ImmuCell Corporation

Good morning and welcome to the Inuspal Corporation Report, first quarter ended March 31st, 2025, Audited Financial Results Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to send the conference call over to Joe Deer of ListenPartners. Please go ahead.

Thank you, Vicki. Good morning and welcome to all. As the operator indicated, my name is Joe Deer of ListenPartners. We are the investor relations consulting firm for Inusel. I thank all of you for joining us today to discuss the unordered financial results for the first quarter ended March 31st, 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 the safe harbor statement provided with Form 10Q and the press release 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, Thursday, May 15, 2025. The company undertakes no obligation to update any information discussed on today's call. Please note that that references to certain non-gap 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 gap 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 Indycell Corporation, for opening remarks. We will then hear from Tim Fiore, the company's newly appointed CFO, with a review of some first quarter financial highlights, after which we will open the call for your questions. Michael.

Thanks, Joe, and good morning, everyone. As Joe said in a moment, I would like to introduce you all to our new CFO, Tim Fiore. First, I would like to offer a few comments from a high-level strategic perspective. Quite simply, our business is becoming larger, more diverse, and more complex, and that's a great thing. We are very focused on the commercial opportunity that we have with First Offense. The recent growth in First Offense sales is very positive for us. Our investments to increase production capacity above $30 million per year are now complete. Expanding our production facilities and implementing the new equipment was a huge project. We implemented important process improvements and worked through certain contamination events. It is important to note that we have not incurred another contamination event for over a year now. During the just completed quarter, we achieved gross margin expansion along with the revenue growth, and we increased our cash balance to about $4.6 million as of March 31, 2025. Moreover, we are pleased to see traction for the different product formats we introduced for First Offense, to the point where these now should be seen as a suite of related products with expanded users and appeal. At the same time, we are initiating investigational product use of retains to collect market feedback about product performance in the field while reducing product development expenses and exploring potential strategic options for our novel technology. Our financial recovery and improvement shows up in the favorable adjusted EBITDA results that Tim will touch on, but first I want to underscore that expanding the size and breadth of our product sales and managing other corporate objectives has become an increasingly complex responsibility. Over the years, we have prided ourselves in keeping administrative expenses low by public company standards. Growing our senior management team brings added expense, but also offers new opportunities and benefits. I have already experienced some of those benefits working with Tim for just over a month now. We are optimistic as we work our way through the balance of 2025. With that said, let me introduce Tim Fiore. Tim, would you please tell us a bit about your background and talk about some of the first quarter financial highlights?

Thanks, Michael. As Michael mentioned, I've been here at MSL for just over a month. Before coming to MSL, I worked for 24 years in various financials for IDEX Laboratories, a well-respected public company headquartered in nearby Westbrook, Maine. Most recently, I was senior director of finance and commercial operations for their livestock, poultry, and dairy, known as LPD, water testing, and IDEX's op-deed medical human health line of business. Let's talk about the first quarter financial results for yourself. Product sales during the first quarter of 2025 increased 11%, or 810,000 over the first quarter of 2024, to a record 8.1 million. Those record quarterly sales equips the previous record, set in the fourth quarter of 2024. These strong sales helped us reduce our order backlog from 4.4 million as of December 31, 2024, to 4 million as of March 31, 2025. I'm pleased to say that we've continued to eat away at that backlog, which was down to 3.4 million as of May 6, 2025. We previously had announced our goal of increasing annual production capacity to 30 million or more per year. Our achievement of 15.8 million in sales during the six-month period ended March 31, 2025 suggests that we are achieving that target. Product sales during the 12-month period ended March 31, 2025, increased by 28%, or 6 million, to 27.3 million compared to the 12-month period ended March 31, 2024. To remain successful, we must continue to avoid significant contamination events and equipment breakdowns and operate with strong production yields. We pay our bills and drive our cash flows with the gross margin dollars. We experienced some low gross margin percentages in prior periods as we dealt with low output and scrap costs related largely to the contamination events mentioned previously. The 42% gross margin during the first quarter of 2025 is an improvement over 37% during the fourth quarter of 2024, but we still have more work to do to achieve our target of 45% or more. The increase in sales and the improvement in gross margin are important. I take nothing away from those accomplishments, but I would like to talk for a moment about adjusted EBITDA because the impact of non-cash depreciation expense on our bottom line is significant. As a reminder, adjusted EBITDA as opposed to just EBITDA includes an add back of stock-based compensation expense, which is another non-cash expense that is included in net income that's calculated in accordance with GAAP. We created adjusted EBITDA of $2.3, $3.7, and $3.3 million during the 3-month, 6-month, and 12-month periods ended March 31, 2025. These strong results compare very favorably to adjusted EBITDA of just $458,000, $247,000, and negative $280,000 during the 3-month, 6-month, and 12-month periods ended March 31, 2024. With regards to the other financial results, the press release and the forms MQ that we filed last night provide the complete, un-audited P&L and balance sheet results. 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. A May 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 said, we would be happy to take your questions. Let's have the operator open up the line.

Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using speakerphone, please pick up your home phone before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. Anyone who has a question may press star

and 1 at this time. Once again, for your questions, please press star and 1. We have a question from George Mellas, MKH Management. Please go ahead.

Good morning, Michael and Jim. Hey there, George. Good morning. How are you? Good. Very well. Question on the product mix. First of all, I have to say I really like how you report the revenue ahead of time and then file your queue before the call. So it helps us sort of get ready for understanding the call. On the product mix, this quarter was quite strong on tri-sheel, which I think was 71% of sales compared to 55% in the previous quarter. So I have two questions. One of them is on the new sort of bulk powder product. How do you expect that to contribute towards the end of 2025 and maybe in 26? And then it seems that the mix of tri-sheel and bivalent has relatively little impact on the gross margin. And maybe could you comment on that?

Yeah, thanks, George. Looking at the queue, you pointed out the third quarter, 70% tri-sheel and 30% other. You know, that's three months with 12 months, 64% tri-sheel, 36% other. Tri-sheel has been a big seller since we launched just a few years ago. The broader claims that really makes that product excel on the market based on efficacy, based on being similar to a vaccine in the coverage of the pathogens that it works on. So that's the exciting driver of our growth. And, you know, we're always looking at what else can we do and how can we expand the product line and how can we grow sales. So when you mentioned your question on the bulk powder, that is still in development. We're on track to get that product out into the market over the second, third and fourth quarter, but we have no sales yet. So it's a different format in that it's again, bulk as you mentioned, George, as opposed to in a capsule or a tube. It's going to be used as a feed additive and it's going to go to big cap ranches where they're not, you know, custom to dosing individual calves with a capsule or with a tube. So more to come on that. I like the development progress that's being led by our VP of Sales and Marketing, Bobbitt Joe Brockman, but no sales report yet. So that's a new event, a new upside for the last nine months of the year. Did that

answer you, George? That certainly does. And maybe, you know, the correlation of gross margin to the product mix right now, it seems like regardless, it seems like you achieve really strong gross margin regardless of whether tri-shield is 70% or 55%. We just kind of see if there is a given any impact to the mix on the gross margin.

Yeah, you know, we do price according to our estimated costing or by format. So tri-shield is quite a bit more expensive than the bolus or the bolus is quite a bit more cost effective than the tri-shield. But I would argue you get what you pay for and people are willing to pay for their tri-shield and get that broader coverage. And we do have, you know, quite a large amount of fixed costs. So we do benefit and we did see that benefit both in the fourth quarter at 37% and more so in the first quarter here at 42%. Just moving our labor is largely fixed. Our equipment facility costs fixed. We're just moving over higher volumes. So all products on this benefit with that volume growth and that's got us to the 42%. And as Tim said, we're not, you know, still a work in progress. We've still got room for improvement.

Great. Congratulations. Fantastic result. And Tim, welcome to your team and wonderful to have you on board. Thank you, George.

For any further questions, please press star and one on your telephone. We have a question from Russ Sollander,

Capital Alliance. Please go ahead.

