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Good morning, and welcome to ImmuCell Corporation Reports Second Quarter Ended June 30, 2025 Unaudited Financial Results Conference Call. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Joe Diaz of Lytham Partners. Please go ahead.

Thank you, and good morning to everyone. As the conference call operator indicated, my name is Joe Diaz. I'm with Lytham Partners. We're the Investor Relations consulting firm for ImmuCell. Thank you again for all those who are joining us today to discuss the unaudited financial results for the second quarter ended June 30, 2025. Listeners are reminded and cautioned that statements made by management during the course of this call include forward-looking statements, which include any statement that refers to future events or expected future results or predictions about steps the company plans to take in the future. These statements are not guarantees of performance and are subject to risks and uncertainties that could cause actual results, outcomes or events to differ materially from those discussed today. Additional information regarding forward-looking statements and the risks and uncertainties that could impact future results, outcomes or events is available under the cautionary note regarding forward-looking statements, or better known as the safe harbor statement, provided with Form 10-Q and the press release that the company filed last night, along with the company's other periodic filings with the SEC. Information discussed on today's call speaks only as of today, Friday, August 15, 2025. The company undertakes no obligation to update any information discussed on today's call. Please note that references to certain non-GAAP financial measures may be made during today's call. The company included definitions of these terms, as well as reconciliations of these figures, to the most comparable GAAP financial measures in last night's press release in order to better assist you in understanding its financial performance. With that said, let me turn the call over to Michael Brigham, President and CEO of ImmuCell Corporation, for opening remarks. Michael?

Great. Thank you, Joe, and good morning, everyone. So yes, I would like to make a few opening comments. We are in the midst of a very positive transition right now at ImmuCell. Our investment to increase production capacity for the First Defense product line to support $30 million or more in revenue per year is now complete. For sure, this took longer than we had planned, as the process was plagued by certain contamination events and other challenges. That said, it is done, and we are in a good place going forward. With regards to our very long development time line with Re-Tain, we are now initiating investigational product use studies to test market acceptance in the field over the second half of the year. While, of course, we would prefer commercial sales under an FDA approval, we'd like to say that we are going to get paid in data. This data will inform our exploration of strategic options and the future plan for this product as we continue to anticipate the FDA approval. So at this point, I'm going to turn the call over to Tim Fiori, our CFO, to review some second quarter financial highlights. Then I would like to offer a few comments from a strategic perspective. After which, we will open the call for your questions. So, Tim?

Thanks, Michael. Product sales during the second quarter of 2025 increased by 18% or $972,000 over the second quarter of 2024. Product sales during the first half of 2025 increased by 14% or $1.8 million over the first half of 2024. Product sales during the trailing 12-month period ended June 30, 2025, increased by 22% or $5.1 million over the trailing 12-month period ended June 30, 2024. This period of increased production output allowed us to effectively eliminate our backlog of orders and rebuild inventory and distribution. During this period of short supply, we were often -- we often shipped direct to critical customers to keep them in supply. Now we are back to only shipping through our normal distribution channels. Refilling the distribution pipeline after an extended backlog likely provided a temporary boost to sales. Because this inventory rebuild is not expected to repeat, we may experience a softening in sales during the second half of 2025. We also realized some good gross margin improvement during the first half of 2025. Gross margin as a percentage of product sales increased to 44% during the second quarter of 2025 compared to just 22% during the second quarter of 2024. Gross margin increased to 43% during the first half of '25 compared to just 28% during the first half of 2024. Gross margin increased to 37% during the trailing 12-month period ended June 30, 2025, compared to just 26% during the trailing 12-month period ended June 30, 2024. To remain successful, we must regain customers that we lost during our period of short product supply and increased market share while operating without significant contamination events or equipment breakdowns and also achieve strong production yields. I'd like to talk for a moment about adjusted EBITDA because the impact of noncash depreciation expense on our bottom line is significant. To be clear, adjusted EBITA, as opposed to adjusted EBITDA, includes an add-back of stock-based compensation expense, which is another noncash expense that is included in net income as calculated in accordance with GAAP. We created an adjusted EBITDA of $1.4 million, $3.7 million and $5.3 million during the 3-month, 6-month and 12-month periods ended June 30, 2025, respectively. These strong results compare very favorably to adjusted EBITDA of negative $619,000, negative $161,000 and negative $370,000 during the 3-month, 6-month and 12-month periods ended June 30, 2024, respectively. These strong results helped us increase cash to $6 million as of June 30, 2025, from $3.8 million as of December 31, 2024. On a final note, you may have seen our press release Tuesday night about the refinancing of a portion of our bank debt. We were able to reduce our interest rate and avoid large balloon payments that were due during the third quarter of 2026 with a new 5-year note payable through the third quarter of 2030. With that, I will turn the call back to Michael. Michael?

