HARVARD BIOSCIENCE INC 10-K

Item 9A. Controls and Procedures. This Report includes the certifications of our Chief Executive Officer and Chief Financial Officer required by Rule 13a-14 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). See Exhibits 31.1 and 31.2. This Item 9A includes information concerning the controls and control evaluations referred to in those certifications. (a) Evaluation of Disclosure Controls and Procedures We carried out an evaluation required by the Securities Exchange Act of 1934 (the “1934 Act”), under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13a-15(e) of the 1934 Act, as of December 31, 2023. Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of December 31, 2023, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the 1934 Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and to provide reasonable assurance that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. 21 Table of Contents (b) Management ’ s Report on Internal Control Over Financial Reporting Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) of the 1934 Act. Management has assessed the effectiveness of our internal control over financial reporting as of December 31, 2023 based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. As a result of this assessment, management concluded that, as of December 31, 2023, our internal control over financial reporting was effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Grant Thornton LLP has independently assessed the effectiveness of our internal control over financial reporting and its report is included below. (c) Changes in Internal Controls Over Financial Reporting There were no changes in our internal control over financial reporting during the last quarter ended December 31, 2023, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. (d) Limitations on Controls Our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives as specified above. Management does not expect, however, that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all error and fraud. Any control system, no matter how well designed and operated, is based upon certain assumptions and can provide only reasonable, not absolute, assurance that its objectives will be met. Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected. 22 Table of Contents (e) Report of Independent Registered Public Accounting Firm REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and Stockholders Harvard Bioscience, Inc. Opinion on internal control over financial reporting We have audited the internal control over financial reporting of Harvard Bioscience, Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2023, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December 31, 2023, and our report dated March 7, 2024 expressed an unqualified opinion on those financial statements. Basis for opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and limitations of internal control over financial reporting A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ GRANT THORNTON LLP Hartford, Connecticut March 7, 2024 23 Table of Contents Item 9B. Other Information. On November 23, 2023 , James Green , our Chairman, President and Chief Executive Officer , adopted a trading plan intended to satisfy the affirmative defense available under Rule 10b5 - 1 (c) (the “Trading Plan”). The expiration date of the Trading Plan was February 7, 2025. The total number of shares of our common stock (the “Shares”) to be sold under the Trading Plan was a maximum of 240,000. Mr. Green terminated the Trading Plan on January 21, 2024 . No Shares were sold under the Trading Plan prior to its termination. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. Not applicable. PART III Item 10. Directors, Executive Officers and Corporate Governance. Incorporated by reference to our definitive Proxy Statement to be filed pursuant to Regulation 14A under the Exchange Act in connection with our 2024 Annual Meeting of Stockholders. Item 11. Executive Compensation. Incorporated by reference to our definitive Proxy Statement to be filed pursuant to Regulation 14A under the Exchange Act in connection with our 2024 Annual Meeting of Stockholders. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. Incorporated by reference to our definitive Proxy Statement to be filed pursuant to Regulation 14A under the Exchange Act in connection with our 2024 Annual Meeting of Stockholders. Item 13. Certain Relationships and Related Transactions, and Director Independence. Incorporated by reference to our definitive Proxy Statement to be filed pursuant to Regulation 14A under the Exchange Act in connection with our 2024 Annual Meeting of Stockholders. Item 14. Principal Accounting Fees and Services. Incorporated by reference to our definitive Proxy Statement to be filed pursuant to Regulation 14A under the Exchange Act in connection with our 2024 Annual Meeting of Stockholders. PART IV Item 15. Exhibits, Financial Statement Schedules. (a) The following documents are filed as part of this Annual Report on Form 10-K or incorporated by reference as indicated: (1) Financial Statements, Schedules, and Exhibits. We have listed our consolidated financial statements filed as part of this annual report in the index to consolidated financial statements on page F-1. (2) Financial Statement Schedules . We have omitted all financial statement schedules because they are not applicable or not required or because we have included the necessary information in our consolidated financial statements or related notes. (3) Exhibits. We have listed the exhibits filed as part of this annual report in the accompanying exhibit index, which follows the signature page to this annual report. Item 16. Form 10-K Summary. None. 24 Table of Contents INDEX TO CONSOLIDATED FINANCIAL STATEMENTS HARVARD BIOSCIENCE, INC. Page Report of Independent Registered Public Accounting Firm (PCAOB ID Number 248 ) F-2 Consolidated Balance Sheets F-3 Consolidated Statements of Operations F-4 Consolidated Statements of Comprehensive Loss F-5 Consolidated Statements of Stockholders’ Equity F-6 Consolidated Statements of Cash Flows F-7 Notes to Consolidated Financial Statements F-8 F-1 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and Stockholders Harvard Bioscience, Inc. Opinion on the financial statements We have audited the accompanying consolidated balance sheets of Harvard Bioscience, Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive loss, stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated March 7, 2024, expressed an unqualified opinion. Basis for opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical audit matters Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters. /s/ GRANT THORNTON LLP We have served as the Company’s auditor since 2017. Hartford, Connecticut March 7, 2024 F-2 Table of Contents HARVARD BIOSCIENCE, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share data) December 31, 2023 2022 Assets Current assets: Cash and cash equivalents $ 4,283 $ 4,508 Accounts receivable, net 16,099 16,705 Inventories 24,716 26,439 Other current assets 3,940 3,472 Total current assets 49,038 51,124 Property, plant and equipment, net 3,981 3,366 Operating lease right-of-use assets 4,773 5,816 Goodwill 57,065 56,260 Intangible assets, net 16,036 21,014 Other long-term assets 6,473 7,780 Total assets $ 137,366 $ 145,360 Liabilities and Stockholders' Equity Current liabilities: Current portion of long-term debt $ 5,859 $ 3,811 Current portion of operating lease liabilities 1,416 2,135 Accounts payable 5,554 6,447 Contract liabilities 4,508 3,370 Other current liabilities 9,205 7,486 Total current liabilities 26,542 23,249 Long-term debt, net 30,704 43,013 Deferred tax liability 776 590 Operating lease liabilities 4,794 5,282 Other long-term liabilities 1,476 1,006 Total liabilities 64,292 73,140 Commitments and contingencies - Note 15 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: 43,394,509 shares issued and outstanding at December 31, 2023; 42,081,707 shares issued and outstanding at December 31, 2022 434 454 Additional paid-in-capital 232,435 229,008 Accumulated deficit ( 145,605 ) ( 142,190 ) Accumulated other comprehensive loss ( 14,190 ) ( 15,052 ) Total stockholders' equity 73,074 72,220 Total liabilities and stockholders' equity $ 137,366 $ 145,360 See accompanying notes to condensed consolidated financial statements. F-3 Table of Contents HARVARD BIOSCIENCE, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) Year Ended December 31, 2023 2022 Revenues $ 112,250 $ 113,335 Cost of revenues 46,179 52,516 Gross profit 66,071 60,819 Sales and marketing expenses 24,108 25,041 General and administrative expenses 22,780 24,493 Research and development expenses 11,764 12,329 Amortization of intangible assets 5,525 6,122 Litigation settlement - Note 16 - ( 233 ) Total operating expenses 64,177 67,752 Operating income (loss) 1,894 ( 6,933 ) Other (expense) income: Interest expense ( 3,591 ) ( 2,548 ) Unrealized loss on equity securities - Note 16 ( 632 ) - Other (expense) income, net ( 227 ) 302 Total other expense ( 4,450 ) ( 2,246 ) Loss before income taxes ( 2,556 ) ( 9,179 ) Income tax expense 859 337 Net loss $ ( 3,415 ) $ ( 9,516 ) Loss per share: Basic and diluted loss per share $ ( 0.08 ) $ ( 0.23 ) Weighted-average common shares: Basic and diluted 42,420 41,413 See accompanying notes to condensed consolidated financial statements. F-4 Table of Contents HARVARD BIOSCIENCE, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (In thousands) Year Ended December 31, 2023 2022 Net loss $ ( 3,415 ) $ ( 9,516 ) Other comprehensive income (loss): Foreign currency translation adjustments 1,507 ( 2,614 ) Defined benefit pension plans, net of tax benefit of $ 137 and $ 566 , respectively ( 446 ) ( 2,411 ) Derivative instruments qualifying as cash flow hedges, net of tax of $- 0 - ( 199 ) - Other comprehensive income (loss) 862 ( 5,025 ) Comprehensive loss $ ( 2,553 ) $ ( 14,541 ) See accompanying notes to consolidated financial statements. F-5 Table of Contents HARVARD BIOSCIENCE, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (In thousands) Accumulated Number Additional Other Total of Shares Common Paid-in Accumulated Comprehensive Stockholders’ Issued Stock Capital Deficit Loss Equity Balance at December 31, 2021 41,143 $ 452 $ 225,650 $ ( 132,674 ) $ ( 10,027 ) $ 83,401 Stock option exercises 40 2 106 - - 108 Stock purchase plan 176 - 469 - - 469 Vesting of restricted stock units 1,135 - - - - - Shares withheld for taxes ( 412 ) - ( 1,628 ) - - ( 1,628 ) Stock-based compensation expense - - 4,411 - - 4,411 Net loss - - - ( 9,516 ) - ( 9,516 ) Other comprehensive loss - - - - ( 5,025 ) ( 5,025 ) Balance at December 31, 2022 42,082 454 229,008 ( 142,190 ) ( 15,052 ) 72,220 Stock option exercises 214 - 506 - - 506 Stock purchase plan 137 - 424 - - 424 Vesting of restricted stock units 1,460 - - - - - Shares withheld for taxes ( 498 ) - ( 2,523 ) - - ( 2,523 ) Stock-based compensation expense - - 5,000 - - 5,000 Net loss - - - ( 3,415 ) - ( 3,415 ) Other comprehensive income - - - - 862 862 Other adjustments - ( 20 ) 20 - - - Balance at December 31, 2023 