hboi20230331

hboi20230331_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2023

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

For the transition period from to

Commission file number 001-33957

HARVARD BIOSCIENCE, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	04-3306140
(State or other jurisdiction of Incorporation or organization)	(I.R.S. Employer Identification No.)

84 October Hill Road, Holliston, Massachusetts 01746

(Address of Principal Executive Offices, including zip code)

(508) 893-8999

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	HBIO	The Nasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☒
Non-accelerated filer ☐	Smaller reporting company ☒
	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of April 20, 2023, there were 42,190,043 shares of the registrant’s common stock issued and outstanding.

	Page

PART I - FINANCIAL INFORMATION	3

Item 1. Condensed Consolidated Financial Statements (unaudited)	3

Consolidated Balance Sheets	3

Consolidated Statements of Operations	4

Consolidated Statements of Comprehensive Income (Loss)	5

Consolidated Statements of Stockholders' Equity	6

Consolidated Statements of Cash Flows	7

Notes to Unaudited Consolidated Financial Statements	8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	18

Item 3. Quantitative and Qualitative Disclosures about Market Risk	22

Item 4. Controls and Procedures	22

PART II - OTHER INFORMATION	23

Item 1. Legal Proceedings	23

Item1A. Risk Factors	23

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.	23

Item 3. Defaults Upon Senior Securities	23

Item 4. Mine Safety Disclosures	23

Item 5. Other Information	23

Item 6. Exhibits	23

SIGNATURES	24

	March 31,			December 31,
	2023			2022
Assets
Current assets:
Cash and cash equivalents	$	3,789		$	4,508
Accounts receivable, net		17,737			16,705
Inventories		26,861			26,439
Other current assets		4,062			3,472
Total current assets		52,449			51,124
Property, plant and equipment, net		3,424			3,366
Operating lease right-of-use assets		5,505			5,816
Goodwill		56,618			56,260
Intangible assets, net		19,641			21,014
Other long-term assets		7,941			7,780
Total assets	$	145,578		$	145,360
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt	$	2,970		$	3,811
Current portion of operating lease liabilities		2,130			2,135
Accounts payable		5,978			6,447
Deferred revenue		4,121			3,370
Other current liabilities		8,018			7,486
Total current liabilities		23,217			23,249
Long-term debt, net		41,083			43,013
Deferred tax liability		546			590
Operating lease liabilities		4,938			5,282
Other long-term liabilities		1,454			1,006
Total liabilities		71,238			73,140
Commitments and contingencies - Note 13
Stockholders' equity:
Preferred stock, par value $0.01 per share, 5,000,000 shares authorized		-			-
Common stock, par value $0.01 per share, 80,000,000 shares authorized: 42,190,043 shares issued and outstanding at March 31, 2023; 42,081,707 shares issued and outstanding at December 31, 2022		455			454
Additional paid-in-capital		230,108			229,008
Accumulated deficit		(141,568	)		(142,190	)
Accumulated other comprehensive loss		(14,655	)		(15,052	)
Total stockholders' equity		74,340			72,220
Total liabilities and stockholders' equity	$	145,578		$	145,360

	Three Months Ended March 31,
	2023			2022

Revenues	$	29,975		$	28,778
Cost of revenues		11,629			12,601
Gross profit		18,346			16,177

Sales and marketing expenses		5,978			6,687
General and administrative expenses		6,334			6,325
Research and development expenses		2,897			3,220
Amortization of intangible assets		1,388			1,466
Settlement of litigation, net - Note 14		-			5,191
Total operating expenses		16,597			22,889

Operating income (loss)		1,749			(6,712	)

Other expense:
Interest expense		(974	)		(384	)
Other income, net		432			78
Total other expense		(542	)		(306	)

Income (loss) before income taxes		1,207			(7,018	)
Income tax expense (benefit)		585			(138	)
Net income (loss)	$	622		$	(6,880	)

Income (loss) per share:
Basic income (loss) per share	$	0.01		$	(0.17	)

Diluted income (loss) per share	$	0.01		$	(0.17	)

Weighted-average common shares:
Basic		42,119			41,219

Diluted		42,783			41,219

												Accumulated
	*Number*					*Additional*						*Other*			*Total*
	*of Shares*			*Common*		*Paid-in*			*Accumulated*			*Comprehensive*			*Stockholders*’
	*Issued*			*Stock*		*Capital*			*Deficit*			*Loss*			*Equity*
Balance at December 31, 2022		42,082		$	454	$	229,008		$	(142,190	)	$	(15,052	)	$	72,220
Stock option exercises		39			1		103			-			-			104
Vesting of restricted stock units		125			-		-			-			-			-
Shares withheld for taxes		(56	)		-		(156	)		-			-			(156	)
Stock-based compensation expense		-			-		1,153			-			-			1,153
Net income		-			-		-			622			-			622
Other comprehensive income		-			-		-			-			397			397
Balance at March 31, 2023		42,190		$	455	$	230,108		$	(141,568	)	$	(14,655	)	$	74,340

												*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		11			-		31			-			-			31
Vesting of restricted stock units		151			-		-			-			-			-
Shares withheld for taxes		(64	)		-		(501	)		-			-			(501	)
Stock-based compensation expense		-			-		1,023			-			-			1,023
Net loss		-			-		-			(6,880	)		-			(6,880	)
Other comprehensive loss		-			-		-			-			(699	)		(699	)
Balance at March 31, 2022		41,241		$	452	$	226,203		$	(139,554	)	$	(10,726	)	$	76,375

(in thousands)
Carrying amount at December 31, 2022	$	56,260
Effect of change in currency translation		358
Carrying amount at March 31, 2023	$	56,618

