Good afternoon and welcome to the ImmuCell Corporation fourth quarter and fiscal year 2017 financial results conference call. All participants will be in listen-only mode. [Operator Instructions] Please note that today's event is being recorded. I would now like to turn the conference over to Mr. Joe Diaz. Please go ahead.

Thank you, Andrea, and thanks to all of you for joining us today to review the 2017 unaudited financial results of ImmuCell Corporation. My name is Joe Diaz. I'm with Lytham Partners. We are the investor relations consulting firm for ImmuCell. Before we get started, let me say that statements made by the management of ImmuCell during the course of this conference call that are not historical facts are considered to be forward-looking statements that are subject to risks and uncertainties. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for such forward-looking statements. Words such as believe, expect, anticipate, intend, estimate, will and other similar words or statements of expectation identify forward-looking statements. Such statements involve risks and uncertainties including, but not limited to, those risks and uncertainties detailed from time to time in the filings the company submits to the Securities and Exchange Commission. Investors are cautioned that forward-looking statements made during the course of this conference call are based on management's analysis as of today and actual results could differ materially from the statements made. The company undertakes no obligation to publicly release the results of any revision to these forward-looking statements. A more complete Safe Harbor statement was included in the press release that was filed by the company today. With that said, let me turn the call over to Michael Brigham, President and CEO of ImmuCell Corporation, after which we will open the call for your questions. Michael?

Thank you all for taking the time to join today's call. The full details to our fourth-quarter and annual financial results are available in the press release filed earlier today. I would like to highlight some key financial points and then review the current state of the business. So, during the quarter ended December 31, 2017, total product sales increased by approximately $919,000 to $3.1 million compared to $2.2 million during the same period in 2016, an increase of 42%. This was a huge quarter. During the year ended December 31, 2017, total product sales increased by approximately $887,000 to $10.4 million compared to $9.5 million during 2016, an increase of 9%. The total product sales in 2017 included $97,000 in sales of the topical wipe product line that was discontinued during the first quarter of 2017 in comparison to $350,000 in sales of that product line during 2016. So, we covered a net drop of $252,000 in sales of the discontinued product line between the periods and we're still up $887,000 for the year. Sales of the First Defense product line increased by 42% and 11% during the quarter and the year ended December 31, 2017 respectively in comparison to 2016. The First Defense product line comprised 94% and 93% of our total sales during the years ended December 31, 2017 and 2016 respectively. My point is that this is the product to watch, to monitor the health of our core business. Depreciation and amortization expenses were $904,000 during the year ended December 31, 2017 in comparison to $802,000 during the year ended 12/31/16. We do expect this non-cash expense increase as we go into 2018 and begin to depreciate our $21 million Nisin plant investment. Cash provided by operating activities was approximately $1.2 million during the year ended…

[Operator Instructions] Our first question comes from Kevin Ellich of Craig-Hallum. Please go ahead.

Hey, Michael. I've got a few questions for you and thanks for the update. I guess, first, let's talk about gross margin. I appreciate the comments on the higher costs associated with the initial batches and lower production. But, I guess, what are you doing to fix that and how quickly do we think gross margin is going to recover.

So, it is kind of a two-prong, a double whammy, if you will. So, just pure volume over fixed costs, and on the Tri-Shield side, we will be scaling up as we go. We're essentially doing some in-the-market commercial test marketing and we're, as I said, pleased with the initial sales of Tri-Shield. So, we could have avoided part of this problem with higher volume and launched with a lot of inventory, tied up a lot of cash and we could have been in the other side of the equation here with a lot of inventory that wasn't moving. So, we're on this side. We’re a little short. So, our volume is a little low. Our yield is low and we will catch up. I don't think it's realistic to expect all that to come through in the first quarter. I think, over the first six months, as we scale up, we'll fix the Tri-Shield side of the equation. Then back to the other issue, this unrelated, but just both hit at the same time, the biological yield on our bivalent product in the capsule, that does come up and down over time. A lot of different factors going on there – season, cow's health, vaccine response, immunology. That is something that we have a pretty good handle on. And I think that fix is going to come a little quicker, but we're still working through a lot – as I said, it's a six-month cycle. So, we're not going to toss out this milk that is maybe of a lower titer. It's still got valuable doses in it. We need to work that through the system, into the first quarter and into the second quarter. So, I think that one fixes a little quicker as we "process out" the bad milk and process better titer milk, higher doses per cow. I just think we need to watch this first quarter carefully before these things are a long lead. There's a little lag. I'm more comfortable with a six-month view than expecting it all to just turnaround real quickly here in the first quarter.

Okay, great. And then, you talked about – you're happy with the ramp on First Defense Tri-Shield, any more color beyond that? How much have you guys generated in revenue and what type of growth should we be expecting from Tri-Shield?

Yeah. I think it's a little really to really have a good answer to that because, again, our sales are limited by the available inventory. For one and two, it's early. And three, what's most important to me and our disclosures going forward is going to be the product line growth because I'm not going to be able to track exactly – I mentioned those four customer groups. Two of them are brand-new market, brand-new opportunity, brand-new sales, people that weren't using anything, people that were using these dam vaccines. That's all new to us. But the extent of our current customers that convert from a bolus over to the Tri-Shield is much, much – I don't have that tracking data. So, I don't really care if they do switch because they're buying up in price and in value, so it's good. So, I don't see it as negative cannibalization, but I don't know how many people did that switch. What I want to see is with all those customer categories that the total product line is growing. But, certainly, that strong fourth quarter was influenced by the new product sales.

Sure. And then, last question for me, let's talk about Nisin plant. I guess, where are we at now with the construction process and the costs associated? Are you through most of that? What are the costs we have left? And then also, walk us through the timeline on the next steps before you guys get that plant up and running?

