with Wipe Out^® Dairy Wipes, a product that we acquired in December 1999. In 2001, we invested in the necessary facility addition and production equipment required to process the wipe stock and perform the filling operations for this product internally, which has caused an improvement in the gross margin. We are now investing in the necessary facility modifications and production equipment required to produce Nisin internally. At this stage in our development, management is focusing on growing the absolute dollar value of the gross margin from the products that we continue to sell.

We increased our expenditures for research and development by approximately $297,000 (28%) to $1,350,000 in 2003 as compared to $1,053,000 in 2002. Research and development expenses aggregated 40% and 17% of total revenues in 2003 and 2002, respectively. Research and development expenses exceeded grant income by approximately $1,238,000 in 2003 and by $750,000 in 2002. These “net” research and development expenses increased to 39% of product sales in 2003 from 14% of product sales in 2002. Since 1999, we have shifted the primary focus of our research and development efforts to products for the animal health industry. The majority of our research and development budget is focused on the development of Mast Out^®.

Product selling expenses decreased by approximately $734,000 (60%) to $493,000 in 2003, aggregating 16% of product sales in 2003, compared to 23% in 2002. The decrease in the aggregate dollar amount of these expenses results principally from the October 1, 2002 termination of the license to market the Kamar Heatmount Detector, a product that had comprised a significant percentage of total sales. We continue to leverage the efforts of our small sales force through veterinary distribution channels. General and administrative expenses increased by approximately $24,000 (4%) to $596,000 in 2003 as compared to $572,000 in 2002. We continue our efforts

14

to control general and administrative expenses while incurring all the necessary expenses associated with being a publicly held company.

Interest income increased by approximately $14,000 to $46,000 in 2003 in comparison to 2002 due principally to the increased amount of invested funds despite the low interest rate environment. We did not incur interest expense after we repaid our outstanding bank debt in May 2002. In 2003, other income included the $1,100,000 payment earned through the sale of our interest in a lactoferrin-producing joint venture. Other income in 2002 included a one-time payment of $930,000 that we accepted in consideration of the October 1, 2002 termination of a product license.

The income before taxes of $716,000 for the year ended December 31, 2003 compares to $1,481,000 for the year ended December 31, 2002. We recorded tax expense at an effective tax rate of 42.6% and 40.2% in 2003 and 2002, respectively, resulting in net income of $411,000 and $886,000 for the years ended December 31, 2003 and 2002, respectively. Income tax expense included deferred taxes of $281,000 and $589,000 for the years ended December 31, 2003 and 2002, respectively, which consisted primarily of the utilization of prior year net operating loss carryforwards.

Financial Position, Liquidity and Capital Resources

We had approximately $4,450,000 in available cash and short-term investments as of December 31, 2004. We are using some of this cash to fund product development and to invest in the manufacturing of our commercialized products. We continue to look for new product acquisition opportunities that would have a strategic fit with the products that we currently sell.

Under our December 2004 product development and marketing agreement with Pfizer, we received an up front payment of $1,500,000. We are eligible to receive additional performance milestone payments and royalties on any sales of Mast Out^® made by Pfizer. Pfizer is responsible for most of the future product development and all of the marketing expenses pertaining to Mast Out^®.

Nisin for Wipe Out^® Dairy Wipes had been produced for us under subcontract since the product’s acquisition in 1999. During 2003, we began making building modifications and fixed asset acquisitions necessary to bring the production process in-house. As of December 31, 2003, approximately $227,000 had been paid to vendors on this project. We completed this investment in July 2004 for a total cost of approximately $423,000. This facility is also being used to produce clinical material for Mast Out^®. The know-how gained in producing Nisin in our facility is being transferred to Pfizer, who is responsible for the production of cGMP Nisin for Mast Out^®.

The table below summarizes the changes in selected key balance sheet items:

	Balance at December 31,				Increase
	2003		2004		$		%
Cash, cash equivalents and short-term investments	$	4,245,000	$	4,450,000	$	205,000	5	%
Net working capital		4,965,000		4,998,000		33,000	1	%
Total assets		8,187,000		9,530,000		1,343,000	16	%
Shareholders’ equity	$	7,370,000	$	7,729,000	$	358,000	5	%

During 2004, operating activities provided approximately $1,358,000 in cash. The two largest operating activities that were added back to net income were: 1) depreciation and amortization expense of $279,000 and 2) an increase in deferred revenue of $1,079,000. Investing activities used $3,161,000 in cash, comprised of a $334,000 net investment in fixed assets, a net investment of $1,861,000 in short-term investments and a $965,000 acquisition of product rights. Financing activities included approximately $146,000 in proceeds from the issuance of common stock upon the exercise of stock options.

15

We funded our 2004 research and development expenses principally from product sales. During the year ended December 31, 2004, gross margin of $2,075,000 from product sales was sufficient to fund the aggregate of $2,060,000 in research and development expenses net of grant income (“net R&D”) and selling, general and administrative (“S,G&A”) expenses, resulting in our sixth consecutive year of profitability. In 2003, the $1,797,000 in gross margin was not sufficient to fund the aggregate of $2,327,000 in net R&D and S,G&A expenses. The resulting deficit was more than funded by the $1,100,000 in other income received from the sale of our interest in a lactoferrin-producing joint venture, and as a result, we were able to record our fifth consecutive year of profitability. In 2002, the $2,502,000 in gross margin almost funded the aggregate of $2,549,000 in net R&D and S,G&A expenses. In 2001, the $3,180,000 gross margin more than funded the aggregate of $2,658,000 in net R&D and S,G&A expenses. In 2000, the $2,684,000 gross margin more than funded the aggregate of $2,325,000 in net R&D and S,G&A expenses. In 1999, the $2,569,000 gross margin more than funded the aggregate of $1,954,000 in net R&D and S,G&A expenses. Since 1999, our strategy has been to focus our research and development efforts on animal health product opportunities, which are generally less expensive to develop than human health products.

In March 2001, we received a two year award aggregating up to $400,000 from the Maine Technology Institute, a non-profit corporation created by the General Assembly of the State of Maine. The award augmented our development of Mast Out^®. The award was subject to a contingent payback obligation unless the product development was terminated. Because of this contingent payback obligation, the funding was recorded as deferred revenue as the cash was received, and no income was recognized to match the development expenses as they were incurred. After Pfizer assumed primary responsibility for the future development of Mast Out^®, we repaid this award in full in December 2004.

Our cumulative investment in research and development expenses of $15,494,000 for the fifteen year period ended December 31, 2004 has been supported, in part, by $3,152,000 in grant awards since 1990. We have been awarded seven Phase I and three Phase II Small Business Innovation Research (“SBIR”) grants from the National Institutes of Health aggregating $2,378,000. In addition, we have received three awards from the State of Maine aggregating $455,000, two Phase I SBIR grants from the USDA aggregating $140,000 and one $139,000 grant from the Department of Defense. In addition to the $2,030,000 that supported the development of the Company’s milk antibody products for humans, approximately $666,000 was awarded in support of the Mast Out^® development program, $191,000 was awarded in support of skin sanitizing applications of Nisin, $140,000 was awarded in support of Crypto-Scan^® and $70,000 was awarded in support of new approaches to the diagnosis of Johne’s Disease. Approximately $2,613,000 of this grant income was recognized prior to 2004, and $67,000 was recognized in 2004 (not including the $400,000 award from the Maine Technology Institute, described above) and $72,000 is expected to be recognized in 2005. We may, on occasion, seek additional research grant support as a means of leveraging the funds that we are able to spend developing new products.

Forward-Looking Statements

This Annual Report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such statements include, but are not limited to, any statements relating to our objectives concerning future product sales, research and development expenses and anticipated timelines, profitability, expense ratios and any other statements that are not historical facts. Such statements involve risks and uncertainties, including, but not limited to, those risks and uncertainties relating to difficulties or delays in development, testing, regulatory approval, production and marketing of our products, competition within our anticipated product markets, the uncertainties associated with product development, and other risks detailed from time to time in filings we make with the Securities and Exchange Commission, including our Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q. Such statements are based on our current expectations, but actual results may differ materially due to various factors, including those risks and uncertainties mentioned or referred to in this Annual Report.

16

Risk Factors

The sale and development of our products is subject to financial, efficacy, regulatory and market risks. We cannot be sure that we will be able to maintain the regulatory compliance required to continue selling our products or that we will be able to finance the development of new product opportunities or that, if financed, the new products will be found to be efficacious and gain the appropriate regulatory approval. Furthermore, if regulatory approval is obtained, there can be no assurance that the market estimates will prove to be accurate or that market acceptance at a profitable price level can be achieved or that the products can be profitably manufactured. We are heavily dependent on the successful development of new products for future growth. One such major effort is our arrangement with Pfizer which will control the development and commercialization of Mast Out^®. Under our agreement, Pfizer has broad discretion over the development efforts and retains the right to terminate the license subject to certain conditions.

We believe that supplies and raw materials for the production of our products are available from more than one source. Our policy is to maintain more than one source of supply for the components used in our products. However, there is a risk that we could have difficulty in efficiently acquiring essential supplies. We are dependent on our manufacturing operations and facility at 56 Evergreen Drive in Portland, Maine for the production of First Defense^® and Wipe Out^® Dairy Wipes. Any disruption in the services at this facility could negatively effect the production of inventory.

The dairy industry has been facing very difficult economic pressures. Many small farmers have been forced out of business. During 2003, milk prices declined to levels last experienced in the 1970’s. While these conditions have recently improved, the financial insecurity of our primary customer base is a risk to our ability to maintain and grow sales at a profitable level.

First Defense^® is sold in the United States subject to a product license approval from the USDA first obtained in 1991. The potency of serial lots is directly traceable to the original serial used to obtain the product performance claims (the “Reference Standard”). Due to the unique nature of the First Defense^® label claims, host animal re-testing is not required as long as periodic laboratory analyses continue to support the stability of stored Reference Standard. To date, these analyses have demonstrated strong stability. However, if, at any time, the USDA does not approve the requalification of the Reference Standard, additional clinical studies could be required to meet regulatory requirements and allow for continued sales of the product.

The potential for epidemics of bovine diseases such as Foot and Mouth Disease, Bovine Tuberculosis, Brucellosis and Bovine Spongiform Encephalopathy (“BSE”) present a risk to us and our customers. A documented case of BSE in the U.S. in 2003 has led to an overall tightening of regulations pertaining to ingredients of animal (especially bovine) origin. For example, the FDA has amended its animal feed rule to eliminate the exemption allowing mammalian blood and blood products to be fed to other ruminants as a protein source. These actions, together with actions by the USDA, to increase the levels of protection of the human food supply do not currently, and are not anticipated to, affect First Defense^®. First Defense^® is considered a veterinary medicine rather than a feed ingredient, and it is manufactured from bovine milk and colostrums, which is not considered a BSE risk material. However, future regulations to minimize risk against the spread of disease could affect the regulatory status of First Defense^®.

The threat of biological terrorism is a risk to both our ability to economically acquire and collect good quality raw material from our contract farms as well as to the economical health of our customers. Any act of widespread bioterrorism against the dairy industry could have a negative impact on our operations.

Effects of Inflation and Interest Rates; Currency Fluctuations

We believe that neither inflation nor interest rates have had a significant effect on our revenues and expenses. Significant increases in inflation or interest rates, however, could affect our customers and the demand

17

for our products. We hope to increase the level of our future sales of products outside the United States, and the cost of our products to foreign customers could be affected by currency fluctuations.

Critical Accounting Policies

Details regarding the impact of new accounting pronouncements on our financial statements is provided in Note 2(m) to our financial statements. The financial statements are presented on the basis of accounting principles that are generally accepted in the U.S. All professional accounting standards that were effective and applicable to us as of December 31, 2004 have been taken into consideration in preparing the financial statements. The preparation of financial statements requires that we make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to revenue recognition, investments, intangible and long lived assets, income taxes and contingencies. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We have chosen to highlight certain policies that we consider critical to the operations of the business and understanding our financial statements.

We recognize revenue in accordance with Staff Accounting Bulletin (“SAB”) No. 104, “Revenue Recognition”, which supersedes SAB No. 101, “Revenue Recognition in Financial Statements”. SAB No. 104 requires that four criteria are met before revenue is recognized. These include i) persuasive evidence that an arrangement exists, ii) delivery has occurred or services have been rendered, iii) the seller’s price is fixed and determinable and iv) collectibility is reasonably assured. We recognize revenue at the time of shipment (including to distributors) for substantially all products, as title and risk of loss pass to the customer on delivery to the common carrier after concluding that collectibility is reasonably assured. We recognize service revenue at the time the service is performed. Royalty income is recorded on the accrual basis based on sales as reported to us by our licensee pursuant to the terms of the agreement. Non-refundable grant income is recognized as reimbursable expenses are incurred. Indirect costs which are billed to the government are subject to their review. All research and development costs and patent costs are expensed as incurred, except as described in the next paragraph.

In November 2004, we capitalized a payment of approximately $965,000 made to Nutrition 21, Inc. to buy out certain future milestone and royalty payment obligations, which principally resulted in a fully paid, perpetual license related to Mast Out^®. This intangible asset is expected to be amortized over the period from November 15, 2004 to December 31, 2007. We received a $1,500,000 up front payment from Pfizer in connection with the December 2004 product development and marketing agreement covering Mast Out^®. We expect to recognize this revenue over the period from December 15, 2004 to December 31, 2007. Both of these periods reflect management’s estimate of the likely period of development before royalties could be received on sales of Mast Out^®. The Pfizer agreement, among other things, also provides for contingent milestone payments and royalties based on any future sales, subject to certain minimums. We expect that revenue from any future milestone payments that we receive from Pfizer will be recognized from the date that the milestone is achieved through December 31, 2007. Any such milestone payments received for obtaining regulatory approvals, or after a regulatory approval is obtained, are expected to be recognized when the milestone has been reached. Should the December 31, 2007 estimate change, the period during which the then remaining expense and revenue are recognized would be adjusted accordingly. Any future royalty payments will be recognized as earned based on future product sales.

We record estimated reductions to revenue in connection with customer programs and incentive offerings that allow customers to earn cash rebates or future rights to free or discounted product. We record product selling expenses for customer programs and incentive offerings that allow customers to earn promotional merchandise. We estimate these expenses based on our experience with similar customer programs in prior years. Distributors of First Defense^® have the right to return expired product for a 50% credit on future orders. As the product has a two year shelf life, we have not experienced significant product returns historically.

18

Inventories include raw materials, work-in-process and finished goods and are recorded at the lower of standard cost which approximates cost on the first-in, first-out method or market (net realizable value). Work-in-process and finished goods inventories include materials, labor and manufacturing overhead.

We utilized approximately $1,264,000, $495,000 and $540,000 of net operating loss carryforwards to offset taxable income in fiscal years 2002, 2003 and 2004, respectively. We have no remaining net operating loss carryforwards as of December 31, 2004 to offset future taxable income. As a result of two consecutive years of profitable results in 1999 and 2000 and the expectation of continued profitability, we recorded a tax benefit of approximately $1,967,000 in fiscal 2000 as a result of the release of the valuation allowance on the deferred tax asset related to net operating loss carryforwards. The remaining valuation allowance related to the general business credit carryforward of approximately $97,000 and $62,000 as of December 31, 2003 and 2004, respectively, has not been released due to the uncertainty of its use before expiration. This credit expires in the years 2005 through 2010.

ITEM 7A—QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

None

ITEM 8—FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Our financial statements, together with the notes thereto and the reports of the independent accountants thereon, are set forth on Pages F-1 through F-20 at the end of this report.

ITEM 9—CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Our Board of Directors decided to change our independent accountants effective April 1, 2003. On that date, the Board dismissed PricewaterhouseCoopers LLP and engaged Baker Newman & Noyes LLC as principal accountants to audit our financial statements. In each case, the decision was recommended by the Audit Committee of the Board of Directors and then approved by the Board.

PricewaterhouseCoopers LLP’s report on the financial statements for the year ended December 31, 2002 contained no adverse opinion or disclaimer of opinion and was not qualified or modified as to uncertainty, audit scope or accounting principles. In addition, in connection with its audit for the year ended December 31, 2002 and through April 1, 2003, there were no disagreements with PricewaterhouseCoopers LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope and procedures, which disagreements, if not resolved to the satisfaction of PricewaterhouseCoopers LLP, would have caused PricewaterhouseCoopers LLP to make reference to the subject matter of the disagreements in their reports on the financial statements for such years.

ITEM 9A—CONTROLS AND PROCEDURES

Our management, with the participation of the individual who serves as our principal executive and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2004. Based on this evaluation, that officer concluded that our disclosure controls and procedures were effective as of that date. There was no change in our internal control over financial reporting that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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 recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure

19

controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officer, as appropriate to allow timely decisions regarding required disclosures.

ITEM 9B—OTHER INFORMATION

None

PART III

ITEM 10—DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

(A) Information with respect to our directors is incorporated herein by reference to the section of our 2005 Proxy Statement titled “Election of the Board of Directors”, which we intend to file with the Securities and Exchange Commission within 120 days after the end of our fiscal year. The information required by this item with respect to our executive officers is contained in Item 1 of Part I of this Annual Report on Form 10-K under the heading, Employees and Executive Officers. There is no family relationship between any director, executive officer, or person nominated or chosen by the Company to become a director or executive officer.

ITEM 11—EXECUTIVE COMPENSATION

Information regarding cash compensation paid to our executive officers is incorporated herein by reference to the section of our 2005 Proxy Statement titled “Executive Compensation”, which we intend to file with the Securities and Exchange Commission within 120 days after the end of our fiscal year.

ITEM 12—SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Information regarding ownership of our common stock by certain owners and management is incorporated herein by reference to the section of our 2005 Proxy Statement titled “Security Ownership of Certain Beneficial Owners and Management”, which we intend to file with the Securities and Exchange Commission within 120 days after the end of our fiscal year.

ITEM 13—CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information regarding certain relationships and related transactions is incorporated herein by reference to the section of our 2005 Proxy Statement titled “Certain Relationships and Related Transactions”, which we intend to file with the Securities and Exchange Commission within 120 days after the end of our fiscal year.

ITEM 14—PRINCIPAL ACCOUNTANT FEES AND SERVICES

Information regarding our principal accountant fees and services is incorporated by reference to the section of our 2005 Proxy Statement titled “Principal Accountant Fees and Services”, which we intend to file with the Securities and Exchange Commission within 120 days after the end of our fiscal year.

20

PART IV

ITEM 15—EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits

3.1	Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 of the Registrant’s 1987 Registration Statement Number 33-12722 on Form S-1 as filed with the Commission).
3.2	Certificate of Amendment to the Company’s Certificate of Incorporation (incorporated by reference to Exhibit 4.1 to the Registrant’s Quarterly Report on Form 10-Q for the three month period ended June 30, 1990).
3.3	Certificate of Amendment to the Company’s Certificate of Incorporation effective August 24, 1992 (incorporated by reference to Exhibit 3.4 of the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 1992).
3.4	Bylaws of the Registrant as amended (incorporated by reference to Exhibit 3.3 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 1995).
4.1	Rights Agreement dated as of September 5, 1995, between the Registrant 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 to the Registrant’s Current Report on Form 8-K dated September 5, 1995).
10.1+	1989 Stock Option and Incentive Plan of the Registrant (incorporated by reference to Exhibit 10.27 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 1989).
10.2+	Form of Incentive Stock Option Agreement (incorporated by reference to Exhibit 10.28 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 1989).
10.3+	Form of Indemnification Agreement entered into with each of the Company’s directors and officers (incorporated by reference to Exhibit 10.32 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 1989).
10.4+	Amendment, dated April 1992, to Employment Agreement dated November 1991, between the Registrant and Michael F. Brigham (incorporated by reference to Exhibit 10.26 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 1992).
10.5+	Amendment, dated April 1992, to Employment Agreement dated November 1991, between the Registrant and Joseph H. Crabb (incorporated by reference to Exhibit 10.32 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 1995).
10.6+	1995 Stock Option Plan for Outside Directors (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the three months ended June 30, 1995).
10.7+	Form of Stock Option Agreement (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the three months ended June 30, 1995).
10.8(1)	License Agreement between the Registrant and Murray Goulburn Co-operative Co., Limited, dated November 14, 1997 (incorporated by reference to Exhibit 10.26 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 1997).
10.9+	Employment Agreement dated April 29, 1999 between the Registrant and Michael F. Brigham (incorporated by reference to Exhibit 10.22 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 1999).