Yeah. Greetings, Michael and Tim. Thank you, Rilo. Hey, good morning. I appreciate the, a little more detail in breakouts of expense categories under the UCFO here. So that's appreciated already. And the focus, I think, just in the presentation on the adjustability to draw and mature in 12 months. I guess looking at the business, there was one last contamination event a year ago, April timeframe. And I'm curious in Q2 of last year, how much EBITDA erosion was there from that event that, you know, I guess what I'm driving at is Q2 and Q3 of last year might have been lower EBITDA than we would expect from the core business in Q2 and Q3 of this year. So can you help us kind of create expectations for Q2 and Q3 this year for EBITDA?

Right. Yeah, it's a great question, guys. You know, we did answer that on an annual basis. I don't have that broken out on a quarterly basis. I'm referring to about page 26 in the queue where we talk about the scrap per year. And so part of my answer would be 22, that total scrap cost was $589,000. Year ended at 23 was $527,000, $527,000. And then 24 was $527,000. So, you know, pretty, around half a million per year during that expansion phase where we're incurring those contaminations. As far as Q2, yeah, there's going to be, you know, that contamination, you're remembering it right, April 24 was the last one. So that affected that full year of just $407,000. But most of that would have been in the first quarter because that was just one contamination in April and then none for the rest of the year. So not anything with a specific number, but a direction. I

got it. Maybe a better way of asking is were there revenue implications still in Q2 and Q3 as last year?

Or how do we look? Right. Right. No, the revenue rebound, you know, began in the fourth quarter of 24. So we were down, you know, we set those consecutive records fourth quarter of 24 and then beat that record first quarter 25. So, you know, that is comparing to those reduced periods. But nonetheless, those are our best two quarters in our history. Oh,

yeah, absolutely. Congratulations. I'm driving at, you know, kind of what could be expectations for revenues for the next couple of quarters. I guess the reality is we should expect greater EBITDA from the enterprise after the next couple of quarters because the comps from a year ago

were

maybe lower than the level of the business. And we were able to get that currently.

Yeah, I think that's fair. I mean, we definitely want to be real clear on that. You know, the fourth quarter and the first quarter are strong. They look strong relative to the reduced quarters, to the reduced first nine months of 24. But I think the other thing, and Tim and I were just looking at our notes here, is also factoring in the backlog. So that's, you know, the second quarter is going to benefit. Tim mentioned that we, what did you say, Tim, 3.4, I believe. We got, you know, so it's... 3

.4 million in May 6.

So, you know, we are, so we have two things going on, increased capacity and then clearing out that accumulated backlog, making progress on that through the second quarter. And yeah, so, you know, don't have a, we don't do the public projections of the revenue, but I guess we're trying to make it clear what's comparing the good period to the bad period. And let's see what the Seropene can do, because they're now allowed, you know, able to go out and actually bring in new business, where over the period there of 24, they were really stuck. They were dealing with irritated customers and allocating scarce products, and bringing in new customers really didn't help us. Now that transition will be able to, that means the Seropene has just made a great pivot from that scarce product allocation period to the business growth period going forward. So not a numerical answer to your question, but directionally I think that that's where we're going. Clear the backlog and bring back customers who lost and find new business both with the existing product line and the expansion of the product line. And that's the kind of times that we talked about with George to the bull powder.

So, Lily, what you're saying, I guess what I'm driving at is the core business EBITDA kind of run rate is much greater than $3.3 million for 12 months. That's what I'm trying to draw. Yeah.

Yeah. I guess, no, I think maybe we'll follow the question there. Yeah, definitely look at the three, that's why we did those three periods. The three is more indicative than the six, more indicative of the recovery company. And the 12 has a... Yeah. ...6 month lag in it. Well,

I think that's, you know, the next part of my question is maybe a statement. That's the core business, but you're spending $800,000 a quarter roughly on product development for most of it going to the new product approval. And so if you wouldn't have been doing additional product development, your core business for First Defense is worth a lot more than the EBITDA, the enterprise.

