10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2019

001-12934

(Commission file number)

ImmuCell Corporation

(Exact name of registrant as specified in its charter)

Delaware	01-0382980
(State of Incorporation)	(I.R.S. Employer
	Identification No.)

56 Evergreen Drive, Portland, ME	04103
(Address of principal executive office)	(Zip Code)

(207) 878-2770

(Registrant’s telephone number)

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	ICCC	Nasdaq Stock Market

The number of shares of the Registrant’s common stock outstanding at May 2, 2019 was 7,209,595.

ImmuCell Corporation

TABLE OF CONTENTS

March 31, 2019

PART I: FINANCIAL INFORMATION
ITEM 1.	Unaudited Condensed Financial Statements
	Balance Sheets as of March 31, 2019 and December 31, 2018	1
	Statements of Operations during the three-month periods ended March 31, 2019 and 2018	2
	Statements of Comprehensive Income (Loss) during the three-month periods ended March 31, 2019 and 2018	2
	Statements of Stockholders’ Equity during the three-month periods ended March 31, 2018 and 2019	3
	Statements of Cash Flows during the three-month periods ended March 31, 2019 and 2018	4-5
	Notes to Unaudited Condensed Financial Statements	6-22
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23-31
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	32
ITEM 4.	Controls and Procedures	32
PART II: OTHER INFORMATION
ITEMS 1	THROUGH   6	33-40
	Signature

i

ImmuCell Corporation

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

(Unaudited Condensed)

BALANCE SHEETS

	As of			As of
	March 31, 2019			December 31, 2018
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	10,584,067		$	2,521,050
Trade accounts receivable, net		1,283,096			932,298
Inventory		2,035,793			2,331,671
Prepaid expenses and other current assets		755,237			635,817
Total current assets		14,658,193			6,420,836
PROPERTY, PLANT AND EQUIPMENT, net		25,585,452			26,027,549
INTANGIBLE ASSETS, net		128,952			133,728
GOODWILL		95,557			95,557
INTEREST RATE SWAPS		4,117			40,209
OTHER ASSETS		4,359			12,953
TOTAL ASSETS	$	40,476,630		$	32,730,832
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	1,172,756		$	1,220,660
Current portion of bank debt		846,292			844,351
Line of credit		—			500,000
Total current liabilities		2,019,048			2,565,011
LONG-TERM LIABILITIES:
Bank debt, net of current portion		8,209,489			8,421,487
Total long-term liabilities		8,209,489			8,421,487
TOTAL LIABILITIES		10,228,537			10,986,498
CONTINGENT LIABILITIES AND COMMITMENTS (See Note 17)
STOCKHOLDERS’ EQUITY:
Common stock, $0.10 par value per share, 11,000,000 and 11,000,000 shares authorized, 7,299,009 and 5,662,645 shares issued and 7,209,595 and 5,568,962 shares outstanding, as of March 31, 2019 and December 31, 2018, respectively		729,901			566,265
Additional paid-in capital		30,908,855			22,695.557
Accumulated deficit		(1,198,143	)		(1,342,698	)
Treasury stock, at cost, 89,414 and 93,683 shares as of March 31, 2019 and December 31, 2018, respectively		(195,608	)		(204,947	)
Accumulated other comprehensive income		3,088			30,157
Total stockholders’ equity		30,248,093			21,744,334
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	40,476,630		$	32,730,832

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

1

ImmuCell Corporation

(Unaudited Condensed)

STATEMENTS OF OPERATIONS

	During the Three-Month Periods Ended March 31,
	2019		2018
Product sales	$	4,410,561	$	2,881,185
Costs of goods sold		2,209,090		1,521,444
Gross margin		2,201,471		1,359,741
Product development expenses		910,370		582,934
Sales and marketing expenses		607,104		531,905
Administrative expenses		418,693		423,057
Operating activities, net		1,936,167		1,537,896
NET OPERATING INCOME (LOSS)		265,304		(178,155	)
Other expenses, net		111,726		92,116
INCOME (LOSS) BEFORE INCOME TAXES		153,578		(270,271	)
Income tax expense (benefit)		9,023		(49,148	)
NET INCOME (LOSS)	$	144,555	$	(221,123	)
Basic weighted average common shares outstanding		5,624,504		5,477,921
Basic net income (loss) per share	$	0.03	$	(0.04	)

Diluted weighted average common shares outstanding		5,666,549		5,477,921
Diluted net income (loss) per share	$	0.03	$	(0.04	)

STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

	During the Three-Month Periods Ended March 31,
	2019			2018
Net income (loss)	$	144,555		$	(221,123	)
Other comprehensive (loss) income:
Interest rate swaps, before taxes		(36,092	)		58,625
Income tax applicable to interest rate swaps		9,023			(14,766	)
Other comprehensive (loss) income, net of taxes		(27,069	)		43,859
Total comprehensive income (loss)	$	117,486		$	(177,264	)

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

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ImmuCell Corporation

(Unaudited Condensed)

STATEMENTS OF STOCKHOLDERS’ EQUITY

	Common Stock							Retained			Treasury Stock						Accumulated
	Shares		Amount		Additional paid-in capital			Earnings (Accumulated Deficit)			Shares			Amount			Other Comprehensive (Loss) Income			Total Stockholders’ Equity
BALANCE, December 31, 2017		5,662,645	$	566,265	$	22,458,219		$	978,973			186,448		$	(407,879	)	$	(638	)	$	23,594,940
Net loss		—		—		—			(221,122	)		—			—			—			(221,122	)
Other comprehensive income, net of taxes		—		—		—			—			—			—			43,859			43,859
Exercise of stock options		—		—		(4,507	)		—			(3,960	)		8,662			—			4,155
Stock-based compensation		—		—		71,048			—			—			—			—			71,048
BALANCE, March 31, 2018		5,662,645	$	566,265	$	22,524,760		$	757,851			182,488		$	(399,217	)	$	43,221		$	23,492,880
BALANCE, December 31, 2018		5,662,645	$	566,265	$	22,695,557		$	(1,342,698	)		93,683		$	(204,947	)	$	30,157		$	21,744,334
Net income		—		—		—			144,555			—			—			—			144,555
Other comprehensive loss, net of taxes		—		—		—			—			—			—			(27,069	)		(27,069	)
Public offering of common stock, net of $696,566 of offering costs		1,636,364		163,636		8,139,800			—			—			—			—			8,303,436
Exercise of stock options		—		—		(9,337	)		—			(4,269	)		9,339			—			2
Stock-based compensation		—		—		82,835			—			—			—			—			82,835
BALANCE, March 31, 2019		7,299,009	$	729,901	$	30,908,855		$	(1,198,143	)		89,414		$	(195,608	)	$	3,088		$	30,248,093

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

3

ImmuCell Corporation

(Unaudited Condensed)

STATEMENTS OF CASH FLOWS

	During the Three-Month Periods Ended March 31,
	2019			2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	144,555		$	(221,123	)
Adjustments to reconcile net income (loss) to net cash  provided by operating activities:
Depreciation		563,805			279,896
Amortization		4,776			4,776
Amortization of debt issue costs		4,244			4,204
Deferred income taxes		9,023			(46,276	)
Stock-based compensation		82,835			71,048
Changes in:
Accounts receivable		(350,798	)		344,123
Inventory		295,878			119,806
Prepaid expenses and other current assets		(119,420	)		(87,072	)
Other assets		8,594			(4,911	)
Accounts payable and accrued expenses		33,705			(214,809	)
Net cash provided by operating activities		677,197			249,662
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment		(194,403	)		(1,213,252	)
Payment of contingent royalties related to 2016 acquisition		(8,914	)		(5,723	)
Net cash used in investing activities		(203,317	)		(1,218,975	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from public offering, net		8,303,436			—
Proceeds from debt issue		—			267,141
Line of credit repayment		(500,000	)		—
Debt principal repayments		(214,301	)		(39,803	)
Payments of debt issue costs		—			(522	)
Proceeds from exercise of stock options		2			4,156
Net cash provided by financing activities		7,589,137			230,972
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		8,063,017			(738,341	)
BEGINNING CASH AND CASH EQUIVALENTS		2,521,050			3,798,811
ENDING CASH AND CASH EQUIVALENTS	$	10,584,067		$	3,060,470

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

4

ImmuCell Corporation

(Unaudited Condensed)

STATEMENTS OF CASH FLOWS

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

	During the Three-Month Periods Ended March 31,
	2019			2018
CASH PAID FOR:
Income taxes	$	—		$	—
Interest expense	$	112,227		$	89,313
NON-CASH ACTIVITIES:
Change in capital expenditures included in accounts payable and accrued expenses	$	(72,695	)	$	(574,288	)
Net change in fair value of interest rate swaps, net of taxes	$	27,069		$	(43,859	)
Fixed asset disposals, gross	$	1,830		$	3,430

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

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ImmuCell Corporation

Notes to Unaudited Condensed Financial Statements

1. BUSINESS OPERATIONS

ImmuCell Corporation (the “Company”, “we”, “us”, “our”) was originally incorporated in Maine in 1982 and reincorporated in Delaware in 1987, in conjunction with its initial public offering of common stock. We are an animal health company whose purpose is to create scientifically-proven and practical products that improve the health and productivity of dairy and beef cattle. We market products that provide Immediate Immunity™ to newborn dairy and beef cattle. We are developing extensions to the First Defense^® product line and are in the late stages of developing Re-Tain™, a treatment for mastitis, the most significant cause of economic loss to the dairy industry. These products help reduce the need to use traditional antibiotics in food producing animals. The Company is subject to certain risks associated with its stage of development including dependence on key individuals and third-party providers of critical goods and services, competition from other larger companies, the successful sale of existing products and the development and acquisition of additional commercially viable products with appropriate regulatory approvals, where applicable. Based on our best estimates and projections, we believe that we have sufficient capital resources to continue operations for at least twelve months from the date of this filing.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of Presentation

We have prepared the accompanying unaudited financial statements reflecting all adjustments that are, in our opinion, necessary in order to ensure that the financial statements are not misleading. We follow accounting standards set by the Financial Accounting Standards Board (FASB). The FASB sets generally accepted accounting principles (GAAP) that we follow to ensure we consistently report our financial condition, results of operations, earnings per share and cash flows. References to GAAP in these footnotes are to the FASB Accounting Standards Codification™ (Codification). Accordingly, we believe that the disclosures are adequate to ensure that the information presented is not misleading.

(b) Cash and Cash Equivalents

We consider all highly liquid investment instruments that mature within three months of their purchase dates to be cash equivalents. Cash equivalents are principally invested in securities backed by the U.S. government. Certain cash balances in excess of Federal Deposit Insurance Corporation (FDIC) limits of $250,000 per financial institution per depositor are maintained in money market accounts at financial institutions that are secured, in part, by the Securities Investor Protection Corporation. Amounts in excess of these FDIC limits per bank that are not invested in securities backed by the U.S. government aggregated $10,331,744 and $2,268,737 as of March 31, 2019 and December 31, 2018, respectively. We account for investments in marketable securities in accordance with Codification Topic 320, Investments — Debt and Equity Securities. See Note 3.

(c) Accounts Receivable

Accounts receivable are carried at the original invoice amount less an estimate made for doubtful collection. Management determines the allowance for doubtful accounts on a monthly basis by identifying troubled accounts and by using historical experience applied to an aging of accounts. Accounts receivable are considered to be past due if a portion of the receivable balance is outstanding for more than 30 days. Past due accounts receivable are subject to an interest charge. Accounts receivable are written off when deemed uncollectible. The amount of accounts receivable written off during all periods reported was immaterial. Recoveries of accounts receivable previously written off are recorded as income when received. As of March 31, 2019 and December 31, 2018, we determined that no allowance for bad debt was necessary. See Note 4.

(d) Inventory

Inventory includes raw materials, work-in-process and finished goods and is recorded at the lower of cost, on the first-in, first-out method, or net realizable value (determined as the estimated selling price in the normal course of business, less reasonably predictable costs of completion, disposal and transportation). Work-in-process and finished goods inventories include materials, labor and manufacturing overhead. At each monthly balance sheet date, we evaluate our ending inventories for excess quantities and obsolescence. Inventories that we consider excess or obsolete are reserved. Once inventory is written down and a new cost basis is established, it is not written back up if demand increases. We believe that supplies and raw materials for the production of our products are available from more than one vendor. Our policy is to maintain more than one source of supply for the components used in our products when practicable. See Note 5.

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ImmuCell Corporation

Notes to Unaudited Condensed Financial Statements (continued)

(e) Property, Plant and Equipment

We depreciate property, plant and equipment on the straight-line method by charges to operations and costs of goods sold in amounts estimated to expense the cost of the assets from the date they are first put into service to the end of the estimated useful lives of the assets. The facility we have constructed to produce the active pharmaceutical ingredient (Nisin) for Re-Tain™ is being depreciated over 39 years from when a certificate of occupancy was issued during the fourth quarter of 2017. We began depreciating the equipment for our Nisin production facility when it was placed in service during the third quarter of 2018. Approximately 89% of these assets are being depreciated over ten years. Significant repairs to fixed assets that benefit more than a current period are capitalized and depreciated over their useful lives. Insignificant repairs are expensed when incurred. See Note 7.

(f) Intangible Assets and Goodwill

We amortize intangible assets on the straight-line method by charges to costs of goods sold in amounts estimated to expense the cost of the assets from the date they are first put into service to the end of the estimated useful lives of the assets. We have recorded intangible assets related to customer relationships, non-compete agreements, and developed technology, each with defined useful lives. We have classified as goodwill the amounts paid in excess of fair value of the net assets (including tax attributes) acquired in purchase transactions.

We assess the impairment of intangible assets and goodwill that have indefinite lives at the reporting unit level on an annual basis (as of December 31^st) and whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. We would record an impairment charge if such an assessment were to indicate that the fair value of such assets was less than the carrying value. Judgment is required in determining whether an event has occurred that may impair the value of goodwill or identifiable intangible assets. Factors that could indicate that an impairment may exist include significant under-performance relative to plan or long-term projections, significant changes in business strategy and significant negative industry or economic trends. Although we believe intangible assets and goodwill are properly stated in the accompanying financial statements, changes in strategy or market conditions could significantly impact these judgments and require an adjustment to the recorded balance. No goodwill impairments were recorded during the three-month periods ended March 31, 2019 or 2018. See Notes 2(h), 8 and 9 for additional disclosures.

(g) Fair Value Measurements

In determining fair value measurements, we follow the provisions of Codification Topic 820, Fair Value Measurements and Disclosures. Codification Topic 820 defines fair value, establishes a framework for measuring fair value under GAAP and enhances disclosures about fair value measurements. The topic provides a consistent definition of fair value which focuses on an exit price, which is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The topic also prioritizes, within the measurement of fair value, the use of market-based information over entity-specific information and establishes a three-level hierarchy for fair value measurements based on the nature of inputs used in the valuation of an asset or liability as of the measurement date. As of March 31, 2019 and December 31, 2018, the carrying amounts of cash and cash equivalents, accounts receivable, inventory, other assets, accounts payable, deferred revenue and accrued liabilities approximate fair value because of their short-term nature. The amount outstanding under our bank debt facilities is measured at carrying value in our accompanying balance sheets. Our bank debt facilities are valued using Level 2 inputs. The estimated fair value of our bank debt facilities approximates their carrying value based on similar instruments with similar maturities. The three-level hierarchy is as follows:

Level 1— Pricing inputs are quoted prices available in active markets for identical assets or liabilities as of the measurement date.

Level 2— Pricing inputs are quoted prices for similar assets or liabilities, or inputs that are observable, either directly or indirectly, for substantially the full term through corroboration with observable market data.

Level 3— Pricing inputs are unobservable for the assets or liabilities, that is, inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability.

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ImmuCell Corporation

Notes to Unaudited Condensed Financial Statements (continued)

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an asset’s or liability’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. From time to time, we also hold money market mutual funds in a brokerage account, which are classified as cash equivalents and measured at fair value. The fair value of these investments is based on their closing published net asset value.

We assess the levels of the investments at each measurement date, and transfers between levels are recognized on the actual date of the event or change in circumstances that caused the transfer in accordance with our accounting policy regarding the recognition of transfers between levels of the fair value hierarchy. During the three-month periods ended March 31, 2019 and 2018, there were no transfers between levels. As of March 31, 2019 and December 31, 2018, our Level 1 assets measured at fair value by quoted prices in active markets consisted of bank savings accounts and money market funds. As of March 31, 2019 and December 31, 2018, our interest rate swaps were classified as Level 2 and were measured by observable market data in combination with expected cash flows for each instrument. There were no assets or liabilities measured at fair value on a nonrecurring basis as of March 31, 2019 or December 31, 2018.

	As of March 31, 2019
	Level 1		Level 2		Level 3		Total
Assets:
Cash and money market accounts	$	10,584,067	$	—	$	—	$	10,584,067
Interest rate swaps		—		4,117		—		4,117
Total	$	10,584,067	$	4,117	$	—	$	10,588,184

	As of December 31, 2018
	Level 1		Level 2		Level 3		Total
Assets:
Cash and money market accounts	$	2,521,050	$	—	$	—	$	2,521,050
Interest rate swaps		—		40,209		—		40,209
Total	$	2,521,050	$	40,209	$	—	$	2,561,259

(h) Valuation of Long-Lived Assets

We periodically evaluate our long-lived assets, consisting principally of fixed assets and amortizable intangible assets, for potential impairment. In accordance with the applicable accounting guidance for the treatment of long-lived assets, we review the carrying value of our long-lived assets or asset group that is held and used, including intangible assets subject to amortization, for impairment whenever events and circumstances indicate that the carrying value of the assets may not be recoverable. Under the held for use approach, the asset or asset group to be tested for impairment should represent the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. We evaluate our long-lived assets whenever events or circumstances suggest that the carrying amount of an asset or group of assets may not be recoverable. No impairment was recognized during the three-month periods ended March 31, 2019 and 2018.

(i) Concentration of Risk

Concentration of credit risk with respect to accounts receivable is principally limited to certain customers to whom we make substantial sales. To reduce risk, we routinely assess the financial strength of our customers and, as a consequence, believe that our accounts receivable credit risk exposure is limited. We maintain an allowance for potential credit losses when deemed necessary, but historically we have not experienced significant credit losses related to an individual customer or groups of customers in any particular industry or geographic area. Sales to significant customers that amounted to 10% or more of total product sales are detailed in the following table:

	During the Three-Month Periods Ended March 31,
	2019			2018
Company A		43	%		34	%
Company B		27	%		24	%
Company C		*			11	%

* Amount is less than 10%

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ImmuCell Corporation

Notes to Unaudited Condensed Financial Statements (continued)

Trade accounts receivable due from significant customers amounted to the percentages of total trade accounts receivable as detailed in the following table:

	As of March 31, 2019			As of December 31, 2018
Company A		42	%		35	%
Company B		29	%		36	%
Company C		13	%		15	%

(j) Interest Rate Swap Agreements

All derivatives are recognized on the balance sheet at their fair value. We entered into interest rate swap agreements in 2010 and 2015. On the dates the agreements were entered into, we designated the derivatives as hedges of the variability of cash flows to be paid related to our long-term debt. The agreements have been determined to be highly effective in hedging the variability of identified cash flows, so changes in the fair market value of the interest rate swap agreements are recorded as comprehensive income (loss), until earnings are affected by the variability of cash flows (e.g., when periodic settlements on a variable-rate asset or liability are recorded in earnings). We formally documented the relationship between the interest rate swap agreements and the related hedged items. We also formally assess, both at the interest rate swap agreements’ inception and on an ongoing basis, whether the agreements are highly effective in offsetting changes in cash flow of hedged items. See Note 11.

(k) Revenue Recognition

For periods ended on and before December 31, 2017, we recognized revenue in accordance with Accounting Standards Codification (ASC) 605 when four criteria were met. These included i) persuasive evidence that an arrangement existed, ii) delivery had occurred, iii) our price was fixed and determinable and iv) collectability was reasonably assured. For periods beginning on or after January 1, 2018, we recognize revenue in accordance with ASC 606, Revenue from Contracts with Customers. ASC 606 is a single comprehensive model for companies to use in accounting for revenue arising from contracts with customers. The core principle is that we recognize the amount of revenue to which we expect to be entitled for the transfer of promised goods or services to customers when a customer obtains control of promised goods or services in an amount that reflects the consideration we expect to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. ASC 606 replaces most existing revenue recognition guidance in accordance with GAAP. We evaluated the new standard against our existing accounting policies and practices, including reviewing distributor agreements, purchase orders, invoices and shipping forms, and conducting questionnaires with our sales team. We adopted the standard using the modified retrospective transition method, and the adoption did not have a material impact on our financial statements as of the date of adoption (January 1, 2018). We conduct our business with customers through valid purchase orders or sales orders which are considered contracts and are not interdependent on one another. A performance obligation is a promise in a contract to transfer a distinct product to the customer. The transaction price is the amount of consideration we expect to receive under the arrangement. Revenue is measured based on consideration specified in a contract with a customer. The transaction price of a contract is allocated to each distinct performance obligation and recognized when or as the customer receives the benefit of the performance obligation. Product transaction prices on a purchase or sale order are discrete and stand-alone. We recognize revenue when we satisfy a performance obligation in a contract by transferring control over a product to a customer when product delivery occurs. Consideration is typically paid approximately 30 days from the time control is transferred. Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost in costs of goods sold. We have enhanced disclosures related to disaggregation of revenue sources and accounting policies prospectively as a result of adopting these standards. We do not bill for or collect sales tax because our sales are generally made to distributors and thus our sales to them are not subject to sales tax. We generally have experienced an immaterial amount of product returns. See Note 13.

(l) Expense Recognition

In 2018, we adopted ASC 340-40, Accounting for Other Assets and Deferred Costs, which requires sales commissions and other third-party acquisition costs resulting directly from securing contracts with customers to be recognized as an asset when incurred and to be expensed over the associated contract term or estimated customer life depending on the nature of the underlying contract. We do not incur costs in connection with product sales to customers that are eligible for capitalization. Advertising costs are expensed when incurred, which is generally during the month in which the advertisement is published. Advertising expenses amounted to $30,807 and $21,766 during the three-month periods ended March 31, 2019 and 2018, respectively. All product development expenses are expensed as incurred, as are all related patent costs. We capitalize costs to produce inventory during the production cycle, and these costs are charged to costs of goods sold when the inventory is sold to a customer. Adoption of the amended provisions of ASC 340-40 did not have a material impact on our financial statements.

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ImmuCell Corporation

Notes to Unaudited Condensed Financial Statements (continued)

(m) Income Taxes

We account for income taxes in accordance with Codification Topic 740, Income Taxes, which requires that we recognize a current tax liability or asset for current taxes payable or refundable and a deferred tax liability or asset for the estimated future tax effects of temporary differences and carryforwards to the extent they are realizable. During the second quarter of 2018, we assessed our historical and near-term future profitability and decided to record $563,252 in non-cash income tax expense to create a full valuation allowance against our net deferred tax assets (which consist largely of net operating loss carryforwards and federal and state tax credits). At that time, we had incurred a net loss for six consecutive quarters, had not been profitable on a year-to-date basis since the nine-month period ended September 30, 2017 and projected additional net losses for some period going forward before returning to profitability. We consider future taxable income and feasible tax planning strategies in assessing the need for a valuation allowance at each quarter end. If we determine that we would be able to realize our deferred tax assets in the future in excess of the net recorded amount over a reasonably short period of time, a reduction of the valuation allowance would increase income in the period such determination was made. Likewise, if we determine that we would not be able to realize all or part of our net deferred tax asset in the future, an increase to the valuation allowance would be charged to income in the period such determination was made.

Codification Topic 740-10 clarifies the accounting for income taxes by prescribing a minimum recognition threshold that a tax position must meet before being recognized in the financial statements. In the ordinary course of business, there are transactions and calculations where the ultimate tax outcome is uncertain. In addition, we are subject to periodic audits and examinations by the Internal Revenue Service and other taxing authorities. With few exceptions, we are no longer subject to income tax examinations by tax authorities for years before 2015. We have evaluated the positions taken on our filed tax returns. We have concluded that no uncertain tax positions exist as of March 31, 2019 or December 31, 2018. Although we believe that our estimates are reasonable, actual results could differ from these estimates. See Note 16.

(n) Stock-Based Compensation

We account for stock-based compensation in accordance with Codification Topic 718, Compensation-Stock Compensation, which generally requires us to recognize non-cash compensation expense for stock-based payments using the fair-value-based method. The fair value of each stock option grant has been estimated on the date of grant using the Black-Scholes option pricing model. Accordingly, we recorded compensation expense pertaining to stock-based compensation of $82,835 and $71,048 during the three-month periods ended March 31, 2019 and 2018, respectively.

(o) Net Income (Loss) Per Common Share

Net income (loss) per common share has been computed in accordance with Codification Topic 260-10, Earnings Per Share. The weighted average number of shares outstanding was 5,624,504 and 5,477,921 during the three-month periods ended March 31, 2019 and 2018, respectively. The basic net income per share has been computed by dividing net income by the weighted average number of common shares outstanding during the period. The diluted net income per share has been computed by dividing net income by the weighted average number of shares outstanding during the period plus all outstanding stock options with an exercise price that is less than the average market price of the common stock during the period less the number of shares that could have been repurchased at this average market price with the proceeds from the hypothetical stock option exercises. The net (loss) per share has been computed by dividing the net (loss) by the weighted average number of common shares outstanding during the period. All stock options have been excluded from the denominator in the calculation of dilutive earnings per share when we are in a loss position, as the inclusion would be anti-dilutive. Outstanding stock options that were not included in this calculation because the effect would be anti-dilutive amounted to 87,000 and 477,000 as of March 31, 2019 and 2018, respectively.

(p) Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Although we regularly assess these estimates, actual amounts could differ from those estimates. Changes in estimates are recorded during the period in which they become known. Significant estimates include our inventory valuation, valuation of goodwill and long-lived assets, valuation of deferred tax assets, accrued expenses, costs of goods sold, and useful lives of intangible assets.

10

ImmuCell Corporation

Notes to Unaudited Condensed Financial Statements (continued)

(q) New Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The guidance in this ASU supersedes the leasing guidance in Topic 840, Leases. Under the new guidance, lessees are required to recognize lease assets and lease liabilities on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. This ASU and its amendments are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption was permitted. We elected to adopt this ASU effective January 1, 2019. In July 2018, the FASB issued ASU 2018-10, Codification improvements to Topic 842, Leases. The amendments in ASU 2018-10 provide more clarification in regards to the application and requirements of Topic 842. In July 2018, the FASB issued ASU 2018-11, Topic 842, Leases - Targeted improvements. The amendments in ASU 2018-11 provide for the option to adopt the standard prospectively and recognize a cumulative-effect adjustment to the opening balance of retained earnings as well as offer a new practical expedient that will allow the Company to elect, by class of underlying asset, to not separate non-lease and lease components in certain circumstances and instead to account for those components as a single item. Based on our current lease agreements and a review of all of our material vendor relationships for potential embedded lease obligations, we have concluded that we are not subject to material lease obligations, and the adoption of Topic 842 did not have a material impact on our financial statements as of January 1, 2019.

In May 2017, the FASB issued ASU 2017-09, Compensation-Stock Compensation (Topic 718) Scope of Modification Accounting to provide clarity and reduce both diversity in practice and cost complexity when applying the guidance in Topic 718 to a change to the terms and conditions of a stock-based payment award. Topic 718 also provides guidance about the types of changes to the terms or conditions of a share-based payment award that require an entity to apply modification accounting in accordance with Topic 718. The standard is effective for interim and annual reporting periods beginning after December 15, 2017, with early adoption permitted. We adopted this guidance during the three-month period ended March 31, 2018. The adoption of this guidance did not have a material impact on our financial statements.

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The new guidance is intended to more closely align hedge accounting with entities’ hedging strategies, simplify the application of hedge accounting and increase the transparency of hedging programs. Topic 815 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. For cash flow and net investment hedges existing at the date of adoption, Topic 815 must be applied through a cumulative-effect adjustment. The amended presentation and disclosure guidance is required only prospectively. The adoption of Topic 815 did not to have a material impact on our financial statements as of January 1, 2019.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements of fair value measurements. Topic 820 is effective for fiscal years beginning after December 15, 2019, and early adoption is permitted. The adoption of this guidance is not expected to have a material impact on our financial statements.

3. CASH AND CASH EQUIVALENTS

Cash and cash equivalents amounted to $10,584,067 and $2,521,050 as of March 31, 2019 and December 31, 2018, respectively. We are required by a bank debt covenant to maintain at least $2,000,000 of otherwise unrestricted cash and cash equivalents.

4. TRADE ACCOUNTS RECEIVABLE, net

Trade accounts receivable amounted to $1,283,096 and $932,298 as of March 31, 2019 and December 31, 2018, respectively. No allowance for bad debt and product returns was recorded as of March 31, 2019 or December 31, 2018.

11

ImmuCell Corporation

Notes to Unaudited Condensed Financial Statements (continued)

5. INVENTORY

Inventory consisted of the following:

	As of March 31, 2019		As of December 31, 2018
Raw materials	$	470,497	$	338,991
Work-in-process		1,153,152		1,337,035
Finished goods		412,144		655,645
Total	$	2,035,793	$	2,331,671

6. PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consisted of the following:

	As of March 31, 2019		As of December 31, 2018
Prepaid expenses	$	292,360	$	142,528
Other receivables(1)		462,877		493,289
Total	$	755,237	$	635,817

(1) This amount includes $450,000 due from a third party for the sale of assets. See Note 14.

7. PROPERTY, PLANT AND EQUIPMENT, net

Property, plant and equipment consisted of the following:

	Estimated Useful Lives (in years)	As of March 31, 2019			As of December 31, 2018
Buildings and improvements	10-39	$	17,060,316		$	17,018,316
Laboratory and manufacturing equipment	3-10		15,156,622			15,092,252
Office furniture and equipment	3-10		733,159			731,510
Construction in progress	n/a		102,926			91,067
Land	n/a		516,867			516,867
Property, plant and equipment, gross			33,569,890			33,450,012
Accumulated depreciation			(7,984,438	)		(7,422,463	)
Property, plant and equipment, net		$	25,585,452		$	26,027,549

As of March 31, 2019 and December 31, 2018, construction in progress consisted principally of down payments towards two pieces of manufacturing equipment. During the three-month periods ended March 31, 2019 and 2018, $1,830 and $3,430 of property, plant and equipment was disposed of, respectively. Depreciation expense was $563,805 and $279,896 during the three-month periods ended March 31, 2019 and 2018, respectively.

12

ImmuCell Corporation

Notes to Unaudited Condensed Financial Statements (continued)

8. BUSINESS ACQUISITION

On January 4, 2016, we acquired certain business assets and processes from DAY 1™ Technology, LLC of Minnesota. The acquired rights and know-how are primarily related to formulating our bovine antibodies into a gel solution (or paste) for an oral delivery option to newborn calves via a syringe (or tube). This product format offers customers an alternative delivery option to the bolus (the standard delivery format of the bivalent First Defense^® product since first approval by the U.S. Department of Agriculture (USDA) and product launch in 1991). This gel formulation had been sold as a feed product without disease claims since 2012. During the fourth quarter of 2018, we achieved USDA approval of an improved bivalent gel formulation and began marketing this product as Dual-Force™ First Defense^®. We achieved Canadian approval of this product during the first quarter of 2019. We were also interested in a gel formulation in anticipation of the launch of Tri-Shield First Defense^® (which was approved by the USDA during the fourth quarter of 2017) because the additional rotavirus antibodies in this new product would not fit in a bolus full of E. coli and coronavirus antibodies. This purchase also included certain other related private-label products. The total purchase price was approximately $532,000 (comprised of a $368,000 up front payment, a $97,000 technology transfer payment and estimated royalties of $67,000). Actual royalties paid based on sales from January 1, 2016 through December 31, 2018 were $36,000. The estimated fair values of the assets purchased in this transaction included inventory of approximately $113,000, machinery and equipment of approximately $132,000, a developed technology intangible of approximately $191,000 (which includes an immaterial amount of value associated with customer relationships and a non-compete agreement, and was valued using the relief from royalty method) and goodwill of approximately $96,000. The goodwill arising from the acquisition consists largely of the estimated value of anticipated growth opportunities arising from synergies and efficiencies. The measurement period for the transaction was closed as of June 30, 2016, and we continue to assess any impairment of these assets acquired in accordance with our policies. The impact of the acquisition on our pro forma prior year operations is not material. As of December 31, 2016, we vacated the rented facility in Minnesota that had been used to produce the gel solution format of our product and certain other related private-label products. This resulted in the termination of employment of four employees, as these production functions were consolidated into our Portland facility, which enables us to better utilize existing infrastructure and larger scale equipment to improve operating efficiencies.

