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:
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.
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 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 synthetic trachea scaffolds and bioreactors, provided by certain of the named defendants and utilized in connection with surgeries performed by third parties in 2012 and 2013. The litigation is at an early stage and we continue to vigorously defend this case through our liability insurance carrier from whom we have requested defense and indemnification of any losses incurred in connection with 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 such claim is 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.
If our goodwill or intangible assets become impaired, we may be required to record a significant charge to earnings.
Under accounting principles generally accepted in the United States, we review our goodwill and intangible assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Goodwill is also required to be tested for impairment at least annually. Factors that may be considered a change in circumstances indicating that the carrying value of our goodwill or other intangible assets may not be recoverable include a decline in our stock price and market capitalization, future cash flows, and slower growth rates in our industry. We may be required to record a significant charge to earnings in our financial statements during the period in which any impairment of our goodwill or other intangible assets is determined, which could adversely impact our results of operations.
Accounting for goodwill, other intangible assets and long-lived assets may have an adverse effect on us.
We assess the recoverability of identifiable intangibles with finite lives and other long-lived assets, such as property, plant and equipment, for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable in accordance with the provisions of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 360, “Property, Plant and Equipment”. In accordance with FASB ASC 350, “Intangibles-Goodwill and Other”, goodwill and intangible assets with indefinite lives from acquisitions are evaluated annually, or more frequently, if events or circumstances indicate there may be an impairment, to determine whether any portion of the remaining balance of goodwill and indefinite lived intangibles may not be recoverable. If it is determined in the future that a portion of our goodwill and other intangible assets is impaired, we will be required to write off that portion of the asset according to the methods defined by FASB ASC 360 and FASB ASC 350, which could have an adverse effect on net income for the period in which the write-off occurs. At December 31, 2017, we had goodwill and intangible assets of $57.2 million, or 52%, of our total assets and we concluded that none of our goodwill or other intangible assets was impaired.
If our accounting estimates are not correct, our financial results could be adversely affected.
Management judgment and estimates are required in the application of our Critical Accounting Policies. We discuss these estimates in the subsection entitled critical accounting policies beginning on page 34 in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations in this Annual Report. If our estimates are incorrect, our future financial operating results and financial condition could be adversely affected.
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 Jeffrey A. Duchemin; theor Chief Financial Officer Robert E. Gagnon; the Vice President, Commercial Operations, Yong Sun; or any of theour 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 area,areas, England, and Germany where demand for personnel with these skills is extremely high and is likely to remain high. Additionally, the COVID-19 pandemic and other macroeconomic factors have exacerbated these challenges, contributed to a sustained labor shortage, and increased turnover rates. 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.
If we are unable to effectively protect our intellectual property, third parties may use our technology, which would impair our ability to compete in our markets.
Our continued success will depend in significant part on our ability to obtain and maintain meaningful patent protection for certain of our products throughout the world. Patent law relating to the scope of claims in the technology fields in which we operate is still evolving. The degree of future protection for our proprietary rights is uncertain. We also own numerous United States registered trademarks and trade names and have applications for the registration of trademarks and trade names pending. We rely on patents to protect a significant part of our intellectual property and to enhance our competitive position. However, our presently pending or future patent applications may not be accepted and patents might not be issued, and any patent previously issued to us may be challenged, invalidated, held unenforceable or circumvented. Furthermore, the claims in patents which have been issued or which may be issued to us in the future may not be sufficiently broad to prevent third parties from producing competing products similar to our products. In addition, the laws of various foreign countries in which we compete may not protect our intellectual property to the same extent, as do the laws of the United States. If we fail to obtain adequate patent protection for our proprietary technology, our ability to be commercially competitive could be materially impaired.
In addition to patent protection, we also rely on protection of trade secrets, know-how and confidential and proprietary information. To maintain the confidentiality of trade-secrets and proprietary information, we generally seek to enter into confidentiality agreements with our employees, consultants and strategic partners upon the commencement of a relationship. However, we may not be able to obtain these agreements in all circumstances in part due to local regulations. In the event of unauthorized use or disclosure of this information, these agreements, even if obtained, may not provide meaningful protection for our trade-secrets or other confidential information. In addition, adequate remedies may not exist in the event of unauthorized use or disclosure of this information. The loss or exposure of our trade secrets and other proprietary information would impair our competitive advantages and could have an adverse effect on our operating results, financial condition and future growth prospects.
The manufacture, sale and use of products and services may expose us to product liability claims for which we could have substantial liability.
We face an inherent business risk of exposure to product liability claims if our products, services or product candidates, including without limitation, any of our life science research tools are alleged or found to have caused injury, damage or loss. We may in the future be unable to obtain insurance with adequate levels of coverage for potential liability on acceptable terms or claims of this nature may be excluded from coverage under the terms of any insurance policy that we can obtain. If we are unable to obtain such insurance or the amounts of any claims successfully brought against us substantially exceed our coverage, then our business could be adversely impacted.
We may be involved in lawsuits to protect or enforce our patents that would be expensive and time-consuming.
In order to protect or enforce our patent rights, we may initiate patent litigation against third parties. We may also become subject to interference proceedings conducted in the patent and trademark offices of various countries to determine the priority of inventions. Several of our products are based on patents that are closely surrounded by patents held by competitors or potential competitors. As a result, we believe there is a greater likelihood of a patent dispute than would be expected if our patents were not closely surrounded by other patents. The defense and prosecution, if necessary, of intellectual property suits, interference proceedings and related legal and administrative proceedings would be costly and divert our technical and management personnel from their normal responsibilities. We may not prevail in any of these suits should they occur. An adverse determination of any litigation or defense proceedings could put our patents at risk of being invalidated or interpreted narrowly and could put our patent applications at risk of being rejected and no patents being issued.
Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. For example, during the course of this kind of litigation, there could be public announcements of the results of hearings, motions or other interim proceedings or developments in the litigation. Securities analysts or investors may perceive these announcements to be negative, which could cause the market price of our stock to decline.
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 partythird-party patent, we may be unable to sell some of our products and services, which could result in reduced revenue.
Third parties may seek to hold us responsible for Harvard Apparatus Regenerative Technologies, Inc.’s (“HRGN”) (formerly known as Biostage, Inc.) liabilities, including liabilities that HRGN has assumed from us.
Third parties may continue to seek to hold us responsible for HRGN’s liabilities, including any of the liabilities that HRGN agreed to retain or assume in connection with the separation of the HRGN business from our businesses, and related spin-off distribution. For example, in April 2022, we and HRGN entered into a settlement of a litigation relating to injuries allegedly caused by products produced by us and HRGN and utilized in connection with surgeries performed by third parties (the “HRGN Settlement”). The HRGN Settlement resolved and dismissed all claims by and between the parties.
Shares of common stock of HRGN held by the Company could fluctuate considerably in value and could become worthless.
In connection with the HRGN Settlement, HRGN issued shares of its Series E Convertible Preferred Stock (the “Series E Preferred Stock”) to the Company in satisfaction of $4.0 million of HRGN’s total indemnification obligations to the Company. In April 2023, all of the Series E Preferred Stock we held in HRGN were mandatorily converted into shares of HRGN common stock. As of December 31, 2023, we held shares of HRGN common stock with an estimated fair value of $3.5 million.
Due to HRGN’s limited operating history, their overall financial condition, (including whether it can continue as a going concern without additional capital) and the limited trading volume and liquidity of HRGN’s common stock, the value of this investment could fluctuate considerably or become worthless.
Risks Related to Our Common Stock
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:
● | 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 our expectations or financial guidance, or the expectations of securities analysts, or investors; | |
● | comments of securities analysts and mistakes by or misinterpretation of comments from analysts, downward revisions in securities analysts’ estimates or management guidance; | |
● | conditions or trends in the biotechnology and pharmaceutical industries; | |
● | announcements of significant acquisitions or financings or strategic partnerships; | |
● | 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 and life science tools 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.
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 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.
General Risks
We are currently operating in a period of economic uncertainty and capital markets disruption, which has been significantly impacted by geopolitical instability due to military conflicts. Our business, financial condition and results of operations may be materially adversely affected by any negative impact on the global economy and capital markets resulting from the conflict in Ukraine, the Middle East or any other geopolitical tensions.
U.S. and global markets are experiencing volatility and disruption following the escalation of geopolitical tensions globally, including military conflicts (such as the conflict between Russia and Ukraine and the conflicts in Israel and the Middle East). Although the length and impact of these conflicts are highly unpredictable, these conflicts could lead to market disruptions, including significant volatility in commodity prices, credit and capital markets, supply chain interruptions, and additional economic and financial sanctions.
Any of the abovementioned factors could affect our business, prospects, financial condition, and operating results. The extent and duration of the military action, sanctions and resulting market disruptions are impossible to predict, but could be substantial. Any such disruptions may also magnify the impact of other risks described in this Annual Report on Form 10-K.
Epidemics and pandemics such as the COVID-19 pandemic have had, and in the future may have, a material adverse impact on our business.
Our operations and financial performance have been, and in the future may be, negatively impacted by public health crises such as the COVID-19 pandemic and other epidemics and pandemics. Such events have caused, and may in the future cause, impacts such as reductions in economic activity (including volatility in demand for our products, services, and solutions, disruptions in global supply chains, and volatility in financial markets). Additionally, we have in the past experienced, and may in the future experience, operational challenges such as workplace disruptions, restrictions on the movement of people, raw materials, and goods (both at our own facilities and at those of our customers and suppliers), global supply chain disruptions, delays or disruptions in orders and order fulfillment, and price inflation.
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.
Regulations related to conflict minerals may force us to incur additional expenses and otherwise adversely impact our business.
The SEC has promulgated final rules mandated by the Dodd-Frank Act regarding disclosure of the use of tin, tantalum, tungsten and gold, known as conflict minerals, in products manufactured by public companies. These new rules require ongoing due diligence to determine whether such minerals originated from the Democratic Republic of Congo (the DRC) or an adjoining country and whether such minerals helped finance the armed conflict in the DRC. Reporting obligations for the rule began on May 31, 2014 and are required annually thereafter. There will be costs associated with complying with these disclosure requirements, including costs to determine the origin of conflict minerals in our products. The implementation of these rules and their effect on customer, supplier and/or consumer behavior could adversely affect the sourcing, supply and pricing of materials used in our products. As a result, we may also incur costs with respect to potential changes to products, processes or sources of supply. We may face disqualification as a supplier for customers and reputational challenges if the due diligence procedures we implement do not enable us to verify the origins for all conflict minerals used in our products, including that such minerals did not originate from any of the covered conflict countries. Accordingly, the implementation of these rules could have an adverse effect on our business, results of operations and/or financial condition.
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.
An active trading market for our common stock may not be sustained.
Although our common stock is quoted on the NASDAQ Global Market, an active trading market for the shares may not be sustained. This could negatively affect the price for our common stock, including investors’ ability to buy or sell our common stock and the listing thereof.