43,395 $ 434 $ 232,435 $ ( 145,605 ) $ ( 14,190 ) $ 73,074 See accompanying notes to consolidated financial statements. F-6 Table of Contents HARVARD BIOSCIENCE, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Year Ended December 31, 2023 2022 Cash flows from operating activities: Net loss $ ( 3,415 ) $ ( 9,516 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation 1,473 1,453 Amortization of intangible assets 5,525 6,122 Amortization of deferred financing costs 280 280 Stock-based compensation expense 5,000 4,411 Deferred income taxes and other 336 ( 414 ) Unrealized loss on equity securities - Note 16 632 - Convertible preferred stock received in litigation settlement - Note 16 - ( 3,900 ) Gain on sale of product line ( 403 ) - Changes in operating assets and liabilities: Accounts receivable 810 4,780 Inventories 1,524 252 Other assets 1,651 474 Accounts payable and other current liabilities 555 ( 1,399 ) Contract liabilities 1,138 ( 896 ) Other liabilities ( 1,078 ) ( 495 ) Net cash provided by operating activities 14,028 1,152 Cash flows from investing activities: Additions to property, plant and equipment ( 1,788 ) ( 1,590 ) Capitalized software development costs ( 523 ) - Proceeds from sale of product line 512 - Net cash used in investing activities ( 1,799 ) ( 1,590 ) Cash flows from financing activities: Borrowing from revolving line of credit 4,500 7,800 Repayment of revolving line of credit ( 10,950 ) ( 6,400 ) Repayment of term debt ( 4,091 ) ( 3,186 ) Proceeds from exercise of stock options and employee stock purchase plan 930 577 Taxes paid related to net share settlement of equity awards ( 2,523 ) ( 1,628 ) Net cash used in financing activities ( 12,134 ) ( 2,837 ) Effect of exchange rate changes on cash ( 320 ) ( 38 ) Decrease in cash and cash equivalents ( 225 ) ( 3,313 ) Cash and cash equivalents at beginning of period 4,508 7,821 Cash and cash equivalents at end of period $ 4,283 $ 4,508 Supplemental disclosures of cash flow information: Cash paid for interest $ 3,795 $ 2,314 Cash paid for income taxes, net of refunds $ 207 $ 534 See accompanying notes to consolidated financial statements. F-7 Table of Contents HARVARD BIOSCIENCE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Organization Harvard Bioscience, Inc., a Delaware corporation (the “Company”), 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. The Company’s 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. With operations in the United States, Europe and China, the Company sells through a combination of direct and distribution channels to customers around the world. 2. Summary of Significant Accounting Policies Principles of Consolidation The consolidated financial statements include the accounts of Harvard Bioscience, Inc. and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. 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. Cash and Cash Equivalents The Company considers all highly liquid instruments with original maturities of three months or less to be cash equivalents. The Company has cash holdings in financial institutions that exceed insured limits for such financial institutions. The Company mitigates this risk by utilizing financial institutions of high credit quality. Approximately 49 % of the Company’s cash and cash equivalents at December 31, 2023 was held by the Company’s foreign subsidiaries and subject to repatriation tax considerations. These foreign funds were held primarily by subsidiaries in the United Kingdom, Germany and Spain. Marketable Equity Securities Equity securities traded in active markets are marked to market at each balance sheet date based on prices as quoted on the relevant stock exchange. Fair value mark-to-market adjustments are recorded as non-operating gains (losses) in the consolidated statement of operations. The Company’s investments in marketable equity securities are classified in the consolidated balance sheet based on the nature of the securities and their availability for use in current operations. Allowance for Expected Credit Losses on Receivables The allowance for expected credit losses on receivables is used to present accounts receivable, net, at an amount that represents the Company’s estimate of the receivables expected to be collected from customers. The allowance represents an estimate of expected credit losses over the lifetime of the receivables, even if the loss is considered remote, and reflects expected recoveries of amounts previously written off. The Company estimates the allowance on the basis of specifically identified receivables that are evaluated individually for impairment and an analysis of the remaining receivables determined by reference to past default experience. The Company considers the need to adjust historical information to reflect the extent to which current conditions and reasonable forecasts are expected to differ from the conditions that existed for the historical period considered. Losses on receivables have not historically been significant. Management judgments are used to determine when to charge off uncollectible trade accounts receivable. The Company bases these judgments on the age of the receivable, credit quality of the customer, current economic conditions, and other factors that may affect a customer’s ability and intent to pay. Customers are generally not required to provide collateral for purchases. F- 8 Table of Contents Inventories The Company values inventories at the lower of cost (determined on a first -in, first -out method) or net realizable value. The Company regularly reviews inventory quantities on hand and writes down excess and obsolete inventories to estimated net realizable value if less than cost, based primarily on historical inventory usage and estimated forecast of product demand. Property, Plant and Equipment Property, plant and equipment are stated at cost and depreciated using the straight-line method over the estimated useful lives of the assets as follows: Machinery and equipment (years) 3 - 10 Computer equipment and software (years) 3 - 7 Furniture and fixtures (years) 5 - 10 Leasehold improvements are amortized using the straight-line method over the shorter of the lease term or estimated useful life of the asset. Leases The Company leases office space, manufacturing facilities, automobiles and equipment. The Company concludes on whether an arrangement is a lease at inception. This determination as to whether an arrangement contains a lease is based on an assessment as to whether a contract conveys the right for the Company to control the use of the identified property, plant or equipment for a period of time in exchange for consideration. Leases with an initial term of 12 months or less are not recorded on the balance sheet. The Company recognizes these lease expenses on a straight-line basis over the lease term. The Company has assessed its contracts and concluded that its leases consist of operating leases. Operating leases are included in operating lease right-of-use (“ROU”) assets, current portion of operating lease liabilities, and operating lease liabilities in the Company’s consolidated balance sheets. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the leases’ commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company determines an incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The incremental borrowing rate represents a significant judgment that is based on an analysis of the Company’s credit rating, country risk, treasury and corporate bond yields, as well as comparison to the Company’s borrowing rate on its most recent loan. The Company uses the implicit rate when readily determinable. The Company has lease agreements with lease and non-lease components, which are generally accounted for separately. Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to be applied to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company uses the flow-through method to account for investment tax credits. Under this method, the investment tax credits are recognized as a reduction of income tax expense. The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is more than 50% likely of being realized. Changes in recognition are reflected in the period in which the judgement occurs. The Company’s policy is to account for Global Intangible Low-Taxed income as a period cost. Foreign Currency The functional currency of the Company’s foreign subsidiaries is generally their local currency. All assets and liabilities of foreign subsidiaries are translated at exchange rates in effect at period-end. Income and expenses are translated at rates which approximate those in effect on the transaction dates. The resulting translation adjustment is recorded as a separate component of stockholders’ equity in accumulated other comprehensive income (loss) (“AOCI”) in the consolidated balance sheets. Gains and losses resulting from foreign currency transactions are included in other expense (income), net, in the Company’s consolidated statements of operations. F- 9 Table of Contents Earnings per Share Basic earnings per share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the periods presented. The computation of diluted earnings per share is similar to the computation of basic earnings per share, except that the denominator is increased for the assumed exercise of dilutive options and other potentially dilutive securities using the treasury stock method unless the effect is antidilutive. The following table sets forth the computation of basic and diluted earnings per share: Year Ended December 31, (in thousands, except per share data) 2023 2022 Net loss $ ( 3,415 ) $ ( 9,516 ) Weighted average shares outstanding - basic 42,420 41,413 Dilutive effect of equity awards - - Weighted average shares outstanding - diluted 42,420 41,413 Basic loss per share $ ( 0.08 ) $ ( 0.23 ) Diluted loss per share $ ( 0.08 ) $ ( 0.23 ) Shares excluded from diluted loss per share due to their anti-dilutive effect 3,868 3,661 Comprehensive Income (Loss) Comprehensive income (loss) represents the change in equity resulting from items other than shareholder investments and distributions. The Company’s foreign currency translation adjustments, interest rate swap - cash flow hedge and minimum pension liability adjustments are included in AOCI. The components of other comprehensive income are reclassified as net income, net of tax, when the underlying component impacts earnings. Comprehensive income (loss) and the components of AOCI are presented in the accompanying consolidated statements of comprehensive loss and consolidated statements of equity. Revenue Recognition Nature of contracts and customers The Company’s contracts are primarily of short duration and are mostly based on the receipt and fulfilment of purchase orders. The purchase orders are binding and include pricing and all other relevant terms and conditions. The Company’s customers are primarily research scientists at pharmaceutical and biotechnology companies, universities, hospitals, government laboratories and contract research organizations. The Company also has global and regional distribution partners, and original equipment manufacturer