hboi20240331_10q.htm
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 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, 2024

 

Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the transition period from          to          

 

Commission file number 001-33957

 

HARVARD BIOSCIENCE, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

Delaware

04-3306140

(State or other jurisdiction of Incorporation or organization)

(I.R.S. Employer Identification No.)

 

84 October Hill Road, Holliston, Massachusetts 01746

(Address of Principal Executive Offices, including zip code)

 

(508) 893-8999

(Registrant’s telephone number, including area code)

 

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, $0.01 par value

HBIO

The Nasdaq Global Market

 

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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S- T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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 ☒

 

As of April 30, 2024, there were 43,429,626 shares of the registrant’s common stock issued and outstanding.

 

 

 

 

 

HARVARD BIOSCIENCE, INC.

 

FORM 10-Q

 

INDEX

 

 

Page

   

PART I - FINANCIAL INFORMATION

3
   

Item 1.    Condensed Consolidated Financial Statements (unaudited)

3
   

Consolidated Balance Sheets

3
   

Consolidated Statements of Operations

4
   

Consolidated Statements of Comprehensive Income (Loss)

5
   

Consolidated Statements of Stockholders' Equity

6
   

Consolidated Statements of Cash Flows

7
   

Notes to Unaudited Consolidated Financial Statements

8
   

Item 2.     Management’s Discussion and Analysis of Financial Condition and Results of Operations

18
   

Item 3.     Quantitative and Qualitative Disclosures about Market Risk

22
   

Item 4.     Controls and Procedures

22
   

PART II - OTHER INFORMATION

23
   

Item 1.     Legal Proceedings

23
   

Item1A.   Risk Factors

23
   

Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds.

23
   

Item 3.     Defaults Upon Senior Securities

23
   

Item 4.     Mine Safety Disclosures

23
   

Item 5.     Other Information

23
   

Item 6.     Exhibits

23
   

SIGNATURES

24

 

 

 

 

 

 

 

 

 

PART I. FINANCIAL INFORMATION

 

Item 1.         Financial Statements.

 

 

HARVARD BIOSCIENCE, INC.

 

CONSOLIDATED BALANCE SHEETS

 

(Unaudied, in thousands, except share and per share data)

 
         
  

March 31,

  

December 31,

 
  

2024

  

2023

 

Assets

        

Current assets:

        

Cash and cash equivalents

 $4,255  $4,283 

Accounts receivable, net

  15,309   16,099 

Inventories

  24,136   24,716 

Other current assets

  4,448   3,940 

Total current assets

  48,148   49,038 

Property, plant and equipment, net

  4,492   3,981 

Operating lease right-of-use assets

  4,359   4,773 

Goodwill

  56,699   57,065 

Intangible assets, net

  14,678   16,036 

Other long-term assets

  4,785   6,473 

Total assets

 $133,161  $137,366 

Liabilities and Stockholders' Equity

        

Current liabilities:

        

Current portion of long-term debt

 $3,720  $5,859 

Current portion of operating lease liabilities

  1,197   1,416 

Accounts payable

  6,044   5,554 

Contract liabilities

  4,388   4,508 

Other current liabilities

  10,328   9,205 

Total current liabilities

  25,677   26,542 

Long-term debt, net

  31,890   30,704 

Deferred tax liability

  772   776 

Operating lease liabilities

  4,557   4,794 

Other long-term liabilities

  1,453   1,476 

Total liabilities

  64,349   64,292 

Commitments and contingencies - Note 13

          

Stockholders' equity:

        

Preferred stock, par value $0.01 per share, 5,000,000 shares authorized

  -   - 

Common stock, par value $0.01 per share, 80,000,000 shares authorized: 43,421,251 shares issued and outstanding at March 31, 2024; 43,394,509 shares issued and outstanding at December 31, 2023

  434   434 

Additional paid-in-capital

  233,451   232,435 

Accumulated deficit

  (150,299)  (145,605)

Accumulated other comprehensive loss

  (14,774)  (14,190)

Total stockholders' equity

  68,812   73,074 

Total liabilities and stockholders' equity

 $133,161  $137,366 

 

See accompanying notes to condensed consolidated financial statements.

 

 

 

HARVARD BIOSCIENCE, INC.

 

CONSOLIDATED STATEMENTS OF OPERATIONS

 

(Unaudited, in thousands, except per share data)

 
                 
   

Three Months Ended March 31,

 
   

2024

   

2023

 
                 

Revenues

  $ 24,512     $ 29,975  

Cost of revenues

    9,740       11,629  

Gross profit

    14,772       18,346  
                 

Sales and marketing expenses

    5,904       5,978  

General and administrative expenses

    5,963       6,334  

Research and development expenses

    2,885       2,897  

Amortization of intangible assets

    1,333       1,388  
Other operating expenses     966       -  

Total operating expenses

    17,051       16,597  
                 

Operating (loss) income

    (2,279 )     1,749  
                 

Other (expense) income:

               

Interest expense

    (751 )     (974 )

Loss on equity securities - Note 6

    (1,312 )     -  

Other (expense) income, net

    (142 )     432  

Total other (expense) income

    (2,205 )     (542 )
                 

(Loss) income before income taxes

    (4,484 )     1,207  

Income tax expense

    210       585  

Net (loss) income

  $ (4,694 )   $ 622  
                 

(Loss) income per share:

               

Basic (loss) income per share

  $ (0.11 )   $ 0.01  
                 

Diluted (loss) income per share

  $ (0.11 )   $ 0.01  
                 

Weighted-average common shares:

               

Basic

    43,402       42,119  
                 

Diluted

    43,402       42,783  

 

See accompanying notes to condensed consolidated financial statements.

 

 

 

HARVARD BIOSCIENCE, INC.

 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

 

(Unaudited, in thousands)

 
         
  

Three Months Ended March 31,

 
  

2024

  

2023

 
         

Net (loss) income

 $(4,694) $622 

Other comprehensive (loss) income:

        

Foreign currency translation adjustments

  (783)  837 

Derivative instruments qualifying as cash flow hedges, net of tax of $-0-

  199   (440)

Other comprehensive (loss) income

  (584)  397 

Comprehensive (loss) income

 $(5,278) $1,019 

 

See accompanying notes to condensed consolidated financial statements.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

HARVARD BIOSCIENCE, INC.