Item1B. None. Cybersecurity Risk Management and Strategy We have implemented a cybersecurity risk management program intended to protect the confidentiality, integrity, and availability of our critical systems and information. Our cybersecurity risk management program is an element of and is integrated into our overall enterprise risk management program. Our framework is informed in part by the National Institute of Standards and Technology (NIST) Cybersecurity Framework and International Organization for Standardization 27001 (ISO 27001) Framework, although we have not been audited to, and may not be in compliance with, all technical standards, specifications or requirements under the NIST or ISO 27001 frameworks. Our cybersecurity risk management program includes: We have been, and expect to continue to be, subject to cybersecurity risks and incidents related to our business. To date, such risks and incidents have not materially affected our business strategy, results of operations or financial condition. For more information about the cybersecurity risks we face, see Item 1A – Risk Factors. Cybersecurity Governance Our Board considers cybersecurity risk as part of its enterprise risk management oversight function. This oversight includes periodic reports from management, including our Vice President of IT, concerning cybersecurity related risks. Our management team, including our Vice President of IT, is responsible for assessing and managing risks from cybersecurity threats. Our Vice President of IT has extensive information technology and program management experience, including broad experience in corporate and consulting environments across of range of organizations and industries. Where appropriate, she engages external cybersecurity consultants to assist with cybersecurity related matters. Our management team has primary responsibility for our overall cybersecurity risk management program and, under the leadership of our Vice President of IT, supervises both our internal personnel and external cybersecurity consultants. This includes efforts to prevent, detect, mitigate, and remediate cybersecurity risks. These efforts employ information from various sources, such as security tools deployed in our IT environment, internal personnel, external security consultants, and governmental sources. Item2. Our Approximate Location Description of Facility Square Footage Expiration Holliston, Massachusetts Manufacturing facility and corporate headquarters 83,000 2024 New Brighton, Minnesota Manufacturing facility 75,000 2030 Reutlingen, Germany Manufacturing facility 23,000 2024 Barcelona, Spain Manufacturing facility 16,000 2024 March-Hugstetten, Germany Manufacturing facility 11,000 2024 We also lease China. We believe our current facilities are adequate for our needs for the foreseeable future. Item3. Item 3. Item4. Not Applicable. PART II Item5. Market for Our common stock Stockholders 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 Item6. Item7. Forward-Looking Statements The following section of this Annual Report on Form 10-K Overview Harvard Bioscience Overall, our results of operations were negatively impacted by the COVID-19 pandemic. However, we experienced a period of increased demand for certain of our products due to increased COVID-19 related research If these trends are prolonged or are more severe, or if the recovery is less robust or takes longer than anticipated, our business, results of operations, and cash flow may be materially impacted. Restructuring Activities On an ongoing basis, we review our business, the global economy, the healthcare industry, and the markets in which we compete to identify operational efficiencies, enhance commercial capabilities and align our cost base and infrastructure with customer During 2022, we reviewed our business and product portfolio and identified opportunities to rationalize our product portfolio, improve our cost structure and optimize our sales organization. In connection with this review, during the In the table below, we provide an overview of selected operating Year Ended December 31, (dollars in thousands) 2023 % of revenue 2022 % of revenue Revenues Gross profit Sales and marketing expenses General and administrative expenses Research and development expenses Amortization of intangible assets Litigation settlement Interest expense Unrealized loss on equity securities Income tax expense Revenues Revenues decreased Gross profit increased $5.3 million, or Sales and marketing expenses Sales and marketing expenses General and administrative expenses General and administrative expenses Research and development expenses Research and development expenses Amortization of intangible assets Amortization of intangible During the On April 6, 2023, all of the shares of Convertible Preferred Stock we Interest expense Interest expense increased $1.1 million, or 40.9%, to Unrealized loss on equity securities In connection with the settlement discussed above, as of December 31, 2023 we held shares of HRGN common stock with an estimated fair value of $3.5 million. During the Income tax expense Income tax expense for the year ended December 31, 2023, was $0.9 million compared to $0.3 million for the year ended December 31, Liquidity and Capital Resources As of December 31, On December 22, 2020, we entered into a Credit Agreement which provides for a term loan of $40.0 million and a $25.0 million senior revolving credit facility both maturing on December 22, 2025 (See Note 9 to the Consolidated Financial Statements included in “Part IV, Item 15. Exhibits, Financial Statement Schedules” of this report). As of December 31, Based on our current operating plans, we financial results described above. Our forecast Condensed Consolidated Cash Flow Statements (in thousands) 2023 2022 Cash provided by operating activities Cash used in investing activities Cash used in financing activities Effect of exchange rate changes on cash Decrease in cash and cash equivalents Cash provided by operations was $14.0 million and $1.2 million for the years ended December 31, 2023 and 2022, respectively. Cash provided by operating activities for the year ended December 31, 2023 improved due to reductions in our Cash used in investing activities was $1.8 million for the year ended December 31, 2023, and Cash used in financing activities was $12.1 million for the year ended December 31, 2023. During this period, we made term loan installments payments under the Credit Agreement of $4.1 million, with net payments of $6.4 million under the revolving credit facility. We Cash used in financing activities was $2.8 million for the Impact of Foreign Currencies Our international operations in some instances operate In addition, the currency exchange rate fluctuations included as a component of net loss resulted in currency losses of Critical Accounting Policies and Estimates The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial We believe the following is one of the more significant judgments and estimates used in Income Taxes and Valuation Allowance We Significant judgment is also required in determining the amount of deferred tax assets that will ultimately be realized and any 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. Item7A. Item8. The information required by this item is contained in the Item9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None. Item9A. 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 We carried out an evaluation required by the Securities Exchange Act of 1934 (the “1934 Act”), under the supervision and with the participation of our (b) Management’s Report on Internal Control Over Financial Reporting (c) (d) issues and instances of fraud, if any, within the Company have been detected. (e) Report of Independent Registered Public Accounting Firm REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 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, 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, 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 We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and limitations of internal control over financial reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ GRANT THORNTON LLP Hartford, Connecticut March 7, 2024 Item9B. On November 23, 2023, James Green, our Chairman, President and Chief Executive Officer, adopted a trading plan intended to satisfy the affirmative defense available under Rule 10b5-1(c) (the “Trading Plan”). The expiration date of the Trading Plan was February 7, 2025. The total number of shares of our common stock (the “Shares”) to be sold under the Trading Plan was a maximum of 240,000. Mr. Green terminated the Trading Plan on January 21, 2024. No Shares were sold under the Trading Plan prior to its termination. Item9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. Not applicable. PART III Item10. Incorporated by reference to our definitive Proxy Statement to be filed pursuant to Regulation 14A under the Exchange Act in connection with our Item11. Incorporated by reference to our definitive Proxy Statement to be filed pursuant to Regulation 14A under the Exchange Act in connection with our Item12. 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 Item13. 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 Item14. Incorporated by reference to our definitive Proxy Statement to be filed pursuant to Regulation 14A under the Exchange Act in connection with our PART IV (a) The following documents are filed as part of this Annual Report on Form 10-K or incorporated by reference as indicated: (1) Financial Statements, Schedules, and Exhibits. We have listed our consolidated financial statements filed as part of this annual report in theindex to consolidated financial statements on page F-1. (2) Financial Statement Schedules. We have omitted all financial statement schedules because they are not applicable or not required or because we have included the necessary information in our consolidated financial statements or related notes. (3) Exhibits. We have listed the exhibits filed as part of this annual report in the accompanying exhibit index, which follows the signature page tothis annual report. Item16. None. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS HARVARD BIOSCIENCE, INC. Page Consolidated Consolidated Statements of Stockholders’ Equity Consolidated Statements of Cash Flows REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Harvard Bioscience, Inc. Opinion on the financial statements We have audited the accompanying consolidated balance We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, Basis for opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our We conducted our Critical audit matters Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters. /s/ GRANT THORNTON LLP We have served as the Company’s auditor since 2017. March HARVARD BIOSCIENCE, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share data) December 31, 2023 2022 Assets Current assets: Cash and cash equivalents Accounts receivable, net Inventories Other current assets Total current assets Property, plant and equipment, net Operating lease right-of-use assets Goodwill Intangible assets, net Other long-term assets Total assets Liabilities and Stockholders' Equity Current liabilities: Current portion of long-term debt Current portion of operating lease liabilities Accounts payable Contract liabilities Other current liabilities Total current liabilities Long-term debt, net Deferred tax liability Operating lease liabilities Other long-term liabilities Total liabilities Commitments and contingencies - Note 15 Stockholders' equity: Preferred stock, par value $0.01 per share, 5,000,000 shares authorized Common stock, par value $0.01 per share, 80,000,000 shares authorized: 43,394,509 shares issued and outstanding at December 31, 2023; 42,081,707 shares issued and outstanding at December 31, 2022 Additional paid-in-capital Accumulated deficit Accumulated other comprehensive loss Total stockholders' equity Total liabilities and stockholders' equity CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) Year Ended December 31, 2023 2022 Revenues Cost of revenues Gross profit Sales and marketing expenses General and administrative expenses Research and development expenses Amortization of intangible assets Litigation settlement - Note 16 Total operating expenses Operating income (loss) Other (expense) income: Interest expense Unrealized loss on equity securities - Note 16 Other (expense) income, net Total other expense Loss before income taxes Income tax expense Net loss Loss per share: Basic and diluted loss per share Weighted-average common shares: Basic and diluted CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (In thousands) Year Ended December 31, 2023 2022 Net loss Other comprehensive income (loss): Foreign currency translation adjustments Defined benefit pension plans, net of tax benefit of $137 and $566, respectively Derivative instruments qualifying as cash flow hedges, net of tax of $-0- Other comprehensive income (loss) Comprehensive loss See accompanying notes to consolidated financial statements. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (In thousands) Accumulated Number Additional Other Total of Shares Common Paid-in Accumulated Comprehensive Stockholders’ Issued Stock Capital Deficit Loss Equity Balance at December 31, 2021 Stock option exercises Stock purchase plan Vesting of restricted stock units Shares withheld for taxes Stock-based compensation expense Net loss Other comprehensive loss Balance at December 31, 2022 Stock option exercises Stock purchase plan Vesting of restricted stock units Shares withheld for taxes Stock-based compensation expense Net loss Other comprehensive income Other adjustments Balance at December 31, 2023 See accompanying notes to consolidated financial statements. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Year Ended December 31, 2023 2022 Cash flows from operating activities: Net loss Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation Amortization of intangible assets Amortization of deferred financing costs Stock-based compensation expense Deferred income taxes and other Unrealized loss on equity securities - Note 16 Convertible preferred stock received in litigation settlement - Note 16 Gain on sale of product line Changes in operating assets and liabilities: Accounts receivable Inventories Other assets Accounts payable and other current liabilities Other liabilities Net cash provided by operating activities Cash flows from investing activities: Additions to property, plant and equipment Capitalized software development costs Proceeds from sale of product line Net cash used in investing activities Cash flows from financing activities: Borrowing from revolving line of credit Repayment of revolving line of credit Repayment of term debt Proceeds from exercise of stock options and employee stock purchase plan Taxes paid related to net share settlement of equity awards Net cash used in financing activities Effect of exchange rate changes on cash Decrease in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period Supplemental disclosures of cash flow information: Cash paid for interest Cash paid for income taxes, net of refunds See accompanying notes to consolidated financial statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Organization Harvard Bioscience, Inc. 2. Summary of Significant Accounting Policies Principles of Consolidation The consolidated financial statements include the accounts of Harvard Bioscience, Inc. and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles Cash and The Company considers all highly liquid instruments with original maturities of three months or less to be cash equivalents. The Company has cash holdings in financial institutions that exceed insured limits for such financial institutions. The Company mitigates this risk by utilizing financial institutions of high credit quality. Marketable Equity Securities Allowance for Expected Credit Losses on Receivables The allowance for expected credit losses on receivables is used to present accounts receivable, net, at an amount that represents the Company’s Management judgments are used to determine when to charge off uncollectible trade accounts receivable. The Company bases these judgments on the age of the Inventories The Company values Property, Plant and Equipment Property, plant and equipment are stated at cost and depreciated using the straight-line method over the estimated useful lives of the assets as follows: Machinery and equipment (years) 3 - 10 Computer equipment and software (years) 3 - 7 Furniture and fixtures (years) 5 - 10 Leases The Company leases office space, manufacturing facilities, automobiles and equipment. The Company concludes on whether an arrangement is a lease at inception. This determination as to whether an arrangement contains a lease is based on an assessment as to whether a contract conveys the right for the Company to control the use of The Company has assessed its contracts and concluded that its leases consist of operating leases. Operating leases are included in operating lease right-of-use (“ROU”) assets, current portion of operating lease liabilities, and operating lease liabilities in the Company’s consolidated balance sheets. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the leases’ commencement date based on the present value of lease payments over the lease term. As most of the Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to be applied to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company uses the flow-through method to account for investment tax credits. Under this method, the investment tax credits are recognized as a reduction of income tax expense. The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is more than 50% likely of being realized. Changes in recognition are reflected in the period in which the judgement occurs. The Company’s policy is to account for Global Intangible Low-Taxed income as a period cost. Foreign Currency The functional currency of the Company’s foreign subsidiaries is generally their local currency. All assets and liabilities of Earnings per Share Basic earnings per share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the periods presented. The computation of diluted earnings per share is similar to the computation of basic earnings per share, except that the denominator is increased for the assumed exercise of dilutive options and other potentially dilutive securities using the treasury stock method unless the effect is antidilutive. The following table sets forth the computation of basic and diluted earnings per share: Year Ended December 31, (in thousands, except per share data) 2023 2022 Net loss Weighted average shares outstanding - basic Dilutive effect of equity awards Weighted average shares outstanding - diluted Basic loss per share Diluted loss per share Shares excluded from diluted loss per share due to their anti-dilutive effect Comprehensive Income (Loss) Comprehensive income (loss) represents the Revenue Recognition Nature of contracts and customers The The Company’s customers are primarily research scientists at pharmaceutical and biotechnology companies, universities, hospitals, government laboratories and contract research organizations. The Company Performance obligations The Company’s performance obligations under its revenue contracts consist of its instruments, equipment, accessories, services, software licenses and enhancements, maintenance and extended warranties. Equipment also includes software that functions together with the tangible equipment to deliver its essential functionality. Contracts with customers may contain multiple promises such as delivery of hardware, software, professional services or post-contract support services. These promises are accounted for as separate performance obligations if they are distinct. For contracts with customers that contain multiple performance obligations, the transaction price is allocated to the separate performance obligations based on estimated relative standalone selling price, which does not materially differ from the stated price in the contract. In general, the Company’s list prices are indicative of standalone selling price, and the majority of the Company's contracts have a term of less than one year. Instruments, equipment and accessories consist of a The Company’s equipment Service revenue consists of installation, training, data analysis and surgeries performed on research animals. Service revenue is recognized when the service Variable Consideration The nature of the Company's contracts gives rise to The Company’s payment terms are generally from zero to sixty days from the time of invoicing, which occurs at the time services offered. Sales taxes, value added taxes, and certain excise taxes collected from customers and remitted to governmental authorities are accounted for on a net basis and are therefore excluded from revenues. Contract Liabilities The The amounts included in contract liabilities from advanced payments relate to amounts that are prepaid for wireless implantable monitors under the exchange program. The Company has made the judgment that these payments do not represent a significant Disaggregation of revenue Refer to Note 13 for revenue disaggregated by type and by geographic location as well as further information about the Software Development Software development costs for software products to be sold, leased or otherwise marketed that are incurred before establishing technological feasibility are charged to operations. Software development costs incurred after establishing technological feasibility are capitalized on a product-by-product basis until the Annual amortization, charged to cost of goods sold, is the Intangible Assets Intangible assets are comprised of existing technology, customer contracts and contractual relationships, and other definite-lived intangible assets. Identifiable intangible assets resulting from the acquisitions of entities accounted for using the purchase method of accounting are estimated by the Company based on the fair value of assets received. Identifiable definite-lived intangible assets are being amortized over the period of estimated benefit using the straight-line method and estimated useful lives ranging from four to fifteen years. Goodwill Goodwill For the purpose of its goodwill analysis, the Company has one reporting unit. The Company The Company evaluated its goodwill for impairment as of October 1, 2023 by performing a qualitative analysis and determined that Impairment of The Company assesses recoverability of its long-lived assets that are held for use, such as property, plant and equipment and amortizable intangible assets The recoverability of assets or an asset group to be held and used is measured by a comparison of the carrying amount of an asset or asset group to estimated undiscounted future cash flows expected to be generated by the asset or the asset group. Cash flow projections are based on trends of historical performance and management’s estimate of future performance. When the Company determines that the carrying value of the assets may not be recoverable based upon the existence of one or more of the above indicators of impairment, the Company measures the potential impairment based on a projected discounted cash flow method using a discount rate determined by management to be commensurate with the risk inherent in its current business model. An impairment loss is recognized only if the carrying amount of the asset Derivatives The Company uses interest-rate-related derivative instruments to manage its exposure related to changes in interest rates on its variable-rate debt instruments. The Company only enters into derivative contracts that it intends to designate as a hedge of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability (cash flow hedge) The Company formally documents the hedging relationship and its risk-management objective and strategy for undertaking the hedge, the hedging instrument, the hedged transaction, the nature of the risk being hedged, how the hedging instrument’s effectiveness in offsetting the hedged risk will be assessed prospectively and retrospectively, and a description of the method used to measure ineffectiveness. 484 By using derivative financial instruments to hedge Market risk is the adverse effect on the value of a derivative instrument that results from a change in interest rates. The market risk associated with interest-rate contracts is managed by establishing and monitoring parameters that limit the types and degree of market risk that may be undertaken. The Company Assets (Liabilities): ● Level 1 includes instruments for which quoted prices in active markets for identical assets or liabilities accessible to the Company at the measurement date. ● Level 2 includes instruments for which the valuations are based on quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of Level 3 includes valuations based on inputs that are unobservable and significant to the overall fair value measurement. The Stock-based Compensation The Company The fair value of restricted stock units is based on the market price of the Company’s stock on the date of grant. The Company values restricted stock units with a market condition using a Monte-Carlo valuation simulation. The determination of fair value of stock-based payment awards on the date of grant using a Monte-Carlo valuation simulation is affected by the Company’s stock price as well as assumptions regarding certain variables including, but are not limited to, the Company’s expected stock price volatility over the term of the awards, interest rate assumptions, and discounts to adjust for any holding period post-vest restrictions. Preferred Stock The Company’s board of directors has the authority to issue up to 5.0 million Business Segment Information The Company operates in one segment which involves the design, development, production and distribution of products and services that enable fundamental advances in life science applications, including research, pharmaceutical and therapy discovery, bioproduction and preclinical testing for pharmaceutical and therapy development. The Company has a single, company-wide management team that administers all properties as a whole rather than as discrete operating segments. The chief operating decision maker, who is the Company's chief executive officer, measures financial performance as a single enterprise and allocates resources across the Company to maximize profitability, and not on geography, legal entity, or end market basis. The Company operates in a number of countries throughout the world in a variety of product lines. Information regarding product lines and geographic financial information is provided in Note 13, “Revenues” and Note 5, "Balance Sheet Information." Commitments and Contingencies Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties, and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated. If a loss is reasonably possible and the loss or range of loss can be reasonably estimated, the Company discloses the possible loss. If a loss is probable and the loss or range of loss cannot be reasonably estimated, the Company discloses or states that such an estimate cannot be made. Refer to Note 15 Commitments and Contingencies for additional information. The Company accrues and expenses legal costs associated with contingencies when incurred. Recent Accounting