21

10.10	Asset Purchase Agreement between the Registrant and Nutrition 21, Inc. dated December 30, 1999 (incorporated by reference to Exhibit 2 to the Registrant’s Current Report on Form 8-K filed January 13, 2000).
10.11+	2000 Stock Option and Incentive Plan of the Registrant (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the three month period ended June 30, 2000).
10.12+	Form of Incentive Stock Agreement (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the three month period ended June 30, 2000).
10.13+	2000 Stock Option Plan for Outside Directors of the Registrant (incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the three month period ended June 30, 2000).
10.14+	Form of Stock Option Agreement (incorporated by reference to Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q for the three month period ended June 30, 2000).
10.15	License and Sublicense Agreement between the Registrant and Nutrition 21, Inc. (f/k/a AMBI Inc.) dated as of April 12, 2000, as amended through November 17, 2004 (conformed copy) (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed November 19, 2004).
10.16(2)	License Agreement between the Registrant and Pfizer Inc. dated as of December 21, 2004.
10.17+	Employment Agreement dated as of January 1, 2005 between the Registrant and Joseph H. Crabb (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed January 4, 2005).
14	Code of Business Conduct and Ethics (incorporated by reference to Exhibit 14 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2003).
16	Letter re Change in Certifying Accountant (incorporated by reference to Exhibit 16 to the Registrant’s Current Report on Form 8-K/A filed April 15, 2003).
23.1	Consent of Baker Newman & Noyes, LLC.
23.2	Consent of PricewaterhouseCoopers LLP.
31	Rule 13a-14(a) Certifications.
32	Section 1350 Certifications, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(1) Confidential treatment previously granted as to certain portions.

(2) Confidential treatment as to certain portions has been requested, which portions have been omitted and filed separately with the Securities and Exchange Commission.

+ Management contract or compensatory plan or arrangement.

22

(b) Index to Financial Statements

Report of Baker Newman & Noyes, LLC, Independent Auditors	F-1
Report of PricewaterhouseCoopers LLP, Independent Auditors	F-2
Balance Sheets as of December 31, 2003 and 2004	F-3
Statements of Operations for the years ended December 31, 2002, 2003 and 2004	F-4
Statements of Stockholders’ Equity for the years ended December 31, 2002, 2003 and 2004	F-5
Statements of Cash Flows for the years ended December 31, 2002, 2003 and 2004	F-6
Notes to Financial Statements	F-7 to F-20
(c) Schedule 2—Supplemental Valuation and Qualifying Accounts	F-21

23

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders

ImmuCell Corporation

Portland, Maine

We have audited the balance sheets of ImmuCell Corporation as of December 31, 2004 and 2003, and the related statements of operations, shareholders’ equity and cash flows for each of the two years in the two year period ended December 31, 2004. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provided a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of ImmuCell Corporation as of December 31, 2004 and 2003, and the results of its operations and its cash flows for each of the two years in the two year period ended December 31, 2004, in conformity with U.S. generally accepted accounting principles.

Our audits were conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States) and were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The financial statement schedule is presented for purposes of complying with the Securities and Exchange Commission’s rules and is not a required part of the basic financial statements. The financial statement schedule for the years ended December 31, 2004 and 2003, has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.

Baker Newman & Noyes, LLC

Portland, Maine

January 21, 2005

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To Board of Directors and Shareholders of

ImmuCell Corporation:

In our opinion, the consolidated financial statements listed in the accompanying index appearing under Item 15(b) present fairly, in all material respects, the results of operations and cash flows of ImmuCell Corporation for the year ended December 31, 2002, in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index appearing under Item 15(c) presents fairly, in all material respects, the information set forth therein for the period ended December 31, 2002 when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company’s management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with the standards of the Public Company Accounting Oversight Board, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

Boston, Massachusetts

January 24, 2003

F-2

IMMUCELL CORPORATION

BALANCE SHEETS

AS OF DECEMBER 31, 2003 and 2004

	2003			2004
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	3,356,742		$	1,700,567
Short-term investments		888,320			2,749,596
Accounts receivable, net of allowance for doubtful accounts of $13,000 at December 31, 2003 and 2004		369,854			434,591
Inventories		674,507			667,666
Current portion of deferred tax asset		45,043			215,066
Prepaid expenses		46,976			44,913
Total current assets		5,381,442			5,812,399
PROPERTY, PLANT AND EQUIPMENT, at cost:
Laboratory and manufacturing equipment		1,456,385			1,701,583
Building and improvements		1,309,781			1,500,559
Office furniture and equipment		91,052			123,289
Construction in progress		210,058			7,356
Land		50,000			50,000
		3,117,276			3,382,787
Less-accumulated depreciation		1,322,691			1,481,643
Net property, plant and equipment		1,794,585			1,901,144
DEFERRED TAX ASSET		782,145			674,240
PRODUCT RIGHTS AND OTHER ASSETS, net of accumulated amortization of $142,000 and $196,000 at December 31, 2003 and 2004, respectively		228,460			1,141,886
TOTAL ASSETS	$	8,186,632		$	9,529,669
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accrued expenses	$	354,540		$	228,609
Accounts payable		61,640			92,732
Deferred revenue		—			493,151
Total current liabilities		416,180			814,492
Long-term portion of deferred revenue		400,000			986,301
COMMITMENTS AND CONTINGENT LIABILITIES (NOTES 5 AND 6)
SHAREHOLDERS’ EQUITY:
Common stock, Par value—$0.10 per share,
Authorized—8,000,000 shares, Issued—3,136,082 and 3,190,148 shares at December 31, 2003 and 2004, respectively		313,608			319,015
Capital in excess of par value		8,951,493			9,160,991
Accumulated deficit		(1,295,647	)		(1,152,128	)
Treasury stock, at cost—395,498 shares at December 31, 2003 and 2004		(599,002	)		(599,002	)
Total shareholders’ equity		7,370,452			7,728,876
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	8,186,632		$	9,529,669

The accompanying notes are an integral part of these financial statements.

F-3

IMMUCELL CORPORATION

STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2002, 2003 and 2004

	2002			2003			2004
REVENUES:
Product sales	$	5,301,313		$	3,144,512		$	3,523,982
Grant income		303,207			111,724			66,900
Royalty income		40,644			81,106			84,850
Sale of technology rights		539,540			20,000			20,548
Total revenues		6,184,704			3,357,342			3,696,280
COSTS AND EXPENSES:
Product costs		2,799,429			1,347,289			1,449,016
Research and development expenses		1,052,783			1,350,164			1,091,836
Product selling expenses		1,227,598			493,151			400,929
General and administrative expenses		571,753			595,769			633,728
Total costs and expenses		5,651,563			3,786,373			3,575,509
Net operating income (loss)		533,141			(429,031	)		120,771
Interest income		32,227			46,181			56,221
Interest expense		(19,708	)		—			—
Other income, net		935,724			1,099,227			201
Net interest and other income		948,243			1,145,408			56,422
INCOME BEFORE INCOME TAXES		1,481,384			716,377			177,193
INCOME TAX EXPENSE		595,147			305,161			33,674
NET INCOME	$	886,237		$	411,216		$	143,519
NET INCOME PER COMMON SHARE:
Basic	$	0.32		$	0.15		$	0.05
Diluted	$	0.32		$	0.15		$	0.05
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic		2,735,495			2,738,193			2,755,070
Diluted		2,797,660			2,823,696			2,966,923

The accompanying notes are an integral part of these financial statements.

F-4

IMMUCELL CORPORATION

STATEMENTS OF SHAREHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2002, 2003 and 2004

	Common Stock $.10 Par Value			Capital in Excess of Par Value		Accumulated Deficit			Treasury Stock				Total Shareholders’ Equity
	Shares	Amount							Shares	Amount
BALANCE,
December 31, 2001	3,115,082	$	311,508	$	8,913,981	$	(2,593,100	)	389,598	$	(586,735	)	$	6,045,654
Net income	—		—		—		886,237		—		—			886,237
Exercise of stock Options	10,500		1,050		21,668		—		—		—			22,718
BALANCE,
December 31, 2002	3,125,582		312,558		8,935,649		(1,706,863	)	389,598		(586,735	)		6,954,609
Net income	—		—		—		411,216		—		—			411,216
Exercise of stock Options	10,500		1,050		13,575		—		—		—			14,625
Tax benefits related to stock options	—		—		2,269		—		—		—			2,269
Acquisition of treasury stock	—		—		—		—		5,900		(12,267	)		(12,267	)
BALANCE,
December 31, 2003	3,136,082		313,608		8,951,493		(1,295,647	)	395,498		(599,002	)		7,370,452
Net income	—		—		—		143,519		—		—			143,519
Exercise of stock Options	54,066		5,407		140,887		—		—		—			146,294
Tax benefits related to stock options	—		—		68,611		—		—		—			68,611
BALANCE,
December 31, 2004	3,190,148	$	319,015	$	9,160,991	$	(1,152,128	)	395,498	$	(599,002	)	$	7,728,876

The accompanying notes are an integral part of these financial statements.

F-5

IMMUCELL CORPORATION

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2002, 2003 and 2004

	2002			2003			2004
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	886,237		$	411,216		$	143,519
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		236,771			256,270			278,522
Deferred income taxes		589,480			280,667			6,493
(Gain) loss on disposal of fixed assets		(4,786	)		33,695			2,892
Changes in:
Accounts receivable		549,640			54,889			(64,737	)
Inventories		(256,330	)		115,687			6,841
Prepaid expenses and other assets		(4,026	)		(5,887	)		(107	)
Accounts payable		(84,460	)		(25,160	)		31,092
Accrued expenses		(104,601	)		202,566			(125,931	)
Deferred revenue		90,460			79,990			1,079,452
Net cash provided by operating activities		1,898,385			1,403,933			1,358,036
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment		(250,004	)		(304,245	)		(338,229	)
Proceeds from disposal of fixed assets		3,005			—			4,000
Maturities of short-term investments		392,145			1,781,702			1,879,413
Purchases of short-term investments		(1,179,191	)		(1,882,976	)		(3,740,689	)
Acquisition of product rights		—			—			(965,000	)
Net cash used for investing activities		(1,034,045	)		(405,519	)		(3,160,505	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of debt obligations		(414,178	)		—			—
Proceeds from exercise of stock options		22,718			14,625			146,294
Acquisition of treasury stock		—			(12,267	)		—
Net cash (used for) provided by financing activities		(391,460	)		2,358			146,294
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		472,880			1,000,772			(1,656,175	)
BEGINNING CASH AND CASH EQUIVALENTS		1,883,090			2,355,970			3,356,742
ENDING CASH AND CASH EQUIVALENTS	$	2,355,970		$	3,356,742		$	1,700,567
CASH PAID FOR INTEREST	$	22,739		$	—		$	—
CASH PAID FOR INCOME TAXES	$	8,617		$	17,150		$	13,893

The accompanying notes are an integral part of these financial statements.

F-6

IMMUCELL CORPORATION

NOTES TO FINANCIAL STATEMENTS

1. BUSINESS OPERATIONS

ImmuCell Corporation (the “Company”) is a biotechnology company primarily engaged in the development, manufacture and sales of products that improve the health and productivity of cows for the dairy and beef industry. The Company was originally incorporated in Maine in 1982 and reincorporated in Delaware in 1987, in conjunction with its initial public offering of common stock. The Company is subject to certain risks associated with its stage of development including dependence on key individuals, competition from other larger companies, the successful sales of existing products and the development and acquisition of additional commercially viable products with appropriate regulatory approvals, where applicable.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Consolidation Principles

Prior to 2003, the consolidated financial statements of the Company included the accounts of the Company and its wholly-owned subsidiary, the Kamar Marketing Group, Inc. All intercompany accounts and transactions were eliminated in consolidation. In connection with the termination of a license to a product that had been marketed by this subsidiary, the subsidiary was merged into the Company at December 31, 2002.

(b) Cash, Cash Equivalents and Short-Term Investments

We consider all highly liquid investment instruments that mature within three months of their purchase dates to be cash equivalents. Cash equivalents are principally invested in securities backed by the U.S. government. Certain cash balances in excess of Federal Deposit Insurance Corporation (“FDIC”) limits of $100,000 per financial institution are maintained in money market accounts at financial institutions that are secured, in part, by the Securities Investor Protection Corporation. Amounts in excess of the FDIC limit of $100,000 per bank that are not invested in securities backed by the U.S. government aggregated $2,068,000 and $1,491,000 at December 31, 2003 and 2004, respectively. Short-term investments are classified as held to maturity and are comprised principally of certificates of deposits that mature in more than three months from their purchase dates and not more than twelve months from the balance sheet date and are held at different financial institutions that are insured by the FDIC within FDIC limits of $100,000 each.

Cash, cash equivalents and short-term investments consist of the following:

	December 31, 2003		December 31, 2004		(Decrease) Increase
Cash and cash equivalents	$	3,356,742	$	1,700,567	$	(1,656,175	)
Short-term investments		888,320		2,749,596		1,861,276
	$	4,245,062	$	4,450,163	$	205,101

(c) Inventories

Inventories include raw materials, work-in-process and finished goods and are recorded at the lower of cost, on the first-in, first-out method, or market (net realizable value). Work-in-process and finished goods inventories include materials, labor and manufacturing overhead. Inventories consist of the following:

	As of December 31,
	2003		2004
Raw materials	$	86,304	$	167,241
Work-in-process		405,004		429,481
Finished goods		183,199		70,944
	$	674,507	$	667,666

F-7

IMMUCELL CORPORATION

NOTES TO FINANCIAL STATEMENTS—(Continued)

(d) Property, Plant and Equipment

We depreciate property, plant and equipment on the straight-line method by charges to operations 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 cost of the building, acquired in 1993, and the subsequent addition thereto, completed in 2001, are being depreciated through 2023. Related building improvements are depreciated over ten year periods. Large and durable fixed assets are depreciated over their useful lives that are generally estimated to be ten years. Other fixed assets and computer equipment are depreciated over their useful lives that are generally estimated to be five and three years, respectively.

(e) Intangible Assets

We amortize intangible assets on the straight-line method by charges to operations 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 $250,000 acquisition of product rights related to Wipe Out^® Dairy Wipes in December 1999 is being amortized to cost of sales over the ten year period ending in December 2009, and the related manufacturing rights acquired in 2001 for $45,000 are being amortized to cost of sales through December 2009. The $75,000 acquisition of product rights related to MASTiK^®, that was paid for in two installments in December 2000 and July 2001, is being amortized to cost of sales through June 2008. Amortization expense relating to these intangible assets is expected to amount to approximately $41,000 per year in each of the years from 2005 to 2007, $35,000 in 2008 and the remaining $30,000 in 2009. No material changes are anticipated in the remaining useful lives of intangible assets.

In November 2004, we capitalized a payment of approximately $965,000 made to Nutrition 21, Inc. to buy out certain future milestone and royalty payment obligations relating principally to Mast Out^®. This intangible asset is expected to be amortized over the period from November 15, 2004 to December 31, 2007. Accordingly, we expect amortization expense of approximately $317,000 annually from 2005 through 2007. See Note 10(a).

We continually assess the realizability of these assets in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”. If an impairment review is triggered, we evaluate the carrying value of long-lived assets by determining if impairment exists based on estimated undiscounted future cash flows over the remaining useful life of the assets and comparing that value to the carrying value of the assets. If the carrying value of the asset is greater than the estimated future cash flows, the asset is written down to its estimated fair value. The cash flow estimates that are used contain our best estimates, using appropriate and customary assumptions and projections at the time. We also review the estimated useful life of intangible assets at the end of each reporting period, making any necessary adjustments. Management believes that none of these assets was impaired as of December 31, 2004.

(f) Disclosure of Fair Value of Financial Instruments and Concentration of Risk

Financial instruments consist mainly of cash and cash equivalents, short-term investments, accounts receivable and accounts payable. Financial instruments that potentially subject the Company to concentrations of credit risk are principally cash, cash equivalents, short-term investments and accounts receivable. We invest our short-term investments in financial instruments that are insured by the FDIC. 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, 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. The carrying amounts of our financial instruments approximate fair market value.

F-8

IMMUCELL CORPORATION

NOTES TO FINANCIAL STATEMENTS—(Continued)

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. However, there is a risk that we could have difficulty in efficiently acquiring essential supplies.

(g) Revenue Recognition

Revenues related to the sale of manufactured products are recorded when title and risk of loss have passed to the customer, which is at the time of shipment and when collectibility is reasonably assured. Non-refundable grant income is recognized as reimbursable expenses are incurred. Indirect costs which are billed to the government are subject to their review. Royalty income is recorded on the accrual basis based on sales as reported to the Company by our licensee pursuant to the terms of the agreement. Revenues from non-refundable upfront payments are deferred and recognized ratably over the period during which the earning process is completed.

We received a $1,500,000 up front payment from Pfizer in connection with the December 2004 product development and marketing agreement covering Mast Out^®. We expect to recognize this revenue over the period from December 15, 2004 to December 31, 2007. Accordingly, we expect to recognize revenue of approximately $493,000 annually from 2005 through 2007 pertaining to this payment. See Notes 2(m) and 10(a).

We were awarded a grant in 2001 for $400,000 that carried a contingent payback obligation upon commercialization of Mast Out^®. Because of this contingent payback obligation, the funding was recorded as deferred revenue as the cash was received, and no income was recognized to match the development expenses as they were incurred. After Pfizer assumed primary responsibility for the future development of Mast Out^®, we repaid this award in full in December 2004.

(h) Expense Recognition

Advertising expenses are expensed when incurred, which is generally during the month in which the advertisement is published. Advertising expenses amounted to $242,000, $163,000 and $172,000 during the years ended December 31, 2002, 2003 and 2004, respectively. All research and development costs are expensed as incurred, as are all related patent costs.

(i) Income Taxes

We account for income taxes in accordance with SFAS No. 109, “Accounting for Income Taxes”. This statement 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. See Note 4.

(j) Net Income Per Common Share

The basic net income per common share has been computed in accordance with Financial Accounting Standards Board (“FASB”) Statement No. 128, “Earnings Per Share”, by dividing net income by the weighted

F-9

IMMUCELL CORPORATION

NOTES TO FINANCIAL STATEMENTS—(Continued)

average number of common shares outstanding during the year. The diluted net income per common share reflects the potential dilution from outstanding stock options as shown below:

	Year Ended December 31,
	2002		2003		2004
Weighted average number of shares outstanding during the period	2,735,495		2,738,193		2,755,070
Dilutive stock options	210,201		261,811		542,889
Shares that could have been repurchased with the proceeds from the dilutive stock options	(148,036	)	(176,308	)	(331,036	)
Diluted number of shares outstanding during the period	2,797,660		2,823,696		2,966,923
Outstanding stock options not included in the calculation because the effect would be anti-dilutive	346,000		337,936		2,500

For additional disclosures regarding the outstanding common stock options, see Note 5(a) and (b).

(k) Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles 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. Actual amounts could differ from those estimates.