 

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

 

(Unaudied, in thousands)

 
                                                 
                                   

Accumulated

         

Three Months Ended

 

Number

           

Additional

           

Other

   

Total

 

March 31, 2024

 

of Shares

   

Common

   

Paid-in

   

Accumulated

   

Comprehensive

   

Stockholders’

 
   

Issued

   

Stock

   

Capital

   

Deficit

   

Loss

   

Equity

 

Balance at December 31, 2023

    43,395     $ 434     $ 232,435     $ (145,605 )   $ (14,190 )   $ 73,074  

Stock option exercises

    4       -       15       -       -       15  

Vesting of restricted stock units

    34       -       -       -       -       -  

Shares withheld for taxes

    (12 )     -       (47 )     -       -       (47 )

Stock-based compensation expense

    -       -       1,048       -       -       1,048  

Net loss

    -       -       -       (4,694 )     -       (4,694 )

Other comprehensive loss

    -       -       -       -       (584 )     (584 )

Balance at March 31, 2024

    43,421     $ 434     $ 233,451     $ (150,299 )   $ (14,774 )   $ 68,812  

 

                                   

Accumulated

         

Three Months Ended

 

Number

           

Additional

           

Other

   

Total

 

March 31, 2023

 

of Shares

   

Common

   

Paid-in

   

Accumulated

   

Comprehensive

   

Stockholders’

 
   

Issued

   

Stock

   

Capital

   

Deficit

   

Loss

   

Equity

 

Balance at December 31, 2022

    42,082     $ 454     $ 229,008     $ (142,190 )   $ (15,052 )   $ 72,220  

Stock option exercises

    39       1       103       -       -       104  

Vesting of restricted stock units

    125       -       -       -       -       -  

Shares withheld for taxes

    (56 )     -       (156 )     -       -       (156 )

Stock-based compensation expense

    -       -       1,153       -       -       1,153  

Net income

    -       -       -       622       -       622  

Other comprehensive income

    -       -       -       -       397       397  

Balance at March 31, 2023

    42,190     $ 455     $ 230,108     $ (141,568 )   $ (14,655 )   $ 74,340  

 

See accompanying notes to condensed consolidated financial statements.

 

 

 

 

 

 

 

 

 

 

HARVARD BIOSCIENCE, INC.

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

(Unaudited, in thousands)

 
                 
   

Three Months Ended March 31,

 
   

2024

   

2023

 

Cash flows from operating activities:

               

Net (loss) income

  $ (4,694 )   $ 622  

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

               

Depreciation

    404       333  

Amortization of intangible assets

    1,377       1,388  

Amortization of deferred financing costs

    70       70  

Stock-based compensation expense

    1,048       1,153  

Deferred income taxes and other

    178       (55 )

Loss on equity securities - Note 6

    1,312       -  

Gain on sale of product line - Note 14

    -       (403 )

Changes in operating assets and liabilities:

               

Accounts receivable

    704       (923 )

Inventories

    (617 )     (292 )

Other assets

    (298 )     (308 )

Accounts payable and other current liabilities

    2,469       (150 )

Contract liabilities

    (120 )     741  

Other liabilities

    (430 )     (364 )

Net cash provided by operating activities

    1,403       1,812  

Cash flows from investing activities:

               

Additions to property, plant and equipment

    (645 )     (224 )

Capitalized software development costs

    (75 )     -  

Proceeds from sale of product line

    -       512  

Proceeds from sale of marketable equity securities

    495       -  

Net cash (used in) provided by investing activities

    (225 )     288  

Cash flows from financing activities:

               

Borrowing from revolving line of credit

    2,500       1,500  

Repayment of revolving line of credit

    (500 )     (2,500 )

Repayment of term debt

    (3,023 )     (1,841 )

Proceeds from exercise of stock options and employee stock purchase plan

    15       104  

Taxes paid related to net share settlement of equity awards

    (47 )     (156 )

Net cash used in financing activities

    (1,055 )     (2,893 )

Effect of exchange rate changes on cash

    (151 )     74  

Decrease in cash and cash equivalents

    (28 )     (719 )

Cash and cash equivalents at beginning of period

    4,283       4,508  

Cash and cash equivalents at end of period

  $ 4,255     $ 3,789  

Supplemental disclosures of cash flow information:

         

Cash paid for interest

  $ 768     $ 1,172  

Cash paid for income taxes, net of refunds

  $ 26     $ (134 )

 

See accompanying notes to condensed consolidated financial statements.

 

 

 

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

1.

Basis of Presentation and Summary of Significant Accounting Policies

 

Basis of Presentation and Summary of Significant Accounting Policies

 

The unaudited consolidated financial statements of Harvard Bioscience, Inc. and its wholly-owned subsidiaries (collectively, the “Company”) as of March 31, 2024 and for the three months ended March 31, 2024 and 2023, have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations. The December 31, 2023 consolidated balance sheet was derived from audited financial statements but does not include all disclosures required by U.S. GAAP. However, the Company believes that the disclosures are adequate to make the information presented not misleading. These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

 

In the opinion of management, all adjustments, which include normal recurring adjustments necessary to present a fair statement of financial position as of March 31, 2024, results of operations and comprehensive income (loss) and cash flows for the three months ended March 31, 2024 and 2023, as applicable, have been made. The results of operations for the three months ended March 31, 2024, are not necessarily indicative of the operating results for the full fiscal year or any future periods.

 

The accounting policies underlying the accompanying unaudited consolidated financial statements are set forth in Note 2 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. There have been no material changes in the Company’s significant accounting policies during the three months ended March 31, 2024.

 

Use of Estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires the use of management estimates. Such estimates include the determination and establishment of certain accruals and provisions, including those for income taxes, credit losses on receivables, and defined benefit pension obligations. Estimates are also required to evaluate the value for inventories reported at lower of cost or net realizable value, stock-based compensation expense, and the recoverability of long-lived and intangible assets, including goodwill. On an ongoing basis, the Company reviews its estimates based upon currently available information. Actual results could differ materially from those estimates.

 

Other Operating Expenses

 

Other operating expenses for the three months ended March 31, 2024 included a fee of $0.5 million in connection with the receipt of employee retention credits (See Note 5) and an estimated loss of $0.5 million related to an unclaimed property audit (See Note 13).

 

Recently Issued Accounting Pronouncements Yet to Be Adopted

 

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax, which enhances disclosures related to the effective tax rate reconciliation, income taxes paid, as well as other disclosures. The new standard impacts footnote disclosures and is effective for the Company’s annual financial statements for the year ended December 31, 2025. The Company is currently evaluating the potential impact of adopting ASU No. 2023-09 will have on the disclosures in its consolidated financial statements.

 

8

 

 

2.

Earnings (Loss) per Share

 

Basic earnings (loss) per share (EPS) is calculated by dividing net income (loss) by the number of weighted average shares of common stock outstanding during the period. The calculation of diluted earnings per share assumes conversion of stock options and restricted stock units into common stock using the treasury method.