Great. Thanks, Tim. So we are very focused on the commercial opportunity that we have with First Defense. We are pleased to see traction of the new product formats of First Defense that we have introduced, to the point where the First Defense product line now should be seen as a suite of related products with expanded uses and appeal. Our financial recovery and improvement shows up on the favorable adjusted EBITDA results that Tim just touched on. Eliminating the order backlog has been a critical business objective for some time now. Our focus remains on both recovering from the disruption caused by the prolonged supply shortage and capturing increased market share with the goal of building a long-term growth track. With regards to Re-Tain, we expect producers to become excited about identifying and treating cows at the subclinical stage with Re-Tain, thereby creating a substantial animal welfare benefit. That is because animals infected with subclinical mastitis often go untreated and progress to the clinical disease state. Once cows are that sick, they require antibiotic treatment and may die or be culled from the herd. The success of this product will depend largely on our ability to implement treatment protocols in a way that the Nisin we deliver to treated cows does not interfere with starter cultures that are used in some milk processing methods to make, for example, cheese and yogurt. One of our challenges is to find optimal treatment and milk processing practices to avoid such issues. The following comment is a very important issue to me. We hope that milk processors will engage in this evaluation with us in order to help the dairy industry improve the health of certain sick cows that often go untreated while at the same time, improving the quantity and quality of milk that is produced and also reducing abortion rates. We believe that treating subclinically infected cows could enhance best practices in the industry. It is common practice for cows to be treated with traditional antibiotics that are also used in the prevention of certain diseases in humans, which is a growing public health concern in our society and an active issue with the FDA, largely because the growing evidence that this overuse of traditional antibiotics contributes to antibiotic resistance and the rise of superbugs, or pathogens that are resistant to these antibiotics. Our bacteriocin is an alternative to these traditional antibiotics that are used in human medicine because our active ingredient, Nisin, is not used in human health care. Re-Tain would not contribute to this significant public health concern and could help the industry address an important sustainability objective, that being the overuse of antibiotics that are medically important to human health care, while at the same time, improving the quantity and quality of milk produced by treated cows. While substantially -- excuse me. While sustainability objectives call for reducing the use of antibiotics in food-producing animals, no new FDA-approved drug to treat mastitis has been developed in years. In the big picture, we are introducing an entirely new class of antimicrobial as an animal drug, a bacteriocin that does not promote resistance against antibiotics use in human medicine, making it more socially responsible. The industry could keep treating this very significant disease with traditional antibiotics, but it takes innovation to bring a bacteriocin like Nisin to market. We believe our product fits very well with where the industry is going to be in the coming years. So while being mindful and prudent of how much cash we invested in inventory that will have a short expiry date, if market launch were delayed, we did build inventory during '22 and '23 to support potential initial sales of Re-Tain. Over the second half of 2025, we plan to use this inventory on hand that now has a relatively short shelf life in investigational product use studies, collecting market feedback about product performance in the field in collaboration with Michigan State University. We do not anticipate the investigational product use to generate sales or gross margin. Although the FDA granted zero milk discard period for Re-Tain in 2018, we decided to introduce a short discard period in these studies out of an abundance of caution. This is because Nisin levels well considered safe for adult human consumption can impact certain milk processing applications. Even if we conclude that a milk discard period is required by milk processors at launch, we expect it to be significantly shorter than those associated with traditional antibiotics currently on the market. Further, discarded milk has often fed the calves, and we believe that this discarded milk will be much healthier for calves than antibiotic-laden discard milk. It is our objective to complete the investigational product study and data analysis during the first quarter of 2026. At the same time, we are reducing product development expenses and exploring potential strategic options for our novel technology. Our go-to-market strategy for Re-Tain has evolved in response to FDA approval delays and cash constraints. A full commercial launch will not proceed until three key conditions are met: one, FDA approval is obtained; two, a validated aseptic fill solution is in place; and three, adequate cash is available to produce commercial inventory. In the meantime, we are focused on three key projects, that being: One, conducting the infield investigational product use trials which could provide valuable insights into how producers perceive the product's benefits and integrate the product into their herd health protocols; and two, evaluating strategic options that could offset some cash requirements and enable the mass market launch of Re-Tain; and three, investigating alternative uses for the Re-Tain manufacturing plant and equipment. This disciplined approach is intended to protect shareholder value, ensure regulatory compliance and support a successful market entry. So lastly, I encourage you to review our corporate presentation slide deck. I believe it provides a very good summary of our business strategy and objectives, as well as our current financial results. An August update was just posted to our website last night. See the Investors section of our website and click on Corporate Presentation or contact us for a copy. With that, we would be happy to take your questions. Let's have Nick open up the lines, please.