customers who incorporate its products into their products under their own brands. Performance obligations The Company’s performance obligations under its revenue contracts consist of its instruments, equipment, accessories, services, software licenses and enhancements, maintenance and extended warranties. Equipment also includes software that functions together with the tangible equipment to deliver its essential functionality. Contracts with customers may contain multiple promises such as delivery of hardware, software, professional services or post-contract support services. These promises are accounted for as separate performance obligations if they are distinct. For contracts with customers that contain multiple performance obligations, the transaction price is allocated to the separate performance obligations based on estimated relative standalone selling price, which does not materially differ from the stated price in the contract. In general, the Company’s list prices are indicative of standalone selling price, and the majority of the Company's contracts have a term of less than one year. Instruments, equipment and accessories consist of a range of products that are used in life sciences research. Revenues from the sales of these items are recognized when transfer of control of these products to the customer occurs. Transfer of control occurs when the Company has a right to payment and the customer has legal title to the asset and the customer or their selected carrier has possession, which is typically upon shipment. Sales of these items are therefore generally recognized at a point in time. F- 10 Table of Contents The Company’s equipment revenue also includes the sale of wireless implantable monitors that are used for life science research purposes. The Company sells these wireless implantable monitors to pharmaceutical companies, contract research organizations and academic laboratories. In addition to sales generated from new and existing customers, these implantable devices are also sold under a program called the “exchange program.” Under this program, customers may return an implantable monitor to the Company after use, and if the returned monitor can be reprocessed and resold, they may, in exchange, purchase a replacement implantable monitor of the same model at a lower price than a new monitor. The implantable monitors that are returned by customers are reprocessed and made available for future sale. The initial sale of implantable monitors and subsequent sale of replacement implantable monitors are independent transactions. The Company has no obligation in connection with the initial sale to sell replacement implantable monitors at any future date under any fixed terms and may refuse returned implantable monitors that cannot be recovered or are obsolete. The Company has concluded that the offer to its customers that they may purchase a discounted product in the future is not a material right. Service revenue consists of installation, training, data analysis and surgeries performed on research animals. Service revenue is recognized when the service is performed. Maintenance revenue consists of post-contract support provided in relation to software that is embedded within the equipment that is sold to the customer. The Company provides standard warranties that promise the customer that the product will work as promised and are not a separate performance obligation. Extended warranties relate to warranties that are separately priced and purchased in addition to a standard warranty, and are therefore a separate performance obligation. The Company has made the judgment that the customer benefits as the Company performs over the period of the contract, and therefore revenues from maintenance and warranty contracts are recognized over time. The Company uses the input method to recognize revenue over time, which is generally on a straight-line basis over the service period. For sales for which transfer of control occurs upon shipment, the Company accounts for shipping and handling costs as fulfilment costs. As such, the Company records the amounts billed to the customer for shipping costs as revenue and the costs within cost of revenues upon shipment. For sales, for which control transfers to customers after shipment, the Company has elected to account for shipping and handling as activities to fulfill the promise to transfer the goods to the customer. The Company therefore accrues for the costs of shipping undelivered items in the period of shipment. Variable Consideration The nature of the Company's contracts gives rise to certain types of variable consideration, including in limited cases volume and payment discounts. The Company analyzes sales that could include variable consideration and estimates the expected or most likely amount of revenue after returns, trade-ins, discounts, rebates, credits, and incentives. Product returns are estimated and accrued for, based on historical information. In making these estimates, the Company considers whether the amount of variable consideration is constrained and is included in revenue only to the extent that it is probable that a significant reversal of the revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Variable consideration, and its impact on the Company’s revenue recognition, was not material in any of the periods presented. The Company’s payment terms are generally from zero to sixty days from the time of invoicing, which occurs at the time of shipment or prior to services being performed. Payment terms vary by the type of customers and the products or services offered. Sales taxes, value added taxes, and certain excise taxes collected from customers and remitted to governmental authorities are accounted for on a net basis and are therefore excluded from revenues. Contract Liabilities The Company records contract liabilities when cash is collected from customers prior to satisfaction of the Company’s performance obligation to the customer. Contract liabilities consist of amounts deferred related to service contracts and revenue deferred as a result of payments received in advance from customers. Contract liabilities are generally expected to be recognized within one year. The amounts included in contract liabilities from advanced payments relate to amounts that are prepaid for wireless implantable monitors under the exchange program. The Company has made the judgment that these payments do not represent a significant financing component as the customer can exercise their discretion as to when they can obtain the products for which they have made a prepayment. Disaggregation of revenue Refer to Note 13 for revenue disaggregated by type and by geographic location as well as further information about the deferred revenue balances. F- 11 Table of Contents Software Development Software development costs for software products to be sold, leased or otherwise marketed that are incurred before establishing technological feasibility are charged to operations. Software development costs incurred after establishing technological feasibility are capitalized on a product-by-product basis until the product is available for general release to customers at which time amortization begins. Annual amortization, charged to cost of goods sold, is the amount computed using the ratio that current revenues for a product bear to the total current and anticipated future revenues for that product. In the event that future revenues are not estimable, such costs are amortized on a straight-line basis over the remaining estimated economic life of the product. Intangible Assets Intangible assets are comprised of existing technology, customer contracts and contractual relationships, and other definite-lived intangible assets. Identifiable intangible assets resulting from the acquisitions of entities accounted for using the purchase method of accounting are estimated by the Company based on the fair value of assets received. Identifiable definite-lived intangible assets are being amortized over the period of estimated benefit using the straight-line method and estimated useful lives ranging from four to fifteen years. Goodwill Goodwill acquired in a business combination and determined to have an indefinite useful life is not amortized, but instead is tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. For the purpose of its goodwill analysis, the Company has one reporting unit. The Company conducts its annual impairment analysis in the fourth quarter of the fiscal year and more frequently if there is an indicator of impairment. The Company assesses qualitative factors of the reporting unit to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying value. If the qualitative assessment indicates a potential impairment, a quantitative analysis is performed. The Company compares the fair value of the reporting unit with its carrying amount. The Company typically estimates fair value using the income approach but will also consider market approaches when appropriate. Under the income approach, the Company uses a discounted cash flows model, which indicates the fair value of the reporting unit based on the present value of the cash flows that the Company expects the reporting unit to generate in the future. The Company's significant estimates in the discounted cash flows model include weighted average cost of capital, long-term rate of growth and profitability of the reporting unit, expected income tax rates and working capital effects. If the carrying amount of a reporting unit exceeds its fair value, goodwill is impaired, and the Company would recognize a loss equal to the excess. The Company evaluated its goodwill for impairment as of October 1, 2023 by performing a qualitative analysis and determined that it was more likely than not that the fair value of the reporting unit exceeded the carrying value. Impairment of Long-Lived Assets The Company assesses recoverability of its long-lived assets that are held for use, such as property, plant and equipment and amortizable intangible assets when events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Factors which could trigger an impairment review include significant negative industry or economic trends, significant loss of clients, and significant changes in the manner of the Company’s use of the assets or the strategy for its overall business. The recoverability of assets or an asset group to be held and used is measured by a comparison of the carrying amount of an asset or asset group to estimated undiscounted future cash flows expected to be generated by the asset or the asset group. Cash flow projections are based on trends of historical performance and management’s estimate of future performance. The Company’s estimate of future cash flows requires significant judgment based on historical and anticipated results and are subject to many factors. When the Company determines that the carrying value of the assets may not be recoverable based upon the existence of one or more of the above indicators of impairment, the Company measures the potential impairment based on a projected discounted cash flow method using a