9. INTANGIBLE ASSETS

The intangible assets described in Note 8 are being amortized to costs of goods sold over their useful lives, which are estimated to be 10 years. Intangible amortization expense was $4,776 during both of the three-month periods ended March 31, 2019 and 2018. The net value of these intangibles was $128,952 and $133,728 as of March 31, 2019 and December 31, 2018, respectively. A summary of intangible amortization expense estimated for the periods subsequent to March 31, 2019 is as follows:

Period	Amount
Nine-month period ending December 31, 2019	$	14,328
Year ending December 31, 2020		19,104
Year ending December 31, 2021		19,104
Year ending December 31, 2022		19,104
Year ending December 31, 2023		19,104
After December 31, 2023		38,208
Total	$	128,952

Intangible assets as of March 31, 2019 consisted of the following:

	Gross Carrying Value		Accumulated Amortization			Net Book Value
Developed technology	$	184,100	$	(59,833	)	$	124,267
Customer relationships		1,300		(422	)		878
Non-compete agreements		5,640		(1,833	)		3,807
Total	$	191,040	$	(62,088	)	$	128,952

Intangible assets as of December 31, 2018 consisted of the following:

	Gross Carrying Value		Accumulated Amortization			Net Book Value
Developed technology	$	184,100	$	(55,230	)	$	128,870
Customer relationships		1,300		(390	)		910
Non-compete agreements		5,640		(1,692	)		3,948
Total	$	191,040	$	(57,312	)	$	133,728

13

ImmuCell Corporation

Notes to Unaudited Condensed Financial Statements (continued)

10. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consisted of the following:

	As of March 31, 2019		As of December 31, 2018
Accounts payable – trade	$	618,646	$	531,048
Accounts payable – capital		-		72,695
Accrued payroll		307,604		358,451
Accrued professional fees		56,275		93,050
Accrued other		190,231		165,416
Total	$	1,172,756	$	1,220,660

11. BANK DEBT

We have in place five credit facilities and a line of credit with TD Bank N.A. These five credit facilities are secured by substantially all of our assets and are subject to certain restrictions and financial covenants.

Proceeds from a $1,000,000 first mortgage on our corporate headquarters and production and research facility at 56 Evergreen Drive in Portland (Loan #1) were received during the third quarter of 2010 with monthly principal and interest payments due for ten years, calculated based on a fifteen-year amortization schedule. A balloon principal payment of $451,885 will be due during the third quarter of 2020. As of March 31, 2019, $545,723 was outstanding under Loan #1.

Proceeds from a $2,500,000 second mortgage on this corporate headquarters (Loan #2) were received during the third quarter of 2015 with monthly principal and interest payments due for ten years, calculated based on a twenty-year amortization schedule. A balloon principal payment of approximately $1,550,000 will be due during the third quarter of 2025. As of March 31, 2019, $2,211,508 was outstanding under Loan #2.

During the first quarter of 2016, we entered into two additional credit facilities (Loans #3 and #4) aggregating up to approximately $4,500,000. As a result of loan amendments entered into the during the first quarter of 2017, these two credit facilities were increased to up to $6,500,000, subject to certain restrictions set forth in the agreements. Loan #3 is comprised of a construction loan of up to $3,940,000 and not to exceed 80% of the cost of the equipment installed in our commercial-scale Nisin production facility at 33 Caddie Lane in Portland. As amended, interest only was payable at a variable rate equal to the one-month LIBOR (adjusted at each monthly payment date) plus a margin of 2.25% through September 2018, at which time the loan converted to a seven-year term loan facility at the same variable interest rate (which was equal to 4.74% as of March 31, 2019) with monthly principal and interest payments due based on a seven-year amortization schedule. As of March 31, 2019, $3,658,571 was outstanding under Loan #3. Loan #4 is comprised of a construction loan of up to $2,560,000 and not to exceed 80% of the appraised value of our commercial-scale Nisin production facility. As amended, interest only was payable at a variable rate equal to the one-month LIBOR (adjusted at each monthly payment date) plus a margin of 2.25% through March 2018, at which time the loan converted to a term loan facility at the same variable interest rate (which was equal to 4.74% as of March 31, 2019) with monthly principal and interest payments due for ten years, calculated based on a twenty-year amortization schedule. A balloon principal payment of approximately $1,408,000 will be due during the first quarter of 2027. As of March 31, 2019, $2,432,000 was outstanding under Loan #4.

Proceeds from a $340,000 first mortgage on our 4,114 square foot warehouse and storage facility near to our Re-Tain™ production facility (Loan #5) were received during the first quarter of 2017. This note bears interest at a variable rate equal to the one-month LIBOR (adjusted at each monthly payment date) plus a margin of 2.25% (which was equal to 4.73% as of March 31, 2019) with monthly principal and interest payments due for ten years, calculated based on a twenty-year amortization schedule. A balloon principal payment of approximately $209,000 will be due during the first quarter of 2027. As of March 31, 2019, $318,322 was outstanding under Loan #5.

14

ImmuCell Corporation

Notes to Unaudited Condensed Financial Statements (continued)

We hedged our interest rate exposures on Loan #1 and Loan #2 with interest rate swap agreements that effectively converted floating interest rates based on the one-month LIBOR plus a margin of 3.25% and 2.25% to the fixed rates of 6.04% and 4.38%, respectively. As of March 31, 2019, the variable rates on these two mortgage notes were 5.75% and 4.74%, respectively. All derivatives are recognized on the balance sheet at their fair value. At the time of the closings and thereafter, the agreements were determined to be highly effective in hedging the variability of the identified cash flows and have been designated as cash flow hedges of the variability in the hedged interest payments. Changes in the fair value of the interest rate swap agreements are recorded in other comprehensive income, net of taxes. The original notional amounts of the interest rate swap agreements of $1,000,000 and $2,500,000 amortize in accordance with the amortization of the mortgage notes. The notional amount of the interest rate swaps was $2,757,231 as of March 31, 2019. The fair values of the interest rate swaps have been determined using observable market-based inputs or unobservable inputs that are corroborated by market data. Accordingly, the interest rate swaps are classified as level 2 within the fair value hierarchy provided in Codification Topic 820, Fair Value Measurements and Disclosures.

	During the Three-Month Periods Ended March 31,
	2019			2018
Payments required by interest rate swaps	$	(1,564	)	$	5,285
Other comprehensive (loss) income, net of taxes	$	(27,069	)	$	43,859

In connection with Loan #1 and Loan #2, we incurred debt issue costs of $26,489 and $34,125, respectively. In connection with Loan #3, Loan #4 and Loan #5, we incurred debt issue costs of $46,734 and $68,072, respectively. The 2017 amendments to Loan #3 and Loan #4 were accounted for as modifications. The amortization of debt issue costs is being recorded as a component of other expenses and is being amortized over the underlying terms of the respective credit facilities.

Debt proceeds received and principal repayments made during the three-month periods ended March 31, 2019 and 2018 are reflected in the following table by year and by loan:

	During the Three-Month Period Ended March 31, 2019					During the Three-Month Period Ended March 31, 2018
	Proceeds from Debt Issue		Debt Principal Repayments			Proceeds from Debt Issue		Debt Principal Repayments
Loan #1	$	—	$	(16,881	)	$	—	$	(15,888	)
Loan #2		—		(22,260	)		—		(21,279	)
Loan #3		—		(140,715	)		—		—
Loan #4		—		(32,000	)		267,141		—
Loan #5		—		(2,445	)		—		(2,636	)
Total	$	—	$	(214,301	)	$	267,141	$	(39,803	)

Principal payments (net of debt issue costs) due under bank loans outstanding as of March 31, 2019 (excluding our $500,000 line of credit) are reflected in the following table by the year that payments are due:

	Nine-Months ending 12/31/2019		Year ending 12/31/2020		Year ending 12/31/2021		Year ending 12/31/2022		Year Ending 12/31/2023		After 12/31/2023		Total
Loan #1	$	52,027	$	493,696	$	—	$	—	$	—	$	—	$	545,723
Loan #2		67,737		94,005		98,538		103,077		107,769		1,740,382		2,211,508
Loan #3(1)		422,143		562,857		562,857		562,857		562,857		985,000		3,658,571
Loan #4(1)		96,000		128,000		128,000		128,000		128,000		1,824,000		2,432,000
Loan #5(2)		8,582		11,926		12,503		13,107		13,741		258,463		318,322
Subtotal	$	646,489	$	1,290,484	$	801,898	$	807,041	$	812,367	$	4,807,845		9,166,124
Debt Issue Costs														(110,343	)
Total													$	9,055,781

(1) These notes bear interest at a variable rate equal to the one-month LIBOR plus a margin of 2.25%. Figures in this table are estimated using an interest rate of approximately 4.74%. The actual interest rate and principal payments will be different.

(2) This note bears interest at a variable rate equal to the one-month LIBOR plus a margin of 2.25%. Figures in this table are estimated using an interest rate of approximately 4.73%. The actual interest rate and principal payments will be different.

15

ImmuCell Corporation

Notes to Unaudited Condensed Financial Statements (continued)

During the third quarter of 2010, we entered into a $500,000 line of credit with TD Bank N.A., which is secured by substantially all of our assets and is subject to certain restrictions and financial covenants. This line of credit has been renewed approximately annually since then, is available as needed and has been extended through May 31, 2020. There was no outstanding balance under this line of credit as of March 31, 2019. As of December 31, 2018, $500,000 was outstanding under this line of credit. Interest on borrowings against the line of credit is variable at the higher of 4.25% per annum or the one-month LIBOR plus 3.5% per annum.

12. STOCKHOLDERS’ EQUITY

On October 28, 2015, we filed a registration statement on Form S-3 (File No. 333-207635) with the Securities and Exchange Commission (SEC) for the potential issuance of up to $10,000,000 in equity securities (subject to certain limitations). This registration statement became effective on November 10, 2015. Under this form of registration statement, we were limited within a twelve-month period to raising gross proceeds of no more than one-third of the market capitalization of our common stock (as determined by the high price of our common stock within the preceding 60 days leading up to a sale of securities) held by non-affiliates (non-insiders) of the Company. Having raised $10,000,000 in gross proceeds under the February 2016, July 2017 and December 2017 equity transactions described below, no additional equity securities can be issued under this registration statement.

On February 3, 2016, we sold 1,123,810 shares of common stock at a price to the public of $5.25 per share in an underwritten public offering pursuant to our effective shelf registration statement on Form S-3, raising gross proceeds of approximately $5,900,000 and resulting in net proceeds to the Company of approximately $5,313,000 (after deducting underwriting discounts and offering expenses incurred in connection with the equity financing).

On October 21, 2016, we closed on a private placement of 659,880 shares of common stock to nineteen institutional and accredited investors at $5.25 per share, raising gross proceeds of approximately $3,464,000 and resulting in net proceeds to the Company of approximately $3,161,000 (after deducting placement agent fees and other expenses incurred in connection with the equity financing).

On July 27, 2017, we issued 200,000 shares of our common stock at a price of $5.25 per share to two related investors pursuant to our effective shelf registration statement on Form S-3, raising gross proceeds of $1,050,000 and resulting in net proceeds of approximately $1,034,000 (after deducting expenses incurred in connection with the equity financing).

On December 21, 2017, we sold 417,807 shares of common stock at a price to the public of $7.30 per share in an underwritten public offering pursuant to our effective shelf registration statement on Form S-3, raising gross proceeds of approximately $3,050,000 and resulting in net proceeds to the Company of approximately $2,734,000 (after deducting underwriting discounts and offering expenses incurred in connection with the equity financing).

On November 20, 2018, we filed a registration statement on Form S-3 (File No. 333-228479) with the SEC for the potential issuance of up to $20,000,000 in equity securities (subject to certain limitations). This registration statement became effective on November 29, 2018. Under this form of registration statement, we are limited within a twelve-month period to raising gross proceeds of no more than one-third of the market capitalization of our common stock (as determined by the high price of our common stock within the preceding 60 days leading up to a sale of securities) held by non-affiliates (non-insiders) of the Company.

On March 29, 2019, we sold 1,636,364 shares of common stock at a price to the public of $5.50 per share in an underwritten public offering pursuant to our effective shelf registration statement on Form S-3, raising gross proceeds of approximately $9,000,000 and resulting in net proceeds to the Company of approximately $8,303,000 (after deducting underwriting discounts and offering expenses incurred in connection with the equity financing).

At the June 15, 2016 Annual Meeting of Stockholders, we reported that our stockholders voted to approve an amendment to the Company’s Certificate of Incorporation to increase the number of shares of common stock authorized for issuance from 8,000,000 to 10,000,000. After careful consideration, we determined that the method of voting instructions described in our Proxy Statement was not consistent with the way the votes were actually recorded in accordance with stock exchange rules. Therefore, during the second quarter of 2017, we elected to treat the amendment as ineffective, and there was no increase in our authorized common stock. At the June 14, 2018 Annual Meeting of Stockholders, our stockholders voted to approve an amendment to the Company’s Certificate of Incorporation to increase the number of shares of common stock authorized for issuance from 8,000,000 to 11,000,000.

In June 2000, our stockholders approved the 2000 Stock Option and Incentive Plan (the “2000 Plan”) pursuant to the provisions of the Internal Revenue Code of 1986, under which employees and certain service providers may be granted options to purchase shares of the Company’s common stock at 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 Plan. The stockholders of the Company approved an increase in this number to 500,000 shares in June 2001. All options granted under the 2000 Plan expire no later than ten years from the date of grant. The 2000 Plan expired in February 2010, after which date no further options could be granted under the 2000 Plan. However, outstanding options under the 2000 Plan may be exercised in accordance with their terms.

16

ImmuCell Corporation

Notes to Unaudited Condensed Financial Statements (continued)

In June 2010, our stockholders approved the 2010 Stock Option and Incentive Plan (the “2010 Plan”) pursuant to the provisions of the Internal Revenue Code of 1986, under which employees and certain service providers may be granted options to purchase shares of the Company’s common stock at no less than fair market value on the date of grant. At that time, 300,000 shares of common stock were reserved for issuance under the 2010 Plan and subsequently no additional shares have been reserved for the 2010 Plan. Vesting requirements are determined by the Compensation and Stock Option Committee of the Board of Directors on a case by case basis. All options granted under the 2010 Plan expire no later than ten years from the date of grant. The 2010 Plan expires in June 2020, after which date no further options could be granted under the 2010 Plan. However, options outstanding under the 2010 Plan at that time could be exercised in accordance with their terms.

In June 2017, our stockholders approved the 2017 Stock Option and Incentive Plan (the “2017 Plan”) pursuant to the provisions of the Internal Revenue Code of 1986, under which employees and certain service providers may be granted options to purchase shares of the Company’s common stock at no less than fair market value on the date of grant. At that time, 300,000 shares of common stock were reserved for issuance under the 2017 Plan and subsequently no additional shares have been reserved for the 2017 Plan. Vesting requirements are determined by the Compensation and Stock Option Committee of the Board of Directors on a case by case basis. All options granted under the 2017 Plan expire no later than ten years from the date of grant. The 2017 Plan expires in March 2027, after which date no further options could be granted under the 2017 Plan. However, options outstanding under the 2017 Plan at that time could be exercised in accordance with their terms.

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

	2000 Plan			2010 Plan			2017 Plan			Weighted Average Exercise Price		Aggregate Intrinsic Value(1)
Outstanding at December 31, 2017		117,500			242,500			—		$	4.58	$	1,513,980
Grants		—			48,500			122,500		$	7.38
Terminations		—			(19,000	)		(11,000	)	$	6.63
Exercises		(105,000	)		(2,000	)		—		$	1.89
Outstanding at December 31, 2018		12,500			270,000			111,500		$	6.37	$	266,020
Grants		—			—			10,000		$	7.50
Terminations		—			(12,000	)		—		$	5.07
Exercises		—			(15,000	)		—		$	4.80
Outstanding at March 31, 2019		12,500			243,000			121,500		$	6.51	$	(59,850	)
Vested at March 31, 2019		12,500			32,500			—		$	4.93	$	63,860
Vested and expected to vest at
March 31, 2019		12,500			243,000			121,500		$	6.51	$	(59,850	)
Reserved for future grants		—			13,000			178,500

(1) Intrinsic value is the difference between the fair market value as of the date indicated and as of the date of the option grant.

The following table displays additional information about the stock option plans described above:

	Number of Shares		Weighted Average Fair Value at Grant Date		Weighted Average Exercise Price
Non-vested stock options as of January 1, 2019		334,000	$	3.63	$	6.64
Non-vested stock options as of March 31, 2019		332,000	$	3.65	$	6.72
Stock options granted during the three-month period ended March 31, 2019		10,000	$	3.16	$	7.50
Stock options that vested during the three-month period ended March 31, 2019		—	$	—	$	—
Stock options that were forfeited during the three-month period ended March 31, 2019		12,000	$	2.65	$	5.07

17

ImmuCell Corporation

Notes to Unaudited Condensed Financial Statements (continued)

During the three-month period ended March 31, 2019, one director exercised stock options covering 15,000 shares by the surrender of 10,731 shares of common stock with a fair market value of $71,998 at the time of exercise and $2 in cash. During the three-month period ended March 31, 2018, two employees exercised stock options covering 6,000 shares. One thousand of these options were exercised for cash, resulting in total proceeds of $4,150 and 5,000 of these options were exercised by the surrender of 2,040 shares of common stock with a fair market value of $14,994 at the time of exercise and $6 in cash.

The weighted average remaining life of the options outstanding under the 2000 Plan, the 2010 Plan and the 2017 plan as of March 31, 2019 was approximately 6 years and 6 months. The weighted average remaining life of the options exercisable under these plans as of March 31, 2019 was approximately 3 years and 1 month. The exercise prices of the options outstanding as of March 31, 2019 ranged from $3.15 to $8.90 per share. The 10,000 stock options granted during the three-month period ended March 31, 2019 had exercise prices of $7.50 per share. The 137,000 stock options granted during the three-month period ended March 31, 2018 had exercise prices between $7.08 and $7.80 per share. The aggregate intrinsic value of options exercised during the three-month periods ended March 31, 2019 and 2018 approximated $28,641 and $24,800, respectively. The weighted-average grant date fair values of options granted during the three-month periods ended March 31, 2019 and 2018 were $3.16 and $4.22 per share, respectively. As of March 31, 2019, total unrecognized stock-based compensation related to non-vested stock options aggregated $562,225, which will be recognized over a weighted average period of 1 year and 7 months. The fair value of each stock option grant has been estimated on the date of grant using the Black-Scholes option pricing model, for the purpose discussed in Note 2(n), with the following weighted-average assumptions for the three-month periods ended March 31, 2019 and 2018:

	During the Three-Month Periods Ended March 31,
	2019			2018
Risk-free interest rate		2.59	%		2.5	%
Dividend yield		0	%		0	%
Expected volatility		51	%		57	%
Expected life		4 years			5.1 years

The risk-free interest rate is based on U.S. Treasury yields for a maturity approximating the expected option term, while the other assumptions are derived from averages of our historical data.

Common Stock Rights Plan

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

The Rights (as amended) become exercisable and transferable apart from the common stock upon the earlier of i) 10 days following a public announcement that a person or group (Acquiring Person) has, without the prior consent of the Continuing Directors (as such term is defined in the Rights Agreement), acquired beneficial ownership of 20% or more of the outstanding common stock or ii) 10 days following commencement of a tender offer or exchange offer the consummation of which would result in ownership by a person or group of 20% or more of the outstanding common stock (the earlier of such dates being called the Distribution Date).

Upon the Distribution Date, the holder of each Right not owned by the Acquiring Person would be entitled to purchase common stock at a discount to the initial purchase price of $70.00 per share, effectively equal to one half of the market price of a share of common stock on the date the Acquiring Person becomes an Acquiring Person. If, after the Distribution Date, the Company should consolidate or merge with any other entity and the Company were not the surviving company, or, if the Company were the surviving company, all or part of the Company’s common stock were changed or exchanged into the securities of any other entity, or if more than 50% of the Company’s assets or earning power were sold, each Right would entitle its holder to purchase, at the Rights’ then-current purchase price, a number of shares of the acquiring company’s common stock having a market value at that time equal to twice the Right’s exercise price.

At any time after a person or group becomes an Acquiring Person and prior to the acquisition by such person or group of 50% or more of the outstanding common stock, the Board of Directors of the Company may exchange the Rights (other than Rights owned by such person or group which have become void), in whole or in part, at an exchange ratio of one share of common stock per Right (subject to adjustment). At any time prior to 14 days following the date that any person or group becomes an Acquiring Person (subject to extension by the Board of Directors), the Board of Directors of the Company may redeem the then outstanding Rights in whole, but not in part, at a price of $0.005 per Right, subject to adjustment.

18

ImmuCell Corporation

Notes to Unaudited Condensed Financial Statements (continued)

At various times over the years, our Board of Directors has voted to authorize amendments of the Rights Agreement to extend the Final Expiration Date, which is currently September 19, 2022. Our Board of Directors also has voted to authorize amendments to increase the ownership threshold for determining “Acquiring Person” status to 20%. During the second quarter of 2015, our Board of Directors also voted to authorize an amendment to remove a provision that prevented a new group of directors elected following the emergence of an Acquiring Person (an owner of more than 20% of our stock) from controlling the Rights Plan by maintaining exclusive authority over the Rights Plan with pre-existing directors. We did this because such provisions have come to be viewed with disfavor by Delaware courts. Each time that we made such amendments we entered into amendments to the Rights Agreement with the Rights Agent reflecting such extensions, threshold increases or provision changes. No other changes have been made to the terms of the Rights or the Rights Agreement.

13. REVENUE

Generally, our products are promoted to veterinarians and dairy and beef producers by our sales team and then sold through distributors. Our primary market is North America. We do sell into select international regions and may expand this international reach in the future. There were no material changes between the allocation and timing of revenue recognition during the year ended December 31, 2018 or the three-month periods ended March 31, 2019 or 2018 (under ASC 606). We do not have any contract assets such as contracts for which we have satisfied the performance obligations but do not yet have the right to bill for or contract liabilities such as customer advances. All trade receivables on our balance sheet are from contracts with customers. We incur no material costs to obtain contracts. As of March 31, 2018, we had a backlog of orders (representing purchase orders received from customers which were not fulfilled or paid) worth approximately $1,245,000 for the First Defense^® product line. Before June 30, 2018 we cleared all of this backlog (approximately $901,000) that was related to orders for our bivalent formats of the First Defense^® product line (which have been re-branded as Dual-Force™ First Defense^®). Demand for Tri-Shield First Defense^® continues to exceed our available inventory, but we are not accepting orders in excess of available inventory, which requires a careful allocation of inventory as it becomes available to address the needs of specific customers. As of December 31, 2018 and March 31, 2019, we had received orders representing backlogs worth approximately $393,000 and $276,000, respectively. We had sufficient inventory on hand to satisfy these orders, but this product did not ship to customers until the beginning of the next quarter because of timing issues at the end of the respective periods.

The following table presents our product sales disaggregated by geographic area:

	During the Three-Month Periods Ended March 31,
	2019		2018
United States	$	3,777,746	$	2,595,616
Other		632,815		285,569
Total product sales	$	4,410,561	$	2,881,185

The following table presents our product sales disaggregated by major product category:

	During the Three-Month Periods Ended March 31,
	2019		2018
First Defense® product line	$	4,140,917	$	2,780,869
Other animal health		136,043		100,316
Other		133,601		—
Total product sales	$	4,410,561	$	2,881,185

19

ImmuCell Corporation

Notes to Unaudited Condensed Financial Statements (continued)

14. GAIN ON SALE OF ASSETS

During the third quarter of 2018, we sold the assets underlying our water diagnostic product for $700,000. This sale of assets was recognized as an operating activity at that time in accordance with ASC 610: Other Income and ASC 810: Consolidation. An upfront payment of $250,000 was received upon closing, a second payment of $250,000 is due during the third quarter of 2019 and a third payment of $200,000 is due during the fourth quarter of 2019 (both of these payments receivable were recorded in prepaid expenses and other current assets as of March 31, 2019).

15. OTHER EXPENSES, NET

Other expenses, net, consisted of the following:

	During the Three-Month Periods Ended March 31,
	2019			2018
Interest expense	$	114,041		$	96,015
Interest income		(2,315	)		(3,824	)
Other gains		—			(75	)
Other expenses, net	$	111,726		$	92,116

16. INCOME TAXES

Our income tax expense (benefit) aggregated $9,023 and ($49,148) (amounting to 6% and (18%) of our income (loss) before income taxes, respectively) for the three-month periods ended March 31, 2019 and 2018, respectively. As of December 31, 2018, we had federal net operating loss carryforwards of $11,839,349 of which $10,127,442 do not expire and $1,711,907 expires in 2034 through 2037 (if not utilized before then) and state net operating loss carryforwards of $3,485,949 that expire in 2037 through 2038 (if not utilized before then). Additionally, we had federal general business tax credit carryforwards of $407,023 that expire in 2027 through 2038 (if not utilized before then) and state tax credit carryforwards of $763,350 that expire in 2023 through 2038 (if not utilized before then).

The provision for income taxes is determined using the asset and liability approach of accounting for income taxes. Under this approach, deferred taxes represent the estimated future tax effects of temporary differences between book and tax treatment of assets and liabilities and carryforwards to the extent they are realizable. During the second quarter of 2018, we assessed our historical and near-term future profitability and recorded approximately $563,000 in non-cash income tax expense to create a full valuation allowance against our net deferred tax assets (which consist largely of net operating loss carryforwards and federal and state tax credits) based on applicable accounting standards and practices. At that time, we had incurred a net loss for five consecutive quarters, had not been profitable on a year-to-date basis since the nine-month period ended September 30, 2017 and projected additional net losses for some period going forward before returning to profitability. Should future profitability be realized at an adequate level, we would be able to release this valuation allowance (resulting in a non-cash income tax benefit) and realize these deferred tax assets before they expire. We will continue to assess the need for the valuation allowance at each quarter and, in the event that actual results differ from these estimates or we adjust these estimates in future periods, we may need to adjust our valuation allowance. No such adjustment was recorded during the nine months ended March 31, 2019.

Net operating loss carryforwards, credits, and other tax attributes are subject to review and possible adjustment by the Internal Revenue Service. Section 382 of the Internal Revenue Code contains provisions that could place annual limitations on the future utilization of net operating loss carryforwards and credits in the event of a change in ownership of the Company, as defined.

The Company files income tax returns in the U.S. federal jurisdiction and several state jurisdictions. We currently have no tax examinations in progress. We also have not paid additional taxes, interest or penalties as a result of tax examinations nor do we have any unrecognized tax benefits for any of the periods in the accompanying financial statements.

The Tax Cuts and Jobs Act was enacted on December 22, 2017. This legislation made significant changes in the U.S. tax laws including a reduction in the corporate tax rates, changes to net operating loss carryforwards and carrybacks, and a repeal of the corporate alternative minimum tax. The legislation reduced the U.S. corporate tax rate from the prior rate of 34% to 21%. As a result of the enacted law, we were required to revalue deferred tax assets and liabilities at the rate enacted in 2017. This revaluation resulted in a benefit of $71,000 to income tax expense in continuing operations and a corresponding increase in the deferred tax assets during 2017. On December 22, 2017, the SEC issued Staff Accounting Bulletin #118 that provides additional guidance and allows companies to apply a measurement period of up to twelve months to account for the impacts of this legislation in their financial statements. The accounting for the transitional impacts of this legislation is now complete.

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ImmuCell Corporation

Notes to Unaudited Condensed Financial Statements (continued)

17. CONTINGENT LIABILITIES AND COMMITMENTS

Our bylaws, as amended, in effect provide that the Company will indemnify its officers and directors to the maximum extent permitted by Delaware law. In addition, we make similar indemnity undertakings to each director through a separate indemnification agreement with that director. The maximum payment that we may be required to make under such provisions is theoretically unlimited and is impossible to determine. We maintain directors’ and officers’ liability insurance, which may provide reimbursement to the Company for payments made to, or on behalf of, officers and directors pursuant to the indemnification provisions. Our indemnification obligations were grandfathered under the provisions of Codification Topic 460, Guarantees. Accordingly, we have recorded no liability for such obligations as of March 31, 2019. Since our incorporation, we have had no occasion to make any indemnification payment to any of our officers or directors for any reason.

The development, manufacturing and marketing of animal health care products entails an inherent risk that liability claims will be asserted against us during the normal course of business. We are aware of no such claims against us as of the date of this filing. We feel that we have reasonable levels of liability insurance to support our operations.

We enter into agreements with third parties in the ordinary course of business under which we are obligated to indemnify such third parties from and against various risks and losses. The precise terms of such indemnities vary with the nature of the agreement. In many cases, we limit the maximum amount of our indemnification obligations, but in some cases those obligations may be theoretically unlimited. We have not incurred material expenses in discharging any of these indemnification obligations, and based on our analysis of the nature of the risks involved, we believe that the fair value of the liabilities potentially arising under these agreements is minimal. Accordingly, we have recorded no liabilities for such obligations as of March 31, 2019.

We are committed to purchasing certain key parts (syringes) and services (final formulation, aseptic filling and final packaging of Drug Product) pertaining to Re-Tain™, our Nisin-based intramammary treatment of subclinical mastitis in lactating dairy cows, exclusively from two contractors. Because we will not achieve regulatory approval for the sale of Re-Tain™ in the U.S. by December 17, 2019, the contract counter party for final formulation, aseptic filling and final packaging of that product may have the right at that date to terminate the agreement, and we could be liable for a $100,000 termination fee. We are negotiating with this party to amend and extend the contract term to allow us to achieve regulatory approval and initiate commercial launch with the availability of this party’s services. At the same time, we are seeking an alternative contractor for these services while we develop a plan to build the required infrastructure to perform these services for ourselves with a portion of the capital we raised at the end of the first quarter of 2019.

During the second quarter of 2009, we entered into an exclusive and perpetual (unless terminated for cause) license with the Baylor College of Medicine covering the underlying rotavirus vaccine technology used to generate the specific antibodies for our product line extension, Tri-Shield First Defense^®. A milestone payment of $150,000 due upon regulatory approval of the product was accrued at December 31, 2017 and paid in January 2018. The license is also subject to a royalty equal to 4% of the sales of the First Defense^® product line realized above the average of the sales of our bivalent product line for the years ended December 31, 2016 and 2015, plus a growth assumption of 6%. Earned royalties due are subject to annual minimums of $5,000, $10,000, $15,000, $20,000 and $25,000 for the years ending December 31, 2017, 2018, 2019, 2020, and 2021 (and thereafter), respectively. Royalties of $10,396 were accrued at December 31, 2018 and paid in January 2019. Royalties of $3,750 were accrued as of March 31, 2019. In addition to the commitments discussed above, we had committed $474,000 to the purchase of inventory and $144,000 to other obligations as of March 31, 2019.

18. SEGMENT INFORMATION

We principally operate in the business segment described in Note 1. Pursuant to Codification Topic 280, Segment Reporting, we operate in one reportable business segment, that being the development, acquisition, manufacture and sale of products that improve the health and productivity of dairy and beef cattle. Almost all of our internally funded product development expenses are in support of such products. The significant accounting policies of this segment are described in Note 2. Our single operating segment is defined as the component of our business for which financial information is available and evaluated regularly by our chief operating decision-maker in deciding how to allocate resources and in assessing performance. Our chief operating decision-maker is our President and CEO.

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ImmuCell Corporation

Notes to Unaudited Condensed Financial Statements (continued)

Sales of the First Defense^® product line aggregated 94% and 97% of our total product sales during the three-month periods ended March 31, 2019 and 2018, respectively. Our primary customers for the majority of our product sales (86% and 90% during the three-month periods ended March 31, 2019 and 2018, respectively) are in the U.S. dairy and beef industries. Product sales to international customers, who are also in the dairy and beef industries, aggregated 11% and 10% of our total product sales during the three-month periods ended March 31, 2019 and 2018, respectively.