 

The following table summarizes the calculation of basic and diluted net income (loss) per share of common stock:

 

   

Three Months Ended March 31,

 

(in thousands, except per share data)

 

2024

   

2023

 

Net (loss) income

  $ (4,694 )   $ 622  

Weighted average shares outstanding - basic

    43,402       42,119  

Dilutive effect of equity awards

    -       664  

Weighted average shares outstanding - diluted

    43,402       42,783  

Basic (loss) income per share

  $ (0.11 )   $ 0.01  

Diluted (loss) income per share

  $ (0.11 )   $ 0.01  

Shares excluded from diluted (loss) income per share due to their anti-dilutive effect

    3,207       1,167  

 

 

3.

Revenues

 

The following tables represent a disaggregation of revenue from contracts with customers for the three months ended March 31, 2024 and 2023:

 

Revenues by type were as follows:

 

   

Three Months Ended March 31,

 

(in thousands)

 

2024

   

2023

 

Instruments, equipment, software and accessories

  $ 22,759     $ 28,493  

Service, maintenance and warranty contracts

    1,753       1,482  

Total revenues

  $ 24,512     $ 29,975  

 

Revenues by timing of recognition were as follows:

 

   

Three Months Ended March 31,

 

(in thousands)

 

2024

   

2023

 

Goods and services transferred at a point in time

  $ 23,743     $ 29,306  

Goods and services transferred over time

    769       669  

Total revenues

  $ 24,512     $ 29,975  

 

Revenue by geographic destination were as follows:

 

   

Three Months Ended March 31,

 

(in thousands)

 

2024

   

2023

 

United States

  $ 10,983     $ 12,302  

Europe

    6,578       7,441  

Greater China

    4,382       6,505  

Rest of the world

    2,569       3,727  

Total revenues

  $ 24,512     $ 29,975  

 

9

 

Contract Liabilities

 

The following table provides details of contract liabilities as of the periods indicated:

 

(dollars in thousands)

 

March 31, 2024

   

December 31, 2023

   

Change

   

Percentage

 

Service, maintenance and warranty contracts

  $ 2,748     $ 2,849     $ (101 )     -3.5 %

Customer advances

    1,640       1,659       (19 )     -1.1 %

Total contract liabilities

  $ 4,388     $ 4,508     $ (120 )     -2.7 %

 

Changes in the Company’s contract liabilities are primarily due to the timing of receipt of payments under service, maintenance and warranty contracts. During the three months ended March 31, 2024 and 2023, the Company recognized revenue of $1.6 million and $1.0 million from contract liabilities existing at December 31, 2023 and 2022, respectively.

 

Provision for Expected Credit Losses on Receivables

 

Activity in the provision for expected losses on receivables was as follows:

 

   

Three Months Ended March 31,

 

(in thousands)

 

2024

   

2023

 

Balance, beginning of period

  $ 160     $ 191  

Provision for expected credit losses

    1       (3 )

Charge-offs and other

    (34 )     (21 )

Balance, end of period

  $ 127     $ 167  

 

Concentrations

 

No customer accounted for more than 10% of revenues for the three months ended March 31, 2024 and 2023. At March 31, 2024 and December 31, 2023, no customer accounted for more than 10% of net accounts receivable.

 

Warranties

 

Activity in the product warranty accrual was as follows:

 

   

Three Months Ended March 31,

 

(in thousands)

 

2024

   

2023

 

Balance, beginning of period

  $ 336     $ 268  

Expense

    105       83  

Warranty claims

    (82 )     (72 )

Balance, end of period

  $ 359     $ 279  

 

 

4.

Goodwill and Intangible Assets

 

The change in the carrying amount of goodwill for the three months ended March 31, 2024 was as follows:

 

(in thousands)

       

Carrying amount at December 31, 2023

  $ 57,065  

Effect of change in currency translation

    (366 )

Carrying amount at March 31, 2024

  $ 56,699  

 

10

 

Intangible assets at March 31, 2024 and December 31, 2023 consisted of the following:

 

   

March 31, 2024

   

December 31, 2023

 

(in thousands)

         

Accumulated

                   

Accumulated

         

Amortizable intangible assets:

 

Gross

   

Amortization

   

Net

   

Gross

   

Amortization

   

Net

 

Distribution agreements/customer relationships

  $ 15,816     $ (9,798 )   $ 6,018     $ 16,038     $ (9,706 )   $ 6,332  

Technology and software development

    34,987       (27,891 )     7,096       35,007       (27,029 )     7,978  

Trade names and patents

    7,530       (6,166 )     1,364       7,613       (6,094 )     1,519  

Total amortizable intangible assets

  $ 58,333     $ (43,855 )   $ 14,478     $ 58,658     $ (42,829 )   $ 15,829  

Indefinite-lived intangible assets:

                    200                       207  

Total intangible assets

                  $ 14,678                     $ 16,036  

 

Intangible asset amortization expense for the three months ended March 31, 2024 and 2023 was as follows:

 

   

Three Months Ended March 31,

 

(in thousands)

 

2024

   

2023

 

Cost of revenues

  $ 44     $ -  

Operating expense

    1,333       1,388  

Total amortization of intangible assets

  $ 1,377     $ 1,388  

 

As of March 31, 2024, estimated future amortization expense of amortizable intangible assets is as follows:

 

(in thousands)

       

2024 (remainder of the year)

  $ 4,051  

2025

    4,197  

2026

    2,536  

2027

    1,264  

2028

    1,093  

Thereafter

    1,337  

Total

  $ 14,478  

 

 

5.

 

Balance Sheet Information

 

The following tables provide details of selected balance sheet items as of the periods indicated:

 

Inventories:

 

March 31,

   

December 31,

 

(in thousands)

 

2024

   

2023

 

Finished goods

  $ 5,917     $ 5,120  

Work in process

    2,865       4,188  

Raw materials

    15,354       15,408  

Total

  $ 24,136     $ 24,716  

 

Other Current Liabilities:

 

March 31,

   

December 31,

 

(in thousands)

 

2024

   

2023

 

Compensation

  $ 3,215     $ 3,929  

Customer credits

    1,548       3,201  

Employee retention credit funds

    3,154       -  

Professional fees

    514       499  

Warranty costs

    359       336  

Other

    1,538       1,240  

Total

  $ 10,328     $ 9,205  

 

11

 

The Coronavirus Aid, Relief, and Economic Security Act of 2020 (“CARES Act”) provided an employee retention credit (“ERC”) that was a refundable tax credit against certain employer taxes. The Company has elected to account for the credit as a government grant. As there is no authoritative guidance under U.S. GAAP on accounting for grants to for-profit business entities from government entities, the Company accounts for government assistance by analogy to International Accounting Standards Topic 20, Accounting for Government Grants and Disclosure of Government Assistance (IAS 20). Under IAS 20, government grants are recognized when there is reasonable assurance that the grant will be received and that all conditions related to the grant will be met.