[Operator Instructions] And your first question today will come from Andrew Rem with Odinson Partners.

I guess my first question, as you noted that second half sales is down because you kind of worked through the backlog. Can you say what organic growth if we exclude the benefit of backlog sales in the first half was?

This is Tim. No, I don't think we are going to specifically mention a number. I would mention that the backlog at the end of March was -- at March 31, 2025, was $4 million. And we have worked through that backlog during the second quarter with some of the orders being canceled, most of them being filled. And I think that's as far as we can go. I don't know, Michael, if you...

Yes. No, I think you're right, Tim. We really stayed focused on GAAP sales out our door. Our sales team has discussions with distribution and obviously tries to keep them full, but we don't have reporting requirements there or reporting results there. Yes, I think we stick with GAAP out our door, but we're in enough conversations to raise it as a caution. It's essentially a one timer. And I think that answer is going to play out over Q3 and Q4. I do think the long-term plan is solid, but we've got to get through this bubble.

All right. And then can you guys give an update on kind of Re-Tain? I think, in your 10-Q from the first quarter, I think you had mentioned you had had a facility inspection and were kind of -- I think you've got a 483. I think you've responded to that. But has there been any additional back-and-forth with the FDA relating to that? Or can you speculate on the delay in potential approval?

No, it's a good question, Andrew. And just for clarity, there's sort of two sides to this. So there's the ImmuCell side where we make the drug substance. We have passed inspection. We do not have a 483. We've been in that good conditions for quite some time now. The challenge -- the frustrating challenge is that we do use a CMO for filling -- aseptically filling our drug substance into the tubes, and that CMO is under -- has to resolve F 483 inspection observations. And I wish as much and probably more than you that I could put a time line on that. It's extremely frustrating. It's been going on for over a year now. I do know with confidence they're working hard on it, but I don't know the timing on either end, their success or the FDA's agreement to their success. It's an open inspection that they are motivated to resolve, not just for Re-Tain, but for other products in their suite. And it is the final hurdle to FDA approval. And we're eager to get it resolved, but it is just almost totally out of our control, and the FDA and the CMO are working on it.

Okay. That's helpful. You guys had also mentioned you've got some inventory, which it sounds like it's coming up close to expiring, so you're going to use that as part of your investigational. Can you just comment on how much inventory will be expiring in that, let's say, the second half of the year that would be part of that investigational use?

Well, not in like numbers of tubes and certainly not in dollar value because it will not generate sales, as I mentioned. But the answer is all of it. This is product that was produced in anticipation of commercial launch. It will all be used for investigational. We will not generate revenue. And I think as I mentioned, coming back to commercial launch will require new production, and we have not put the cash to that at this point because we think it's better to get the approval, complete the investigational, and then see what our strategic options are. And that will really have -- yes, Tim, comment on the P&L impact.

Yes. So that inventory for Re-Tain has already been expensed, so there is no P&L impact in the future.

Right.

Okay. And then can you just maybe provide maybe some examples of the type -- when you mentioned -- you mentioned a few different times, you're including in the press release, pursuing some strategic options. Like what might be some of the different forms that, that could reasonably take?

Yes. So I think the #1 priority would be -- we are a relatively small company with a relatively small sales team, and that team is very, very focused on First Defense. So bringing in a larger marketing group that could -- we hope they would look at our investigational study data and get excited and then help us with that launch financially and in the barn, introducing a very different, a very novel, very new way to treat a disease state subclinical mastitis that's not treated today. So we would be looking for financial support and marketing support to take this to the next step. And we like to think that we would be a manufacturer. But that -- those negotiations are really open and really flexible as to what form that takes, but conceptually, it would be financial support and introducing a novel product to commercial launch requires a lot of time in the barn and a lot of time with producers. And so some combination that brings us that commercial launch with less financial exposure based on good data that we hope to get from this study during the second half of 2025.