19. RELATED PARTY TRANSACTIONS

Dr. David S. Tomsche (Chair of our Board of Directors) is a controlling owner of Leedstone Inc., a domestic distributor of ImmuCell products (the First Defense^® product line and CMT) and of J-t Enterprises of Melrose, Inc., an exporter. His affiliated companies purchased $176,866 and $209,633 of products from us during the three-month periods ended March 31, 2019 and 2018, respectively, on terms consistent with those offered to other distributors of similar status. We made marketing-related payments of $0 and $10,383 to these affiliated companies during the three-month periods ended March 31, 2019 and 2018, respectively, that were expensed as incurred. Our accounts receivable (subject to standard and customary payment terms) due from these affiliated companies aggregated $35,543 and $16,283 as of March 31, 2019 and December 31, 2018, respectively.

20. EMPLOYEE BENEFITS

We have a 401(k) savings plan (the Plan) in which all employees completing one month of service with the Company are eligible to participate. Participants may contribute up to the maximum amount allowed by the Internal Revenue Service. We currently match 100% of the first 3% of each employee’s salary that is contributed to the Plan and 50% of the next 2% of each employee’s salary that is contributed to the Plan. Under this matching plan, we paid $31,197 and $24,646 into the plan for the three-month periods ended March 31, 2019 and 2018, respectively.

21. SUBSEQUENT EVENTS

We have evaluated subsequent events through the time of filing on May 13, 2019, the date we have issued this Quarterly Report on Form 10-Q. As of such date, there were no material, reportable subsequent events.

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ImmuCell Corporation

ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read together with our unaudited condensed financial statements and the related notes and other financial information included in this Quarterly Report on Form 10-Q. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. One should review Part II -“Other Information”, Item 1A -“Risk Factors” of this Quarterly Report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Liquidity and Capital Resources

We believe that our cash, together with gross margin anticipated to be earned from ongoing product sales, will be sufficient to meet our working capital and capital expenditure requirements and to finance our ongoing business operations for at least twelve months from the date of this filing. We have funded our business principally from our gross margin on product sales and equity and debt financings. We were profitable during the unaudited six-month period ended December 31, 2014, during the years ended December 31, 2015 and 2016, during the unaudited nine-month period ended September 30, 2017 and during the unaudited three-month period ended March 31, 2019. The table below summarizes the changes in selected, key accounts (in thousands, except for percentages):

	As of March 31,		As of December 31,		Increase
	2019		2018		Amount		%
Cash and cash equivalents	$	10,584	$	2,521	$	8,063		320	%
Net working capital	$	12,639	$	3,856	$	8,783		228	%
Total assets	$	40,477	$	32,731	$	7,746		24	%
Stockholders’ equity	$	30,248	$	21,744	$	8,504		39	%
Common shares outstanding		7,210		5,569		1,641		29	%

From the first quarter of 2016 through the first quarter of 2019, we raised gross proceeds of approximately $22.5 million (net proceeds were approximately $20.5 million) from five different common equity transactions. No warrants were issued in connection with any of these transactions. No convertible or preferred securities were issued. During the first and fourth quarters of 2016, we issued an aggregate of 1,783,690 shares of common stock at $5.25 per share, raising net proceeds of approximately $8.5 million in two separate transactions. During the third quarter of 2017, we issued 200,000 shares of common stock at $5.25 per share, raising net proceeds of just over $1.0 million. During the fourth quarter of 2017, we issued 417,807 shares of common stock at $7.30 per share, raising net proceeds of approximately $2.7 million. No additional equity transactions were completed during 2018. During the first quarter of 2019, we issued 1,636,364 shares of common stock at $5.50 per share, raising net proceeds of approximately $8.3 million.

During 2017 and 2016, we secured debt financing from TDBank N.A. in the form of three different facilities aggregating approximately $6.8 million. This debt is in addition to two mortgage loans entered into during 2010 and 2015 that aggregated $3.5 million at inception, also with TDBank N.A. As of March 31, 2019, approximately $9.2 million was outstanding under these five facilities. We also have a $500,000 line of credit with TDBank N.A. that is available as needed through May 31, 2020 and subject to extension by the bank after that date. The $500,000 balance outstanding under the line of credit as of December 31, 2018 was repaid during the first quarter of 2019, and there was no outstanding balance as of March 31, 2019. These credit facilities are subject to certain restrictions and financial covenants and are secured by substantially all of our assets, including our facility at 56 Evergreen Drive in Portland, which was independently appraised at $4.2 million in connection with the 2015 financing. We are required by bank debt covenant to maintain at least $2 million of otherwise unrestricted cash, cash equivalents and short-term investments, thus reducing the effective availability of our liquid assets for operational needs by that amount. We are negotiating with the bank to return to an acceptable covenant based on income statement performance in order to regain access to these liquid assets. We were in compliance with all applicable covenants as of March 31, 2019.

Net cash provided by operating activities amounted to $677,000 during the three-month period ended March 31, 2019 in comparison to net cash provided by operating activities of $250,000 during the three-month period ended March 31, 2018. Cash paid for capital expenditures totaled $194,000 during the three-month period ended March 31, 2019 in comparison to capital expenditures of $1.2 million during the three-month period ended March 31, 2018 reflecting the completion of the investment in our Drug Substance production facility.

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ImmuCell Corporation

During the third quarter of 2016, we initiated construction of our Drug Substance (Nisin) production facility for Re-Tain™. We completed construction of the building during the fourth quarter of 2017 and began depreciating these construction costs at that time. We began equipment installation during the third quarter of 2017 and began depreciating these costs when the equipment was placed into service for its intended purpose (which is to produce Nisin) during the third quarter of 2018. The aggregate cost of this investment was $20.8 million. We anticipate that depreciation expense, while not affecting our cash flows from operations, will result in net operating losses until product sales increase sufficiently to offset these non-cash expenses. Going forward, repayments of the indebtedness incurred to acquire these assets will reduce our cash flows from financing activities.

As of January 1, 2019, we had authorization from our Board of Directors to invest up to approximately $500,000 through December 31, 2019 in routine and necessary capital expenditures. During the three-month period ended March 31, 2019, we paid approximately $194,000 for such investments. This authorized spending limit may be increased during the second quarter of 2019 to help us achieve our growth objectives. Given the new capital raised at the end of the first quarter of 2019, our Board of Directors authorized an investment of approximately $3 million (a very preliminary estimate) in the First Defense^® product line to double our liquid processing capacity and increase our freeze drying capacity by 50% in order to enable us to meet anticipated growth in demand for these products. No money had been spent on this project as of March 31, 2019. We anticipate finalizing the plans for this expansion, contracting for the necessary equipment and construction services and commencing work in mid-2019, and, based on that expected start time, we expect to complete this project during the second half of 2020. As we continue to evaluate options for the Drug Product formulation, aseptic filling and packaging of Re-Tain™ (discussed elsewhere in this report in more detail), it is increasingly likely that we will invest approximately $4 million (a very preliminary estimate) to develop our own Drug Product manufacturing facilities and capability to end our reliance on third-party Drug Product manufacturing services for the Re-Tain™ manufacturing process. These two investment estimates are based on internally-generated calculations using, among other things, actual costs incurred for previous construction projects and equipment installations and do not reflect any bids or quotes from third-party providers for either project.

Our capital expenditures from January 1, 2014 through December 31, 2018 have been larger than our historical norm principally due to investments to increase our production capacity for the First Defense^® product line and to construct and equip our Re-Tain™ production facility, as detailed in the following table:

	Paid during the years ended December 31,
Project Description	2015		2016		2017			2018		Total
First Defense® production facility addition(1)	$	914,000	$	—	$	—		$	—	$	914,000
First Defense® production capacity increase		1,077,000		1,173,000		—			—		2,250,000
Land for Re-Tain™ production facility		265,000		13,000		53,000			—		331,000
Re-Tain™ production facility and equipment		—		2,080,000		17,161,000			1,596,000		20,837,000
Purchase of a warehouse building		—		—		472,000			—		472,000
Other capital expenditures		463,000		320,000		74,000	(2)		434,000		1,291,000
Total	$	2,719,000	$	3,586,000	$	17,760,000		$	2,030,000	$	26,095,000

(1)	An additional $1,041,000 was paid during the year ended December 31, 2014, bringing the total cost of this project to $1,955,000. This investment also included the construction and equipping of a pilot plant for small-scale production of Re-Tain™ within our First Defense® production facility that is now used to produce the gel tube formats of the First Defense® product line.
(2)	This amount is net of a credit of approximately $61,000 for a returned fixed asset acquired during 2016.

During the third quarter of 2016, the City of Portland approved a Tax Increment Financing (TIF) credit enhancement package that reduces the real estate taxes on our Drug Substance production facility by 65% over the eleven-year period beginning on July 1, 2017 and ending June 30, 2028 and by 30% during the twelve-month period ending June 30, 2029, at which time the rebate expires. During the second quarter of 2017, the TIF was approved by the Maine Department of Economic and Community Development. Based on the assessed value of $1.7 million as of April 1, 2017, the TIF reduced our property taxes by approximately $22,000 during the twelve-month period ended June 30, 2018 (the first year of the TIF benefit). Based on the assessed value of $4 million as of April 1, 2018, the TIF reduced our property taxes by approximately $58,000 during the twelve-month period ending June 30, 2019 (the second year of the TIF benefit). The value of the tax savings will increase (decrease) in proportion to any increase (decrease) in the assessment of the building for city real estate tax purposes.

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ImmuCell Corporation

Outlook for the First Defense^® product line

Having completed an investment of approximately $4.2 million to enlarge our First Defense^® production facility and increase our freeze drying capacity by 100% and make other improvements to our liquid processing capacity during the first quarter of 2016, we can now produce product with an annual sales value of approximately $18 million. The actual value of the production output will vary subject to product yields, selling price, product format mix and other factors. Since the third quarter of 2016 and through most of 2017, we had sufficient available inventory and were shipping in accordance with the demand of our distributors. However, we quickly sold out of our initial launch quantities of Tri-Shield First Defense^® soon after regulatory approval was obtained during the fourth quarter of 2017. Presently, we are only accepting purchase orders from customers to match available inventory, which requires a careful allocation of product supply directly to certain end-users and veterinary clinics. Production of this new product format has not kept pace with demand primarily because of our inability to produce enough of the new, complex rotavirus vaccine that is used to immunize our source cows. We worked on production improvements in our vaccine laboratory throughout 2018. Improvements achieved during the first quarter of 2019 will allow us to immunize more source cows, but the increased supply of finished product will not be available for sale in a significant way until the second half of 2019 because of the long production cycle. While this product shortage is a problem resulting in lost sales, it is also a positive indication that the market is accepting our new product offering. Given our projections for future demand for the First Defense^® product line, we are initiating an investment of approximately $3 million (a very preliminary estimate) to further increase our liquid processing capacity by 100% and our freeze drying capacity by 50%. We expect that this investment will increase our production equipment processing capacity from approximately $18 million to approximately $27 million. As noted above, the actual value of this production output will vary subject to product yields, selling price, product format mix and other factors.

Results of Operations

2019 Compared to 2018

Product Sales

Total product sales during the three-month period ended March 31, 2019 increased by 53%, or $1.5 million, to $4.4 million, from $2.9 million during the same period in 2018, with domestic sales increasing by 46%, or $1.2 million, and international sales increasing by 122%, or $347,000, in comparison to the same period during 2018. Total product sales during the trailing twelve-month period ended March 31, 2019 increased by 28%, or $2.7 million, to $12.5 million from $9.8 million during the same period ended March 31, 2018. Tri-Shield First Defense^® is an important growth contributor, and the core bivalent portion of our First Defense^® product line is also growing well. Approximately 86% and 90% of our sales were made in the domestic market during the first quarters of 2019 and 2018, respectively. Sales of our core animal health products (excluding one product that was divested during 2018) increased by 48%, or $1.4 million, during the three-month period ended March 31, 2019 over the same period ended March 31, 2018. During the first quarter of 2018, sales demand for Dual-Force™ First Defense^® exceeded available inventory, resulting in a backlog of orders worth approximately $901,000 as of March 31, 2018, which was shipped during the second quarter of 2018. This backlog problem was largely caused by a reduction in the biological yield from an increased colostrum supply. Process improvements have since been made that improve yields despite the inherent biological variability of our raw material. We can now return to consistently supplying Dual-Force™ to the market. As of December 31, 2018 and March 31, 2019, we had backlogs of orders worth approximately $393,000 and $276,000, respectively, resulting from timing issues (i.e. not caused by a lack of available inventory) at the end of the respective periods. The estimated value of these backlogs was calculated by multiplying the number of units for which customer orders had been received but were not shipped at the end of the period by the expected selling price.

The First Defense^® product line continues to benefit from wide acceptance by dairy and beef producers as an effective tool to prevent scours (diarrhea) in newborn calves. Sales of the First Defense^® product line aggregated 94% and 97% of our total product sales during the three-month periods ended March 31, 2019 and 2018, respectively. Sales of the First Defense^® product line increased by 49% during the three-month period ended March 31, 2019 in comparison to the same period during 2018, with domestic sales increasing by 46% and international sales increasing by 75%.

Going forward into the second quarter of 2019 and after, we expect to provide disclosures only about sales of the First Defense^® product line as a whole. However, to provide some insight into the new product launch, we are disclosing that sales of Tri-Shield^® were approximately $250,000, $236,000, $216,000, $252,000, $442,000 and $669,000 during the fourth quarter of 2017, the first quarter of 2018, the second quarter of 2018, the third quarter of 2018, the fourth quarter of 2018 and the first quarter of 2019, respectively. By the third quarter of 2019, we expect to be able to produce approximately $1.5 million per quarter in sales value of Tri-Shield^®. As these projections suggest, we are satisfied that we have successfully addressed the vaccine production and biological yield issues, noted above, pertaining to the manufacture of this new product that have limited sales since commercial launch.

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ImmuCell Corporation

During the middle of 2016, we implemented a price increase of approximately 5% for Dual-Force™ First Defense^®. Effective in December of 2018, we implemented an 11% increase for Tri-Shield First Defense^®. Effective January 1, 2019, we implemented a 2% increase for Dual-Force™ First Defense^®. Going forward, we anticipate making more frequent (but not more than annual) price increases in line with current rates of inflation.

Sales of products other than the First Defense^® product line increased by $169,000 during the three-month period ended March 31, 2019 in comparison to the same period during 2018. Sales of these other products aggregated 6% and 3% of our total product sales during the three-month periods ended March 31, 2019 and 2018, respectively. We acquired several private label products (our second leading source of product sales during 2018 and third leading source during the first quarter of 2019) in connection with our January 2016 acquisition of certain gel formulation technology. During the fourth quarter of 2016, we shut down the manufacturing site in Minnesota that had been used to produce these products and moved these operations to our Portland facility. We are realizing reduced labor and overhead expenses and benefiting from certain other operating efficiencies as a result of this consolidation. We sell our own California Mastitis Test (CMT) (our third leading source of product sales during 2018 and fourth leading source during the first quarter of 2019), which is used to detect somatic cell counts in milk. We have made and sold bulk reagents for Isolate™ (our third leading source of product sales during 2017 and second leading source during the first quarter of 2019), which is a drinking water test that is sold by our distributor in the United Kingdom. Sales of this product amounted to just $24,000 during the year ended December 31, 2018. A final sale of $134,000 was made during the first quarter of 2019. Because this product is non-core to our strategic focus, we sold the underlying cell line assets and intellectual property to a distributor during the third quarter of 2018 for $700,000. We have retained the rights to all animal health, diagnostic, feed and nutritional applications of this technology.

Gross Margin

Changes in the gross margin on product sales are summarized in the following tables for the respective periods (in thousands, except for percentages):

	During the Three-Month Periods Ended March 31,						Increase
	2019			2018			Amount			%
Gross margin	$	2,201		$	1,360		$	842			62	%
Percent of Product sales		50	%		47	%		3	%		6	%

	During the Trailing Twelve-Month Periods Ended March 31,						Increase
	2019			2018			Amount			%
Gross margin	$	6,036		$	4,429		$	1,606			36	%
Percent of Product sales		48	%		45	%		3	%		6	%

The gross margin as a percentage of product sales was 48% and 45% during the trailing twelve-month periods ended March 31, 2019 and 2018, respectively. This compares to gross margin percentages of 47% and 50% during the years ended December 31, 2018 and 2017, respectively. The gross margin percentage for the legacy formats of the First Defense^® product line was in line with prior years. A number of factors account for the variability in our costs, resulting in some fluctuations in gross margin percentages from quarter to quarter. The new gel formats of our product are more complex and more expensive to produce and presently contribute a lower gross margin. We continue to work for yield improvements and opportunities to reduce costs. Costs associated with the initial batches of Tri-Shield First Defense^® yielded fewer doses at a higher cost than we expected. However, these new formats are creating sales growth for us, and we are focused on increasing total gross margin, even if that is accomplished with a lower gross margin as a percentage of sales. The gross margin on the First Defense^® product line is affected by biological yields from our raw material, which do vary over time. Just as our customers’ cows respond differently to commercial dam-level vaccines depending on time of year and immune competency, our source cows have similar biological variances in response to our proprietary vaccine. The value of our First Defense^® product line is that we compensate for that variability by standardizing each dose of finished product. This impacts our costs of goods sold but insures that every calf is equally protected, which is something that dam-level commercial scours vaccines cannot offer. Like most U.S. manufacturers, we have also been experiencing increases in the cost of labor and raw materials. Our costs have increased due to increased labor costs and other expenses associated with our efforts to sustain compliance with current Good Manufacturing Practice (cGMP) regulations in our production processes. Over time, we have been able to minimize the impact of cost increases by implementing yield improvements. As we evaluate our product costs and selling price, it is one of our goals to continue to achieve a gross margin (before related depreciation and amortization expenses) as a percentage of total sales approaching 50%. We achieved this annual objective from 2009 to 2017 and during the first quarter of 2019, but the full year 2018 result was lower than prior years, as we worked to refine our production knowledge and processes.

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ImmuCell Corporation

Product Development Expenses

Product development expenses increased by 56%, or $327,000, to $910,000 during the three-month period ended March 31, 2019 in comparison to $583,000 during the same period in 2018. Product development expenses aggregated 21% and 20% of product sales during the three-month periods ended March 31, 2019 and 2018, respectively. It is important to note that these figures include $374,000 and $105,000 of non-cash depreciation expense and $31,000 and $36,000 of non-cash, stock-based compensation expense during the three-month periods ended March 31, 2019 and 2018, respectively. Excluding these non-cash expenses, cash-based product development expenses increased by 14%, or $63,000, to $506,000 during the three-month period ended March 31, 2019 in comparison to $443,000 during the same period in 2018.

The majority of our product development spending has been focused on the development of Re-Tain™, our purified Nisin treatment for subclinical mastitis in lactating dairy cows. During the 19.25 years that began on January 1, 2000 and ended on March 31, 2019, we invested the aggregate of approximately $16,003,000 (excluding depreciation and the capital cost of our Drug Substance production facility) in the development of this product. This estimated allocation reflects only direct expenditures and includes no allocation of product development or administrative overhead expenses. Approximately $2.9 million of this investment was offset by related product licensing revenues and grant income, most of which was earned from 2001 to 2007.

Nisin is a bacteriocin that is not used in human medicines and could alleviate some of the social concerns that the widespread use of antibiotics encourages the growth of antibiotic-resistant bacteria (“superbugs”). This antibacterial peptide is known to be effective against most Gram-positive and some Gram-negative bacteria. Mastitis, which costs the dairy industry about $2 billion per year, is currently treated with traditional antibiotic products, and treatment is generally reserved for clinical infections when the cow produces non-saleable milk. The “zero milk discard” product feature approved for Re-Tain™ would make earlier treatment of sick cows economically feasible, while these cows are still producing saleable milk. No other existing product can provide this kind of value proposition.

During 2000, we acquired an exclusive license from Nutrition 21, Inc. (formerly Applied Microbiology Inc. or AMBI) to develop and market Nisin-based products for animal health applications, which allowed us to initiate the development of Re-Tain™. In 2004, we paid Nutrition 21 approximately $965,000 to buy out this royalty and milestone-based license to Nisin, thereby acquiring control of the animal health applications of Nisin. Nisin is a well characterized substance, having been used in food preservation applications for over 50 years. Food-grade Nisin, however, cannot be used in pharmaceutical applications because of its low purity. Our Nisin technology includes processing and purification methods to achieve pharmaceutical-grade purity.

In 2004, we entered into a product development and marketing agreement with Pfizer Animal Health (now known as Zoetis) covering this product. That company elected to terminate the agreement in 2007. We believe that this decision was not based on any unanticipated efficacy or regulatory issues. Rather, we believe the decision was primarily driven by a marketing concern relating to their fear that the milk from treated cows could interfere with the manufacture of certain cultured dairy products. Due to the zero milk discard feature, there is a risk that Nisin from the milk of treated cows could interfere with the manufacture of certain (but not all) commercial cultured dairy products, such as some kinds of cheese and yogurt, if a process tank contains a high enough percentage of milk from treated cows. The impact of this potential interference ranges from a delay in the manufacturing process (which does happen at times for other reasons) to the less likely stopping of a cheese starter culture. Milk from cows that have been treated with our product that is sold exclusively for fluid milk products presents no such risk. We worked with scientists and mastitis experts to conduct a formal risk assessment to quantify the impact that milk from treated cows may have on cultured dairy products. This study concluded that the dilution of milk from treated cows through comingling with milk from untreated cows during normal milk hauling and storage practices reduces the risk of interference with commercial dairy cultures to a negligible level when the product is used in accordance with the product label. We do not believe that such a premium-priced product will be used as part of a whole herd (“blitz”) treatment protocol, which reduces the risk of cheese interference. We do not see this as a significant problem as modern “precision dairying” practices, as well as cost and other economic considerations, support reducing the indiscriminate use of drug treatments.

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ImmuCell Corporation

Approval by the Center for Veterinary Medicine, U.S. Food and Drug Administration (FDA) of the New Animal Drug Application (NADA) for Re-Tain™ is required before any sales of the product can be initiated. The NADA is comprised of five principal Technical Sections and one administrative submission that are subject to phased review by the FDA. By statute, each Technical Section submission is generally subject to a six-month review cycle by the FDA. Each Technical Section can be reviewed and approved separately. Upon review and assessment by the FDA that all requirements for a Technical Section have been met, the FDA may issue a Technical Section Complete Letter. The current status of our work on these submissions to the FDA is as follows:

1)  Environmental Impact: During the third quarter of 2008, we received the Environmental Impact Technical Section Complete Letter from the FDA.

2)  Target Animal Safety: During the second quarter of 2012, we received the Target Animal Safety Technical Section Complete Letter from the FDA.

3)  Effectiveness: During the third quarter of 2012, we received the Effectiveness Technical Section Complete Letter from the FDA. The draft product label carries claims for the treatment of subclinical mastitis associated with Streptococcus agalactiae, Streptococcus dysgalactiae, Streptococcus uberis, and coagulase-negative staphylococci in lactating dairy cattle. In our pivotal effectiveness study, statistically significant cure rates were associated with a statistically significant reduction in milk somatic cell count, which is an important measure of milk quality.

4)  Human Food Safety (HFS): During the third quarter of 2018, we received the Human Food Safety Technical Section Complete Letter from the FDA confirming, among other things, a zero milk discard period and a zero meat withhold period during and after treatment with our product.

5)  Chemistry, Manufacturing and Controls (CMC): Obtaining FDA approval of the CMC Technical Section is the final critical step to FDA approval and to initial commercial sales. Implementing Nisin production at commercial scale, which is a required component of the CMC Technical Section, has been the most expensive part of this project. We previously entered into an agreement with a multi-national pharmaceutical ingredient manufacturer for our commercial-scale supplies of Nisin. However, we determined in 2014 that the agreement did not offer us the most advantageous supply arrangement in terms of either cost or long-term dependability. We presented this product development opportunity to a variety of large and small animal health companies. While such a corporate partnership could have provided access to a much larger sales and marketing team and allowed us to avoid the large investment in a commercial-scale production facility, the partner would have taken a large share of the gross margin from all future product sales of Re-Tain™. The regulatory and marketing feedback about the prospects for this product that we received from prospective partners, following their due diligence, was positive. During the third quarter of 2014, we completed an investment in facility modifications and processing equipment necessary to produce the Nisin Drug Substance (the active pharmaceutical ingredient) at small-scale. This small-scale facility was used to i) expand our process knowledge and controls, ii) establish operating ranges for critical process parameters, iii) conduct product stability studies, iv) optimize process yields and v) verify the cost of production. We believe these efforts have reduced the risks associated with our investment in the commercial-scale production facility. During the fourth quarter of 2015, we acquired land nearby to our existing Portland facility for the construction of a new commercial-scale Drug Substance manufacturing facility. We commenced construction of this facility during the third quarter of 2016 and completed construction during the fourth quarter of 2017. Equipment installation and qualification was initiated during the third quarter of 2017 and completed during the third quarter of 2018. The total cost of this building and equipment investment was approximately $20.8 million.

We made our first phased Drug Substance submission to the FDA of this comprehensive and complex CMC Technical Section during the first quarter of 2019. This Technical Section includes data from the Nisin Drug Substance Registration Batches produced at commercial scale in our new manufacturing facility. This submission is subject to a six-month review period. The timing of this first submission does not directly impact the regulatory timeline because the second phased Nisin Drug Product submission (which will include responses to the FDA review of the first phased submission and detailed information about the manufacturing process and controls for the sterile Nisin Drug Product) defines the critical path to product approval. A successful FDA inspection of our manufacturing facility must also be achieved. The second phased Drug Product submission, which is also subject to a six-month review period, will not be made in time to achieve product approval by our original goal of December 2019.

Since 2010, we have been a party to a long-term exclusive product development and contract manufacturing agreement with Norbrook Laboratories Limited of Newry, Northern Ireland, an FDA-approved Drug Product manufacturer, covering the Drug Product formulation, aseptic filling and packaging services for Re-Tain™. Norbrook has provided services to us under this contract throughout the FDA process for use in all of our pivotal studies. During the fourth quarter of 2015, this agreement was amended and restated to, among other things, extend the term of the agreement to January 1, 2024. It has been our expectation that we would have these services available through both the remainder of the development process and approximately the first four years of commercial sales. However, the agreement includes a provision potentially entitling Norbrook to terminate the agreement if we fail to receive FDA approval for Re-Tain™ by mid-December of 2019. Due to unexpected difficulties and delays encountered by Norbrook at this late stage of the development and the usual FDA timeline for processing CMC Technical Sections, we do not expect to receive FDA approval before the second half of 2020. 

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ImmuCell Corporation

In anticipation of this potential issue, we have made requests to Norbrook to amend the existing agreement to avoid early termination, including a shorter term and increased payments to Norbrook. However, we have not yet reached resolution on an amendment, and it remains unclear whether we will be able to reach agreement on a suitable amendment, or if we do, for how long we will continue to have access to Norbrook’s services. Consequently, we have been actively investigating multiple alternatives, including securing an agreement for such services with another qualified third party or performing the services in-house by constructing an aseptic filling capability within our new Drug Substance production facility. Both of these alternatives would likely delay our commencement of commercial sales of Re-Tain™ to at least 2021, we believe, in the case of a new third-party manufacturer, and to at least 2022, we estimate, in the case of performing these services in-house. Our potential alternative options for these services are narrowed considerably because our product cannot be formulated or filled in a facility that also processes traditional antibiotics (i.e. beta lactams). Our strong preference would be to reach at least an interim arrangement with Norbrook, while we pursue the implementation of the chosen alternative in parallel.

The option of establishing our own Drug Product formulation, aseptic filling and packaging capability would provide us with the longer-term advantage of controlling the entire manufacturing process for Re-Tain™ in one facility, thereby reducing our dependence on third parties and potentially reducing our manufacturing costs, but it would require us to invest approximately $4 million (a very preliminary estimate) in equipment, facility modifications and related validation process. This equipment would occupy space in our new Drug Substance facility that we had originally intended to use to double our Drug Substance manufacturing capacity if warranted by Re-Tain™ sales volumes during the initial years following product launch, thereby limiting the maximum production capacity of our new Drug Substance facility to at least $10 million per year.

After approval of the CMC Technical Section, there is a 60-day administrative review before anticipated product license approval can be issued and commercial sales can be initiated.

We are party to a long-term, exclusive supply agreement with Plas-Pak Industries, Inc. (now owned by Nordson Corporation) of Norwich, Connecticut covering the proprietary syringe that was developed specifically for treating cows with our mastitis product. These syringes were used for all pivotal studies. During the third quarter of 2017, this agreement was extended to January 1, 2024.

Our second most important product development initiatives (in terms of dollars invested and, we believe, potential market impact) have been focused on other improvements, extensions or additions to our First Defense^® product line. During the second quarter of 2009 we entered into an exclusive license with the Baylor College of Medicine covering the underlying rotavirus vaccine technology used to generate the specific antibodies for use with animals. This perpetual license (if not terminated for cause) is subject to ongoing royalty payments. We achieved product license approval and initiated market launch of this product, Tri-Shield First Defense^®, during the fourth quarter of 2017. During the third quarter of 2018, we obtained approval from the Canadian Food Inspection Agency (CFIA) to sell Tri-Shield^® in Canada. We expect to initiate sales in Canada after domestic demand is met. We achieved USDA approval of our bivalent gel tube formulation (formerly marketed as First Defense Technology^®) during the fourth quarter of 2018 and have re-branded this product format, together with the bolus format, as Dual-Force™ First Defense^®. During the first quarter of 2019, we obtained CFIA approval to sell Dual-Force™ in Canada and have initiated commercial sales there. We are currently working to establish USDA claims for our bivalent bulk powder formulation of First Defense Technology^®. We are also investing in additional studies comparing the First Defense^® product line to the competition.

At the same time, we are working to expand our product development pipeline of bacteriocins that can be used as alternatives to traditional antibiotics. During the second quarter of 2015, we entered into an exclusive option agreement to license new bacteriocin technology from the University of Massachusetts Amherst. During the first quarter of 2019, we extended this exclusive option agreement through the first quarter of 2021. This technology focuses on bacteriocins having activity against Gram-negative infections for use in combating mastitis in dairy cattle. Subject to the availability of resources, we intend to begin new development projects that are aligned with our core competencies and market focus. We also remain interested in acquiring, on suitable terms, other new products and technologies that fit with our sales focus on the dairy and beef industries.

Sales and Marketing Expenses

Sales and marketing expenses increased by approximately 14%, or $75,000, to $607,000 during the three-month period ended March 31, 2019 in comparison to $532,000 during the same period in 2018, amounting to 14% and 18% of product sales during the three-month periods ended March 31, 2019 and 2018, respectively. We continue to leverage the efforts of our small sales force by using animal health distributors. These expenses have increased due principally to a strategic decision to invest more to support sales of the First Defense^® product line. Our current budgetary objective in 2019 is to invest less than 20% of product sales in sales and marketing expenses on an annual basis. This ratio can come down incrementally as sales grow. The lower than usual percentage during the first quarter of 2019 resulted principally from timing differences and the seasonally high sales level recorded during the first quarter.

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Administrative Expenses

Administrative expenses decreased by approximately 1%, or $4,000, to $419,000 during the three-month period ended March 31, 2019 in comparison to $423,000 during the same period in 2018. Administrative expenses include $17,000 and $18,000 of non-cash depreciation expense and $35,000 and $36,000 of non-cash, stock-based compensation expense during the three-month periods ended March 31, 2019 and 2018, respectively. We strive to be efficient with these expenses while funding costs associated with complying with the Sarbanes-Oxley Act of 2002 and all the legal, audit and other costs associated with being a publicly-held company. Prior to 2014, we had limited our investment in investor relations spending. Beginning in the second quarter of 2014, we initiated an investment in a more active investor relations program while continuing to provide full disclosure of the status of our business and financial condition in three quarterly reports and one annual report each year, as well as in Current Reports on Form 8-K when legally required or deemed appropriate by management. Additional information about us is available in our annual Proxy Statement. All of these reports are filed with the SEC and are available on-line or upon request to the Company.

Net Operating Income (Loss)

Our net operating income during the three-month period ended March 31, 2019 of $265,000 was in contrast to a net operating (loss) of ($178,000) during the three-month period ended March 31, 2018. The net operating income (loss) included $656,000 and $360,000 of non-cash depreciation, amortization, debt issue costs and stock-based compensation expense during the three-month periods ended March 31, 2019 and 2018, respectively. The improvement in our net operating results was driven primarily by an increase in gross margin that was offset, in part, by an increase in product development expenses and by a lesser increase in sales and marketing expenses.