Pronouncements Accounting Pronouncements Adopted in 2023 In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ASU 2017-04,Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (ASU 2017-04), which eliminates the performance of Step 2 from the goodwill impairment test. In performing its annual or interim impairment testing, an entity will instead compare the fair value of the reporting unit with its carrying amount and recognize any impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. Additionally, an entity should consider income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss. The Company adopted ASU 2017-04 effective January 1, 2023, with no impact to the consolidated financial statements. In September 2016, the FASB issued ASU No.2016-13,Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU 2016-13), which amends the impairment model by requiring entities to use a forward-looking approach based on expected losses rather than incurred losses to estimate credit losses on certain types of financial instruments, including trade receivables. This may result in the earlier recognition of allowances for losses. The FASB issued several ASUs after ASU 2016-13 to clarify implementation guidance and to provide transition relief for certain entities. The Company adopted ASU 2016-13 effective January 1, 2023, which resulted in an immaterial impact to the consolidated financial statements. Accounting Pronouncements yet to be Adopted In December 2023, the FASB issued ASU No.2023-09,Income Taxes (Topic 740): Improvements to Income Tax, which enhances disclosures related to the effective tax rate reconciliation, income taxes paid, as well as other disclosures. The new standard impacts footnote disclosures and is effective for the Company’s annual financial statements for the year ended December 31, 2025. The Company is currently evaluating the potential impact of adopting ASU 2023-09 will have on the disclosures in its consolidated financial statements. Prior Period Financial Statement Reclassifications During the year ended December 31, 2023, the Company identified immaterial misclassification errors in the financial statement footnote describing the components of AOCI as of December 31, 2022 and 2021. These misclassifications overstated the amount attributed to the defined benefit pension plans, net of tax, by $5.4 million and 3. Accumulated Other Comprehensive Loss Changes in the components of accumulated other comprehensive loss, net of tax, for the years ended December 31, 2023 and 2022, respectively, are as follows: Foreign Currency Derivatives Translation Defined Benefit Qualifying (in thousands) Adjustments Pension Plans as Hedges Total Balance at December 31, 2021* Other comprehensive loss, net Balance at December 31, 2022* Other comprehensive income (loss), net Balance at December 31, 2023 * See Note 2 – Prior Period Financial Statement Reclassifications 4. Goodwill and Intangible Assets The change in the carrying amount of goodwill is as follows: December 31, (in thousands) 2023 2022 Carrying amount at beginning of period Effect of change in currency translation Carrying amount at end of period Intangible assets at December 31, 2023 and 2022 consist of the following: December 31, 2023 December 31, 2022 (in thousands) Average Accumulated Accumulated Amortizable intangible assets: Life* Gross Amortization Net Gross Amortization Net Distribution agreements/customer relationships Existing technology & software development Trade names and patents Total amortizable intangible assets Indefinite-lived intangible assets: Total intangible assets * Weighted average life in years as of December 31, 2023 During the year ended December 31, 2023, the Company wrote off approximately $3.7 million of fully amortized intangible assets of certain existing technology and other intangibles related to discontinued product lines. The Company capitalized $0.5 million of software development costs during the year ended December 31, 2023. Intangible asset amortization expense was $5.5 million and $6.1 million for the years ended December 31, (in thousands) 2024 2025 2026 2027 2028 Thereafter Total 5. Balance Sheet Information The following tables provide details of selected balance sheet items as of the periods indicated: Inventories: December 31, (in thousands) 2023 2022 Finished goods Work in process Raw materials Total Property, Plant and Equipment: December 31, (in thousands) 2023 2022 Machinery and equipment Computer equipment and software Leasehold improvements Furniture and fixtures Automobiles Less: accumulated depreciation Property, plant and equipment, net Depreciation expense was $1.5 million for each of the years ended December 31, 2023 and 2022. During the year ended December 31, 2023, the Company wrote off approximately $2.0 million of fully depreciated property and equipment from its fixed asset records. Other Current Liabilities: December 31, (in thousands) 2023 2022 Compensation Customer credits Professional fees Warranty costs Other Total Long-lived Assets by Geographic Area: December 31, (in thousands) 2023 2022 United States Germany Rest of the world Total long-lived assets 6. Restructuring and Other Exit Costs (in thousands) Inventory Related Severance Other Total Balance at December 31, 2021 Restructuring and other exit costs Non-cash charges Cash payments Balance at December 31, 2022 Restructuring and other exit costs Non-cash charges Cash payments Balance at December 31, 2023 7. Employee Benefit Plans Employee Retirement Savings Plans The Company sponsors Employee Pension Plans The Company’s subsidiary in the United Kingdom, Biochrom Ltd., maintains The components of the Company’s Year Ended December 31, (in thousands) 2023 2022 Net periodic benefit expense (credit) The following provides a reconciliation of the changes in the plans’ fair value of assets and benefit obligations for the years ended December 31, 2023 and 2022, and a summary of the funded status as of December 31, 2023 and 2022: December 31, (in thousands) 2023 2022 Change in fair value of plan assets: Balance at beginning of year Actual return on plan assets Employer contributions Benefits paid Currency translation adjustment Balance at end of year December 31, (in thousands) 2023 2022 Change in benefit obligation: Balance at beginning of year Interest cost Actuarial loss (gain) Benefits paid Currency translation adjustment Balance at end of year December 31, (in thousands) 2023 2022 Fair value of plan assets Benefit obligation Net funded status The amounts recognized in the consolidated balance sheets consist of: December 31, (in thousands) 2023 2022 Other long-term assets Accumulated other comprehensive loss The weighted average assumptions used in determining the net pension cost for these plans follows: December 31, (in thousands) 2023 2022 The discount rate assumptions used for pension accounting reflect the prevailing rates available on high-quality, fixed-income debt instruments with terms that match the average expected duration of the Company’s defined benefit pension plan obligations. The Company’s mix of pension plan investments among asset classes also affects the long-term expected rate of return on plan assets. As of December 31, The asset allocations and fair value (in thousands) 2023 2022 Debt securities (in thousands) 2023 2022 Level 1 assets consist of cash and cash equivalents held in the pension The Company expects to contribute approximately 2024.The benefits expected to be paid from the pension plans are 8. Leases The components of lease expense for the years ended December 31, 2023 and 2022, are as follows: Year Ended December 31, (in thousands) 2023 2022 Operating lease cost Short-term lease cost Sublease income Total lease cost Supplemental balance sheet information related to the Company’s (in thousands) December 31, 2023 2022 Operating lease right-of-use assets Current portion, operating lease liabilities Operating lease liabilities, long-term Total operating lease liabilities Weighted average remaining lease term (years) Weighted average discount rate Supplemental cash flow information related to the Year Ended December 31, (in thousands) 2023 2022 Cash paid for amounts included in the measurement of lease liabilities Right-of-use assets obtained in exchange for lease obligations Future minimum lease payments for operating leases, with initial terms in excess of Year Ending December 31, (in thousands) 2024 2025 2026 2027 2028 Thereafter Total lease payments Less imputed interest Total operating lease liabilities 9. Long-Term Debt As of December 31, 2023 and (in thousands) December 31, 2023 December 31, 2022 Long-term debt: Term loan Revolving line Less: unamortized deferred financing costs Total debt Less: current portion of long-term debt Current unamortized deferred financing costs Long-term debt The (in thousands) 2024 2025 On December 22, 2020, the Company entered into a Credit Agreement (the “Credit Agreement”) with Citizens Bank, N.A., Wells Fargo Bank, National Association, and Silicon Valley Bank, (together, the “Lenders”). Effective March 27, 2023, all commitments and obligations under the Credit Agreement previously held by Silicon Valley Bank were assumed by First Citizens Bank & Trust Company. The Credit Agreement provides for a term loan of Borrowings under the amended Credit Facility will, at the option of the Company, As of December 31, 2023, the term loan amortizes in quarterly installments of $1.0 million with a balloon payment at maturity. Furthermore, within ninety days after the end of the Company’s fiscal year, the term loans may be permanently reduced pursuant to certain mandatory prepayment events including an annual “excess cash flow sweep”, as defined in the agreement; provided that, in any fiscal year, any voluntary prepayments of the term loans shall be credited against the Company’s “excess cash flow” prepayment obligations on a dollar-for-dollar basis for such fiscal year. As of December 31, 2023, the current portion of long-term debt includes an excess cash flow sweep of $2.1 million to be paid by March 31, 2024. As of December 31, 2022, the current portion of long-term debt included an excess cash flow sweep of $1.1 million which was paid on March 31, 2023. Amounts outstanding under the revolving credit facility can be repaid at any time but are due in full at maturity. The Credit Agreement, as amended, includes customary affirmative, negative, and financial covenants binding on the In 10. Derivatives On February 28, 2023, the Company entered into an interest rate swap contract to improve the predictability of cash flows from interest payments related to its variable, SOFR-based debt. The swap contract has a notional amount of $27.4 million as of December 31, 2023, and matures on December 22, 2025. This swap contract effectively converts the SOFR-based variable portion of The following table presents the (in thousands) December 31, 2023 Derivatives Instruments Balance Sheet Classification Notional Amount Fair Value (a) Interest rate swap Other long-term liabilities (a) See Note 11 for the fair value measurements related to this financial instrument. The following table summarizes the effect of derivatives designated as cash flow hedging instruments for the year ended December 31, 2023: Year Ended Derivatives Qualifying as Hedges, net of tax (in thousands) December 31, 2023 Amount of loss recognized in OCI on derivatives (effective portion) Amounts reclassified from accumulated other comprehensive loss to interest expense 11. Fair Value Measurements The following tables present the fair value hierarchy for those assets or liabilities measured at fair value on a recurring basis: Fair Value as of December 31, 2023 Assets (Liabilities) (in thousands) Level 1 Level 2 Level 3 Total Equity securities - common stock Interest rate swap agreements The Company uses the market approach technique to value its financial assets and liabilities. The Company’s financial assets and liabilities carried at fair value include, when applicable, investments in common stock and derivative instruments used to hedge the Company’s interest rate risks. The fair value of the Company’s investment in common stock of Harvard Apparatus Regenerative Technologies (“HRGN” formerly known as Biostage, Inc.) (see Note 16 for information regarding the HRGN Settlement) was based on the closing price as quoted on the OTCQB Marketplace at the 12. Stock-Based Compensation Stock-based compensation expense for the Year Ended December 31, (in thousands) 2023 2022 Cost of revenues Sales and marketing expenses General and administrative expenses Research and development expenses Total stock-based compensation expenses As of December 31, 2023, the total compensation costs related to unvested awards not yet recognized is $4.7 million and the weighted average period over which it is expected to be recognized is approximately 1.6 years. During the years ended December 31, Restricted Stock Units with a Market Condition The Company grants deferred awards of market condition restricted stock units (the “Market Condition For Market Condition RSUs with a measurement period that concluded during the years ended December 31, The weighted average assumptions used in the valuation of the Market Condition RSUs granted during the years ended December 31, 2023 and 2022, are as follows: 2023 2022 Volatility Risk-free interest rate Correlation coefficient Dividend yield Liquidity discount The Company used historical volatility to calculate the expected volatility matching the expected holding period. The risk-free interest rate assumption is based upon observed U.S. Treasury bill interest rates (risk-free) appropriate for the term of the award. Additionally, the Company assumes a liquidity discount to adjust