discount rate determined by management to be commensurate with the risk inherent in its current business model. An impairment loss is recognized only if the carrying amount of the asset is not recoverable and exceeds its fair value. Different assumptions and judgments could materially affect the calculation of the fair value of our assets. For the years ended December 31, 2023 and 2022, the Company concluded that there were no triggering events requiring the Company to assess the recoverability of its long-lived assets. Derivatives The Company uses interest-rate-related derivative instruments to manage its exposure related to changes in interest rates on its variable-rate debt instruments. The Company only enters into derivative contracts that it intends to designate as a hedge of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability (cash flow hedge) and does not use derivative financial instruments for trading or speculative purposes. The Company recognizes all derivative instruments as either assets or liabilities in the balance sheet at their respective fair values. F- 12 Table of Contents The Company formally documents the hedging relationship and its risk-management objective and strategy for undertaking the hedge, the hedging instrument, the hedged transaction, the nature of the risk being hedged, how the hedging instrument’s effectiveness in offsetting the hedged risk will be assessed prospectively and retrospectively, and a description of the method used to measure ineffectiveness. For derivative instruments that are designated and qualify as part of a cash flow hedging relationship, the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income (loss) (“OCI”) and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings. By using derivative financial instruments to hedge exposure to changes in interest rates, the Company exposes itself to credit risk and market risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes the Company, which creates credit risk for the Company. When the fair value of a derivative contract is negative, the Company owes the counterparty and, therefore, the Company is not exposed to the counterparty’s credit risk in those circumstances. The Company minimizes counterparty credit risk in derivative instruments by entering into transactions with major financial institutions based upon their credit profile. Market risk is the adverse effect on the value of a derivative instrument that results from a change in interest rates. The market risk associated with interest-rate contracts is managed by establishing and monitoring parameters that limit the types and degree of market risk that may be undertaken. The Company monitors interest rate risk attributable to both its outstanding and forecasted debt obligations by the use of cash flow sensitivity analysis, which estimates the expected impact of changes in interest rates on the Company’s future cash flows. Fair Value of Financial Instruments Financial reporting standards define a fair value hierarchy that consists of three levels: ● Level 1 includes instruments for which quoted prices in active markets for identical assets or liabilities accessible to the Company at the measurement date. ● Level 2 includes instruments for which the valuations are based on quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities. ● Level 3 includes valuations based on inputs that are unobservable and significant to the overall fair value measurement. The carrying values of the Company’s cash and cash equivalents, trade accounts receivable, trade accounts payable and short-term debt approximate their fair values because of the short maturities of those instruments. The fair value of the Company’s long-term debt approximates its carrying value and is based on the amount of future cash flows associated with the debt discounted using current borrowing rates for similar debt instruments of comparable maturity (Level 2 ). Stock-based Compensation The Company recognizes compensation expense for all stock-based payment awards made to employees and directors including stock options, restricted stock units, and restricted stock units with a market condition. The Company issues awards under the 2021 Incentive Plan (the “2021 Incentive Plan”) and the Fourth Amended and Restated 2000 Stock Option and Incentive Plan (the “2000 Incentive Plan” and together with the 2021 Incentive Plan, the “Incentive Plans”), as well as issues shares for employee stock purchases related to its Employee Stock Purchase Plan (as amended, the “ESPP”). The Company issues new shares from its registered but unissued stock pool to satisfy stock option exercises and vesting of the restricted stock units. Stock-based compensation expense is recorded on a straight-line basis over the applicable service period, which ranges from one to four years. The Company has elected as an accounting policy to account for forfeitures for service-based awards as they occur, with no adjustment for estimated forfeitures. The fair value of restricted stock units is based on the market price of the Company’s stock on the date of grant. The Company values restricted stock units with a market condition using a Monte-Carlo valuation simulation. The determination of fair value of stock-based payment awards on the date of grant using a Monte-Carlo valuation simulation is affected by the Company’s stock price as well as assumptions regarding certain variables including, but are not limited to, the Company’s expected stock price volatility over the term of the awards, interest rate assumptions, and discounts to adjust for any holding period post-vest restrictions. Preferred Stock The Company’s board of directors has the authority to issue up to 5.0 million shares of preferred stock and to determine the price privileges and other terms of the shares. The board of directors may exercise this authority without any further approval from stockholders. As of December 31, 2023 and 2022, the Company had no preferred stock issued or outstanding. F- 13 Table of Contents Business Segment Information The Company operates in one segment which involves the design, development, production and distribution of 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. The Company has a single, company-wide management team that administers all properties as a whole rather than as discrete operating segments. The chief operating decision maker, who is the Company's chief executive officer, measures financial performance as a single enterprise and allocates resources across the Company to maximize profitability, and not on geography, legal entity, or end market basis. The Company operates in a number of countries throughout the world in a variety of product lines. Information regarding product lines and geographic financial information is provided in Note 13, “Revenues” and Note 5, "Balance Sheet Information." Commitments and Contingencies Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties, and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated. If a loss is reasonably possible and the loss or range of loss can be reasonably estimated, the Company discloses the possible loss. If a loss is probable and the loss or range of loss cannot be reasonably estimated, the Company discloses or states that such an estimate cannot be made. Refer to Note 15 Commitments and Contingencies for additional information. The Company accrues and expenses legal costs associated with contingencies when incurred. Recent Accounting Pronouncements Accounting Pronouncements Adopted in 2023 In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ASU 2017 - 04, Intangibles — Goodwill and Other (Topic 350 ) : Simplifying the Test for Goodwill Impairment (ASU 2017 - 04 ), which eliminates the performance of Step 2 from the goodwill impairment test. In performing its annual or interim impairment testing, an entity will instead compare the fair value of the reporting unit with its carrying amount and recognize any impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. Additionally, an entity should consider income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss. The Company adopted ASU 2017 - 04 effective January 1, 2023, with no impact to the consolidated financial statements. In September 2016, the FASB issued ASU No. 2016 - 13, Financial Instruments — Credit Losses (Topic 326 ) : Measurement of Credit Losses on Financial Instruments (ASU 2016 - 13 ), which amends the impairment model by requiring entities to use a forward-looking approach based on expected losses rather than incurred losses to estimate credit losses on certain types of financial instruments, including trade receivables. This may result in the earlier recognition of allowances for losses. The FASB issued several ASUs after ASU 2016 - 13 to clarify implementation guidance and to provide transition relief for certain entities. The Company adopted ASU 2016 - 13 effective January 1, 2023, which resulted in an immaterial impact to the consolidated financial statements. Accounting Pronouncements yet to be Adopted In December 2023, the FASB issued 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 2023 - 09 will have on the disclosures in its consolidated financial statements. Prior Period Financial Statement Reclassifications During the year ended December 31, 2023, the Company identified immaterial misclassification errors in the financial statement footnote describing the components of AOCI as of December 31, 2022 and 2021. These misclassifications overstated the amount attributed to the defined benefit pension plans, net of tax, by $ 5.4 million and $ 5.1 million and understated the amount attributed to foreign currency translation adjustments by $( 5.4 ) million and $( 5.1 ) million as of December 31, 2022 and 2021, respectively. These misclassifications had no impact on total OCI for the year ended December 31, 2022, included in the consolidated statements of comprehensive loss, or the total AOCI included in the consolidated balance sheets as of December 31, 2022, and also had no impact on any of the Company’s previously reported consolidated statements of operations, stockholders’ equity, or cash flows. The correction of these offsetting misclassifications is included in these consolidated financial statements. See Note 3 below for further details. F- 14 Table of Contents 3. Accumulated Other Comprehensive Loss Changes in the components of accumulated other comprehensive loss, net of tax, for the years ended December 31, 2023 and 2022, respectively, are as follows: Foreign Currency Derivatives Translation Defined Benefit Qualifying (in thousands) Adjustments Pension Plans as Hedges Total Balance at December 31, 2021* $ ( 8,778 ) $ ( 1,249 ) $ - $ ( 10,027 ) Other comprehensive loss, net ( 2,614 ) ( 2,411 ) - ( 5,025 ) Balance at December 31, 2022* ( 11,392 ) ( 3,660 ) - ( 15,052 ) Other comprehensive income (loss), net 1,507 ( 446 ) ( 199 ) 862 Balance at December 31, 2023 $ ( 9,885 ) $ ( 4,106 ) $ ( 199 ) $ ( 14,190 ) * See Note 2 – Prior Period Financial Statement Reclassifications 4. Goodwill and Intangible Assets The change in the carrying amount of goodwill is as