Other Expenses, net

Other expenses, net, aggregated $112,000 and $92,000 during the three-month periods ended March 31, 2019 and 2018, respectively. Interest expense (including amortization of debt issue costs of approximately $4,000 during the three-month periods ended March 31, 2019 and 2018) increased by approximately 19%, or $18,000, to $114,000 during the three-month period ended March 31, 2019 in comparison to $96,000 during the same period in 2018, due to higher levels of outstanding debt at modestly higher interest rates on the variable rate notes. Assuming an interest rate of 5.0% on our variable rate notes, we estimate that total interest expense would be approximately $456,000 during the year ending December 31, 2019. Actual interest expense on our variable rate notes will be charged at 2.25% over the one-month LIBOR. The one-month LIBOR was 2.49% as March 31, 2019. Interest income decreased by approximately $2,000, to $2,000 during the three-month period ended March 31, 2019, in comparison to $4,000 during the comparable period in 2018. Less interest income was earned during the first quarter of 2019 because we had less cash and investments on hand.

Income (Loss) Before Income Taxes and Net Income (Loss)

Our income before income taxes of $154,000 during the three-month period ended March 31, 2019 was in contrast to a (loss) before income taxes of ($270,000) during the three-month period ended March 31, 2018. Our income (loss) before income taxes included $656,000 and $360,000 of non-cash depreciation, amortization, debt issue costs and stock-based compensation expense during the three-month periods ended March 31, 2019 and 2018, respectively. We began depreciating our Drug Substance production facility during the fourth quarter of 2017, and we began depreciating the related production equipment during the third quarter of 2018. For tax return purposes only, our depreciation expense for the Drug Substance production facility and equipment was approximately $9.2 million and $1.5 million for the years ended December 31, 2018 and 2017, respectively. This significant increase was largely related to accelerated depreciation allowed for tax purposes for our Drug Substance production facility investment. This increased our net operating loss carryforward to approximately $11.8 million as of December 31, 2018 from approximately $1.7 million as of December 31, 2017, which will be available to offset future taxable income. Our preliminary estimate of depreciation expense for books for the year ending December 31, 2019 is approximately $2.3 million. This figure is a preliminary estimate only and actual depreciation expense will vary from this estimate. This depreciation expense (which is far larger than what we have incurred historically) may cause, in part, a net loss for the year ending December 31, 2019.

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ImmuCell Corporation

On December 22, 2017, the Tax Cuts and Jobs Act was signed into law. This legislation makes significant changes in the U.S. tax laws, including a reduction in the corporate tax rates, changes to net operating loss carryforwards and carrybacks, and a repeal of the corporate alternative minimum tax. The legislation reduced the U.S. corporate tax rate from the current rate of 34% to 21%. We recorded an income tax expense (benefit) of 6% and (18%) of the income (loss) before income taxes during the three-month periods ended March 31, 2019 and 2018, respectively. Our net income of $145,000, or $0.03 per diluted share, during the three-month period ended March 31, 2019 was in contrast to a net (loss) of ($221,000), or ($0.04) per share, during the three-month period ended March 31, 2018.

During the second quarter of 2018, we assessed our historical and near-term future profitability and recorded approximately $563,000 in non-cash income tax expense to create a full valuation allowance against our net deferred tax assets (which consist largely of net operating loss carryforwards and federal and state tax credits) based on applicable accounting standards and practices. At that time, we had incurred a net loss for five consecutive quarters, had not been profitable on a year-to-date basis since the nine-month period ended September 30, 2017 and projected additional net losses for some period going forward before returning to profitability. Should future profitability be realized at an adequate level, we would be able to release this valuation allowance (resulting in a non-cash income tax benefit) and realize these deferred tax assets before they expire. We will continue to assess the need for the valuation allowance at each quarter and, in the event that actual results differ from these estimates or we adjust these estimates in future periods, we may need to adjust our valuation allowance. No such adjustment was recorded during the nine months ended March 31, 2019.

We believe it is important to consider our net cash provided by operating activities from our Statements of Cash Flows in the accompanying unaudited financial statements to assess the cash generating ability of our operations. Net cash provided by operating activities (which does not include investing or financing activities) was $677,000 and $250,000 during the three-month periods ended March 31, 2019 and 2018, respectively. Given our increased level of outstanding bank debt, we believe it is also important to consider the amount of our debt principal repayments that is disclosed as part of our net cash provided by financing activities from our Statements of Cash Flows in the accompanying unaudited financial statements. Debt principal repayments (excluding a $500,000 repayment of our line of credit during the first quarter of 2019) were $214,000 and $40,000 during the three-month periods ended March 31, 2019 and 2018, respectively.

Critical Accounting Policies

The financial statements are presented on the basis of accounting principles that are generally accepted in the United States. All professional accounting standards that were effective and applicable to us as of March 31, 2019 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, income taxes, contingencies and the useful lives and carrying values of intangible and long lived assets. 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 our business and understanding our financial statements.

We sell products that provide Immediate Immunity™ to newborn dairy and beef cattle. We recognize revenue in accordance with the five step model in ASC 606. These include i) identification of the contract with the customer, ii) identification of the performance obligations in the contract, iii) determination of the transaction price, iv) allocation of the transaction price to the separate performance obligations in the contract and v) recognition of revenue associated with performance obligations as they are satisfied. 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 collectability is reasonably assured. We do not bill for or collect sales tax because our sales are generally made to distributors and thus our sales to them are not subject to sales tax. We generally have experienced an immaterial amount of product returns.

Inventory includes raw materials, work-in-process and finished goods and is recorded at the lower of cost, on the first-in, first-out method, or net realizable value (determined as the estimated selling price in the normal course of business, less reasonably predictable costs of completion, disposal and transportation). Work-in-process and finished goods inventories include materials, labor and manufacturing overhead.

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ImmuCell Corporation

ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of March 31, 2019, there have been no significant changes in market risk exposures that materially affected the quantitative and qualitative disclosures as described in Item 7A in our Annual Report on Form 10-K for the year ended December 31, 2018.

ITEM 4 - CONTROLS AND PROCEDURES

Disclosure Controls and Procedures. Our management, with the participation of the individual who serves as our principal executive and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2019. Based on this evaluation, that officer concluded that our disclosure controls and procedures were effective as of that date. Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our principal executive and principal financial officer, as appropriate to allow timely decisions regarding required disclosures.

Changes in Internal Control over Financial Reporting. The individual who serves as our principal executive and principal financial officer periodically evaluates any change in internal control over financial reporting which has occurred during the prior fiscal quarter. We have concluded that there was no change in our internal control over financial reporting that occurred during the quarter ended March 31, 2019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS

In the ordinary course of business, we may become subject to lawsuits, investigations and claims. Although we cannot predict with certainty the ultimate resolution of any such lawsuits, investigations and claims against us, we do not believe that any pending or threatened legal proceedings to which we are or could become a party will have a material adverse effect on our business, results of operations, or financial condition.

ITEM 1A – RISK FACTORS

Cautionary Note Regarding Forward-Looking Statements (Safe Harbor Statement):

This Quarterly Report on Form 10-Q 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 plans and strategies for our business; projections of future financial performance; the value of our deferred tax assets; projections about depreciation expense and its impact on income for book and tax return purposes; the scope and timing of ongoing and future product development work and commercialization of our products; future costs of product development efforts; the estimated prevalence rate of subclinical mastitis; the expected efficacy of new products; estimates about the market size for our products; future market share of and revenue generated by current products and products still in development; our ability to increase production output and reduce costs of goods sold associated with our new product, Tri-Shield First Defense^®; the future adequacy of our own manufacturing facilities or those of third parties with which we have contractual relationships to meet demand for our products on a timely basis; the anticipated costs of (or time to complete) planned expansions of our manufacturing facilities and the adequacy of our funds available for these projects; the continuing availability to us on reasonable terms of third-party providers of critical products or services; the robustness of our manufacturing processes and related technical issues; estimates about our production capacity; the future adequacy of our working capital and the availability and cost of third-party financing; the timing and outcome of pending or anticipated applications for regulatory approvals; future regulatory requirements relating to our products; future expense ratios and margins; future compliance with bank debt covenants; future cost of our variable interest rate exposure on most of our bank debt; costs associated with sustaining compliance with current Good Manufacturing Practice (cGMP) regulations in our current operations and attaining such compliance for the facility to produce the Drug Substance; factors that may affect the dairy and beef industries and future demand for our products; implementation of international trade tariffs that could reduce the export of dairy products, which could in turn weaken the price received by our customers for their products; our effectiveness in competing against competitors within both our existing and our anticipated product markets; the cost-effectiveness of additional sales and marketing expenditures and resources; anticipated changes in our manufacturing capabilities and efficiencies; anticipated competitive and market conditions; and any other statements that are not historical facts. Forward-looking statements can be identified by the use of words such as “expects”, “may”, “anticipates”, “aims”, “intends”, “would”, “could”, “should”, “will”, “plans”, “believes”, “estimates”, “targets”, “projects”, “forecasts”, “seeks” and similar words and expressions. In addition, there can be no assurance that future developments affecting us will be those that we anticipate. 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 (including First Defense^® and Re-Tain™), competition within our anticipated product markets, customer acceptance of our new and existing products, product performance, alignment between our manufacturing resources and product demand, our reliance upon third parties for financial support, products and services, changes in laws and regulations, decision making by regulatory authorities, possible dilutive impacts on existing stockholders from any equity financing transactions in which we may engage, currency values and fluctuations and other risks detailed from time to time in filings we make with the SEC, including our Quarterly Reports on Form 10-Q, our Annual Reports on Form 10-K and our Current Reports on Form 8-K. Such statements involve risks and uncertainties and are based on our current expectations, but actual results may differ materially due to various factors, including the risk factors summarized below and uncertainties otherwise referred to in this Quarterly Report

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ImmuCell Corporation

Production capacity constraints: The failure to meet market demand for our products, discussed elsewhere in this report in more detail, is a risk to our business. Our plan to continue to expand the First Defense^® product line requires ongoing review of equipment capacity and utilization across the manufacturing value stream at the 56 Evergreen Drive facility as well as assessment of functional obsolescence and reliability of equipment. With the additional capital we raised at the end of the first quarter of 2019, we expect to invest approximately $3 million to increase our liquid processing capacity by 100% and our freeze drying capacity by 50% for the First Defense^® product line. There is a risk that we will not be able to achieve our production capacity growth objectives on a timely basis and that we could experience an interruption to product supply during the expansion process.

Risk of experiencing higher than anticipated costs, or delays in expanding our manufacturing facilities and risk of failing to access adequate funding to complete the expansion projects: As discussed elsewhere in this report in more detail, we presently intend to invest the aggregate of approximately $7 million to fund at least a substantial portion of the costs of: i) expanding our existing manufacturing facilities for our First Defense^® product line (approximately $3 million) and ii) potentially (we believe it is increasingly likely) constructing and equipping our own aseptic filling facility for Re-Tain™ (approximately $4 million). The preliminary cost budgets and timelines for these projects have been estimated internally and are not based on any bids or quotes or proposals from contractors or equipment suppliers or other reliable third-party information. Actual bids and binding agreements could result in longer time frames for completion and in higher actual costs, which may outstrip our available resources, and even those actual bids could understate actual costs, due to change orders, delays or other unforeseen events, in any of which instances actual project costs could exceed our current estimates. Also, our ability to fund the completion of these projects may depend on cash flows from future operations, which may not materialize or be available at the needed levels. In addition, completion of either project could be delayed due to factors outside our control, including equipment delivery delays or delays in obtaining FDA approvals for Re-Tain™.

Projection of net income (loss): Generally speaking, our financial performance can differ significantly from management projections, due to numerous factors that are difficult to predict or that are beyond our control. Weaker than expected sales of the First Defense^® product line could lead to less profits or an operating loss. Large investments in product development (or cost overruns) can result in a net loss. We were profitable during the second half of 2014, during the years ended December 31, 2015 and 2016 and during the nine-month period ended September 30, 2017. During the following five quarters, we incurred net losses (largely due to facility start-up costs and other expenses related to the development of Re-Tain™) before reporting a small profit for the quarter ended March 31, 2019. Depreciation expenses related to the Re-Tain™ production facility and related equipment are expected to contribute to reported net losses until and unless product sales increase to offset these non-cash expenses.

Deferred tax assets: The realizability of our deferred tax assets is a subjective estimate that is contingent upon many variables. During the second quarter of 2018, we recorded a full valuation allowance against our deferred tax assets that significantly increased our net loss in comparison to other periods. This non-cash expense could be reversed in the future if justified by current and near-term projections of profitability. We will continue to assess the need for the valuation allowance at each quarter. We may be able to reduce or eliminate our valuation allowance if warranted by our profitability and projected profitability in the future.

Reliance on sales of the First Defense^® product line: We are heavily reliant on the market acceptance of the First Defense^® product line to generate product sales and fund our operations. Our business would not have been profitable during the nine consecutive years in the period ended December 31, 2007, during the years ended December 31, 2012, 2013, 2015 and 2016, during the nine-month period ended September 30, 2017 or during the three-month period ended March 31, 2019, without the gross margin that we earned on sales of the First Defense^® product line.

Concentration of sales: Sales of the First Defense^® product line aggregated 94% and 97% of our total product sales during the three-month periods ended March 31, 2019 and 2018, respectively. Our primary customers for the majority of our product sales (86% and 90% during the three-month periods ended March 31, 2019 and 2018, respectively) are in the U.S. dairy and beef industries. Product sales to international customers, who are also in the dairy and beef industries, aggregated 11% and 10% of our total product sales during the three-month periods ended March 31, 2019 and 2018, respectively. The concentration of our sales from one product into one market is a risk to our business. The animal health distribution segment has been aggressively consolidating over the last few years with larger distributors acquiring smaller distributors. A large portion of our product sales (69% and 58% during the three-month periods ended March 31, 2019 and 2018, respectively) was made to two large distributors. A large portion of our trade accounts receivable (71% as of March 31, 2019 and 72% as of December 31, 2018) was due from these two distributors. We have a good history with these distributors, but the concentration of sales and accounts receivable with a small number of customers does present a risk to us, including risks related to such customers experiencing financial difficulties or altering the basis on which they do business with us.

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ImmuCell Corporation

Gross margin on product sales: It is one of our goals to again achieve a gross margin (before related depreciation expenses) as a percentage of total sales close to 50% after the initial launch of new products. Depreciation expense will be a larger component of costs of goods sold for Re-Tain™ than it is for First Defense^®, and gross margins generally improve over time. Many factors discussed in this report impact our costs of goods sold. There is a risk that we are not able to achieve our gross margin goals, which would adversely affect our operating results and could impact our future operating plans.

Product risks: The sale of our products is subject to production, financial, efficacy, regulatory, competitive and other market risks. Elevated standards to achieve and maintain regulatory compliance required to sell our products continue to evolve. Failure to achieve acceptable biological yields from our production processes can materially increase our costs of goods sold and reduce our production output, leading to an order backlog. We have experienced customer complaints pertaining to the gel tube format of the First Defense^® product line about some product that has become compacted and not expressible. We believe these failures result from exposure of our original formula to excessive heat conditions. This is a risk to achieving and maintaining customer acceptance. The costs associated with replacing defective product are accounted for in costs of goods sold. We believe we have improved our formulation and production processes to prevent this problem going forward and are now incurring added costs to ship this product under cold chain. There is no assurance that we will continue to achieve market acceptance at a profitable price level or that we can continue to manufacture our products at a low enough cost to result in a sufficient gross margin to justify their continued manufacture and sale.

Product liability: The manufacture and sale of our products entails a risk of product liability. Our exposure to product liability is mitigated to some extent by the fact that our products are 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. We have no history of claims of this nature being made.

Regulatory requirements for the First Defense^® product line: First Defense^® is sold in the United States subject to a product license from the Center for Veterinary Biologics, USDA, which was first obtained in 1991 with subsequent approvals of line extensions in 2017 and 2018. As such, our operations are subject to periodic inspection by the USDA. The potency of serial lots is directly traceable to the original serial used to obtain the product performance claims (the “Reference Standard”). Due to the unique nature of the label claims, host animal re-testing is not required as long as periodic laboratory analyses continue to support the stability of stored Reference Standard. To date, these analyses have demonstrated strong stability. However, if the USDA were not to approve requalification of the Reference Standard, additional clinical studies could be required to meet regulatory requirements and allow for continued sales of the product. We expect to be subject to similar regulatory oversight risks in territories outside of the United States where we sell our products.

Regulatory requirements for Re-Tain™: The commercial introduction of this product in the United States will require us to obtain FDA approval. Completing the development through to approval of the NADA by the FDA involves risk. While four of the five required Technical Sections have been approved, the development process timeline has been extensive (approximately 19 years) and has involved multiple commercial production strategies. The Chemistry, Manufacturing and Controls Technical Section was submitted for the Nisin Drug Substance during the first quarter of 2019. The timeline for the Nisin Drug Product submission defines the critical path to product approval. To reduce the risk associated with this process, we have met with the FDA on multiple occasions to align on filing strategy and requirements. We have disclosed a timeline of events that could lead to potential approval by the end of 2020. However, there remains a risk that approval could be delayed or not obtained. We are exposed to additional regulatory compliance risks through the subcontractors that we choose to work with to produce Re-Tain™, who also need to satisfy certain regulatory requirements in order to provide us with the products and services we need. International regulatory approvals would be required for sales outside of the United States. European regulatory authorities are not expected to approve a product with a zero milk discard claim, which would remove a significant competitive advantage in that territory. However, the assigned milk discard period may be shorter for our product than it is for other products on the market in Europe.

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ImmuCell Corporation

Economics of the dairy and beef industries:

● The January count of all cattle and calves in the United States had steadily declined from 97,000,000 as of January 1, 2007 to 88,500,000 as of January 1, 2014. Then this figure increased each year to reach 94,800,000 as of January 1, 2019, which is 0.5% higher than at January 1, 2018.

● From 1998 through 2018, the size (annual average) of the U.S. dairy herd ranged from approximately the low of 9,011,000 (2004) to the high of 9,392,000 (2017). The monthly average for 2018 increased slightly to 9,399,000. This monthly average dropped to 9,351,000 during the first quarter of 2019.

● The Class III milk price (an industry benchmark that reflects the value of product used to make cheese) is an important indicator because it defines our customers’ revenue level. This annual average milk price level (measured in dollars per hundred pounds of milk) reached its highest point ever during 2014 at $22.34 (peaking at $24.60 in September 2014) since these prices were first reported in 1980. The 2014 high price for milk corresponds to a low count of cattle and calves of 88,500,000 on January 1, 2014 and an average annual U.S. dairy herd size of 9,256,000 during 2014. This average annual herd size from 1998 to 2013 was always lower than the 2014 level (except for during 2008), and since 2014 this average annual herd size has always been higher than the 2014 level. This strong milk price level during 2014 declined to the average of $15.80 during 2015 and further declined to $14.87 during 2016, but increased by 9% to $16.17 during 2017 and then declined by 10% to $14.61 during 2018. During the first quarter of 2019, this milk price averaged $14.30. The low price level in 2018 and into 2019 is very challenging to the profitability of our customers. The recent annual fluctuations in this milk price level are demonstrated in the following table:

Average Class III Milk Price for the Year Ended December 31,			(Decrease) Increase
	2014	2015
	$22.34	$15.80		(29%)
	2015	2016
	$15.80	$14.87		(6%)
	2016	2017
	$14.87	$16.17		9%
	2017	2018
	$16.17	$14.61		(10%)

● The actual level of milk prices may be less important than its level relative to feed costs. One measure of this relationship is known as the milk-to-feed price ratio, which represents the amount of feed that one pound of milk can buy. The annual average for this ratio of 1.52 in 2012 was the lowest recorded since this ratio was first reported in 1985. The highest annual average this ratio has reached since it was first reported in 1985 was 3.64 in 1987. Since this ratio reached 3.24 in 2005, it has not exceeded 3.0. The annual average of 2.54 for 2014 was the highest this ratio has been since it was 2.81 in 2007. This ratio dropped 16% from 2.42 in 2017 to an annual average of 2.04 during 2018. The annual average has not been lower than this level since 2013. This ratio averaged 2.09 during the first quarter of 2019. An increase in feed costs also has a negative impact on the beef industry. The following table demonstrates the annual volatility and the low values of this ratio recently:

Average Milk-To-Feed Price Ratio for the Year Ended December 31,			(Decrease) Increase
	2014	2015
	2.54	2.14		(16%)
	2015	2016
	2.14	2.26		6%
	2016	2017
	2.26	2.42		7%
	2017	2018
	2.42	2.04		(16%)

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ImmuCell Corporation

● While the number of cows in the U.S. herd and the production of milk per cow directly influence the supply of milk, the price for milk is also influenced by very volatile international demand for milk products.

● The all-time high value (annual average) for a milk cow was $1,993 during 2015. Since then, this annual average value has steadily declined to $1,358 during 2018. The 2018 value represents a 32%, or $635, decrease from the 2015 high. This price dropped to $1,140 during January of 2019 and remained at that level as of April 2019.

● The industry data referred to above is compiled from USDA databases. Additionally, the value of newborn bull calves had risen to the unusually high level of approximately $300 to $400 during 2015 but has declined to very little presently, depending on region.

Given our focus on the dairy and beef industries, the volatile market conditions and the resulting financial insecurities of our primary end users are risks to our ability to maintain and grow sales at a profitable level. These factors also heighten the challenge of selling premium-priced animal health products (such as Tri-Shield First Defense^® and Re-Tain™) into the dairy market.

Product development risks: The development of new products is subject to financial, scientific, regulatory, and market risks. Our current business growth strategy relies heavily on the development of Re-Tain™, our new product to treat subclinical mastitis, which has required (and will continue to require) a substantial investment of capital resources and personnel. Our efforts will be subject to inspection and approval by the FDA. There is no assurance whether or when we will obtain all of the data necessary to support regulatory approval for this product.

Risks associated with our funding strategy for Re-Tain™: Producing our pharmaceutical-grade Nisin at commercial-scale is the most critical action in front of us on our path to U.S. regulatory approval for this product. Having completed construction of the production facility described elsewhere in this report at a cost of approximately $20.8 million, we will continue to incur product development expenses to operate this facility. We do not know whether we will receive the necessary regulatory approvals to manufacture and sell the product, or whether the product will achieve market acceptance and profitability. The additional debt we incurred to fund this project will significantly increase our debt service costs going forward. These loans are subject to certain financial covenants. Absent sufficient sales of Re-Tain™ at a profitable gross margin, we would be required to fund all debt service costs from sales of the First Defense^® product line, which would reduce, and could eliminate, our expected profitability going forward and significantly reduce our cash flows. As discussed elsewhere in this report in more detail, we may incur additional capital costs to construct our own aseptic filling capability for Re-Tain™ which would magnify the risks detailed in this paragraph.

Uncertainty of market size and product sales estimates for Re-Tain™: Estimating the size of the market for any new product is subject to numerous uncertainties. Some of the uncertainties surrounding our product include market acceptance, the development of the subclinical mastitis treatment market, the effect of a premium selling price on market penetration, competition from existing products sold by substantially larger competitors, the risk of competition from other new products, cost of manufacture and integration of milk from treated cows with susceptible cheese starter cultures. Given what we believe to be reasonable assumptions, we estimate that the market potential for first year sales of our new product could be approximately $5.8 million and could grow to approximately $36.1 million during the fifth year after market launch. The amount of sales that we can capture from this estimated market potential and the timing of when this can be achieved is very difficult to know, and the actual size of the market for our new product may differ materially from our estimates (up or down). We expect the Drug Substance production facility that we have constructed to have production capacity to meet at least $10 million in annual sales. Our new facility is designed to have enough room to add a second fermentation and recovery portion of the production line to be purchased and installed at the cost of approximately $7 million to effectively double production output. However, we are considering the strategic alternative of using this available space to perform the final formulation, aseptic filling and final packaging services in-house.

Exposure to debt service obligations and debt covenants: Rising interest rates could negatively affect our operating results due to the large portion of our borrowings that bear interest at variable rates (which were not effectively converted to fixed rate obligations through interest rate swaps) as well as by increasing dairy farmers’ operating costs and thus putting further financial pressure on an already stressed business sector. Based on the terms of our bank debt agreements effective as of March 31, 2019, we are required by bank debt covenant to maintain at least $2 million of otherwise unrestricted cash, cash equivalents and short-term investments. This requirement effectively reduces the availability of our liquid assets for operational needs and creates a risk of non-compliance.

Competition from others: Many of our competitors are significantly larger and more diversified in the relevant markets than we are and have substantially greater financial, marketing, manufacturing and human resources and more extensive product development capabilities than we do, including greater ability to withstand adverse economic or market conditions and declining revenues and/or profitability. Elanco, Merck and Zoetis, among other companies, sell products that compete directly with the First Defense^® product line in preventing scours in newborn calves. The scours product sold by Zoetis sells for approximately half the price of our product, but it does not have an E. coli claim (which ours does). With Tri-Shield First Defense^®, we can now compete directly against vaccines that are given to the mother cow (dam) to improve the quality of the colostrum that she produces for the newborn calf. Merck and Zoetis dominate the market for these dam vaccine products. The market for the treatment of mastitis in dairy cows is highly competitive, and presently is dominated by large companies such as Boehringer Ingelheim, Merck and Zoetis. The mastitis products sold by these large companies are well established in the market and are priced lower than what we expect for our product, but all of them involve traditional antibiotics and are sold subject to a requirement to discard milk during and for a period of time after treatment. There is no assurance that our product will compete successfully in this market. We may not be aware of other companies that compete with us or intend to compete with us in the future.

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ImmuCell Corporation

Access to raw materials and contract manufacturing services: Our objective is to maintain more than one source of supply for the components used to manufacture and test our products that we obtain from third parties. However, there is a risk that we could have difficulty in efficiently acquiring essential supplies. We have significantly increased the number of farms from which we purchase colostrum. The loss of farms from which we buy raw material for the First Defense^® product line could make it difficult for us to produce enough inventory to meet customer demand. The specific antibodies that we purify from colostrum for the First Defense^® product line are not readily available from other sources. We are and will be dependent on our manufacturing facilities and operations in Portland for the production of the First Defense^®product line and Re-Tain™. We are and will be dependent on Plas-Pak Industries, Inc. (now owned by Nordson Corporation) for the supply of the syringes used for our gel tube format of Dual-Force™ First Defense^®, Tri-Shield First Defense^® and Re-Tain™. The supply contract covering the mastitis syringes has been extended to January 1, 2024. We expect to be dependent on a contract with Norbrook for the Drug Product formulation, aseptic filling and packaging of our Nisin Drug Substance into Drug Product unless we find an alternative contractor or invest to perform these services in-house. Norbrook may have the right to terminate the agreement in December 2019 and charge us a $100,000 termination fee if (as we anticipate) we do not receive FDA approval for Re-Tain™ by that date. We have been and are currently negotiating certain contract modifications and a term extension with Norbrook. There is no assurance that this negotiation will be successful for us. Due to the potential loss of this contract as discussed elsewhere in this report, we are evaluating alternative sources for these services (including a potential investment in our own facility to perform these services internally) for potential use post-approval, but given the requirement that such a facility be inspected and approved by the FDA, it could be costly and time-consuming to find and qualify an adequate alternative source for these services. Also, our potential alternative options for these services are narrowed considerably because our product cannot be formulated or filled in a facility that also processes traditional antibiotics (i.e. beta lactams). There can be no assurance that we would be able to identify and reach contractual terms with a duly licensed/certified provider of these services, as applicable, if our relationship with Norbrook were to be terminated or, if we were able to do so, how quickly that could occur and on what terms. Such a shift could result in significant production interruptions, delay in market launch, significantly increased costs of goods sold and reduced margins, the effects of which could be material and adverse to us. Any significant damage to or other disruption in the services at any of these third-party facilities (including due to regulatory non-compliance) could adversely affect the production of inventory and result in significant added expenses and potential loss of future sales.

Small size; dependence on key personnel: We are a small company with 50 employees (including 3 part-time employees). As such, we rely on certain key employees to support multiple operational functions, with limited redundancy in capacity. The loss of any of these key employees could adversely affect our operations until a qualified replacement is hired and trained. Our competitive position will be highly influenced by our ability to attract and retain key scientific, manufacturing, managerial and sales and marketing personnel, to develop proprietary technologies and products, to obtain USDA or FDA approval for new products, to maintain regulatory compliance with current products and to continue to profitably sell our current products. We continue to monitor our network of independent distributors to maintain our competitive position.

Failure to protect intellectual property: In some cases, we have chosen (and may choose in the future) not to seek patent protection for certain products or processes. Instead, we have sought (and may seek in the future) to maintain the confidentiality of any relevant proprietary technology through operational safeguards and 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. 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. There is also a risk that competitors could challenge the claims in patents that have been issued to us.

Cost burdens of our reporting obligations as a public company: Operating a public company involves substantial costs to comply with reporting obligations under federal securities laws and the provisions of the Sarbanes-Oxley Act of 2002.

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ImmuCell Corporation

Exposure to risks associated with the financial downturn and economic instability: Positive indications about the health of the U.S. economy could prove temporary, and a downturn could occur. Some observers believe that the housing market remains problematic for the overall U.S. economy, the United States has taken on too much national debt and the equity markets are overvalued. Interest rates are trending higher, which could adversely affect us and the general economy and our customers. The dairy market is presently under extreme economic pressure, causing many of our customers to lose money or only earn minimal profits. A small percentage reduction in the export of dairy products results in a significant drop in the domestic price of milk. A combination of the conditions, trends and concerns summarized above could have a corresponding negative effect on our business and operations, including the demand for our products in the U.S. market and our ability to penetrate or maintain a profitable presence in international markets.

Bovine diseases: The potential for epidemics of bovine diseases such as Foot and Mouth Disease, Bovine Tuberculosis, Brucellosis and Bovine Spongiform Encephalopathy (BSE) presents a risk to us and our customers. Documented cases of BSE in the United States have led to an overall tightening of regulations pertaining to ingredients of animal origin, especially bovine. The First Defense^® product line is manufactured from bovine milk (colostrum), which is not considered a BSE risk material. Future regulatory action to increase protection of the human food supply could affect the First Defense^® product line, although presently we do not anticipate that this will be the case.

Biological terrorism: The threat of biological terrorism is a risk to both the economic health of our customers and our ability to economically acquire and collect good quality raw material from our contract farms. Any act of widespread bioterrorism against the dairy industry could adversely affect our operations.

Certain provisions might discourage, delay or prevent a change in control of our Company or changes in our management: Provisions of our certificate of incorporation, our bylaws, our Common Stock Rights Plan or Delaware law may discourage, delay or prevent a merger, acquisition or other change in control that stockholders may consider favorable, including transactions in which stockholders might otherwise receive a premium for their shares of our common stock. These provisions may also prevent or frustrate attempts by our stockholders to replace or remove our management. These provisions include:

● limitations on the removal of directors;

● advance notice requirements for stockholder proposals and nominations;

● the ability of our Board of Directors to alter or repeal our bylaws;

● the ability of our Board of Directors to refuse to redeem rights issued under our Common Stock Rights Plan or otherwise to limit or suspend its operation that would work to dilute the stock ownership of a potential hostile acquirer, likely preventing acquisitions that have not been approved by our Board of Directors; and

● Section 203 of the Delaware General Corporation Law, which prohibits a publicly-held Delaware corporation from engaging in a business combination with an interested stockholder (generally defined as a person which together with its affiliates owns, or within the last three years has owned, 15% of our voting stock, for a period of three years after the date of the transaction in which the person became an interested stockholder) unless the business combination is approved in a prescribed manner.

The existence of the foregoing provisions and anti-takeover measures could depress the trading price of our common stock or limit the price that investors might be willing to pay in the future for shares of our common stock. They could also deter potential acquirers of our Company, thereby reducing the likelihood of obtaining a premium for our common stock in an acquisition.

Stock market valuation and liquidity: Our common stock trades on The Nasdaq Stock Market (Nasdaq: ICCC). Our average daily trading volume is lower than the volume for most other companies and the bid/ask stock price spread can be larger and prices can be volatile, which could result in investors facing difficulty selling their stock for proceeds that they may expect or desire. There are companies in the animal health sector with market capitalization values that greatly exceed our current market capitalization of approximately $43,000,000 as of May 2, 2019. We currently (for the year ended December 31, 2018) have annual product sales of approximately $11,000,000. Before gross margin from the sale of new products is achieved, our market capitalization may be heavily dependent on the perceived potential for growth from our products under development.

No expectation to pay any dividends or repurchase stock for the foreseeable future: We do not anticipate paying any dividends to, or repurchasing stock from, our stockholders for the foreseeable future. Instead, we expect to use cash to fund product development costs and investments in our facility and production equipment, and to increase our working capital and to reduce debt. Stockholders must be prepared to rely on sales of their common stock after price appreciation to earn an investment return, which may never occur. Any determination to pay dividends in the future will be made at the discretion of our Board of Directors and will depend on our financial condition, results of operations, contractual restrictions, restrictions imposed by applicable laws, current and anticipated needs for liquidity and other factors our Board of Directors deems relevant.