(l) Employee Stock-Based Compensation

We measure compensation related to employee stock-based compensation plans in accordance with the intrinsic value method of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees”, and we elect to disclose the pro forma impact of accounting for stock-based compensation plans under the provisions of SFAS No. 123, “Accounting for Stock-Based Compensation” and SFAS No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure”. Accordingly, no stock-based employee compensation cost has been recognized for these plans. Had compensation cost for our stock plans been determined consistent with the provisions of these statements, our net income and basic and diluted net income per share would have been reduced to the pro forma amounts indicated below:

	Year Ended December 31,
	2002		2003		2004
Net income, as reported	$	886,237	$	411,216	$	143,519
Pro forma stock-based employee compensation expense determined under the fair value based method, net of related tax effects		12,865		40,358		27,768
Pro forma net income	$	873,372	$	370,858	$	115,751
Net income per share:
Basic: as reported	$	0.32	$	0.15	$	0.05
Basic: pro forma		0.32		0.14		0.04
Diluted: as reported		0.32		0.15		0.05
Diluted: pro forma	$	0.31	$	0.13	$	0.04

See Note 5(a) and (b) for discussion of our stock-based compensation plans and assumptions used in determining the pro forma stock-based employee compensation above.

F-10

IMMUCELL CORPORATION

NOTES TO FINANCIAL STATEMENTS—(Continued)

(m) New Accounting Pronouncements

In November 2002, the Financial Accounting Standards Board’s (“FASB’s”) Emerging Issues Task Force reached consensus on EITF No. 00-21, “Accounting for Revenue Arrangements with Multiple Deliverables” (“EITF No. 00-21”). EITF No. 00-21 addresses the accounting treatment for arrangements that provide for the delivery or performance of multiple products or services where the delivery of a product, system or performance of services may occur at different points in time or over different periods of time. EITF No. 00-21 requires the separation of the multiple deliverables that meet certain requirements into individual units of accounting that are accounted for separately under the appropriate authoritative accounting literature. EITF No. 00-21 is applicable to revenue arrangements entered into in fiscal periods beginning after June 15, 2003. The provisions of EITF No. 00-21 were considered in 2004 in implementing our revenue recognition method to account for the transaction with Pfizer. See Note 10(a).

Statement on Financial Accounting Standards (“SFAS”) No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities was effective for contracts entered into or modified after June 30, 2003 and will be applied prospectively. SFAS No. 149 amends and clarifies financial accounting and reporting for derivative instruments, including certain derivatives instruments embedded in other contracts and for hedging activities under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, resulting in more consistent reporting of contracts as either derivatives or hybrid instruments. The adoption of this standard did not have a material impact on our financial condition, results of operations, earnings per share or cash flows.

FASB Interpretation No. 46, Consolidation of Variable Interest Entities, an interpretation of Accounting Review Board (“ARB”) No. 51, was effective immediately for variable interest entities (“VIEs”) created after January 31, 2003 and was effective beginning July 1, 2003 for VIEs created prior to the issuance of the interpretation. Interpretation No. 46 provides a new framework for identifying VIEs and determining when a company should include the assets, liabilities, non-controlling interests, and results of activities of a VIE in its financial statements. FASB Interpretation No. 46, Consolidation of Variable Interest Entities, an interpretation of ARB No. 51, was revised by FASB Interpretation No. 46 (Revised December 2003), Consolidation of Variable Interest Entities. Application of FIN 46R (or FIN 46) is required in financial statements of public entities for periods ending after December 15, 2003, which have interests in special-purpose entities. Application by public entities, other than small business issuers, for all other types of VIEs is required in financial statements for periods ending after March 15, 2004. This pronouncement did not have a material effect on our financial condition, results of operations, earnings per share or cash flows.

In November 2004, the FASB issued, Statement of Financial Accounting Standards No. 151, Inventory Costs, an amendment of ARB No. 43, Chapter 4. This Statement amends the guidance in ARB No. 43, Chapter 4, “Inventory Pricing,” to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). Paragraph 5 of ARB 43, Chapter 4, previously stated that “under some circumstances, items such as idle facility expense, excessive spoilage, double freight, and rehandling costs may be so abnormal as to require treatment as current period charges.” This Statement requires that those items be recognized as current-period charges regardless of whether they meet the criterion of “so abnormal.” In addition, this Statement requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. The provisions of this Statement shall be effective for inventory costs incurred during fiscal years beginning after June 15, 2005. Earlier application is permitted for inventory costs incurred during fiscal years beginning after the date this Statement is issued. The provisions of this Statement shall be applied prospectively. We do not expect the adoption of this Statement to have a material impact on our financial condition, results of operations, earnings per share or cash flows.

In December 2004, the FASB issued, Statement of Financial Accounting Standards No. 153, Exchange of Nonmonetary Assets, an amendment of APB Opinion No. 29. The guidance in APB Opinion No. 29, Accounting

F-11

IMMUCELL CORPORATION

NOTES TO FINANCIAL STATEMENTS—(Continued)

for Nonmonetary Transactions, is based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged. The guidance in that Opinion, however, included certain exceptions to that principle. This Statement amends Opinion No. 29 to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. The provisions of this Statement shall be effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. Earlier application is permitted for nonmonetary asset exchanges occurring in fiscal periods beginning after the date this Statement is issued. The provisions of this Statement shall be applied prospectively. We do not expect the adoption of this Statement to have a material impact on our financial condition, results of operations, earnings per share or cash flows.

In December 2004, the FASB issued Revised Statement of Financial Accounting Standards No. 123, Share-Based Payments (“FAS 123R”), revising FASB Statements No. 123 and 95. FAS 123R addresses the accounting for transactions in which an enterprise receives employee services in exchange for (a) equity instruments of the enterprise or (b) liabilities that are based on the fair value of the enterprise’s equity instruments or that may be settled by the issuance of such equity instruments. FAS 123R eliminates the ability to account for share-based compensation transactions using APB Opinion No. 25, Accounting for Stock Issued to Employees, and generally requires that such transactions be accounted for using the fair-value-based method. This requires us to recognize compensation costs for share-based payments. The provisions of this Statement shall be effective for the quarter ending September 30, 2005. We have not yet determined the possible impact of this Statement on our financial condition, results of operations, earnings per share or cash flows in the years 2005 and after.

3. ACCRUED EXPENSES

Accrued expenses consisted of the following:

	As of December 31,
	2003		2004
Royalties	$	1,673	$	—
Professional fees		48,817		56,697
Payroll		84,007		109,196
Other		220,043		62,716
	$	354,540	$	228,609

The accrued “other” category as of December 31, 2003 included approximately $164,000 for services performed by outside contractors in connection with the preliminary field trial of Mast Out^® that were completed but not billed as of December 31, 2003.

F-12

IMMUCELL CORPORATION

NOTES TO FINANCIAL STATEMENTS—(Continued)

4. INCOME TAXES

The income tax provision consists of the following:

	Year Ended December 31,
	2002		2003		2004
Current
Federal	$	—	$	9,123	$	11,996
State		1,603		9,500		10,942
Foreign		4,064		5,871		4,243
		5,667		24,494		27,181
Deferred
Federal		457,528		216,695		2,670
State		131,952		63,972		3,823
		589,480		280,667		6,493
Total	$	595,147	$	305,161	$	33,674

The actual income tax expense differs from the expected tax computed by applying the U.S. Federal corporate tax rate of 34% to income before income tax as follows:

	Year Ended December 31,
	2002		2003		2004
Computed expected tax expense	$	503,671	$	243,568	$	60,245
State income taxes, net of federal benefit		87,310		48,492		9,745
Foreign tax on royalty income		4,064		5,871		4,243
Change in valuation allowance		—		—		(35,000	)
Other		102		7,230		(5,559	)
Total income tax expense	$	595,147	$	305,161	$	33,674

The significant components of our deferred tax assets and liabilities are as follows:

	As of December 31,
	2003			2004
Deferred tax assets (liabilities):
Net operating loss carryforward	$	210,097		$	—
Deferred revenue and other reserves		204,660			626,457
Depreciation		(34,903	)		(97,534	)
Capitalized research and experimentation		447,334			378,301
Prepaid expenses		—			(17,918	)
General business credit carryforward		97,419			62,419
Deferred tax assets before valuation allowance		924,607			951,725
Valuation allowance		(97,419	)		(62,419	)
Net deferred tax assets	$	827,188		$	889,306

We utilized approximately $1,264,000, $495,000 and $540,000 of net operating loss carryforwards to offset taxable income in fiscal years 2002, 2003 and 2004, respectively, and $35,000 of general business tax credits in

F-13

IMMUCELL CORPORATION

NOTES TO FINANCIAL STATEMENTS—(Continued)

2004. We have no remaining net operating loss carryforwards as of December 31, 2004 to offset future taxable income. The $1,500,000 payment from Pfizer received in December 2004 was treated as taxable income, for tax return purposes only. The $965,000 payment made to Nutrition 21 in November 2004 was treated as an intangible asset and is being amortized over 15 years, for tax return purposes only. The valuation allowance related to the general business credit carryforward of approximately $97,000 and $62,000 as of December 31, 2003 and 2004, respectively, is due to the uncertainty of its use before expiration. This credit expires in the years 2005 through 2010 if not utilized.

In order to accelerate the utilization of available net operating loss carryforwards in advance of their expiration dates, we elected to increase income for federal tax purposes by capitalizing research and experimentation expenditures aggregating $900,000 and $831,000 for the years ended December 31, 2000 and 2001, respectively, for tax return purposes only in accordance with the Internal Revenue Code. We do not intend to capitalize additional research and experimentation expenditures. Accordingly, we recorded amortization of these capitalized expenditures aggregating $90,000 for the year ended December 31, 2000 and $173,000 for the subsequent four years through December 31, 2004 for tax return purposes only. We expect to amortize an additional $173,000 of these capitalized expenditures for each of the five years ending December 31, 2005 to December 31, 2009 as well as $84,000 for the year ending December 31, 2010 for tax return purposes only.

5. STOCKHOLDERS’ EQUITY

(a) Non-qualified Stock Options

In April 1999, a total of 93,300 non-qualified stock options were issued to the three then-serving executive officers at an exercise price of $1.31 per share, the then current market price of our common stock. These options were granted outside of the stock option plans described below. In March 2000, 31,098 of these options became exercisable. In 2000, 20,734 of these options terminated when one of the officers separated from the Company. In September 2001, that former officer exercised 10,300 of these options and 66 of these options expired without being exercised. An additional 20,734 options became exercisable in March 2001, and the remaining 20,734 options became exercisable in March 2002. If not exercised, the 62,200 remaining outstanding options expire in April 2009.

(b) Stock Option Plans

In May 1989, the shareholders approved the 1989 Stock Option and Incentive Plan (the “1989 Employee Plan”) pursuant to the provisions of the Internal Revenue Code of 1986, under which employees may be granted options to purchase shares of the Company’s common stock at i) no less than fair market value on the date of grant in the case of incentive stock options and ii) no less than 85% of fair market value on the date of grant in the case of non-qualified stock options. 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 1989 Employee Plan expire no later than ten years from the date of grant. The 1989 Employee Plan expired in March 1999, and no further options may be granted under the 1989 Employee Plan. However, outstanding options under the 1989 Employee Plan may be exercised in accordance with their terms.

In June 2000, the shareholders approved the 2000 Stock Option and Incentive Plan (the “2000 Employee Plan”) pursuant to the provisions of the Internal Revenue Code of 1986, under which employees may be granted options to purchase shares of the Company’s common stock at i) no less than fair market value on the date of grant in the case of incentive stock options and ii) no less than 85% of fair market value on the date of grant in the case of non-qualified stock options. Vesting requirements are determined by the Compensation and Stock Option Committee of the Board of Directors on a case by case basis. Originally, 250,000 shares of common stock were reserved for issuance under the 2000 Employee Plan. The shareholders of the Company approved an

F-14

IMMUCELL CORPORATION

NOTES TO FINANCIAL STATEMENTS—(Continued)

increase in this number to 500,000 shares in June 2001. All options granted under the 2000 Employee Plan expire no later than ten years from the date of grant. The 2000 Employee Plan expires in June 2010, after which date no further options may be granted under the 2000 Employee Plan. However, any outstanding options under the 2000 Employee Plan may be exercised in accordance with their terms.

In June 2000, the shareholders approved the 2000 Stock Option Plan for Outside Directors (the “2000 Outside Director Plan”) pursuant to the provisions of the Internal Revenue Code of 1986, under which each of the five, then-serving outside directors of the Company was automatically granted a non-qualified stock option to purchase 15,000 shares of common stock at its fair market value on the date the 2000 Outside Director Plan was approved by the shareholders. Directors who are newly elected to the Board subsequent to June 2000 receive an automatic grant of an option to purchase 15,000 shares, at fair market value on the date when such directors are first elected to the Board by the shareholders. One-third of the options subject to the grant vest on the date that the director is re-elected to the Board by the shareholders; an additional 5,000 options vest on the second date that the director is re-elected to the Board by the shareholders; and the remaining 5,000 options vest on the third date that the director is re-elected to the Board by the shareholders. Directors of the Company are elected at each Annual Meeting of Shareholders for one-year terms. There are 120,000 shares of common stock reserved for issuance under the 2000 Outside Director Plan. All options granted under the 2000 Outside Director Plan expire no later than five years from the date of grant. The 2000 Outside Director Plan expires in June 2005, after which date no further options may be granted under the 2000 Outside Director Plan. However, any outstanding options under the 2000 Outside Director Plan may be exercised in accordance with their terms.

Activity under the stock option plans described above, was as follows:

	1989 Employee Plan		2000 Employee Plan		2000 Outside Director Plan		Weighted Average Exercise Price
Balance at December 31, 2001	186,672		357,000		75,000		$	2.81
Grants	—		30,000		—			2.37
Terminations	(500	)	(60,000	)	(15,000	)		2.92
Exercises	(10,500	)	—		—			2.16
Balance at December 31, 2002	175,672		327,000		60,000			2.78
Grants	—		34,000		—			3.10
Terminations	(13,500	)	(39,000	)	—			2.36
Exercises	(10,500	)	—		—			1.39
Balance at December 31, 2003	151,672		322,000		60,000			2.87
Grants	—		28,500		—			4.10
Terminations	—		(81,667	)	—			3.01
Exercises	(19,000	)	(35,066	)	—			2.71
Balance at December 31, 2004	132,672		233,767		60,000			2.94
Exercisable at December 31, 2004	132,672		159,266		60,000		$	2.89
Reserved for future grants	—		231,167		60,000

F-15

IMMUCELL CORPORATION

NOTES TO FINANCIAL STATEMENTS—(Continued)

At December 31, 2004, 488,639 common shares were reserved for future issuance under all outstanding stock options described above. An additional 291,167 common shares were reserved for potential issuance under future stock option grants. The weighted average remaining life of the options outstanding under the 1989 Employee Plan, the 2000 Employee Plan and the 2000 Outside Director Plan as of December 31, 2004 was approximately four years and six months. The exercise price of the options outstanding and of the options exercisable as of December 31, 2004 ranged from $1.31 to $4.36 per share. The weighted-average grant date fair values of options granted during 2002, 2003 and 2004 were $0.43, $0.23 and $0.92 per share, respectively. 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(l), with the following weighted-average assumptions:

	2002		2003		2004
Risk-free interest rate	2.9	%	2.2	%	3.0	%
Dividend yield	0		0		0
Expected volatility	45.6	%	26	%	27.8	%
Expected life	3 years		3 years		3 years

(c) Common Stock Rights Plan

In September 1995, the Board of Directors of the Company adopted a Common Stock Rights Plan and declared a dividend of one common share purchase right (a “Right”) for each of the then outstanding shares of the common stock of the Company. Each Right entitles the registered holder to purchase from the Company one share of common stock at an initial purchase price of $70.00 per share, subject to adjustment. The description and terms of the Rights are set forth in a Rights Agreement between the Company and American Stock Transfer & Trust Co., as Rights Agent.

The Rights 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 15% 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 acquisition of 15% or more of the Company’s common stock by an acquiring person, the holder of each Right not owned by the acquiring person would be entitled to purchase common stock having a market value equal to two times the exercise price of the Right (i.e., at a 50% discount). 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

F-16

IMMUCELL CORPORATION

NOTES TO FINANCIAL STATEMENTS—(Continued)

outstanding Rights in whole, but not in part, at a price of $.005 per Right, subject to adjustment. The Rights will expire on the earlier of i) the close of business on September 19, 2005, or ii) the time at which the Rights are redeemed by the Company.

6. COMMITMENTS AND CONTINGENT LIABILITIES

In March 2003, we entered into an agreement with a vendor that has offered to perform certain manufacturing services for us relating to Mast Out^®. Under the December 2004 product development and marketing agreement with Pfizer, Pfizer has the right to approve or disapprove the contract manufacturer. In the event that Pfizer elects to not approve our existing vendor, we would be responsible for any termination payment owing to that vendor. The agreement with the vendor provides for a termination payment of $100,000 in certain circumstances. Pfizer is presently evaluating its options and has not elected to terminate the agreement with this contract manufacturer at this time, and thus we have accrued no liability for any such termination in the future.

Our By-Laws, as amended, in effect provide that the Company will indemnify its officers and directors to the maximum extent permitted by Delaware law. 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 FIN No. 45 as they were in effect prior to December 31, 2002. Accordingly, we have recorded no liability for such obligations as of December 31, 2004. Since our incorporation, we have had no occasion to make any indemnification payment to any of our officers or directors for any reason.

We enter into agreements with third parties in the ordinary course of business under which we are obligated to indemnify such third parties for and against various risks and losses. The precise terms of such indemnities vary with the nature of the agreement. In many cases, the Company limits the maximum amount of its 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 these agreements is minimal. Accordingly, we have recorded no liabilities for these obligations as of December 31, 2004.

We entered into an employment contract with our president and chief executive officer, which could require us to pay three months’ salary as severance pay depending upon the circumstances of any termination of employment of this key employee. We also entered into an employment contract with our vice president and chief scientific officer, requiring us to pay him a reduced annual salary for the one year period ending December 31, 2005 in exchange for a half-time commitment to his job duties. Depending upon the circumstances of any termination of employment of this key employee, we could be required to pay this salary through December 31, 2005.

The research, manufacturing and marketing of human and animal health care products entails an inherent risk that liability claims will be asserted against us. We feel that we have reasonable levels of liability insurance to support our operations.

7. SEGMENT AND SIGNIFICANT CUSTOMER INFORMATION

We principally operate in the business segment described in Note 1. Pursuant to SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information”, we operate in one reportable business

F-17

IMMUCELL CORPORATION

NOTES TO FINANCIAL STATEMENTS—(Continued)

segment, that being the development, acquisition, manufacture and sales of products that improve the health and productivity of cows for the dairy and beef industries. The significant accounting policies of this segment are described in Note 2.

Our primary customers for the majority of our product sales (70%, 92% and 89% for the years ended December 31, 2002, 2003 and 2004, respectively) are in the U.S. dairy and beef industry. Revenues derived from foreign customers, who are also in the dairy and beef industry, aggregated 29%, 7% and 10% of our total product sales for the years ended December 31, 2002, 2003 and 2004, respectively. The changes in the domestic and foreign components of the product sales mix is principally the result of the license termination discussed in Note 10(d). Sales made to Walco International aggregated 8%, 19% and 17% of total product sales during the years ended December 31, 2002, 2003 and 2004, respectively. This customer accounted for 21% and 16% of the Company’s outstanding accounts receivable as of December 31, 2003 and 2004, respectively.

8. EMPLOYEE BENEFITS

We have a 401(k) savings plan in which all employees completing one year of service with the Company (working at least 1,000 hours) are eligible to participate. Participants may contribute up to the maximum amount allowed by the Internal Revenue Service. We match 50% of each employee’s contribution to the plan up to a maximum match of 4% of each employee’s base compensation. Under this matching contribution program, we paid approximately $33,000, $35,000 and $35,000 to the plan for the years ended December 31, 2002, 2003 and 2004, respectively.

