EDGAR 10-K Filing

Company CIK: 1123494
Filing Year: 2021
Filename: 1123494_10-K_2021_0001171843-21-001737.json

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ITEM 1. BUSINESS
Item 1. Business.
Overview
Harvard Bioscience, Inc., a Delaware corporation, is a leading developer, manufacturer and seller of technologies, products and services that enable fundamental research, discovery, and preclinical testing for drug development. Our customers range from renowned academic institutions and government laboratories, to the world’s leading pharmaceutical, biotechnology and contract research organizations. With operations in North America, Europe, and China, we sell through a combination of direct and distribution channels to customers around the world.
Recent Developments
COVID-19
On March 11, 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic. The COVID-19 pandemic has had a negative impact on our operations to date and the future impacts of the pandemic and any resulting economic impact are largely unknown and rapidly evolving. Since the COVID-19 outbreak in the United States, Europe and elsewhere, many customers, particularly academic research institutions, have been unable to maintain laboratory work which has negatively impacted, and will continue to negatively impact, our sales. Additionally, to ensure business continuity while maintaining a safe environment for employees aligned with guidance from government and health organizations, we transitioned the majority of our workforce to work-from-home while implementing social distancing requirements and other measures in factories to allow manufacturing and other personnel essential to production to continue work within our facilities. Business travel was significantly reduced during this period. While we have maintained operations under these conditions, these measures represent disruptions which can impact productivity including sales and marketing activities. Accordingly, these conditions in addition to the overall impact on the global economy has negatively impacted our results of operations and cash flows.
Our History and Strategy
Our business began in 1901 under the name Harvard Apparatus. It was founded by Dr. William T. Porter, a Professor of Physiology at Harvard Medical School and a pioneer of physiology education. We have grown over the years with the development and evolution of modern life science research and education. Our early inventions included ventilators based on Dr. Porter’s design, the mechanical syringe pump for drug infusion in the 1950s, and the microprocessor-controlled syringe pump in the 1980s.
In March of 1996, a group of investors acquired a majority of the then existing business of our predecessor, Harvard Apparatus, Inc. Following this acquisition, our focus was redirected to acquiring complementary companies with innovative technologies while continuing to grow the existing business through internal product development. Since 1996, we have completed multiple business or product line acquisitions related to our continuing operations. Harvard Bioscience, Inc. was incorporated in the State of Delaware in September 2000 and became the successor entity to Harvard Apparatus, Inc. by merger in November 2000.
In the first quarter of 2018, we completed two transactions to improve the overall customer and product mix of our business. In January 2018, we acquired Data Sciences International, Inc. (DSI) for approximately $71.1 million. DSI, a St. Paul, Minnesota-based life science research company, is a recognized leader in physiologic monitoring focused on delivering preclinical products, systems, services and solutions to its customers. Its customers include pharmaceutical and biotechnology companies, as well as contract research organizations, academic labs and government researchers. This acquisition diversified our customer base deeper into the biopharmaceutical and contract research organization markets. The acquisition also provided opportunities to generate meaningful cost and revenue synergies. Also during the first quarter of 2018, we sold substantially all the assets of our wholly owned subsidiary, Denville Scientific, Inc. (Denville). Denville was a laboratory products distributor with lower average gross margins and deemed no longer core to our strategy.
On July 8, 2019, we announced the departure of the previous President and Chief Executive Officer and the appointment by the Board of Directors of James Green as President and Chief Executive Officer. In addition, on July 18, 2019 we announced the appointment of Michael Rossi as Chief Financial Officer.
Immediately after the appointment of Mr. Green and Mr. Rossi, we began a process to identify opportunities to improve profitability, increase cash flow and enhance internal capabilities to position the business for organic growth. As a result of this assessment, in September 2019 we announced a strategic action plan which included:
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Capitalizing on the strong existing Harvard Bioscience and Data Science franchises and products;
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Adding new senior leadership with significant experience with turnarounds and driving growth and operational improvements within global, middle market life science manufacturing businesses;
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Consolidating sub-scale operations and integrating existing functions and processes to drive scale and reduce fixed costs;
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Increasing effectiveness of sales and product management to deliver organic sales growth; and
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Improving cash flow and reducing debt and leverage.
In December 2019, we implemented the 2019 Restructuring Plan to deliver significant cost savings beginning in 2020 and to support delivery of the strategic action plan we announced in September 2019. The 2019 Restructuring Plan includes consolidation of our Connecticut manufacturing plant to our existing Massachusetts site, downsizing of operations in the United Kingdom and a reduction in force across the business equal to approximately 10% of our headcount. The initial initiatives under the 2019 restructuring plan were completed in the second half of 2020.
We
A portion of the savings generated from these actions is expected to be reinvested to drive profitable growth. We believe these strategic actions will significantly improve our financial performance.
Our Products
Our products support research in 6 different classes of laboratory use: (1) molecular, (2) cellular, (3) tissue, (4) organ, (5) organisms or preclinical and (6) clinical. Historically, our products were marketed and sold in three different product families: PCMI (Physiology, Cellular, Molecular Instruments), DSI (Data Science International) and Ephys (Electrophysiology).
In 2019, as part of our strategic action plan, we consolidated the products in classes (1), (2), (3), (4) and some products in class (5) into a single product family, Cellular and Molecular Technologies (CMT), that includes 14 individual business lines supporting new drug discovery and development. We also consolidated certain of our products in class (5) into our Preclinical product family, which includes 4 individual business lines supporting the preclinical research phase for drug development. CMT products are primarily sold to academic and government labs and institutions. Preclinical products are primarily sold to pharmaceutical, biotechnology and contract research organizations.
We primarily sell our products under several brand names, including Harvard Apparatus, DSI, Ponemah, Buxco, Biochrom, BTX, MCS.
Our solutions range from simple to complex, and generally consist of hardware/firmware/ and software products, augmented with consumables, options, upgrades and post-sales (scientific) services. Sales prices of these products and services range from under $100 to over $100,000. Our products include spectrophotometers that analyze light to detect and quantify a wide range of molecules as well as cell analysis and electroporation and electrofusion systems to influence and/or analyze cellular processes. Other products and services focus on tissue and organ responses to new drugs and encompass wireless monitors, and signal acquisition and analysis functionality. We also feature products that monitor physiology processes in living organisms to study behavior. Many of our proprietary products are leaders in their field.
In addition to our proprietarily manufactured products, we sell factored products from other manufacturers. These re-distributed products accounted for approximately 15% and 16 % of our revenues for the years ended December 31, 2020 and 2019, respectively. Re-distributed products enable us to act as a single source for our customers’ research needs. They consist of a large variety of complementing instruments or accessories as well as consumables used in experiments involving fluid handling, molecular and cell analysis and tissue, organ and animal research. Following is a description of each product family.
Cellular and Molecular Technologies Product Family
Our CMT product family includes products designed primarily to support the discovery phase of new drug development. CMT products include:
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syringe and peristaltic pump product lines, as well as a broad range of instruments and accessories for tissue, organ-based lab research, including surgical products, infusion systems, and behavior research systems;
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spectrophotometers, microplate readers, amino acid analyzers, gel electrophoresis equipment, electroporation and electrofusion instruments which primarily support molecular level testing and research; and
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precision scientific measuring instrumentation and equipment in the field of electrophysiology such as: data acquisition systems with custom amplifier configurations for cellular analysis, complete micro electrode array solutions for in vivo recordings and in vitro systems for extracellular recordings.
Our CMT product family made up approximately 57% and 63% of our global revenues for the years ended December 31, 2020 and 2019, respectively.
Preclinical Product Family
Our Preclinical product family provides a complete platform to assess physiological data from organisms for research ranging from basic research to drug discovery, and drug development services. The Preclinical product family consists of the DSI and Buxco brands. It includes:
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the most comprehensive portfolio of implantable and externally-worn telemetry systems, which are commonly used in research to collect cardiovascular, central nervous system, respiratory, metabolic data;
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turn-key respiratory system solutions encompassing plethysmograph chambers, data acquisition hardware, physiological signal analysis software, and final report generation;
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inhalation and exposure systems providing precise, homogenous aerosol delivery for up to 42 subjects, while integrating respiratory parameters for the ultimate delivered dose system; and
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powerful GLP-capable data acquisition and analysis systems, capable of integrating third party sensors for a more comprehensive study design.
DSI’s direct sales force supports North America, Europe, and China, with distributors supporting the rest of the world. Our Preclinical products made up approximately 43% and 37% of our global revenues for the year ended December 31, 2020 and 2019, respectively.