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ImmuCell Corporation

ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4 - MINE SAFETY DISCLOSURES

None

ITEM 5 - OTHER INFORMATION

None

ITEM 6 – EXHIBITS

Exhibit 31	Certifications required by Rule 13a-14(a).
Exhibit 32	Certification pursuant to Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document.
101.SCH	XBRL Taxonomy Extension Schema Document.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.

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ImmuCell Corporation

SIGNATURE

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	ImmuCell Corporation
	Registrant
Date: May 13, 2019	By:	/s/ Michael F. Brigham
		Michael F. Brigham
		President, Chief Executive Officer
		and Principal Financial Officer

EX-31

EXHIBIT 31

ImmuCell Corporation

CERTIFICATIONS REQUIRED BY RULE 13a-14(a)

I, Michael F. Brigham, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of ImmuCell Corporation (the Company);

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 Company 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 Exchange Act Rules 13a- 15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company 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 Company is made known to me by others within the Company, particularly during the period in which this report is being prepared;

b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)evaluated the effectiveness of the Company’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 Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter (the Company’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Company’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 Company’s auditors and the audit committee of the Company’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 Company’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 Company’s internal control over financial reporting.

Date: May 13, 2019

/s/ Michael F. Brigham

Michael F. Brigham

President, Chief Executive Officer and
Principal Financial Officer

EX-32

EXHIBIT 32

ImmuCell Corporation

CERTIFICATION PURSUANT TO SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES- OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of ImmuCell Corporation (the “Company”) for the period ended March 31, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael F. Brigham, President, Chief Executive Officer and Principal Financial Officer 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), as applicable, of the Securities Exchange Act of 1934, as amended (the “Exchange Act”); 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.

This certification is provided pursuant to 18 U.S.C. Section 1350 and Item 601(b)(32) of Regulation S-K (“Item 601(b)(32)”) promulgated under the Securities Act of 1933, as amended (the “Securities Act”), and the Exchange Act. In accordance with clause (ii) of Item 601(b)(32), this certification (A) shall not be deemed “filed” for the purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and (B) shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the Company specifically incorporates it by reference.

/s/ Michael F. Brigham

Michael F. Brigham

President, Chief Executive Officer and
Principal Financial Officer

May 13, 2019

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.

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2019	May 02, 2019
Document and Entity Information [Abstract]
Entity Registrant Name	IMMUCELL CORP /DE/
Entity Central Index Key	0000811641
Amendment Flag	false
Trading Symbol	ICCC
Current Fiscal Year End Date	--12-31
Document Type	10-Q
Document Period End Date	Mar. 31, 2019
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2019
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Ex Transition Period	false
Entity Common Stock, Shares Outstanding		7,209,595

XML

Balance Sheets (Unaudited) - USD ($)	Mar. 31, 2019	Dec. 31, 2018
CURRENT ASSETS:
Cash and cash equivalents	$ 10,584,067	$ 2,521,050
Trade accounts receivable, net	1,283,096	932,298
Inventory	2,035,793	2,331,671
Prepaid expenses and other current assets	755,237	635,817
Total current assets	14,658,193	6,420,836
PROPERTY, PLANT AND EQUIPMENT, net	25,585,452	26,027,549
INTANGIBLE ASSETS, net	128,952	133,728
GOODWILL	95,557	95,557
INTEREST RATE SWAPS	4,117	40,209
OTHER ASSETS	4,359	12,953
TOTAL ASSETS	40,476,630	32,730,832
CURRENT LIABILITIES:
Accounts payable and accrued expenses	1,172,756	1,220,660
Current portion of bank debt	846,292	844,351
Line of credit		500,000
Total current liabilities	2,019,048	2,565,011
LONG-TERM LIABILITIES:
Bank debt, net of current portion	8,209,489	8,421,487
Total long-term liabilities	8,209,489	8,421,487
TOTAL LIABILITIES	10,228,537	10,986,498
CONTINGENT LIABILITIES AND COMMITMENTS (See Note 17)
STOCKHOLDERS' EQUITY:
Common stock, $0.10 par value per share, 11,000,000 and 11,000,000 shares authorized, 7,299,009 and 5,662,645 shares issued and 7,209,595 and 5,568,962 shares outstanding, as of March 31, 2019 and December 31, 2018, respectively	729,901	566,265
Additional paid-in capital	30,908,855	22,695,557
Accumulated deficit	(1,198,143)	(1,342,698)
Treasury stock, at cost, 89,414 and 93,683 shares as of March 31, 2019 and December 31, 2018, respectively	(195,608)	(204,947)
Accumulated other comprehensive income	3,088	30,157
Total stockholders' equity	30,248,093	21,744,334
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 40,476,630	$ 32,730,832

XML

Balance Sheets (Unaudited) (Parenthetical) - $ / shares	Mar. 31, 2019	Dec. 31, 2018
Statement of Financial Position [Abstract]
Common stock, par value (in dollars per share)	$ 0.10	$ 0.10
Common stock, shares authorized	11,000,000	11,000,000
Common stock, shares issued	7,299,009	5,662,645
Common stock, shares outstanding	7,209,595	5,568,962
Treasury stock, shares	89,414	93,683

XML

Statements of Operations (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Income Statement [Abstract]
Product sales	$ 4,410,561	$ 2,881,185
Costs of goods sold	2,209,090	1,521,444
Gross margin	2,201,471	1,359,741
Product development expenses	910,370	582,934
Sales and marketing expenses	607,104	531,905
Administrative expenses	418,693	423,057
Operating activities, net	1,936,167	1,537,896
NET OPERATING INCOME (LOSS)	265,304	(178,155)
Other expenses, net	111,726	92,116
INCOME (LOSS) BEFORE INCOME TAXES	153,578	(270,271)
Income tax expense (benefit)	9,023	(49,148)
NET INCOME (LOSS)	$ 144,555	$ (221,123)
Basic weighted average common shares outstanding	5,624,504	5,477,921
Basic net income (loss) per share	$ 0.03	$ (0.04)
Diluted weighted average common shares outstanding	5,666,549	5,477,921
Diluted net income (loss) per share	$ 0.03	$ (0.04)

XML

Statements of Comprehensive Income (Loss) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Statement of Comprehensive Income [Abstract]
Net income (loss)	$ 144,555	$ (221,123)
Other comprehensive (loss) income:
Interest rate swaps, before taxes	(36,092)	58,625
Income tax applicable to interest rate swaps	9,023	(14,766)
Other comprehensive (loss) income, net of taxes	(27,069)	43,859
Total comprehensive income (loss)	$ 117,486	$ (177,264)

XML

Statements of Stockholders' Equity (Unaudited) - USD ($)	Common Stock	Additional paid-in capital	Retained Earnings (Accumulated Deficit)	Treasury Stock	Accumulated Other Comprehensive (Loss) Income	Total
Balance at Dec. 31, 2017	$ 566,265	$ 22,458,219	$ 978,973	$ (407,879)	$ (638)	$ 23,594,940
Balance, Shares at Dec. 31, 2017	5,662,645			186,448
Net income			(221,122)			(221,123)
Other comprehensive loss, net of taxes					43,859	43,859
Exercise of stock options		(4,507)		$ 8,662		4,155
Exercise of stock options, Shares				(3,960)
Stock-based compensation		71,048				71,048
Balance at Mar. 31, 2018	$ 566,265	22,524,760	757,851	$ (399,217)	43,221	23,492,880
Balance, Shares at Mar. 31, 2018	5,662,645			182,488
Balance at Dec. 31, 2018	$ 566,265	22,695,557	(1,342,698)	$ (204,947)	30,157	21,744,334
Balance, Shares at Dec. 31, 2018	5,662,645			93,683
Net income			144,555			144,555
Other comprehensive loss, net of taxes					(27,069)	(27,069)
Public offering of common stock, net of $696,566 of offering costs	$ 163,636	8,139,800				8,303,436
Public offering of common stock, net of $696,566 of offering costs, Shares	1,636,364
Exercise of stock options		(9,337)		$ 9,339		2
Exercise of stock options, Shares				(4,269)
Stock-based compensation		82,835				82,835
Balance at Mar. 31, 2019	$ 729,901	$ 30,908,855	$ (1,198,143)	$ (195,608)	$ 3,088	$ 30,248,093
Balance, Shares at Mar. 31, 2019	7,299,009			89,414

XML

Statements of Stockholders' Equity (Unaudited) (Parenthetical)	3 Months Ended
	Mar. 31, 2019 USD ($)
Statement of Stockholders' Equity [Abstract]
Common stock, public offering costs	$ 696,566

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Statements of Cash Flows (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$ 144,555	$ (221,123)
Adjustments to reconcile net income (loss) to net cash  provided by operating activities:
Depreciation	563,805	279,896
Amortization	4,776	4,776
Amortization of debt issue costs	4,244	4,204
Deferred income taxes	9,023	(46,276)
Stock-based compensation	82,835	71,048
Changes in:
Accounts receivable	(350,798)	344,123
Inventory	295,878	119,806
Prepaid expenses and other current assets	(119,420)	(87,072)
Other assets	8,594	(4,911)
Accounts payable and accrued expenses	33,705	(214,809)
Net cash provided by operating activities	677,197	249,662
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment	(194,403)	(1,213,252)
Payment of contingent royalties related to 2016 acquisition	(8,914)	(5,723)
Net cash used in investing activities	(203,317)	(1,218,975)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from public offering, net	8,303,436
Proceeds from debt issue		267,141
Line of credit repayment	(500,000)
Debt principal repayments	(214,301)	(39,803)
Payments of debt issue costs		(522)
Proceeds from exercise of stock options	2	4,156
Net cash provided by financing activities	7,589,137	230,972
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	8,063,017	(738,341)
BEGINNING CASH AND CASH EQUIVALENTS	2,521,050	3,798,811
ENDING CASH AND CASH EQUIVALENTS	10,584,067	3,060,470
CASH PAID FOR:
Income taxes
Interest expense	112,227	89,313
NON-CASH ACTIVITIES:
Change in capital expenditures included in accounts payable and accrued expenses	(72,695)	(574,288)
Net change in fair value of interest rate swaps, net of taxes	27,069	(43,859)
Fixed asset disposals, gross	$ 1,830	$ 3,430

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Business Operations

3 Months Ended

Mar. 31, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

BUSINESS OPERATIONS

1. BUSINESS OPERATIONS

ImmuCell Corporation (the “Company”, “we”, “us”, “our”) was originally incorporated in Maine in 1982 and reincorporated in Delaware in 1987, in conjunction with its initial public offering of common stock. We are an animal health company whose purpose is to create scientifically-proven and practical products that improve the health and productivity of dairy and beef cattle. We market products that provide Immediate Immunity™ to newborn dairy and beef cattle. We are developing extensions to the First Defense^® product line and are in the late stages of developing Re-Tain™, a treatment for mastitis, the most significant cause of economic loss to the dairy industry. These products help reduce the need to use traditional antibiotics in food producing animals. The Company is subject to certain risks associated with its stage of development including dependence on key individuals and third-party providers of critical goods and services, competition from other larger companies, the successful sale of existing products and the development and acquisition of additional commercially viable products with appropriate regulatory approvals, where applicable. Based on our best estimates and projections, we believe that we have sufficient capital resources to continue operations for at least twelve months from the date of this filing.

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Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2019

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of Presentation

We have prepared the accompanying unaudited financial statements reflecting all adjustments that are, in our opinion, necessary in order to ensure that the financial statements are not misleading. We follow accounting standards set by the Financial Accounting Standards Board (FASB). The FASB sets generally accepted accounting principles (GAAP) that we follow to ensure we consistently report our financial condition, results of operations, earnings per share and cash flows. References to GAAP in these footnotes are to the FASB Accounting Standards Codification™ (Codification). Accordingly, we believe that the disclosures are adequate to ensure that the information presented is not misleading.

(b) Cash and Cash Equivalents

We consider all highly liquid investment instruments that mature within three months of their purchase dates to be cash equivalents. Cash equivalents are principally invested in securities backed by the U.S. government. Certain cash balances in excess of Federal Deposit Insurance Corporation (FDIC) limits of $250,000 per financial institution per depositor are maintained in money market accounts at financial institutions that are secured, in part, by the Securities Investor Protection Corporation. Amounts in excess of these FDIC limits per bank that are not invested in securities backed by the U.S. government aggregated $10,331,744 and $2,268,737 as of March 31, 2019 and December 31, 2018, respectively. We account for investments in marketable securities in accordance with Codification Topic 320, Investments — Debt and Equity Securities. See Note 3.

(c) Accounts Receivable

Accounts receivable are carried at the original invoice amount less an estimate made for doubtful collection. Management determines the allowance for doubtful accounts on a monthly basis by identifying troubled accounts and by using historical experience applied to an aging of accounts. Accounts receivable are considered to be past due if a portion of the receivable balance is outstanding for more than 30 days. Past due accounts receivable are subject to an interest charge. Accounts receivable are written off when deemed uncollectible. The amount of accounts receivable written off during all periods reported was immaterial. Recoveries of accounts receivable previously written off are recorded as income when received. As of March 31, 2019 and December 31, 2018, we determined that no allowance for bad debt was necessary. See Note 4.

(d) Inventory

Inventory includes raw materials, work-in-process and finished goods and is recorded at the lower of cost, on the first-in, first-out method, or net realizable value (determined as the estimated selling price in the normal course of business, less reasonably predictable costs of completion, disposal and transportation). Work-in-process and finished goods inventories include materials, labor and manufacturing overhead. At each monthly balance sheet date, we evaluate our ending inventories for excess quantities and obsolescence. Inventories that we consider excess or obsolete are reserved. Once inventory is written down and a new cost basis is established, it is not written back up if demand increases. We believe that supplies and raw materials for the production of our products are available from more than one vendor. Our policy is to maintain more than one source of supply for the components used in our products when practicable. See Note 5.

(e) Property, Plant and Equipment

We depreciate property, plant and equipment on the straight-line method by charges to operations and costs of goods sold in amounts estimated to expense the cost of the assets from the date they are first put into service to the end of the estimated useful lives of the assets. The facility we have constructed to produce the active pharmaceutical ingredient (Nisin) for Re-Tain™ is being depreciated over 39 years from when a certificate of occupancy was issued during the fourth quarter of 2017. We began depreciating the equipment for our Nisin production facility when it was placed in service during the third quarter of 2018. Approximately 89% of these assets are being depreciated over ten years. Significant repairs to fixed assets that benefit more than a current period are capitalized and depreciated over their useful lives. Insignificant repairs are expensed when incurred. See Note 7.

(f) Intangible Assets and Goodwill

We amortize intangible assets on the straight-line method by charges to costs of goods sold in amounts estimated to expense the cost of the assets from the date they are first put into service to the end of the estimated useful lives of the assets. We have recorded intangible assets related to customer relationships, non-compete agreements, and developed technology, each with defined useful lives. We have classified as goodwill the amounts paid in excess of fair value of the net assets (including tax attributes) acquired in purchase transactions.

We assess the impairment of intangible assets and goodwill that have indefinite lives at the reporting unit level on an annual basis (as of December 31^st) and whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. We would record an impairment charge if such an assessment were to indicate that the fair value of such assets was less than the carrying value. Judgment is required in determining whether an event has occurred that may impair the value of goodwill or identifiable intangible assets. Factors that could indicate that an impairment may exist include significant under-performance relative to plan or long-term projections, significant changes in business strategy and significant negative industry or economic trends. Although we believe intangible assets and goodwill are properly stated in the accompanying financial statements, changes in strategy or market conditions could significantly impact these judgments and require an adjustment to the recorded balance. No goodwill impairments were recorded during the three-month periods ended March 31, 2019 or 2018. See Notes 2(h), 8 and 9 for additional disclosures.

(g) Fair Value Measurements

In determining fair value measurements, we follow the provisions of Codification Topic 820, Fair Value Measurements and Disclosures. Codification Topic 820 defines fair value, establishes a framework for measuring fair value under GAAP and enhances disclosures about fair value measurements. The topic provides a consistent definition of fair value which focuses on an exit price, which is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The topic also prioritizes, within the measurement of fair value, the use of market-based information over entity-specific information and establishes a three-level hierarchy for fair value measurements based on the nature of inputs used in the valuation of an asset or liability as of the measurement date. As of March 31, 2019 and December 31, 2018, the carrying amounts of cash and cash equivalents, accounts receivable, inventory, other assets, accounts payable, deferred revenue and accrued liabilities approximate fair value because of their short-term nature. The amount outstanding under our bank debt facilities is measured at carrying value in our accompanying balance sheets. Our bank debt facilities are valued using Level 2 inputs. The estimated fair value of our bank debt facilities approximates their carrying value based on similar instruments with similar maturities. The three-level hierarchy is as follows:

Level 1— Pricing inputs are quoted prices available in active markets for identical assets or liabilities as of the measurement date.

Level 2— Pricing inputs are quoted prices for similar assets or liabilities, or inputs that are observable, either directly or indirectly, for substantially the full term through corroboration with observable market data.

Level 3— Pricing inputs are unobservable for the assets or liabilities, that is, inputs that reflect the reporting entity's own assumptions about the assumptions market participants would use in pricing the asset or liability.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an asset's or liability's level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. From time to time, we also hold money market mutual funds in a brokerage account, which are classified as cash equivalents and measured at fair value. The fair value of these investments is based on their closing published net asset value.

We assess the levels of the investments at each measurement date, and transfers between levels are recognized on the actual date of the event or change in circumstances that caused the transfer in accordance with our accounting policy regarding the recognition of transfers between levels of the fair value hierarchy. During the three-month periods ended March 31, 2019 and 2018, there were no transfers between levels. As of March 31, 2019 and December 31, 2018, our Level 1 assets measured at fair value by quoted prices in active markets consisted of bank savings accounts and money market funds. As of March 31, 2019 and December 31, 2018, our interest rate swaps were classified as Level 2 and were measured by observable market data in combination with expected cash flows for each instrument. There were no assets or liabilities measured at fair value on a nonrecurring basis as of March 31, 2019 or December 31, 2018.

	As of March 31, 2019
	Level 1		Level 2		Level 3		Total
Assets:
Cash and money market accounts	$	10,584,067	$	—	$	—	$	10,584,067
Interest rate swaps		—		4,117		—		4,117
Total	$	10,584,067	$	4,117	$	—	$	10,588,184

	As of December 31, 2018
	Level 1		Level 2		Level 3		Total
Assets:
Cash and money market accounts	$	2,521,050	$	—	$	—	$	2,521,050
Interest rate swaps		—		40,209		—		40,209
Total	$	2,521,050	$	40,209	$	—	$	2,561,259

(h) Valuation of Long-Lived Assets

We periodically evaluate our long-lived assets, consisting principally of fixed assets and amortizable intangible assets, for potential impairment. In accordance with the applicable accounting guidance for the treatment of long-lived assets, we review the carrying value of our long-lived assets or asset group that is held and used, including intangible assets subject to amortization, for impairment whenever events and circumstances indicate that the carrying value of the assets may not be recoverable. Under the held for use approach, the asset or asset group to be tested for impairment should represent the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. We evaluate our long-lived assets whenever events or circumstances suggest that the carrying amount of an asset or group of assets may not be recoverable. No impairment was recognized during the three-month periods ended March 31, 2019 and 2018.

(i) Concentration of Risk

Concentration of credit risk with respect to accounts receivable is principally limited to certain customers to whom we make substantial sales. To reduce risk, we routinely assess the financial strength of our customers and, as a consequence, believe that our accounts receivable credit risk exposure is limited. We maintain an allowance for potential credit losses when deemed necessary, but historically we have not experienced significant credit losses related to an individual customer or groups of customers in any particular industry or geographic area. Sales to significant customers that amounted to 10% or more of total product sales are detailed in the following table:

	During the Three-Month Periods Ended March 31,
	2019			2018
Company A		43	%		34	%
Company B		27	%		24	%
Company C		*			11	%

* Amount is less than 10%

Trade accounts receivable due from significant customers amounted to the percentages of total trade accounts receivable as detailed in the following table:

	As of March 31, 2019			As of December 31, 2018
Company A		42	%		35	%
Company B		29	%		36	%
Company C		13	%		15	%

(j) Interest Rate Swap Agreements

All derivatives are recognized on the balance sheet at their fair value. We entered into interest rate swap agreements in 2010 and 2015. On the dates the agreements were entered into, we designated the derivatives as hedges of the variability of cash flows to be paid related to our long-term debt. The agreements have been determined to be highly effective in hedging the variability of identified cash flows, so changes in the fair market value of the interest rate swap agreements are recorded as comprehensive income (loss), until earnings are affected by the variability of cash flows (e.g., when periodic settlements on a variable-rate asset or liability are recorded in earnings). We formally documented the relationship between the interest rate swap agreements and the related hedged items. We also formally assess, both at the interest rate swap agreements' inception and on an ongoing basis, whether the agreements are highly effective in offsetting changes in cash flow of hedged items. See Note 11.

(k) Revenue Recognition

For periods ended on and before December 31, 2017, we recognized revenue in accordance with Accounting Standards Codification (ASC) 605 when four criteria were met. These included i) persuasive evidence that an arrangement existed, ii) delivery had occurred, iii) our price was fixed and determinable and iv) collectability was reasonably assured. For periods beginning on or after January 1, 2018, we recognize revenue in accordance with ASC 606, Revenue from Contracts with Customers. ASC 606 is a single comprehensive model for companies to use in accounting for revenue arising from contracts with customers. The core principle is that we recognize the amount of revenue to which we expect to be entitled for the transfer of promised goods or services to customers when a customer obtains control of promised goods or services in an amount that reflects the consideration we expect to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. ASC 606 replaces most existing revenue recognition guidance in accordance with GAAP. We evaluated the new standard against our existing accounting policies and practices, including reviewing distributor agreements, purchase orders, invoices and shipping forms, and conducting questionnaires with our sales team. We adopted the standard using the modified retrospective transition method, and the adoption did not have a material impact on our financial statements as of the date of adoption (January 1, 2018). We conduct our business with customers through valid purchase orders or sales orders which are considered contracts and are not interdependent on one another. A performance obligation is a promise in a contract to transfer a distinct product to the customer. The transaction price is the amount of consideration we expect to receive under the arrangement. Revenue is measured based on consideration specified in a contract with a customer. The transaction price of a contract is allocated to each distinct performance obligation and recognized when or as the customer receives the benefit of the performance obligation. Product transaction prices on a purchase or sale order are discrete and stand-alone. We recognize revenue when we satisfy a performance obligation in a contract by transferring control over a product to a customer when product delivery occurs. Consideration is typically paid approximately 30 days from the time control is transferred. Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost in costs of goods sold. We have enhanced disclosures related to disaggregation of revenue sources and accounting policies prospectively as a result of adopting these standards. We do not bill for or collect sales tax because our sales are generally made to distributors and thus our sales to them are not subject to sales tax. We generally have experienced an immaterial amount of product returns. See Note 13.

(l) Expense Recognition

In 2018, we adopted ASC 340-40, Accounting for Other Assets and Deferred Costs, which requires sales commissions and other third-party acquisition costs resulting directly from securing contracts with customers to be recognized as an asset when incurred and to be expensed over the associated contract term or estimated customer life depending on the nature of the underlying contract. We do not incur costs in connection with product sales to customers that are eligible for capitalization. Advertising costs are expensed when incurred, which is generally during the month in which the advertisement is published. Advertising expenses amounted to $30,807 and $21,766 during the three-month periods ended March 31, 2019 and 2018, respectively. All product development expenses are expensed as incurred, as are all related patent costs. We capitalize costs to produce inventory during the production cycle, and these costs are charged to costs of goods sold when the inventory is sold to a customer. Adoption of the amended provisions of ASC 340-40 did not have a material impact on our financial statements.

(m) Income Taxes

We account for income taxes in accordance with Codification Topic 740, Income Taxes, which requires that we recognize a current tax liability or asset for current taxes payable or refundable and a deferred tax liability or asset for the estimated future tax effects of temporary differences and carryforwards to the extent they are realizable. During the second quarter of 2018, we assessed our historical and near-term future profitability and decided to record $563,252 in non-cash income tax expense to create a full valuation allowance against our net deferred tax assets (which consist largely of net operating loss carryforwards and federal and state tax credits). At that time, we had incurred a net loss for six consecutive quarters, had not been profitable on a year-to-date basis since the nine-month period ended September 30, 2017 and projected additional net losses for some period going forward before returning to profitability. We consider future taxable income and feasible tax planning strategies in assessing the need for a valuation allowance at each quarter end. If we determine that we would be able to realize our deferred tax assets in the future in excess of the net recorded amount over a reasonably short period of time, a reduction of the valuation allowance would increase income in the period such determination was made. Likewise, if we determine that we would not be able to realize all or part of our net deferred tax asset in the future, an increase to the valuation allowance would be charged to income in the period such determination was made.

Codification Topic 740-10 clarifies the accounting for income taxes by prescribing a minimum recognition threshold that a tax position must meet before being recognized in the financial statements. In the ordinary course of business, there are transactions and calculations where the ultimate tax outcome is uncertain. In addition, we are subject to periodic audits and examinations by the Internal Revenue Service and other taxing authorities. With few exceptions, we are no longer subject to income tax examinations by tax authorities for years before 2015. We have evaluated the positions taken on our filed tax returns. We have concluded that no uncertain tax positions exist as of March 31, 2019 or December 31, 2018. Although we believe that our estimates are reasonable, actual results could differ from these estimates. See Note 16.

(n) Stock-Based Compensation

We account for stock-based compensation in accordance with Codification Topic 718, Compensation-Stock Compensation, which generally requires us to recognize non-cash compensation expense for stock-based payments using the fair-value-based method. The fair value of each stock option grant has been estimated on the date of grant using the Black-Scholes option pricing model. Accordingly, we recorded compensation expense pertaining to stock-based compensation of $82,835 and $71,048 during the three-month periods ended March 31, 2019 and 2018, respectively.

(o) Net Income (Loss) Per Common Share

Net income (loss) per common share has been computed in accordance with Codification Topic 260-10, Earnings Per Share. The weighted average number of shares outstanding was 5,624,504 and 5,477,921 during the three-month periods ended March 31, 2019 and 2018, respectively. The basic net income per share has been computed by dividing net income by the weighted average number of common shares outstanding during the period. The diluted net income per share has been computed by dividing net income by the weighted average number of shares outstanding during the period plus all outstanding stock options with an exercise price that is less than the average market price of the common stock during the period less the number of shares that could have been repurchased at this average market price with the proceeds from the hypothetical stock option exercises. The net (loss) per share has been computed by dividing the net (loss) by the weighted average number of common shares outstanding during the period. All stock options have been excluded from the denominator in the calculation of dilutive earnings per share when we are in a loss position, as the inclusion would be anti-dilutive. Outstanding stock options that were not included in this calculation because the effect would be anti-dilutive amounted to 87,000 and 477,000 as of March 31, 2019 and 2018, respectively.

(p) Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Although we regularly assess these estimates, actual amounts could differ from those estimates. Changes in estimates are recorded during the period in which they become known. Significant estimates include our inventory valuation, valuation of goodwill and long-lived assets, valuation of deferred tax assets, accrued expenses, costs of goods sold, and useful lives of intangible assets.

(q) New Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The guidance in this ASU supersedes the leasing guidance in Topic 840, Leases. Under the new guidance, lessees are required to recognize lease assets and lease liabilities on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. This ASU and its amendments are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption was permitted. We elected to adopt this ASU effective January 1, 2019. In July 2018, the FASB issued ASU 2018-10, Codification improvements to Topic 842, Leases. The amendments in ASU 2018-10 provide more clarification in regards to the application and requirements of Topic 842. In July 2018, the FASB issued ASU 2018-11, Topic 842, Leases - Targeted improvements. The amendments in ASU 2018-11 provide for the option to adopt the standard prospectively and recognize a cumulative-effect adjustment to the opening balance of retained earnings as well as offer a new practical expedient that will allow the Company to elect, by class of underlying asset, to not separate non-lease and lease components in certain circumstances and instead to account for those components as a single item. Based on our current lease agreements and a review of all of our material vendor relationships for potential embedded lease obligations, we have concluded that we are not subject to material lease obligations, and the adoption of Topic 842 did not have a material impact on our financial statements as of January 1, 2019.

In May 2017, the FASB issued ASU 2017-09, Compensation-Stock Compensation (Topic 718) Scope of Modification Accounting to provide clarity and reduce both diversity in practice and cost complexity when applying the guidance in Topic 718 to a change to the terms and conditions of a stock-based payment award. Topic 718 also provides guidance about the types of changes to the terms or conditions of a share-based payment award that require an entity to apply modification accounting in accordance with Topic 718. The standard is effective for interim and annual reporting periods beginning after December 15, 2017, with early adoption permitted. We adopted this guidance during the three-month period ended March 31, 2018. The adoption of this guidance did not have a material impact on our financial statements.

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The new guidance is intended to more closely align hedge accounting with entities' hedging strategies, simplify the application of hedge accounting and increase the transparency of hedging programs. Topic 815 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. For cash flow and net investment hedges existing at the date of adoption, Topic 815 must be applied through a cumulative-effect adjustment. The amended presentation and disclosure guidance is required only prospectively. The adoption of Topic 815 did not to have a material impact on our financial statements as of January 1, 2019.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements of fair value measurements. Topic 820 is effective for fiscal years beginning after December 15, 2019, and early adoption is permitted. The adoption of this guidance is not expected to have a material impact on our financial statements.

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Cash and Cash Equivalents

3 Months Ended

Mar. 31, 2019

Cash and Cash Equivalents [Abstract]

CASH AND CASH EQUIVALENTS

3. CASH AND CASH EQUIVALENTS

Cash and cash equivalents amounted to $10,584,067 and $2,521,050 as of March 31, 2019 and December 31, 2018, respectively. We are required by a bank debt covenant to maintain at least $2,000,000 of otherwise unrestricted cash and cash equivalents.

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Trade Accounts Receivable, Net

3 Months Ended

Mar. 31, 2019

Receivables [Abstract]

TRADE ACCOUNTS RECEIVABLE, net

4. TRADE ACCOUNTS RECEIVABLE, net

Trade accounts receivable amounted to $1,283,096 and $932,298 as of March 31, 2019 and December 31, 2018, respectively. No allowance for bad debt and product returns was recorded as of March 31, 2019 or December 31, 2018.

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Inventory

3 Months Ended

Mar. 31, 2019

Inventory Disclosure [Abstract]

INVENTORY

5. INVENTORY

Inventory consisted of the following:

	As of March 31, 2019		As of December 31, 2018
Raw materials	$	470,497	$	338,991
Work-in-process		1,153,152		1,337,035
Finished goods		412,144		655,645
Total	$	2,035,793	$	2,331,671

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Prepaid Expenses and Other Current Assets

3 Months Ended

Mar. 31, 2019

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

PREPAID EXPENSES AND OTHER CURRENT ASSETS

6. PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consisted of the following:

	As of March 31, 2019		As of December 31, 2018
Prepaid expenses	$	292,360	$	142,528
Other receivables(1)		462,877		493,289
Total	$	755,237	$	635,817

(1) This amount includes $450,000 due from a third party for the sale of assets. See Note 14.

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Property, Plant and Equipment, Net

3 Months Ended

Mar. 31, 2019

Property, Plant and Equipment [Abstract]

PROPERTY, PLANT AND EQUIPMENT, net

7. PROPERTY, PLANT AND EQUIPMENT, net

Property, plant and equipment consisted of the following:

	Estimated Useful Lives (in years)	As of March 31, 2019			As of December 31, 2018
Buildings and improvements	10-39	$	17,060,316		$	17,018,316
Laboratory and manufacturing equipment	3-10		15,156,622			15,092,252
Office furniture and equipment	3-10		733,159			731,510
Construction in progress	n/a		102,926			91,067
Land	n/a		516,867			516,867
Property, plant and equipment, gross			33,569,890			33,450,012
Accumulated depreciation			(7,984,438	)		(7,422,463	)
Property, plant and equipment, net		$	25,585,452		$	26,027,549

As of March 31, 2019 and December 31, 2018, construction in progress consisted principally of down payments towards two pieces of manufacturing equipment. During the three-month periods ended March 31, 2019 and 2018, $1,830 and $3,430 of property, plant and equipment was disposed of, respectively. Depreciation expense was $563,805 and $279,896 during the three-month periods ended March 31, 2019 and 2018, respectively.