 

The Company received an ERC refund of $3.2 million during the quarter ended March 31, 2024. Due to the subjectivity of the credit, the Company has included the refund received in other current liabilities in the consolidated balance sheet as of March 31, 2024, subject to a determination that the refund is recognizable under IAS 20.

 

The Company engaged a professional services firm under a commission fee arrangement to assist with determining program eligibility and in accumulating the necessary support that was used as a basis in the filing. During the three months ended March 31, 2024, the Company paid a fee of $0.5 million for these services, which is included in other operating expenses in the consolidated statement of operations.

 

 

6.

Marketable Equity Securities

 

In April 2023, the Company obtained shares of common stock of Harvard Apparatus Regenerative Technologies, Inc. (“HRGN” formerly known as Biostage, Inc.) in connection with settlement of indemnification obligations related to litigation which occurred during the year ended December 31, 2022. These shares had an estimated fair value of $1.7 million and $3.5 million, as of March 31, 2024, and December 31, 2023, respectively, and are included in the consolidated balance sheets as a component of other long-term assets.

 

The Company received cash proceeds of $0.5 million from the sale of HRGN shares sold during the three months ended March 31, 2024, which resulted in a realized loss on sale of $0.3 million. The Company incurred an unrealized loss of $1.0 million on HRGN shares held during the three months ended March 31, 2024. The Company determines the fair value of its HRGN common stock based on the closing price as quoted on the OTCQB Marketplace at the reporting date. Due to HRGN’s limited operating history, its overall financial condition and the limited trading volumes and liquidity of its common stock, the value of the Company’s investment in this common stock could fluctuate considerably or become worthless.

 

 

7.

Leases

 

The Company has noncancelable operating leases for offices, manufacturing facilities, warehouse space, automobiles and equipment expiring at various dates through 2030.

 

The components of lease expense for the three months ended March 31, 2024 and 2023, were as follows:

 

   

Three Months Ended March 31,

 

(in thousands)

 

2024

   

2023

 

Operating lease cost

  $ 511     $ 543  

Short-term lease cost

    50       67  

Sublease income

    (25 )     (25 )

Total lease cost

  $ 536     $ 585  

 

Supplemental cash flow information related to the Company's operating leases is as follows:

 

   

Three Months Ended March 31,

 

(in thousands)

 

2024

   

2023

 

Cash paid for amounts included in the measurement of lease liabilities

  $ 597     $ 653  

 

12

 

Supplemental balance sheet information related to the Company’s operating leases is as follows:

 

   

March 31,

   

December 31,

 

(in thousands)

 

2024

   

2023

 

Operating lease right-of-use assets

  $ 4,359     $ 4,773  
                 

Current portion, operating lease liabilities

  $ 1,197     $ 1,416  

Operating lease liabilities, long-term

    4,557       4,794  

Total operating lease liabilities

  $ 5,754     $ 6,210  
                 

Weighted average remaining lease term (years)

    6          

Weighted average discount rate

    9.5 %        

 

Future minimum lease payments for operating leases, with initial terms in excess of one year at March 31, 2024, are as follows:

 

(in thousands)

       

2024 (remainder of the year)

  $ 1,377  

2025

    1,172  

2026

    1,069  

2027

    1,057  

2028

    1,057  

Thereafter

    1,867  

Total lease payments

    7,599  

Less imputed interest

    (1,845 )

Total operating lease liabilities

  $ 5,754  

 

 

8.

Long-Term Debt

 

As of March 31, 2024 and December 31, 2023, the Company’s borrowings were as follows: 

 

(in thousands)

 

March 31, 2024

   

December 31, 2023

 

Long-term debt:

               

Term loan

  $ 27,700     $ 30,723  

Revolving line

    8,400       6,400  

Less: unamortized deferred financing costs

    (490 )     (560 )

Total debt

    35,610       36,563  

Less: current portion of long-term debt

    (4,000 )     (6,139 )

Current unamortized deferred financing costs

    280       280  

Long-term debt

  $ 31,890     $ 30,704  

 

The aggregate amounts of debt maturities are as follows:

 

(in thousands)

       

2024

  $ 4,000  

2025

    32,100  
    $ 36,100  

 

13

 

The Company maintains a Credit Agreement (as amended, the “Credit Agreement”) with Citizens Bank, N.A., Wells Fargo Bank, National Association, and First Citizens Bank & Trust Company (together, the “Lenders”). The Credit Agreement provides for a term loan of $40.0 million and a $25.0 million senior revolving credit facility (including a $10.0 million sub-facility for the issuance of letters of credit and a $10.0 million swingline loan sub facility) (collectively, the “Credit Facility”). The Company’s obligations under the Credit Agreement are guaranteed by certain of the Company’s direct, domestic wholly-owned subsidiaries; none of the Company’s direct or indirect foreign subsidiaries has guaranteed the Credit Facility. The Company’s obligations under the Credit Agreement are secured by substantially all of the assets of Harvard Bioscience, Inc., and each guarantor (including all or a portion of the equity interests in certain of the Company’s domestic and foreign subsidiaries). The Credit Facility matures on December 22, 2025. Issuance costs of $1.4 million are amortized over the contractual term to maturity date on a straight-line basis, which approximates the effective interest method. Available and unused borrowing capacity under the revolving line of credit was $4.4 million as of March 31, 2024 based on the Credit Agreement, as amended pursuant to the March 2024 Amendment as described below. Total revolver borrowing capacity is limited by the consolidated net leverage ratio as defined under the amended Credit Agreement.

 

Borrowings under the Credit Facility will, at the option of the Company, bear interest at either (i) a rate per annum based on the Secured Overnight Financing Rate (“SOFR”) for an interest period of one, two, three or six months, plus an applicable interest rate margin determined as provided in the Credit Agreement, (a “SOFR Loan”), or (ii) an alternative base rate plus an applicable interest rate margin, each as determined as provided in the Credit Agreement (an “ABR Loan”). SOFR interest under the Credit Agreement is subject to applicable market rates and a floor of 0.50%. The alternative base rate is based on the Citizens Bank prime rate or the federal funds effective rate of the Federal Reserve Bank of New York and is subject to a floor of 1.0%. The applicable interest rate margin varies from 2.0% per annum to 3.25% per annum for SOFR Loans, and from 1.5% per annum to 3.0% per annum for ABR Loans, in each case depending on the Company’s consolidated net leverage ratio and is determined in accordance with a pricing grid set forth in the Credit Agreement. There are no prepayment penalties in the event the Company elects to prepay and terminate the Credit Facility prior to its scheduled maturity date, subject to SOFR Loan breakage and redeployment costs in certain circumstances.