Our Customers
Our end-user customers are primarily research scientists at pharmaceutical and biotechnology companies, universities, hospitals, government laboratories, including the United States National Institutes of Health (NIH), and contract research organizations (CROs). Our pharmaceutical and biotechnology customers have included pharmaceutical companies and research laboratories such as Pfizer, Amgen, Inc., AstraZeneca plc, Genentech, Inc. and Johnson & Johnson. Our academic customers include major colleges and universities including Harvard University, Cambridge University, Johns Hopkins University, Massachusetts Institute of Technology, Yale University, the University of California system, Baylor College of Medicine, and the University of Texas - MD Anderson Center. Our CRO customers include Covance and Charles River Laboratories. We have a wide range of diverse customers worldwide and no customer accounted for more than 10% of our revenues in 2020.
Sales
We conduct direct sales in the United States, the United Kingdom, Germany, France, Italy, Spain, Sweden, Canada and China. We sell primarily through distributors in other countries. For the year ended December 31, 2020, revenues from direct sales to end-users represented approximately 65% of our revenues; and revenues from sales of our products through distributors represented approximately 35% of our revenues.
Direct Sales
We have a global sales organization managing both direct sales and distributors. Our websites and catalogs serve as the primary sales tool for our product lines, which includes both proprietary manufactured products and complementary products from various suppliers. Our reputation as a leading producer of many of our manufactured products creates traffic to our websites, enables cross-selling and facilitates the introduction of new products.
Sales through Distributors
We engage distributors for the sales of our own branded and private label products in certain areas of the world and for certain product lines.
Marketing
We have a centralized marketing group, which encompasses product management, field-marketing and market communications and application science. Marketing maintains value -proposition based product roadmaps, collaborates with research and development on timing and investment for new products, supports direct and distributor sales activities, sets the global pricing of our products and conceives the storylines on how to sell our products. Marketing also maintains digital presence across the web and social media, creates electronic leads and analyzes opportunities for new product portfolio extensions.
Research and Development
Our principal research and development mission is to develop products that address growth opportunities within the life science research process as well as to maintain and optimize our existing product portfolios. We maintain development staff in many of our manufacturing facilities to design and develop new products and to re-engineer existing products to bring them to the next generation. Our research and development expenses were approximately $8.7 million and $10.7 million for the years ended December 31, 2020 and 2019, respectively. We anticipate that we will continue to make investments in research and development activities as we deem appropriate. We plan to continue to pursue a balanced development portfolio strategy of originating new products from internal research and acquiring products through business and technology acquisitions.
Manufacturing
We manufacture and test the majority of our products in our principal manufacturing facilities located in the United States, Sweden, Spain and Germany. We have considerable manufacturing flexibility at our various facilities, and each facility can manufacture multiple products at the same time. We maintain in-house manufacturing expertise, technologies and resources. We seek to maintain multiple suppliers for key components that are not manufactured in-house, and while some of our products are dependent on sole-source suppliers, we do not believe our dependence upon these suppliers creates any significant risks. Our manufacturing operations primarily involve assembly and testing activities along with some machine-based processes. Going forward we will continue to evaluate our manufacturing facilities and operations in order to optimize our manufacturing footprint.
See “Part I, Item 2. Properties” of this report for additional information regarding our manufacturing facilities.
Competition
The markets into which we sell our products are highly competitive, and we expect the intensity of competition to continue or increase. We compete with many companies engaged in developing and selling tools for life science research. Many of our competitors have greater financial, operational, sales and marketing resources and more experience in research and development and commercialization than we have. Moreover, our competitors may have greater name recognition than we do, and many offer discounts as a competitive tactic. These competitors and other companies may have developed or could in the future develop new technologies that compete with our products, which could render our products obsolete. We cannot assure you that we will be able to make the enhancements to our technologies necessary to compete successfully with newly emerging technologies. We believe that we offer one of the broadest selections of products to organizations engaged in life science research. We have numerous competitors on a product line basis. We believe that we compete favorably with our competitors on the basis of product performance, including quality, reliability, speed, technical support, price and delivery time.
We compete with several companies that provide instruments for life science research including, Lonza Group Ltd., Becton Dickinson, Eppendorf AG, Kent Scientific Corporation, Razel Scientific Instruments, Inc., Ugo Basile, Danaher Corporation, Bio-Rad Laboratories, Inc., PerkinElmer, Inc., Thermo Fisher Scientific, Inc. Notocord, Emka Technologies and TSE Systems.
We cannot forecast if or when these or other companies may develop competitive products. We expect that other products will compete with our products and potential products based on efficacy, safety, cost and intellectual property positions. While we believe that these will be the primary competitive factors, other factors include, in certain instances, availability of supply, manufacturing, marketing and sales expertise and capability.
Seasonality
Sales and earnings in our third quarter are usually flat or down from the second quarter primarily because there are a large number of holidays and vacations during such quarter, especially in Europe. Our fourth quarter revenues and earnings are often the highest in any fiscal year compared to the other three quarters, primarily because many of our customers tend to spend budgeted money before their own fiscal year ends.
Intellectual Property
To establish and protect our proprietary technologies and products, we rely on a combination of patent, copyright, trademark and trade secret laws, as well as confidentiality provisions in our contracts. Patents or patent applications cover certain of our new technologies. Most of our more mature product lines are protected by trade names and trade secrets only.
We have implemented a patent strategy designed to provide us with freedom to operate and facilitate commercialization of our current and future products. Our success depends, to a significant degree, upon our ability to develop proprietary products and technologies. We intend to continue to file patent applications as we develop new products and technologies.
Patents provide some degree of protection for our intellectual property. However, the assertion of patent protection involves complex legal and factual determinations and is therefore uncertain. The scope of any of our issued patents may not be sufficiently broad to offer meaningful protection. In addition, our issued patents or patents licensed to us may be successfully challenged, invalidated, circumvented or unenforceable so that our patent rights would not create an effective competitive barrier. Moreover, the laws of some foreign countries may protect our proprietary rights to a greater or lesser extent than the laws of the United States. In addition, the laws governing patentability and the scope of patent coverage continue to evolve, particularly in areas of interest to us. As a result, there can be no assurance that patents will be issued from any of our patent applications or from applications licensed to us. As a result of these factors, our intellectual property positions bear some degree of uncertainty.
We also rely in part on trade secret protection of our intellectual property. We attempt to protect our trade secrets by entering into confidentiality agreements with third parties, employees and consultants. Our employees and consultants also sign agreements requiring that they assign to us their interests in patents and copyrights arising from their work for us. Although many of our United States employees have signed agreements not to compete unfairly with us during their employment and after termination of their employment, through the misuse of confidential information, soliciting employees, soliciting customers and the like, the enforceability of these provisions varies from jurisdiction to jurisdiction and, in some circumstances, they may not be enforceable. In addition, it is possible that these agreements may be breached or invalidated and if so, there may not be an adequate corrective remedy available. Despite the measures we have taken to protect our intellectual property, we cannot assure you that third parties will not independently discover or invent competing technologies or reverse engineer our trade secrets or other technologies. Therefore, the measures we are taking to protect our proprietary rights may not be adequate.
We do not believe that our products infringe on the intellectual property rights of any third party. We cannot assure you, however, that third parties will not claim such infringement by us or our licensors with respect to current or future products. We expect that product developers in our market will increasingly be subject to such claims as the number of products and competitors in our market segment grows and the product functionality in different market segments overlaps. In addition, patents on production and business methods are becoming more common and we expect that more patents will be issued in our technical field. Any such claims, with or without merit, could be time-consuming, result in costly litigation and diversion of management’s attention and resources, cause product shipment delays or require us to enter into royalty or licensing agreements. Moreover, such royalty or licensing agreements, if required, may not be on terms advantageous to us, or acceptable at all, which could seriously harm our business or financial condition.
“Harvard” is a registered trademark of Harvard University. The marks “Harvard Apparatus” and “Harvard Bioscience” are being used pursuant to a license agreement entered into in December 2002 between us and Harvard University.
Government Regulation
We are not subject to direct governmental regulation other than the laws and regulations generally applicable to businesses in the domestic and foreign jurisdictions in which we operate. In particular, our current products are not subject to pre-market approval by the United States Food and Drug Administration (“FDA”) for use on human clinical patients. In addition, we believe we are
Employees
As of December 31, 2020, we employed 459 employees, which includes 428 full-time employees. Some of our employees in Europe have statutory collective bargaining rights. We have never experienced a general work stoppage or strike, and management believes that our relations with our employees are good. Additional information about our employees follows:
Employees by country:
Country
Full time
Part time
United States
Germany
United Kingdom
Spain
China
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Rest of World
-
Total
Employees by business function:
Function
Full time
Part time
Manufacturing
Sales and marketing
Research and development
General and adminstrative
Total
Geographic Area
Financial information regarding geographic areas in which we operate is provided in Note 16 to the Consolidated Financial Statements included in “Part IV, Item 15. Exhibits, Financial Statement Schedules” of this report.