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Business Acquisition

3 Months Ended

Mar. 31, 2019

Business Combinations [Abstract]

BUSINESS ACQUISITION

8. BUSINESS ACQUISITION

On January 4, 2016, we acquired certain business assets and processes from DAY 1™ Technology, LLC of Minnesota. The acquired rights and know-how are primarily related to formulating our bovine antibodies into a gel solution (or paste) for an oral delivery option to newborn calves via a syringe (or tube). This product format offers customers an alternative delivery option to the bolus (the standard delivery format of the bivalent First Defense^® product since first approval by the U.S. Department of Agriculture (USDA) and product launch in 1991). This gel formulation had been sold as a feed product without disease claims since 2012. During the fourth quarter of 2018, we achieved USDA approval of an improved bivalent gel formulation and began marketing this product as Dual-Force™ First Defense^®. We achieved Canadian approval of this product during the first quarter of 2019. We were also interested in a gel formulation in anticipation of the launch of Tri-Shield First Defense^® (which was approved by the USDA during the fourth quarter of 2017) because the additional rotavirus antibodies in this new product would not fit in a bolus full of E. coli and coronavirus antibodies. This purchase also included certain other related private-label products. The total purchase price was approximately $532,000 (comprised of a $368,000 up front payment, a $97,000 technology transfer payment and estimated royalties of $67,000). Actual royalties paid based on sales from January 1, 2016 through December 31, 2018 were $36,000. The estimated fair values of the assets purchased in this transaction included inventory of approximately $113,000, machinery and equipment of approximately $132,000, a developed technology intangible of approximately $191,000 (which includes an immaterial amount of value associated with customer relationships and a non-compete agreement, and was valued using the relief from royalty method) and goodwill of approximately $96,000. The goodwill arising from the acquisition consists largely of the estimated value of anticipated growth opportunities arising from synergies and efficiencies. The measurement period for the transaction was closed as of June 30, 2016, and we continue to assess any impairment of these assets acquired in accordance with our policies. The impact of the acquisition on our pro forma prior year operations is not material. As of December 31, 2016, we vacated the rented facility in Minnesota that had been used to produce the gel solution format of our product and certain other related private-label products. This resulted in the termination of employment of four employees, as these production functions were consolidated into our Portland facility, which enables us to better utilize existing infrastructure and larger scale equipment to improve operating efficiencies.

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Intangible Assets

3 Months Ended

Mar. 31, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

INTANGIBLE ASSETS

9. INTANGIBLE ASSETS

The intangible assets described in Note 8 are being amortized to costs of goods sold over their useful lives, which are estimated to be 10 years. Intangible amortization expense was $4,776 during both of the three-month periods ended March 31, 2019 and 2018. The net value of these intangibles was $128,952 and $133,728 as of March 31, 2019 and December 31, 2018, respectively. A summary of intangible amortization expense estimated for the periods subsequent to March 31, 2019 is as follows:

Period	Amount
Nine-month period ending December 31, 2019	$	14,328
Year ending December 31, 2020		19,104
Year ending December 31, 2021		19,104
Year ending December 31, 2022		19,104
Year ending December 31, 2023		19,104
After December 31, 2023		38,208
Total	$	128,952

Intangible assets as of March 31, 2019 consisted of the following:

	Gross Carrying Value		Accumulated Amortization			Net Book Value
Developed technology	$	184,100	$	(59,833	)	$	124,267
Customer relationships		1,300		(422	)		878
Non-compete agreements		5,640		(1,833	)		3,807
Total	$	191,040	$	(62,088	)	$	128,952

Intangible assets as of December 31, 2018 consisted of the following:

	Gross Carrying Value		Accumulated Amortization			Net Book Value
Developed technology	$	184,100	$	(55,230	)	$	128,870
Customer relationships		1,300		(390	)		910
Non-compete agreements		5,640		(1,692	)		3,948
Total	$	191,040	$	(57,312	)	$	133,728

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Accounts Payable and Accrued Expenses

3 Months Ended

Mar. 31, 2019

Payables and Accruals [Abstract]

ACCOUNTS PAYABLE AND ACCRUED EXPENSES

10. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consisted of the following:

	As of March 31, 2019		As of December 31, 2018
Accounts payable – trade	$	618,646	$	531,048
Accounts payable – capital		-		72,695
Accrued payroll		307,604		358,451
Accrued professional fees		56,275		93,050
Accrued other		190,231		165,416
Total	$	1,172,756	$	1,220,660

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Bank Debt

3 Months Ended

Mar. 31, 2019

Debt Disclosure [Abstract]

BANK DEBT

11. BANK DEBT

We have in place five credit facilities and a line of credit with TD Bank N.A. These five credit facilities are secured by substantially all of our assets and are subject to certain restrictions and financial covenants.

Proceeds from a $1,000,000 first mortgage on our corporate headquarters and production and research facility at 56 Evergreen Drive in Portland (Loan #1) were received during the third quarter of 2010 with monthly principal and interest payments due for ten years, calculated based on a fifteen-year amortization schedule. A balloon principal payment of $451,885 will be due during the third quarter of 2020. As of March 31, 2019, $545,723 was outstanding under Loan #1.

Proceeds from a $2,500,000 second mortgage on this corporate headquarters (Loan #2) were received during the third quarter of 2015 with monthly principal and interest payments due for ten years, calculated based on a twenty-year amortization schedule. A balloon principal payment of approximately $1,550,000 will be due during the third quarter of 2025. As of March 31, 2019, $2,211,508 was outstanding under Loan #2.

During the first quarter of 2016, we entered into two additional credit facilities (Loans #3 and #4) aggregating up to approximately $4,500,000. As a result of loan amendments entered into the during the first quarter of 2017, these two credit facilities were increased to up to $6,500,000, subject to certain restrictions set forth in the agreements. Loan #3 is comprised of a construction loan of up to $3,940,000 and not to exceed 80% of the cost of the equipment installed in our commercial-scale Nisin production facility at 33 Caddie Lane in Portland. As amended, interest only was payable at a variable rate equal to the one-month LIBOR (adjusted at each monthly payment date) plus a margin of 2.25% through September 2018, at which time the loan converted to a seven-year term loan facility at the same variable interest rate (which was equal to 4.74% as of March 31, 2019) with monthly principal and interest payments due based on a seven-year amortization schedule. As of March 31, 2019, $3,658,571 was outstanding under Loan #3. Loan #4 is comprised of a construction loan of up to $2,560,000 and not to exceed 80% of the appraised value of our commercial-scale Nisin production facility. As amended, interest only was payable at a variable rate equal to the one-month LIBOR (adjusted at each monthly payment date) plus a margin of 2.25% through March 2018, at which time the loan converted to a term loan facility at the same variable interest rate (which was equal to 4.74% as of March 31, 2019) with monthly principal and interest payments due for ten years, calculated based on a twenty-year amortization schedule. A balloon principal payment of approximately $1,408,000 will be due during the first quarter of 2027. As of March 31, 2019, $2,432,000 was outstanding under Loan #4.

Proceeds from a $340,000 first mortgage on our 4,114 square foot warehouse and storage facility near to our Re-Tain™ production facility (Loan #5) were received during the first quarter of 2017. This note bears interest at a variable rate equal to the one-month LIBOR (adjusted at each monthly payment date) plus a margin of 2.25% (which was equal to 4.73% as of March 31, 2019) with monthly principal and interest payments due for ten years, calculated based on a twenty-year amortization schedule. A balloon principal payment of approximately $209,000 will be due during the first quarter of 2027. As of March 31, 2019, $318,322 was outstanding under Loan #5.

We hedged our interest rate exposures on Loan #1 and Loan #2 with interest rate swap agreements that effectively converted floating interest rates based on the one-month LIBOR plus a margin of 3.25% and 2.25% to the fixed rates of 6.04% and 4.38%, respectively. As of March 31, 2019, the variable rates on these two mortgage notes were 5.75% and 4.74%, respectively. All derivatives are recognized on the balance sheet at their fair value. At the time of the closings and thereafter, the agreements were determined to be highly effective in hedging the variability of the identified cash flows and have been designated as cash flow hedges of the variability in the hedged interest payments. Changes in the fair value of the interest rate swap agreements are recorded in other comprehensive income, net of taxes. The original notional amounts of the interest rate swap agreements of $1,000,000 and $2,500,000 amortize in accordance with the amortization of the mortgage notes. The notional amount of the interest rate swaps was $2,757,231 as of March 31, 2019. The fair values of the interest rate swaps have been determined using observable market-based inputs or unobservable inputs that are corroborated by market data. Accordingly, the interest rate swaps are classified as level 2 within the fair value hierarchy provided in Codification Topic 820, Fair Value Measurements and Disclosures.

	During the Three-Month Periods Ended March 31,
	2019			2018
Payments required by interest rate swaps	$	(1,564	)	$	5,285
Other comprehensive (loss) income, net of taxes	$	(27,069	)	$	43,859

In connection with Loan #1 and Loan #2, we incurred debt issue costs of $26,489 and $34,125, respectively. In connection with Loan #3, Loan #4 and Loan #5, we incurred debt issue costs of $46,734 and $68,072, respectively. The 2017 amendments to Loan #3 and Loan #4 were accounted for as modifications. The amortization of debt issue costs is being recorded as a component of other expenses and is being amortized over the underlying terms of the respective credit facilities.

Debt proceeds received and principal repayments made during the three-month periods ended March 31, 2019 and 2018 are reflected in the following table by year and by loan:

	During the Three-Month Period Ended March 31, 2019					During the Three-Month Period Ended March 31, 2018
	Proceeds from Debt Issue		Debt Principal Repayments			Proceeds from Debt Issue		Debt Principal Repayments
Loan #1	$	—	$	(16,881	)	$	—	$	(15,888	)
Loan #2		—		(22,260	)		—		(21,279	)
Loan #3		—		(140,715	)		—		—
Loan #4		—		(32,000	)		267,141		—
Loan #5		—		(2,445	)		—		(2,636	)
Total	$	—	$	(214,301	)	$	267,141	$	(39,803	)

Principal payments (net of debt issue costs) due under bank loans outstanding as of March 31, 2019 (excluding our $500,000 line of credit) are reflected in the following table by the year that payments are due:

	Nine-Months ending 12/31/2019		Year ending 12/31/2020		Year ending 12/31/2021		Year ending 12/31/2022		Year Ending 12/31/2023		After 12/31/2023		Total
Loan #1	$	52,027	$	493,696	$	—	$	—	$	—	$	—	$	545,723
Loan #2		67,737		94,005		98,538		103,077		107,769		1,740,382		2,211,508
Loan #3(1)		422,143		562,857		562,857		562,857		562,857		985,000		3,658,571
Loan #4(1)		96,000		128,000		128,000		128,000		128,000		1,824,000		2,432,000
Loan #5(2)		8,582		11,926		12,503		13,107		13,741		258,463		318,322
Subtotal	$	646,489	$	1,290,484	$	801,898	$	807,041	$	812,367	$	4,807,845		9,166,124
Debt Issue Costs														(110,343	)
Total													$	9,055,781

(1) These notes bear interest at a variable rate equal to the one-month LIBOR plus a margin of 2.25%. Figures in this table are estimated using an interest rate of approximately 4.74%. The actual interest rate and principal payments will be different.

(2) This note bears interest at a variable rate equal to the one-month LIBOR plus a margin of 2.25%. Figures in this table are estimated using an interest rate of approximately 4.73%. The actual interest rate and principal payments will be different.

During the third quarter of 2010, we entered into a $500,000 line of credit with TD Bank N.A., which is secured by substantially all of our assets and is subject to certain restrictions and financial covenants. This line of credit has been renewed approximately annually since then, is available as needed and has been extended through May 31, 2020. There was no outstanding balance under this line of credit as of March 31, 2019. As of December 31, 2018, $500,000 was outstanding under this line of credit. Interest on borrowings against the line of credit is variable at the higher of 4.25% per annum or the one-month LIBOR plus 3.5% per annum.

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Stockholders' Equity

3 Months Ended

Mar. 31, 2019

Equity [Abstract]

STOCKHOLDERS' EQUITY

12. STOCKHOLDERS' EQUITY

On October 28, 2015, we filed a registration statement on Form S-3 (File No. 333-207635) with the Securities and Exchange Commission (SEC) for the potential issuance of up to $10,000,000 in equity securities (subject to certain limitations). This registration statement became effective on November 10, 2015. Under this form of registration statement, we were limited within a twelve-month period to raising gross proceeds of no more than one-third of the market capitalization of our common stock (as determined by the high price of our common stock within the preceding 60 days leading up to a sale of securities) held by non-affiliates (non-insiders) of the Company. Having raised $10,000,000 in gross proceeds under the February 2016, July 2017 and December 2017 equity transactions described below, no additional equity securities can be issued under this registration statement.

On February 3, 2016, we sold 1,123,810 shares of common stock at a price to the public of $5.25 per share in an underwritten public offering pursuant to our effective shelf registration statement on Form S-3, raising gross proceeds of approximately $5,900,000 and resulting in net proceeds to the Company of approximately $5,313,000 (after deducting underwriting discounts and offering expenses incurred in connection with the equity financing).

On October 21, 2016, we closed on a private placement of 659,880 shares of common stock to nineteen institutional and accredited investors at $5.25 per share, raising gross proceeds of approximately $3,464,000 and resulting in net proceeds to the Company of approximately $3,161,000 (after deducting placement agent fees and other expenses incurred in connection with the equity financing).

On July 27, 2017, we issued 200,000 shares of our common stock at a price of $5.25 per share to two related investors pursuant to our effective shelf registration statement on Form S-3, raising gross proceeds of $1,050,000 and resulting in net proceeds of approximately $1,034,000 (after deducting expenses incurred in connection with the equity financing).

On December 21, 2017, we sold 417,807 shares of common stock at a price to the public of $7.30 per share in an underwritten public offering pursuant to our effective shelf registration statement on Form S-3, raising gross proceeds of approximately $3,050,000 and resulting in net proceeds to the Company of approximately $2,734,000 (after deducting underwriting discounts and offering expenses incurred in connection with the equity financing).

On November 20, 2018, we filed a registration statement on Form S-3 (File No. 333-228479) with the SEC for the potential issuance of up to $20,000,000 in equity securities (subject to certain limitations). This registration statement became effective on November 29, 2018. Under this form of registration statement, we are limited within a twelve-month period to raising gross proceeds of no more than one-third of the market capitalization of our common stock (as determined by the high price of our common stock within the preceding 60 days leading up to a sale of securities) held by non-affiliates (non-insiders) of the Company.

On March 29, 2019, we sold 1,636,364 shares of common stock at a price to the public of $5.50 per share in an underwritten public offering pursuant to our effective shelf registration statement on Form S-3, raising gross proceeds of approximately $9,000,000 and resulting in net proceeds to the Company of approximately $8,303,000 (after deducting underwriting discounts and offering expenses incurred in connection with the equity financing).

At the June 15, 2016 Annual Meeting of Stockholders, we reported that our stockholders voted to approve an amendment to the Company's Certificate of Incorporation to increase the number of shares of common stock authorized for issuance from 8,000,000 to 10,000,000. After careful consideration, we determined that the method of voting instructions described in our Proxy Statement was not consistent with the way the votes were actually recorded in accordance with stock exchange rules. Therefore, during the second quarter of 2017, we elected to treat the amendment as ineffective, and there was no increase in our authorized common stock. At the June 14, 2018 Annual Meeting of Stockholders, our stockholders voted to approve an amendment to the Company's Certificate of Incorporation to increase the number of shares of common stock authorized for issuance from 8,000,000 to 11,000,000.

In June 2000, our stockholders approved the 2000 Stock Option and Incentive Plan (the "2000 Plan") pursuant to the provisions of the Internal Revenue Code of 1986, under which employees and certain service providers may be granted options to purchase shares of the Company's common stock at 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 Plan. The stockholders of the Company approved an increase in this number to 500,000 shares in June 2001. All options granted under the 2000 Plan expire no later than ten years from the date of grant. The 2000 Plan expired in February 2010, after which date no further options could be granted under the 2000 Plan. However, outstanding options under the 2000 Plan may be exercised in accordance with their terms.

In June 2010, our stockholders approved the 2010 Stock Option and Incentive Plan (the "2010 Plan") pursuant to the provisions of the Internal Revenue Code of 1986, under which employees and certain service providers may be granted options to purchase shares of the Company's common stock at no less than fair market value on the date of grant. At that time, 300,000 shares of common stock were reserved for issuance under the 2010 Plan and subsequently no additional shares have been reserved for the 2010 Plan. Vesting requirements are determined by the Compensation and Stock Option Committee of the Board of Directors on a case by case basis. All options granted under the 2010 Plan expire no later than ten years from the date of grant. The 2010 Plan expires in June 2020, after which date no further options could be granted under the 2010 Plan. However, options outstanding under the 2010 Plan at that time could be exercised in accordance with their terms.

In June 2017, our stockholders approved the 2017 Stock Option and Incentive Plan (the "2017 Plan") pursuant to the provisions of the Internal Revenue Code of 1986, under which employees and certain service providers may be granted options to purchase shares of the Company's common stock at no less than fair market value on the date of grant. At that time, 300,000 shares of common stock were reserved for issuance under the 2017 Plan and subsequently no additional shares have been reserved for the 2017 Plan. Vesting requirements are determined by the Compensation and Stock Option Committee of the Board of Directors on a case by case basis. All options granted under the 2017 Plan expire no later than ten years from the date of grant. The 2017 Plan expires in March 2027, after which date no further options could be granted under the 2017 Plan. However, options outstanding under the 2017 Plan at that time could be exercised in accordance with their terms.

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

	2000 Plan			2010 Plan			2017 Plan			Weighted Average Exercise Price		Aggregate Intrinsic Value(1)
Outstanding at December 31, 2017		117,500			242,500			—		$	4.58	$	1,513,980
Grants		—			48,500			122,500		$	7.38
Terminations		—			(19,000	)		(11,000	)	$	6.63
Exercises		(105,000	)		(2,000	)		—		$	1.89
Outstanding at December 31, 2018		12,500			270,000			111,500		$	6.37	$	266,020
Grants		—			—			10,000		$	7.50
Terminations		—			(12,000	)		—		$	5.07
Exercises		—			(15,000	)		—		$	4.80
Outstanding at March 31, 2019		12,500			243,000			121,500		$	6.51	$	(59,850	)
Vested at March 31, 2019		12,500			32,500			—		$	4.93	$	63,860
Vested and expected to vest at
March 31, 2019		12,500			243,000			121,500		$	6.51	$	(59,850	)
Reserved for future grants		—			13,000			178,500

(1) Intrinsic value is the difference between the fair market value as of the date indicated and as of the date of the option grant.

The following table displays additional information about the stock option plans described above:

	Number of Shares		Weighted Average Fair Value at Grant Date		Weighted Average Exercise Price
Non-vested stock options as of January 1, 2019		334,000	$	3.63	$	6.64
Non-vested stock options as of March 31, 2019		332,000	$	3.65	$	6.72
Stock options granted during the three-month period ended March 31, 2019		10,000	$	3.16	$	7.50
Stock options that vested during the three-month period ended March 31, 2019		—	$	—	$	—
Stock options that were forfeited during the three-month period ended March 31, 2019		12,000	$	2.65	$	5.07

During the three-month period ended March 31, 2019, one director exercised stock options covering 15,000 shares by the surrender of 10,731 shares of common stock with a fair market value of $71,998 at the time of exercise and $2 in cash. During the three-month period ended March 31, 2018, two employees exercised stock options covering 6,000 shares. One thousand of these options were exercised for cash, resulting in total proceeds of $4,150 and 5,000 of these options were exercised by the surrender of 2,040 shares of common stock with a fair market value of $14,994 at the time of exercise and $6 in cash.

The weighted average remaining life of the options outstanding under the 2000 Plan, the 2010 Plan and the 2017 plan as of March 31, 2019 was approximately 6 years and 6 months. The weighted average remaining life of the options exercisable under these plans as of March 31, 2019 was approximately 3 years and 1 month. The exercise prices of the options outstanding as of March 31, 2019 ranged from $3.15 to $8.90 per share. The 10,000 stock options granted during the three-month period ended March 31, 2019 had exercise prices of $7.50 per share. The 137,000 stock options granted during the three-month period ended March 31, 2018 had exercise prices between $7.08 and $7.80 per share. The aggregate intrinsic value of options exercised during the three-month periods ended March 31, 2019 and 2018 approximated $28,641 and $24,800, respectively. The weighted-average grant date fair values of options granted during the three-month periods ended March 31, 2019 and 2018 were $3.16 and $4.22 per share, respectively. As of March 31, 2019, total unrecognized stock-based compensation related to non-vested stock options aggregated $562,225, which will be recognized over a weighted average period of 1 year and 7 months. The fair value of each stock option grant has been estimated on the date of grant using the Black-Scholes option pricing model, for the purpose discussed in Note 2(n), with the following weighted-average assumptions for the three-month periods ended March 31, 2019 and 2018:

	During the Three-Month Periods Ended March 31,
	2019			2018
Risk-free interest rate		2.59	%		2.5	%
Dividend yield		0	%		0	%
Expected volatility		51	%		57	%
Expected life		4 years			5.1 years

The risk-free interest rate is based on U.S. Treasury yields for a maturity approximating the expected option term, while the other assumptions are derived from averages of our historical data.

Common Stock Rights Plan

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

The Rights (as amended) become exercisable and transferable apart from the common stock upon the earlier of i) 10 days following a public announcement that a person or group (Acquiring Person) has, without the prior consent of the Continuing Directors (as such term is defined in the Rights Agreement), acquired beneficial ownership of 20% or more of the outstanding common stock or ii) 10 days following commencement of a tender offer or exchange offer the consummation of which would result in ownership by a person or group of 20% or more of the outstanding common stock (the earlier of such dates being called the Distribution Date).

Upon the Distribution Date, the holder of each Right not owned by the Acquiring Person would be entitled to purchase common stock at a discount to the initial purchase price of $70.00 per share, effectively equal to one half of the market price of a share of common stock on the date the Acquiring Person becomes an Acquiring Person. If, after the Distribution Date, the Company should consolidate or merge with any other entity and the Company were not the surviving company, or, if the Company were the surviving company, all or part of the Company's common stock were changed or exchanged into the securities of any other entity, or if more than 50% of the Company's assets or earning power were sold, each Right would entitle its holder to purchase, at the Rights' then-current purchase price, a number of shares of the acquiring company's common stock having a market value at that time equal to twice the Right's exercise price.

At any time after a person or group becomes an Acquiring Person and prior to the acquisition by such person or group of 50% or more of the outstanding common stock, the Board of Directors of the Company may exchange the Rights (other than Rights owned by such person or group which have become void), in whole or in part, at an exchange ratio of one share of common stock per Right (subject to adjustment). At any time prior to 14 days following the date that any person or group becomes an Acquiring Person (subject to extension by the Board of Directors), the Board of Directors of the Company may redeem the then outstanding Rights in whole, but not in part, at a price of $0.005 per Right, subject to adjustment.

At various times over the years, our Board of Directors has voted to authorize amendments of the Rights Agreement to extend the Final Expiration Date, which is currently September 19, 2022. Our Board of Directors also has voted to authorize amendments to increase the ownership threshold for determining "Acquiring Person" status to 20%. During the second quarter of 2015, our Board of Directors also voted to authorize an amendment to remove a provision that prevented a new group of directors elected following the emergence of an Acquiring Person (an owner of more than 20% of our stock) from controlling the Rights Plan by maintaining exclusive authority over the Rights Plan with pre-existing directors. We did this because such provisions have come to be viewed with disfavor by Delaware courts. Each time that we made such amendments we entered into amendments to the Rights Agreement with the Rights Agent reflecting such extensions, threshold increases or provision changes. No other changes have been made to the terms of the Rights or the Rights Agreement.

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Revenue

3 Months Ended

Mar. 31, 2019

Revenue from Contract with Customer [Abstract]

REVENUE

13. REVENUE

Generally, our products are promoted to veterinarians and dairy and beef producers by our sales team and then sold through distributors. Our primary market is North America. We do sell into select international regions and may expand this international reach in the future. There were no material changes between the allocation and timing of revenue recognition during the year ended December 31, 2018 or the three-month periods ended March 31, 2019 or 2018 (under ASC 606). We do not have any contract assets such as contracts for which we have satisfied the performance obligations but do not yet have the right to bill for or contract liabilities such as customer advances. All trade receivables on our balance sheet are from contracts with customers. We incur no material costs to obtain contracts. As of March 31, 2018, we had a backlog of orders (representing purchase orders received from customers which were not fulfilled or paid) worth approximately $1,245,000 for the First Defense^® product line. Before June 30, 2018 we cleared all of this backlog (approximately $901,000) that was related to orders for our bivalent formats of the First Defense^® product line (which have been re-branded as Dual-Force™ First Defense^®). Demand for Tri-Shield First Defense^® continues to exceed our available inventory, but we are not accepting orders in excess of available inventory, which requires a careful allocation of inventory as it becomes available to address the needs of specific customers. As of December 31, 2018 and March 31, 2019, we had received orders representing backlogs worth approximately $393,000 and $276,000, respectively. We had sufficient inventory on hand to satisfy these orders, but this product did not ship to customers until the beginning of the next quarter because of timing issues at the end of the respective periods.

The following table presents our product sales disaggregated by geographic area:

	During the Three-Month Periods Ended March 31,
	2019		2018
United States	$	3,777,746	$	2,595,616
Other		632,815		285,569
Total product sales	$	4,410,561	$	2,881,185

The following table presents our product sales disaggregated by major product category:

	During the Three-Month Periods Ended March 31,
	2019		2018
First Defense® product line	$	4,140,917	$	2,780,869
Other animal health		136,043		100,316
Other		133,601		—
Total product sales	$	4,410,561	$	2,881,185

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Gain on Sale of Assets

3 Months Ended

Mar. 31, 2019

Gain on Sale of Assets [Abstract]

GAIN ON SALE OF ASSETS

14. GAIN ON SALE OF ASSETS

During the third quarter of 2018, we sold the assets underlying our water diagnostic product for $700,000. This sale of assets was recognized as an operating activity at that time in accordance with ASC 610: Other Income and ASC 810: Consolidation. An upfront payment of $250,000 was received upon closing, a second payment of $250,000 is due during the third quarter of 2019 and a third payment of $200,000 is due during the fourth quarter of 2019 (both of these payments receivable were recorded in prepaid expenses and other current assets as of March 31, 2019).

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Other Expenses, Net

3 Months Ended

Mar. 31, 2019

Other Income and Expenses [Abstract]

OTHER EXPENSES, NET

15. OTHER EXPENSES, NET

Other expenses, net, consisted of the following:

	During the Three-Month Periods Ended March 31,
	2019			2018
Interest expense	$	114,041		$	96,015
Interest income		(2,315	)		(3,824	)
Other gains		—			(75	)
Other expenses, net	$	111,726		$	92,116

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Income Taxes

3 Months Ended

Mar. 31, 2019

Income Tax Disclosure [Abstract]

INCOME TAXES

16. INCOME TAXES

Our income tax expense (benefit) aggregated $9,023 and ($49,148) (amounting to 6% and (18%) of our income (loss) before income taxes, respectively) for the three-month periods ended March 31, 2019 and 2018, respectively. As of December 31, 2018, we had federal net operating loss carryforwards of $11,839,349 of which $10,127,442 do not expire and $1,711,907 expires in 2034 through 2037 (if not utilized before then) and state net operating loss carryforwards of $3,485,949 that expire in 2037 through 2038 (if not utilized before then). Additionally, we had federal general business tax credit carryforwards of $407,023 that expire in 2027 through 2038 (if not utilized before then) and state tax credit carryforwards of $763,350 that expire in 2023 through 2038 (if not utilized before then).

The provision for income taxes is determined using the asset and liability approach of accounting for income taxes. Under this approach, deferred taxes represent the estimated future tax effects of temporary differences between book and tax treatment of assets and liabilities and carryforwards to the extent they are realizable. During the second quarter of 2018, we assessed our historical and near-term future profitability and recorded approximately $563,000 in non-cash income tax expense to create a full valuation allowance against our net deferred tax assets (which consist largely of net operating loss carryforwards and federal and state tax credits) based on applicable accounting standards and practices. At that time, we had incurred a net loss for five consecutive quarters, had not been profitable on a year-to-date basis since the nine-month period ended September 30, 2017 and projected additional net losses for some period going forward before returning to profitability. Should future profitability be realized at an adequate level, we would be able to release this valuation allowance (resulting in a non-cash income tax benefit) and realize these deferred tax assets before they expire. We will continue to assess the need for the valuation allowance at each quarter and, in the event that actual results differ from these estimates or we adjust these estimates in future periods, we may need to adjust our valuation allowance. No such adjustment was recorded during the nine months ended March 31, 2019.

Net operating loss carryforwards, credits, and other tax attributes are subject to review and possible adjustment by the Internal Revenue Service. Section 382 of the Internal Revenue Code contains provisions that could place annual limitations on the future utilization of net operating loss carryforwards and credits in the event of a change in ownership of the Company, as defined.

The Company files income tax returns in the U.S. federal jurisdiction and several state jurisdictions. We currently have no tax examinations in progress. We also have not paid additional taxes, interest or penalties as a result of tax examinations nor do we have any unrecognized tax benefits for any of the periods in the accompanying financial statements.

The Tax Cuts and Jobs Act was enacted on December 22, 2017. This legislation made significant changes in the U.S. tax laws including a reduction in the corporate tax rates, changes to net operating loss carryforwards and carrybacks, and a repeal of the corporate alternative minimum tax. The legislation reduced the U.S. corporate tax rate from the prior rate of 34% to 21%. As a result of the enacted law, we were required to revalue deferred tax assets and liabilities at the rate enacted in 2017. This revaluation resulted in a benefit of $71,000 to income tax expense in continuing operations and a corresponding increase in the deferred tax assets during 2017. On December 22, 2017, the SEC issued Staff Accounting Bulletin #118 that provides additional guidance and allows companies to apply a measurement period of up to twelve months to account for the impacts of this legislation in their financial statements. The accounting for the transitional impacts of this legislation is now complete.

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Contingent Liabilities and Commitments

3 Months Ended

Mar. 31, 2019

Commitments and Contingencies Disclosure [Abstract]

CONTINGENT LIABILITIES AND COMMITMENTS

17. CONTINGENT LIABILITIES AND COMMITMENTS

Our bylaws, as amended, in effect provide that the Company will indemnify its officers and directors to the maximum extent permitted by Delaware law. In addition, we make similar indemnity undertakings to each director through a separate indemnification agreement with that director. The maximum payment that we may be required to make under such provisions is theoretically unlimited and is impossible to determine. We maintain directors' and officers' liability insurance, which may provide reimbursement to the Company for payments made to, or on behalf of, officers and directors pursuant to the indemnification provisions. Our indemnification obligations were grandfathered under the provisions of Codification Topic 460, Guarantees. Accordingly, we have recorded no liability for such obligations as of March 31, 2019. Since our incorporation, we have had no occasion to make any indemnification payment to any of our officers or directors for any reason.

The development, manufacturing and marketing of animal health care products entails an inherent risk that liability claims will be asserted against us during the normal course of business. We are aware of no such claims against us as of the date of this filing. We feel that we have reasonable levels of liability insurance to support our operations.

We enter into agreements with third parties in the ordinary course of business under which we are obligated to indemnify such third parties from and against various risks and losses. The precise terms of such indemnities vary with the nature of the agreement. In many cases, we limit the maximum amount of our indemnification obligations, but in some cases those obligations may be theoretically unlimited. We have not incurred material expenses in discharging any of these indemnification obligations, and based on our analysis of the nature of the risks involved, we believe that the fair value of the liabilities potentially arising under these agreements is minimal. Accordingly, we have recorded no liabilities for such obligations as of March 31, 2019.

We are committed to purchasing certain key parts (syringes) and services (final formulation, aseptic filling and final packaging of Drug Product) pertaining to Re-Tain™, our Nisin-based intramammary treatment of subclinical mastitis in lactating dairy cows, exclusively from two contractors. Because we will not achieve regulatory approval for the sale of Re-Tain™ in the U.S. by December 17, 2019, the contract counter party for final formulation, aseptic filling and final packaging of that product may have the right at that date to terminate the agreement, and we could be liable for a $100,000 termination fee. We are negotiating with this party to amend and extend the contract term to allow us to achieve regulatory approval and initiate commercial launch with the availability of this party's services. At the same time, we are seeking an alternative contractor for these services while we develop a plan to build the required infrastructure to perform these services for ourselves with a portion of the capital we raised at the end of the first quarter of 2019.