Would a distributor not necessarily be good partner just because they might have the distribution channel, but they would lack kind of the experience or knowledge around a manufacturing side or even maybe the willingness to put up capital?

Yes. I think you've almost answered your own question, and I would agree with your answer. I mean, our distribution partners are essential. They're key. They do a great job for us. Our sales team is leveraged by them largely, obviously, right now getting First Defense to market. But as far as selling and changing practice and educating the industry and working with milk processors and lending financial support, I mean, the phone line is open, but I don't think that's likely. I think it's going to come more from a strategic than a distributor.

I think maybe my last question is just -- I think you also have mentioned before, taking capacity from 30 to 40. Does the timing of that -- what is that kind of dependent on?

Yes. So we're continuing to evaluate the timing of that. There's no change in what we've announced in the past, which is essentially that, that project is on hold. There's some disclosure in the Q about the relative cost of moving to -- from supporting $30 million in revenue to $40 million plus approximately. But no news on the timing, I think.

I think it's a very important decision for management and for our Board, and timing is essential, and we're just going to watch this over the second half of the year just to make sure the cash flows are right. So we're very happy to be over 30, and we're very optimistic that we will need to be over 40 and not too far out. So careful evaluation and under consideration, timing is everything, cash flow is everything.

Okay. Maybe last question on First Defense. It sounds like the sales team maybe have had some distraction, but now or more recently have greater focus. Can you comment on how you think that will help that product line, First Defense?

Yes. I'm guessing if there's a distraction to our sales team, that would be -- I think you might be referencing how does the sales team sell product when it's on short supply. So they've been very distracted, dealing with a lot of very irritated distributors and customers that couldn't get the product they need. So they did the best they could to manage that short supply, but that is distracting from new business, new territories, new customers, out of essential need. We didn't -- we couldn't -- it would only make our backlog bigger if we brought in new business. So it's a great flip here right around June 30, going into the third quarter, where now, they are confident that we have adequate, very sufficient inventory, go get the customers that we may have lost during short supply, go get the new business wherever they can find it, dairy, beef, new territories. They're back to what they like doing, which is selling.

Is some of that too, part of -- I may be using the wrong word, but kind of rebuilding your reputation in the marketplace, but I assume some of that -- it's not necessarily starting on June 30, your ability to unwind the backlog. I would hope that kind of helps in that process. But maybe just talk about some of the challenges of... you know.

Yes. I mean, I would be very fair to say -- very open to say our reputation was tarnished when we didn't deliver what the market wanted. They got frustrated with us. And efficacy rules. They want this product because it works better than others. So yes, they were frustrated. That's what the sales team was distracted on, dealing with that frustration. But with the expansion, capacity expansion complete, that phase, that era is over, and we just fill back with -- we were unreliable in supply in the past, but we are ready to ship every day going forward. So come back to us because efficacy rules, and that's how we're getting back the product performance.

Yes. All right. Well, I appreciate the time. It sounds like you've kind of been some ways, at least for First Defense specifically, a little bit of blue sky, which is kind of a nice environment for you guys to be in. So looking forward to watching you guys and the team kind of execute. So I appreciate it.

Thank you, Andrew. Very, very fair comment. That's felt by each employee at ImmuCell for sure.

And your next question today will come from George Melas with MKH Management.

You mentioned that you're starting to get some traction for the new format for First Defense, and I think that's the spray-dried colostrum. Can you talk a little bit about that and maybe if you already had some sales there and how you sort of see the market opportunity?

Yes. Just on sales, we're not specifically breaking it out. We definitely did have our first sales in Q2, and we're going to continue to be on the market. And I think we'll start breaking that out in the disclosures in Q3. So we'll provide a little bit more detail as it becomes hopefully more material over time. And Michael?

Yes. Just -- yes, I think the numbers are early, but the feeling and the momentum is certain. I know Bobby and the sales team are really excited about -- it's a new niche. It's customers, it's large ranches of calf feed as opposed to the traditional -- the dairy milking operation. And yes, so far so good. And I'll stand with Tim's comment. And I think third quarter is the right time to start. We've always recently given that Tri-Shield product line breakout, and I think it's appropriate to see where we get to in the third quarter and start Tri-Shield, spray-dried and other. Just to give -- but an exciting start. It's quite a buildup, a great job by the production team and by the sales team to get this new format out there. And it's -- that's how we grow. Same technology in different formats, different packages, different markets, different customers.