Available Information and Website
Our website address is www.harvardbioscience.com. Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and exhibits and amendments to those reports filed or furnished with the Securities and Exchange Commission pursuant to Section 13(a) of the Exchange Act are available for review on our website and the Securities and Exchange Commission’s website at www.sec.gov. Any such materials that we file with, or furnish to, the SEC in the future will be available on our website as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. The information on our website is not incorporated by reference into this Annual Report on Form 10-K.

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ITEM 1A. RISK FACTORS
Item 1A. Risk Factors.
The following factors should be reviewed carefully, in conjunction with the other information contained in this Annual Report on Form 10-K. As previously discussed, our actual results could differ materially from our forward-looking statements. Our business faces a variety of risks. These risks include those described below and may include additional risks and uncertainties not presently known to us or that we currently deem immaterial. If any of the events or circumstances described in the following risk factors occur, our business operations, performance and financial condition could be adversely affected and the trading price of our common stock could decline.
Risks Related to Our Industry
The life sciences industry is very competitive.
We expect to encounter increased competition from both established and development-stage companies that continually enter the market. These include companies developing and marketing life science instruments, systems and lab consumables, health care companies that manufacture laboratory-based tests and analyzers, diagnostic and pharmaceutical companies, analytical instrument companies, and companies developing life science or drug discovery technologies. Currently, our principal competition comes from established companies that provide products that perform many of the same functions for which we market our products. Many of our competitors have substantially greater financial, operational, marketing and technical resources than we do. Moreover, these competitors may offer broader product lines and tactical discounts and may have greater name recognition. In addition, we may face competition from new entrants into the field. We may not have the financial resources, technical expertise or marketing, distribution or support capabilities to compete successfully in the future. In addition, we face changing customer preferences and requirements, including increased customer demand for more environmentally friendly products.
The life sciences industry is also subject to rapid technological change and discovery. The development of new or improved products, processes or technologies by other companies may render our products or proposed products obsolete or less competitive. In some instances, our competitors may develop or market products that are more effective or commercially attractive than our current or future products. To meet the evolving needs of customers, we must continually enhance our current and planned products and develop and introduce new products. However, we may experience difficulties that may delay or prevent the successful development, introduction and marketing of new products or product enhancements. In addition, our product lines are based on complex technologies that are subject to change as new technologies are developed and introduced in the marketplace. We may have difficulty in keeping abreast of the changes affecting each of the different markets we serve or intend to serve. Our failure to develop and introduce products in a timely manner in response to changing technology, market demands, or the requirements of our customers could cause our product sales to decline, and we could experience significant losses.
We offer, and plan to continue to offer, a broad range of products and have incurred, and expect to continue to incur, substantial expenses for development of new products and enhancements to our existing products. The speed of technological change in our market may prevent us from being able to successfully market some or all of our products for the length of time required to recover development costs. Failure to recover the development costs of one or more products or product lines could decrease our profitability or cause us to experience significant losses.
A portion of our revenues are derived from customers from the pharmaceutical and biotechnology industries and are subject to risks faced by those industries. Such risks may adversely affect our financial results.
We derive a significant portion of our revenues from pharmaceutical and biotechnology companies. We expect that pharmaceutical and biotechnology companies will continue to be a significant source of our revenues for the foreseeable future, including in our Cellular and Molecular Technologies and Preclinical product families. As a result, we are subject to risks and uncertainties that affect the pharmaceutical and biotechnology industries, such as government regulation, ongoing consolidation, uncertainty of technological change, and reductions and delays in research and development expenditures by companies in these industries.
In particular, the biotechnology industry is largely dependent on raising capital to fund its operations. If biotechnology companies that are our customers are unable to obtain the financing necessary to purchase our products, our business and results of operations could be adversely affected. In addition, we are dependent, both directly and indirectly, upon general health care spending patterns, particularly in the research and development budgets of the pharmaceutical and biotechnology industries, as well as upon the financial condition and purchasing patterns of various governments and government agencies. As it relates to both the biotechnology and pharmaceutical industries, many companies have significant patents that have expired or are about to expire, which could result in reduced revenues for those companies. If pharmaceutical or biotechnology companies that are our customers suffer reduced revenues as a result of these patent expirations, they may be unable to purchase our products, and our business and results of operations could be adversely affected.
Changes in governmental regulations may reduce demand for our products, adversely impact our revenues, or increase our expenses.
We operate in many markets in which we and our customers must comply with federal, state, local and international regulations. We develop, configure and market our products to meet customer needs created by, and in compliance with, those regulations. These requirements include, among other things, regulations regarding manufacturing practices, product labeling, and advertising and post marketing reporting. We must incur expense and spend time and effort to ensure compliance with these complex regulations. Possible regulatory actions for non-compliance could include warning letters, fines, damages, injunctions, civil penalties, recalls, seizures of our products, and criminal prosecution. These actions could result in, among other things, substantial modifications to our business practices and operations; refunds, recalls, or seizures of our products; a total or partial shutdown of production in one or more of our facilities while we or our suppliers remedy the alleged violation; and withdrawals or suspensions of current products from the market. Any of these events could disrupt our business and have a material adverse effect on our revenues, profitability and financial condition.
Risks Related to Our Business
Reductions in customers’ research budgets or government funding may adversely affect our business.
Many of our customers are universities, government research laboratories, private foundations and other institutions who are dependent on grants from U.S. government agencies, such as NIH, for funding. These customers represent a significant source of our revenue. Research and development spending by our customers may fluctuate based on spending priorities and general economic conditions. The level of government funding for research and development is unpredictable. In the past, NIH grants have been frozen or otherwise made unavailable for extended periods or directed to certain products. Reductions or delay in governmental spending could cause customers to delay or forego purchases of our products. If government funding necessary for purchase of our products were to decrease, our business and results of operations could be materially, adversely affected. Spending by some of these customers fluctuates based on budget allocations and the timely passage of the annual federal budget. An impasse in federal government budget decisions could lead to substantial delays or reductions in federal spending.
Our business is subject to economic, political and other risks associated with international revenues and operations.
We manufacture and sell our products worldwide and as a result, our business is subject to risks associated with doing business internationally. A substantial amount of our revenues is derived from international operations, and we anticipate that a significant portion of our sales will continue to come from outside the United States in the future. We anticipate that revenues from international operations will likely continue to increase as a result of our efforts to expand our business in markets abroad. In addition, a number of our manufacturing facilities and suppliers are located outside the United States. Our foreign operations subject us to certain risks, including: effects of fluctuations in foreign currency exchange rates; the impact of local economic conditions; local product preferences and seasonality and product requirements; local difficulty to effectively establish and expand our business and operations in international markets; disruptions of capital and trading markets; restrictions and potentially negative tax implications of transfer of capital across borders; differing labor regulations; other factors beyond our control, including potential political instability, terrorism, acts of war, natural disasters and diseases, including the coronavirus discussed below; unexpected changes and increased enforcement of regulatory requirements and various state, federal and international, intellectual property, environmental, antitrust, anti-corruption, fraud and abuse (including anti-kickback and false claims laws) and employment laws; interruption to transportation flows for delivery of parts to us and finished goods to our customers; and laws and regulations on foreign investment in the United States under the jurisdiction of the Committee on Foreign Investment in the United States, or CFIUS, and other agencies, including the Foreign Investment Risk Review Modernization Act, or FIRRMA, adopted in August 2018.
We may incur a variety of costs in connection with acquisitions we may seek to consummate in the future, and we may never realize the anticipated benefits of our acquisitions due in part to difficulties integrating the businesses, operations and product lines.
Our business strategy has historically included the acquisition of businesses, technologies, services or products that we believe are a strategic fit with our business. If we were to undertake future acquisitions, the process of integrating the acquired business, technology, service and/or product(s) may result in unforeseen operating difficulties and expenditures and potentially absorb significant management attention that would otherwise be available for ongoing development of our business. Moreover, we may fail to realize the anticipated benefits of an acquisition as rapidly as expected, or at all. Such transactions are inherently risky, and any such recent or future acquisitions could reduce stockholders’ ownership, cause us to incur debt, expose us to future liabilities and result in amortization expenses related to intangible assets with definite lives, which may adversely impact our ability to undertake future acquisitions on substantially similar terms. We may also incur significant expenditures in anticipation of an acquisition that is never realized.
Our ability to achieve the benefits of acquisitions depends in part on the integration and leveraging of technology, operations, sales and marketing channels and personnel. Integration is a complex, time-consuming and expensive process and may disrupt our business if not completed in a timely and efficient manner. We may have difficulty successfully integrating acquired businesses, and their domestic and foreign operations or product lines, and as a result, we may not realize any of the anticipated benefits of the acquisitions we make. We cannot assure that our growth rate will equal the growth rates that have been experienced by us, and these other acquired companies, respectively, operating as separate companies in the past.
We have substantial debt and other financial obligations, and we may incur even more debt. Any failure to meet our debt and other financial obligations or maintain compliance with related covenants could harm our business, financial condition and results of operations.