9. UNAUDITED QUARTERLY FINANCIAL DATA

The following tables present the quarterly information for fiscal years 2003 and 2004 (in thousands, except per share amounts):

	Three Months Ended
	March 31		June 30			September 30			December 31
Fiscal 2003:
Product sales	$	1,016	$	590		$	745		$	794
Total revenues		1,127		617			789			825
Gross margin		591		305			410			491
Research and development expenses		316		289			270			476
Income (loss) before taxes		1,179		(201	)		(58	)		(204	)
Net income (loss)		701		(124	)		(38	)		(128	)
Net income (loss) per common share:
Basic	$	0.26	$	(0.05	)	$	(0.01	)	$	(0.05	)
Diluted	$	0.25	$	(0.05	)	$	(0.01	)	$	(0.05	)
Fiscal 2004:
Product sales	$	1,217	$	642		$	808		$	856
Total revenues		1,242		665			846			944
Gross margin		758		343			465			510
Research and development expenses		222		241			272			356
Income (loss) before taxes		290		(95	)		(5	)		(13	)
Net income (loss)		172		(58	)		(5	)		35
Net income (loss) per common share:
Basic	$	0.06	$	(0.02	)	$	(0.00	)	$	0.01
Diluted	$	0.06	$	(0.02	)	$	(0.00	)	$	0.01

F-18

IMMUCELL CORPORATION

NOTES TO FINANCIAL STATEMENTS—(Continued)

10. LICENSING AND SALE OF TECHNOLOGY

(a) In November 2004, we capitalized a payment of approximately $965,000 made to Nutrition 21, Inc. to buy out certain future milestone and royalty payment obligations, which principally resulted in a fully paid, perpetual license related to Mast Out^®. This intangible asset is expected to be amortized over the period from November 15, 2004 to December 31, 2007. We received a $1,500,000 up front payment from Pfizer in connection with the December 2004 product development and marketing agreement covering Mast Out^®. We expect to recognize this revenue over the period from December 15, 2004 to December 31, 2007. Both of these periods reflect management’s estimate of the likely period of development before royalties could be received on sales of Mast Out^®. The Pfizer agreement, among other things, also provides for contingent milestone payments and royalties based on any future sales, subject to certain minimums. We expect that revenue from any future milestone payments that we receive from Pfizer will be recognized from the date that the milestone is achieved through December 31, 2007. Any such milestone payments received for obtaining regulatory approvals, or after a regulatory approval is obtained, are expected to be recognized when the milestone has been reached. Should the December 31, 2007 estimate change, the period during which the then remaining expense and revenue are recognized would be adjusted accordingly. Any future royalty payments will be recognized as earned based on future product sales.

(b) In March 2003, we sold our 50% interest in the joint venture, AgriCell Company, LLC, to DMV International Nutritionals, an operating division of DMV USA LP of the Netherlands, for $1,100,000. As this joint venture and the related technology had no book value, the full amount of the proceeds was recorded as other income in the first quarter of 2003. In August 2001, DMV paid us $100,000 for an option to purchase our interest, which income was recognized as revenue from the sale of technology rights over the twenty month option period ended in March 2003.

(c) We received a payment of $100,000 in March 2001 under a license agreement covering certain rights to the Company’s DiffGAM^™ technology which was recognized as revenue from the sale of technology rights over the twenty-two month period ended in December 2002, representing the period during which we had agreed to provide clinical material to the licensee at a discount. In December 2002, we received a $400,000 payment upon the termination of this license in accordance with the terms of the agreement. The full amount of the proceeds was recorded as revenue from the sale of technology rights in the fourth quarter of 2002.

(d) In October 2002, we accepted a payment of $930,000 in consideration of the early termination of our rights to market the Kamar Heatmount Detector. As this license had no book value, the full amount of the proceeds represented a pre-tax gain and was recorded as other income in the fourth quarter of 2002. The license was scheduled to expire after an additional twenty-seven months on December 31, 2004, had it not been terminated. As a result of the termination of this license, our product sales, product costs and sales and marketing expenses were reduced beginning October 1, 2002. The following unaudited, pro forma, condensed financial

F-19

IMMUCELL CORPORATION

NOTES TO FINANCIAL STATEMENTS—(Continued)

information gives effect to this transaction as if it had occurred as of January 1, 2002 and then compares those figures to the results obtained for the twelve month periods ended December 31, 2003 and 2004.

	Year Ended December 31, 2002		Adjustments			2002 Pro forma Adjusted		Year Ended December 31, 2003			Year Ended December 31, 2004
Product sales	$	5,301,313	$	(2,204,077	)	$	3,097,236	$	3,144,512		$	3,523,982
Product costs		2,799,429		(1,347,861	)		1,451,568		1,347,289			1,449,016
Product selling expenses		1,227,598		(566,922	)		660,676		493,151			400,929
Net operating income (loss)		533,141		(289,294	)		243,847		(429,031	)		120,771
Net interest and other income		948,243		(930,000	)		18,243		1,145,408			56,422
Income before income taxes		1,481,384		(1,219,294	)		262,090		716,377			177,193
Tax expense		595,147		(489,865	)		105,282		305,161			33,674
Net income	$	886,237	$	(729,429	)	$	156,808	$	411,216		$	143,519
Diluted net income per common share	$	0.32	$	(0.26	)	$	0.06	$	0.15		$	0.05

11. COMMON STOCK REPURCHASE PLAN

On April 3, 2003, we announced that our Board of Directors had approved a plan to repurchase up to 100,000 shares of our common stock as market conditions warrant. Repurchases under the plan are to be made from time to time at the discretion of management. There is no fixed number of shares to be repurchased and no time limit for the completion of the repurchase plan. Our present intention is to hold repurchased shares as treasury stock to be used for general corporate purposes. The maximum of 100,000 shares represented approximately 3.7% of our outstanding common stock as of March 31, 2003. During the three months ended June 30, 2003, we repurchased 5,900 shares of our common stock at a total cost of approximately $12,267 under this plan. We have repurchased no additional shares since then.

F-20

SCHEDULE 2—SUPPLEMENTAL VALUATION AND QUALIFYING ACCOUNTS

Allowance for Doubtful Accounts:
Balance at December 31, 2001	$	38,000
Amount charged to costs and expenses		—
Write-offs and returns		(1,000	)
Reversal of accrual		(18,000	)
Balance at December 31, 2002		19,000
Amount charged to costs and expenses		—
Write-offs and returns		(6,000	)
Balance at December 31, 2003		13,000
Amount charged to costs and expenses		5,000
Write-offs and returns		(5,000	)
Balance at December 31, 2004	$	13,000

F-21

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
Date:  March 21, 2005	By:	/s/    MICHAEL F. BRIGHAM
		Michael F. Brigham President, Chief Executive Officer and Treasurer

POWER OF ATTORNEY

We, the undersigned directors and officers 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 resubstitution, 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.

Date:  March 21, 2005	By:	/s/    MICHAEL F. BRIGHAM
		Michael F. Brigham President, Chief Executive Officer, Treasurer and Director
Date:  March 21, 2005	By:	/s/    ANTHONY B. CASHEN
		Anthony B. Cashen, Director
Date:  March 21, 2005	By:	/s/    JOSEPH H. CRABB
		Joseph H. Crabb, Ph.D., Director
Date:  March 21, 2005	By:	/s/    WILLIAM H. MAXWELL
		William H. Maxwell, M.D., Director
Date:  March 21, 2005	By:	/s/    JONATHAN E. ROTHSCHILD
		Jonathan E. Rothschild, Director
Date:  March 21, 2005	By:	/s/    MITCHEL SAYARE
		Mitchel Sayare, Ph.D., Director

IMMUCELL CORPORATION

EXHIBIT INDEX

Exhibit 10.16*	License Agreement between the Registrant and Pfizer Inc. dated as of December 21, 2004.
Exhibit 23.1	Consent of Baker Newman & Noyes, LLC.
Exhibit 23.2	Consent of PricewaterhouseCoopers LLP.
Exhibit 31	Rule 13a-14(a) Certifications.
Exhibit 32	Section 1350 Certifications, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Confidential treatment as to certain portions has been requested, which portions have been omitted and filed separately with the Securities and Exchange Commission.

EX-10.16

EXHIBIT 10.16 (REDACTED)

CONFIDENTIAL MATERIAL OMITTED AND

FILED SEPARATELY WITH THE SECURITIES AND

EXCHANGE COMMISSION ([* * *] Denotes Omission)

LICENSE AGREEMENT

This License Agreement (“Agreement”), dated as of December 21, 2004, is entered into by and between IMMUCELL CORPORATION, a corporation organized under the laws of the State of Delaware and having its principal place of business at 56 Evergreen Drive, Portland, Maine 04103 (“IMMUCELL”), and PFIZER INC., a corporation organized under the laws of the State of Delaware and operating through its Pfizer Animal Health Division with a principal place of business at 235 East 42^nd Street, New York, New York, 10017 (“PFIZER”).

WHEREAS, IMMUCELL owns or controls, or may acquire rights to, certain patents, patent applications, technology, know-how, trade secrets and scientific and technical information relating to nisin-based animal health products, including an intra-mammary pharmaceutical for treatment of bovine mastitis in lactating cows, and desires to engage a global development and marketing partner to further develop and commercialize said pharmaceutical in such field;

WHEREAS, PFIZER has extensive experience and expertise in the development and commercialization of animal health pharmaceuticals and desires to acquire exclusive licenses in the Territory (as defined below) to certain patents, patent applications, technology, know-how, trade secrets and scientific and technical information owned, controlled or to be acquired by IMMUCELL for PFIZER’s further development and commercialization of said pharmaceutical for use in the designated field; and

WHEREAS, IMMUCELL desires to grant such exclusive licenses to PFIZER, all upon the terms and conditions set forth herein.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and in consideration of the mutual covenants and agreements provided herein, and intending to become legally bound, IMMUCELL and PFIZER hereby agree as follows:

Section 1. DEFINITIONS.

For purposes of this Agreement, the following definitions shall be applicable:

1.1 “Affiliate” means any entity directly or indirectly controlled by, controlling, or under common control with, a party to this Agreement, but only for so long as such control shall continue. For purposes of this definition, “control” (including, with correlative meanings, “controlled by”, “controlling” and “under common control with”) means possession, direct or indirect, of (a) the power (shared or otherwise) to direct or cause direction of the management and policies of an entity (whether through ownership of securities or partnership or other

[* * *] Confidential Treatment Requested. The confidential portions have been filed separately with the Securities & Exchange Commission.

ownership interests, by contract or otherwise), or (b) at least 50% of the voting securities (whether directly or pursuant to any option, warrant or other similar arrangement) or other comparable equity interests.

1.2 “Business Day” means a day other than a Saturday, Sunday, bank or other public holiday in New York, New York.

1.3 “Clinical Study” means a clinical study or studies addressing, without limitation, sub-clinical and clinical mastitis, with study design and statistical power intended to meet the requirements for approval of an NADA for the Licensed Product, including, without limitation those studies specified in Exhibit A attached hereto.

1.4 “Competing Product” means any nisin-based intra-mammary product for treatment of bovine mastitis in lactating cows, other than the Licensed Product.

1.5 “Confidentiality Agreements” mean those certain Mutual Confidentiality Agreements between IMMUCELL and Pfizer Limited, dated January 8, 2004, as thereafter amended, and August 17, 2001.

1.6 “Contract Manufacturer” means any third party manufacturer approved or designated by PFIZER, and identified to IMMUCELL by written notice, to fill plastets with Raw Material for purposes of conducting PFIZER’s clinical development plan, and/or to manufacture Licensed Product designed for commercial distribution or any other purpose permitted under the terms of this Agreement.

1.7 “CVM” means the United States Center for Veterinary Medicine and any successor agency thereto.

1.8 “Drug Product” means Raw Material further manufactured to finished, sterile intra-mammary unit dose (“plastet”) generally known as MastOut^®. For purposes of clarification only, “Active Drug Product” shall mean Drug Product with Raw Material, and “Placebo Drug Product” shall mean Drug Product without Raw Material.

1.9 “Effective Date” means the date that this Agreement has been fully executed by IMMUCELL and PFIZER.

1.10 “EMEA” means the European Medicines Agency and any successor agency thereto.

1.11 “European Patent Convention Countries” means countries under the European Patent Convention, which includes, for example, the United Kingdom, Spain, Italy, France, The Netherlands, Ireland, Sweden and Germany.

1.12 “European Union” means Member States as of the Effective Date consisting of Austria, Belgium, Cyprus, Czech Republic, Denmark, Finland, Estonia, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, The Netherlands, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden, and the United Kingdom, as well as any

country within the Territory which by execution of an accession treaty becomes a Member State during the Term.

1.13 “Field” means the use of nisin-based intra-mammary agents in the treatment of clinical and sub-clinical bovine mastitis in lactating cows.

1.14 “Governmental Authority” means any court, agency, department, authority or other instrumentality of any foreign, federal, state, county, city or other political subdivision.

1.15 “IMMUCELL Confidential Information” means all information about any element of IMMUCELL Technology, as well as any other information regarding the business or operations of IMMUCELL, that (A) is disclosed by IMMUCELL to PFIZER or its Affiliates during the Term of this Agreement and, if in written form, designated “confidential” by IMMUCELL at the time of disclosure or, if in oral form, memorialized in writing as “confidential” and delivered to PFIZER within thirty (30) days after disclosure, or (B) was deemed confidential and supplied by IMMUCELL to PFIZER prior to the Term of this Agreement under the Confidentiality Agreements (and, to the extent such prior disclosure was made after November 1, 2004, is memorialized in writing as confidential within 60 days after the Effective Date), except to the extent that PFIZER can show that such information (i) as of the date of disclosure to PFIZER, was already lawfully in PFIZER’s possession free from any obligation to keep it confidential at the time of receipt from the other party; or (ii) was or is, now or in the future, public knowledge through no act or omission of PFIZER or its officers, employees, agents, subcontractors, sublicensees, distributors or Affiliates; or (iii) was lawfully obtained by PFIZER from a third party having the right to disclose it free from any obligation of confidentiality; or (iv) was independently developed by or for PFIZER without violating the terms of this Agreement or the Confidentiality Agreements; or (v) is, in the reasonable opinion of legal counsel, required to be disclosed under Law; provided that, in the case of (v), PFIZER (x) provides IMMUCELL sufficient prior notice (to the extent practicable) of such disclosure and agrees to cooperate, at the request and sole expense of IMMUCELL with IMMUCELL’s efforts to preserve the confidentiality of such information and (y) complies with Section 7.1(b) hereof.

1.16 “IMMUCELL Improvements” shall have the meaning set forth in Section 6.3 hereof.

1.17 “IMMUCELL Patent Rights” means all Patent Rights within IMMUCELL Technology, including the Patent Rights listed in Exhibit B attached hereto.

1.18 “IMMUCELL Technology” means Technology that is or was:

(a) developed by employees of or consultants to IMMUCELL alone or jointly with third parties including, without limitation, IMMUCELL Improvements; or

(b) acquired by purchase, license, assignment or other means from third parties by IMMUCELL.

1.19 “Launch” means the first shipment of the Licensed Product for commercial sale by or for PFIZER, its Affiliates or its sublicensees to an unaffiliated third party after receipt by PFIZER of the first Registration for the Licensed Product.

1.20 “Law” or “Laws” means all laws, statutes, rules, regulations, orders, judgments and/or ordinances of any Governmental Authority.

1.21 “Licensed Product” means the animal health pharmaceutical MastOut^® or any other animal health pharmaceutical, the manufacture, use, sale, offer for sale or importation of which, in the absence of a license, would infringe any of the IMMUCELL Patent Rights or utilizes any IMMUCELL Technology.

1.22 “Major EU Markets” means the United Kingdom, France, Germany Spain, Italy and The Netherlands.

1.23 “Marketing Authorization Application” means the equivalent of an NADA, submitted under the EMEA or any comparable application required by a Governmental Authority in any country in the Territory.

1.24 “NADA” means a New Animal Drug Application submitted under the CVM or any comparable application required by a Governmental Authority in any other country in the Territory.

1.25 “Net Sales” means, subject at all times to Sections 5.1 and 5.2, gross sales of PFIZER, its Affiliates and sublicensees or distributors of Licensed Product to third parties, less bad debts related to the Licensed Product (with any subsequent adjustments for bad debts being appropriately credited to or accrued against Net Sales for the period in which the adjustment occurs), normal and customary trade discounts actually allowed or accrued, credits or allowances for rejected or returned Licensed Product previously sold, taxes the legal incidence of which falls on the purchaser and is separately shown on the seller’s invoices and transportation, insurance and postage charges, if prepaid by PFIZER, any of its Affiliates or any sublicensee of PFIZER and billed on the seller’s invoices as a separate item, and compulsory payments and rebates, accrued, paid or deducted pursuant to governmental regulations or agreements (other than employment agreements or agreements with Affiliates) with third parties (provided such agreements with third parties are identified and made available to IMMUCELL for review and deductions relating to such agreements are identified separately in any statements pursuant to Section 5.3). Net Sales shall be determined from books and records maintained by PFIZER, its Affiliates and sublicensees in accordance with generally acceptable accounting principles in the United States, consistently applied.

1.26 [* * *]

1.27 [* * *]

1.28 “Nutrition 21” means Nutrition 21, Inc., a New York corporation (formerly known as AMBI Inc.).

[* * *] Confidential Treatment Requested. The confidential portions have been filed separately with the Securities & Exchange Commission.

1.29 “Nutrition 21 Agreements” shall have the meaning set forth in Section 11.1 hereof.

1.30 “Patent Rights” means all the patents and patent applications issuing as patents relating to PFIZER Technology or IMMUCELL Technology, including all continuations, continuations-in-part, divisionals, provisionals and renewals, and letters of patent granted with respect to any of the foregoing, patents of addition, supplementary protection certificates, registration or confirmation patents and all reissues, re-examinations and extensions thereof. Patent Rights shall also include any patent restoration or extension period granted by a Governmental Authority, including but not limited to the compensation for patent term lost during the clinical trial or regulatory approval process.

1.31 “PFIZER Confidential Information” means all information about any element of PFIZER Technology, as well as any other information regarding the business or operations of PFIZER, that (A) is disclosed by PFIZER to IMMUCELL or its Affiliates during the Term of this Agreement and, if in written form, designated “Confidential” in writing by PFIZER at the time of disclosure or, if in oral form, memorialized in writing as “confidential” and delivered to IMMUCELL within thirty (30) days after disclosure, and (B) was deemed confidential and supplied by PFIZER to IMMUCELL prior to the Term of this Agreement under the Confidentiality Agreements (and, to the extent such disclosure was made orally after November 1, 2004, is memorialized in writing as confidential within 60 days after the Effective Date), except to the extent that IMMUCELL can show that such information (i) as of the date of disclosure to IMMUCELL, was already lawfully in IMMUCELL’s possession free from any obligation to keep it confidential at the time of receipt from the other party; or (ii) was or is, now or in the future, public knowledge through no act or omission of IMMUCELL or its officers, employees, agents, subcontractors, sublicensees, distributors or Affiliates; or (iii) was lawfully obtained by IMMUCELL from a third party having the right to disclose it free from any obligation of confidentiality; or (iv) was independently developed by or for IMMUCELL without violating the terms of this Agreement or the Confidentiality Agreements; or (v) in the reasonable opinion of legal counsel, is required to be disclosed under Law; provided that, in the case of (v), IMMUCELL provides PFIZER at least three Business Days’ prior notice (to the extent practicable) of such disclosure and agrees to cooperate with PFIZER’s efforts to preserve the confidentiality of such information and (y) complies with Section 7.1(b) hereof.

1.32 “PFIZER Quarter” means each of the four (4) thirteen (13) week periods (i) with respect to the United States, commencing on January 1 of any year, and (ii) with respect to any country in the Territory other than the United States, commencing on December 1 of any year.

1.33 “PFIZER Patent Rights” means all Patent Rights within PFIZER Technology.

1.34 “PFIZER Technology” means Technology that is or was:

(a) developed by employees of or consultants to PFIZER alone or jointly with third parties; or

(b) acquired by purchase, license, assignment or other means from third parties by PFIZER, except that Technology acquired under this Agreement shall constitute Pfizer Technology only to the extent expressly provided herein.