 

The effective interest rate on the Company borrowings for the three months ended March 31, 2024 and 2023, was 7.7% and 7.9%, respectively, and the weighted average interest rate as of March 31, 2024, net of the effect of the Company’s interest rate swaps, was 7.4%. The carrying value of the debt approximates fair value because the interest rate under the obligation approximates market rates of interest available to the Company for similar instruments.

 

As of March 31, 2024, the term loan requires quarterly installments of $1.0 million with a balloon payment at maturity. Furthermore, within ninety days after the end of the Company’s fiscal year, the term loan may be permanently reduced pursuant to certain mandatory prepayment events including an annual “excess cash flow sweep”, as defined in the agreement; provided that, in any fiscal year, any voluntary prepayments of the term loan shall be credited against the Company’s “excess cash flow” prepayment obligations on a dollar-for-dollar basis for such fiscal year. As of December 31, 2023, the current portion of long-term debt included amounts due under the excess cash flow sweep of $2.0 million which was paid on March 29, 2024. Amounts outstanding under the revolving credit facility can be repaid at any time but are due in full at maturity.

 

The Credit Agreement includes customary affirmative, negative, and financial covenants binding on the Company. The negative covenants limit the ability of the Company, among other things, to incur debt, incur liens, make investments, sell assets and pay dividends on its capital stock. The financial covenants include a maximum consolidated net leverage ratio and a minimum consolidated fixed charge coverage ratio. The Credit Agreement also includes customary events of default. 

 

In March, 2024, the Company entered into an amendment to the Credit Agreement (the “March 2024 Amendment”) pursuant to which the Lenders and administrative agent modified the definition of Consolidated EBITDA used in the calculation of certain financial covenants to adjust for charges related to the ongoing abandoned property audit (See Note 13) and commission fees expected to be paid in connection with the employee retention credit filings (See Note 5). The Company was in compliance with the covenants of the Credit Agreement, as amended, as of March 31, 2024.

 

 

9.

Derivatives

 

In February 2023, the Company entered into an interest rate swap contract to improve the predictability of cash flows from interest payments related to its variable, SOFR-based debt. The swap contract had a notional amount of $25.9 million as of March 31, 2024 and matures on December 22, 2025. This swap contract effectively converts the SOFR-based variable portion of the interest payable under the Credit Agreement into fixed-rate debt at an annual rate of 4.75%. The swap contract does not impact the additional interest related to the applicable interest rate margin as discussed above in Note 8, Long-Term Debt. The swap contract is considered an effective cash flow hedge, and as a result, net gains or losses are reported as a component of other comprehensive income (“OCI”) in the consolidated financial statements and are reclassified as net income when the underlying hedged interest impacts earnings. An assessment is performed quarterly to evaluate the ongoing hedge effectiveness.

 

14

 

The following table presents the notional amount and fair value of the Company’s derivative instruments as of March 31, 2024 and December 31, 2023:

 

(in thousands)

 

March 31, 2024

  

December 31, 2023

 

Derivatives Instruments

 

Balance Sheet Classification

 

Notional Amount

  

Fair Value (a)

  

Notional Amount

  

Fair Value (a)

 

Interest rate swap

 

Other long-term liabilities

 $25,920  $*  $27,375  $(199)

 

* Amount not significant.

 

(a) See Note 10 for the fair value measurements related to these financial instruments.

 

The effect of the cash flow hedge on other comprehensive income (loss) and earnings for the periods presented was as follows:

 

   

Three Months Ended

   

Three Months Ended

 

Derivatives Qualifying as Hedges, net of tax (in thousands)

 

March 31, 2024

   

March 31, 2023

 

Gain (loss) recognized in OCI on derivatives (effective portion)

  $ 199     $ (440 )

Gian (loss) reclassified from OCI to interest expense

    47       (1 )

 

 

10.

Fair Value Measurements

 

The following tables present the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis: 

 

   

Fair Value as of March 31, 2024

 

Assets (Liabilities) (in thousands)

 

Level 1

   

Level 2

   

Level 3

   

Total

 

Equity securities - common stock

  $ 1,704     $ -     $ -     $ 1,704  

Interest rate swap agreements

  $ -     $ *     $ -     $ -  

 

 

   

Fair Value as of December 31, 2023

 
   

Level 1

   

Level 2

   

Level 3

   

Total

 

Equity securities - common stock

  $ 3,511     $ -     $ -     $ 3,511  

Interest rate swap agreements

  $ -     $ (199 )   $ -     $ (199 )

 

* Amount not significant.

 

The Company uses the market approach technique to value its financial liabilities. The Company’s financial assets and liabilities carried at fair value include, when applicable, investments in common stock and derivative instruments used to hedge the Company’s interest rate risks. The fair value of the Company’s investment in HRGN common stock (See Note 6) was based on the closing price per the OTCQB Marketplace at the reporting date. The fair value of the Company’s interest rate swap agreements was based on SOFR yield curves at the reporting date.

 

 

11.

Stock-Based Compensation

 

Stock-based compensation expense for the three months ended March 31, 2024 and 2023 was allocated as follows:

 

   

Three Months Ended March 31,

 

(in thousands)

 

2024

   

2023

 

Cost of revenues

  $ 52     $ 69  

Sales and marketing expenses

    130       145  

General and administrative expenses

    771       869  

Research and development expenses

    95       70  

Total stock-based compensation expense

  $ 1,048     $ 1,153  

 

As of March 31, 2024, the total compensation costs related to unvested awards not yet recognized was $8.4 million and the weighted average period over which it is expected to be recognized is approximately 2.3 years. The Company did not capitalize any stock-based compensation.

 

15

 

Restricted stock unit (“RSU”) activity for the three months ended March 31, 2024 was as follows:

 

                   

Market-

           

Performance-

         
   

Time-Based

           

Based

           

Based

         
   

Restricted

   

Grant Date

   

Restricted

   

Grant Date

   

Restricted

   

Grant Date

 
   

Stock Units

   

Fair Value

   

Stock Units

   

Fair Value

   

Stock Units

   

Fair Value

 

Balance at December 31, 2023

    1,164,996     $ 3.28       801,845     $ 3.37       -     $ -  

Granted

    779,629       4.19       -       -       375,895       4.19  

Vested

    (33,979 )     2.58       -       -       -       -  

Forfeited

    (16,083 )     3.27       -       -       -       -  

Balance at March 31, 2024

    1,894,563     $ 3.67       801,845     $ 3.37       375,895     $ 4.19  

 

Unvested shares related to market-based and performance-based vesting conditions are reflected at 100% of their target vesting amount in the table above. Actual vesting could range from zero up to 150% of their target amounts.