Yeah. I think there's a lot of variability in the sales and in the gross margin is what we need to track. I think what we can count on is that admin expense, noting just the modest increase we've agreed to fund, but the other expenses are more straight line. So I think what was important to answer your question there is that's one of the reasons we put together that segment footnote. And I would really, yeah, I think that's what you're doing or else if you're not, I would encourage you to just look at that note. I just want to get the number in front of me towards the end of the footnote from number 16. And I think that really is my best answer to your question is when we break the business down to the scours, to the mass status and to the other. The other is very small. The mass status is the retain, and that's the one that we are actively seeking, you know, strategic options to cover that big expense. And then the scour standalone is just what the business would be without the other two categories, just purely the scour business.

Well, I think there's a lot of value here is what I'm driving at and that you've been investing quite a bit of product development capital here, which detracts from the EBITDA of the kind of existing core business, all of which shareholders approve. And I think we're always excited to see a new product come to fruition for mass status. So any update on that, I guess, you've got it in the front of you. Yes, I'm

glad you touched on that because, yeah, I pointed to that segment footnote that's there. I also, we always fully disclose appreciation to the fuse and it won't affect that EBITDA. And it is a big piece of that product development spend. But then, you know, we touch on more in the press race than in our script. The investigational product use is really a new development, a really important development. You know, we're all frustrated by not being able to achieve that FDA license yet. And there are things that we can control and things that we can't. And we're frustrated by can't control. It really is hung up right now based on the need for our contract manufacturer to clear inspection. And it would be horrible if that was the end of the story. But the new piece of the story is this investigational use. Well, it won't generate revenue. Getting the product out to the market right now, right in the next few months, through the balance of the year, the sales team is going to do a really good job of getting product in and getting customer feedback. And that's what investigational product use is. It's a way that the FDA creates a little bit of flexibility. We are not granting you the license yet, but we're giving you the ability to get market feedback. So that's a big step. And I wish we had the bigger step, which is just full commercial sales and FDA approval. We simply don't. And this allows us to move forward to test this product that, you know, hasn't been tested since, in cows, since efficacy trials years ago. So we will be looking forward to reporting on those results. You know, it'll start late second quarter into third quarter and have some results around the year end, as far as, you know, outside of the lab and on a commercial dairy. How does the product perform? Well, congrats

on the six months of performance, the opportunities ahead, and the first appearance over many years. And good luck going forward.

Hey Russ, Tim's got one point for you on this. It's a good one that I missed.

Yeah, I just wanted to mention, you know, when you were thinking about ABATA in the full year estimate, when you were thinking of that, I would consider that Q1 is a seasonal high. I'm not going to quantify exactly, you know, relative to other quarters, but there is seasonality. You do

have to watch that. And I would add to Tim's right, but also that backlog, maybe it's a little bit of that seasonal bump, because right now we're just selling almost everything that we make. So yeah, going forward, that Q1 is always going to be the high season, and going forward, we're not going to have a backlog. Okay, thank you. Awesome.

The next question from Jane Lindenheim, private investor. Please go ahead.

Hey Mike, it's Bruce and Jane. First we want to congratulate you and the company on a really, really nice quarter.

Thank you. We appreciate it. I hope so. Thanks.

You're welcome. And also we've, exactly, what's the, a few questions, what's the difference between that you could investigate this and the product and approval? How come we can investigate it, but it's not approved?

Well, the biggest difference is it's not commercial sales, so it's not a revenue initiative. It doesn't generate revenue, but it is, it's very similar in that we're going to dose, we're going to deliver product to cows, whether on the investigational status without license, or under commercial approval with a license, we're going to put the retain into cows and track data. So the real difference is because of the inspectional issues at our CMO, we don't have a license. We're not going through distribution, typical sales, where you just move out a lot of product. We really wanted to do something like this anyway, even with license. We had previously referred to it as a control launch. We've worked on a just mass market, a novel practice changing product like this through distribution, and we're going to, we're going to handhold, and this just gives us the approval to start those studies, to deliver that product, to gather that data, while the final stages of that FDA license and approval are still in process.