the fair value for the one-year holding period post-vest restrictions. Stock-Based Payment Awards Condition Restricted Grant Date Restricted Grant Date Stock Units Fair Value Stock Units Fair Value Balance at December 31, 2021 Granted Vested Cancelled/Forfeited Balance at December 31, 2022 Granted Vested Cancelled/Forfeited Balance at December 31, 2023 Stock option activity for the years ended December 31, 2023 and 2022, is as follows: Number of Options Weighted-Average Exercise Price Weighted-Aveage Remaining Contractual Term (years) Average Intrinsic Value (in thousands) Outstanding at December 31, 2021 Exercised Cancelled/Forfeited Outstanding at December 31, 2022 Exercised Cancelled/Forfeited Outstanding and Exerciseable at December 31, 2023 The aggregate intrinsic value in the preceding table represents the total pre-tax intrinsic value, based on the Company’s closing stock price of The Company Revenues The Year Ended December 31, (in thousands) 2023 2022 Instruments, equipment, software and accessories Service, maintenance and warranty contracts Total revenues Year Ended December 31, (in thousands) 2023 2022 Goods and services transferred at a point in time Goods and services transferred over time Total revenues Year Ended December 31, (in thousands) 2023 2022 United States Europe Greater China Rest of the world Total revenues Contract Liabilities The following tables December 31, December 31, (in thousands) 2023 2022 Change 2022 2021 Change Service contracts Customer advances Total contract liabilities Changes in the Company’s Provision for Expected Credit Losses on Receivables December 31, (in thousands) 2023 2022 Balance, beginning of period Provision for expected credit losses Charge-offs and other Balance, end of period Concentrations Warranties Year Ended December 31, (in thousands) 2023 2022 Balance at December 31, 2022 Expense Warranty claims Balance at December 31, 2023 14. Income Tax Income tax expense for the years ended December 31, 2023 and 2022, consisted of: Year Ended December 31, (in thousands) 2023 2022 Current income tax expense: Federal and state Foreign Deferred income tax expense (benefit): Federal and state Foreign Total income tax expense The effective tax rate for the year ended December 31, 2023 was (33.5)% as compared with (3.7)% for the same period in 2022. The difference between the Company’s effective tax rate year over year was primarily attributable to changes in the mix of pre-tax income and losses at individual subsidiaries, and the impact of changes in uncertain tax positions. Income tax expense for the years ended December 31, 2023 and 2022, differed from the amount computed by applying the U.S. federal income tax rate of 21% to pre-tax loss as a result of the following: Year Ended December 31, (in thousands) 2023 2022 Income tax benefit computed at federal statutory tax rate Increase (decrease) in income taxes resulting from: Permanent differences, net Non-deductible executive compensation Global Intangible Low-Taxed Income (GILTI) State income taxes, net of federal income tax benefit Stock-based compensation Tax credits Net operating loss true-ups and expirations Change in reserve for uncertain tax position Impact of change to prior year tax accruals Change in valuation allowance allocated to income tax Other Total income tax expense Income tax expense is based on the following pre-tax (loss) income from operations: Year Ended December 31, (in thousands) 2023 2022 Domestic Foreign Total The tax effects of temporary differences that give rise to significant components of the deferred tax assets and deferred tax liabilities at December 31, 2023 and 2022, are as follows: Year Ended December 31, (in thousands) 2023 2022 Deferred income tax assets: Inventory Operating loss and credit carryforwards Research and development Employee retention credit Lease liabilities Accrued expenses Stock compensation Deferred interest expense Other assets Total gross deferred assets Less: valuation allowance Deferred tax assets Deferred income tax liabilities: Indefinite-lived intangible assets Definite-lived intangible assets Lease right-of-use assets Employee benefit plans Other liabilities Total deferred tax liabilities Deferred income tax liabilities, net Deferred income tax assets and liabilities by classification on the consolidated balance sheets were as follows: Year Ended December 31, (in thousands) 2023 2022 Deferred tax assets (included in other long-term assets) Deferred income tax liabilities Deferred income tax liability, net At December 31, 2023, the Company had state net operating loss carryforwards of $6.3 million, which expire between 2024 and 2043. The Company had net operating loss carryforwards of $7.8 million in certain foreign jurisdictions which may be carried forward indefinitely, partially offset by valuation allowances. The Company had $7.8 million of research and development tax credit carryforwards which begin to expire in 2024, and are partially offset by a reserve of $0.8 million for uncertain tax positions. The Company had a total of $2.7 million of state investment tax credit carryforwards, research and development tax credit carryforwards, and enterprise zone credit carryforwards, which begin to expire in 2024. In addition, the Company had a total of $0.4 million international R&D credits which begin to expire in 2037. The Internal Revenue Code (“IRC”) limits the amounts of net operating loss carryforwards or credits that a company may use in any one year in the event of a change in ownership under IRC Sections 382 or 383. As a result of various acquisitions in prior years, certain losses and credit carryforwards are subject to these limitations. As of December 31, 2023 and 2022, the Company maintained a total valuation allowance of $15.2 million and $14.5 million, respectively, which relates to foreign, federal, and state deferred tax assets in both years. The valuation allowance is based on estimates of taxable income in each of the jurisdictions in which the Company operates and the period over which deferred tax assets will be recoverable. The net change in the total valuation allowance for the years ended December 31, 2023 and 2022, was an increase of $0.7 million and a decrease of $0.2 million, respectively. During the year ended December 31, 2023, the Company increased the valuation allowance related to the estimate of realizability of German deferred tax assets and deferred tax assets related to the Employee Retention Credit, offset by the utilization and expiration of certain U.S. federal and state net operating losses and the expiration of certain U.S. credits. As of December 31, 2023 and 2022, cash and cash equivalents held by the Company’s foreign subsidiaries were $2.1 million and $2.6 million, respectively. As of December 31, 2023, the Company has determined the potential income tax and withholding liability related to available cash balances at foreign subsidiaries to be immaterial. A summary of activity of unrecognized tax benefits is as follows: (in thousands) Balance at December 31, 2021 Additions based on tax positions of prior years Decreases based on tax positions of prior years Additions based on tax positions of current year Other decreases, net Balance at December 31, 2022 Additions based on tax positions of prior years Decreases based on tax positions of prior years Additions based on tax positions of current year Other decreases, net Balance at December 31, 2023 We expect the amount of unrecognized tax benefits to change within the next twelve months, including the release of reserves of approximately $0.4 million. Substantially all of the liability for uncertain tax benefits related to various federal, state and foreign income tax matters would benefit the Company's effective tax rate, if recognized. The Company classifies interest and penalties related to unrecognized tax benefits as a component of income tax expense, which has not been significant during the years ended December 31, 2023 and 2022, respectively. With a few exceptions, the Company is no longer subject to income tax examinations by tax authorities in foreign jurisdictions for the years before 2019. In the U.S., the Company’s net operating loss and tax credit carryforward amounts remain subject to federal and state examination for tax years starting in 2004 as a result of tax losses incurred in prior years. There are currently no pending federal or state tax examinations. 15. Commitments and Contingent Liabilities In April 2022, the Company and HRGN executed a settlement with the plaintiffs in the HRGN Litigation (as defined below), which resolves all claims relating to the litigation as described in Note 16, Litigation Settlement. In addition, the Company has entered into indemnification agreements with its directors. It is not possible to determine the maximum potential liability amount under these indemnification agreements due to the limited history of The Company is subject to unclaimed property laws in the ordinary course of its business. State escheat laws generally require entities to report and remit abandoned and unclaimed property to the state. Failure to timely report and remit the property can result in assessments that could include interest and penalties, in addition to the payment of the escheat liability itself. The Company is currently undergoing an unclaimed property audit. Based on the current stage of the audits, the Company has not accrued any significant losses related to these audits as of December 31, 2023. 16. Litigation Settlement In April 2022, the Company and HRGN entered into a settlement of a litigation related to injuries allegedly caused by products produced by the Company and HRGN and utilized in connection with surgeries performed by third parties (the “HRGN Settlement”). The HRGN Settlement resolved and dismissed all claims by and between the parties. HRGN has indemnified the Company for all losses and expenses that the Company incurred in connection with such litigation and settlement. In connection with the HRGN Settlement, in June 2022, HRGN issued 4,000 shares of Series E Convertible Preferred Stock (the “Series E Preferred Stock”) to the Company in satisfaction of $4.0 million of its total indemnification obligations. The Company recorded the Series E Preferred Stock at an estimated fair value of $3.9 million using a Monte Carlo valuation simulation incorporating information from selected guideline companies. As of December 31, 2022, the book value of the shares of Series E Preferred Stock, inclusive of accrued dividends, was $4.1 million and was included in the consolidated balance sheet as a component of other long-term assets. In April 2023, all of the shares of Series E Preferred Stock the Company held in HRGN were mandatorily converted into shares of HRGN common stock. As of December 31, 2023, the Company held shares of HRGN common stock with an estimated fair value of $3.5 million, which are included in the consolidated balance sheet as a component of other long-term assets. During the year ended December 31, 2023, the Company recorded an unrealized loss related to these shares of $(0.6) million, which was recorded as other (expense) income, net, in the consolidated statements of operations. The Company determines the fair value of its HRGN common stock based on the closing price as quoted on the OTCQB Marketplace at the reporting date. Due to HRGN’s limited operating history, its overall financial condition and the limited trading volumes and liquidity of its common stock, the value of the Company’s investment in this common stock could fluctuate considerably or become worthless. 17. Product Line Disposition On February 17, 2023, the Company completed the disposition of its Hoefer product line for cash consideration of $0.5 million. The carrying value of assets sold was $0.1 million resulting in a gain on disposition of $0.4 million which is recorded in other (expense) income, net, in the consolidated statement of operations for the year ended December 31, 2023. Revenue and gross profit of this disposed product line included in the condensed consolidated statement of operations for the years ended December 31, 2023 and 2022, were not significant. 18. Government Assistance As there is no authoritative guidance under U.S. GAAP on accounting for grants to for profit business entities from government entities, the Company accounts for government assistance by analogy to International Accounting Standards Topic 20,Accounting for Government Grants and Disclosure of Government Assistance (IAS 20). Under IAS 20, grants related to income are presented as part of the consolidated statements of operations In February 2024, the Company received and recorded $3.1 million for Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. HARVARD BIOSCIENCE, INC. Date: March By: /s/ James Green Chief Executive Officer Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates Signature Title Date /s/ JAMES GREEN Chief Executive Officer and Director (Principal Executive Officer) March 7, 2024 James Green /s/ JENNIFER COTE Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) March Jennifer Cote /s/ KATHERINE A. EADE Director March Katherine A. Eade /s/ ALAN EDRICK Director March Alan Edrick /s/ THOMAS W. LOEWALD Director March 7, 2024 Thomas W. Loewald /s/ BERTRAND LOY Director March Bertrand Loy The following exhibits are filed as part of this Annual Report on Form 10-K. Where such filing is made by incorporation by reference to a previously filed document, such document is identified. Exhibit Description Method of Filing 2.1§ Exhibit to the 3.2 Exhibit to the 3.3 Exhibit to the thereto. thereto. 10.2 Harvard Bioscience, Inc. Employee Stock Purchase Plan, as amended. Disclosed as 10.3 Exhibit to the thereto. Exhibit to the thereto. 