During the second quarter of 2009, we entered into an exclusive and perpetual (unless terminated for cause) license with the Baylor College of Medicine covering the underlying rotavirus vaccine technology used to generate the specific antibodies for our product line extension, Tri-Shield First Defense^®. A milestone payment of $150,000 due upon regulatory approval of the product was accrued at December 31, 2017 and paid in January 2018. The license is also subject to a royalty equal to 4% of the sales of the First Defense^® product line realized above the average of the sales of our bivalent product line for the years ended December 31, 2016 and 2015, plus a growth assumption of 6%. Earned royalties due are subject to annual minimums of $5,000, $10,000, $15,000, $20,000 and $25,000 for the years ending December 31, 2017, 2018, 2019, 2020, and 2021 (and thereafter), respectively. Royalties of $10,396 were accrued at December 31, 2018 and paid in January 2019. Royalties of $3,750 were accrued as of March 31, 2019. In addition to the commitments discussed above, we had committed $474,000 to the purchase of inventory and $144,000 to other obligations as of March 31, 2019.

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Segment Information

3 Months Ended

Mar. 31, 2019

Segment Reporting [Abstract]

SEGMENT INFORMATION

18. SEGMENT INFORMATION

We principally operate in the business segment described in Note 1. Pursuant to Codification Topic 280, Segment Reporting, we operate in one reportable business segment, that being the development, acquisition, manufacture and sale of products that improve the health and productivity of dairy and beef cattle. Almost all of our internally funded product development expenses are in support of such products. The significant accounting policies of this segment are described in Note 2. Our single operating segment is defined as the component of our business for which financial information is available and evaluated regularly by our chief operating decision-maker in deciding how to allocate resources and in assessing performance. Our chief operating decision-maker is our President and CEO.

Sales of the First Defense^® product line aggregated 94% and 97% of our total product sales during the three-month periods ended March 31, 2019 and 2018, respectively. Our primary customers for the majority of our product sales (86% and 90% during the three-month periods ended March 31, 2019 and 2018, respectively) are in the U.S. dairy and beef industries. Product sales to international customers, who are also in the dairy and beef industries, aggregated 11% and 10% of our total product sales during the three-month periods ended March 31, 2019 and 2018, respectively.

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Related Party Transactions

3 Months Ended

Mar. 31, 2019

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

19. RELATED PARTY TRANSACTIONS

Dr. David S. Tomsche (Chair of our Board of Directors) is a controlling owner of Leedstone Inc., a domestic distributor of ImmuCell products (the First Defense^® product line and CMT) and of J-t Enterprises of Melrose, Inc., an exporter. His affiliated companies purchased $176,866 and $209,633 of products from us during the three-month periods ended March 31, 2019 and 2018, respectively, on terms consistent with those offered to other distributors of similar status. We made marketing-related payments of $0 and $10,383 to these affiliated companies during the three-month periods ended March 31, 2019 and 2018, respectively, that were expensed as incurred. Our accounts receivable (subject to standard and customary payment terms) due from these affiliated companies aggregated $35,543 and $16,283 as of March 31, 2019 and December 31, 2018, respectively.

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Employee Benefits

3 Months Ended

Mar. 31, 2019

Retirement Benefits [Abstract]

EMPLOYEE BENEFITS

20. EMPLOYEE BENEFITS

We have a 401(k) savings plan (the Plan) in which all employees completing one month of service with the Company are eligible to participate. Participants may contribute up to the maximum amount allowed by the Internal Revenue Service. We currently match 100% of the first 3% of each employee's salary that is contributed to the Plan and 50% of the next 2% of each employee's salary that is contributed to the Plan. Under this matching plan, we paid $31,197 and $24,646 into the plan for the three-month periods ended March 31, 2019 and 2018, respectively.

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Subsequent Events

3 Months Ended

Mar. 31, 2019

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

21. SUBSEQUENT EVENTS

We have evaluated subsequent events through the time of filing on May 13, 2019, the date we have issued this Quarterly Report on Form 10-Q. As of such date, there were no material, reportable subsequent events.

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Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2019

Accounting Policies [Abstract]

Basis of Presentation

(a) Basis of Presentation

We have prepared the accompanying unaudited financial statements reflecting all adjustments that are, in our opinion, necessary in order to ensure that the financial statements are not misleading. We follow accounting standards set by the Financial Accounting Standards Board (FASB). The FASB sets generally accepted accounting principles (GAAP) that we follow to ensure we consistently report our financial condition, results of operations, earnings per share and cash flows. References to GAAP in these footnotes are to the FASB Accounting Standards Codification™ (Codification). Accordingly, we believe that the disclosures are adequate to ensure that the information presented is not misleading.

Cash and Cash Equivalents

(b) Cash and Cash Equivalents

We consider all highly liquid investment instruments that mature within three months of their purchase dates to be cash equivalents. Cash equivalents are principally invested in securities backed by the U.S. government. Certain cash balances in excess of Federal Deposit Insurance Corporation (FDIC) limits of $250,000 per financial institution per depositor are maintained in money market accounts at financial institutions that are secured, in part, by the Securities Investor Protection Corporation. Amounts in excess of these FDIC limits per bank that are not invested in securities backed by the U.S. government aggregated $10,331,744 and $2,268,737 as of March 31, 2019 and December 31, 2018, respectively. We account for investments in marketable securities in accordance with Codification Topic 320, Investments — Debt and Equity Securities. See Note 3.

Accounts Receivable

(c) Accounts Receivable

Accounts receivable are carried at the original invoice amount less an estimate made for doubtful collection. Management determines the allowance for doubtful accounts on a monthly basis by identifying troubled accounts and by using historical experience applied to an aging of accounts. Accounts receivable are considered to be past due if a portion of the receivable balance is outstanding for more than 30 days. Past due accounts receivable are subject to an interest charge. Accounts receivable are written off when deemed uncollectible. The amount of accounts receivable written off during all periods reported was immaterial. Recoveries of accounts receivable previously written off are recorded as income when received. As of March 31, 2019 and December 31, 2018, we determined that no allowance for bad debt was necessary. See Note 4.

Inventory

(d) Inventory

Inventory includes raw materials, work-in-process and finished goods and is recorded at the lower of cost, on the first-in, first-out method, or net realizable value (determined as the estimated selling price in the normal course of business, less reasonably predictable costs of completion, disposal and transportation). Work-in-process and finished goods inventories include materials, labor and manufacturing overhead. At each monthly balance sheet date, we evaluate our ending inventories for excess quantities and obsolescence. Inventories that we consider excess or obsolete are reserved. Once inventory is written down and a new cost basis is established, it is not written back up if demand increases. We believe that supplies and raw materials for the production of our products are available from more than one vendor. Our policy is to maintain more than one source of supply for the components used in our products when practicable. See Note 5.

Property, Plant and Equipment

(e) Property, Plant and Equipment

We depreciate property, plant and equipment on the straight-line method by charges to operations and costs of goods sold in amounts estimated to expense the cost of the assets from the date they are first put into service to the end of the estimated useful lives of the assets. The facility we have constructed to produce the active pharmaceutical ingredient (Nisin) for Re-Tain™ is being depreciated over 39 years from when a certificate of occupancy was issued during the fourth quarter of 2017. We began depreciating the equipment for our Nisin production facility when it was placed in service during the third quarter of 2018. Approximately 89% of these assets are being depreciated over ten years. Significant repairs to fixed assets that benefit more than a current period are capitalized and depreciated over their useful lives. Insignificant repairs are expensed when incurred. See Note 7.

Intangible Assets and Goodwill

(f) Intangible Assets and Goodwill

We amortize intangible assets on the straight-line method by charges to costs of goods sold in amounts estimated to expense the cost of the assets from the date they are first put into service to the end of the estimated useful lives of the assets. We have recorded intangible assets related to customer relationships, non-compete agreements, and developed technology, each with defined useful lives. We have classified as goodwill the amounts paid in excess of fair value of the net assets (including tax attributes) acquired in purchase transactions.

We assess the impairment of intangible assets and goodwill that have indefinite lives at the reporting unit level on an annual basis (as of December 31^st) and whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. We would record an impairment charge if such an assessment were to indicate that the fair value of such assets was less than the carrying value. Judgment is required in determining whether an event has occurred that may impair the value of goodwill or identifiable intangible assets. Factors that could indicate that an impairment may exist include significant under-performance relative to plan or long-term projections, significant changes in business strategy and significant negative industry or economic trends. Although we believe intangible assets and goodwill are properly stated in the accompanying financial statements, changes in strategy or market conditions could significantly impact these judgments and require an adjustment to the recorded balance. No goodwill impairments were recorded during the three-month periods ended March 31, 2019 or 2018. See Notes 2(h), 8 and 9 for additional disclosures.

Fair Value Measurements

(g) Fair Value Measurements

In determining fair value measurements, we follow the provisions of Codification Topic 820, Fair Value Measurements and Disclosures. Codification Topic 820 defines fair value, establishes a framework for measuring fair value under GAAP and enhances disclosures about fair value measurements. The topic provides a consistent definition of fair value which focuses on an exit price, which is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The topic also prioritizes, within the measurement of fair value, the use of market-based information over entity-specific information and establishes a three-level hierarchy for fair value measurements based on the nature of inputs used in the valuation of an asset or liability as of the measurement date. As of March 31, 2019 and December 31, 2018, the carrying amounts of cash and cash equivalents, accounts receivable, inventory, other assets, accounts payable, deferred revenue and accrued liabilities approximate fair value because of their short-term nature. The amount outstanding under our bank debt facilities is measured at carrying value in our accompanying balance sheets. Our bank debt facilities are valued using Level 2 inputs. The estimated fair value of our bank debt facilities approximates their carrying value based on similar instruments with similar maturities. The three-level hierarchy is as follows:

Level 1— Pricing inputs are quoted prices available in active markets for identical assets or liabilities as of the measurement date.

Level 2— Pricing inputs are quoted prices for similar assets or liabilities, or inputs that are observable, either directly or indirectly, for substantially the full term through corroboration with observable market data.

Level 3— Pricing inputs are unobservable for the assets or liabilities, that is, inputs that reflect the reporting entity's own assumptions about the assumptions market participants would use in pricing the asset or liability.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an asset's or liability's level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. From time to time, we also hold money market mutual funds in a brokerage account, which are classified as cash equivalents and measured at fair value. The fair value of these investments is based on their closing published net asset value.

We assess the levels of the investments at each measurement date, and transfers between levels are recognized on the actual date of the event or change in circumstances that caused the transfer in accordance with our accounting policy regarding the recognition of transfers between levels of the fair value hierarchy. During the three-month periods ended March 31, 2019 and 2018, there were no transfers between levels. As of March 31, 2019 and December 31, 2018, our Level 1 assets measured at fair value by quoted prices in active markets consisted of bank savings accounts and money market funds. As of March 31, 2019 and December 31, 2018, our interest rate swaps were classified as Level 2 and were measured by observable market data in combination with expected cash flows for each instrument. There were no assets or liabilities measured at fair value on a nonrecurring basis as of March 31, 2019 or December 31, 2018.

	As of March 31, 2019
	Level 1		Level 2		Level 3		Total
Assets:
Cash and money market accounts	$	10,584,067	$	—	$	—	$	10,584,067
Interest rate swaps		—		4,117		—		4,117
Total	$	10,584,067	$	4,117	$	—	$	10,588,184

	As of December 31, 2018
	Level 1		Level 2		Level 3		Total
Assets:
Cash and money market accounts	$	2,521,050	$	—	$	—	$	2,521,050
Interest rate swaps		—		40,209		—		40,209
Total	$	2,521,050	$	40,209	$	—	$	2,561,259

Valuation of Long-Lived Assets

(h) Valuation of Long-Lived Assets

We periodically evaluate our long-lived assets, consisting principally of fixed assets and amortizable intangible assets, for potential impairment. In accordance with the applicable accounting guidance for the treatment of long-lived assets, we review the carrying value of our long-lived assets or asset group that is held and used, including intangible assets subject to amortization, for impairment whenever events and circumstances indicate that the carrying value of the assets may not be recoverable. Under the held for use approach, the asset or asset group to be tested for impairment should represent the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. We evaluate our long-lived assets whenever events or circumstances suggest that the carrying amount of an asset or group of assets may not be recoverable. No impairment was recognized during the three-month periods ended March 31, 2019 and 2018.

Concentration of Risk

(i) Concentration of Risk

Concentration of credit risk with respect to accounts receivable is principally limited to certain customers to whom we make substantial sales. To reduce risk, we routinely assess the financial strength of our customers and, as a consequence, believe that our accounts receivable credit risk exposure is limited. We maintain an allowance for potential credit losses when deemed necessary, but historically we have not experienced significant credit losses related to an individual customer or groups of customers in any particular industry or geographic area. Sales to significant customers that amounted to 10% or more of total product sales are detailed in the following table:

	During the Three-Month Periods Ended March 31,
	2019			2018
Company A		43	%		34	%
Company B		27	%		24	%
Company C		*			11	%

* Amount is less than 10%

Trade accounts receivable due from significant customers amounted to the percentages of total trade accounts receivable as detailed in the following table:

	As of March 31, 2019			As of December 31, 2018
Company A		42	%		35	%
Company B		29	%		36	%
Company C		13	%		15	%

Interest Rate Swap Agreements

(j) Interest Rate Swap Agreements

All derivatives are recognized on the balance sheet at their fair value. We entered into interest rate swap agreements in 2010 and 2015. On the dates the agreements were entered into, we designated the derivatives as hedges of the variability of cash flows to be paid related to our long-term debt. The agreements have been determined to be highly effective in hedging the variability of identified cash flows, so changes in the fair market value of the interest rate swap agreements are recorded as comprehensive income (loss), until earnings are affected by the variability of cash flows (e.g., when periodic settlements on a variable-rate asset or liability are recorded in earnings). We formally documented the relationship between the interest rate swap agreements and the related hedged items. We also formally assess, both at the interest rate swap agreements' inception and on an ongoing basis, whether the agreements are highly effective in offsetting changes in cash flow of hedged items. See Note 11.

Revenue Recognition

(k) Revenue Recognition

For periods ended on and before December 31, 2017, we recognized revenue in accordance with Accounting Standards Codification (ASC) 605 when four criteria were met. These included i) persuasive evidence that an arrangement existed, ii) delivery had occurred, iii) our price was fixed and determinable and iv) collectability was reasonably assured. For periods beginning on or after January 1, 2018, we recognize revenue in accordance with ASC 606, Revenue from Contracts with Customers. ASC 606 is a single comprehensive model for companies to use in accounting for revenue arising from contracts with customers. The core principle is that we recognize the amount of revenue to which we expect to be entitled for the transfer of promised goods or services to customers when a customer obtains control of promised goods or services in an amount that reflects the consideration we expect to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. ASC 606 replaces most existing revenue recognition guidance in accordance with GAAP. We evaluated the new standard against our existing accounting policies and practices, including reviewing distributor agreements, purchase orders, invoices and shipping forms, and conducting questionnaires with our sales team. We adopted the standard using the modified retrospective transition method, and the adoption did not have a material impact on our financial statements as of the date of adoption (January 1, 2018). We conduct our business with customers through valid purchase orders or sales orders which are considered contracts and are not interdependent on one another. A performance obligation is a promise in a contract to transfer a distinct product to the customer. The transaction price is the amount of consideration we expect to receive under the arrangement. Revenue is measured based on consideration specified in a contract with a customer. The transaction price of a contract is allocated to each distinct performance obligation and recognized when or as the customer receives the benefit of the performance obligation. Product transaction prices on a purchase or sale order are discrete and stand-alone. We recognize revenue when we satisfy a performance obligation in a contract by transferring control over a product to a customer when product delivery occurs. Consideration is typically paid approximately 30 days from the time control is transferred. Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost in costs of goods sold. We have enhanced disclosures related to disaggregation of revenue sources and accounting policies prospectively as a result of adopting these standards. We do not bill for or collect sales tax because our sales are generally made to distributors and thus our sales to them are not subject to sales tax. We generally have experienced an immaterial amount of product returns. See Note 13.

Expense Recognition

(l) Expense Recognition

In 2018, we adopted ASC 340-40, Accounting for Other Assets and Deferred Costs, which requires sales commissions and other third-party acquisition costs resulting directly from securing contracts with customers to be recognized as an asset when incurred and to be expensed over the associated contract term or estimated customer life depending on the nature of the underlying contract. We do not incur costs in connection with product sales to customers that are eligible for capitalization. Advertising costs are expensed when incurred, which is generally during the month in which the advertisement is published. Advertising expenses amounted to $30,807 and $21,766 during the three-month periods ended March 31, 2019 and 2018, respectively. All product development expenses are expensed as incurred, as are all related patent costs. We capitalize costs to produce inventory during the production cycle, and these costs are charged to costs of goods sold when the inventory is sold to a customer. Adoption of the amended provisions of ASC 340-40 did not have a material impact on our financial statements.

Income Taxes

(m) Income Taxes

We account for income taxes in accordance with Codification Topic 740, Income Taxes, which requires that we recognize a current tax liability or asset for current taxes payable or refundable and a deferred tax liability or asset for the estimated future tax effects of temporary differences and carryforwards to the extent they are realizable. During the second quarter of 2018, we assessed our historical and near-term future profitability and decided to record $563,252 in non-cash income tax expense to create a full valuation allowance against our net deferred tax assets (which consist largely of net operating loss carryforwards and federal and state tax credits). At that time, we had incurred a net loss for six consecutive quarters, had not been profitable on a year-to-date basis since the nine-month period ended September 30, 2017 and projected additional net losses for some period going forward before returning to profitability. We consider future taxable income and feasible tax planning strategies in assessing the need for a valuation allowance at each quarter end. If we determine that we would be able to realize our deferred tax assets in the future in excess of the net recorded amount over a reasonably short period of time, a reduction of the valuation allowance would increase income in the period such determination was made. Likewise, if we determine that we would not be able to realize all or part of our net deferred tax asset in the future, an increase to the valuation allowance would be charged to income in the period such determination was made.

Codification Topic 740-10 clarifies the accounting for income taxes by prescribing a minimum recognition threshold that a tax position must meet before being recognized in the financial statements. In the ordinary course of business, there are transactions and calculations where the ultimate tax outcome is uncertain. In addition, we are subject to periodic audits and examinations by the Internal Revenue Service and other taxing authorities. With few exceptions, we are no longer subject to income tax examinations by tax authorities for years before 2015. We have evaluated the positions taken on our filed tax returns. We have concluded that no uncertain tax positions exist as of March 31, 2019 or December 31, 2018. Although we believe that our estimates are reasonable, actual results could differ from these estimates. See Note 16.

Stock-Based Compensation

(n) Stock-Based Compensation

We account for stock-based compensation in accordance with Codification Topic 718, Compensation-Stock Compensation, which generally requires us to recognize non-cash compensation expense for stock-based payments using the fair-value-based method. The fair value of each stock option grant has been estimated on the date of grant using the Black-Scholes option pricing model. Accordingly, we recorded compensation expense pertaining to stock-based compensation of $82,835 and $71,048 during the three-month periods ended March 31, 2019 and 2018, respectively.

Net Loss Per Common Share

(o) Net Income (Loss) Per Common Share

Net income (loss) per common share has been computed in accordance with Codification Topic 260-10, Earnings Per Share. The weighted average number of shares outstanding was 5,624,504 and 5,477,921 during the three-month periods ended March 31, 2019 and 2018, respectively. The basic net income per share has been computed by dividing net income by the weighted average number of common shares outstanding during the period. The diluted net income per share has been computed by dividing net income by the weighted average number of shares outstanding during the period plus all outstanding stock options with an exercise price that is less than the average market price of the common stock during the period less the number of shares that could have been repurchased at this average market price with the proceeds from the hypothetical stock option exercises. The net (loss) per share has been computed by dividing the net (loss) by the weighted average number of common shares outstanding during the period. All stock options have been excluded from the denominator in the calculation of dilutive earnings per share when we are in a loss position, as the inclusion would be anti-dilutive. Outstanding stock options that were not included in this calculation because the effect would be anti-dilutive amounted to 87,000 and 477,000 as of March 31, 2019 and 2018, respectively.

Use of Estimates

(p) Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Although we regularly assess these estimates, actual amounts could differ from those estimates. Changes in estimates are recorded during the period in which they become known. Significant estimates include our inventory valuation, valuation of goodwill and long-lived assets, valuation of deferred tax assets, accrued expenses, costs of goods sold, and useful lives of intangible assets.

New Accounting Pronouncements

(q) New Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The guidance in this ASU supersedes the leasing guidance in Topic 840, Leases. Under the new guidance, lessees are required to recognize lease assets and lease liabilities on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. This ASU and its amendments are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption was permitted. We elected to adopt this ASU effective January 1, 2019. In July 2018, the FASB issued ASU 2018-10, Codification improvements to Topic 842, Leases. The amendments in ASU 2018-10 provide more clarification in regards to the application and requirements of Topic 842. In July 2018, the FASB issued ASU 2018-11, Topic 842, Leases - Targeted improvements. The amendments in ASU 2018-11 provide for the option to adopt the standard prospectively and recognize a cumulative-effect adjustment to the opening balance of retained earnings as well as offer a new practical expedient that will allow the Company to elect, by class of underlying asset, to not separate non-lease and lease components in certain circumstances and instead to account for those components as a single item. Based on our current lease agreements and a review of all of our material vendor relationships for potential embedded lease obligations, we have concluded that we are not subject to material lease obligations, and the adoption of Topic 842 did not have a material impact on our financial statements as of January 1, 2019.

In May 2017, the FASB issued ASU 2017-09, Compensation-Stock Compensation (Topic 718) Scope of Modification Accounting to provide clarity and reduce both diversity in practice and cost complexity when applying the guidance in Topic 718 to a change to the terms and conditions of a stock-based payment award. Topic 718 also provides guidance about the types of changes to the terms or conditions of a share-based payment award that require an entity to apply modification accounting in accordance with Topic 718. The standard is effective for interim and annual reporting periods beginning after December 15, 2017, with early adoption permitted. We adopted this guidance during the three-month period ended March 31, 2018. The adoption of this guidance did not have a material impact on our financial statements.

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The new guidance is intended to more closely align hedge accounting with entities' hedging strategies, simplify the application of hedge accounting and increase the transparency of hedging programs. Topic 815 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. For cash flow and net investment hedges existing at the date of adoption, Topic 815 must be applied through a cumulative-effect adjustment. The amended presentation and disclosure guidance is required only prospectively. The adoption of Topic 815 did not to have a material impact on our financial statements as of January 1, 2019.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements of fair value measurements. Topic 820 is effective for fiscal years beginning after December 15, 2019, and early adoption is permitted. The adoption of this guidance is not expected to have a material impact on our financial statements.

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Summary of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2019

Accounting Policies [Abstract]

Schedule of financial assets measured at fair value on nonrecurring basis

	As of March 31, 2019
	Level 1		Level 2		Level 3		Total
Assets:
Cash and money market accounts	$	10,584,067	$	—	$	—	$	10,584,067
Interest rate swaps		—		4,117		—		4,117
Total	$	10,584,067	$	4,117	$	—	$	10,588,184

	As of December 31, 2018
	Level 1		Level 2		Level 3		Total
Assets:
Cash and money market accounts	$	2,521,050	$	—	$	—	$	2,521,050
Interest rate swaps		—		40,209		—		40,209
Total	$	2,521,050	$	40,209	$	—	$	2,561,259

Schedule of sales to significant customers

	During the Three-Month Periods Ended March 31,
	2019			2018
Company A		43	%		34	%
Company B		27	%		24	%
Company C		*			11	%

* Amount is less than 10%

Schedule of accounts receivable due from significant customers

	As of March 31, 2019			As of December 31, 2018
Company A		42	%		35	%
Company B		29	%		36	%
Company C		13	%		15	%

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Inventory (Tables)

3 Months Ended

Mar. 31, 2019

Inventory Disclosure [Abstract]

Schedule of inventory

	As of March 31, 2019		As of December 31, 2018
Raw materials	$	470,497	$	338,991
Work-in-process		1,153,152		1,337,035
Finished goods		412,144		655,645
Total	$	2,035,793	$	2,331,671

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Prepaid Expenses and Other Current Assets (Tables)

3 Months Ended

Mar. 31, 2019

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Schedule of prepaid expenses and other current assets

	As of March 31, 2019		As of December 31, 2018
Prepaid expenses	$	292,360	$	142,528
Other receivables(1)		462,877		493,289
Total	$	755,237	$	635,817

(1) This amount includes $450,000 due from a third party for the sale of assets. See Note 14.

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Property, Plant and Equipment, Net (Tables)

3 Months Ended

Mar. 31, 2019

Property, Plant and Equipment [Abstract]

Schedule of property, plant and equipment

	Estimated Useful Lives (in years)	As of March 31, 2019			As of December 31, 2018
Buildings and improvements	10-39	$	17,060,316		$	17,018,316
Laboratory and manufacturing equipment	3-10		15,156,622			15,092,252
Office furniture and equipment	3-10		733,159			731,510
Construction in progress	n/a		102,926			91,067
Land	n/a		516,867			516,867
Property, plant and equipment, gross			33,569,890			33,450,012
Accumulated depreciation			(7,984,438	)		(7,422,463	)
Property, plant and equipment, net		$	25,585,452		$	26,027,549

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Intangible Assets (Tables)

3 Months Ended

Mar. 31, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of intangible amortization expense

Period	Amount
Nine-month period ending December 31, 2019	$	14,328
Year ending December 31, 2020		19,104
Year ending December 31, 2021		19,104
Year ending December 31, 2022		19,104
Year ending December 31, 2023		19,104
After December 31, 2023		38,208
Total	$	128,952

Schedule of intangible assets

Intangible assets as of March 31, 2019 consisted of the following:

	Gross Carrying Value		Accumulated Amortization			Net Book Value
Developed technology	$	184,100	$	(59,833	)	$	124,267
Customer relationships		1,300		(422	)		878
Non-compete agreements		5,640		(1,833	)		3,807
Total	$	191,040	$	(62,088	)	$	128,952

Intangible assets as of December 31, 2018 consisted of the following:

	Gross Carrying Value		Accumulated Amortization			Net Book Value
Developed technology	$	184,100	$	(55,230	)	$	128,870
Customer relationships		1,300		(390	)		910
Non-compete agreements		5,640		(1,692	)		3,948
Total	$	191,040	$	(57,312	)	$	133,728

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Accounts Payable and Accrued Expenses (Tables)

3 Months Ended

Mar. 31, 2019

Payables and Accruals [Abstract]

Schedule of accounts payable and accrued expenses

	As of March 31, 2019		As of December 31, 2018
Accounts payable – trade	$	618,646	$	531,048
Accounts payable – capital		-		72,695
Accrued payroll		307,604		358,451
Accrued professional fees		56,275		93,050
Accrued other		190,231		165,416
Total	$	1,172,756	$	1,220,660

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Bank Debt (Tables)

3 Months Ended

Mar. 31, 2019

Debt Disclosure [Abstract]

Schedule of interest rate swaps classified as level 2 fair value

	During the Three-Month Periods Ended March 31,
	2019			2018
Payments required by interest rate swaps	$	(1,564	)	$	5,285
Other comprehensive (loss) income, net of taxes	$	(27,069	)	$	43,859

Schedule of debt proceeds received and principal repayments made during the year

	During the Three-Month Period Ended March 31, 2019					During the Three-Month Period Ended March 31, 2018
	Proceeds from Debt Issue		Debt Principal Repayments			Proceeds from Debt Issue		Debt Principal Repayments
Loan #1	$	—	$	(16,881	)	$	—	$	(15,888	)
Loan #2		—		(22,260	)		—		(21,279	)
Loan #3		—		(140,715	)		—		—
Loan #4		—		(32,000	)		267,141		—
Loan #5		—		(2,445	)		—		(2,636	)
Total	$	—	$	(214,301	)	$	267,141	$	(39,803	)

Schedule of principal payments due under debt outstanding

	Nine-Months ending 12/31/2019		Year ending 12/31/2020		Year ending 12/31/2021		Year ending 12/31/2022		Year Ending 12/31/2023		After 12/31/2023		Total
Loan #1	$	52,027	$	493,696	$	—	$	—	$	—	$	—	$	545,723
Loan #2		67,737		94,005		98,538		103,077		107,769		1,740,382		2,211,508
Loan #3(1)		422,143		562,857		562,857		562,857		562,857		985,000		3,658,571
Loan #4(1)		96,000		128,000		128,000		128,000		128,000		1,824,000		2,432,000
Loan #5(2)		8,582		11,926		12,503		13,107		13,741		258,463		318,322
Subtotal	$	646,489	$	1,290,484	$	801,898	$	807,041	$	812,367	$	4,807,845		9,166,124
Debt Issue Costs														(110,343	)
Total													$	9,055,781

(1) These notes bear interest at a variable rate equal to the one-month LIBOR plus a margin of 2.25%. Figures in this table are estimated using an interest rate of approximately 4.74%. The actual interest rate and principal payments will be different.

(2) This note bears interest at a variable rate equal to the one-month LIBOR plus a margin of 2.25%. Figures in this table are estimated using an interest rate of approximately 4.73%. The actual interest rate and principal payments will be different.

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Stockholders' Equity (Tables)

3 Months Ended

Mar. 31, 2019

Equity [Abstract]

Schedule of activity under the stock option plans

	2000 Plan			2010 Plan			2017 Plan			Weighted Average Exercise Price		Aggregate Intrinsic Value(1)
Outstanding at December 31, 2017		117,500			242,500			—		$	4.58	$	1,513,980
Grants		—			48,500			122,500		$	7.38
Terminations		—			(19,000	)		(11,000	)	$	6.63
Exercises		(105,000	)		(2,000	)		—		$	1.89
Outstanding at December 31, 2018		12,500			270,000			111,500		$	6.37	$	266,020
Grants		—			—			10,000		$	7.50
Terminations		—			(12,000	)		—		$	5.07
Exercises		—			(15,000	)		—		$	4.80
Outstanding at March 31, 2019		12,500			243,000			121,500		$	6.51	$	(59,850	)
Vested at March 31, 2019		12,500			32,500			—		$	4.93	$	63,860
Vested and expected to vest at
March 31, 2019		12,500			243,000			121,500		$	6.51	$	(59,850	)
Reserved for future grants		—			13,000			178,500

(1) Intrinsic value is the difference between the fair market value as of the date indicated and as of the date of the option grant.

Schedule of additional information about the stock option plans

	Number of Shares		Weighted Average Fair Value at Grant Date		Weighted Average Exercise Price
Non-vested stock options as of January 1, 2019		334,000	$	3.63	$	6.64
Non-vested stock options as of March 31, 2019		332,000	$	3.65	$	6.72
Stock options granted during the three-month period ended March 31, 2019		10,000	$	3.16	$	7.50
Stock options that vested during the three-month period ended March 31, 2019		—	$	—	$	—
Stock options that were forfeited during the three-month period ended March 31, 2019		12,000	$	2.65	$	5.07

Schedule of fair value stock option grant using black-scholes option valuation model with the weighted-average assumptions

	During the Three-Month Periods Ended March 31,
	2019			2018
Risk-free interest rate		2.59	%		2.5	%
Dividend yield		0	%		0	%
Expected volatility		51	%		57	%
Expected life		4 years			5.1 years

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Revenue (Tables)

3 Months Ended

Mar. 31, 2019

Geographic Area [Member]

Disaggregation of Revenue [Line Items]

Schedule of revenue disaggregated by geographic area and major product category

	During the Three-Month Periods Ended March 31,
	2019		2018
United States	$	3,777,746	$	2,595,616
Other		632,815		285,569
Total product sales	$	4,410,561	$	2,881,185

Major Product Category [Member]

Disaggregation of Revenue [Line Items]

Schedule of revenue disaggregated by geographic area and major product category

	During the Three-Month Periods Ended March 31,
	2019		2018
First Defense® product line	$	4,140,917	$	2,780,869
Other animal health		136,043		100,316
Other		133,601		—
Total product sales	$	4,410,561	$	2,881,185

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Other Expenses, Net (Tables)

3 Months Ended

Mar. 31, 2019

Other Income and Expenses [Abstract]

Schedule of other expenses, net

	During the Three-Month Periods Ended March 31,
	2019			2018
Interest expense	$	114,041		$	96,015
Interest income		(2,315	)		(3,824	)
Other gains		—			(75	)
Other expenses, net	$	111,726		$	92,116

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Summary of Significant Accounting Policies (Details) - USD ($)	Mar. 31, 2019	Dec. 31, 2018
Assets:
Cash and money market accounts	$ 10,584,067	$ 2,521,050
Interest rate swaps	4,117	40,209
Total	10,588,184	2,561,259
Fair Value, Inputs, Level 1 [Member]
Assets:
Cash and money market accounts	10,584,067	2,521,050
Interest rate swaps
Total	10,584,067	2,521,050
Fair Value, Inputs, Level 2 [Member]
Assets:
Cash and money market accounts
Interest rate swaps	4,117	40,209
Total	4,117	40,209
Fair Value, Inputs, Level 3 [Member]
Assets:
Cash and money market accounts
Interest rate swaps
Total

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Summary of Significant Accounting Policies (Details 1)	3 Months Ended
	Mar. 31, 2019		Mar. 31, 2018
Company A [Member]
Revenue, Major Customer [Line Items]
Concentration risk percentage	43.00%		34.00%
Company B [Member]
Revenue, Major Customer [Line Items]
Concentration risk percentage	27.00%		24.00%
Company C [Member]
Revenue, Major Customer [Line Items]
Concentration risk percentage		[1]	11.00%

[1] Amount is less than 10%.