On December 22, 2020, we entered into a Credit Agreement (the “Credit Agreement”) with certain financial institutions party thereto as lenders (the “Lenders”), Citizens Bank, N.A., as the administrative agent, and Citizens Bank, Wells Fargo Bank, National Association and Silicon Valley Bank, as joint bookrunners, joint lead arrangers and syndication agents. The Credit Agreement provides for a term loan of $40.0 million and a $25.0 million senior revolving credit facility (collectively, the “Citizens Credit Facility”). The Citizens Credit Facility replaces our prior credit facility with Cerberus Business Finance, LLC, as agent and lender (the “Prior Credit Facility”), and in connection with the entry into the Credit Agreement, we paid off all outstanding borrowings under the Prior Credit Facility. As of December 31, 2020, we had outstanding borrowings of $49.4 million under the Credit Agreement. The Citizens Credit Facility will mature on December 22, 2025.
Pursuant to the terms of the Credit Agreement, we are subject to various covenants, including negative covenants that restrict our ability to engage in certain transactions, which may limit our ability to respond to changing business and economic conditions. Such negative covenants include, among other things, limitations on our ability and the ability of our subsidiaries to:
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incur debt,
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incur liens,
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make investments (including acquisitions),
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sell assets, and
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pay dividends on our capital stock.
In addition, the Credit Agreement contains certain financial covenants, including a maximum consolidated net leverage ratio and a minimum consolidated fixed charge coverage ratio, each of which will be tested at the end of each fiscal quarter of the Company.
If we are not in compliance with certain of these covenants, in addition to other actions the Lenders may require, the amounts outstanding under the Credit Agreement may become immediately due and payable. This immediate payment may negatively impact our financial condition. In addition, any failure to make scheduled payments of interest and principal on our outstanding indebtedness would likely harm our ability to incur additional indebtedness on acceptable terms. Our cash flow and capital resources may be insufficient to pay interest and principal on our debt in the future. If that should occur, our capital raising or debt restructuring measures may be unsuccessful or inadequate to meet our scheduled debt service obligations, which could cause us to default on our obligations and further impair our liquidity.
Further, based upon our actual performance levels, our covenants relating to leverage and fixed charges could limit our ability to incur additional debt, which could hinder our ability to execute our current business strategy.
Our ability to make scheduled payments on our debt and other financial obligations and comply with financial covenants depends on our financial and operating performance. Our financial and operating performance will continue to be subject to prevailing economic conditions and to financial, business and other factors, some of which are beyond our control. Failure within any applicable grace or cure periods to may such payments, comply with the financial covenants, or any other non-financial or restrictive covenant, would create a default under our Credit Agreement. Our cash flow and existing capital resources may be insufficient to repay our debt at maturity, in which such case prior thereto we would have to extend such maturity date, or otherwise repay, refinance and or restructure the obligations under the Credit Agreement, including with proceeds from the sale of assets, and additional equity or debt capital. If we are unsuccessful in obtaining such extension, or entering into such repayment, refinance or restructure prior to maturity, or any other default existed under the Credit Agreement, our lenders could accelerate the indebtedness under the Credit Agreement, foreclose against their collateral or seek other remedies, which would jeopardize our ability to continue our current operations.
Ethical concerns surrounding the use of our products and misunderstanding of the nature of our business could adversely affect our ability to develop and sell our existing products and new products.
Some of our products may be used in areas of research involving animal research and other techniques presently being explored in the life science industry. These techniques have drawn negative attention in the public forum. Government authorities may regulate or prohibit any of these activities. Additionally, the public may disfavor or reject these activities.
If we are not able to manage our growth, our operating profits may be adversely impacted.
Our success will depend on the expansion of our operations through organic growth, and we may execute acquisitions in the future to augment this growth. Effective growth management will place increased demands on our management team, operational and financial resources and expertise. To manage growth, we must optimize our operational, financial and management processes and systems, and hire and train additional qualified personnel. Failure to manage this growth effectively could impair our ability to generate revenues or could cause our expenses to increase more rapidly than revenues, resulting in operating losses or reduced profitability.
Foreign currency exchange rate fluctuations may have a negative impact on our reported earnings.
We are subject to the risks of fluctuating foreign currency exchange rates, which could have an adverse effect on the sales price of our products in foreign markets, as well as the costs and expenses of our foreign subsidiaries. A substantial amount of our revenues is derived from international operations, and we anticipate that a significant portion of revenues will continue to come from outside the United States in the future. As a result, currency fluctuations among the United States dollar, British pound, euro and the other currencies in which we do business have caused and will continue to cause foreign currency translation and transaction gains and losses. We have not used forward exchange contracts to hedge our foreign currency exposures. We attempt to manage foreign currency risk through the matching of assets and liabilities. In the future, we may undertake to manage foreign currency risk through hedging methods, including foreign currency contracts. We recognize foreign currency gains or losses arising from our operations in the period incurred. We cannot guarantee that we will be successful in managing foreign currency risk or in predicting the effects of exchange rate fluctuations upon our future operating results because of the number of currencies involved, the variability of currency exposure and the potential volatility of currency exchange rates. We cannot predict with any certainty changes in foreign currency exchange rates or the degree to which we can address these risks.
Failure or inadequacy of our information technology infrastructure or software could adversely affect our day-to-day operations and decision-making processes and have an adverse effect on our performance.
We depend on accurate and timely information and numerical data from key software applications to aid our day-to-day business, financial reporting and decision-making and, in many cases, proprietary and custom-designed software is necessary to operate our business. We are upgrading our disaster recovery procedures for our critical systems. However, any disruption caused by the failure of these systems, the underlying equipment, or communication networks could delay or otherwise adversely impact our day-to-day business and decision making, could make it impossible for us to operate critical equipment, and could have an adverse effect on our performance, if our disaster recovery plans do not mitigate the disruption. Disruptions could be caused by a variety of factors, such as catastrophic events or weather, power outages, or cyber-attacks on our systems by outside parties.
We review our IT systems regularly to assess and implement opportunities to improve or upgrade our enterprise resource planning (ERP) or other information systems required to operate our business effectively. Our ERP systems are critical to our ability to accurately maintain books and records, record transactions, provide important information to our management and prepare our financial statements. The implementation of any IT systems, including ERP systems has required in the past, and may continue to require, the investment of significant financial and human resources. In addition, we may not be able to successfully complete the implementation of the ERP systems without experiencing difficulties. Any disruptions, delays or deficiencies in the design and implementation of any IT system, including ERP systems could adversely affect our ability to process orders, ship products, provide services and customer support, send invoices and track payments, fulfill contractual obligations or otherwise operate our business.
An information security incident, including a cybersecurity breach, could have a negative impact to our business or reputation
To meet business objectives, we rely on both internal information technology (IT) systems and networks, and those of third parties and their vendors, to process and store sensitive data, including confidential research, business plans, financial information, intellectual property, and personal data that may be subject to legal protection. The extensive information security and cybersecurity threats, which affect companies globally, pose a risk to the security and availability of these IT systems and networks, and the confidentiality, integrity, and availability of our sensitive data. We continually assess these threats and make investments to increase internal protection, detection, and response capabilities, as well as ensure our third-party providers have required capabilities and controls, to address this risk. To date, we have not experienced any material impact to the business or operations resulting from information or cybersecurity attacks; however, because of the frequently changing attack techniques, along with the increased volume and sophistication of the attacks, there is the potential for us to be adversely impacted. This impact could result in reputational, competitive, operational or other business harm as well as financial costs and regulatory action. Additionally, the California Consumer Privacy Act of 2018 (the “CCPA”), which became effective on January 1, 2020, provides private rights of action for data breaches and requires companies that process information on California residents to make new disclosures to consumers about their data collection, use and sharing practices and allow consumers to opt out of certain data sharing with third parties. Compliance with the CCPA and other current and future applicable privacy, cybersecurity and related laws can be costly and time-consuming. Significant capital investments and other expenditures could also be required to remedy cybersecurity problems and prevent future breaches, including costs associated with additional security technologies, personnel, experts and credit monitoring services for those whose data has been breached. These costs, which could be material, could adversely impact our results of operations in the period in which they are incurred and may not meaningfully limit the success of future attempts to breach our information technology systems.
We may incur additional restructuring costs or not realize the expected benefits of our initiatives to reduce operating expenses to date and in the future.
We may not be able to implement all of the actions that we intend to take in the restructuring of our operations, and we may not be able to fully realize the expected benefits from such realignment and restructuring plans or other similar restructurings in the future. In addition, we may incur additional restructuring costs in implementing such realignment and restructuring plans or other similar future plans in excess of our expectations. The implementation of our restructuring efforts, including the reduction of our workforce, may not improve our operational and cost structure or result in greater efficiency of our organization; and we may not be able to support sustainable revenue growth and profitability following such restructurings.