Thank you. At this point, with this quarter, the great results of this quarter, at this point, we would stop having to sell common shares, because the company is profitable.

It's certainly a factor, it's certainly a factor, Bruce, we monitor that closely. I like to refer to the ATM as raw opportunistic, so that means you sell certain shares at certain prices, and you consider your long-term capital needs even beyond just our profitability, our debt obligations, our capex desires, slash almost obligations, obligations to grow. But you saw it's very active. You can see this both in the -S-E, the MD&A discussion, and in the subsequent event, you can see that during 2024, when we needed to be, we were very active, and more recently, we've been less active. So we just have a lot, it's a great tool to be, because of its correctability. And I think we just continue to watch that going forward, and consider all those capital needs beyond just operating expenses, but as you said, debt and capex and growth, and yeah, less recently and more back in 2024, when we were in the deep for the contamination, and really was very, very central and productive for us.

So at this point, you would look at numbers that were higher than $5 or whatever.

Right, a lot of that 24-month money went out in the $350 to $370 range, which was needed cash, but the trade-off was unwanted solutions. But yeah, look at that subsequent event note, you can see the activity is much, much smaller, as I think appropriate for where we stand today.

Right, it seems as the company gets more and more profitable, that the needs, other than really far out, unless the stock was really skyrocketed, would be as necessary as this. I

definitely agree.

And would you, again, as retained gets approval, and your normal contamination, at some point would you look to maybe project into the future, what the company expects to do, so that people have an idea of what's going on, you know, what you anticipate to go on?

Yeah, extremely difficult to do with retained. It's a practice changing. We have moved to the mass trade paradigm. It's a whole new thing. So very hard to do with retained. And I think the track record on first offense is the better indicator. I mean, we're going to talk a lot about our production capacity. We talked about getting doubling from 15 or 16 million to 30 or 30 plus. We do talk a little bit about the desire to get capacity up to 40 million. So some of those projections come from just, you know, we have a hope and we have a projection, so we build capacity to meet that. But at the same time, we don't have the benefit of one or two or any financial analysts that could kind of help us on those projections and make those projections with us. So is this small company has stepped without an error? We're stuck too timely as one of the questioners that said, isn't that George? Yeah. Anyway, that early, I think we will stick with that early announcement on the top line because we know that quick after the end of the quarter. And it's a little harder than to get more deeper into projections because it's just subject to change. And we know one thing about projections is they're always wrong and it's just either high or low.

Right. No, no, listen, you guys are, you know, at this point you're doing a wonderful job. Congratulations. I was just looking more into the, you know, into the future as opposed to, you know, not tomorrow obviously or... Yeah.

Okay.

But as you get a handle on the attain and look, you know, the companies come out and they do conservative projections. And usually, usually it's what you said with, you know, working with the analysts, usually it's the peers that the analysts look to the companies more than the companies look to the analysts.

And I think it's something that has certainly been our objective for years. We haven't succeeded. We'd love to have that interactive collaboration. That's missing from the cell right now. That's third party financial analysts. Right. Collaboratively as you said.

Right. And as you, you know, as the company grows it becomes more profitable and more people follow you. Hopefully one of the institutions, you know, will either follow you because they own it or one of the other services, you know, not with school or something. Maybe, you know, maybe somebody like that will start with you guys. All right. Well, listen, thank you very much. Congratulations to you. That

makes sense, Bruce. Thanks for your thoughts. Yeah, I'm with you.

All right. Be safe and healthy and good luck to everybody.

All

right. Thank you. Thank you. Thank you. Again, if you have a question, please press star and one. This concludes the Q&A

session. I would like to turn the conference back over to Mr. Diaz for any closing remarks. Thank you.

Thank you, Vicki. And thank all of you for participating on today's call. We look forward to talking with you again to review the results of the second quarter ending June 30, 2025 during the week of August 11, 2025. That concludes today's call. Thank you and have a great day.