			March 31, 2023							December 31, 2022
(in thousands)	Average				Accumulated							Accumulated
Amortizable intangible assets:	Life*		Gross		Amortization			Net		Gross		Amortization			Net
Distribution agreements/customer relationships		7.0	$	16,226	$	(9,086	)	$	7,140	$	16,124	$	(8,727	)	$	7,397
Existing technology		3.0		37,365		(27,196	)		10,169		37,549		(26,482	)		11,067
Trade names and patents		3.5		7,558		(5,428	)		2,130		7,523		(5,197	)		2,326
Total amortizable intangible assets			$	61,149	$	(41,710	)	$	19,439	$	61,196	$	(40,406	)	$	20,790
Indefinite-lived intangible assets:									202							224
Total intangible assets								$	19,641						$	21,014

(in thousands)
2023 (remainder of the year)	$	4,169
2024		5,260
2025		4,023
2026		2,362
2027		1,265
2028		1,018
Thereafter		1,342
Total	$	19,439

*Inventories:*	March 31,		December 31,
(in thousands)	2023		2022
Finished goods	$	5,144	$	5,223
Work in process		3,660		3,776
Raw materials		18,057		17,440
Total	$	26,861	$	26,439

*Other Current Liabilities:*	March 31,		December 31,
(in thousands)	2023		2022
Compensation	$	3,154	$	3,476
Professional fees		589		392
Warranty costs		279		268
Customer credits		2,204		2,368
Accrued income taxes		700		-
Other		1,092		982
Total	$	8,018	$	7,486

Year Ending December 31,
(in thousands)
2023 (remainder of the year)	$	1,605
2024		1,803
2025		1,065
2026		1,022
2027		1,035
Thereafter		2,965
Total lease payments		9,495
Less imputed interest		(2,427	)
Total operating lease liabilities	$	7,068

	Three Months Ended March 31,
	2023			2022
Cash flows from operating activities:
Net income (loss)	$	622		$	(6,880	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation		333			382
Amortization of intangible assets		1,388			1,466
Amortization of deferred financing costs		70			70
Stock-based compensation expense		1,153			1,023
Deferred income taxes and other		(55	)		(123	)
Gain on sale of product line		(403	)		-
Changes in operating assets and liabilities:
Accounts receivable		(923	)		1,506
Inventories		(292	)		(1,308	)
Other assets		(308	)		(466	)
Accounts payable and accrued expenses		(150	)		2,729
Deferred revenue		741			(300	)
Other liabilities		(364	)		(85	)
Net cash provided by (used in) operating activities		1,812			(1,986	)
Cash flows from investing activities:
Additions to property, plant and equipment		(224	)		(471	)
Proceeds from sale of product line		512			-
Net cash provided by (used in) investing activities		288			(471	)
Cash flows from financing activities:
Borrowing on bank line of credit		1,500			1,500
Repayment on bank line of credit		(2,500	)		-
Repayment of term debt		(1,841	)		(936	)
Proceeds from exercise of stock options and employee stock purchase plan		104			31
Taxes paid related to net share settlement of equity awards		(156	)		(501	)
Net cash (used in) provided by financing activities		(2,893	)		94
Effect of exchange rate changes on cash		74			(25	)
Decrease in cash and cash equivalents		(719	)		(2,388	)
Cash and cash equivalents at beginning of period		4,508			7,821
Cash and cash equivalents at end of period	$	3,789		$	5,433
Supplemental disclosures of cash flow information:
Cash paid for interest	$	1,172		$	383
Cash paid for income taxes, net of refunds	$	(134	)	$	107

	March 31,			December 31,
(in thousands)	2023			2022
Long-term debt:
Term loan	$	32,973		$	34,814
Revolving line		11,850			12,850
Less: unamortized deferred financing costs		(770	)		(840	)
Total debt		44,053			46,824
Less: current portion of long-term debt		(3,250	)		(4,091	)
Current unamortized deferred financing costs		280			280
Long-term debt	$	41,083		$	43,013

(in thousands)		March 31, 2023
Derivatives instruments	Balance sheet classification	Notional Amount		Fair Value (a)
Interest rate swaps	Other long term liabilities	$	31,841	$	(440	)

	Fair Value as of March 31, 2023
Assets (Liabilities) (in thousands)	Level 1		Level 2			Level 3		Total
Equity securities - common stock	$	206	$	-		$	-	$	206
Interest rate swap agreements	$	-	$	(440	)	$	-	$	(440	)

				Weighted
	*Stock*			*Average*
	*Options*			*Exercise*		*RSUs*			*Grant Date*		*PRSUs*		*Grant Date*
	*Outstanding*			*Price*		*Outstanding*			*Fair Value*		*Outstanding*		*Fair Value*
Balance at December 31, 2022		1,238,776		$	3.15		1,093,801		$	3.94		646,235	$	4.51
Granted		-			-		1,177,391			2.51		558,958		2.61
Exercised		(39,618	)		2.63		-			-		-		-
Vested (RSUs)		-			-		(125,036	)		1.93		-		-
Cancelled/Forfeited		(29,201	)		2.99		(3,122	)		5.54		-		-
Balance at March 31, 2023		1,169,957		$	3.17		2,143,034		$	3.27		1,205,193	$	3.63

	2023
Volatility		56.8	%
Risk-free interest rate		4.6	%
Correlation coefficient		41.7	%
Dividend yield		-	%

	Three Months Ended March 31,
(dollars in thousands)	2023		% of revenue			2022		% of revenue
Revenues	$	29,975				$	28,778
Gross profit		18,346		61.2	%		16,177		56.2	%
Sales and marketing expenses		5,978		19.9	%		6,687		23.2	%

SEC Form 10-Q filed by Harvard Bioscience Inc.