1.35 “Raw Material” means pharmaceutical-grade nisin.

1.36 “Registrations” means the marketing authorizations or approvals issued by the competent Governmental Authority of any country in the Territory, including without limitation, the CVM and the EMEA.

1.37 “Technology” means and includes all materials, technology, data, technical and scientific information, intellectual property, know-how, expertise and trade secrets that relate to or are used in connection with the manufacture of Raw Material for use in the intra-mammary treatment of bovine mastitis.

1.38 “Territory” means the entire world.

1.39 “Trademark” means the MastOut^® trademark, tradename and related rights with respect to the Licensed Product.

1.40 “Valid Claim” means any claim from an issued and unexpired patent included within the IMMUCELL Patent Rights or PFIZER Patent Rights which has not been revoked or held unenforceable or invalid by a final, nonappealable decision of a court or other Governmental Authority of competent jurisdiction or unappealed within the time allowable for appeal, and which has not been admitted to be invalid or unenforceable by IMMUCELL (as to IMMUCELL Patent Rights) or PFIZER (as to PFIZER Patent Rights), through reissue, disclaimer or otherwise.

Section 2. LICENSE AND ADDITIONAL RIGHTS.

2.1 Exclusive License and Right to Sublicense.

(a) Subject to the terms of this Agreement including, without limitation, Section 2.1(b) hereof, IMMUCELL hereby grants to PFIZER, and PFIZER hereby accepts: (i) an exclusive sublicense under the IMMUCELL Patent Rights to the patents set forth in Exhibit B which are listed as “Licensed from Nutrition 21”, including the right to sublicense, under the said IMMUCELL Patent Rights to develop, make, have made, use, sell, offer for sale and import Licensed Product in the Field in the Territory, (ii) an exclusive license under the IMMUCELL Patent Rights to the patents and patent applications (and any patents issuing therefrom) set forth in Exhibit B which are listed as “Patents and Applications Filed by IMMUCELL”, including the right to sublicense, to use IMMUCELL Technology and IMMUCELL Confidential Information for the purpose of the development, manufacture, use, sale, offer for sale and importation of Licensed Product in the Field in the Territory, (iii) an exclusive license to IMMUCELL Technology which does not encompass the IMMUCELL Patent Rights set forth in Section 2.1(a)(i) and (ii), to develop, make, have made, use, sell, offer for sale and import Licensed Product in the Field in the Territory, including the right to sublicense, and (iv)

(b) an exclusive license, including the right to sublicense, to use and register the Trademark (collectively, the “License”). Any and all rights to sublicense the License granted hereunder shall be subject to the terms and conditions of this Agreement.

(c) PFIZER may sublicense any of its rights under Section 2.1(a)(i) of this Agreement to a third party (including a sublicense of manufacturing rights to a Contract Manufacturer), and make disclosures of IMMUCELL Confidential Information to such third party, only if (i) such third party is a Qualified Person (as defined below) and agrees to comply with the terms of this Agreement (including without limitation the confidentiality provisions hereof) and (ii) PFIZER gives notice of such third party to IMMUCELL at least three Business Days before entering into an agreement with any such third party. PFIZER agrees to provide a copy of each such third party agreement to IMMUCELL, PFIZER having the right to redact financial information from such copies. For purposes of this paragraph, a “Qualified Person” is a person or entity that is not otherwise involved in the manufacture of any Nisin Preparations, as defined hereinbelow (other than manufacture for delivery to, or for the benefit of, A&B, Nutrition 21, IMMUCELL, or their respective affiliates); “Nisin Preparations” means all products containing a measurable concentration of any form, variant, or derivative of nisin for incorporation into food additives for food preservation, food preservatives and food preservation methods or for human health products; and “A&B” means Aplin & Barrett, Limited, the company with whom Nutrition 21 entered into a License Agreement dated as of December 12, 1996.

2.2 Term of License Grant. Unless terminated earlier pursuant to Section 10, the License in each country shall commence on the Effective Date, and shall terminate, on a country-by-country basis on the latest date on which the Licensed Product is covered by a Valid Claim under the IMMUCELL Patent Rights in that country, or ten (10) years from the Launch of the Licensed Product in such country, whichever is later (the “Initial Term”); provided, however, that any time prior to termination of the Initial Term the parties may jointly agree in writing to extend the Initial Term for an additional three (3) year period, and thereafter may at any time jointly agree in writing to extend any such renewal term(s) for successive three-year periods (each, a “Renewal Term” and collectively with the Initial Term, the “Term”).

2.3 Additional Rights Outside the Field; Exclusivity.

(a) IMMUCELL shall be entitled to manufacture or have manufactured non-pharmaceutical grade nisin for applications outside the Field, subject at all times to the terms, conditions and restrictions contained in this Agreement.

(b) IMMUCELL agrees not to manufacture or have manufactured, directly or indirectly, Raw Material for applications outside the Field unless IMMUCELL first offers PFIZER an opportunity in writing to manufacture or supply, directly or indirectly, such Raw Material on substantially equivalent terms. PFIZER shall have sixty (60) days from receipt of such offer to communicate, in writing, its acceptance or rejection thereof. In the event PFIZER communicates its acceptance, the parties shall in good faith promptly negotiate and enter into a separate agreement setting forth the terms and conditions for

such manufacture or supply. In the event PFIZER does not accept the offer within the stated 60-day period, or if the parties for any reason fail to reach agreement on terms within ninety (90) days after PFIZER’s written acceptance of the offer, IMMUCELL shall be permitted to manufacture or have manufactured, directly or indirectly, Raw Material solely for applications outside the Field, subject at all times to the terms, conditions and restrictions contained in this Agreement.

(c) In respect of IMMUCELL Technology, but subject to Section 2.4 below, IMMUCELL retains all rights, including the right to sublicense, to develop, make, have made, use, sell, offer for sale and import products outside the Field, including without limitation nisin-based products for treatment of mastitis in non-lactating cows.

2.4 Additional Products. In the event that IMMUCELL should develop, acquire rights to or obtain, directly or indirectly, any other intra-mammary nisin-based animal health product during the Term of this Agreement, IMMUCELL agrees that PFIZER shall have the option to acquire exclusive distribution rights to such products, with distribution terms to be set forth in a separate agreement, negotiated promptly and in good faith; provided, however, that negotiations for such rights shall be limited in time to six (6) months after written notice to PFIZER by IMMUCELL of its development of, acquisition of rights to or obtaining such products. Any such notice shall include, at a minimum, a reasonably detailed description of technical and scientific information, ownership rights, clinical data and fields of application.

Section 3. CLINICAL DEVELOPMENT AND COMMERCIALIZATION.

3.1 Clinical Development Plan. After the Effective Date, PFIZER shall have the exclusive right to, and responsibility for, preparing and implementing a clinical development plan, including the Clinical Studies as set forth in Exhibit A, for developing the Licensed Product and obtaining the Registrations. All decisions with respect to the creation, modification and implementation of such development plans shall be made by PFIZER in its sole discretion. PFIZER shall be solely responsible for conducting all Clinical Studies and for costs related thereto.

3.2 Joint Steering Committee. The parties shall establish a joint steering committee (the “Joint Steering Committee”) for the sole purpose of monitoring progress of PFIZER’s clinical development plan for the Licensed Product. The Joint Steering Committee shall consist of four (4) persons (or such greater number as the parties agree), with an equal number of representatives of PFIZER and IMMUCELL, and shall meet at least quarterly, or with such other frequency as the parties shall mutually agree, during the period commencing immediately after the Effective Date and ending on the Launch of the Licensed Product (the “Initial Period’) and as mutually agreed-upon thereafter, either in person at a location to be designated by PFIZER, or by videoconference or teleconference.

3.3 Clinical Supply.

(a) IMMUCELL shall use commercially reasonable efforts to make available to PFIZER by March 31, 2005, but in no event later than December 31, 2005, [* * *]

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finished plastets of Active Drug Product and [* * *] finishe[d] plastets of Placebo Drug Product for purposes of PFIZER conducting the US Clinical Study trials (collectively, “Clinical Supply”), it being understood that IMMUCELL’s failure to deliver Clinical Supply prior to December 31, 2005 shall not, in and of itself, be deemed to constitute a breach of this Agreement. Such Clinical Supply shall be of a suitable specification to allow: (i) registerable efficacy trials to be initiated by PFIZER and (ii) registerable VICH stability Drug Product studies to be initiated by IMMUCELL. After delivery of the Clinical Supply, IMMUCELL shall make best efforts to furnish (subject to reimbursement by PFIZER at IMMUCELL’s cost, with no markup permitted) such additional Drug Product plastets and/or Raw Material as PFIZER may reasonably request in writing for purposes of those US Clinical Study trials. IMMUCELL shall bear the cost of all Raw Material contained within the Clinical Supply, and PFIZER shall pay IMMUCELL for the cost of manufacture of the Clinical Supply plastets and any such additional Drug Product plastets and/or Raw Material requested by PFIZER, each within 30 days from receipt of IMMUCELL’s invoice therefor. Exhibit A attached hereto shall contain mutually agreed quality requirements for the Clinical Supply.

(b) PFIZER shall have sole responsibility for approving the Contract Manufacturer to create Clinical Supply from the Raw Material, and PFIZER hereby consents to the selection of [* * *] as the Contract Manufacturer for such purpose.

(c) IMMUCELL shall be solely responsible for the characterization of minor nisin variants/impurities, validation of all required analytical methods agreed to by the parties and transfer of such methods to PFIZER or the Contract Manufacturer, and for IMMUCELL’s costs related to these studies. IMMUCELL shall provide access to PFIZER personnel as necessary for training as part of the transfer process. IMMUCELL shall be solely responsible for conducting stability studies on Clinical Supply “Drug Product” subject to CVM guideline 73. PFIZER shall ensure that IMMUCELL receives [* * *] finished plastets for this purpose from the initial Clinical Supply.

3.4 Regulatory Matters; Product Attributes.

(a) Subject to its rights to terminate this Agreement, PFIZER agrees to use commercially reasonable efforts to obtain registration of the Licensed Product, at least in the United States and Major EU Markets, within the time frames contemplated by this Agreement. PFIZER shall be responsible for the preparation, submission and prosecution of regulatory dossiers, including the NADA, the Marketing Authorization Application and their equivalents, of Licensed Product to Governmental Authorities in all markets in the Territory; all such filings shall be at PFIZER’s sole discretion. To assist PFIZER in its regulatory activities, IMMUCELL shall provide technical support and grant PFIZER access to existing data, including without limitation, IMMUCELL Technology.

(b) IMMUCELL shall use commercially reasonable efforts to prepare and deliver to PFIZER the documentation for the CMC section of the regulatory dossier by no later than [* * *], but the dossier shall be drafted and submitted to the CVM by PFIZER.

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(c) All NADA’s, Marketing Authorization Applications and their equivalents in other Territories, shall be owned and maintained by PFIZER, subject to Section 10.4 below.

(d) PFIZER shall have sole responsibility for determining the attributes of the Licensed Products and achievable claims related thereto.

(e) PFIZER shall be responsible, at its sole cost and discretion, for pursuing additional claims related to the Licensed Product. Any studies that are required for enhancements to the Licensed Product shall be monitored by the Joint Steering Committee.

3.5 Manufacturing and Marketing.

(a) PFIZER shall have sole responsibility for approving the Contract Manufacturer (including itself) to create Raw Material and/or Licensed Product. PFIZER agrees to consider an assignment by IMMUCELL of that certain Contract Manufacture Agreement between IMMUCELL and [* * *] in draft form dated March 19, 2003 (the “[* * *] Agreement”), taking into account PFIZER’s supply and quality requirements, but reserves the right to condition any such assignment and assumption by PFIZER on [* * *] making such amendments to the [* * *] Agreement as may be requested by PFIZER in its sole discretion with prior notice to IMMUCELL. IMMUCELL agrees to cooperate with PFIZER in furtherance of any such negotiations. In the event PFIZER or [* * *] declines any such assignment or assumption for any reason, and provided that PFIZER does not in connection therewith enter into any similar replacement agreement with [* * *] IMMUCELL shall bear any costs of terminating the [* * *] Agreement.

(b) Subject to its rights to terminate this Agreement, PFIZER agrees to use commercially reasonable efforts to commercialize the Licensed Product, in at least the United States and Major EU Markets, within the time frames contemplated by this Agreement. Upon its receipt of notice from PFIZER identifying the commercial manufacturer (being either PFIZER or its designated Contract Manufacturer), IMMUCELL shall aid in the transfer of the manufacturing process for Raw Material and Licensed Product to such commercial manufacturer in accordance with the specifications set forth in Exhibit C attached hereto.

(c) No later than six (6) months after establishing the commercial manufacture operations in accordance with sub-section (a) above, PFIZER or its designated Contract Manufacturer shall supply up to a maximum of [* * *] of Raw Material to IMMUCELL per calendar year during the Term, free of charge, for the sole purpose of IMMUCELL’s investigations.

(d) PFIZER shall be solely responsible for all aspects of distribution, sales and marketing of the Licensed Product, and all related expenses. IMMUCELL’s name shall appear on product packaging as co-inventor/developer, in a format reasonably acceptable to IMMUCELL.

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Section 4. FEES AND ROYALTIES.

4.1 Fees. In consideration of the rights granted hereunder, and subject to the terms and conditions of this Agreement, PFIZER shall pay to IMMUCELL the following license fees:

(a) One Million Five Hundred Thousand Dollars (US$1,500,000) payable on the Effective Date by wire transfer according to instructions provided in writing by IMMUCELL;

(b) $[* * *] payable 18 months after the Effective Date or, if earlier, within forty-two (42) days of IMMUCELL’s invoice issuable to PFIZER after the successful transfer by IMMUCELL to PFIZER or its designated Contract Manufacturer of a commercially viable manufacturing process for Raw Material; provided, however, that the criteria for successful transfer shall be at PFIZER’s sole decision;

(c) $[* * *] payable within forty-two (42) days of completion of the Clinical Study in the United States; provided, however, that if PFIZER during such 42-day period gives notice of termination pursuant to Section 10.2(c) of this Agreement, then such amount shall not be deemed to have become payable;

(d) $[* * *] payable within forty-two (42) days of acceptance by the CVM of PFIZER’s NADA submission for the Licensed Product in the United States; provided, however, that if PFIZER during such 42-day period gives notice of termination pursuant to Section 10.2(c) of this Agreement, then such amount shall not be deemed to have become payable;

(e) $[* * *] payable within forty-two (42) days of the date of first acceptance by the EMEA of PFIZER’s Marketing Authorization Application for the Licensed Product in Europe; provided, however, that if PFIZER during such 42-day period gives notice of termination pursuant to Section 10.2(c) of this Agreement, then such amount shall not be deemed to have become payable;

(f) $[* * *] payable within forty-two (42) days of IMMUCELL’s invoice issuable to PFIZER after the last to file of either (i) a European National Phase Application of International Patent Application No. PCT/US03/31986 (entitled “Method of Purifying Lantibiotics”) in one of the European Patent Convention Countries, or (ii) a new United States patent application which claims a Nisin A Composition intended for use as a pharmaceutical preparation for intra-mammary infusion; and

(g) $[* * *] payable within forty-two (42) days of IMMUCELL’s invoice issuable to PFIZER following the issuance of a patent maturing from the European National Phase Application referred to in Section 4.1(f)(i), with claims directed toward a method for purifying nisin.

PFIZER agrees to give IMMUCELL prompt notice of any approval or other event giving rise to payment obligations under subsections (c), (d), or (e) above, and IMMUCELL shall then

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promptly issue Pfizer an invoice for the relevant payment. Except as expressly stated in this Section 4.1, no payments shall be due or owing in respect of any other approvals of any Governmental Authority sought and/or obtained by PFIZER or IMMUCELL in any other countries within the Territory.

4.2 Payments for Certain Filing Delays.

(a) In addition to the payments under Section 4.1, and subject to the terms and conditions of this Agreement including, without limitation, the provisos set forth in sub-section (b) hereinbelow, in the event PFIZER fails to file the complete administrative NADA with the CVM by [* * *], then PFIZER shall pay to IMMUCELL the following amounts by the following dates until such time as such filing is made:

(i) $[* * *] for each calendar quarter ending [* * *], payable within forty-two (42) days after the end of each such quarter;

(ii) $[* * *] for each calendar quarter ending [* * *], payable within forty-two (42) days after the end of each such quarter;

(iii) $[* * *] for each calendar quarter ending September [* * *], payable within forty-two (42) days after the end of each such quarter; and

(iv) $[* * *] for each calendar quarter after the calendar quarter ending [* * *], payable within forty-two (42) days after the end of each such quarter.

(b) The timing of all of the payments specified in sub-section (a) above are expressly conditioned upon IMMUCELL:

(i) providing PFIZER with Clinical Supply in accordance with Section 3.3(a) before March 31, 2005 to allow: (A) registerable efficacy trials to be initiated by PFIZER and (B) registerable VICH stability drug product studies to be initiated by IMMUCELL;

(ii) preparing and transferring to PFIZER all CMC documentation in a suitable form, as reasonably requested by PFIZER, prior to end of 2005; and

(iii) otherwise cooperating with PFIZER and fulfilling its obligations as specified in the License Agreement.

(c) If any of the obligations specified in sub-section (b) above are not met by IMMUCELL for any reason, the timing of payments specified in sub-section (a) above shall be adjusted on a month-to-month basis in line with the delays caused thereby.

[* * *] Confidential Treatment Requested. The confidential portions have been filed separately with the Securities & Exchange Commission.

4.3 Royalty Payments. In addition to the payments under Section 4.1 and Section 4.2, and subject to the terms and conditions of this Agreement, PFIZER shall pay to IMMUCELL with respect to the Licensed Product:

(a) [* * *]% of Net Sales for the portion of Net Sales of Licensed Product in a calendar year in the Territory less than or equal to $[* * *]; plus

(b) [* * *]% of Net Sales for the portion of Net Sales of Licensed Product in a calendar year in the Territory greater than $[* * *].

4.4 Guaranteed Minimum Royalties for Designated Territories. Notwithstanding anything contained in this Agreement to the contrary, so long as this Agreement remains in effect and following approval of the NADA or Marketing Authorization Application by the CVM or EMEA, whichever shall first occur, PFIZER shall be obligated to pay IMMUCELL guaranteed minimum royalties for the United States and for the European Union (“Minimum Royalties”) as set forth in Exhibit D attached hereto, at all times taking into account the payments made under Section 4.3 for the United States or European Union, respectively, it being acknowledged and agreed that Minimum Royalties shall be due regardless of commercial sales of Licensed Product.

4.5 Duration of Royalty Payments. Payments under Section 4.3 on Net Sales in a given country shall continue until the expiration of the Term in such country.

4.6 Suspension of Further Payment Obligations. Notwithstanding the foregoing, upon due termination by PFIZER of this Agreement for any reason, PFIZER shall have no further obligation to make any payments specified in Sections 4.1, 4.2, 4.3 or 4.4 after the effective date of termination; provided, however, that any such payments made by PFIZER or otherwise accrued prior to the effective date of termination (except for those referenced in Sections 4.1 (c), (d) and (e) as not having become payable) shall not be refundable.

Section 5. ACCOUNTING AND PROCEDURES FOR PAYMENT.

5.1 Inter-Company Sales. Sales between or among PFIZER, its Affiliates or sublicensees (except for sales to end users) shall not be counted toward Net Sales. PFIZER shall be responsible for payments on Net Sales of its Affiliates or sublicensees.

5.2 Calculation of Net Sales. All payments under Section 4 shall be computed and paid in United States dollars. For the purposes of determining the amount of royalties due under Section 4.3 for the relevant PFIZER Quarter, the amount of Net Sales in respect of sales originally denominated in a foreign currency shall be computed by converting such foreign currency amount into U.S. dollars at the prevailing commercial rate of exchange for purchasing dollars with such foreign currency as published in the Wall Street Journal for the close of the last Business Day of the PFIZER Quarter for which the relevant royalty payment is to be made to IMMUCELL.