 

Performance-based RSU awards are contingent on the achievement of certain performance metrics. Compensation cost associated with performance-based RSUs are recognized based on the estimated number of shares that the Company ultimately expects will be earned. If the estimated number of shares to be earned is revised in the future, then stock-based compensation expense will be adjusted accordingly.

 

Stock option activity for the three months ended March 31, 2024 was as follows:

 

   

Number of
Options

   

Weighted-
Average
Exercise
Price

 

Weighted-
Average
Remaining
Contractual
Term

 

Aggregate
Intrinsic Value
(in thousands)

 

Outstanding and Exerciseable at December 31, 2023

    924,067     $ 3.37            

Exercised

    (3,899 )     3.96            

Outstanding and Exerciseable at March 31, 2024

    920,168     $ 3.37  

3.2 years

  $ 964  

 

The aggregate intrinsic value in the preceding table represents the total pre-tax intrinsic value, based on the Company’s closing stock price of $4.24 as of the end of the reporting period, which would have been received by the option holders had all option holders exercised their options as of that date. The aggregate intrinsic value of options exercised during the three months ended March 31, 2024, was not significant.

 

 

12.

Income Tax

 

The determination of the annual effective tax rate is based upon a number of significant estimates and judgments, including the estimated annual pretax income in each tax jurisdiction in which the Company operates and the development of tax planning strategies during the year. In addition, as a global commercial enterprise, the Company’s tax expense can be impacted by changes in tax rates or laws, the finalization of tax audits and reviews and other factors that cannot be predicted with certainty. As such, there can be significant volatility in interim tax provisions.

 

Income tax expense was $0.2 million and $0.6 million for the three months ended March 31, 2024 and 2023, respectively. The Company’s effective tax rate of (4.7%) for the three months ended March 31, 2024 was lower than the U.S. statutory rate primarily due to the inclusion of non-deductible executive compensation and changes in valuation allowances associated with the Company’s assessment of the likelihood of the recoverability of deferred tax assets. The Company’s effective tax rate of 48.5% for the three months ended March 31, 2023 was higher than the U.S. statutory rate primarily due to a Global Intangible Low-Taxed Income (“GILTI”) inclusion to taxable income and changes in valuation allowances. The Company has valuation allowances against substantially all of its tax credit carryforwards.

 

16

 
 

13.

Commitments and Contingent Liabilities

 

The Company is involved in various claims and legal proceedings arising in the ordinary course of business. After consultation with legal counsel, the Company has determined that the ultimate disposition of such proceedings is not likely to have a material adverse effect on its business, financial condition, results of operations or cash flows. Although unfavorable outcomes in the proceedings are possible, the Company has not accrued loss contingencies relating to any such matters as they are not considered to be probable and reasonably estimable. If one or more of these matters are resolved in a manner adverse to the Company, the impact on the Company’s business, financial condition, results of operations and cash flows could be material.

 

In addition, the Company has entered into indemnification agreements with its directors and officers. It is not possible to determine the maximum potential liability amount under these indemnification agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. The Company has not recorded any liability for costs related to contingent indemnification obligations as of March 31, 2024.

 

The Company is subject to unclaimed property laws in the ordinary course of its business.  State escheat laws generally require entities to report and remit abandoned and unclaimed property to the state. Failure to timely report and remit the property can result in assessments that could include interest and penalties, in addition to the payment of the escheat liability itself. The Company is currently undergoing an unclaimed property audit. Based on the Company’s evaluation of the current stage of the audit, the Company accrued $0.5 million of loss contingencies during the three months ended March 31, 2024, which has been included in other operating expenses in the consolidated statement of operations.

 

 

14.

Product Line Disposition

 

In February 2023, the Company sold its Hoefer product line for $0.5 million. The carrying value of assets sold was $0.1 million resulting in a gain on disposition of $0.4 million which was recorded in Other income, net in the consolidated statement of operations for the three months ended March 31, 2023. Revenue and gross profit of this disposed product line included in the condensed consolidated statement of operations for the three months ended March 31, 2023 were not significant.

 

 

 

 

 

Item 2.        Managements Discussion and Analysis of Financial Condition and Results of Operations.

 

Forward-Looking Statements

 

This Quarterly Report on Form 10-Q contains statements that are not statements of historical fact and are 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 (the Exchange Act). The forward-looking statements are principally, but not exclusively, contained in Item 2: Managements Discussion and Analysis of Financial Condition and Results of Operations.These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Forward-looking statements include, but are not limited to, statements about managements confidence or expectations, and our plans, objectives, expectations, and intentions that are not historical facts. In some cases, you can identify forward-looking statements by terms such as may,” “will,” “should,” “could,” “would,” “seek,” “expects,” “plans,” “aim,” “anticipates,” “believes,” “estimates,” “projects,” “predicts,” “intends,” “think,” “potential,” “objectives,” “optimistic,” “strategy,” “goals,” “sees,” “new,” “guidance,” “future,” “continue,” “drive,” “growth,” “long-term,” “projects,” “develop,” “possible,” “emerging,” “opportunity,” “pursueand similar expressions intended to identify forward-looking statements. These statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties. Given these uncertainties, you should not place undue reliance on these forward-looking statements. We discuss many of these risks in detail in our Annual Report on Form 10-K for the year ended December 31, 2023 and our other filings with the SEC. You should carefully review all of these factors, as well as other risks described in our public filings, and you should be aware that there may be other factors, including factors of which we are not currently aware, that could cause these differences. Also, these forward-looking statements represent our estimates and assumptions only as of the date of this report. We may not update these forward-looking statements, even though our situation may change in the future, unless we have obligations under the federal securities laws to update and disclose material developments related to previously disclosed information. Harvard Bioscience, Inc. is referred to herein as we,” “our,” “us,and the Company.

 

Overview

 

Harvard Bioscience, Inc., a Delaware corporation, is a leading developer, manufacturer and seller of technologies, products and services that enable fundamental advances in life science applications, including research, pharmaceutical and therapy discovery, bioproduction and preclinical testing for pharmaceutical and therapy development. Our products and services are sold globally to customers ranging from renowned academic institutions and government laboratories to the world’s leading pharmaceutical, biotechnology and contract research organizations (“CROs”). With operations in the United States, Europe and China, we sell through a combination of direct and distribution channels to customers around the world.