follows: December 31, (in thousands) 2023 2022 Carrying amount at beginning of period $ 56,260 $ 57,689 Effect of change in currency translation 805 ( 1,429 ) Carrying amount at end of period $ 57,065 $ 56,260 Intangible assets at December 31, 2023 and 2022 consist of the following: December 31, 2023 December 31, 2022 (in thousands) Average Accumulated Accumulated Amortizable intangible assets: Life* Gross Amortization Net Gross Amortization Net Distribution agreements/customer relationships 6 $ 16,038 $ ( 9,706 ) $ 6,332 $ 16,124 $ ( 8,727 ) $ 7,397 Existing technology & software development 2 35,007 ( 27,029 ) 7,978 37,549 ( 26,482 ) 11,067 Trade names and patents 3 7,613 ( 6,094 ) 1,519 7,523 ( 5,197 ) 2,326 Total amortizable intangible assets $ 58,658 $ ( 42,829 ) $ 15,829 $ 61,196 $ ( 40,406 ) $ 20,790 Indefinite-lived intangible assets: 207 224 Total intangible assets $ 16,036 $ 21,014 * Weighted average life in years as of December 31, 2023 During the year ended December 31, 2023, the Company wrote off approximately $ 3.7 million of fully amortized intangible assets of certain existing technology and other intangibles related to discontinued product lines. The Company capitalized $ 0.5 million of software development costs during the year ended December 31, 2023. Intangible asset amortization expense was $ 5.5 million and $ 6.1 million for the years ended December 31, 2023 and 2022, respectively. Estimated amortization expense of existing amortizable intangible assets for each of the five succeeding years and thereafter is as follows: (in thousands) 2024 $ 5,281 2025 4,027 2026 2,366 2027 1,269 2028 1,546 Thereafter 1,340 Total $ 15,829 F- 15 Table of Contents 5. Balance Sheet Information The following tables provide details of selected balance sheet items as of the periods indicated: Inventories: December 31, (in thousands) 2023 2022 Finished goods $ 5,120 $ 5,223 Work in process 4,188 3,776 Raw materials 15,408 17,440 Total $ 24,716 $ 26,439 Property, Plant and Equipment: December 31, (in thousands) 2023 2022 Machinery and equipment $ 8,154 $ 7,500 Computer equipment and software 6,493 6,781 Leasehold improvements 2,417 2,507 Furniture and fixtures 1,244 1,386 Automobiles 58 38 18,366 18,212 Less: accumulated depreciation ( 14,385 ) ( 14,846 ) Property, plant and equipment, net $ 3,981 $ 3,366 Depreciation expense was $ 1.5 million for each of the years ended December 31, 2023 and 2022. During the year ended December 31, 2023, the Company wrote off approximately $ 2.0 million of fully depreciated property and equipment from its fixed asset records. Other Current Liabilities: December 31, (in thousands) 2023 2022 Compensation $ 3,929 $ 3,476 Customer credits 3,201 2,368 Professional fees 499 392 Warranty costs 336 268 Other 1,240 982 Total $ 9,205 $ 7,486 Long-lived Assets by Geographic Area: Long-lived assets by geographic area, which include operating lease right-of-use assets, property, plant and equipment, and amortizable intangible assets, are as follows: December 31, (in thousands) 2023 2022 United States $ 21,558 $ 26,051 Germany 1,703 2,432 Rest of the world 1,322 1,489 Total long-lived assets $ 24,583 $ 29,972 F- 16 Table of Contents 6. Restructuring and Other Exit Costs On an ongoing basis, the Company reviews the global economy, the healthcare industry, and the markets in which it competes to identify operational efficiencies, enhance commercial capabilities and align its cost base and infrastructure with customer needs and its strategic plans. In order to realize these opportunities, the Company undertakes activities from time to time to transform its business. A portion of these transformation activities are considered restructuring costs under ASC 420, Exit or Disposal Cost Obligations , and are discussed below. During the year ended December 31, 2022, the Company reviewed its product portfolio and identified certain non-strategic products for discontinuation and incurred severance expenses in connection with headcount reductions in Europe and North America. The following table summarizes the restructuring activity for the years ended December 31, 2023 and 2022: (in thousands) Inventory Related Severance Other Total Balance at December 31, 2021 $ - $ - $ - $ - Restructuring and other exit costs 1,471 877 46 2,394 Non-cash charges ( 1,471 ) - - ( 1,471 ) Cash payments - ( 241 ) ( 46 ) ( 287 ) Balance at December 31, 2022 - 636 - 636 Restructuring and other exit costs 320 42 29 391 Non-cash charges ( 142 ) - - ( 142 ) Cash payments ( 94 ) ( 678 ) ( 29 ) ( 801 ) Balance at December 31, 2023 $ 84 $ - $ - $ 84 Substantially all of the severance and other costs detailed above have been included as a component of general and administrative expenses, and all inventory-related charges are included in cost of revenues. 7. Employee Benefit Plans Employee Retirement Savings Plans The Company sponsors various qualified employee retirement savings plans and makes discretionary contributions to match a certain portion of employee contributions. The Company contributed $ 1.1 million to these plans for each of the years ended December 31, 2023 and 2022. Employee Pension Plans The Company’s subsidiary in the United Kingdom, Biochrom Ltd., maintains two defined benefit pension plans for its employees. In 2014, these defined benefit pension plans were closed to new employees, as well as closed to the future accrual of benefits for existing employees. The Company recognizes the funded status of the pension plans as an asset or liability in the consolidated balance sheets. The funded status equals the difference between the fair value of the plan’s assets and their benefit obligations and has historically measured each year as of December 31. The Company records net period benefit expense (credit) as a component of other expense in the Consolidated Statement of Operations. The components of the Company’s net period benefit expense (credit) were as follows: Year Ended December 31, (in thousands) 2023 2022 Interest cost $ 670 $ 371 Expected return on plan assets ( 788 ) ( 818 ) Net amortization loss 328 27 Net periodic benefit expense (credit) $ 210 $ ( 420 ) F- 17 Table of Contents The following provides a reconciliation of the changes in the plans’ fair value of assets and benefit obligations for the years ended December 31, 2023 and 2022, and a summary of the funded status as of December 31, 2023 and 2022: December 31, (in thousands) 2023 2022 Change in fair value of plan assets: Balance at beginning of year $ 15,576 $ 27,252 Actual return on plan assets 351 ( 9,098 ) Employer contributions 622 619 Benefits paid ( 563 ) ( 592 ) Currency translation adjustment 954 ( 2,605 ) Balance at end of year $ 16,940 $ 15,576 December 31, (in thousands) 2023 2022 Change in benefit obligation: Balance at beginning of year $ 13,263 $ 22,562 Interest cost 665 371 Actuarial loss (gain) 479 ( 6,912 ) Benefits paid ( 563 ) ( 592 ) Currency translation adjustment 819 ( 2,166 ) Balance at end of year $ 14,663 $ 13,263 December 31, (in thousands) 2023 2022 Fair value of plan assets $ 16,940 $ 15,576 Benefit obligation 14,663 13,263 Net funded status $ 2,277 $ 2,313 Changes in the actuarial loss (gain) disclosed above are primarily the result of changes in the discount rate and inflation assumptions due to underlying market conditions. The amounts recognized in the consolidated balance sheets consist of: December 31, (in thousands) 2023 2022 Other long-term assets $ 2,277 $ 2,313 Accumulated other comprehensive loss 5,909 5,326 The weighted average assumptions used in determining the net pension cost for these plans follows: December 31, (in thousands) 2023 2022 Discount rate 4.6 % 5.0 % Expected return on assets 5.3 % 5.0 % The discount rate assumptions used for pension accounting reflect the prevailing rates available on high-quality, fixed-income debt instruments with terms that match the average expected duration of the Company’s defined benefit pension plan obligations. The Company’s mix of pension plan investments among asset classes also affects the long-term expected rate of return on plan assets. As of December 31, 2023, the Company’s actual asset mix approximated its target mix. Differences between actual and expected returns are recognized in the calculation of net periodic pension cost over the average remaining expected future working lifetime, which is approximately 7 years for active plan participants. F- 18 Table of Contents The asset allocations and fair value of the Company’s pension benefits as of December 31, 2023 and 2022, were as follows: (in thousands) 2023 2022 Asset category: Debt securities $ 11,761 69 % $ 11,714 75 % Equity securities 3,567 21 % 3,507 23 % Cash and cash equivalents 304 2 % 185 1 % Other 1,308 8 % 170 1 % Total $ 16,940 100 % $ 15,576 100 % (in thousands) 2023 2022 Quoted Prices in Active Markets for Identical Assets (Level 1) $ 304 $ 185 Significant Other Observable Inputs (Level 2) 16,636 15,391 Significant Other Unobservable Inputs (Level 3) - - Total $ 16,940 $ 15,576 Level 1 assets consist of cash and cash equivalents held in the pension plans. The Level 2 assets primarily consist of investments in private investment funds that are valued using the net asset values provided by the trust or fund, including an insurance contract. Although these funds are not traded in an active market with quoted prices, the investments underlying the net asset value are based on quoted prices. The Company expects to contribute approximately $ 0.6 million to its pension plans during 2024. The benefits expected to be paid from the pension plans are $ 0.9 million in 2024, $ 0.7 million in 2025, $ 0.8 million in 2026, $ 1.0 million in 2027 and $ 0.8 million in 2028. The expected benefits to be paid in the five years from 2029 to 2033 are $ 5.0 million. The expected benefits are based on the same assumptions used to measure the Company’s benefit obligations at December 31, 2023. 