5.3 Royalty Payments and Reports. PFIZER shall make royalty payments to IMMUCELL with respect to each PFIZER Quarter within 90 days after the end of each such period, and each payment shall be accompanied by a report identifying the country, Net Sales for each such country for the relevant PFIZER Quarter, and the amount payable to IMMUCELL, as well as computation thereof including any applicable offset. In addition, PFIZER shall use reasonable efforts, based on its current monitoring procedures used to track other similar

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products, to provide IMMUCELL with sales estimates on a quarterly basis in regions where such procedures are commonly used, but shall not be obliged to provide binding estimates, it being understood that (i) such estimates shall not be used for calculation of royalties, and (ii) a failure to provide such estimates shall not be deemed to constitute a breach of this Agreement. Subject to Section 7.4, said reports shall be kept confidential by IMMUCELL and not disclosed to any other party other than IMMUCELL’s accountants or attorneys, who shall be obligated to keep such information confidential, and such information and reports shall only be used for purposes of this Agreement,.

5.4 Method of Payments. All payments hereunder shall be made by electronic transfer in immediately available funds via either a bank wire transfer, an ACH (automated clearing house) mechanism, or any other means of electronic funds transfer, at PFIZER’s election, to such bank account as IMMUCELL shall designate in writing at least five Business Days before the payment is due. In the event that any payment due hereunder is not paid when due, such payment obligation shall bear interest from the date on which the payment was due and payable, at 7.5% per annum.

5.5 Inspection of Records. PFIZER shall, and shall cause its Affiliates and sublicensees to, keep for two (2) years from the date of each payment of royalties complete and accurate records of gross sales of Licensed Product, Net Sales of Licensed Product, and amounts payable hereunder to IMMUCELL for the Licensed Product, all in sufficient detail to allow the accruing royalties to be determined accurately. IMMUCELL shall have the right for a period of two years after receiving any report or statement with respect to royalties due and payable to appoint at its expense an independent certified public accountant reasonably acceptable to PFIZER to inspect the relevant records of PFIZER, and its relevant Affiliates or sublicensees as the case may be, to verify such report or statement. PFIZER shall make such records available for inspection by such independent certified public accountant during regular business hours at such place or places where such records are customarily kept, upon prior written notice of at least ten (10) Business Days’ from IMMUCELL, to verify the accuracy of the reports and payments. Such accountants may be required by PFIZER to enter into a reasonably acceptable confidentiality agreement, and in no event shall such accountants disclose to IMMUCELL any information other than such as relates to the accuracy of reports and payments made or due hereunder. Such inspection right shall not be exercised more than once in any calendar year nor more than once with respect to sales in any given period. IMMUCELL agrees to hold in strict confidence all information concerning royalty payments and reports, and all information learned in the course of any audit or inspection, except to the extent necessary for IMMUCELL to reveal such information in order to enforce its rights under this Agreement or if disclosure is required by law. The failure of IMMUCELL to request verification of any report or statement during said two-year period shall be considered final acceptance of the accuracy of such report, and neither PFIZER nor its Affiliates or sublicensees shall have any obligation to maintain records pertaining to such report or statement beyond said two-year period. The results of each inspection, if any, shall be binding on both parties unless PFIZER objects, by delivery to IMMUCELL of a written notice of objections, within thirty (30) days of receipt of a report of the independent certified public accountant retained by IMMUCELL. The costs and expenses of the independent certified public accountant retained by IMMUCELL pursuant to this Section to review the records of PFIZER or its Affiliates or sublicensees shall be paid by IMMUCELL; provided, however, that if the results of any review of such records shall reveal that the Net Sales

reported for any period covered by such review shall have been understated by ten percent (10%) or more, PFIZER shall reimburse IMMUCELL for all such costs and expenses.

5.6 Tax Matters. It is understood and agreed by the parties that any payments made under Section 4.1 of this Agreement are inclusive of any value added tax imposed against the payee under applicable Law. In addition, in the event any of the payments made by PFIZER pursuant to Section 4 are or become subject to withholding taxes under the Laws of any jurisdiction, PFIZER shall deduct and withhold the amount of such taxes for the account of IMMUCELL to the extent required by Law, such amounts payable to IMMUCELL shall be reduced by the amount of taxes deducted and withheld, and PFIZER shall pay the amounts of such taxes to the proper Governmental Authority in a timely manner and promptly transmit to IMMUCELL an official tax certificate or other evidence of such tax obligations together with proof of payment from the relevant Governmental Authority of all amounts deducted and withheld sufficient to enable IMMUCELL to claim such payment of taxes and will otherwise provide IMMUCELL with reasonable assistance to enable IMMUCELL to recover its allocable portion of such taxes as permitted by Law.

Section 6. PATENTS, TECHNOLOGY, TRADEMARK AND INFRINGEMENT.

6.1 IMMUCELL and PFIZER shall cooperate in connection with the continued prosecution and maintenance by IMMUCELL of the patents and patent applications under the IMMUCELL Patent Rights, it being acknowledged and agreed as follows:

(i) IMMUCELL agrees to prosecute and maintain all patents and patent applications under the IMMUCELL Patent Rights in the United States, such European Patent Convention Countries as Pfizer shall reasonably designate (to include, without limitation, the Major EU Markets), Australia, New Zealand, South Africa, Japan, Brazil, Canada, Mexico, Argentina, and such additional countries as PFIZER may reasonably designate or consent to in writing; provided, however, that IMMUCELL shall not be required to expend more than $150,000 on prosecution and maintenance of Patent Rights (including patent counsel fees) throughout the Term of this Agreement and, except as IMMUCELL may otherwise agree, shall not be required to expend more than $50,000 on such efforts in any calendar year during the Term.

(ii) The foregoing patent prosecution and maintenance obligations shall extend to and include such of the IMMUCELL Improvements as IMMUCELL or PFIZER reasonably selects from time to time for patent prosecution or maintenance.

(iii) Subject to the foregoing obligations, if IMMUCELL decides not to prosecute and/or maintain IMMUCELL Patent Rights in particular countries, or otherwise decides to abandon such Patent Rights, IMMUCELL shall give PFIZER at least 90 days prior written notice of such decision, provided that the Patent Rights will not lapse within the 90-day period, and if so, then IMMUCELL shall notify PFIZER at least 90 days in advance of any non-extendable response date. In all such cases, PFIZER retains the right (in its discretion) to prosecute and/or maintain such IMMUCELL Patent Rights at its own expense during the Term.

(iv) If PFIZER desires that an application be filed for a patent (including any extension or supplemental patent protection) on any IMMUCELL Technology relating to the Raw Material or the Licensed Product, PFIZER shall advise IMMUCELL of the desired application. Provided that IMMUCELL has no reasonable objection thereto, IMMUCELL shall thereupon file patent applications as requested, and (subject to IMMUCELL’s obligations set forth above) PFIZER shall pay all reasonable expenses, including reasonable fees for patent counsel, for filing and prosecuting such requested patent applications.

(v) PFIZER shall retain full discretion hereunder to prosecute, maintain, or abandon Patent Rights for any PFIZER Technology, at its own expense.

(vi) PFIZER shall have reasonable access to all documentation, filings and communications to or from the respective patent offices and shall be kept fully advised as to the status of all pending applications to the extent pertaining to the Raw Material and Licensed Product. IMMUCELL, its agents and attorneys will give due consideration to all suggestions and comments of PFIZER regarding any aspect of such patent prosecutions. IMMUCELL shall likewise have reasonable access to all documentation, filings and communications to or from the respective patent offices and shall be kept fully advised as to the status of all pending PFIZER applications to the extent pertaining to the Raw Material and Licensed Product. PFIZER, its agents and attorneys will give due consideration to all suggestions and comments of IMMUCELL regarding any aspect of such patent prosecutions.

The parties acknowledge that the IMMUCELL Patent Rights and Technology include patents and technology licensed from Nutrition 21 (the “N21 Rights”). Notwithstanding any provision herein to the contrary, IMMUCELL shall not be obligated to file additional patent applications under this Section 6 in respect of N21 Rights except with Nutrition 21’s consent or except as otherwise permitted under the Nutrition 21 Agreements.

6.2 Any new Technology developed by or for PFIZER during the Term will remain the property of PFIZER and shall constitute PFIZER Technology; provided, however, that (a) if any such Technology constitutes an improvement to the manufacture of Raw Material, then PFIZER shall notify IMMUCELL promptly in writing of any such new Technology, and IMMUCELL shall have an option, exercisable in writing by IMMUCELL within sixty (60) days after receipt of notice, to acquire a non-exclusive, world-wide right to sublicense, develop, and use any such Technology only for animal health applications outside the Field, with terms of such license to be set forth in a separate agreement, negotiated promptly and in good faith; provided, however, that negotiations for such rights shall be limited in time to six (6) months after written notice to IMMUCELL by PFIZER setting forth a reasonably detailed description of technical and scientific information, ownership rights, clinical data and fields of application in respect of such Technology; and (b) such agreement shall provide that in the event of a termination of this Agreement by PFIZER pursuant to Section 10.2(c), then all Technology created by or for PFIZER during the Term shall be subject to the provisions set forth in Section 10.5. Throughout the Term, PFIZER shall use commercially reasonable efforts to preserve viable

samples of all production culture stocks received or developed by PFIZER, and shall maintain reasonable records of all testing and development work with respect thereto.

6.3 Any new Technology developed or acquired by or for, or licensed to or for the benefit of, IMMUCELL during the Term, directly or indirectly (“IMMUCELL Improvements”), will remain the property of IMMUCELL and shall constitute IMMUCELL Technology. To the extent that IMMUCELL Improvements relate to the Field (including, without limitation, improvements to the manufacture of Raw Material), they shall constitute part of the IMMUCELL Technology subject to the License granted in this Agreement, including without limitation, IMMUCELL Patent Rights related thereto. IMMUCELL shall notify PFIZER in writing within forty-five (45) days of the development, acquisition or license of any IMMUCELL Improvements and new patents under IMMUCELL Patent Rights generated by IMMUCELL during the Term, and comply with the terms and conditions of this Agreement with respect thereto.

6.4 IMMUCELL agrees that it will, and will cause its Affiliates to, (i) execute and file such notices and other filings as PFIZER shall reasonably request be made, from time to time with the United States Patent and Trademark Office and its foreign equivalents (or any successor agencies) with respect to the rights granted under this Agreement and (ii) subject to the limitations otherwise provided herein, take commercially reasonable steps to maintain at all times during the term of this Agreement ownership of the patents under the IMMUCELL Patent Rights and the IMMUCELL Technology free and clear of any and all mortgages, liens, pledges, security interests, charges or other encumbrances and (iii) as a condition to any transfer of any such patent or IMMUCELL Technology on and after the date hereof to any Affiliate, require such Affiliate to be obligated to perform all of IMMUCELL’s obligations under this Agreement as if it were a party hereto.

6.5 If any Valid Claim relating to an issued patent under the IMMUCELL Patent Rights becomes the subject of a judgment, decree or decision of a court, tribunal, or other authority of competent jurisdiction, which judgment, decree, or decision is or becomes final (there being no further right of review) and adjudicates the validity, enforceability, scope, or infringement of the same, the construction of such claim in such judgment, decree or decision shall be followed thereafter in the Territory in determining whether a Licensed Product is licensed hereunder, not only as to such Valid Claim but also as to all other Valid Claims in the Territory to which such construction reasonably applies, but only if this Licensed Product is not covered additionally by IMMUCELL Technology. If at any time there are two or more conflicting final judgments, decrees, or decisions with respect to the same Valid Claim, the decision of the higher tribunal shall thereafter control, but if the tribunal be of equal rank, then the final judgment, decree, or decision more favorable to such Valid Claim shall control unless and until the majority of such tribunals of equal rank adopt or follow a less favorable final judgment, decree, or decision, in which event the latter shall control.

6.6 PFIZER shall take steps to avoid infringement liability to third parties on a par with steps that PFIZER customarily takes with other products to avoid infringement liability in similar circumstances. If PFIZER (a) reasonably determines in good faith that, in order to avoid infringement of any third party patent not licensed under the IMMUCELL Patent Rights, it is

reasonably necessary to obtain a third party license in order to make, use, sell, offer for sale or import the Licensed Product in a country in the Territory and to pay a royalty on sales under such license (including, without limitation, in connection with settlement of a patent infringement claim), or (b) shall be subject to a final court or other binding order or ruling requiring the payment of a royalty or other payment to a third party patent holder in respect of sales of the Licensed Product in a country in the Territory, then the amount of PFIZER’s royalty payments under Section 4.3 with respect to Net Sales for the Licensed Product in such country shall be reduced by the lesser of (i) the amount of the royalty paid under such other license, and (ii) the amount payable by PFIZER under Section 4.3; provided, however, that in no event shall the royalty payments otherwise due under Section 4.3 be reduced by the application of this Section by more than fifty percent (50%) in such country where third party royalties are paid. In such event, the amount payable for the United States or European Union (as the case may be, if applicable) under Section 4.4 shall be reduced by the same amount.

6.7 Each of the parties will promptly notify the other in the event of any potential infringement of a patent under the IMMUCELL Patent Rights by any third party or any claims of alleged patent infringement by PFIZER or IMMUCELL with respect to the manufacture, use, sale, offer for sale or importation of the Licensed Product to the extent such potential infringement or claim relates to the Raw Material or the Licensed Product. PFIZER shall have the right, but not the obligation, to defend or institute litigation in connection therewith, and any such litigation shall be at PFIZER’s expense. IMMUCELL, upon request of PFIZER, agrees to join in any such litigation at PFIZER’s expense and to cooperate with PFIZER. If PFIZER fails to defend or prosecute any such action, IMMUCELL shall have the right upon 60 days prior notice to PFIZER, at IMMUCELL’s expense and for IMMUCELL’s sole benefit, to defend or institute any such litigation.

6.8 PFIZER shall be entitled to use the Trademark at PFIZER’s sole discretion, and to register, at PFIZER’s sole expense, the Trademark in any jurisdiction where it is not so registered as of the Effective Date. In any such case, PFIZER shall own an exclusive license to the Trademark in those jurisdictions during the Term. Subject to the foregoing sentence, PFIZER acknowledges that the Trademark is the exclusive property of IMMUCELL and, upon termination of this Agreement, shall revert to IMMUCELL in accordance with Section 10.4. PFIZER shall also be entitled to register and use its own trademark with respect to the Licensed Product, in its sole discretion. Use of the Trademark by PFIZER or its Affiliates or sublicensees shall be in good taste and shall not be denigrating in any way to IMMUCELL or the Trademark. Except for valid sub-licenses granted by PFIZER in connection with commercial distribution of Licensed Product on terms consistent with this Agreement, PFIZER shall not use or grant to any other party the right to use the Trademark without the prior written consent of IMMUCELL. The parties agree to promptly notify each other of any and all illegal uses, infringements, limitations or misuses of the Trademark which come to the their attention and shall assist each other in obtaining protection thereof in the Territory. PFIZER shall have the right, but not the obligation, to defend or institute litigation in connection with any infringement or potential infringement of the Trademark, and any such litigation shall be at PFIZER’s expense. IMMUCELL, upon request of PFIZER, agrees to join in any such litigation at PFIZER’s expense and to cooperate with PFIZER. If PFIZER fails to defend or prosecute any such action,

IMMUCELL shall have the right upon 60 days prior notice to PFIZER, at IMMUCELL’s expense and for IMMUCELL’s sole benefit, to defend or institute any such litigation.

Section 7. CONFIDENTIALITY; PUBLICATION.

7.1 Confidentiality.

(a) PFIZER and IMMUCELL each agree that during the term of this Agreement and for at least five (5) years after the expiration or termination hereof, it will: (a) protect and hold in confidence the Confidential Information of the other party; (b) not disclose or use, or caused to be disclosed or used, such Confidential Information to or by any person except with the prior written consent of the other party or except to the extent reasonably necessary to carry out its responsibilities under this Agreement or under applicable law; (c) handle, preserve and protect such Confidential Information with at least the same degree of care that such party affords its own confidential information; and (d) use diligent efforts to ensure that each of its agents, representatives, Affiliates, sublicensees and distributors preserves and protects the confidentiality of such Confidential Information. A party who discloses to its agents, representatives, Affiliates, sublicensees and distributors Confidential Information of the other party shall (i) upon such disclosure, advise such persons of the confidential nature of such Confidential Information and (ii) be responsible for any breach of confidentiality by such persons. The foregoing requirements shall be in addition to those under Section 2.1(b), relating to disclosures to prospective sublicensees.

(b) PFIZER and IMMUCELL each agree that it shall notify the other party of receipt of any process, subpoena, demand or request by any person to disclose Confidential Information of the other party, and shall, as soon as practicable but in no event later than three (3) Business Days from the date of such receipt, furnish to the other party a copy of such process, subpoena, demand or request and inform the other party of the circumstances relating thereto. Such party shall, at its cost and expense, take all reasonable steps to maintain and protect the confidentiality of the Confidential Information of the other party. If such party is legally compelled to disclose the Confidential Information of the other party, then such party may, without liability under this Agreement, disclose only that portion of such Confidential Information that it is legally compelled to disclose and shall, within ten (10) days from the date of such disclosure, furnish to the other party a copy of the Confidential Information disclosed and all correspondence and communications relating to such disclosure.

(c) Notwithstanding the foregoing, PFIZER may disclose IMMUCELL Confidential Information to (i) Governmental Authorities (A) to the extent desirable to obtain or maintain government approvals for the Licensed Product within the Territory and (B) in order to respond to inquiries, requests or investigations; and (ii) to outside consultants, scientific advisory boards, and non-clinical and clinical investigators to the extent desirable to develop, register or market the Licensed Product; provided that PFIZER shall obtain the same confidentiality obligations from such third parties as it obtains with respect to its own similar types of proprietary information.

7.2 Return of Information. Each of the parties shall, within sixty (60) days from the date of expiration or termination of this Agreement, return to the other party or destroy all extant copies of the Confidential Information of the other party on any tangible medium, accompanied by a written confirmation that all tangible copies of such Confidential Information have been completely destroyed and all electronic memories, including archival media, have been purged of all Confidential Information of the other party; provided, however, that one (1) tangible copy may be kept for the purpose of enforcement of or compliance with this Agreement. Notwithstanding any return or destruction of Confidential Information in accordance with this Section 7.2, the other duties and obligations of each of the parties under this Agreement, including without limitation restrictions against use of Confidential Information or Technology of the other party, shall continue in effect.

7.3 Discovery of Breach. Each party shall immediately notify the other party of, and shall provide all information and documents relating to, any breach of this Section 7 in respect of the other party’s Confidential Information. Upon the request of the other party, such party shall at its own expense take all steps reasonably necessary to recover any and all Confidential Information that may have been improperly disclosed or used.

7.4 Publication. Subject to Section 7.5 below, neither party, without the prior written approval of the other party, shall originate any publicity, news release or public announcement, written or oral, whether to the public press, stockholders or otherwise, relating to this Agreement, the subject matter to which it relates, performance under it or any of its terms, to any amendment hereto or performance hereunder (herein referred to as an “Announcement”), except to the limited extent that such an Announcement (x) is required by Law to be made, in the opinion of counsel for the party proposing to make such Announcement (to be confirmed in writing if the other party so requests) or (y) is contained in a party’s financial statements prepared in accordance with generally acceptable accounting principles in the United States. A party will give the other party at least ten (10) days’ advance notice of the text of any proposed Announcement so that the other party will have an opportunity to comment upon the Announcement and/or propose non-disclosure of sensitive information; provided that in the case of an Announcement required by clause (x) of this Section, the disclosing party will endeavor to give the other party notice that is reasonable under the circumstances.