10.5 # Form of Incentive Stock Option Agreement (Executive Officers). Exhibit to the 10.6 # Form of Non-Qualified Stock Option Agreement (Executive Officers). Exhibit to the 10.11# Employment Agreement between Jennifer Cote and the Company dated June 19, 2023 Exhibit to the Current Report on Form 8-K filed June 20, 2023, and incorporated by reference thereto. 10.12 Exhibit to the 10.13 Exhibit to the 10.14 Exhibit to the thereto. 10.15 Exhibit to the 10.16 Exhibit to the 10.17 Exhibit to the 10.18# Exhibit to the 10.19# Exhibit to the 10.20# Exhibit to the 10.21# Exhibit to the 10.22# Exhibit to the 10.23# Exhibit to the 32.2 97 Filed with this report 101.INS Inline XBRL Instance Document Filed with this report 101.SCH Inline XBRL Taxonomy Extension Schema Document Filed with this report 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document Filed with this report 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document Filed with this report 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document Filed with this report 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document Filed with this report 104 Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101) + Portions of this * This certification shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section, nor shall it be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934 # Management contract or compensatory plan or arrangement. § The schedules and exhibits The Company will furnish to stockholders a copy of any exhibit without charge upon written request. Your percentage ownership will be diluted in the future becauseItem 1B.Item 2.1C.Properties.Cybersecurity.● risk assessments designed to help identify material cybersecurity risks to our critical systems, information, products, services, and our broader enterprise information technology (“IT”) environment; ● a security team that is principally responsible for managing (1) our cybersecurity risk assessment processes, (2) our security controls, and (3) our response to cybersecurity incidents; ● the use of external service providers, where appropriate, to assess, test, or otherwise assist with aspects of our security controls; ● cybersecurity awareness training for our employees, incident response personnel, and senior management; ● assessment of material cybersecurity risks posed by third-party service providers, including risks to employee, customer and financial information; and ● a cybersecurity incident response protocol that includes procedures for responding to cybersecurity incidents. principal facilities incorporateperform manufacturing, research and development, sales and marketing, and administration functions. Our facilities consist of:As of December 31, 2023, we leased the following principal facilities: • a leased 83,123 square foot facility in Holliston, Massachusetts, which includes our corporate headquarters,• a leased 29,020 square foot facility in Richmond, California,• a leased 22,449 square foot facility in Reutlingen, Germany,• a leased 20,853 square foot facility in Barcelona, Spain,• a leased 12,031 square foot facility in March-Hugstetten, Germany,Excluded from the listing of facilities above, is the 115,667 square foot facility leased by DSI in New Brighton, Minnesota, and the 36,144 square foot facility in Charlotte, North Carolina that was leased by Denville. additional facilities in Cambourne, England, Lambrecht, Germany, Hamden Connecticut, Durham, North CarolinaCambridge, England; Kista, Sweden; Beijing, China; and Kista, Sweden, Shanghai, China, Les Ulis, France, St. Augustin, Germany, Lunenburg, Canada and Montreal, Canada.Item 3.On April 14, 2017, anticipated representatives forFor information related to legal proceedings, see the estatediscussion in Note 15 and Note 16 to the Consolidated Financial Statements included in “Part IV, Item 15. Exhibits, Financial Statement Schedules” of an individual plaintiff filed a wrongful death complaint with the Suffolk Superior Court, in the County of Suffolk, Massachusetts, against the Company and other defendants, including Biostage, Inc. (f/k/a Harvard Apparatus Regenerative Technology, Inc.), our former subsidiary that was spun off in 2013, 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 causedthis report, which information is incorporated by products, including synthetic trachea scaffolds and bioreactors, provided by certain of the named defendants and utilized in connection with surgeries performed by third parties in 2012 and 2013. The litigation is at an early stage and the Company intends to vigorously defendreference into this case and has contacted its liability insurance carrier to request defense and indemnification of any losses incurred in connection with this lawsuit. While we believe that such claim is without merit, we are unable to predict the ultimate outcome of such litigation.Mine Safety Disclosures 20Item 5.Registrant’sRegistrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.SecuritiesPrice Range of Common StockMarket Informationhas beenis quoted on the NASDAQNasdaq Global Market since our initial public offering on December 7, 2000, and currently trades under the symbol “HBIO.” The following table sets forth the range of the high and low sales prices per share of our common stock as reported on the NASDAQ Global Market for the quarterly periods indicated.Fiscal Year Ended December 31, 2017 High Low First Quarter $ 3.25 $ 2.55 Second Quarter $ 2.75 $ 2.30 Third Quarter $ 3.75 $ 2.35 Fourth Quarter $ 3.80 $ 3.08 Fiscal Year Ended December 31, 2016 High Low First Quarter $ 3.25 $ 2.48 Second Quarter $ 3.83 $ 2.72 Third Quarter $ 3.19 $ 2.53 Fourth Quarter $ 3.05 $ 2.30 On March 9, 2018, the closing sale price of our common stock on the NASDAQ Global Market was $4.60 per share. There were 11690 holders of record of our common stock as of March 9, 2018. We believe that1, 2024. The number of record holders was determined from the numberrecords of our transfer agent and does not include beneficial owners of our common stock at that date was substantially greater.whose shares are held in the names of various security brokers, dealers, and registered clearing agencies.Boardboard of Directorsdirectors and will depend on our financial condition, results of operations, capital requirements and other factors our Boardboard of Directorsdirectors deems relevant.Stockholder Return Performance GraphThis performance graph shall not be deemed “filed” for purposes 
12/12 12/13 12/14 12/15 12/16 12/17 Harvard Bioscience, Inc. 100.00 141.63 170.86 104.56 91.91 99.44 Russell 2000 100.00 138.82 145.62 139.19 168.85 193.58 NASDAQ Biotechnology 100.00 174.05 230.33 244.29 194.95 228.29 The stock price performance included in this graph is not necessarily indicative of future stock price performance.Item 6.Selected Financial DataThe financial data presented below have been derived from our audited consolidated financial statements. The selected historical financial data presented below should be read in conjunction with “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Item 8. Financial Statements and Supplementary Data.” and with our previously filed Annual Reports on Form 10-K. The selected data in this section is not intended to replace the consolidated financial statements. The information presented below is not necessarily indicative of the results of our future operations.22 For The Year Ended December 31, 2017 2016 2015 2014 2013 (in thousands, except per share data) Statement of Operations Data: Revenues $ 101,882 $ 104,521 $ 108,664 $ 108,663 $ 105,171 Cost of revenues 54,285 56,106 59,941 59,319 57,475 Gross profit 47,597 48,415 48,723 49,344 47,696 Operating expenses 47,698 51,412 50,436 42,726 46,159 Operating (loss) income (101 ) (2,997 ) (1,713 ) 6,618 1,537 Other expense, net (1,987 ) (81 ) (1,895 ) (2,201 ) (1,102 ) (Loss) income from continuing operations before income taxes (1) (2,088 ) (3,078 ) (3,608 ) 4,417 435 Income tax expense (benefit) (2) (1,223 ) 1,229 15,431 2,062 (288 ) (Loss) income from continuing operations (865 ) (4,307 ) (19,039 ) 2,355 723 Discontinued operations (3): Loss from discontinued operations, net of tax - - - - (2,553 ) Net (loss) income $ (865 ) $ (4,307 ) $ (19,039 ) $ 2,355 $ (1,830 ) (Loss) earnings per share: Basic (loss) earnings per common share from continuing operations $ (0.02 ) $ (0.13 ) $ (0.57 ) $ 0.07 $ 0.02 Discontinued operations - - - - (0.08 ) Basic (loss) earnings per common share $ (0.02 ) $ (0.13 ) $ (0.57 ) $ 0.07 $ (0.06 ) Diluted (loss) earnings per common share from continuing operations $ (0.02 ) $ (0.13 ) $ (0.57 ) $ 0.07 $ 0.02 Discontinued operations - - - - (0.08 ) Diluted (loss) earnings per common share $ (0.02 ) $ (0.13 ) $ (0.57 ) $ 0.07 $ (0.06 ) Weighted average common shares: Basic 34,753 34,212 33,593 32,171 30,384 Diluted 34,753 34,212 33,593 33,237 31,914 As of December 31, 2017 2016 2015 2014 2013 (in thousands) Balance Sheet Data: Cash and cash equivalents $ 5,733 $ 5,596 $ 6,744 $ 14,134 $ 25,771 Working capital 33,494 30,871 31,226 38,964 44,665 Total assets 109,354 107,765 120,050 135,916 135,460 Long-term debt, net of current portion 8,983 11,374 16,369 16,450 19,750 Stockholders’ equity 80,900 72,196 77,598 95,468 94,485 (1)Included in the net operating loss for the year ended December 31, 2016 was $1.7 million of forensic investigation costs from the first half, a $0.7 million AHN impairment charge from the third quarter, and a $1.2 million loss on sale of AHN from the fourth quarter. The total impact of these three charges, on a pre-tax basis, was $3.6 million for the year ended December 31, 2016.(2)Income tax expense for the year ended December 31, 2015 is primarily the result of the recognition of a valuation allowance on U.S. deferred tax assets.(3)On September 30, 2008, we completed the sale of assets of our Union Biometrica Division including its German subsidiary, Union Biometrica GmbH, representing at that time the remaining portion of our Capital Equipment Business Segment, to UBIO Acquisition Company. The purchase price paid by UBIO Acquisition Company included an earn-out based on the revenue generated by the acquired business over a five-year post-transaction period. Discontinued operations include a gain on disposal related to the earn-out, net of tax, of $0.3 million in 2013.On November 1, 2013, the spin-off of our RMD business from our Company was completed. Through the spin-off date the historical operations of RMD were reported as continuing operations in our consolidated statements of operations. Following the spin-off, and reported herein, the historical operations of RMD were restated and presented as discontinued operations in our consolidated statements of operations presented. Discontinued operations include the results of the RMD business except for certain corporate overhead costs and other allocations, which remain in continuing operations. The costs incurred to separate and spin-off the RMD business remain in continuing operations and have been classified and reported as transaction costs, within operating expenses, on our consolidated statements of operations. Discontinued operations include losses from operations of the RMD business, net of tax, for 2013 of $2.8 million.23Item 7.Management’sManagement’s Discussion and Analysis of Financial Condition and Results of Operations. entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” 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” beginning on page 9 ofin 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.Inc., a Delaware corporation, is a globalleading developer, manufacturer and marketerseller of a broad range of scientific instruments, systemstechnologies, products and lab consumables used to advanceservices that enable fundamental advances in life science applications, including research, pharmaceutical and therapy discovery, bioproduction and preclinical testing for basic research, drug discovery, clinicalpharmaceutical and environmental testing.therapy development. Our products and services are sold globally to thousands of researchers in over 100 countries through our global sales organization, websites, catalogs,customers ranging from renowned academic institutions and through distributors including Thermo Fisher Scientific Inc., VWRgovernment laboratories to the world’s leading pharmaceutical, biotechnology and other specialized distributors. We have sales and manufacturingCROs. With operations in the United States, Europe and China, we sell through a combination of direct and distribution channels to customers around the United Kingdom, Germany, Sweden, Spain, France, Canada, and China.world.Led by PresidentTrends and CEO Jeffrey A. Duchemin, we have conducted a multi-year restructuring program to reduce costs, align global functions, consolidate facilities to optimize our global footprint, divest non-core businesses and to reinvest in key areas such as sales and common IT systems. As part of these efforts, we divested our AHN Biotechnologie GmbH subsidiary (AHN) in the fourth quarter of 2016 and, during the first quarter of 2018, we sold substantially all the assets of our wholly-owned subsidiary, Denville Scientific, Inc. (Denville).DevelopmentsWe areOur business is affected by global and regional economic trends and uncertainties. The global economy has recently experienced increasing uncertainty, including inflationary pressure, rising interest rates, and fluctuations in exchange rates. Our business has also pursuingbeen affected by a strategy to growrecent softening of certain international markets, especially in China and the business through strategic, accretive acquisitions, including four acquisitions sinceAsia-Pacific region, the fourth