Failure to raise additional capital or generate the significant capital necessary to implement our acquisition strategy, expand our operations and invest in new products could reduce our ability to compete and result in less revenues.
We anticipate that our financial resources, which include available cash, cash generated from operations, and debt and equity capacity, will be sufficient to finance operations and capital expenditures for at least the next twelve months. However, this expectation is premised on the current operating plan, which may change as a result of many factors, including market acceptance of new products and future opportunities with collaborators. Consequently, we may need additional funding sooner than anticipated. In addition, our borrowings under the Citizens Credit Facility may not be sufficient to fund our acquisition strategy. In such case, our inability to raise sufficient capital on favorable terms and in a timely manner (if at all) could seriously harm our business, product development, and acquisition efforts. In addition, our Credit Agreement contains various negative covenants that, among other things, restrict our ability to incur additional indebtedness and make acquisitions for aggregate consideration in excess of $5.0 million. If future financing is not available or is not available on acceptable terms, we may have to alter our operations or change our business strategy. We cannot assure you that the capital required to fund operations, or our acquisition strategy will be available in the future.
If we fail to retain key personnel and hire, train and retain qualified employees, we may not be able to compete effectively, which could result in reduced revenue or increased costs.
Our success is highly dependent on the continued services of key management, technical and scientific personnel. Our management and other employees may voluntarily terminate their employment at any time upon short notice. The loss of the services of any member of the senior management team, including the Chief Executive Officer, James Green; the Chief Financial Officer, Michael Rossi; or any of the managerial, technical or scientific staff may significantly delay or prevent the achievement of product development, our growth strategies and other business objectives. Our future success will also depend on our ability to identify, recruit and retain additional qualified scientific, technical and managerial personnel. We operate in several geographic locations where labor markets are particularly competitive, including the Boston, Massachusetts and Minneapolis, Minnesota metropolitan areas, England, and Germany where demand for personnel with these skills is extremely high and is likely to remain high. As a result, competition for qualified personnel is intense, particularly in the areas of general management, finance, information technology, engineering and science, and the process of hiring suitably qualified personnel is often lengthy and expensive, and may become more expensive in the future. If we are unable to hire and retain a sufficient number of qualified employees, our ability to conduct and expand our business could be seriously reduced.
Our success will depend partly on our ability to operate without infringing on or misappropriating the intellectual property rights of others.
We may be sued for infringing on the intellectual property rights of others, including the patent rights, trademarks and trade names of third parties. Intellectual property litigation is costly, and the outcome is uncertain. If we do not prevail in any intellectual property litigation, in addition to any damages we might have to pay, we could be required to stop the infringing activity, or obtain a license to or design around the intellectual property in question. If we are unable to obtain a required license on acceptable terms, or are unable to design around any third-party patent, we may be unable to sell some of our products and services, which could result in reduced revenue.
As a result of our spin-off of Harvard Apparatus Regenerative Technology, Inc., now known as Biostage, together with certain related transactions, third parties may seek to hold us responsible for Biostage’s liabilities, including liabilities that Biostage has assumed from us.
Third parties may continue to seek to hold us responsible for Biostage’s liabilities, including any of the liabilities that Biostage agreed to retain or assume in connection with the separation of the Biostage business from our businesses, and related spin-off distribution. On April 14, 2017, anticipated representatives for the estate of an individual plaintiff filed a wrongful death complaint with the Suffolk Superior Court, in the County of Suffolk, Massachusetts, against us and other defendants, including Biostage, as well as another third party. The complaint seeks payment for an unspecified amount of damages and alleges that the plaintiff sustained terminal injuries allegedly caused by products, including one synthetic trachea scaffold and two bioreactors, provided by certain of the named defendants and utilized in connection with surgeries performed by third parties in Europe in 2012 and 2013. We continue to vigorously defend this case by counsel provided by our liability insurance carrier from whom we have requested defense and indemnification for losses incurred related to this lawsuit. Any such product liability insurance coverage may not be sufficient to satisfy all liabilities resulting from this claim. If claims against us substantially exceed our coverage, then our business could be adversely impacted. While we believe that claims made in this lawsuit are without merit, we are unable to predict the ultimate outcome of such litigation. Pursuant to our agreements with Biostage, Biostage has agreed to indemnify us for claims and losses relating to certain liabilities that it has assumed from us, including liabilities in connection with the sale of Biostage’s products, intellectually property infringement and other liabilities related to the operation of Biostage’s business. However, if those liabilities are significant and we are ultimately held liable for them, we cannot assure you that Biostage will have the ability to satisfy its obligations to us, in particular due to Biostage having limited revenues, products in early-stage development and a need for additional funds in the future. If Biostage is unable to satisfy its obligations under its indemnity to us, we may have to satisfy these obligations, which could have an adverse impact on our financial condition, results of operations or cash flows.
Risks Related to Our Common Stock
If we raise additional funds through the sale of equity or convertible debt or equity-linked securities, existing percentages of ownership in our common stock will be reduced and these transactions may dilute the value of our outstanding common stock.
We may raise additional funds through the sale of equity or convertible debt or equity-linked securities to repay our existing indebtedness, implement our acquisition strategy, expand our operations and/or invest in new products. If we so raise additional funds through such sales, existing percentages of ownership in our common stock will be reduced and these transactions may dilute the value of our outstanding common stock. We may issue securities that have rights, preferences and privileges senior to our common stock. If we raise additional funds through collaborations or licensing arrangements, we may relinquish rights to certain of our technologies or products, or grant licenses to third parties on terms that are unfavorable.
Our stock price has fluctuated in the past and could experience substantial declines in the future.
The market price of our common stock has experienced significant fluctuations and may become volatile and could decline in the future, perhaps substantially, in response to various factors including, but not limited to:
·
significant sales of our common stock, whether by us or our shareholders;
·
volatility of the financial markets;
·
uncertainty regarding the prospects of the domestic and foreign economies;
·
technological innovations by competitors or in competing technologies;
·
revenues and operating results fluctuating or failing to meet the expectations of management, securities analysts, or investors in any quarter;
·
comments of securities analysts and mistakes by or misinterpretation of comments from analysts, downward revisions in securities analysts’ estimates or management guidance;
·
investment banks and securities analysts becoming subject to lawsuits that may adversely affect the perception of the market;
·
conditions or trends in the biotechnology and pharmaceutical industries;
·
announcements of significant acquisitions or financings or strategic partnerships;
·
failure to realize the anticipated benefits of the DSI acquisition;
·
non-compliance with the internal control standards pursuant to the Sarbanes-Oxley Act of 2002; and
·
a decrease in the demand for our common stock.
In addition, public stock markets have experienced extreme price and trading volatility. The stock market and the Nasdaq Global Market in general, and the biotechnology industry and small cap markets in particular, have experienced significant price and volume fluctuations that at times may have been unrelated or disproportionate to the operating performance of those companies. These broad market and industry factors may further harm the market price of our common stock, regardless of our operating performance. In the past, securities class action litigation has often been instituted following periods of volatility in the market price of a company’s securities. A securities class action suit against us could result in substantial costs, potential liabilities and the diversion of management’s attention and resources.
General Risks
The COVID-19 outbreak has significantly impact worldwide economic conditions and has negatively impacted our business, financial condition and results of operations.
The ongoing global outbreak of COVID-19 has caused disruptions to our business and has had a negative impact on our operations to date. As a result of the outbreak, many of our customers, particularly academic research institutions, have had laboratory work negatively impacted, which will continue to negatively impact, our sales. Additionally, to ensure business continuity while maintaining a safe environment for employees, the majority of our workforce continues to work from home. We continue to require social distancing and other measures in factories for our manufacturing and other personnel essential to production to continue work within our facilities. Business travel continues to be significantly reduced. While we have maintained operations under these conditions, these measures represent disruptions which can impact productivity including sales and marketing activities. Accordingly, these conditions in addition to the overall impact on the global economy could continue to have a negative impact our results of operations and cash flows.
Economic conditions and regulatory changes caused by the United Kingdom’s (“UK”) exit from the European Union (“EU”) could adversely affect our business.
The UK House of Commons passed a Brexit deal on December 20, 2019 and the UK formally left the EU on January 31, 2020. On December 30, 2020, the EU and UK entered into the EU-UK Trade and Cooperation Agreement. The announcement of Brexit has resulted in significant volatility in global stock market and currency exchange rate fluctuations that resulted in strengthening of the U.S. dollar relative to other foreign currencies in which we conduct business. The withdrawal of the UK from the EU may also create global economic uncertainty, including an uncertain funding environment for UK customers historically receiving funding from the EU, which may cause our customers to reduce their spending budgets. Since a significant proportion of the regulatory framework in the UK is derived from EU directives and regulations, Brexit could materially change the regulatory regime applicable to the approval of any product candidates in the UK. Brexit is likely to lead to legal uncertainty and potentially divergent national laws and regulations as the UK determines which EU laws to replace or replicate. This could adversely affect our business, financial condition, operating results and cash flows.