That sounds really good. And it would be great if you could -- I appreciate that you will break it out. That will, I think, sort of enrich the conversation. Regarding regaining customers, are you talking primarily about sort of second-tier distributors that were somewhat neglected? Or are you talking about end customers? Or are you talking sort of about both?

It is a little bit of both, but mostly, it's end customers. Distribution will move whatever they have available. And we'll -- some got more than others. So the same balancing act or rebound act is important. But it's the end customers that just have to switch to a different product. They have to try something else to take care of their calf. Those are the ones that we got to get back, and they can call their distributor, and the answer will be it will ship tomorrow.

Okay. So is your sales force really energized right now that they can actually really sell as opposed to sort of take phone calls from customers that they couldn't deliver on?

Energized? How do I see that more strongly. I mean, it's a new world, George. I mean, it was really hard for them. It was really hard for everyone. And this is what they are just -- this is what they do for a living. This is what turns them on, and they are fired up. Yes, it's a great -- it's a -- I'm sorry that they had to go through what they went through on short supply, and I'm excited for what they're going to deliver with tubes in the cooler.

Okay. Great. And then a couple of more questions. I looked at the frozen colostrum inventory, and it's relatively flat. It came down a little. So it seems after 2 very strong quarters of production, I was a little surprised that it didn't come down. So you still -- you have a very strong inflow of colostrum -- of milk on the cows. How do you see that over the next 6 or 12 months?

Yes. Just on the inventory, in general, you're right. We do have a strong network of farms that can provide colostrum to us, and we're going to evaluate inventory over time as we see sales come in during the second half and manage that appropriately.

And I think just preventing a return to backlog is probably the #1 priority. And so yes, cash management is essential and obviously super important. But this inventory, this frozen colostrum does have a long shelf life. So it's a little bit of a security blanket, and the rebound plan would be to build -- work it down, and spray-dried is part of that strategy. But yes, it's pretty high right now. And I -- back to Andrew's question on when do you go from 30 to 40, those are the things we're managing. Whatever steps we take are influenced by cash and by no return to backlog.

Okay. Well, you made progress on those counts this quarter because net debt is down significantly and backlog is gone, then you have some finished good inventory. So it seems like you're in good shape there.

George, I missed it. You said backlog was down, we agree. The other piece, we missed. What else?

Your net debt went down meaningfully. So you made progress both on the cash position and on being able to serve customers.

Yes. And sorry, George. We're definitely agreeing with you, backlog down, that was key. Did you say debt was down? I missed that.

Yes. The net debt was down significantly as well.

Yes. So we were able to refinance a couple of our loans. And as part of that, we eliminated a balloon payment right around $2 million. And so the debt in total is around the same amount, but we did eliminate a balloon payment in 2026.

Taking the '26 balloon and spreading it over 5 years. But like Tim said, total is still -- it was kind of a wash on the total. Same total.

And then on the beef segment, that's my last question. It's very seasonal. It is primarily December and January. What -- how big historically has that segment been for ImmuCell? And sort of what are you trying to do to build that side of the business?

Yes. It's hard because, again, we sell to distribution, and we don't know where they ship to. We don't get that kind of data. But we know just by historical seasonality, and we know the way the beef guys do their calving early in the year. We know that, that spike is largely due to beef, but also, there can be seasonal challenges on scours and maybe some people do treat more in a stressful, cold winter. But beef is important, and beef is difficult. Like, we can do big dairies in one sales call, can address 1,000, 10,000 calves. Beef is much more spread out, much more smaller. So a lot of that work is done by marketing and just in the right pockets with the sales reps in the beef area do the on-site, on-farm, on-ranch visit. But what's new on that area to address beef is probably the biggest new thing is what Bobby, the VP of Sales, has done with the marketing campaign so we can reach a lot of people without a lot of truck rides.

[Operator Instructions] Seeing no further questions, this will conclude our question-and-answer session. I would like to turn the conference back over to Joe Diaz for any closing remarks.

ending September 30, 2025, sometime during the week of November 10. Thank you, and have a great day.