hboi20220331

hboi20220331_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2022

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

For the transition period from_____to _____

Commission file number 001-33957

HARVARD BIOSCIENCE, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware 04-3306140

(State or other jurisdiction of (I.R.S. Employer

Incorporation or organization) Identification No.)

84 October Hill Road, Holliston, Massachusetts 01746

(Address of Principal Executive Offices, including zip code)

(508) 893-8999

(Registrant’s telephone number, including area code)

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

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

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

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

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

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

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

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

As of April 29, 2022, there were 41,241,449 shares of the registrant’s common stock issued and outstanding.

	Page

PART I - FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements (unaudited)	3

Consolidated Balance Sheets	3

Consolidated Statements of Operations	4

Consolidated Statements of Comprehensive Loss	5

Consolidated Statements of Stockholders' Equity	6

Consolidated Statements of Cash Flows	7

Notes to Unaudited Consolidated Financial Statements	8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	16

Item 3. Quantitative and Qualitative Disclosures about Market Risk	20

Item 4. Controls and Procedures	20

PART II - OTHER INFORMATION

Item 1. Legal Proceedings	21

Item1A. Risk Factors	21

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.	21

Item 3. Default Upon Senior Securities	21

Item 4. Mine Safety Disclosures	21

Item 5. Other Information	21

Item 6. Exhibits	21

SIGNATURES	22

	March 31,			December 31,
	2022			2021
Assets
Current assets:
Cash and cash equivalents	$	5,433		$	7,821
Accounts receivable, net		20,274			21,834
Inventories		28,711			27,587
Other current assets		5,030			4,341
Total current assets		59,448			61,583
Property, plant and equipment, net		3,499			3,415
Operating lease right-of-use assets		6,605			6,897
Goodwill		57,356			57,689
Intangible assets, net		25,878			27,385
Other long-term assets		5,258			5,375
Total assets	$	158,044		$	162,344
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt	$	2,720		$	3,235
Current portion of operating lease liabilities		2,151			2,142
Accounts payable		6,218			4,911
Deferred revenue		3,956			4,266
Other current liabilities		12,181			10,762
Total current liabilities		27,226			25,316
Long-term debt, net		46,244			45,095
Deferred tax liability		1,442			1,558
Operating lease liabilities		6,159			6,488
Other long-term liabilities		598			486
Total liabilities		81,669			78,943
Commitments and contingencies - Note 12
Stockholders' equity:
Preferred stock, par value $0.01 per share, 5,000,000 shares authorized		-			-
Common stock, par value $0.01 per share, 80,000,000 shares authorized: 41,241,449 shares issued and outstanding at March 31, 2022; 41,142,876 shares issued and outstanding at December 31, 2021		452			452
Additional paid-in-capital		226,203			225,650
Accumulated deficit		(139,554	)		(132,674	)
Accumulated other comprehensive loss		(10,726	)		(10,027	)
Total stockholders' equity		76,375			83,401
Total liabilities and stockholders' equity	$	158,044		$	162,344

	Three Months Ended March 31,
	2022			2021
Revenues	$	28,778		$	26,989
Cost of revenues		12,601			11,558
Gross profit		16,177			15,431

Sales and marketing expenses		6,687			5,386
General and administrative expenses		6,325			6,333
Research and development expenses		3,220			2,487
Amortization of intangible assets		1,466			1,464
Settlement of litigation - Note 13		5,191			-
Total operating expenses		22,889			15,670

Operating loss		(6,712	)		(239	)

Other (expense) income:
Interest expense		(384	)		(411	)
Other income (expense), net		78			(34	)
Total other expense		(306	)		(445	)

Loss before income taxes		(7,018	)		(684	)
Income tax benefit		(138	)		(15	)
Net loss	$	(6,880	)	$	(669	)

Loss per share:
Basic and diluted loss per common share	$	(0.17	)	$	(0.02	)

Weighted-average common shares:
Basic and diluted		41,219			39,787

												Accumulated
	*Number*					*Additional*						*Other*						*Total*
	*of Shares*			*Common*		*Paid-in*			*Accumulated*			*Comprehensive*			*Treasury*			*Stockholders*’
	*Issued*			*Stock*		*Capital*			*Deficit*			*Loss*			*Stock*			*Equity*
Balance at December 31, 2021		41,143		$	452	$	225,650		$	(132,674	)	$	(10,027	)	$	-		$	83,401
Stock option exercises		11			-		31			-			-			-			31
Vesting of restricted stock units		151			-		-			-			-			-			-
Shares withheld for taxes		(64	)		-		(501	)		-			-			-			(501	)
Stock-based compensation expense		-			-		1,023			-			-			-			1,023
Net loss		-			-		-			(6,880	)		-			-			(6,880	)
Other comprehensive loss		-			-		-			-			(699	)		-			(699	)
Balance at March 31, 2022		41,241		$	452	$	226,203		$	(139,554	)	$	(10,726	)	$	-		$	76,375

Balance at December 31, 2020		47,153		$	444	$	232,357		$	(132,386	)	$	(13,066	)	$	(10,668	)	$	76,681
Stock option exercises		311			4		1,920			-			-			-			1,924
Vesting of restricted stock units		340			-		-			-			-			-			-
Shares withheld for taxes		(108	)		-		(464	)		-			-			-			(464	)
Stock-based compensation expense		-			-		968			-			-			-			968
Net loss		-			-		-			(669	)		-			-			(669	)
Other comprehensive loss		-			-		-			-			(1,325	)		-			(1,325	)
Balance at March 31, 2021		47,696		$	448	$	234,781		$	(133,055	)	$	(14,391	)	$	(10,668	)	$	77,115