If we incur higher costs as a result of trade policies, treaties, government regulations or tariffs, we may become less profitable.
There continues to be uncertainty about the relationship between the United States and foreign countries, including with respect to trade policies, treaties, government regulations and tariffs. We are unable to predict whether or when tariffs will be imposed or the impact of any such future tariff increases.
We may be the subject of lawsuits from counterparties to acquisitions and divestitures, including an acquiring company or its stockholders, an acquired company’s previous stockholders, a divested company’s stockholders or our current stockholders.
We may be the subject of lawsuits from either an acquiring company or its stockholders, an acquired company’s previous stockholders, a divested company’s stockholders or our current stockholders. Such lawsuits could result from the actions of the acquisition or divestiture target prior to the date of the acquisition or divestiture, from the acquisition or divestiture transaction itself or from actions after the acquisition or divestiture. Defending potential lawsuits could cost us significant expense and detract management’s attention from the operation of the business. Additionally, these lawsuits could result in the cancellation of or the inability to renew certain insurance coverage that would be necessary to protect our assets.
Rising commodity and precious metals costs could adversely impact our profitability.
Raw material commodities such as resins, and precious metal commodities such as platinum are subject to wide price variations. Increases in the costs of these commodities and the costs of energy, transportation and other necessary services may adversely affect our profit margins if we are unable to pass along any higher costs in the form of price increases or otherwise achieve cost efficiencies such as in manufacturing and distribution.
Provisions of Delaware law, or of our charter and bylaws may make a takeover more difficult, which could cause our stock price to decline.
Provisions in our certificate of incorporation and bylaws and in the Delaware corporate law may make it difficult and expensive for a third party to pursue a tender offer, change in control or takeover attempt, which is opposed by management and the board of directors. Public stockholders who might desire to participate in such a transaction may not have an opportunity to do so. We have a staggered board of directors that makes it difficult for stockholders to change the composition of the board of directors in any one year. These anti-takeover provisions could substantially impede the ability of public stockholders to change our management and board of directors. Such provisions may also limit the price that investors might be willing to pay for shares of our common stock in the future.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B. Unresolved Staff Comments.
None.

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ITEM 2. PROPERTIES
Item 2. Properties.
Our facilities perform manufacturing, research and development, sales and marketing, and administration functions. As of December 31, 2020, we leased the following principal facilities:
Approximate
Location
Description of Facility
Square Footage
Expiration
New Brighton, Minnesota
Manufacturing facility
96,000
Holliston, Massachusetts
Manufacturing facility and corporate headquarters
83,000
Reutlingen, Germany
Manufacturing facility
22,000
Barcelona, Spain
Manufacturing facility
21,000
2021-2022
March-Hugstetten, Germany
Manufacturing facility
12,000
We also lease additional facilities in Cambridge, England; Kista, Sweden; Shanghai, China; Les Ulis, France; St. Augustin, Germany; and Montreal, Canada. We believe our current facilities are adequate for our needs for the foreseeable future.

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ITEM 3. LEGAL PROCEEDINGS
Item 3. Legal Proceedings.
For information related to legal proceedings, see the discussion in Note 15 to the Consolidated Financial Statements included in “Part IV, Item 15. Exhibits, Financial Statement Schedules” of this report, which information is incorporated by reference into this Item 3.

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ITEM 4. MINE SAFETY DISCLOSURE
Item 4. Mine Safety Disclosures
Not Applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
Our common stock has been quoted on the Nasdaq Global Market since our initial public offering on December 7, 2000, and trades under the symbol “HBIO.”
Stockholders
There were 104 holders of record of our common stock as of March 5, 2021. We believe that the number of beneficial owners of our common stock at that date was substantially greater.
Dividend Policy
We have never declared or paid cash dividends on our common stock in the past and do not intend to pay cash dividends on our common stock in the foreseeable future. Any future determination to pay cash dividends will be at the discretion of our Board of Directors and will depend on our financial condition, results of operations, capital requirements and other factors our Board of Directors deems relevant.

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ITEM 6. SELECTED FINANCIAL DATA
Item 6. Selected Financial Data
Not Applicable.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Forward-Looking Statements
The following section of this Annual Report on Form 10-K contains statements that are not statements of historical fact and are forward-looking statements within the meaning of federal securities laws. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. These statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties. Factors that may cause our actual results to differ materially from those in the forward-looking statements include those factors described in “Item 1A. Risk Factors” in this Annual Report on Form 10-K. You should carefully review all of these factors, as well as the comprehensive discussion of forward-looking statements on page 1 of this Annual Report on Form 10-K.
Overview
Harvard Bioscience is a leading developer, manufacturer and seller of technologies, products and services that enable fundamental research, discovery, and preclinical testing for drug development. Our customers range from renowned academic institutions and government laboratories to the world’s leading pharmaceutical, biotechnology and contract research organizations. With operations in North America, Europe, and China, we sell through a combination of direct and distribution channels to customers around the world.
Recent Developments
COVID-19
On March 11, 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic. The COVID-19 pandemic has had a negative impact on our operations to date and the future impacts of the pandemic and any resulting economic impact are largely unknown and rapidly evolving. Since the COVID-19 outbreak in the United States, Europe and elsewhere, many customers, particularly academic research institutions, have been unable to maintain laboratory work which has negatively impacted, and will continue to negatively impact, our sales. Additionally, to ensure business continuity while maintaining a safe environment for employees aligned with guidance from government and health organizations, we transitioned the majority of our workforce to work-from-home while implementing social distancing requirements and other measures in factories to allow manufacturing and other personnel essential to production to continue work within our facilities. Business travel was significantly reduced during this period. While we have maintained operations under these conditions, these measures represent disruptions which can impact productivity including sales and marketing activities. Accordingly, these conditions in addition to the overall impact on the global economy has negatively impacted our results of operations and cash flows.
As a result of market and economic conditions, in accordance with the guidelines set forth in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 350 and ASC 360, we performed an analysis for potential interim impairment indicators of our intangible and other long-lived assets. During the year ended December 31, 2020, we concluded there were no impairments of goodwill, other indefinite-lived intangibles, or long-lived assets that resulted from triggering events due to COVID-19.
See Part I, Item 1. “Business-Our History and Strategy” of this report for a discussion of recent significant acquisitions, divestitures and other developments.
Revenue for the year ending December 31, 2020 was negatively impacted due to the conditions noted, and is likely to continue to be negatively impacted by delayed or partial reopening of academic research institutions. In April 2020, we implemented a COVID-19 mitigation plan designed to reduce expenses. Actions taken include work hour and temporary salary reductions, reductions-in-force and a realignment of our organizational structure to reduce management layers. During the second half of 2020 a portion of our employees returned to regular work hours in areas of the business based on sequential improvements in revenue. These cost reductions are in addition to the significant restructuring actions we initiated in the fourth quarter of 2019 as discussed below. If business interruptions resulting from COVID-19 were to be prolonged or expanded in scope, our business, financial condition, results of operations and cash flows would be negatively impacted. We will continue to actively monitor this situation and will implement actions necessary to maintain business continuity.
Restructuring Plan
In July 2019, we announced the appointment by the Board of Directors of James Green as President and Chief Executive Officer and the appointment of Michael Rossi as Chief Financial Officer. Immediately thereafter we began a process to identify opportunities to improve profitability, increase cash flow and enhance internal capabilities to position the business for organic growth. As a result of this assessment, in September 2019 we announced a strategic action plan for 2020 and 2021. Key elements of this plan include:
●
Capitalizing on the strong existing Harvard Bioscience and Data Science franchises and products;
●
Adding new senior leadership with significant experience with turnarounds and driving growth and operational improvements within global, middle market life science manufacturing businesses;
●
Consolidating sub-scale operations and integrating existing functions and processes to drive scale and reduce fixed costs;
●
Increasing effectiveness of sales and product management to deliver organic sales growth; and
●
Improving cash flow and reducing debt and leverage.
In December 2019, we implemented the 2019 Restructuring Plan to deliver significant cost savings beginning in 2020 and to support delivery of the strategic action plan we announced in September 2019. The 2019 Restructuring Plan includes consolidation of our Connecticut manufacturing plant with our existing Massachusetts site, downsizing of operations in the United Kingdom and a reduction in force across the business equal to approximately 10% of our headcount. The 2019 Restructuring Plan is expected to deliver annualized run-rate savings of $4.0 million to $5.0 million. The original initiatives under the 2019 Restructuring Plan were completed in the second half of 2020.
We
A
As
Selected Results of Operations
Year ended December 31, 2020 compared to year ended December 31, 2019
In the table below, we provide an overview of selected operating metrics.