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Summary of Significant Accounting Policies (Details 2)	Mar. 31, 2019	Dec. 31, 2018
Company A [Member]
Revenue, Major Customer [Line Items]
Accounts receivable due from significant customers	42.00%	35.00%
Company B [Member]
Revenue, Major Customer [Line Items]
Accounts receivable due from significant customers	29.00%	36.00%
Company C [Member]
Revenue, Major Customer [Line Items]
Accounts receivable due from significant customers	13.00%	15.00%

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Summary of Significant Accounting Policies (Details Textual) - USD ($)	3 Months Ended
	Mar. 31, 2019	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2018
Summary of Significant Accounting Policies (Textual)
Federal deposit insurance corporation limits	$ 250,000
Property, plant and equipment, description	The facility we have constructed to produce the active pharmaceutical ingredient (Nisin) for Re-Tain™ is being depreciated over 39 years from when a certificate of occupancy was issued during the fourth quarter of 2017. We began depreciating the equipment for our Nisin production facility when it was placed in service during the third quarter of 2018. Approximately 89% of these assets are being depreciated over ten years.
Concentration risk percentage, description	Sales to significant customers that amounted to 10% or more of total product sales.
U.S. government aggregated amount	$ 10,331,744			$ 2,268,737
Advertising expenses	30,807		$ 21,766
Stock-based compensation	$ 82,835		$ 71,048
Non-cash income tax expense to create a full valuation allowance against our net deferred tax assets		$ 563,252
Outstanding stock options not included in the calculation because the effect would be anti-dilutive	87,000		477,000
Weighted average number of shares outstanding	5,624,504		5,477,921

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Cash and Cash Equivalents (Details) - USD ($)	3 Months Ended
	Mar. 31, 2019	Dec. 31, 2018	Mar. 31, 2018	Dec. 31, 2017
Cash and Cash Equivalents (Textual)
Debt covenant, description	Bank debt covenant to maintain at least $2,000,000 of otherwise unrestricted cash and cash equivalents.
Cash and cash equivalents	$ 10,584,067	$ 2,521,050	$ 3,060,470	$ 3,798,811

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Trade Accounts Receivable, Net (Details) - USD ($)	Mar. 31, 2019	Dec. 31, 2018
Schedule of accounts receivable
Trade accounts receivable, net	$ 1,283,096	$ 932,298

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Inventory (Details) - USD ($)	Mar. 31, 2019	Dec. 31, 2018
Schedule of inventory
Raw materials	$ 470,497	$ 338,991
Work-in-process	1,153,152	1,337,035
Finished goods	412,144	655,645
Total	$ 2,035,793	$ 2,331,671

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Prepaid Expenses and Other Current Assets (Details) - USD ($)		Mar. 31, 2019	Dec. 31, 2018
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
Prepaid expenses		$ 292,360	$ 142,528
Other receivables	[1]	462,877	493,289
Total		$ 755,237	$ 635,817

[1] This amount includes $450,000 due from a third party for the sale of assets. See Note 14.

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Prepaid Expenses and Other Current Assets (Details Textual) - USD ($)	Mar. 31, 2019	Dec. 31, 2018
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
Due from a third party	$ 450,000	$ 450,000

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Property, Plant and Equipment, Net (Details) - USD ($)	3 Months Ended
	Mar. 31, 2019	Dec. 31, 2018
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	$ 33,569,890	$ 33,450,012
Accumulated depreciation	(7,984,438)	(7,422,463)
Property, plant and equipment, net	25,585,452	26,027,549
Buildings and improvements [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	17,060,316	17,018,316
Laboratory and manufacturing equipment [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	15,156,622	15,092,252
Office furniture and equipment [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	733,159	731,510
Construction in progress [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	102,926	91,067
Land [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	$ 516,867	$ 516,867
Minimum [Member] | Buildings and improvements [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, Estimated Useful Lives	10 years
Minimum [Member] | Laboratory and manufacturing equipment [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, Estimated Useful Lives	3 years
Minimum [Member] | Office furniture and equipment [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, Estimated Useful Lives	3 years
Maximum [Member] | Buildings and improvements [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, Estimated Useful Lives	39 years
Maximum [Member] | Laboratory and manufacturing equipment [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, Estimated Useful Lives	10 years
Maximum [Member] | Office furniture and equipment [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, Estimated Useful Lives	10 years

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Property, Plant and Equipment, Net (Details Textual) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Property, Plant and Equipment (Textual)
Property, plant and equipment, disposals	$ 1,830	$ 3,430
Depreciation expense	$ 563,805	$ 279,896

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Business Acquisition (Details) - USD ($)		36 Months Ended
	Jan. 04, 2016	Dec. 31, 2018
Business Acquisition (Textual)
Total purchase price	$ 532,000
Amount paid on acquisition	368,000
Technology transfer payment	97,000
Aggregate royalties payment	67,000
Royalty expense		$ 36,000
Estimated fair values of inventory	113,000
Estimated fair values of machinery and equipment	132,000
Estimated fair values of intangible assets	191,000
Estimated fair values of goodwill	$ 96,000

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Intangible Assets (Details) - USD ($)	Mar. 31, 2019	Dec. 31, 2018
Summary of intangible amortization expense
Nine-month period ending December 31, 2019	$ 14,328
Year ending December 31, 2020	19,104
Year ending December 31, 2021	19,104
Year ending December 31, 2022	19,104
Year ending December 31, 2023	19,104
After December 31, 2023	38,208
Total	$ 128,952	$ 133,728

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Intangible Assets (Details 1) - USD ($)	Mar. 31, 2019	Dec. 31, 2018
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Value	$ 191,040	$ 191,040
Accumulated Amortization	(62,088)	(57,312)
Net Book Value	128,952	133,728
Developed technology [Member]
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Value	184,100	184,100
Accumulated Amortization	(59,833)	(55,230)
Net Book Value	124,267	128,870
Customer relationships [Member]
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Value	1,300	1,300
Accumulated Amortization	(422)	(390)
Net Book Value	878	910
Non-compete agreements [Member]
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Value	5,640	5,640
Accumulated Amortization	(1,833)	(1,692)
Net Book Value	$ 3,807	$ 3,948

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Intangible Assets (Details Textual) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Dec. 31, 2018
Intangible Assets (Textual)
Intangible amortization expense	$ 4,776	$ 4,776
Intangible asset amortized, useful lives	10 years
Net value	$ 128,952		$ 133,728

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Accounts Payable and Accrued Expenses (Details) - USD ($)	Mar. 31, 2019	Dec. 31, 2018
Payables and Accruals [Abstract]
Accounts payable - trade	$ 618,646	$ 531,048
Accounts payable - capital		72,695
Accrued payroll	307,604	358,451
Accrued professional fees	56,275	93,050
Accrued other	190,231	165,416
Total	$ 1,172,756	$ 1,220,660

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Bank Debt (Details) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Debt Disclosure [Abstract]
Payments required by interest rate swaps	$ (1,564)	$ 5,285
Other comprehensive (loss) income, net of taxes	$ (27,069)	$ 43,859

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Bank Debt (Details 1) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Debt Instrument [Line Items]
Proceeds from Debt Issue		$ 267,141
Debt Principal Repayments	(214,301)	(39,803)
Loan #1 [Member]
Debt Instrument [Line Items]
Proceeds from Debt Issue
Debt Principal Repayments	(16,881)	(15,888)
Loan #2 [Member]
Debt Instrument [Line Items]
Proceeds from Debt Issue
Debt Principal Repayments	(22,260)	(21,279)
Loan #3 [Member]
Debt Instrument [Line Items]
Proceeds from Debt Issue
Debt Principal Repayments	(140,715)
Loan #4 [Member]
Debt Instrument [Line Items]
Proceeds from Debt Issue		267,141
Debt Principal Repayments	(32,000)
Loan #5 [Member]
Debt Instrument [Line Items]
Proceeds from Debt Issue
Debt Principal Repayments	$ (2,445)	$ (2,636)

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Bank Debt (Details 2)	Mar. 31, 2019 USD ($)
Debt Instrument [Line Items]
Nine-Months ending 12/31/2019	$ 646,489
Year ending 12/31/2020	1,290,484
Year ending 12/31/2021	801,898
Year ending 12/31/2022	807,041
Year ending 12/31/2023	812,367
After 12/31/2023	4,807,845
Subtotal	9,166,124
Debt Issuance Costs	(110,343)
Total	9,055,781
loan 1 [Member]
Debt Instrument [Line Items]
Nine-Months ending 12/31/2019	52,027
Year ending 12/31/2020	493,696
Year ending 12/31/2021
Year ending 12/31/2022
Year ending 12/31/2023
After 12/31/2023
Subtotal	545,723
loan 2 [Member]
Debt Instrument [Line Items]
Nine-Months ending 12/31/2019	67,737
Year ending 12/31/2020	94,005
Year ending 12/31/2021	98,538
Year ending 12/31/2022	103,077
Year ending 12/31/2023	107,769
After 12/31/2023	1,740,382
Subtotal	2,211,508
loan 3 [Member]
Debt Instrument [Line Items]
Nine-Months ending 12/31/2019	422,143	[1]
Year ending 12/31/2020	562,857	[1]
Year ending 12/31/2021	562,857	[1]
Year ending 12/31/2022	562,857	[1]
Year ending 12/31/2023	562,857	[1]
After 12/31/2023	985,000	[1]
Subtotal	3,658,571	[1]
loan 4 [Member]
Debt Instrument [Line Items]
Nine-Months ending 12/31/2019	96,000	[1]
Year ending 12/31/2020	128,000	[1]
Year ending 12/31/2021	128,000	[1]
Year ending 12/31/2022	128,000	[1]
Year ending 12/31/2023	128,000	[1]
After 12/31/2023	1,824,000	[1]
Subtotal	2,432,000	[1]
loan 5 [Member]
Debt Instrument [Line Items]
Nine-Months ending 12/31/2019	8,582	[2]
Year ending 12/31/2020	11,926	[2]
Year ending 12/31/2021	12,503	[2]
Year ending 12/31/2022	13,107	[2]
Year ending 12/31/2023	13,741	[2]
After 12/31/2023	258,463	[2]
Subtotal	$ 318,322	[2]

[1] These notes bear interest at a variable rate equal to the one-month LIBOR plus a margin of 2.25%. Figures in this table are estimated using an interest rate of approximately 4.74%. The actual interest rate and principal payments will be different.

[2] This note bears interest at a variable rate equal to the one-month LIBOR plus a margin of 2.25%. Figures in this table are estimated using an interest rate of approximately 4.73%. The actual interest rate and principal payments will be different.

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Bank Debt (Details Textual)	3 Months Ended		12 Months Ended
	Mar. 31, 2019 USD ($) ft²	Mar. 31, 2018 USD ($)	Dec. 31, 2018 USD ($)	Mar. 31, 2017 USD ($)	Mar. 31, 2016 USD ($)	Sep. 30, 2010 USD ($)
Bank Debt (Textual)
Debt issue costs		$ 522
Interest Rate Swap [Member]
Bank Debt (Textual)
Variable interest rate with LIBOR, description	Interest rate exposures on Loan #1 and Loan #2 with interest rate swap agreements that effectively converted floating interest rates based on the one-month LIBOR plus a margin of 3.25% and 2.25% to the fixed rates of 6.04% and 4.38%, respectively. As of March 31, 2019, the variable rates on these two mortgage notes were 5.75% and 4.74%, respectively
Original notional amount	$ 2,757,231
Line of Credit [Member]
Bank Debt (Textual)
Credit facility aggregate value				$ 6,500,000	$ 4,500,000
Variable interest rate with LIBOR, description			Interest on borrowings against the line of credit is variable at the higher of 4.25% per annum or the one-month LIBOR plus 3.5% per annum.
Outstanding under line of credit			$ 500,000
Line of Credit [Member] | Loan 1 and Loan 2 [Member]
Bank Debt (Textual)
Debt issue costs	26,489
Line of Credit [Member] | Loan 1 and Loan 2 [Member]
Bank Debt (Textual)
Debt issue costs	34,125
Line of Credit [Member] | Loan 3 and Loan 4 and Laon 5 [Member]
Bank Debt (Textual)
Debt issue costs	46,734
Line of Credit [Member] | Loan 3 and Loan 4 and Laon 5 [Member]
Bank Debt (Textual)
Debt issue costs	68,072
Loan One [Member] | Interest Rate Swap [Member]
Bank Debt (Textual)
Original notional amount	1,000,000
Loan Two [Member] | Interest Rate Swap [Member]
Bank Debt (Textual)
Original notional amount	$ 2,500,000
Loan Four [Member] | Line of Credit [Member]
Bank Debt (Textual)
Variable interest rate with LIBOR, description	These notes bear interest at a variable rate equal to the one-month LIBOR plus a margin of 2.25%.
Variable interest rate	4.74%
Loan Five [Member] | Line of Credit [Member]
Bank Debt (Textual)
Variable interest rate with LIBOR, description	This note bears interest at a variable rate equal to the one-month LIBOR plus a margin of 2.25%.
Variable interest rate	4.73%
Td Bank [Member] | Line of Credit [Member]
Bank Debt (Textual)
Credit facility aggregate value						$ 500,000
Td Bank [Member] | Loan One [Member]
Bank Debt (Textual)
Proceeds from issuance of loan	$ 1,000,000
Interest payments, term	10 years
Loan amortization, term	15 years
Balloon principal payment	$ 451,885
Balloon principal payment due, description	Due during the third quarter of 2020.
Outstanding amount of loan	$ 545,723
Td Bank [Member] | Loan Two [Member]
Bank Debt (Textual)
Proceeds from issuance of loan	$ 2,500,000
Interest payments, term	10 years
Loan amortization, term	20 years
Balloon principal payment			$ 1,550,000
Balloon principal payment due, description	Due during the third quarter of 2025.
Outstanding amount of loan	$ 2,211,508
Td Bank [Member] | Loan Three [Member]
Bank Debt (Textual)
Maximum limit on issuance of loan, description	Not to exceed 80%.
Proceeds from issuance of loan	$ 3,940,000
Loan amortization, term	7 years
Outstanding amount of loan	$ 3,658,571
Variable interest rate with LIBOR, description	Variable rate equal to the one-month LIBOR (adjusted at each monthly payment date) plus a margin of 2.25% through March 2018, at which time the loan converted to a term loan facility at the same variable interest rate (which was equal to 4.74% as of March 31, 2019)
Loan conversion, term	7 years
Td Bank [Member] | Loan Four [Member]
Bank Debt (Textual)
Maximum limit on issuance of loan, description	Not to exceed 80%.
Proceeds from issuance of loan	$ 2,560,000
Interest payments, term	10 years
Loan amortization, term	20 years
Balloon principal payment	$ 1,408,000
Balloon principal payment due, description	Due during the first quarter of 2027.
Outstanding amount of loan	$ 2,432,000
Variable interest rate with LIBOR, description	Variable rate equal to the one-month LIBOR (adjusted at each monthly payment date) plus a margin of 2.25% through March 2018, at which time the loan converted to a term loan facility at the same variable interest rate (which was equal to 4.74% as of March 31, 2019)
Td Bank [Member] | Loan Five [Member]
Bank Debt (Textual)
Proceeds from issuance of loan	$ 340,000
Interest payments, term	10 years
Loan amortization, term	20 years
Balloon principal payment	$ 209,000
Balloon principal payment due, description	Due during the first quarter of 2027.
Outstanding amount of loan	$ 318,322
Variable interest rate with LIBOR, description	Variable rate equal to the one-month LIBOR (adjusted at each monthly payment date) plus a margin of 2.25% (which was equal to 4.73% as of March 31, 2019)
Warehouse and storage facility | ft²	4,114

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Stockholders' Equity (Details) - Stock Option [Member] - USD ($)		3 Months Ended	12 Months Ended
		Mar. 31, 2019	Dec. 31, 2018
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Weighted Average Exercise Price, Outstanding, Beginning		$ 6.37
Weighted Average Exercise Price, Grants		7.50	$ 7.38
Weighted Average Exercise Price, Terminations		5.07	6.63
Weighted Average Exercise Price, Exercises		4.80	1.89
Weighted Average Exercise Price, Outstanding, Ending		6.51	$ 6.37
Weighted Average Exercise Price, Vested		4.93
Weighted average exercise price, Vested and expected to vest		$ 6.51
Aggregate Intrinsic Value, Outstanding, Beginning	[1]	$ 266,020	$ 1,513,980
Aggregate Intrinsic Value, Outstanding, Ending	[1]	(59,850)	$ 266,020
Aggregate Intrinsic Value, Vested	[1]	63,860
Aggregate Intrinsic Value, Vested and expected to vest	[1]	$ (59,850)
2000 Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Outstanding, Beginning balance		12,500	117,500
Grants
Terminations
Exercises			(105,000)
Outstanding, Ending balance		12,500	12,500
Vested		12,500
Vested and expected to vest		12,500
Reserved for future grants
2010 Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Outstanding, Beginning balance		270,000	242,500
Grants			48,500
Terminations		(12,000)	(19,000)
Exercises		(15,000)	(2,000)
Outstanding, Ending balance		243,000	270,000
Vested		32,500
Vested and expected to vest		243,000
Reserved for future grants		13,000
2017 Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Outstanding, Beginning balance		111,500
Grants		10,000	122,500
Terminations			(11,000)
Exercises
Outstanding, Ending balance		121,500	111,500
Vested
Vested and expected to vest		121,500
Reserved for future grants		178,500

[1] Intrinsic value is the difference between the fair market value as of the date indicated and as of the date of the option grant.

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Stockholders' Equity (Details 1) - Stock option plans [Member]	3 Months Ended
	Mar. 31, 2019 $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of Shares, Non-vested stock options as of January 1, 2019 | shares	334,000
Number of Shares, Non-vested stock options as of March 31, 2019 | shares	332,000
Number of Shares, Stock options granted during the three-month period ended March 31, 2019 | shares	10,000
Number of Shares, Stock options that vested during the three-month period ended March 31, 2019 | shares
Number of Shares, Stock options that were forfeited during the three-month period ended March 31, 2019 | shares	12,000
Weighted Average Fair Value at Grant Date, Non-vested stock options as of January 1, 2019	$ 3.63
Weighted Average Fair Value at Grant Date, Non-vested stock options as of March 31, 2019	3.65
Weighted Average Fair Value at Grant Date, Stock options granted during the three-month period ended March 31, 2019	3.16
Weighted Average Fair Value at Grant Date, Stock options that vested during the three-month period ended March 31, 2019
Weighted Average Fair Value at Grant Date, Stock options that were forfeited during the three-month period ended March 31, 2019	2.65
Weighted Average Exercise Price, Non-vested stock options as of January 1, 2019	6.64
Weighted Average Exercise Price, Non-vested stock options as of March 31, 2019	6.72
Weighted Average Exercise Price, Stock options granted during the three-month period ended March 31, 2019	7.50
Weighted Average Exercise Price, Stock options that vested during the three-month period ended March 31, 2019
Weighted Average Exercise Price, Stock options that were forfeited during the three-month period ended March 31, 2019	$ 5.07

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Stockholders' Equity (Details 2)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Equity [Abstract]
Risk-free interest rate	2.59%	2.50%
Dividend yield	0.00%	0.00%
Expected volatility	51.00%	57.00%
Expected life	4 years	5 years 1 month 6 days

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Stockholders' Equity (Details Textual)			1 Months Ended							3 Months Ended		12 Months Ended
	Feb. 03, 2016 USD ($) $ / shares shares	Sep. 30, 1995 $ / shares	Nov. 20, 2018 USD ($)	Dec. 21, 2017 USD ($) $ / shares shares	Jul. 27, 2017 USD ($) Investors $ / shares shares	Oct. 21, 2016 USD ($) $ / shares shares	Oct. 28, 2015 USD ($)	Jun. 30, 2010 shares	Jun. 30, 2000 shares	Mar. 31, 2019 USD ($) Director $ / shares shares	Mar. 31, 2018 USD ($) $ / shares	Dec. 31, 2018 $ / shares shares	Jun. 14, 2018 shares	Jun. 30, 2017 shares	Jun. 15, 2016 shares	Jun. 30, 2001 shares
Stockholders' Equity (Textual)
Potential issuance or sale of equity | $							$ 10,000,000
Gross proceeds | $	$ 5,900,000			$ 3,050,000						$ 9,000,000
Net proceeds | $	$ 5,313,000			$ 2,734,000						$ 8,303,000
Common stock shares sold	1,123,810			417,807						1,636,364
Sale of stock, per share | $ / shares	$ 5.25			$ 7.30						$ 5.50
Common stock, shares authorized										11,000,000		11,000,000
Stock option and incentive plan, description										We currently match 100% of the first 3% of each employee's salary that is contributed to the Plan and 50% of the next 2% of each employee's salary that is contributed to the Plan.
Proceeds from exercise of stock options | $										$ 2	$ 4,156
Potential issuance cost in equity securities | $			$ 20,000,000
Registration statement, description										Having raised $10,000,000 in gross proceeds under the February 2016, July 2017 and December 2017 equity transactions.
Private Placement [Member]
Stockholders' Equity (Textual)
Gross proceeds | $						$ 3,464,000
Net proceeds | $						$ 3,161,000
Common stock shares sold						659,880
Closing share price | $ / shares						$ 5.25
Stock Options Granted [Member]
Stockholders' Equity (Textual)
Weighted average remaining life of options exercisable										3 years 1 month
Investor [Member]
Stockholders' Equity (Textual)
Gross proceeds | $					$ 1,050,000
Net proceeds | $					$ 1,034,000
Number of related investors | Investors					2
Common stock shares issued					200,000
Closing share price | $ / shares					$ 5.25
Common Stock Rights Plan [Member]
Stockholders' Equity (Textual)
Share-based payment, description		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).
Common stock purchase price | $ / shares		$ 70.00
Employee stock, plan description		The Rights (as amended) become exercisable and transferable apart from the common stock upon the earlier of i) 10 days following a public announcement that a person or group (Acquiring Person) has, without the prior consent of the Continuing Directors (as such term is defined in the Rights Agreement), acquired beneficial ownership of 20% or more of the outstanding common stock or ii) 10 days following commencement of a tender offer or exchange offer the consummation of which would result in ownership by a person or group of 20% or more of the outstanding common stock (the earlier of such dates being called the Distribution Date).								Our Board of Directors also has voted to authorize amendments to increase the ownership threshold for determining "Acquiring Person" status to 20%. During the second quarter of 2015, our Board of Directors also voted to authorize an amendment to remove a provision that prevented a new group of directors elected following the emergence of an Acquiring Person (an owner of more than 20% of our stock) from controlling the Rights Plan by maintaining exclusive authority over the Rights Plan with pre-existing directors.
Sale of common stock, description		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.
Outstanding rights price per share | $ / shares		$ 0.005
Option expiry date										Sep. 19, 2022
Employee Stock Option [Member]
Stockholders' Equity (Textual)
Number of directors exercised stock options | Director										1
Aggregate intrinsic value of options exercised | $										$ 28,641	$ 24,800
Weighted-average grant date fair values of options granted | $ / shares										$ 3.16	$ 4.22
Total unrecognized stock-based compensation related to non-vested stock options | $										$ 562,225
Exercise prices of options outstanding | $ / shares										$ 6.51		$ 6.37
Weighted average remaining life of unrecognized stock-based compensation related to non-vested										1 year 7 months
Employee Stock Option [Member] | Two Thousand Ten Plan [Member]
Stockholders' Equity (Textual)
Common stock reserved for issuance under the plan										13,000
Weighted average remaining life of options outstanding										6 years 6 months
Number of stock options exercised
Stock option granted during the period												48,500
Employee Stock Option [Member] | Two Thousand Ten Plan [Member] | Employee [Member]
Stockholders' Equity (Textual)
Common stock reserved for issuance under the plan								300,000
Stock option expiration period								10 years
Weighted average remaining life of options exercisable										3 years 1 month
Share-based payment, description								The 2010 Plan expires in June 2020, after which date no further options could be granted under the 2010 Plan.
Option expiry date								Jun. 30, 2020
Employee Stock Option [Member] | Two Thousand Plan [Member]
Stockholders' Equity (Textual)
Common stock reserved for issuance under the plan
Weighted average remaining life of options outstanding										6 years 6 months
Number of stock options exercised
Stock option granted during the period
Employee Stock Option [Member] | Two Thousand Plan [Member] | Employee [Member]
Stockholders' Equity (Textual)
Stock option and incentive plan, description									No less than 85% of fair market value on the date of grant in the case of non-qualified stock options.
Common stock reserved for issuance under the plan									250,000							500,000
Stock option expiration period									10 years
Weighted average remaining life of options exercisable										3 years 1 month
Option expiry date									Feb. 28, 2010
Employee Stock Option [Member] | Two Thousand Seventeen Plan [Member]
Stockholders' Equity (Textual)
Common stock reserved for issuance under the plan										178,500
Weighted average remaining life of options outstanding										6 years 6 months
Number of stock options exercised
Stock option granted during the period										10,000		122,500
Weighted-average grant date fair values of options granted | $ / shares										$ 7.50
Employee Stock Option [Member] | Two Thousand Seventeen Plan [Member] | Employee [Member]
Stockholders' Equity (Textual)
Common stock reserved for issuance under the plan														300,000
Weighted average remaining life of options exercisable										3 years 1 month
Equity Option [Member]
Stockholders' Equity (Textual)
Stock option granted during the period										10,000
Weighted-average grant date fair values of options granted | $ / shares										$ 3.16
Share-based payment, description										Stock options covering 15,000 shares by the surrender of 10,731 shares of common stock with a fair market value of $71,998 at the time of exercise and $2 in cash.	Two employees exercised stock options covering 6,000 shares. One thousand of these options were exercised for cash, resulting in total proceeds of $4,150 and 5,000 of these options were exercised by the surrender of 2,040 shares of common stock with a fair market value of $14,994 at the time of exercise and $6 in cash.
Maximum [Member]
Stockholders' Equity (Textual)
Common stock, shares authorized													11,000,000		10,000,000
Maximum [Member] | Stock Options Granted [Member]
Stockholders' Equity (Textual)
Weighted-average grant date fair values of options granted | $ / shares											$ 7.80
Minimum [Member]
Stockholders' Equity (Textual)
Common stock, shares authorized													8,000,000		8,000,000
Minimum [Member] | Stock Options Granted [Member]
Stockholders' Equity (Textual)
Weighted-average grant date fair values of options granted | $ / shares											$ 7.08

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Revenue (Details) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Disaggregation of Revenue [Line Items]
Total product sales	$ 4,410,561	$ 2,881,185
United States [Member]
Disaggregation of Revenue [Line Items]
Total product sales	3,777,746	2,595,616
Other [Member]
Disaggregation of Revenue [Line Items]
Total product sales	$ 632,815	$ 285,569

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Revenue (Details 1) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Disaggregation of Revenue [Line Items]
Total product sales	$ 4,410,561	$ 2,881,185
First Defense product line [Member]
Disaggregation of Revenue [Line Items]
Total product sales	4,140,917	2,780,869
Other animal health [Member]
Disaggregation of Revenue [Line Items]
Total product sales	136,043	100,316
Other [Member]
Disaggregation of Revenue [Line Items]
Total product sales	$ 133,601

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Revenue (Details Textual) - USD ($)	1 Months Ended	3 Months Ended
	Jun. 30, 2018	Mar. 31, 2019	Mar. 31, 2018	Dec. 31, 2018
Revenue (Textual)
Revenue, description	We cleared all of this backlog (approximately $901,000)	We had received orders representing backlogs worth approximately $393,000 and $276,000, respectively.	We had a backlog of orders (representing purchase orders received from customers which were not fulfilled or paid) worth approximately $1,245,000.
Received orders from backlogs		$ 276,000		$ 393,000

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Gain on Sale of Assets (Details) - USD ($)	3 Months Ended
	Mar. 31, 2019	Sep. 30, 2018
Gain on Sale of Assets (Textual)
Sale of technology		$ 700,000
Upfront payment received	$ 250,000
Third Quarter [Member]
Gain on Sale of Assets (Textual)
Second payment due	200,000
Fourth Quarter [Member]
Gain on Sale of Assets (Textual)
Third payment due	$ 200,000

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Other Expenses, Net (Details) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Other Income and Expenses [Abstract]
Interest expense	$ 114,041	$ 96,015
Interest income	(2,315)	(3,824)
Other gains		(75)
Other expenses, net	$ 111,726	$ 92,116

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Income Taxes (Details) - USD ($)	1 Months Ended	3 Months Ended
	Dec. 22, 2017	Mar. 31, 2019	Jun. 30, 2018	Mar. 31, 2018
Income Taxes (Textual)
Income tax expense (benefit)		$ 9,023		$ (49,148)
(Loss) income before income taxes, rate		6.00%		18.00%
Tax credit carryforward, description		Federal net operating loss carryforwards of $11,839,349 of which $10,127,442 do not expire and $1,711,907 expires in 2034 through 2037 (if not utilized before then) and state net operating loss carryforwards of $3,485,949 that expire in 2037 through 2038 (if not utilized before then). Additionally, we had federal general business tax credit carryforwards of $407,023 that expire in 2027 through 2038 (if not utilized before then) and state tax credit carryforwards of $763,350 that expire in 2023 through 2038 (if not utilized before then).
Non-cash income tax expense to create a full valuation allowance against our net deferred tax assets			$ 563,252
Income tax expense in continuing operations increase in the deferred tax assets	$ 71,000
Minimum [Member]
Income Taxes (Textual)
U.S. federal corporate tax rate	21.00%
Maximum [Member]
Income Taxes (Textual)
U.S. federal corporate tax rate	34.00%

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Contingent Liabilities and Commitments (Details) - USD ($)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Mar. 31, 2019	Dec. 31, 2018
Contingent Liabilities and Commitments (Textual)
Termination fee				$ 100,000
Purchase of inventory				474,000
Other obligations				144,000
Milestone payment	$ 150,000
Royalty, percentage		4.00%
Growth assumption, percentage			6.00%
Royalties due for 2017					$ 5,000
Royalties due for 2018					10,000
Royalties due for 2019					15,000
Royalties due for 2020					20,000
Royalties due for 2021 (and thereafter)					25,000
Royalties				$ 3,750	$ 10,396

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Segment Information (Details) - Segment	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Segment Information (Textual)
Number of business segment	1
Sales Revenue, Net [Member]
Segment Information (Textual)
Concentration risk percentage	94.00%	97.00%
U.S. dairy and beef industries [Member] | Sales Revenue, Net [Member]
Segment Information (Textual)
Concentration risk percentage	86.00%	90.00%
International dairy and beef [Member] | Sales Revenue, Net [Member]
Segment Information (Textual)
Concentration risk percentage	11.00%	10.00%

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Related Party Transactions (Details) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Dec. 31, 2018
Related Party Transactions (Textual)
Revenues from transactions with related party	$ 176,866	$ 209,633
Marketing-related payments	0	$ 10,383
Accounts receivable, related parties	$ 35,543		$ 16,283

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Employee Benefits (Details) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Employee Benefits (Textual)
Employee savings plan, description	All employees completing one month of service with the Company are eligible to participate.
Defined benefit plans general information, description	We currently match 100% of the first 3% of each employee's salary that is contributed to the Plan and 50% of the next 2% of each employee's salary that is contributed to the Plan.
Defined benefit plan benefits paid	$ 31,197	$ 24,646