quarter of 2014.Most recently,events in January 2018, we acquired Data Sciences International, Inc. (DSI) for approximately $70.0 million. DSI, a St. Paul, Minnesota-based life science research company, is a recognized leader in physiologic monitoring focused on delivering preclinical products, systems, servicesUkraine and solutions to its customers. Its customers include pharmaceutical and biotechnology companies,the Middle East, as well as contractdelays in government funding for our customers. These developments may lead to additional economic uncertainties.organizations, academic labsactivity during the pandemic, which is unlikely to be repeated. Our business has been affected by a reduced demand from our biotechnology and government researchers. This acquisition diversifiespharmaceutical company customers, due principally to the increased cost of capital and a reduction in spending following the COVID-19 pandemic.base intoneeds and our strategic plans.biopharmaceuticalyear ended December 31, 2022, we identified certain non-strategic products for discontinuation and contract research organization marketsrecorded $1.5 million of inventory charges and offers revenuealso recorded $0.9 million in severance expenses in connection with headcount reductions in Europe and cost synergies.North America. During the year ended December 31, 2023, we incurred an additional $0.3 million in inventory charges and $0.1 million in remaining severance and other expenses related to completion of this restructuring program.Our StrategyOur vision is to be a world leading life science company that excels in meeting the needsSelected Results of our customers by providing a wide breath of innovative products and solutions, while providing exemplary customer service. Our business strategy is to grow our top-line and bottom-line, and build shareholder value through a commitment to:Operationscommercial excellence;new product development;strategic acquisitions; andoperational efficiencies.metrics. % of % of % of 2017 Revenues 2016 Revenues 2015 Revenues (dollars in thousands) Revenues $ 101,882 $ 104,521 $ 108,664 Cost of revenues 54,285 53.3 % 56,106 53.7 % 59,941 55.2 % Sales and marketing expenses 21,036 20.6 % 20,486 19.6 % 20,577 18.9 % General and administrative expenses 18,575 18.2 % 20,950 20.0 % 19,832 18.3 % Research and development expenses 5,645 5.5 % 5,392 5.2 % 6,420 5.9 % Restructuring (credits) charges - 0.0 % (4 ) 0.0 % 788 0.7 % Amortization of intangible assets 2,442 2.4 % 2,722 2.6 % 2,819 2.6 % Impairment charges - 0.0 % 676 0.6 % - 0.0 % Loss on sale of AHN - 0.0 % 1,190 1.1 % - 0.0 % Components of Operating IncomeRevenues. We generate revenues by selling apparatus, instruments, devices and consumables through our distributors, direct sales force, websites and catalogs. Our websites and catalogs serve as the primary sales tools for our various product lines. These product lines include both proprietary manufactured products and complementary products from various suppliers. Our reputation as a leading producer in many of our manufactured products creates traffic to our website, enables cross-selling and facilitates the introduction of new products. We have field sales teams in the U.S., Canada, the United Kingdom, Germany, France, Spain and China. In those regions where we do not have a direct sales team, we use distributors. Revenues from direct sales to end users represented approximately 65%, 64% and 63% of our revenuesmetrics for the yearsyear ended December 31, 2017, 2016 and 2015, respectively.Our products consist of instruments, consumables, and systems that are made up of several individual products. Sales prices of these products are mostly priced in2023, compared to the range of $5,000 to $15,000, but range from under $100 to over $100,000. They are mainly scientific instruments like spectrophotometers and plate readers that analyze light to detect and quantify a wide range of molecular and cellular processes, or apparatus like gel electrophoresis units. We also use distributors for both our catalog products and our higher priced products, for sales in locations where we do not have subsidiaries or where we have existing distributors in place from acquired businesses. For the yearsyear ended December 31, 2017, 2016 and 2015, approximately 35%, 36% and 37% of our revenues, respectively, were derived from sales to distributors.2022.For the years ended December 31, 2017, 2016 and 2015, approximately 62% of our revenues, for all periods, were derived from products we manufacture, approximately 14%, 14% and 13%, respectively, were derived from complementary products we distribute in order to provide the researcher with a single source for all equipment needed to conduct a particular experiment. Approximately 24%, 24% and 25% of our revenues, respectively, for the years ended December 31, 2017, 2016, 2015 were derived from distributed products sold under our brand names.For the years ended December 31, 2017, 2016 and 2015, approximately 35%, 38% and 40% of our revenues, respectively, were derived from sales made by our non-United States operations. The decrease in international revenues was primarily due to the impact of the loss of revenue following the AHN disposition, the effects of currency fluctuation, and the impact of softness in the European funding environment.25Changes in the relative proportion of our revenue sources between catalog or website sales, direct sales and distribution sales are primarily the result of a different sales proportion of acquired companies and changes in geographic mix. $ 112,250 $ 113,335 66,071 58.9 % 60,819 53.7 % 24,108 21.5 % 25,041 22.1 % 22,780 20.3 % 24,493 21.6 % 11,764 10.5 % 12,329 10.9 % 5,525 4.9 % 6,122 5.4 % - - (233 ) -0.2 % 3,591 3.2 % 2,548 2.2 % 632 0.6 % - - 859 0.8 % 337 0.3 % Cost of revenues. Cost of revenues includes material, labor and manufacturing overhead costs, obsolescence charges, packaging costs, warranty costs, shipping costs and royalties. Our cost of revenues may vary over time based on the mix of products sold. We sell products that we manufacture and products that we purchase from third parties. The products that we purchase from third parties typically have a higher cost of revenues as a percent of revenues because the profit is effectively shared with the original manufacturer. We anticipate that our manufactured products will continue to have a lower cost of revenues as a percentage of revenues as compared with the cost of non-manufactured products for the foreseeable future. Additionally, our cost of revenues as a percent of revenues will vary based on mix of direct to end user sales and distributor sales, mix by product line and mix by geography.Sales and marketing expenses. Sales and marketing expense consists primarily of salaries and related expenses for personnel in sales, marketing and customer support functions. We also incur costs for travel, trade shows, demonstration equipment, public relations and marketing materials, consisting primarily of the printing and distribution of our catalogs, supplements and the maintenance of our websites. We may from time to time expand our marketing efforts by employing additional technical marketing specialists in an effort to increase sales of selected categories of products. We may also from time to time expand our direct sales organizations in an effort to concentrate on key accounts or promote certain product lines.General and administrative expenses. General and administrative expense consists primarily of salaries and other related costs for personnel in executive, finance, accounting, information technology and human resource functions. Other costs include professional fees for legal and accounting services, facility costs, investor relations, insurance and provision for doubtful accounts.Research and development expenses. Research and development expense consists primarily of salaries and related expenses for personnel and spending to develop and enhance our products. Other research and development expense includes fees for consultants and outside service providers, and material costs for prototype and test units. We expense research and development costs as incurred. From time to time, we receive grants from governmental entities in relation to research projects. Such grants received are accounted for as a reduction in research and development expense over the period of the project.We believe that investment in product development is a competitive necessity and plan to continue to make these investments in order to realize the potential of new technologies that we develop, license or acquire for existing markets.Restructuring charges. Restructuring charges consist of severance, other personnel-related charges and exit costs related to plans to create organizational efficiencies and reduce operating expenses.Amortization of intangibles. Amortization of intangibles expense consists of the expensing of the costs of the finite lived intangible assets over the useful life of the assets.Stock-based compensation expenses. Stock-based compensation expense for the years ended December 31, 2017, 2016 and 2015 was $3.5 million, $3.5 million and $2.8 million, respectively. The stock-based compensation expense related to stock options, restricted stock units, restricted stock units with a market condition and the employee stock purchase plan and was recorded as a component of cost of revenues, sales and marketing expenses, general and administrative expenses, research and development expenses and discontinued operations.Currently, we intend to retain all of our earnings to pay down debt, finance the expansion and development of our business and do not anticipate paying any cash dividends to holders of our common stock in the near future. As a result, capital appreciation, if any, of our common stock will be a stockholder’s sole source of gain for the near future.26Selected Results of OperationsYear Ended December 31, 2017 compared to Year Ended December 31, 20162.6%$1.0 million, or 1.0%, or $2.6 million, to $101.9$112.3 million for the year ended December 31, 2017,2023, compared to revenues of $104.5$113.3 million for the year ended December 31, 2016. 2022. Revenues included a net decrease of $5.0 million from the discontinuation of non-strategic products, which was largely offset by growth in preclinical product and service revenue. Foreign exchange favorably impacted revenue by $0.7 million during the year ended December 31, 2023.The loss in revenues from the October 2016 AHN disposition negatively impacted 2017 revenues by approximately $2.1 million, while the impact of currency translation negatively impacted 2017 revenues by approximately $0.3 million. Excluding the impact of the AHN disposition and currency translation, organic revenues declined approximately $0.3Gross profit0.2%.Reconciliation of Changes In Revenues Compared8.6%, to the Same Period of the Prior YearFor the Year EndedDecember 31, 2017Organic and AHN change-2.3%Foreign exchange effect-0.3%Total revenue change-2.6%Each reporting period, we face currency exposure that arises from translating the results of our worldwide operations to the United States dollar at exchange rates that fluctuate from the beginning of such period. We evaluate our results of operations on both a reported and a foreign currency-neutral basis, which excludes the impact of fluctuations in foreign currency exchange rates. We believe that disclosing this non-GAAP financial information provides investors with an enhanced understanding of the underlying operations of the business. This non-GAAP financial information is used by our management to internally evaluate our operating results. The non-GAAP financial information provided in the table above should be considered in addition to, not as a substitute for, the financial information provided and presented in accordance with accounting principles generally accepted in the United States, or GAAP and may be different than other companies’ non-GAAP financial information.Cost of revenuesCost of revenues were $54.3$66.1 million for the year ended December 31, 2017, a decrease of $1.8 million, or 3.2%,2023, compared with $56.1$60.8 million for the year ended December 31, 2016. The decrease in cost of revenues was primarily due2022. Gross margin increased to the decrease in sales, including the effect of cost of revenues from the sale of AHN of approximately $1.6 million. Gross profit margin as a percentage of revenues increased slightly to 46.7%58.9% for the year ended December 31, 20172023, compared with 46.3%53.7% for 2016.the year ended December 31, 2022. The increase in gross margin was due primarily to a higher mix of preclinical products, services, and software, which generally have higher gross margins than our other product lines, reduced revenue from lower margin products discontinued during the second half of 2022 and lower cost of sales resulting from restructuring activities related to discontinuing those products. Costs of goods sold for the year ended December 31, 2022, also included a $1.5 million inventory write down related to the discontinuation of certain non-strategic products.increased $0.5decreased $0.9 million, or 2.7%3.7%, to $21.0$24.1 million for the year ended December 31, 20172023, compared with $20.5to $25.0 million for the year ended December 31, 2016. This increase was2022. A reduction in salaries due to lower headcount was partially offset by increases in employee costs and stock compensation offset by decreases in consulting and purchased services as well as the impact of the sale of AHN.variable compensation.were $18.6decreased by $1.7 million, or 7.0%, to $22.8 million for the year ended December 31, 2017, a decrease of $2.4 million, or 