8. Leases The Company has noncancelable operating leases for office space, manufacturing facilities, warehouse space, automobiles and equipment expiring at various dates through 2030. The components of lease expense for the years ended December 31, 2023 and 2022, are as follows: Year Ended December 31, (in thousands) 2023 2022 Operating lease cost $ 2,013 $ 1,971 Short-term lease cost 199 233 Sublease income ( 102 ) ( 102 ) Total lease cost $ 2,110 $ 2,102 Supplemental balance sheet information related to the Company’s operating leases was as follows: (in thousands) December 31, 2023 2022 Operating lease right-of-use assets $ 4,773 $ 5,816 Current portion, operating lease liabilities 1,416 2,135 Operating lease liabilities, long-term 4,794 5,282 Total operating lease liabilities $ 6,210 $ 7,417 Weighted average remaining lease term (years) 5.7 6.2 Weighted average discount rate 9.5 % 9.4 % F- 19 Table of Contents Supplemental cash flow information related to the Company’s operating leases was as follows: Year Ended December 31, (in thousands) 2023 2022 Cash paid for amounts included in the measurement of lease liabilities $ 2,367 $ 2,347 Right-of-use assets obtained in exchange for lease obligations 293 295 Future minimum lease payments for operating leases, with initial terms in excess of one year at December 31, 2023, are as follows: Year Ending December 31, (in thousands) 2024 1,938 2025 1,166 2026 1,060 2027 1,047 2028 1,057 Thereafter 1,926 Total lease payments 8,194 Less imputed interest ( 1,984 ) Total operating lease liabilities $ 6,210 9. Long-Term Debt As of December 31, 2023 and 2022, the Company’s borrowings were comprised of the following: (in thousands) December 31, 2023 December 31, 2022 Long-term debt: Term loan $ 30,723 $ 34,814 Revolving line 6,400 12,850 Less: unamortized deferred financing costs ( 560 ) ( 840 ) Total debt 36,563 46,824 Less: current portion of long-term debt ( 6,139 ) ( 4,091 ) Current unamortized deferred financing costs 280 280 Long-term debt $ 30,704 $ 43,013 The aggregate amounts of debt maturities are as follows: (in thousands) 2024 $ 6,139 2025 30,984 $ 37,123 On December 22, 2020, the Company entered into a Credit Agreement (the “Credit Agreement”) with Citizens Bank, N.A., Wells Fargo Bank, National Association, and Silicon Valley Bank, (together, the “Lenders”). Effective March 27, 2023, all commitments and obligations under the Credit Agreement previously held by Silicon Valley Bank were assumed by First Citizens Bank & Trust Company. 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 $ 10.8 million as of December 31, 2023, based on the Credit Agreement, as amended pursuant to the April 2022 Amendment and November 2022 Amendment as described below. Total revolver borrowing capacity is limited by the consolidated net leverage ratio as defined under the amended Credit Agreement. F- 20 Table of Contents Borrowings under the amended 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, as amended (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 leverage ratio and is determined in accordance with a pricing grid set forth in the Credit Agreement. Interest on SOFR Loans is payable in arrears on the last day of each applicable interest period, and interest on ABR Loans is payable in arrears at the end of each calendar quarter. 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’s borrowings for the years ended December 31, 2023 and 2022, was 8.1 % and 5.0 %, respectively. The weighted average interest rate as of December 31, 2023, inclusive 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 December 31, 2023, the term loan amortizes in 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 loans 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 loans 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 includes an excess cash flow sweep of $ 2.1 million to be paid by March 31, 2024. As of December 31, 2022, the current portion of long-term debt included an excess cash flow sweep of $ 1.1 million which was paid on March 31, 2023. Amounts outstanding under the revolving credit facility can be repaid at any time but are due in full at maturity. The Credit Agreement, as amended, 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, as amended, also includes customary events of default. In April 2022, the Company entered into an amendment to the Credit Agreement (the “April 2022 Amendment”) which modified, among other things, the financial covenant relating to the consolidated net leverage ratio, and provided consent for the HRGN Settlement (as defined in Note 16 ). In November 2022, the Company entered into a subsequent amendment to the Credit Agreement which modified, among other things, the financial covenant relating to the consolidated net leverage ratio, and the definition of Consolidated EBITDA used in the calculation of certain financial covenants (the “November 2022 Amendment”). The Company was in compliance with the covenants of the Credit Agreement, as amended, as of December 31, 2023. 10. Derivatives On February 28, 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 has a notional amount of $ 27.4 million as of December 31, 2023, 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 9, 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 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. The following table presents the notional amount and fair value of the Company’s derivative instrument as of December 31, 2023: (in thousands) December 31, 2023 Derivatives Instruments Balance Sheet Classification Notional Amount Fair Value (a) Interest rate swap Other long-term liabilities $ 27,375 $ ( 199 ) (a) See Note 11 for the fair value measurements related to this financial instrument. F- 21 Table of Contents The following table summarizes the effect of derivatives designated as cash flow hedging instruments for the year ended December 31, 2023: Year Ended Derivatives Qualifying as Hedges, net of tax (in thousands) December 31, 2023 Amount of loss recognized in OCI on derivatives (effective portion) $ 199 Amounts reclassified from accumulated other comprehensive loss to interest expense 120 11. Fair Value Measurements The following tables present the fair value hierarchy for those assets or liabilities measured at fair value on a recurring basis: Fair Value as of December 31, 2023 Assets (Liabilities) (in thousands) Level 1 Level 2 Level 3 Total Equity securities - common stock $ 3,511 $ - $ - $ 3,511 Interest rate swap agreements - ( 199 ) - ( 199 ) The Company uses the market approach technique to value its financial assets and 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 common stock of Harvard Apparatus Regenerative Technologies (“HRGN” formerly known as Biostage, Inc.) (see Note 16 for information regarding the HRGN Settlement) was based on the closing price as quoted on 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. 12. Stock-Based Compensation Stock-based compensation expense for the years ended December 31, 2023 and 2022, is allocated as follows: Year Ended December 31, (in thousands) 2023 2022 Cost of revenues $ 308 $ 121 Sales and marketing expenses 746 557 General and administrative expenses 3,560 3,487 Research and development expenses 386 246 Total stock-based compensation expenses $ 5,000 $ 4,411 As of December 31, 2023, the total compensation costs related to unvested awards not yet recognized is $ 4.7 million and the weighted average period over which it is expected to be recognized is approximately 1.6 years. During the years ended December 31, 2023 and 2022, the Company did not capitalize any stock-based compensation. Equity Incentive Plans During 2021, the Company’s board of directors and stockholders adopted the 2021 Incentive Plan which authorized additional shares available for grants to officers, employees, non-employee directors and other key persons of the Company and its subsidiaries. As of December 31, 2023, there were approximately 3.1 million shares available for issuance under the 2021 Incentive Plan. Restricted Stock Units with a Market Condition The Company grants deferred awards of market condition restricted stock units (the “Market Condition RSUs”) to certain members of the Company’s management team. The vesting of the Market Condition RSUs is linked to the achievement of a relative total shareholder return (“TSR”) of the Company’s common stock measured from the earlier of (i) the measurement period as set out in the award agreement or (ii) upon a change of control (measured relative to the Nasdaq Biotechnology or Russell 2000 index and based on a 20 -day trading average price) and is subject to a one -year holding period after vesting. For Market Condition RSUs with a measurement period that concluded during the years ended December 31, 2023, the TSR of the Company’s common stock relative to the applicable index resulted in achieving 100 % of the target. Market Condition RSUs outstanding as of December 31, 2023 remain subject to a TSR measurement which can result in vesting rates ranging from 0 % to 150 % of the target number. F- 22 Table of Contents The weighted average assumptions used in the valuation of the Market Condition RSUs granted during the years ended December 31, 2023 and 2022, are as follows: 2023 2022 Volatility 56.8 % 62.6 % Risk-free interest rate 4.6 % 2.1 % Correlation coefficient 41.7 % 41.5 % Dividend yield - % - % Liquidity discount 14.1 % 11.7 % The Company used historical volatility to calculate the expected volatility matching the expected holding period. The risk-free interest rate assumption is based upon observed U.S. Treasury bill interest rates (risk-free) appropriate for the term of the award. Additionally, the Company assumes a liquidity discount to adjust the fair value for the one -year holding period post-vest restrictions. Stock-Based Payment Awards RSU and Market Condition RSU activity for the years ended December 31, 2023 and 2022, is as follows: Condition Restricted Grant Date Restricted Grant Date Stock Units Fair Value Stock Units Fair Value Balance at December 31, 2021 1,141,164 $ 3.57 860,155 $ 3.13 Granted 918,870 4.64 320,272 5.08 Vested ( 733,611 ) 4.08 ( 401,308 ) 2.11 Cancelled/Forfeited ( 232,622 ) 4.44 ( 132,884 ) 4.21 Balance at December 31, 2022 1,093,801 $ 3.94 646,235 $ 4.51 Granted 1,350,125 2.87 558,958 2.61 Vested ( 1,144,065 ) 3.38 ( 316,210 ) 4.01 Cancelled/Forfeited ( 134,865 ) 3.71 ( 87,138 ) 4.64 Balance at December 31, 2023 1,164,996 $ 3.28 801,845 $ 3.37 Stock option activity for the years ended December 31, 2023 and 2022, is as follows: Number of Options Weighted-Average Exercise Price Weighted-Aveage Remaining Contractual Term (years) Average Intrinsic Value (in thousands) Outstanding at December 31, 2021 1,404,816 $ 3.10 Exercised ( 40,267 ) 2.64 Cancelled/Forfeited ( 125,773 ) 2.77 Outstanding at December 31, 2022 1,238,776 $ 3.15 Exercised ( 213,644 ) 2.38 Cancelled/Forfeited ( 101,065 ) 2.71 Outstanding and Exerciseable at December 31, 2023 924,067 $ 3.37 3.4 $ 1,836 The aggregate intrinsic value in the preceding table represents the total pre-tax intrinsic value, based on the Company’s closing stock price of $ 5.35 as of December 31, 2023, 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 was $ 0.6 million and $ 0.1 million for the years ended December 31, 2023 and 2022, respectively. Employee Stock Purchase Plan ( “ ESPP ” ) The Company has an employee stock purchase plan under which eligible employees may purchase a limited number of shares of common stock at a discount of up to 15 % of the market value of such stock at pre-determined and plan-defined dates. There were 0.1 million and 0.2 million shares issued under the ESPP during the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, there were 0.3 million shares available for issuance under the ESPP. F- 23 Table of Contents 13. Revenues The following table represents a disaggregation of revenue from contracts with customers for the years ended December 31, 2023 and 2022: Year Ended December 31, (in thousands) 2023 2022 Instruments, equipment, software and accessories $ 105,716 $ 108,165 Service, maintenance and warranty contracts 6,534 5,170 Total revenues $ 112,250 $ 113,335 Revenues by timing of recognition are as follows: Year Ended December 31, (in thousands) 2023 2022 Goods and services transferred at a point in time $ 108,558 $ 111,927 Goods and services transferred over time 