Yeah. So, on the CapEx side, that number, $1.8 million, and we're talking as of 12/31, is mostly equipment. The $1.8 million left to spend. I see our original budget here was $20 million. We did revise that budget up by 5% to $21 million. I see us coming in on that budget. We're pretty late in the game for any surprises. But that cutoff at year-end left $1.8 million to spend here in 2018. So, most of the spending is done. All of the construction is done. All the equipment is on site, in place. Most of the connections are done. So, the timeline forward is, over the next couple of months, as we transition from plumbing and connections, there's a lot of – it's not just pipe plumbing. It's a lot of computer work. These tanks and these systems are all computer-driven. So, all the programming and all the controlling that remove validation. Then we start making a couple of practice batches. So, somewhere here in the middle of 2018 – the earlier the better – and we'll give clarity as we go forward. But we make our first submission to the FDA. That's because we have, at this point, made three validation batches. That's really the core – the big nugget to the manufacturing technical sections of the CMC. It's called the CMC to the FDA. That includes these three batches. We give them all the data. They're going to review that for six months. So, we go from the middle of 2018 to the latter part of 2018 to the beginning of 2019. We do anticipate they'll come back with an incomplete. It almost always happens. We think we're in pretty good contact with the FDA. We think there are no big surprises here. So, we take a month or two to answer their questions. Kind of they give us a to-do list. We resubmit it. It's subject to the same six-month timeline, same six-month review. We would expect, at that point, a complete because we've answered – we don't submit until we answer the questions they have. So, then we're out to the latter – second half of 2019. There's a 60-day administrative review at that point. You get a Technical Section Complete letter, we hope. The 60-day review is kind of administrative. But that's the timeline that if we could stick to that gets us to FDA approval at the end of 2019. We launch right away. Those validation batches, there's salable product, we would build inventory as we go forward for launch.

Excellent, thank you.

Thanks, Kevin. Appreciate it.

Our next question comes from Sam Rebotsky of SER Asset Management. Please go ahead.

Yes. Good afternoon, Michael. It's an accomplishment to finish the year. Now, as far as the Tri-Shield and the First Defense, do we find from the customers that have received both – are they happy? Do you see more customers needing to get the product and what's their expectations?

That's sort of beyond vaccinations or the positioning of our product, that story, that product positioning is going very well. People get it. I think it is something new. It's a new way of thinking. As I said, a game changer. And as we visit farm by farm and try and train distribution to do that with us, people are really intrigued by the idea of – yeah, one less needle. So, I think, clearly, right now, demand is outpacing supply. And so, with that sort of market feedback on the good side – there is a good side of a backlog as opposed to be sitting here with a lot of product that wasn't moving at the launched price point, we're scrambling, we're pushing hard to catch right up and meet that demand. So, yeah, we've got some people that are frustrated because the supply is under the demand, but that's not a good thing. It's less bad than the alternative. So, I don't know if I answered your question, Sam. I appreciate the question, but it's more – we're in catchup mode. We're pleased with the launch. And over the first half of the year, we're going to catch up. And the sales team is just having a lot of fun and being very successful with that position of the new technology – positioning of the new technology.

So, as far as the supply, we feel we're at the proper quality and it just – to manufacture more, you have the proper size facility. Previously, with the First Defense, we thought we could sell $20 million and we had inventory of $2.7 million at September, which I assume was mostly the First Defense. So, have we reduced that number at December 31? And I guess – I believe we have solved the problem or on the way to solving the problem to get the proper way to manufacture the Tri-Shield and increase the production?

Right. Yes and yes. So, the facility is not the limiting factor. I can't imagine – we would be in a really bad position if we hadn't invested in that doubling our capacity. So, we need every tank, every freeze dry run, every square foot we have, so that double in capacity is – I wouldn't want to be starting that investment right now or we'd be talking about a much longer timeline to catch up. So, the facility is good and the technology is better. And now, with the feedback that this is the right price point, this is the right technology, this value in the product, now we just double down and run it through, like I said, from a vaccine to a cow to a cheese tank, to a finished dose. Fix or six months, we've just got to fill that production pipeline.

Well, that seems reasonable. When you bring a new product, it takes a while. It doesn't happen overnight. Now, with the two members of the Board of Directors, Bobbi who was there before, but Mr. Rosgen up in Calgary and you're speaking of hiring additional people to sell overseas. And with Mr. Rosgen's being in Canada, do we see – once you could supply enough product, I guess, the First Defense, to the extent you have enough product to supply the market for overseas, do you see that Mr. Rosgen helping ImmuCell get to sell overseas? What do we see there, so that we could sell more product?

Yeah. So, the question makes sense. Just one clarification. We're not going to hire people in these international markets, but we are more aggressive and more active. Partners are consultants. They can get us there. Our sales team will be North America based and we will work with partners that have that sales and marketing presence in these other territories. So, there's the regulatory challenge and then the sale challenge and we'll look to do that with consultants, not employees. Steven Rosgen is a great add to our board. We are pretty successful up in Canada where he is based through Kane. So, I'm sure he can help there. He's definitely not going to hurt there. But that market is pretty – we're pretty well-established there. I think what he brings more specifically is just a lot of years of expertise and new product launches, branding, ag space branding. He's going to – he's jumping in a little bit late on the Tri-Shield launch, but working well with Bobbi on that as we go forward. And then, he will be right with us up and running as we get up to that new launch with the Nisin product. So, good add for our board as an independent member. Made room for getting Bobbi back on the board as a non-independent member, which has been important to me and to us. And we're just getting started. But I'm looking forward to working with them.

Congratulations, Michael and to the whole ImmuCell team. Good luck. I'll step out. And if there's – I may step back in. Thanks.

Great. Thanks, Sam.