7.5 Registration and Filing of Agreement. To the extent required by Law, the parties will file, register or notify (collectively, a “Required Filing”) this Agreement with appropriate Governmental Authorities. Except as otherwise provided in this Agreement, each party shall be responsible for its own legal and other external costs for a Required Filing. For each Required Filing, the filing party shall (i) provide the other party with reasonable advance written notice thereof to the extent practicable, and (ii) prior to or commensurate with any such filing request from the applicable Governmental Authority confidential treatment of the sensitive provisions of this Agreement, it being acknowledged and agreed that the parties consider, at a minimum, the royalty rates, milestone payments and development timelines specified herein to be confidential information. To the extent practicable, the filing party shall grant the other party the opportunity to comment on the confidentiality request with respect to each such Required Filing. The parties shall otherwise cooperate in such Required Filing(s) and in any contacts with or responses to Governmental Authorities.

Section 8. REPRESENTATIONS AND WARRANTIES.

8.1 By IMMUCELL. As of the date hereof, IMMUCELL hereby represents and warrants to PFIZER as follows:

(a) To its knowledge, the issued patents under the IMMUCELL Patent Rights are valid and enforceable patents, and no third party is infringing any such patents. IMMUCELL has no information that leads it to believe the patents under the IMMUCELL Patent Rights are invalid or unenforceable in any material respect. To its knowledge, none of the manufacture, use or sale by PFIZER of Raw Material or the Licensed Product would infringe any patents of third parties. IMMUCELL is the legal and beneficial owner or lawful licensee of all the patents under the IMMUCELL Patent Rights and all IMMUCELL Technology, and except with respect to the various rights, conditions and obligations contained within the Nutrition 21 Agreements, (i) no other person, firm, corporation or other entity has any right, interest or claim in or to and (ii) IMMUCELL has not entered into any agreement granting any right or interest in such patents or the IMMUCELL Technology with respect to the Territory. Exhibit B contains a complete and correct list of all patents and patent applications owned by, or otherwise licensed to or controlled by, IMMUCELL or any of its Affiliates relating to the manufacture, use or sale of the Raw Material or the Licensed Product in the Territory. Except as specified in Exhibit B with respect to licenses of patents listed as “Patents Licensed from Nutrition 21,” the rights to which have been obtained by IMMUCELL prior to the date hereof, none of the rights of IMMUCELL or its Affiliates under the patents under the IMMUCELL Patent Rights have been licensed to IMMUCELL or its Affiliates from a third party.

(b) The Nutrition 21 Agreements constitute (i) the legal, valid and binding obligations of the parties thereto, enforceable against the parties thereto in accordance with their terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and similar Laws, or by general principles of equity, and (ii) insofar as is material to PFIZER’s rights hereunder within the Field, the entirety of all legally binding obligations which exist between IMMUCELL and Nutrition 21 as of the Effective Date.

(c) IMMUCELL has sufficient right, title and interest to grant the License and accompanying rights to PFIZER as provided in this Agreement.

(d) IMMUCELL has the corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder, and the execution, delivery and performance of this Agreement by IMMUCELL have been duly and validly authorized and approved by proper corporate action on the part of IMMUCELL, and IMMUCELL has taken all other action required by Law, its certificate of incorporation, by-laws or other organizational documents or any agreement to which it is a party or to which it may be subject required to authorize such execution, delivery and performance. Assuming due authorization, execution and delivery on the part of PFIZER, this Agreement constitutes a legal, valid and binding obligation of IMMUCELL, enforceable against

IMMUCELL in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and similar Laws.

(e) To its knowledge, the execution and delivery of this Agreement by IMMUCELL and the performance by IMMUCELL contemplated hereunder and thereunder does not and will not violate any Laws or any order of any court or Governmental Authority.

(f) Neither the execution and delivery of this Agreement nor the performance hereof by IMMUCELL requires IMMUCELL to obtain any permits, authorizations or consents from any Governmental Authority or from any other person, firm or corporation, and such execution, delivery and performance will not result in the breach of or give rise to any termination of any agreement or contract to which IMMUCELL may be a party which relates to the IMMUCELL Patent Rights or the IMMUCELL Technology.

(g) There is no action, claim, demand, suit, proceeding, arbitration, grievance, citation, summons, subpoena, inquiry or investigation of any nature, civil, criminal, regulatory or otherwise, in Law or in equity, pending or relating to or, to the best of IMMUCELL’s knowledge, threatened against IMMUCELL, or any of its Affiliates, in each case in connection with the IMMUCELL Patent Rights, or the IMMUCELL Technology or relating to the transactions contemplated by this Agreement.

8.2 By PFIZER. As of the date hereof, PFIZER hereby represents and warrants to IMMUCELL as follows:

(a) PFIZER has the corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder, and the execution, delivery and performance of this Agreement by PFIZER have been duly and validly authorized and approved by proper corporate action on the part of PFIZER, and PFIZER has taken all other action required by Law, its certificate of incorporation or by-laws or any agreement to which it is a party or to which it may be subject required to authorize such execution, delivery and performance. Assuming due authorization, execution and delivery on the part of IMMUCELL, this Agreement constitutes a legal, valid and binding obligation of PFIZER, enforceable against PFIZER in accordance with its respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and similar Laws.

(b) The execution and delivery of this Agreement and the performance by PFIZER contemplated hereunder will not violate (subject to obtaining appropriate governmental health, pricing and reimbursement approvals) any Laws or any order of any court or Governmental Authority.

(c) Neither the execution and delivery of this Agreement nor the performance hereof by PFIZER requires PFIZER to obtain any permits, authorizations or consents from any Governmental Authority (subject to obtaining all necessary CVM, EMEA and their equivalent approvals with respect to the manufacture, use or sale of the Licensed Product) or from any other person, firm or corporation and such execution, delivery and

performance will not result in the breach of or give rise to any termination of any agreement or contract to which PFIZER may be a party, except that may reasonably not be expected to adversely affect the ability to perform its obligations under this Agreement.

(d) There is no action, claim, demand, suit, proceeding, arbitration, grievance, citation, summons, subpoena, inquiry or investigation of any nature, civil, criminal, regulatory or otherwise, in Law or in equity, pending or relating to or, to the best of knowledge of PFIZER, threatened against PFIZER in connection with or relating to the transactions contemplated by this Agreement.

8.3 Disclaimer of Warranties. EXCEPT TO THE EXTENT EXPRESSLY PROVIDED IN THIS AGREEMENT, NEITHER PARTY MAKES ANY REPRESENTATION OR WARRANTY OF ANY KIND, EXPRESS OR IMPLIED (INCLUDING BUT NOT LIMITED TO ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE), WITH REGARD TO EACH SUCH PARTY’S TECHNOLOGY, PATENT RIGHTS, OR CONFIDENTIAL INFORMATION, OR THE PRODUCTS OR SERVICES DESCRIBED IN THIS AGREEMENT.

Section 9. NON-COMPETITION

9.1 Except as expressly set forth herein with respect to Licensed Product or as may be mutually agreed in writing between IMMUCELL and PFIZER, and subject to the limited exceptions set forth in Sections 2.3, 2.4, 6.2, 6.3 and 9.2, during the Term of this Agreement and for a period of one (1) year after termination of this Agreement, neither party nor any of their respective Affiliates or sublicensees may, directly or indirectly (through a license or otherwise), develop, commercialize, sell or distribute a Competing Product anywhere in the Territory; except that in the European Union, and in any other jurisdiction to the extent that the foregoing period would be unenforceable, then the foregoing restrictions shall lapse on the fifth anniversary of the Effective Date; provided, however, that (a) in the event PFIZER terminates this Agreement in accordance with Section 10.2(c), or in the event IMMUCELL terminates this Agreement in accordance with Section 9.2 or 10.2(a) or (b), the above-referenced restriction shall end with respect to IMMUCELL and its Affiliates and sublicensees on the date of such termination; and (b) in the event PFIZER terminates this Agreement in accordance with Section 10.2(a) or (b), the above-referenced restriction shall end with respect to PFIZER on the date of such termination. Without limitation of the foregoing, each party further agrees that it shall not grant to any unaffiliated third party the right to engage in any of the activities proscribed in this Section 9.1. Lapse of the restrictive period shall not be deemed to grant either party any license to Patent Rights or Technology of the other party beyond the Term.

9.2 Notwithstanding the provisions of Section 9.1 above, which provision shall not be deemed in breached solely as a result of an acquisition or merger described in this Section 9.2, if PFIZER acquires a Competing Product through acquisition or merger, PFIZER shall, within sixty (60) days from the date of PFIZER’s board approval of such acquisition or merger, notify IMMUCELL as to whether PFIZER intends to divest its interest in such Competing Product. If PFIZER elects to divest its interest in such Competing Product, PFIZER shall use reasonable efforts to identify a third party purchaser to whom PFIZER will divest its interest in such Competing Product and to enter into a definitive agreement with such third party for such

divestiture as soon as reasonably practicable under the circumstances (which may be subject to the terms of a Hold Separate Transaction (as defined below) as applicable). If PFIZER elects not to divest its interest in such Competing Product or fails to enter into a definitive agreement with a third party to divest such Competing Product (other than as part of any Hold Separate Transaction) within ten (10) months after the closing of the acquisition or merger for which PFIZER has provided IMMUCELL with notice, then IMMUCELL shall have the option to terminate this Agreement, exercisable upon written notice to PFIZER given no later than ninety (90) days after the earlier of: (i) PFIZER’s election not to divest such Competing Product; and (ii) the end of such ten-month period described above (in the event that PFIZER has elected to divest such Competing Product in a manner which does not involve a Hold Separate Transaction). As used herein, a “Hold Separate Transaction” shall mean any “hold separate” transaction (whether through the establishment of a trust or otherwise) involving the proposed sale of the applicable Competing Product pursuant to an agreement with any Governmental Authority responsible for antitrust laws. The application of this Section 9.2 shall not excuse or postpone the performance of any party’s obligations under this Agreement.

Section 10.  TERM AND TERMINATION.

10.1 This Agreement shall be effective as of the Effective Date and shall remain in effect until the expiration of the last-to-expire Term.

10.2 This Agreement shall terminate as follows:

(a) If either PFIZER or IMMUCELL materially breaches or materially defaults in the performance or observance of any of the provisions of this Agreement, and such breach or default is not cured within sixty (60) days after the giving of notice by the other party specifying such breach or default, the other party shall have the right to terminate this Agreement forthwith such termination to be effective upon the expiration of such sixty-day notice period.

(b) If either party is generally unable to meet its debts when due, or makes a general assignment for the benefit of its creditors, or there shall have been appointed a receiver, trustee or other custodian for such party for or a substantial part of its assets, or any case or proceeding shall have been commenced or other action taken by or against such party in bankruptcy or seeking the reorganization, liquidation, dissolution or winding-up of such party or any other relief under any bankruptcy, insolvency, reorganization or other similar act or Law, and any such event shall have continued for sixty (60) days undismissed, unstayed, unbonded and undischarged, then the other party may, upon notice to such party terminate this Agreement, such termination to be effective upon such party’s receipt of such notice.

(c) At any time PFIZER, upon thirty (30) days’ notice to IMMUCELL, shall have the right, at PFIZER’s sole discretion, to terminate this Agreement, such termination to be effective upon the expiration such thirty-day notice period; provided, however, that in the event PFIZER desires to terminate the Agreement pursuant to this Section 10.2(c) at any time after either CVM or the first European Union authorization or approval of the Licensed Product has been issued, then the applicable period for notice and expiration

shall instead be one hundred eighty (180) days and PFIZER shall use reasonable efforts to transfer the manufacturing process for Licensed Product to IMMUCELL, or its designee, at PFIZER’s reasonable cost.

10.3 Termination of this Agreement for any reason (x) shall be without prejudice to IMMUCELL’s right to timely receive (subject to the provisos contained in Sections 4.1(c), (d) and (e)) all fees and royalties accrued under Sections 4.1, 4.2, 4.3 and 4.4 prior to the effective date of such termination and any other remedies which either party may otherwise have and (y) shall not release a party hereto from any indebtedness, liability or other obligation incurred hereunder by such party prior to the date of termination or expiration and shall not terminate any right to inspect records as provided herein. Termination of this Agreement by PFIZER pursuant to Section 10.2(c) shall relieve PFIZER of any obligation to pay any such fees or royalties which have not accrued prior to the effective date of termination.

10.4 Subject to Section 10.6 below, upon any termination of this Agreement pursuant to Section 10.2, all licenses and rights granted herein to PFIZER shall terminate. In addition, PFIZER shall, promptly after termination, unless PFIZER terminates this Agreement under Section 10.2(a) or (b), (i) transfer to IMMUCELL ownership of all rights of PFIZER or its Affiliates in governmental or regulatory filings, rights and approvals (including all NADAs, Marketing Authorization Applications and their foreign equivalents) relating to the Licensed Product and the Trademark, (ii) deliver to IMMUCELL all pre-clinical and clinical data and information in PFIZER’s or its Affiliates’ or sublicensees’ possession or control relating to the Licensed Product, (iii) deliver to IMMUCELL all stocks of Licensed Product and producing cultures, provided that IMMUCELL shall reimburse PFIZER for Licensed Product stocks at PFIZER’s cost and pay for reasonable shipping expenses incurred in the transfer; and (iv) deliver to IMMUCELL copies of all reports, records, regulatory correspondence and dossiers and all other materials or data in PFIZER’s or its Affiliates’ or sublicensees’ possession or control relating to the clinical development of Licensed Product.

10.5 In addition, upon any termination of this Agreement by PFIZER pursuant to Section 10.2(c) or by IMMUCELL pursuant to Sections 9.2, or 10.2(a) or (b), PFIZER shall grant to IMMUCELL a non-exclusive, royalty-free, perpetual license under PFIZER’s and its Affiliates’ rights in any nisin-related PFIZER Technology (including any related PFIZER Confidential Information) developed by or for PFIZER during the Term; provided, however, that any such license to IMMUCELL may not be sub-licensed by IMMUCELL unless, if requested by IMMUCELL in writing, the parties agree to reasonable terms of any such sublicense including, without limitation, reasonable royalties payable with respect thereto.

10.6 Notwithstanding anything contained herein to the contrary, in the event that PFIZER has grounds for valid termination of this Agreement pursuant to Section 10.2(a) for any action or inaction on the part of IMMUCELL or its Affiliates constituting (a) fraud, (b) gross and willful misconduct, or (c) a material violation by IMMUCELL of Section 9.1 (Non-Competition), then PFIZER shall have the option, exercisable in writing at any time prior to termination and in its sole discretion, to maintain this Agreement in effect whereupon all Licenses granted hereunder shall automatically be converted into royalty-free, non-exclusive licenses for the life of the Patent Rights underlying the Licensed Product.

10.7 Bankruptcy. PFIZER may, in addition to any other remedies available to it by law or in equity, exercise the rights set forth below by written notice to IMMUCELL, in the event IMMUCELL shall have become insolvent or bankrupt, or shall have made a general assignment for the benefit of its creditors, or there shall have been appointed a trustee or receiver of IMMUCELL or for all or a substantial part of its property, or any case or proceeding shall have been commenced or other action taken by or against IMMUCELL in bankruptcy or seeking reorganization, liquidation, dissolution, winding-up arrangement, composition or readjustment of its debts or any other relief under any bankruptcy, insolvency, reorganization or other similar act or law of any jurisdiction now or hereafter in effect, and any such event shall have continued for sixty (60) days undismissed, unbonded and undischarged. All rights and licenses granted under or pursuant to this Agreement by IMMUCELL are, and shall otherwise be deemed to be, for purposes of Article 365(n) of the U.S. Bankruptcy Code, licenses of rights to “intellectual property” as defined under Article 101 of the U.S. Bankruptcy Code. The parties agree that PFIZER, as licensee of such rights under this Agreement, shall retain and may fully exercise all of its rights and elections under the U.S. Bankruptcy Code. The parties further agree that, in the event of the commencement of a bankruptcy proceeding by or against IMMUCELL under the U.S. Bankruptcy Code, PFIZER shall be entitled to a complete duplicate of (or complete access to, as appropriate) any such intellectual property and all embodiments of such intellectual property, and same, if not already in their possession, shall be promptly delivered to it (a) upon any such commencement of a bankruptcy proceeding upon its written request therefor, unless IMMUCELL elects to continue to perform all of its obligations under this Agreement or (b) if not delivered under (a) above, upon the rejection of this Agreement by or on behalf of IMMUCELL upon written request therefor by PFIZER.

Section 11.  INDEMNIFICATION.

11.1 Indemnification. PFIZER and IMMUCELL will indemnify, defend and hold each other and each other’s Affiliates, directors, officers and employees (collectively, “Representatives”) harmless from any and all Losses (as defined below) arising out of or resulting from a claim by a third party against either party based on any action or omission of the indemnifying party’s agents, employees or officers related to its obligations under this Agreement; provided, however, that the foregoing shall not apply if the claim is found to be based upon the negligence, recklessness or willful misconduct of the party seeking indemnification. Notwithstanding the foregoing, PFIZER hereby expressly agrees to indemnify, defend and hold IMMUCELL and its Representatives harmless from and against any and all Losses relating to claims arising from clinical trials pursued by PFIZER or its Affiliates or sublicensees, or the sale of Licensed Products (including without limitation product liability claims). In addition, IMMUCELL shall indemnify, defend and hold PFIZER and its Representatives harmless from and against any and all Losses arising out of or resulting from a

claim by a third party that IMMUCELL breached or violated any terms or conditions involving or relating to those certain license agreements dated as of December 30, 1999, April 12, 2000, and February 1, 2002, as amended, between IMMUCELL and Nutrition 21 (the “Nutrition 21 Agreements”), the [* * *] Agreement, and that certain Development Agreement dated March 19, 2003 between IMMUCELL and [* * *].

11.2 IP Indemnification.

(a) PFIZER shall indemnify, defend and hold IMMUCELL and its Representatives harmless from and against any and all Losses arising out of or resulting from a claim by a third party involving any actual or alleged infringement, misappropriation or other violation of a third party’s intellectual property rights arising out of or related to any PFIZER Patent Rights, PFIZER Technology and/or use, promotion, manufacture, commercialization, distribution, offering for sale, sale or importation of the Licensed Product to the extent such claim is based on PFIZER Patent Rights and/or PFIZER Technology (but in all cases excluding Losses for which IMMUCELL is obligated to indemnify PFIZER pursuant to Section 11.1).

(b) To the limited extent that PFIZER suffers Losses arising out of or resulting from a claim by a third party involving any actual or alleged infringement, misappropriation or other violation of a third party’s intellectual property rights arising out of or related to any IMMUCELL Patent Rights, IMMUCELL Technology and/or use, promotion, manufacture, commercialization, distribution, offering for sale, sale or importation of the Licensed Product to the extent such claim is based on IMMUCELL Patent Rights and/or IMMUCELL Technology (but in all cases excluding (1) Losses for which PFIZER is obligated to indemnify IMMUCELL pursuant to Section 11.1, and (2) third party claims that (if successful) would be subject to royalty reduction under Section 6.6), then, upon written notice to IMMUCELL, PFIZER shall be entitled to deduct and/or offset the amount of any and all such Losses from future royalties payable to IMMUCELL pursuant to Sections 4.3 and 4.4 after the date of incurring such Losses, it being acknowledged and agreed that any such offset of Losses from future royalty payments shall represent IMMUCELL’s maximum potential liability with respect to IMMUCELL’s infringement of third party intellectual property rights as specified in this sub-section.

(c) IMMUCELL shall indemnify, defend and hold PFIZER and its Representatives harmless from and against any and all Losses arising out of or resulting from a claim by Nutrition 21 involving any actual or alleged infringement, misappropriation or other violation of Nutrition 21’s intellectual property rights as defined in the Nutrition 21 Agreements (but in all cases excluding Losses for which PFIZER may be responsible in the event that PFIZER does not comply with Section 2.1(b)).