3,692 1,408 Total revenues $ 112,250 $ 113,335 Revenues by geographic destination are as follows: Year Ended December 31, (in thousands) 2023 2022 United States $ 48,205 $ 49,912 Europe 32,801 30,687 Greater China 18,488 16,393 Rest of the world 12,756 16,343 Total revenues $ 112,250 $ 113,335 Contract Liabilities The following tables provide details of contract liabilities as of the periods indicated: December 31, December 31, (in thousands) 2023 2022 Change 2022 2021 Change Service contracts $ 2,849 $ 1,530 $ 1,319 1,530 $ 1,976 $ ( 446 ) Customer advances 1,659 1,840 ( 181 ) 1,840 2,290 ( 450 ) Total contract liabilities $ 4,508 $ 3,370 $ 1,138 3,370 $ 4,266 $ ( 896 ) Changes in the Company’s contract liabilities are primarily due to the timing of receipt of payments under service and warranty contracts. During the years ended December 31, 2023 and 2022, the Company recognized revenue of $ 2.1 million and $ 2.5 million from contract liabilities existing at December 31, 2022 and 2021, respectively. Provision for Expected Credit Losses on Receivables Activity in the provision for expected losses on receivables is as follows: December 31, (in thousands) 2023 2022 Balance, beginning of period $ 191 $ 136 Provision for expected credit losses 29 62 Charge-offs and other ( 60 ) ( 7 ) Balance, end of period $ 160 $ 191 Concentrations No customer accounted for more than 10% of the revenues for the years ended December 31, 2023 and 2022, or for more than 10% of net accounts receivable at December 31, 2023 and 2022. F- 24 Table of Contents Warranties Activity in the product warranty accrual is as follows: Year Ended December 31, (in thousands) 2023 2022 Balance at December 31, 2022 $ 268 $ 240 Expense 381 408 Warranty claims ( 313 ) ( 380 ) Balance at December 31, 2023 $ 336 $ 268 14. Income Tax Income tax expense for the years ended December 31, 2023 and 2022, consisted of: Year Ended December 31, (in thousands) 2023 2022 Current income tax expense: Federal and state $ 570 $ 641 Foreign 61 194 631 835 Deferred income tax expense (benefit): Federal and state 132 ( 468 ) Foreign 96 ( 30 ) 228 ( 498 ) Total income tax expense $ 859 $ 337 The effective tax rate for the year ended December 31, 2023 was ( 33.5 )% as compared with ( 3.7 )% for the same period in 2022. The difference between the Company’s effective tax rate year over year was primarily attributable to changes in the mix of pre-tax income and losses at individual subsidiaries, and the impact of changes in uncertain tax positions. Income tax expense for the years ended December 31, 2023 and 2022, differed from the amount computed by applying the U.S. federal income tax rate of 21% to pre-tax loss as a result of the following: Year Ended December 31, (in thousands) 2023 2022 Income tax benefit computed at federal statutory tax rate $ ( 537 ) $ ( 1,927 ) Increase (decrease) in income taxes resulting from: Permanent differences, net ( 89 ) 375 Non-deductible executive compensation 324 346 Global Intangible Low-Taxed Income (GILTI) 537 552 State income taxes, net of federal income tax benefit ( 19 ) ( 295 ) Stock-based compensation ( 329 ) 69 Tax credits ( 51 ) 492 Net operating loss true-ups and expirations 1,140 431 Change in reserve for uncertain tax position 239 688 Impact of change to prior year tax accruals ( 171 ) ( 232 ) Change in valuation allowance allocated to income tax 631 ( 102 ) Other ( 816 ) ( 60 ) Total income tax expense $ 859 $ 337 F- 25 Table of Contents Income tax expense is based on the following pre-tax (loss) income from operations: Year Ended December 31, (in thousands) 2023 2022 Domestic $ ( 2,951 ) $ ( 9,099 ) Foreign 395 ( 80 ) Total $ ( 2,556 ) $ ( 9,179 ) The tax effects of temporary differences that give rise to significant components of the deferred tax assets and deferred tax liabilities at December 31, 2023 and 2022, are as follows: Year Ended December 31, (in thousands) 2023 2022 Deferred income tax assets: Inventory $ 1,489 $ 1,696 Operating loss and credit carryforwards 11,550 14,883 Research and development 3,908 2,000 Employee retention credit 1,435 - Lease liabilities 1,317 1,538 Accrued expenses 818 621 Stock compensation 670 675 Deferred interest expense 386 881 Other assets 934 726 Total gross deferred assets 22,507 23,020 Less: valuation allowance ( 15,222 ) ( 14,506 ) Deferred tax assets $ 7,285 $ 8,514 Deferred income tax liabilities: Indefinite-lived intangible assets $ 1,964 $ 1,914 Definite-lived intangible assets 3,733 4,875 Lease right-of-use assets 959 1,148 Employee benefit plans 569 579 Other liabilities 400 255 Total deferred tax liabilities 7,625 8,771 Deferred income tax liabilities, net $ ( 340 ) $ ( 257 ) Deferred income tax assets and liabilities by classification on the consolidated balance sheets were as follows: Year Ended December 31, (in thousands) 2023 2022 Deferred tax assets (included in other long-term assets) $ 436 $ 333 Deferred income tax liabilities ( 776 ) ( 590 ) Deferred income tax liability, net $ ( 340 ) $ ( 257 ) At December 31, 2023, the Company had state net operating loss carryforwards of $ 6.3 million, which expire between 2024 and 2043. The Company had net operating loss carryforwards of $ 7.8 million in certain foreign jurisdictions which may be carried forward indefinitely, partially offset by valuation allowances. The Company had $ 7.8 million of research and development tax credit carryforwards which begin to expire in 2024, and are partially offset by a reserve of $ 0.8 million for uncertain tax positions. The Company had a total of $ 2.7 million of state investment tax credit carryforwards, research and development tax credit carryforwards, and enterprise zone credit carryforwards, which begin to expire in 2024. In addition, the Company had a total of $ 0.4 million international R&D credits which begin to expire in 2037. The Internal Revenue Code (“IRC”) limits the amounts of net operating loss carryforwards or credits that a company may use in any one year in the event of a change in ownership under IRC Sections 382 or 383. As a result of various acquisitions in prior years, certain losses and credit carryforwards are subject to these limitations. F- 26 Table of Contents As of December 31, 2023 and 2022, the Company maintained a total valuation allowance of $ 15.2 million and $ 14.5 million, respectively, which relates to foreign, federal, and state deferred tax assets in both years. The valuation allowance is based on estimates of taxable income in each of the jurisdictions in which the Company operates and the period over which deferred tax assets will be recoverable. The net change in the total valuation allowance for the years ended December 31, 2023 and 2022, was an increase of $ 0.7 million and a decrease of $ 0.2 million, respectively. During the year ended December 31, 2023, the Company increased the valuation allowance related to the estimate of realizability of German deferred tax assets and deferred tax assets related to the Employee Retention Credit, offset by the utilization and expiration of certain U.S. federal and state net operating losses and the expiration of certain U.S. credits. As of December 31, 2023 and 2022, cash and cash equivalents held by the Company’s foreign subsidiaries were $ 2.1 million and $ 2.6 million, respectively. As of December 31, 2023, the Company has determined the potential income tax and withholding liability related to available cash balances at foreign subsidiaries to be immaterial. A summary of activity of unrecognized tax benefits is as follows: (in thousands) Balance at December 31, 2021 $ 1,332 Additions based on tax positions of prior years 534 Decreases based on tax positions of prior years ( 34 ) Additions based on tax positions of current year 237 Other decreases, net ( 86 ) Balance at December 31, 2022 1,983 Additions based on tax positions of prior years 13 Decreases based on tax positions of prior years 57 Additions based on tax positions of current year 245 Other decreases, net ( 76 ) Balance at December 31, 2023 $ 2,222 We expect the amount of unrecognized tax benefits to change within the next twelve months, including the release of reserves of approximately $ 0.4 million. Substantially all of the liability for uncertain tax benefits related to various federal, state and foreign income tax matters would benefit the Company's effective tax rate, if recognized. The Company classifies interest and penalties related to unrecognized tax benefits as a component of income tax expense, which has not been significant during the years ended December 31, 2023 and 2022, respectively. With a few exceptions, the Company is no longer subject to income tax examinations by tax authorities in foreign jurisdictions for the years before 2019. In the U.S., the Company’s net operating loss and tax credit carryforward amounts remain subject to federal and state examination for tax years starting in 2004 as a result of tax losses incurred in prior years. There are currently no pending federal or state tax examinations. 15. Commitments and Contingent Liabilities In April 2022, the Company and HRGN executed a settlement with the plaintiffs in the HRGN Litigation (as defined below), which resolves all claims relating to the litigation as described in Note 16, Litigation Settlement. The Company is involved in various other 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 flow. 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. 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 December 31, 2023. 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 current stage of the audits, the Company has not accrued any significant losses related to these audits as of December 31, 2023. F- 27 Table of Contents 16. Litigation Settlement In April 2022, the Company and HRGN entered into a settlement of a litigation related to injuries allegedly caused by products produced by the Company and HRGN and utilized in connection with surgeries performed by third parties (the “HRGN Settlement”). The HRGN Settlement resolved and dismissed all claims by and between the parties. HRGN has indemnified the Company for all losses and expenses that the Company incurred in connection with such litigation and settlement. In connection with the HRGN Settlement, in June 2022, HRGN issued 4,000 shares of Series E Convertible Preferred Stock (the “Series E Preferred Stock”) to the Company in satisfaction of $ 4.0 million of its total indemnification obligations. The Company recorded the Series E Preferred Stock at an estimated fair value of $ 3.9 million using a Monte Carlo valuation simulation incorporating information from selected guideline companies. As of December 31, 2022, the book value of the shares of Series E Preferred Stock, inclusive of accrued dividends, was $ 4.1 million and was included in the consolidated balance sheet as a component of other long-term assets. In April 2023, all of the shares of Series E Preferred Stock the Company held in HRGN were mandatorily converted into shares of HRGN common stock. As of December 31, 2023, the Company held shares of HRGN common stock with an estimated fair value of $ 3.5 million, which are included in the consolidated balance sheet as a component of other long-term assets. During the year ended December 31, 2023, the Company recorded an unrealized loss related to these shares of $( 0.6 ) million, which was recorded as other (expense) income, net, in the consolidated statements of operations. 