 

Trends and Developments

 

Our business is affected by global and regional economic trends and uncertainties. The global economy has recently experienced increasing uncertainty as a result of developments including inflationary pressure, higher interest rates, fluctuations in exchange rates, economic conditions in China, and the events in Ukraine and the Middle East. Our business has also been affected by the softening of certain international markets, especially in China and the Asia-Pacific region, as well as by delays in government funding for certain customers. Our business has been affected by a reduced demand from our biotechnology and pharmaceutical company customers, due principally to the increased cost of capital and a reduction in spending following the COVID-19 pandemic.

 

If these trends are prolonged or are more severe, or if the recovery is less robust or takes longer than anticipated, our business, results of operations, and cash flow may be materially impacted.

 

 

 

 

 

 

 

 

 

 

Selected Results of Operations

 

Three months ended March 31, 2024 compared to three months ended March 31, 2023

 

   

Three Months Ended March 31,

 

(dollars in thousands)

 

2024

   

% of revenue

   

2023

   

% of revenue

 

Revenues

  $ 24,512             $ 29,975          

Gross profit

    14,772       60.3 %     18,346       61.2 %

Sales and marketing expenses

    5,904       24.1 %     5,978       19.9 %

General and administrative expenses

    5,963       24.3 %     6,334       21.1 %

Research and development expenses

    2,885       11.8 %     2,897       9.7 %

Amortization of intangible assets

    1,333       5.4 %     1,388       4.6 %
Other operating expenses     966       3.9 %     -       -  

Interest expense

    751       3.1 %     974       3.2 %

Loss on equity securities

    1,312       5.4 %     -       -  

Income tax expense

    210       0.9 %     585       2.0 %

 

Revenues

 

Revenues decreased $5.5 million, or 18.2%, to $24.5 million for the three months ended March 31, 2024, compared to $30.0 million for the three months ended March 31, 2023. The decrease in revenue was primarily due to the softening of worldwide demand, in particular in the Asia-Pacific region compared to a strong first quarter in 2023.

 

Gross profit

 

Gross profit decreased $3.5 million, or 19.5%, to $14.8 million for the three months ended March 31, 2024 compared with $18.3 million for the three months ended March 31, 2023, primarily due to the decrease in revenues. Gross margin decreased to 60.3% for the three months ended March 31, 2024, compared with 61.2% for the three months ended March 31, 2023. The decrease in gross margin was primarily the result of under-absorption of manufacturing overhead costs due to the decrease in revenues.

 

Sales and marketing expenses

 

Sales and marketing expenses of $5.9 million for the three months ended March 31, 2024, were comparable to the $6.0 million during the same period in 2023. Reduced variable compensation was offset by increased investments in personnel to support our growth strategy, product launches and travel costs related to industry trade shows.

 

General and administrative expenses

 

General and administrative expenses decreased $0.3 million, or 5.9%, to $6.0 million for the three months ended March 31, 2024, compared with $6.3 million for the three months ended March 31, 2023. The decrease was primarily due to reduced variable compensation.

 

Research and development expenses

 

Research and development expenses were $2.9 million for both the three months ended March 31, 2024, and March 31, 2023.

 

Amortization of intangible assets

 

Amortization of intangible assets included in operating expenses remained relatively unchanged and decreased to $1.3 million for the three months ended March 31, 2024, compared with $1.4 million for the three months ended March 31, 2023.

 

Other operating expenses

 

Other operating expenses for the three months ended March 31, 2023 included a fee of $0.5 million in connection with the receipt of employee retention credits and an estimated loss of $0.5 million related to an unclaimed property audit.

 

 

Interest expense

 

Interest expense decreased $0.2 million, or 22.9%, to $0.8 million for the three months ended March 31, 2024, compared with $1.0 million for the three months ended March 31, 2023. The decrease was primarily due to lower average borrowings during the period.

 

Loss on equity securities

 

As of March 31, 2024 and December 31, 2023 we held shares of common stock of HRGN with an estimated fair value of $1.7 million and $3.5 million, respectively. These shares were received in April 2023 in connection with settlement of indemnification obligations related to litigation which occurred during the year ended December 31, 2022. During the three months ended March 31, 2024, we recorded a loss of $1.3 million consisting of a realized loss of $0.3 million for shares sold and an unrealized loss of $1.0 million for shares held. We determine the fair value of our HRGN common stock based on the closing price as quoted on the OTCQB Marketplace at the reporting date. Due to HRGN’s limited operating history, its overall financial condition and the limited trading volumes and liquidity of its common stock, the value of our investment in this common stock could fluctuate considerably or become worthless.

 

Income tax expense

 

Income tax expense was $0.2 million and $0.6 million for the three months ended March 31, 2024 and 2023, respectively. The effective tax rates for the three months ended March 31, 2024 and 2023 were (4.7)% and 48.5%, respectively. The effective tax rate decreased in the first quarter of 2024 compared to 2023 due to a decrease in the GILTI inclusion. The effective tax rate for both the first quarters of 2024 and 2023 differed from the U.S. statutory rate primarily due to the inclusion of non-deductible executive compensation and changes in valuation allowances associated with our assessment of the likelihood of the recoverability of deferred tax assets.

 

Liquidity and Capital Resources

 

Our primary sources of liquidity are cash and cash equivalents, internally generated cash flow from operations and our revolving credit facility. Our expected cash outlays relate primarily to cash payments due under our Credit Agreement described below as well as capital expenditures, salaries, inventory, and capital expenditures.

 

We held cash and cash equivalents of $4.3 million at both March 31, 2024, and December 31, 2023. Borrowings outstanding were $36.1 million and $37.1 million as of March 31, 2024 and December 31, 2023, respectively.

 

We maintain a Credit Agreement which provides for a term loan of $40.0 million and a $25.0 million senior revolving credit facility both maturing on December 22, 2025. On March 28, 2024, we entered into an amendment to the Credit Agreement pursuant to which the Lenders and administrative agent modified the definition of Consolidated EBITDA used in the calculation of certain financial covenants to adjust for charges related to the ongoing abandoned property audit and commission fees expected to be paid in connection with our employee retention credit filings. We were in compliance with the covenants of the Credit Agreement, as amended, as of March 31, 2024. (See Note 8 to the Consolidated Condensed Financial Statements included in Part I, Item 1. of this report).

 

As of March 31, 2024, the weighted average interest rate on our borrowings, net of the effect of the interest rate swaps, was 7.4%, and the available and unused borrowing capacity was $4.4 million. Total revolver borrowing capacity is limited by our consolidated net leverage ratio as defined under the Credit Agreement, as amended.

 

Based on our current operating plans, we expect that our available cash, cash generated from current operations and debt capacity will be sufficient to finance current operations and capital expenditures for at least the next 12 months. This assessment includes consideration of our best estimates of the impact of macroeconomic conditions on our financial results described above. Our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary as a result of a number of factors.