11.3 Losses. For purposes of this Agreement, “Losses” shall mean any and all (a) claims, losses, liabilities, damages, fines, penalties, punitive damages, deficiencies, interest, awards, and judgments, (b) with respect to third parties, amounts actually and reasonably paid in

[* * *] Confidential Treatment Requested. The confidential portions have been filed separately with the Securities & Exchange Commission.

settlement, including (where applicable) any special, indirect, incidental and consequential damages (including without limitation lost profits) paid to the third party, and (c) in connection with all of the items referred in clause (a) above, any and all reasonable, out-of-pocket attorneys’ fees and all other costs and expenses actually and reasonably incurred in investigating, preparing or defending any litigation or proceeding, commenced or threatened.

11.4 Defense Procedures; Procedures for Third Party Claims. In the event that any third party (in no event to include any Affiliate of any of the parties) asserts a claim with respect to any matter for which a party (the “Indemnified Party”) is entitled to indemnification hereunder (a “Third Party Claim”), then the Indemnified Party shall promptly notify the party obligated to indemnify the Indemnified Party (the “Indemnifying Party”) thereof; provided, however, that no delay on the part of the Indemnified Party in notifying the Indemnifying Party shall relieve the Indemnifying Party from any obligation hereunder unless (and then only to the extent that) the Indemnifying Party is prejudiced thereby.

(a) The Indemnifying Party shall have the right, exercisable by written notice to the Indemnified Party within ten (10) days of receipt of notice from the Indemnified Party of the commencement of or assertion of any Third Party Claim, to assume and conduct the defense of a Third Party Claim, with counsel selected by the Indemnifying Party and reasonably acceptable to the Indemnified Party, provided that (i) the Indemnifying Party has sufficient financial resources, in the reasonable judgment of the Indemnified Party, to satisfy the amount of any adverse monetary judgment that is sought; and (ii) the Third Party Claim solely seeks monetary damages; and (iii) the Indemnifying Party expressly agrees in writing that as between the Indemnifying Party and the Indemnified Party, the Indemnifying Party shall be solely obligated to satisfy and discharge the Third Party Claim in full. (The conditions set forth in (i), (ii) and (iii) above are collectively referred to as the “Litigation Conditions”). In the case of any Third Party Claim which is the subject of Section 11.2 (a) or (b), PFIZER shall be entitled to control the defense of such Third Party Claim.

(b) Within ten (10) days after the Indemnifying Party has given notice to the Indemnified Party of its intended exercise of its right to defend a Third Party Claim, the Indemnified Party shall give notice to the Indemnifying Party of any objection thereto based upon the Litigation Conditions. If the Indemnified Party reasonably so objects, the Indemnified Party shall continue to defend the Third Party Claim, at the expense of the Indemnifying Party, until such time as such objection is withdrawn. If no such notice is given, or if any such objection is withdrawn, the Indemnifying Party shall be entitled, at its sole cost and expense, to assume and conduct such defense, with counsel selected by the Indemnifying Party, until such time as the Indemnified Party shall give notice that any of the Litigation Conditions, in its reasonable judgment, are no longer satisfied. During such time as the Indemnifying Party is controlling the defense of such Third Party Claim, the Indemnified Party shall cooperate, and cause its Affiliates and agents to cooperate upon request of the Indemnifying Party in the defense or prosecution of the Third Party Claim, including by furnishing such records, information and testimony and attending such conferences, discovery proceedings, hearings, trials or appeals as may reasonably be requested by the Indemnifying Party. In the event that the Indemnifying

Party fails to satisfy the Litigation Conditions or does not notify the Indemnified Party in writing of the Indemnifying Party’s intent to defend any Third Party Claim within ten (10) days after notice thereof, the Indemnified Party may (upon notice to the Indemnifying Party) undertake the defense thereof with counsel of its choice and at the Indemnifying Party’s expense (including reasonable, out-of-pocket attorneys’ fees and costs and expenses of enforcement or defense). The Indemnifying Party or the Indemnified Party, as the case may be, shall have the right to join in (including the right to conduct discovery, interview and examine witnesses and participate in all settlement conferences), but not control, at its own expense, the defense of any Third Party Claim which the other party is defending as provided in this Agreement.

(c) The Indemnifying Party shall not, without the prior written consent of the Indemnified Party, enter into any compromise or settlement which commits the Indemnified Party to take, or to forbear to take, any action. The Indemnified Party shall have the sole and exclusive right to settle any Third Party Claim, on such terms and conditions as it deems reasonably appropriate, to the extent such Third Party Claim involves equitable or other non-monetary relief, and shall not have the right to settle such Third Party Claim to the extent such Third Party Claim involves monetary damages without the prior written consent of the Indemnifying Party. Notwithstanding the foregoing, neither party shall have the right to enter into a compromise or settlement that materially adversely affects the other party’s Technology or Patent Rights, except with the consent of the other party.

11.5 Disclaimer of Liability for Consequential Damages. IN NO EVENT SHALL ANY PARTY OR ANY OF ITS RESPECTIVE AFFILIATES BE LIABLE UNDER THIS AGREEMENT FOR SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES, WHETHER IN CONTRACT, WARRANTY, TORT, NEGLIGENCE, STRICT LIABILITY OR OTHERWISE, INCLUDING, BUT NOT LIMITED TO, LOSS OF PROFITS OR REVENUE, SUFFERED BY PFIZER, IMMUCELL OR ANY OF THEIR RESPECTIVE REPRESENTATIVES, UNDER THIS AGREEMENT, EXCEPT (A) TO THE EXTENT OF ANY SUCH DAMAGES PAID TO A THIRD PARTY AS PART OF A THIRD PARTY CLAIM, AND (B) FOR PURPOSES OF INDEMNIFICATION PURSUANT TO SECTION 11, IN THE EVENT OF AN INTENTIONAL AND WILLFUL BREACH IN BAD FAITH OF ANY REPRESENTATION, WARRANTY, COVENANT OR AGREEMENT BY IMMUCELL OR PFIZER OR THEIR RESPECTIVE AFFILIATES (AS THE CASE MAY BE) OF THIS AGREEMENT.

Section 12.  GOVERNING LAW.

12.1 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to the conflict of law principles thereof.

12.2 Dispute Resolution. With the exception of those matters referred for resolution by independent accountants under Section 5.5, in the event of any controversy, claim or counter-claim arising out of or relating to this Agreement, the parties shall first attempt to resolve such

controversy or claim through good-faith negotiations for a period of no less than thirty (30) days following notification of such controversy or claim to the other party.

Section 13.  CHANGE OF CONTROL.

13.1 The parties agree that if, prior to the date that is six (6) months after submission of the NADA or the Marketing Authorization Application to the CVM or EMEA for regulatory approval, whichever should first occur, but in no event later than January 1, 2008, IMMUCELL should undergo a “change of control” without PFIZER’s prior written consent, then PFIZER shall have option, in its sole discretion, to purchase from IMMUCELL or its new owner, as the case may be, for cash within forty-five (45) days after PFIZER receives written notice of the change of control, all of the IMMUCELL Technology and IMMUCELL Patent Rights associated with the Licensed Product, including without limitation the Trademark, which are licensed or are available to PFIZER under this Agreement for a total purchase price of $2,000,000. For purposes hereof, “Change of Control” means any transaction resulting in the sale of (1) all or substantially all of the assets of IMMUCELL, (2) the assets comprising the Technology and Patent Rights licensed by IMMUCELL hereunder, or (3) beneficial ownership, direct or indirect, of capital stock representing 50% or more of the number of votes that may be cast to elect directors of IMMUCELL, but in each case excluding (a) a reorganization or going-private transaction in which no person or group owns or controls more than 35% of the outstanding stock of IMMUCELL, except where any such person or group acquiring ownership or control of more than 10% of such stock is a material competitor of PFIZER’s animal health business, and (b) a transaction involving PFIZER or any of its Affiliates.

Section 14.  MISCELLANEOUS.

14.1 Force Majeure. Neither party hereto shall be liable to the other party for any losses or damages attributable to a default in or breach of this Agreement (other than an obligation to make any payment due under this Agreement) which is the result of war (whether declared or undeclared), acts of God, revolution, acts of terror, fire, earthquake, flood, pestilence, riot, enactment or change of Law, labor trouble, or shortage of or inability to obtain material, equipment or transport which is beyond the reasonable control of such party.

14.2 Severability. If and solely to the extent that any provision of this Agreement shall be invalid or unenforceable, or shall render this entire Agreement to be unenforceable or invalid, such offending provision shall be of no effect and shall not affect the validity of the remainder of this Agreement or any of its provisions; provided, however, the parties shall use their respective reasonable efforts to renegotiate the offending provisions to best accomplish the original intentions of the parties.

14.3 Accrued Obligation. Termination of this Agreement for any reason shall not release any party hereto from any liability which at the time of such termination has already accrued to the other party or which is attributable to a period prior to such termination, nor shall it preclude either party from pursuing all rights and remedies it may have hereunder or at law or in equity with respect to any breach of this Agreement.

14.4 Waivers. Any term or condition of this Agreement may be waived at any time by the party that is entitled to the benefit thereof, but no such waiver shall be effective unless set forth in a written instrument duly executed by or on behalf of the party or parties waiving such term or condition. Neither the waiver by any party of any term or condition of this Agreement nor the failure on the part of any party, in one or more instances, to enforce any of the provisions of this Agreement or to exercise any right or privilege, shall be deemed or construed to be a waiver of such term or condition for any similar instance in the future or of any subsequent breach hereof. All rights, remedies, undertakings, obligations and agreements contained in this Agreement shall be cumulative and none of them shall be a limitation of any other remedy, right, undertaking, obligation or agreement.

14.5 Entire Agreement; Amendments. This Agreement sets forth the entire agreement and understanding among the parties as to the subject matter hereof and supersedes all agreements or understandings, verbal or written, made between IMMUCELL and PFIZER before the date hereof with respect to the subject matter hereof. None of the terms or this Agreement shall be amended, supplemented or modified except in writing signed by the parties.

14.6 Survival. The provisions of Sections 4, 5, 6, 7, 9, 10, 11, 12, and 14 shall survive the expiration or any termination of this Agreement.

14.7 Assignment. This Agreement may not be assigned or otherwise transferred by either party without the written consent of the other party; provided, however, either party may, without such consent, assign this Agreement, in whole or in part, (i) to any of its respective Affiliates or (subject to compliance with Section 13) any successor-in-interest to substantially all of its business; or (ii) pursuant to Section 9.2. Any purported assignment in violation of this Section 14.7 shall be void. Any permitted assignee shall assume all obligations of its assignor under this Agreement.

14.8 Independent Contractor. The relationship between IMMUCELL and PFIZER is that of independent contractors. IMMUCELL and PFIZER are not joint venturers, partners, principal and agent, employer and employee, and have no other relationship other than independent contracting parties.

14.9 Notices. Each communication and document made or delivered by one party to another under this Agreement shall be made in the English language. All notices, consents, approvals, or other communications required hereunder given by one party to the other hereunder shall be in writing and made by registered or certified air mail, facsimile, express overnight courier or delivered personally to the following addresses of the respective parties:

If to IMMUCELL:	ImmuCell Corporation
	56 Evergreen Drive
	Portland, Maine 04103
	Attention: Michael F. Brigham
	Facsimile: (207) 878-2117

with a copy to:	Verrill Dana, LLP
	One Portland Square
	Portland, ME 04112-0586
	Attention: Gregory S. Fryer, Esq.
	Facsimile: (207) 774-7499
If to PFIZER:	Pfizer Animal Health
	235 East 42nd Street
	Mailstop: 150-41-19
	New York, New York 10017-5755
	Attention: Peggy Dillender
	Facsimile: 212-883-4858
with a copy to:	Pfizer Animal Health
	235 East 42nd Street
	Mailstop: 150-42-22
	New York, New York 10017-5755
	Attention: Christopher Eliopulos, Sr. Corp. Counsel
	Facsimile: 646-792-4155

Notices hereunder shall be deemed to be effective (a) upon receipt if personally delivered, (b) on the tenth (10^th) Business Day following the date of mailing if sent by registered or certified air mail; (c) on the second Business Day following the date of transmission or delivery to the overnight courier if sent by facsimile or overnight courier. A party may change its address listed above by sending notice to the other party in accordance with this Section 14.9.

14.10 Third Party Beneficiaries. None of the provisions of this Agreement shall be for the benefit of or enforceable by any third party, including, without limitation, any creditor of either party. No such third party shall obtain any right under any provision of this Agreement or shall by reasons of any such provision make any claim in respect of any debt, liability or obligation (or otherwise) against either party. A person who is not a party to this Agreement may not enforce any of its terms under the Contracts (Rights of Third Parties) Act 1999 but this does not affect any right or remedy of a third party which exists or is available other than under that Act.

14.11 Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, successors and permitted assigns.

14.12 Counterparts. This Agreement may be executed in any two or more counterparts, each of which, when executed, shall be deemed to be an original and all of which together shall constitute one and the same document.

14.13 Headings. Headings in this Agreement are included herein to ease of reference only and shall have no legal effect. References to Sections, Schedules, and Exhibits are to Sections, Schedules and Exhibits to this Agreement unless otherwise specified.

IN WITNESS WHEREOF the parties hereto have caused this Agreement to be executed by their duly authorized officers upon the date set forth below.

IMMUCELL CORPORATION		PFIZER INC.
By:	/s/ Michael F. Brigham	By:	/s/ Pedro Lichtinger
Name:	Michael F. Brigham	Name:	Pedro Lichtinger
Title:	President and CEO	Title:	President, Pfizer Animal Health
Date:	December 21, 2004	Date:	December 21, 2004

EXHIBIT A

Clinical Studies and Supplies

1. Clinical Studies:

To include:

US study to determine efficacy against sub-clinical mastitis

US study to determine efficacy against clinical mastitis

European study to determine efficacy against sub-clinical mastitis

European study to determine efficacy against clinical mastitis

Other such studies as required in other Territories (including US and Europe) as required to support regulatory submissions.

2. Drug Product Supplies for Clinical Studies

IMMUCELL shall provide fully characterized Drug Product, manufactured to appropriate GMP standards for the API at this point in development, and suitable for the initial US clinical trials as determined by QA requirements that will be agreed to subsequently by the parties.

EXHIBIT B

IMMUCELL Patent Rights

Patents Licensed from Nutrition 21:

Country	Patent number	Date of filing	Date of grant
USA	US 5,217,950	1/21/92	6/8/93
USA	US 5,260,271	4/17/92	11/9/93
USA	US 5,691,301	11/9/93	11/25/97
USA	US 5,753,614	6/6/95	5/19/98
USA	US 5,763,395	2/9/95	6/9/98

Patents and Applications Filed by IMMUCELL:

Country	Patent number	Date of filing	Date of grant
USA	US 6,794,181	10/9/02	9/21/04
PCT	Application PCT/US03/31986	10/7/03	<pending>

This includes all continuations, continuations-in-part, divisionals, provisionals, patents of addition, reissues, re-examinations, renewals or extensions thereof and all Supplemental Protection Certificates.

EXHIBIT C

Transfer of Manufacturing Process

a) Production Cultures

IMMUCELL shall transfer stocks of production culture to PFIZER, together with methods and full historical documentation for the production and the testing of the stocks. IMMUCELL shall aid PFIZER in the transfer of these production culture stocks to a facility that PFIZER identifies with necessary licenses and USDA permits.

This transfer is to be completed within 60 days after the Effective Date, after which time PFIZER and IMMUCELL shall each be responsible for maintenance and propagation of the seed stocks in their respective facilities.

If the Agreement is terminated, all samples of the original culture, and strains derived from the original, shall be returned by PFIZER to IMMUCELL. Under these circumstances IMMUCELL shall reimburse PFIZER for reasonable shipping expenses in the transfer of such cultures.

b) Transfer of the Raw Material process

IMMUCELL shall:-

• allow PFIZER to observe the manufacture of the clinical supplies of Raw Material, following which transfer of the process shall commence.

• be responsible for its respective reasonable expenses involved in the transfer.

• provide reasonable access to key IMMUCELL personnel to advise on establishing the process at a PFIZER facility (to include visits to the site of Raw Material manufacture, with PFIZER to bear all reasonable travel costs)

c) Transfer of the Drug Product process

IMMUCELL shall, to the extent reasonably required by PFIZER or its designated Contract Manufacturer, provide PFIZER with all available details concerning the manufacture of Drug Product, subject however to any nondisclosure obligations to third parties.

EXHIBIT D

Minimum Royalties

	Year 1	Year 2	Year 3	Year 4	Year 5	Until expiry
Payment for US Sales ($)	[* * *]	[* * *]	[* * *]	[* * *]	[* * *]	[* * *]
Payment for EU Sales ($)	[* * *]	[* * *]	[* * *]	[* * *]	[* * *]	[* * *]

Notes

1) Year relates to full calendar year immediately following the year during the Term in which the NADA or Marketing Authorization Application is approved by the CVM or the EMEA, whichever is first to occur.

2) Minimum Royalties in a given calendar year are to be reduced by 50% in any country within the Territory where a Competing Product (other than one offered by a party to this Agreement or its Affiliates or sublicensees) achieves market share in the Field of Use of 25% or more than that of the Licensed Product (except that de minimis sales of less than $250,000 for the Competing Product in that country shall not give rise to any adjustment), with the result that a reduction in overall Minimum Royalties for the United States or European Union (as the case may be) shall be made on a pro rata basis based on commercial sales per country relative to the respective Territory.

3) During any of Years 1, 2 or 3, if Licensed Product has been sold commercially in both the United States and the European Union, and if there is excess of royalties in either the US or the EU above the Minimum Royalties due in such region, then such excess amount shall be applied and credited to the Minimum Royalties due in the other region for the same period.

[* * *] Confidential Treatment Requested. The confidential portions have been filed separately with the Securities & Exchange Commission.

EX-23.1

EXHIBIT 23.1

IMMUCELL CORPORATION

CONSENT OF BAKER NEWMAN & NOYES, LLC

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

ImmuCell Corporation

We consent to the incorporation by reference in Registration Statement No. 333-2631 and No. 333-65514 of ImmuCell Corporation on Form S-8 of our report, dated January 21, 2005, appearing in this Annual Report on Form 10-K of ImmuCell Corporation for the year ended December 31, 2004.

/S/    BAKER NEWMAN & NOYES        

Baker Newman & Noyes, LLC

Portland, Maine

March 28, 2005

EX-23.2

EXHIBIT 23.2

IMMUCELL CORPORATION

CONSENT OF PRICEWATERHOUSECOOPERS LLP

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-2631 and No. 333-65514) of ImmuCell Corporation of our report dated January 24, 2003, relating to the financial statements and financial statement schedule at December 31, 2002 and for the year ended December 31, 2002, which appears in this Form 10-K.

/S/    PRICEWATERHOUSECOOPERS LLP        

PricewaterhouseCoopers LLP

Boston, Massachusetts

March 28, 2005

EX-31

EXHIBIT 31

IMMUCELL CORPORATION

RULE 13a-14(a) CERTIFICATIONS

I, Michael F. Brigham, certify that:

1. I have reviewed this Annual Report on Form 10-K of ImmuCell Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Securities Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the Registrant is made known to me by others, particularly during the period in which this report is being prepared;

b) [paragraph omitted pursuant to SEC Release Nos. 33-8238 and 33-8392];

c) evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

/S/    MICHAEL F. BRIGHAM        

Michael F. Brigham

President, Chief Executive Officer and Treasurer

Date: March 29, 2005

EX-32

EXHIBIT 32

IMMUCELL CORPORATION

SECTION 1350 CERTIFICATIONS, AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report on Form 10-K of ImmuCell Corporation (the “Company”) for the period ended December 31, 2004, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael F. Brigham, President, Chief Executive Officer and Treasurer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition, results of operations and cash flows of the Company.

/S/    MICHAEL F. BRIGHAM        

Michael F. Brigham

President, Chief Executive Officer and Treasurer

March 29, 2005

A signed original of this written statement required by Section 906 has been provided to ImmuCell Corporation and will be retained by ImmuCell Corporation and furnished to the Securities and Exchange Commission or its staff upon request.