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. 17. Product Line Disposition On February 17, 2023, the Company completed the disposition of its Hoefer product line for cash consideration of $ 0.5 million. The carrying value of assets sold was $ 0.1 million resulting in a gain on disposition of $ 0.4 million which is recorded in other (expense) income, net, in the consolidated statement of operations for the year ended December 31, 2023. Revenue and gross profit of this disposed product line included in the condensed consolidated statement of operations for the years ended December 31, 2023 and 2022, were not significant. 18. Government Assistance 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, grants related to income are presented as part of the consolidated statements of operations either as a deduction of the related expense or reported separately in other income. The Company recognizes government assistance that supplements salaries or research activities as a reduction of the related operating expense over the period for which it is intended to compensate. Government assistance that is not directly related to expense reimbursement or relates to costs incurred in a previous fiscal period is recorded as other income. For the years ended December 31, 2023 and 2022, the Company received $ 0.2 million and $ 0.7 million, respectively, under government assistance programs. The majority of the assistance was a result of the Company’s German subsidiaries participating in programs established to offset the negative impact of COVID- 19 on profitability, to support employment during the COVID- 19 pandemic, and to offset the costs of qualifying research and development activities. In February 2024, the Company received and recorded $ 3.1 million for the Employee Retention Credit (“ERC”), which was enacted as part of the Coronavirus Aid, Relief, and Economic Security Act of 2020 (“CARES Act”) to provide financial incentives to eligible businesses to retain their workforce through the period of financial hardship resulting from the COVID- 19 pandemic. F- 28 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. HARVARD BIOSCIENCE, INC. Date: March 7, 2024 By: /s/ JAMES GREEN James Green Chief Executive Officer Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ JAMES GREEN Chief Executive Officer and Director (Principal Executive Officer) March 7, 2024 James Green /s/ JENNIFER COTE Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) March 7, 2024 Jennifer Cote /s/ KATHERINE A. EADE Director March 7, 2024 Katherine A. Eade /s/ ALAN EDRICK Director March 7, 2024 Alan Edrick /s/ THOMAS W. LOEWALD Director March 7, 2024 Thomas W. Loewald /s/ BERTRAND LOY Director March 7, 2024 Bertrand Loy F-29 Table of Contents EXHIBIT INDEX The following exhibits are filed as part of this Annual Report on Form 10-K. Where such filing is made by incorporation by reference to a previously filed document, such document is identified. Exhibit Description Method of Filing 2.1§ Separation and Distribution Agreement between Harvard Bioscience, Inc. and Biostage, Inc. (f/k/a Harvard Apparatus Regenerative Technology, Inc.) dated as of October 31, 2013. Exhibit to the Current Report on Form 8-K filed November 6, 2013, and incorporated by reference thereto. 3.1 Second Amended and Restated Certificate of Incorporation of Harvard Bioscience, Inc. Exhibit to the Registration Statement on Form S-1/A (File No. 333-45996) (filed November 9, 2000) and incorporated by reference thereto. 3.2 Amended and Restated By-laws of Harvard Bioscience, Inc. Exhibit to the Registration Statement on Form S-1/A (File No. 333-45996) (filed November 9, 2000) and incorporated by reference thereto. 3.3 Amendment No. 1 to Amended and Restated Bylaws of Harvard Bioscience, Inc. (as adopted October 30, 2007). Exhibit to the Current Report on Form 8-K (filed November 1, 2007) and incorporated by reference thereto. 4.1 Specimen certificate for shares of Common Stock, $0.01 par value, of Harvard Bioscience, Inc. Exhibit to the Registration Statement on Form S-1/A (File No. 333-45996) (filed November 9, 2000) and incorporated by reference thereto. 4.2 Description of Securities. Exhibit to the Annual Report on Form 10-K (filed March 16, 2020) and incorporated by reference thereto. 10.1 # Harvard Bioscience, Inc. Fourth Amended and Restated 2000 Stock Option and Incentive Plan. Exhibit to the Quarterly Report on Form 10-Q filed August 10, 2020, and incorporated by reference thereto. 10.2 Harvard Bioscience, Inc. Employee Stock Purchase Plan, as amended. Disclosed as Appendix A to the Proxy Statement on Schedule 14A filed April 7, 2022, and incorporated by reference thereto. 10.3 Form of Director Indemnification Agreement. Exhibit to the Quarterly Report on Form 10-Q filed May 8, 2020, and incorporated by reference thereto. 10.4 + Trademark License Agreement, dated December 19, 2002, by and between Harvard Bioscience, Inc. and President and Fellows of Harvard College. Exhibit to the Annual Report on Form 10-K filed March 9, 2023, and incorporated by reference thereto. 10.5 # Form of Incentive Stock Option Agreement (Executive Officers). Exhibit to the Annual Report on Form 10-K filed March 16, 2006, and incorporated by reference thereto. 10.6 # Form of Non-Qualified Stock Option Agreement (Executive Officers). Exhibit to the Annual Report on Form 10-K filed March 16, 2006, and incorporated by reference thereto. 10.7 # Form of Non-Qualified Stock Option Agreement (Non-Employee Directors). Exhibit to the Annual Report on Form 10-K filed March 16, 2006, and incorporated by reference thereto. 10.8 # Form of Deferred Stock Award Agreement. Exhibit to the Annual Report on Form 10-K filed March 16, 2011, and incorporated by reference thereto. 10.9 # Form of Market Condition Deferred Stock Award Agreement. Exhibit to the Annual Report on Form 10-K filed March 16, 2020, and incorporated by reference thereto. 10.10 # Employment Agreement between Harvard Bioscience, Inc. and James Green. Exhibit to the Current Report on Form 8-K filed July 8, 2019, and incorporated by reference thereto. Table of Contents 10.11# Employment Agreement between Jennifer Cote and the Company dated June 19, 2023 Exhibit to the Current Report on Form 8-K filed June 20, 2023, and incorporated by reference thereto. 10.12 Consulting Agreement, dated as of March 2, 2020, by and between Harvard Bioscience, Inc. and Chane Graziano. Exhibit to the Current Report on Form 8-K filed March 6, 2020, and incorporated by reference thereto. 10.13 Credit Agreement dated as of December 22, 2020 among Harvard Bioscience, Inc., as borrower, the lenders party thereto, and Citizens Bank, N.A., as administrative agent. Exhibit to the Current Report on Form 8-K filed December 23, 2020, and incorporated by reference thereto. 10.14 Pledge and Security Agreement dated as of December 22, 2020 among Harvard Bioscience, Inc., certain of Harvard Bioscience’s direct and indirect subsidiaries and Citizens Bank, N.A., as administrative agent. Exhibit to the Current Report on Form 8-K filed December 23, 2020, and incorporated by reference thereto. 10.15 First Amendment to Credit Agreement and Amendment to Pledge and Security Agreement, dated April 28, 2022, among Harvard Bioscience, Inc., Citizens Bank, N.A., as the administrative agent, and the lenders party thereto. Exhibit to the Current Report on Form 8-K filed April 28, 2022, and incorporated by reference thereto. 10.16 Second Amendment to Credit Agreement and Amendment to Pledge and Security Agreement, dated November 8, 2022, among Harvard Bioscience, Inc., Citizens Bank, N.A., as the administrative agent, and the lenders party thereto. Exhibit to the Form 10-Q filed November 9, 2022, and incorporated by reference thereto. 10.17 Guarantee Agreement dated as of December 22, 2020 among Harvard Bioscience, Inc., certain of Harvard Bioscience’s direct and indirect subsidiaries and Citizens Bank, N.A., as administrative agent. Exhibit to the Current Report on Form 8-K filed December 23, 2020, and incorporated by reference thereto. 10.18# Harvard Bioscience, Inc. 2021 Incentive Plan. Exhibit to the Current Report on Form 8-K filed May 19, 2021, and incorporated by reference thereto. 10.19# Form of Performance RSU Award Agreement - 2021 Incentive Plan. Exhibit to the Annual Report on Form 10-K filed March 11, 2022, and incorporated by reference thereto. 10.20# Form of Time-Based RSU Awards Agreement – 2021 Incentive Plan. Exhibit to the Annual Report on Form 10-K filed March 11, 2022, and incorporated by reference thereto. 10.21# Form of RSU Award for Directors – 2021 Incentive Plan. Exhibit to the Annual Report on Form 10-K filed March 11, 2022, and incorporated by reference thereto. 10.22# Separation Agreement and Release between Harvard Bioscience, Inc. and Ken Olson, dated as of January 26, 2022. Exhibit to the Current Report on Form 8-K filed January 28, 2022, and incorporated by reference thereto. 10.23# Separation Agreement and Release between Harvard Bioscience, Inc. and Michael Rossi, dated January 18, 2023 Exhibit to the Current Report on Form 8-K filed January 19, 2023, and incorporated by reference thereto. 21.1 Subsidiaries of the Registrant Filed with this report 23.1 Consent of Grant Thornton LLP Filed with this report 31.1 Certification of Chief Financial Officer of Harvard Bioscience, Inc., pursuant to Rules 13a-15(e) and 15d-15(e), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 Filed with this report 31.2 Certification of Chief Executive Officer of Harvard Bioscience, Inc., pursuant to Rules 13a-15(e) and 15d-15(e), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 Filed with this report 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 * Table of Contents 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 * 97 Harvard Bioscience Inc., Dodd-Frank Clawback Policy Filed with this report 101.INS Inline XBRL Instance Document Filed with this report 101.SCH Inline XBRL Taxonomy Extension Schema Document Filed with this report 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document Filed with this report 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document Filed with this report 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document Filed with this report 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document Filed with this report 104 Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101) + Portions of this exhibit have been redacted in compliance with Item 601(b)(10) of Regulation S-K. * 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 # Management contract or compensatory plan or arrangement. § The schedules and exhibits have been omitted. A copy of any omitted schedule or exhibit will be furnished to the SEC supplementally upon request. The Company will furnish to stockholders a copy of any exhibit without charge upon written request.