 

 

 

 

 

 

CONDENSED CONSOLIDATED CASH FLOW STATEMENTS

 

           

Three Months Ended March 31,

 

(in thousands)

 

2024

   

2023

 

Cash provided by operating activities

  $ 1,403     $ 1,812  

Cash (used in) provided by investing activities

    (225 )     288  

Cash used in financing activities

    (1,055 )     (2,893 )

Effect of exchange rate changes on cash

    (151 )     74  

Decrease in cash and cash equivalents

  $ (28 )   $ (719 )

 

Cash provided by operating activities was $1.4 million and $1.8 million for the three months ended March 31, 2024 and 2023, respectively. Cash flow from operations for the three months ended March 31, 2024 was negatively impacted as a result of the decline in net income for the period adjusted for non-cash items and was positively impacted by the receipt of $3.2 million of employee retention credits.

 

Cash used in investing activities was $0.2 million for the three months ended March 31, 2024 and primarily consisted of capital expenditures in manufacturing and information technology infrastructure of $0.7 million partially offset by $0.5 million from the proceeds from the sale of marketable equity securities. Cash provided by investing activities was $0.3 million for the three months ended March 31, 2023 and primarily consisted of $0.5 million from proceeds of the sale our Hoefer product line partially offset by $0.2 million of capital expenditures.

 

Cash used in financing activities was $1.1 million and $2.9 million for the three months ended March 31, 2024 and 2023, respectively. During the three months ended March 31, 2024, debt outstanding under our credit facility decreased by $1.0 million, consisting of net borrowings under our revolver of $2.0 million, and payments of $3.0 million against the term loan. During the three months ended March 31, 2023, debt outstanding under our credit facility decreased by $2.8 million, consisting of net payments against our revolver of $1.0 million, and payments of $1.8 million against the term loan.

 

Impact of Foreign Currencies

 

Our international operations in some instances operate in a natural hedge, as we sell our products in many countries and a substantial portion of our revenues, costs and expenses are denominated in foreign currencies, primarily the euro and British pound.

 

During the three months ended March 31, 2024, changes in foreign currency exchange rates had an insignificant effect on our revenues and expenses. The gain (loss) associated with the translation of our foreign equity into U.S. dollars included as a component of other comprehensive income (loss) during the three months ended March 31, 2024 was a loss of $(0.8) million, compared to a gain of $0.8 million for the three months ended March 31, 2023. Currency exchange rate fluctuations included as a component of net income (loss) during the three months ended March 31, 2024, and March 31, 2023 were not significant.

 

Critical Accounting Policies

 

There have been no material changes to the critical accounting policies underlying the accompanying unaudited consolidated financial statements and as set forth in Part II, Item 7 included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

 

Recent Accounting Pronouncements

 

For information on recent accounting pronouncements impacting our business, see “Recently Issued Accounting Pronouncements Yet to Be Adopted” included in Note 1 to our Condensed Consolidated Financial Statements included in Part I, Item 1. of this report.

 

 

 

Item 3.       Quantitative and Qualitative Disclosures about Market Risk

 

Not Applicable.

 

Item 4.       Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

As of March 31, 2024, the end of the period covered by this report, our management, including our Chief Executive Officer and our Chief Financial Officer, reviewed and evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e) of the Exchange Act). Based upon management's review and evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified by the SEC and is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting during the first quarter of fiscal 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

Limitations on Effectiveness of Controls and Procedures

 

In designing and evaluating our controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud within the Company have been detected.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PART II. OTHER INFORMATION

 

Item 1        Legal Proceedings.

 

The information included in Note 13 to the Condensed Consolidated Financial Statements (Unaudited) included in Part I, Item 1 of this quarterly report is incorporated herein by reference.

 

Item 1A.    Risk Factors.

 

You should carefully consider the risk factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, which could materially affect our business, financial position, or future results of operations. The risks described in our Annual Report on Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business, financial position, or future results of operations.

 

Item 2.       Unregistered Sales of Equity Securities and Use of Proceeds.

 

There were no unregistered sales of equity securities during the period covered by this report.

 

Item 3.       Defaults Upon Senior Securities.

 

None.

 

Item 4.       Mine Safety Disclosures.

 

Not applicable.

 

 

Item 5.        Other Information.

 

The information included in Part II, Item 9B in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 is incorporated herein by reference.

 

 

Item 6.       Exhibits

 

10.1

Third Amendment to Credit Agreement dated March 28, 2024, among Harvard Bioscience, Inc., Citizen Bank, N. A., as the administrative agent, and the lenders party thereto. (previously filed as an exhibit to the Company’s Current Report on Form 8-K on April 3, 2024 and incorporated by reference thereto).

31.1

Certification of Chief Financial Officer of Harvard Bioscience, Inc., pursuant to Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification of Chief Executive Officer of Harvard Bioscience, Inc., pursuant to Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*

Certification of Chief Financial Officer of Harvard Bioscience, Inc., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2*

Certification of Chief Executive Officer of Harvard Bioscience, Inc., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS

Inline XBRL Instance Document

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Labels Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)

   

*

This certification shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section, nor shall it be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934

 

 

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by undersigned thereunto duly authorized.

 

 

HARVARD BIOSCIENCE, INC.

 

Date: May 7, 2024         

     
 

By:

/s/ JAMES GREEN

 
   

James Green

 
   

Chief Executive Officer

 
       
       
 

By:

/s/ JENNIFER COTE  

 
   

Jennifer Cote

 
   

Chief Financial Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

24

EXHIBIT 31.1

 

Certification

 

I, Jennifer Cote, certify that:

 

1.

I have reviewed this Quarterly Report on Form 10-Q of Harvard Bioscience, Inc.

   

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 registrant as of, and for, the periods presented in this report;

   

4.

The registrant’s other certifying officer(s) and I are 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 registrant and have:

 

 

a.

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, 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 our 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 registrant’s disclosure controls and procedures and presented in this report our 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 registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

 

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 registrant’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 registrant’s internal control over financial reporting.

 

 

Date May 7, 2024

/s/ JENNIFER COTE

   
 

Jennifer Cote

 

Chief Financial Officer

 

 

 

EXHIBIT 31.2

 

Certification

 

I, James Green, certify that:

 

1.

I have reviewed this Quarterly Report on Form 10-Q of Harvard Bioscience, Inc.

   

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 registrant as of, and for, the periods presented in this report;

   

4.

The registrant’s other certifying officer(s) and I are 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 registrant and have:

 

 

a.

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, 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 our 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 registrant’s disclosure controls and procedures and presented in this report our 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 registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

 

a.