(dollars in thousands)
% of
Revenue
% of
Revenue
Revenues
$ 102,100
$ 116,176
Gross profit
58,041
56.8%
64,322
55.4%
Sales and marketing expenses
19,916
19.5%
23,264
20.0%
General and administrative expenses
23,509
23.0%
22,760
19.6%
Research and development expenses
8,685
8.5%
10,715
9.2%
Amortization of intangible assets
5,710
5.6%
5,746
4.9%
Impairment charges
-
-%
1,460
1.3%
Interest expense
4,831
4.7%
5,410
4.7%
Debt extinguishment and related costs
1,876
1.8%
-
-%
Other expense, net
0.8%
0.4%
Income tax expense (benefit)
0.5%
(815 )
(0.7)%
Revenues
Revenues for the year ended December 31, 2020 were $102.1 million, a decrease of (12.1)%, or $14.1 million, compared to revenues of $116.2 million for the same period in 2019. The decrease in revenue was primarily due to the impact of the COVID-19 pandemic and in particular, lower sales to academic labs and other institutions that are temporarily closed as a result of the pandemic. The negative impact of academic lab closures has moderated since the middle of 2020 but continued to negatively impact the business exiting 2020. These reductions were partially offset by improved sales of products from our Preclinical product family to CRO and pharmaceutical customers.
Gross Profit
Gross profit decreased $6.3 million, or 9.8%, to $58.0 million for the year ended December 31, 2020 compared with $64.3 million for the year ended December 31, 2019, due primarily to the reduction in revenue noted. Gross margin increased to 56.8% for the year ended December 31, 2020 compared with 55.4% for the year ended December 31, 2019. The increase in gross margin was primarily due to improved product mix as well as cost reduction initiatives partially offset by lower volumes.
Sales and marketing expenses
Sales
General and administrative expenses
General
Research and development expenses
Research
Amortization of intangible assets
Amortization of intangible asset expenses was $5.7 million for the year ended December 31, 2020 and did not change materially as compared to the year ended December 31, 2019.
Impairment charges
There were no impairment charges for the year ended December 31, 2020. Impairment charges for the year ended December 31, 2019 included a write-off of $0.9 million related to in-process research and development intangible assets as a result of our on-going evaluation of our research and development activities, and a charge of $0.5 million related to the impairment of certain intangible assets due to the decision to discontinue one of our product lines and to cease operations in our facility in Raleigh, North Carolina.
Interest expense
Interest expense was $4.8 million for the year ended December 31, 2020, a decrease of $0.6 million, or 10.7%, compared with $5.4 million for the year ended December 31, 2019 due to lower average debt balances for the year ended December 31, 2020 compared to the year ended December 31, 2019.
Debt extinguishment and related costs
On December 22, 2020, we entered into the Credit Agreement for the Citizens Credit Facility, which replaced our Prior Credit Facility. In connection with our entry into the Credit Agreement, we paid $0.6 million in debt extinguishment costs, wrote off $0.8 million of unamortized debt issuance costs, and paid $0.5 million to terminate our interest rate swap agreements.
Other expense, net
Other expense, net, were $0.8 million for the year ended December 31, 2020, an increase of $0.3 million, compared with $0.5 million for the year ended December 31, 2019. The increase was substantially due to foreign currency exchange losses.
Income tax expense (benefit)
Income tax was an expense of $0.5 million for the year ended December 31, 2020, compared with a benefit of $(0.8) million for the year ended December 31, 2019. The effective income tax rate was (7.1)% for the year ended December 31, 2020, compared with 14.8% for the same period in 2019. The difference between our effective rates in 2020 as compared to 2019 is due to a change in estimate of the realizability of certain U. S. deferred tax assets. In 2020, we increased the valuation allowance against
Liquidity and Capital Resources
Our primary sources of liquidity are cash and cash equivalents, internally generated cash flow from operations and our revolving credit facility. Our expected cash outlays relate primarily to cash payments due under our Credit Agreement described below as well as capital expenditures, severance and other payments associated with ongoing restructuring and cost reduction initiatives.
On December 22, 2020, we entered into the Citizens Credit Facility that 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). The Citizens Credit Facility matures on December 22, 2025.
The Citizens Credit Facility replaced the Prior Credit Facility which consisted of a revolving credit facility and a term loan and was scheduled to expire on January 31, 2023. In connection with entering into the Credit Agreement, we paid off the Prior Credit Facility as well as incurred $0.6 million in fees and expenses. We financed the payoff of the outstanding borrowings under the Prior Credit Facility with borrowings under the Citizens Credit Facility.
As of December 31, 2020, we held cash and cash equivalents of $8.3 million, compared with $8.3 million at December 31, 2019. As of December 31, 2020 and December 31, 2019, we had $49.4 million and $55.0 million of borrowings outstanding, respectively. Total debt, net of cash and cash equivalents, was $41.1 million at December 31, 2020, compared to $46.7 million at December 31, 2019.
As of December 31, 2020 and December 31, 2019, cash and cash equivalents held by our foreign subsidiaries was $2.5 million and $3.5 million, respectively.
Condensed Consolidated Cash Flow Statements
Year Ended December 31,
Net cash provided by operating activities
$ 9,331
$ 8,045
Net cash used in investing activities
(1,402 )
(229 )
Net cash used in financing activities
(7,967 )
(7,624 )
Effect of exchange rate changes on cash
(30 )
(Decrease) increase in cash and cash equivalents
$ (18 )
$
Cash provided by operations was $9.3 million for the year ended December 31, 2020, an increase of $1.3 million as compared with $8.0 million for the year ended December 31, 2019. The increase in net cash flow from operations was primarily due to working capital reductions including significant improvements in accounts receivable collections.
Cash used in investing activities was $1.4 million for the year ended December 31, 2020 and consisted primarily of capital expenditures. Our investing activities used cash of $0.2 million for the year ended December 31, 2019 consisting of $1.2 million used for capital expenditures and the receipt of $1.0 million in connection with the release of an escrow amount associated with the sale of substantially all of the assets of our wholly-owned subsidiary, Denville Scientific, Inc. (the “Denville Transaction”).
Cash used in financing activities was $8.0 million and $7.6 million for the years ended December 31, 2020 and 2019, respectively. Cash used in both years is due primarily to cash provided by operations utilized to reduce overall debt levels.
During the year ended December 31, 2020, net payments to reduce total debt were $5.6 million. Prior to entering the Citizens Credit Facility, we made payments under the Prior Credit Facility of $11.1 million to reduce term loan borrowings, with net borrowings of $2.8 million under the revolving facility. At the closing of the Citizens Credit Facility, we repaid in full the Prior Credit Facility, which included $43.9 million of term loan borrowings and $2.8 million of outstanding revolver borrowings. Under the Citizens Credit Facility, we borrowed $49.4 million, consisting of a $40.0 million term loan and $9.4 million drawn on the revolving loan. Other financing activities for the year ended December 31, 2020 were primarily $1.9 million of costs associated with the refinancing of our debt previously described.
During the year ended December 31, 2019 we borrowed $4.3 million and repaid $11.7 million of debt, including an excess cash flow payment of $4.0 million and a payment of $1.0 million in connection with the release of an escrow amount associated with the Denville Transaction as required by the Prior Credit Facility, and ended the year with $55.0 million of borrowings.
On April 18, 2020, the Company entered into a promissory note with PNC Bank, National Association, which provided for a loan in the amount of $6.1 million (the “PPP Loan”) pursuant to the Paycheck Protection Program (the PPP) of the Coronavirus Aid, Relief, and Economic Security Act administered by the U.S. Small Business Administration (the “SBA”). On April 23, 2020, the SBA, in consultation with the U.S. Department of the Treasury, issued guidance regarding consideration of alternate available sources of liquidity and its impact on qualification for PPP loans. The Company reassessed its business plans and liquidity available under our existing credit facility and elected to repay all PPP funds. The PPP Loan was repaid in full on May 4, 2020.
Borrowing
On December 22, 2020, we entered into the Citizens Credit Facility which 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). Obligations under the Credit Agreement are secured by substantially all of our assets and are guaranteed by certain of our direct, domestic wholly-owned subsidiaries. The Credit Agreement matures on December 22, 2025. See Note 11 to the Consolidated Financial Statements for a detailed discussion regarding our Credit Agreement.
We are compliant with all covenants under the Credit Agreement as of December 31, 2020.
As of December 31, 2020 and December 31, 2019, we had borrowings of $49.4 million and $55.0 million respectively, outstanding. We had available borrowing capacity under the revolving line of credit of $15.6 million as of December 31, 2020. As of December 31, 2020, the interest rate on our borrowings was 3.25%.
Based on our current operating plans, including actions taken to mitigate the impact of COVID-19, we expect that our available cash, cash generated from current operations and debt capacity will be sufficient to finance current operations, any costs associated with restructuring activities and capital expenditures for at least the next 12 months. This assessment includes consideration of our best estimates of the impact of the COVID-19 pandemic on our financial results described above.
