ImmuCell(US:ICCC)2024-05-14 20:06Financial Performance - Net cash provided by operating activities improved by $3.2 million, from a net cash used of $(2.8) million in Q1 2023 to $419,000 in Q1 2024, primarily due to a $1.9 million decrease in net loss and a $952,000 swing from inventory build to reduction [136]. - Total assets decreased by $757,000, from $43.8 million as of December 31, 2023, to $43.1 million as of March 31, 2024, representing a 2% decline [140]. - Stockholders' equity decreased by $357,000, from $24.993 million as of December 31, 2023, to $24.636 million as of March 31, 2024, also a 1% decline [140]. - Interest expense for Q1 2024 was $146,000, compared to $90,000 in Q1 2023, with anticipated interest expenses of $566,000 and $494,000 for the years ending December 31, 2024, and 2025, respectively [138]. - During the three-month period ended March 31, 2024, net operating loss decreased to $300,000 from $2.3 million in the same period of 2023, primarily due to a $2 million increase in gross margin [211]. - Sales and marketing expenses decreased by 9% to $801,000, representing 11% of product sales for the three-month period ended March 31, 2024, compared to 26% in the same period of 2023 [201]. - Administrative expenses decreased by 6% to $532,000, amounting to 7% of product sales for the three-month period ended March 31, 2024, down from 16% in the same period of 2023 [210]. Inventory and Production - Inventory balance decreased by $662,000 from $7.8 million as of December 31, 2023, to $7.1 million as of March 31, 2024 [136]. - The investment of approximately $5.5 million for First Defense and Re-Tain projects has been deferred due to production challenges and contamination events [146]. - Finished goods production increased from approximately $3.3 million in Q1 2023 to $7.2 million in Q1 2024, aiming for an annualized production capacity of approximately $30 million [159]. - The annual production capacity for the First Defense product line increased from approximately $16.5 million to $23 million, and further to approximately $30 million, representing a 33% increase [149][150]. - The production capacity for First Defense is estimated at $30 million annually, with potential to increase to $40 million with further investments [161]. - The company has produced adequate inventory to implement a controlled launch strategy, with expiration dating estimated between Q2 2025 and Q1 2026 [193]. Sales and Market Performance - First Defense product line sales reached $7.3 million in Q1 2024, a 111% increase compared to $3.45 million in Q1 2023 [166]. - Total product sales for 2023 were approximately $17.5 million, with a goal to exceed $35 million annually post Re-Tain market launch [162]. - Domestic sales in Q1 2024 increased by 112% compared to Q1 2023, while international sales rose by 104% [166]. - The gross margin for Q1 2024 was $2.3 million, representing a 663% increase from $301,000 in Q1 2023, with a gross margin percentage of 32% [177]. - The gross margin as a percentage of product sales was 28% for the trailing twelve months ended March 31, 2024, down from 30% in the previous year [177]. - The company experienced a significant increase in selling prices, with First Defense prices raised by approximately 8% in November 2023 [176]. Regulatory and Compliance - The FDA has issued a Technical Section Incomplete Letter regarding the CMC Technical Section, requiring a re-submission that could potentially be handled through a shortened review period [192]. - The FDA conducted a pre-approval inspection of the DS facility in early 2024, resulting in one deficiency noted on the FDA's Form 483 [194]. - The current agreement with Norbrook for DP manufacturing is expected to enable the company to commence sales of Re-Tain without delay upon FDA approval [196]. - The company anticipates FDA approval for its new DP manufacturing facility at least two years after project restart, with expected annual sales capacity of $7 million to $10 million [198]. Strategic Initiatives - The company aims to achieve stable production of approximately $30 million per year, with a goal of producing at least $6 million worth of product per quarter [159]. - The anticipated benefits from a new lease for additional space include potential installation of Freeze-Dryers 5, 6, 7, and 8, and improved operations [151]. - The company is pursuing an insurance claim of approximately $700,000 related to losses from contamination events, with $250,000 received to date [160]. - The company aims to limit initial distribution of Re-Tain to ensure effective usage and support, potentially leading to lower initial revenues but safeguarding long-term performance [209]. - The company is strategically investing in international market development while focusing on domestic growth to maximize efficiency [204]. Financial Position and Taxation - As of December 31, 2023, the federal net operating loss carryforward was $17.8 million, and the state net operating loss carryforward was $4.7 million, which significantly offsets future income tax expenses [216]. - The U.S. corporate tax rate was reduced from 34% to 21% due to the Tax Cuts and Jobs Act, impacting the company's income tax rate and deferred tax assets [216]. Quality Control and Risk Management - The company implemented new quality control measures to mitigate risks of contamination, which previously impacted production and sales [177]. - The cost of milk discard associated with traditional antibiotics ranges from approximately $36.00 to $150.00 per treated animal, depending on treatment duration and milk production [182]. - Finished goods yield has shown favorable improvement, but remains variable; the goal is to achieve a gross margin percentage of approximately 45% of total sales [180]. Investment and Capital Expenditure - The company has invested in capital projects to increase annual production capacity for the First Defense product line from approximately $16.5 million to $40 million [142]. - Total construction and equipment costs for the new commercial-scale DS production facility amounted to approximately $20.8 million [189]. - Total investments of approximately $13.7 million have been made over the past 10 years to increase production capacity, which represents about 56% of stockholders' equity as of March 31, 2024 [155].