(in thousands)
Carrying amount at December 31, 2021	$	57,689
Effect of change in currency translation		(333	)
Carrying amount at March 31, 2022	$	57,356

			March 31, 2022							December 31, 2021
(in thousands)	Average				Accumulated							Accumulated
Amortizable intangible assets:	Life*		Gross		Amortization			Net		Gross		Amortization			Net
Distribution agreements/customer relationships		7.7	$	17,594	$	(8,938	)	$	8,656	$	17,689	$	(8,675	)	$	9,014
Existing technology		3.9		38,611		(24,786	)		13,825		38,707		(23,962	)		14,745
Trade names and patents		4.2		8,467		(5,304	)		3,163		8,496		(5,108	)		3,388
Total amortizable intangible assets			$	64,672	$	(39,028	)	$	25,644	$	64,892	$	(37,745	)	$	27,147
Indefinite-lived intangible assets:									234							238
Total intangible assets								$	25,878						$	27,385

	Amortization
Year Ending December 31,	Expense
(in thousands)
2022 (remainder of year)	$	4,366
2023		5,728
2024		5,427
2025		4,109
2026		2,368
Thereafter		3,646
Total	$	25,644

*Inventories:*	March 31,		December 31,
(in thousands)	2022		2021
Finished goods	$	6,798	$	5,646
Work in process		3,439		3,410
Raw materials		18,474		18,531
Total	$	28,711	$	27,587

*Other Current Liabilities:*	March 31,		December 31,
(in thousands)	2022		2021
Compensation	$	2,878	$	6,048
Professional fees		396		480
Warranty costs		242		240
Customer related costs		2,058		2,265
Settlement of litigation		4,814		-
Accrued income taxes		141		224
Other		1,653		1,505
Total	$	12,181	$	10,762

				Weighted
	*Stock*			*Average*		*Time-Based*					*Performance-*
	*Options*			*Exercise*		*RSUs*			*Grant Date*		*Based RSUs*		*Grant Date*
	*Outstanding*			*Price*		*Outstanding*			*Fair Value*		*Outstanding*		*Fair Value*
Balance at December 31, 2021		1,404,816		$	3.10		1,141,164		$	3.57		860,155	$	3.13
Granted		-			-		518,163			5.52		205,122		5.92
Exercised		(10,987	)		2.78		-			-		-		-
Vested (RSUs)		-			-		(151,185	)		2.30		-		-
Cancelled/Forfeited		(3,126	)		3.79		(12,917	)		3.07		-		-
Balance at March 31, 2022		1,390,703		$	3.10		1,495,225		$	4.37		1,065,277	$	3.67

	Three Months Ended March 31,
	2022			2021
Cash flows from operating activities:
Net loss	$	(6,880	)	$	(669	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation		382			445
Amortization of intangible assets		1,466			1,464
Amortization of deferred financing costs		70			70
Stock-based compensation expense		1,023			968
Deferred income taxes and other		(123	)		(53	)
Changes in operating assets and liabilities:
Accounts receivable		1,506			584
Inventories		(1,308	)		(602	)
Other assets		(466	)		(94	)
Accounts payable and accrued expenses		2,729			(245	)
Deferred revenue		(300	)		(135	)
Other liabilities		(85	)		(696	)
Net cash (used in) provided by operating activities		(1,986	)		1,037

Cash flows from investing activities:
Additions to property, plant and equipment		(471	)		(151	)
Additions to intangible assets		-			(150	)
Net cash used in investing activities		(471	)		(301	)

Cash flows from financing activities:
Borrowing from revolving line of credit		1,500			-
Repayment of revolving line of credit		-			(4,000	)
Repayment of term debt		(936	)		(500	)
Debt issuance costs		-			(101	)
Proceeds from exercise of stock options		31			1,924
Taxes paid related to net share settlement of equity awards		(501	)		(464	)
Net cash provided by (used in) financing activities		94			(3,141	)

Effect of exchange rate changes on cash		(25	)		(97	)
Decrease in cash and cash equivalents		(2,388	)		(2,502	)
Cash and cash equivalents at beginning of period		7,821			8,317
Cash and cash equivalents at end of period	$	5,433		$	5,815

Supplemental disclosures of cash flow information:
Cash paid for interest	$	383		$	458

	2022
Volatility		65.1	%
Risk-free interest rate		1.4	%
Correlation coefficient		38.5	%
Dividend yield		-	%

	March 31,			December 31,
(in thousands)	2022			2021
Long-term debt:
Term loan	$	37,064		$	38,000
Revolving line		12,950			11,450
Less unamortized deferred financing costs		(1,050	)		(1,120	)
Total debt		48,964			48,330
Current portion of long-term debt		(3,000	)		(3,515	)
Current unamortized deferred financing costs		280			280
Long-term debt	$	46,244		$	45,095

	Three Months Ended March 31,
(in thousands)	2022		2021
United States	$	12,239	$	11,177
Europe		7,823		8,589
Asia		6,733		5,538
Rest of the world		1,983		1,685
Total revenues	$	28,778	$	26,989

	Three Months Ended March 31,
(dollars in thousands)	2022			% of revenue			2021			% of revenue
Revenues	$	28,778					$	26,989
Gross profit		16,177			56.2	%		15,431			57.2	%
Sales and marketing expenses		6,687			23.2	%		5,386			20.0	%
General and administrative expenses		6,325			22.0	%		6,333			23.5	%
Research and development expenses		3,220			11.2	%		2,487			9.2	%
Amortization of intangible assets		1,466			5.1	%		1,464			5.4	%
Settlement of litigation		5,191			18.0	%		-			-
Interest expense		384			1.3	%		411			1.5	%
Income tax benefit		(138	)		-0.5	%		(15	)		-0.1	%

SEC Form 10-Q filed by Harvard Bioscience Inc.