Our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary as a result of a number of factors.
Critical Accounting Policies and Estimates
The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to revenue recognition, investments, income taxes, litigation and other contingencies. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
We believe the following are the more significant judgments and estimates used in the preparation of our consolidated financial statements.
Goodwill
Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in each business combination. Goodwill is not subject to amortization, but is subject to at least an annual assessment for impairment. We perform our impairment analysis of goodwill on an annual basis during the fourth quarter of the year unless conditions arise that warrant a more frequent evaluation. For purposes of our goodwill analysis, we have one operating unit.
When goodwill is assessed for impairment, we have the option to perform an assessment of qualitative factors of impairment (optional assessment) prior to necessitating a quantitative impairment test. Should the optional assessment be used for any given year, qualitative factors to consider for a reporting unit include financial performance; legal, regulatory, contractual, political, business, or other factors; entity specific factors; industry and market considerations; and other relevant events and factors affecting the reporting unit. If we determine in the qualitative assessment that it is more likely than not that the fair value of the reporting unit is less than its carrying value, a quantitative test is then performed. Otherwise, no further testing is required. For a reporting unit tested using a quantitative approach, we compare the fair value of the reporting unit with the carrying amount of the reporting unit, including goodwill. The fair value of the reporting unit is estimated using an income approach.
Under the income approach, we measure fair value of the reporting unit based on a projected cash flow method using a discount rate determined by our management which is commensurate with the risk inherent in its current business model. Our discounted cash flow projections are based on its annual financial forecasts developed internally by management for use in managing our business. If the fair value of the reporting unit exceeds its carrying value, goodwill is not impaired, and no further testing is required. If the fair value of the reporting unit is less than the carrying value, then the amount of goodwill impairment will be the amount by which the reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill.
Intangible Assets
Intangible assets are comprised of existing technology, customer contracts and contractual relationships, and other definite-lived and indefinite-lived intangible assets. Identifiable intangible assets resulting from the acquisitions of entities accounted for using the purchase method of accounting are estimated by management 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.
We amortize definite-lived assets over their estimated useful lives. We evaluate definite-lived and indefinite-lived assets for impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. The carrying value is not recoverable if it exceeds the undiscounted cash flows resulting from the use of the asset and its eventual disposition. Our estimates of future cash flows attributable to our assets require significant judgment based on our historical and anticipated results and are subject to many factors. Factors we consider important which could trigger an impairment review include significant negative industry or economic trends, significant loss of clients, and significant changes in the manner of our use of the acquired assets or the strategy for our overall business.
When we determine 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, we measure the potential impairment based on a projected discounted cash flow method using a discount rate determined by our management to be commensurate with the risk inherent in our 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.
Income Taxes and Valuation Allowance
We are subject to income taxes in the U.S. and numerous foreign jurisdictions. Our annual tax rate is based on income, statutory tax rates, tax reserve changes and tax planning opportunities available to us in the various jurisdictions in which we operate. Significant judgment is required in determining the annual tax rate and in evaluating our tax positions. We regularly assess the likelihood of tax adjustments in each of the tax jurisdictions in which we have operations and account for the related financial statement implications. We have established tax reserves that we believe are appropriate given the possibility of tax adjustments. Determining the appropriate level of tax reserves requires judgment regarding the uncertain application of tax laws. Reserves are adjusted when information becomes available or when an event occurs indicating a change in the reserve is appropriate. Changes in tax reserves could have a material impact on our financial condition or results of operations.
Significant judgment is also required in determining the amount of deferred tax assets that will ultimately be realized and corresponding deferred tax asset valuation allowance. When estimating the necessary valuation allowance, we consider all available evidence for each jurisdiction including historical operating results, estimates of future taxable income and the feasibility of ongoing tax planning strategies. If new information becomes available that would alter our estimate of the amount of deferred tax assets that will ultimately be realized, we adjust the valuation allowance through income tax expense. Changes in the deferred tax asset valuation allowance could have a material impact on our financial condition or results of operations.
Excess and Obsolete Inventory
Inventories are priced at the lower of cost (first-in, first-out method) or net realizable value. When necessary, the write-down of inventory to its net realizable value is recorded for obsolete or slow-moving inventory based on assumptions about future demand and marketability of products, the impact of new product introductions and specific identification of items, such as product discontinuance or engineering/material changes. These estimates could vary significantly, either favorably or unfavorably, from actual requirements if future economic conditions, customer inventory levels or competitive conditions differ from our expectations.
Impact of Foreign Currencies
Our international operations in some instances operate in a natural hedge as we sell our products in many countries and a substantial portion of our revenues, costs and expenses are denominated in foreign currencies, primarily the British pound, the euro, the Canadian dollar and the Swedish krona.
During the year ended December 31, 2020, changes in foreign currency exchange rates resulted in a favorable translation effect on our consolidated revenues and on our consolidated net loss. Changes in foreign currency exchange rates resulted in a favorable effect on revenues of approximately $0.5 million and a favorable effect on expenses of approximately $1.0 million.
The gain associated with the translation of foreign currency into U.S. dollars included as a component of comprehensive loss during the year ended December 31, 2020, was approximately $1.7 million, compared to a loss of $(0.5) million for the year ended December 31, 2019.
In addition, the currency exchange rate fluctuations included as a component of net loss resulted in approximately $(0.5) million and $(0.1) million in currency loss during the year ended December 31, 2020 and 2019, respectively.
Recent Accounting Pronouncements
For information on recent accounting pronouncements impacting our business, see “Recent Accounting Pronouncements” included in Note 2 to the Consolidated Financial Statements included in “Part IV, Item 15. Exhibits, Financial Statement Schedules” of this report.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
Not Applicable.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. Financial Statements and Supplementary Data.
The information required by this item is contained in the financial statements referenced in “Part IV, Item 15. Exhibits, Financial Statement Schedules” of this report, which financial statements are appended to this report. An index of those financial statements is found on page.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.

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ITEM 9A. CONTROLS AND PROCEDURES
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
Disclosure controls and procedures refer to controls and other procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the U.S. Securities and Exchange Commission. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in our reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding our required disclosure. In designing and evaluating our disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management was required to apply its judgment in evaluating and implementing possible controls and procedures.
We carried out an evaluation, under the supervision and with the participation our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered in this Report. Based upon the evaluation described above, our Chief Executive Officer and Chief Financial Officer have concluded that they believe that our disclosure controls and procedures were effective, as of December 31, 2020, in providing reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures, and is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.
(b)
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Our internal control over financial reporting is a process designed by and under the supervision of our Chief Executive Officer and Chief Financial Officer and effected by our management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles. Our 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 transactions and dispositions of assets, (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles, (3) provide reasonable assurance that receipts and expenditures are being made only in accordance with authorizations of management and directors, and (4) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the consolidated financial statements.
Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. It is a process that involves human diligence and compliance and is therefore subject to human error and misjudgment. In general, evaluations of effectiveness for future periods are subject to risk as controls may become inadequate due to changes in conditions or the degree of compliance with key processes or procedures could deteriorate.
Our management evaluated the effectiveness of our internal control over financial reporting as of December 31, 2020 using the criteria set forth in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). As a result of that evaluation, management has concluded that our internal control over financial reporting was effective as of December 31, 2020.
The effectiveness of our internal control over financial reporting as of December 31, 2020 has also been audited by Grant Thornton LLP, our independent registered public accounting firm, as stated in their report, which is included below in Item 9A(e).
(c)
Changes in Internal Controls Over Financial Reporting
There has been no change in the Company's internal control over financial reporting as of December 31, 2020, that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting. We continue to monitor the impact of the COVID-19 pandemic and, despite many of our employees working remotely, have not experienced any changes that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
(d)
Inherent Limitations on Effectiveness of Controls
The design of any system of control is based upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated objectives under all future events, no matter how remote, that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may not deteriorate. Because of their inherent limitations, systems of control may not prevent or detect all misstatements. Accordingly, even effective systems of control can provide only reasonable assurance of achieving their control objectives.
(e)
Report of Independent Registered Public Accounting Firm
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
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, 2020, 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, 2020, 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, 2020, and our report dated March 12, 2021 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 (“Management’s Report”). 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
Boston, Massachusetts
March 12, 2021

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ITEM 9B. OTHER INFORMATION
Item 9B. Other Information.
None.
PART III

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
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 2021 Annual Meeting of Stockholders.

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ITEM 11. EXECUTIVE COMPENSATION
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 2021 Annual Meeting of Stockholders.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
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 2021 Annual Meeting of Stockholders.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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 2021 Annual Meeting of Stockholders.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
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 2021 Annual Meeting of Stockholders.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. Exhibits, Financial Statement Schedules.
The following documents are filed as part of this Annual Report on Form 10-K or incorporated by reference as indicated.
(a) 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.
(b) 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.
(c) 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.