11.3%,2023, compared with $21.0$24.5 million for the year ended December 31, 2016.2022. The decrease was primarily due to a decreasereduced consulting costs and severance costs incurred with restructuring activities in audit costs, consultingthe prior period, partially offset by increases in salaries and purchased services costs, as well asvariable compensation in the impact of the sale of AHN.current period.were $5.6decreased $0.5 million, or 4.6%, to $11.8 million for the year ended December 31, 2017, an increase of $0.2 million, or 4.7%,2023, compared with $5.4$12.3 million for the year ended December 31, 2016.2022. The increasedecrease was primarily due to an increasethe capitalization of software development costs. Reduced salaries and consulting costs were offset by increases in employee, consulting and other purchased services due to investments in product development and compliance efforts.variable compensation.asset expensesassets was $2.4$5.5 million for the year ended December 31, 20172023, compared with $2.7to $6.1 million for the year ended December 31, 2016. The decrease in amortization2022. Amortization expense was due to some long-lived intangibles having becomedecreased as certain intangible assets became fully amortized in 2016, as well as the impact of the disposal of AHN.during 2022.Impairment chargesLitigation settlementthird quarteryear ended December 31, 2022, we recorded a net credit of 2016,$0.2 million related to the HRGN Settlement consisting of $5.2 million in settlement and legal expenses offset by credits of $5.4 million. The credits consisted of adjustments to the reserve against an indemnification receivable from HRGN to reflect: i) the issuance by HRGN of Series E Convertible Preferred Stock to us on June 10, 2022, in satisfaction of $4.0 million of Biostage’s total indemnification obligations, ii) the payment by HRGN of legal fees associated with the HRGN Settlement, and iii) other accrual adjustments.initiated plansheld in HRGN were mandatorily converted into shares of common stock.sell the operations of AHN. As a result of initiating the plan to sell the operations of AHN, we evaluated the long-lived assets for impairment, pursuant to ASC 360-10. Based on the resulting impairment analysis, we recognized an impairment charge of $0.7$3.6 million for the year ended December 31, 2016.Loss on sale of AHNThe loss on sale of AHN was $1.22023, compared with $2.5 million for the year ended December 31, 2016.2022. The increase was the result of higher interest costs in a rising rate environment, which was partially offset by lower average borrowings during the period.fourth quarteryear ended December 31, 2023, we recorded an unrealized loss of 2016, we concluded$0.6 million related to these shares. We determine the salefair value of AHN. Uponour HRGN common stock based on the closing price as quoted on the OTCQB Marketplace at the reporting date. Due to HRGN’s limited operating history, its overall financial condition and the limited trading volumes and liquidity of its common stock, the transaction, we recorded a loss on salevalue of $1.2our investment in this common stock could fluctuate considerably or become worthless.2016.Other expense, netOther expense, net, was $2.0 million and $0.1 million2022. The effective tax rates for the years ended December 31, 20172023 and 2016,2022, were (33.5)% and (3.7)%, respectively. Included in other expense, net forThe difference between our effective tax rates compared to the year ended December 31, 2017 was $0.7 millionU.S. statutory tax rate of interest expense and $0.7 million of transaction related costs, including due diligence and deal investigative activities. For the year ended December 31, 2016, other expense, net included $0.6 million of interest expense. The increase in other expense, net21% was primarily due to the increasemix of forecasted income or losses in transaction related costsour U.S. and currency exchange rate fluctuations. Currency exchange rate fluctuations included asforeign tax jurisdictions, the impact of the employee retention credit, and a component of net loss resultedGlobal Intangible Low-Taxed Income inclusion to taxable income. The effective tax rates in approximately $0.5 million in currency losses during the year ended December 31, 2017, compared to $0.7 million in currency gains during the year ended December 31, 2016.Income taxesIncome tax was a benefit of approximately $1.2 million and an expense of $1.2 million forboth the years ended December 31, 20172023 and 2016, respectively. The decrease2022, were also impacted by changes in income tax expense year over year was primarily attributable to a reduction in the valuation allowance recorded against US net deferred tax assets in 2017, partially offset by tax expenseallowances associated with our assessment of the remeasurementlikelihood of net federalthe recoverability of our deferred tax assets. These events result directly from recent U.S.We have valuation allowances against substantially all of our net operating loss carryforwards and tax reform legislation which is discussed below.credit carryforwards.On December 22, 2017, tax reform legislation known as the Tax Cuts and Jobs Act (the Tax Act) was signed into law. The Tax Act makes broad and complex changes to the U.S. Internal Revenue Code, including the reduction of the corporate income tax rate from 35% to 21% and the implementation of a modified territorial tax system; the latter includes a one-time transition tax on previously unremitted earnings of foreign subsidiaries. The Company has recorded provisional estimates related to repatriation tax impact and changes in the revaluation of net deferred tax assets in the consolidated financial statements. Other provisions of the Tax Act will not impact the Company until the tax year ended December 31, 2018.Year Ended December 31, 2016 compared to Year Ended December 31, 2015RevenuesRevenues decreased 3.8%, or $4.2 million, to $104.5 million for the year ended December 31, 2016, compared to revenues of $108.7 million for the year ended December 31, 2015. Excluding the effects of currency translation, primarily from the weakening of the British Pound against the U.S. dollar, our revenues decreased 1.8% or $2.0 million, from the previous year. The remainder of the decline in revenues was primarily the result of softness in the European funding environment and slower than expected NIH budget funding, as well as less revenues from AHN in 2016 compared to 2015, following its sale in October 2016, due to two fewer months of revenue which amounted to approximately $0.5 million.28Reconciliation of Changes In Revenues Compared to the Same Period of the Prior YearFor the Year EndedDecember 31, 2016Organic and AHN change-1.8%Foreign exchange effect-2.0%Total revenue change-3.8%Each reporting period, we face currency exposure that arises from translating the results of our worldwide operations to the United States dollar at exchange rates that fluctuate from the beginning of such period. We evaluate our results of operations on both a reported and a foreign currency-neutral basis, which excludes the impact of fluctuations in foreign currency exchange rates. We believe that disclosing this non-GAAP financial information provides investors with an enhanced understanding of the underlying operations of the business. This non-GAAP financial information approximates information used by our management to internally evaluate our operating results. The non-GAAP financial information provided in the table above should be considered in addition to, not as a substitute for, the financial information provided and presented in accordance with accounting principles generally accepted in the United States, or GAAP.Cost of revenuesCost of revenues were $56.1 million for the year ended December 31, 2016, a decrease of $3.8 million, or 6.4%, compared with $59.9 million for the year ended December 31, 2015. Gross profit margin as a percentage of revenues increased to 46.3% for the year ended December 31, 2016 compared with 44.8% for 2015. The increase in gross profit margin was due primarily due to the savings associated with the relocation and consolidation of certain facilities in 2015.Sales and marketing expensesSales and marketing expenses decreased $0.1 million, or 0.4%, to $20.5 million for the year ended December 31, 2016 compared with $20.6 million for the year ended December 31, 2015. The decrease was primarily due to favorable currency translation and the impact of our restructuring activities.General and administrative expensesGeneral and administrative expenses were $21.0 million for the year ended December 31, 2016, an increase of $1.2 million, or 5.6%, compared with $19.8 million for the year ended December 31, 2015. The increase was primarily due to audit and forensic investigation costs, higher stock compensation expense, partially offset by favorable currency translation, and the impact of our restructuring activities.Research and development expensesResearch and development expenses were $5.4 million for the year ended December 31, 2016, a decrease of $1.0 million, or 16.0%, compared with $6.4 million for the year ended December 31, 2015. The decrease was primarily due to the impact of our restructuring activities, favorable currency translation, and an increase in the amount of research grants earned. Research grants earned are accounted for as a reduction in research and development expense.RestructuringRestructuring charges were immaterial for the year ended December 31, 2016 compared with $0.8 million for the year ended December 31, 2015. There were no restructuring activities during the year ended December 31, 2016.Restructuring charges recorded during the year ended December 31, 2015 included additional charges related to the restructuring plan we implemented during the year ended December 31, 2014, as well as charges related to restructuring plans commenced during the year ended December 31, 2015. The 2015 restructuring plans included actions to move the Coulbourn Instruments’ operations to Holliston, MA and the HEKA Canada operations to HEKA Germany, as well as eliminating certain positions made redundant as a result of our site consolidations and a realignment of our commercial sales team.29Amortization of intangible assetsAmortization of intangible asset expenses was $2.7 million for the year ended December 31, 2016 compared with $2.8 million for the year ended December 31, 2015.Impairment chargesDuring the third quarter of 2016, we initiated plans to sell the operations of AHN. As a result of initiating the plan to sell the operations of AHN, we evaluated the long-lived assets for impairment, pursuant to ASC 360-10. Based on the resulting impairment analysis, we recognized an impairment charge of $0.7 million for the year ended December 31, 2016.Loss on sale of AHNThe loss on sale of AHN was $1.2 million for the year ended December 31, 2016. During the fourth quarter of 2016, we concluded the sale of AHN. Upon the closing of the transaction, we recorded a loss on sale of $1.2 million for the year ended December 31, 2016.Other expense, netOther expense, net, was $0.1 million and $1.9 million for the years ended December 31, 2016 and 2015, respectively. Included in other expense, net for the year ended December 31, 2016 was interest expense of $0.6 million. For the year ended December 31, 2015 other expense, net included $0.9 million of interest expense and $1.2 million of acquisition related costs, including due diligence and deal investigative activities. The decrease in other expense, net was primarily due to the decrease in acquisition related costs and currency exchange rate fluctuations. Currency exchange rate fluctuations included as a component of net (loss) income resulted in approximately $0.7 million in currency gains during the year ended December 31, 2016, compared to $0.2 million in currency gains during the year ended December 31, 2015.Income taxesIncome tax expense was approximately $1.2 million and $15.4 million for the years ended December 31, 2016 and 2015, respectively. The decrease in income tax expense year over year was primarily attributable to the recognition of a valuation allowance on U.S. deferred tax assets in 2015. During the year ended December 31, 2015, we determined that it was more likely than not that our U.S. deferred tax assets would not be realized and therefore recorded a net increase to the valuation allowance of $16.4 million to offset U.S. deferred tax assets net of deferred tax liabilities except for certain indefinite-lived intangible assets. This decision was based on all available evidence.Historically, we have financedOur primary sources of liquidity are cash and cash equivalents, internally generated cash flow from operations and our business throughrevolving credit facility. Our expected cash provided by operating activities, the issuance of common stock,outlays relate primarily to cash payments due under our Credit Agreement described below, salaries, inventory, and bank borrowings. Our liquidity requirements arise primarily from investing activities, including funding of acquisitions, and other capital expenditures. On October 26, 2016, we sold the operations of AHN and received approximately $1.4 million, net of cash on hand. Subsequent to December 31, 2017, we sold the operations of Denville Scientific, Inc. and received approximately $17.0 million. Simultaneously, we retired our existing debt balances of approximately $11.9 million. On January 31, 2018, we entered into a financing agreement which comprised of a $64.0 million term loan and up to a $25.0 million line of credit. Finally, on January 31, 2018, we acquired Data Sciences International, Inc. for $70.0 million.2017,2023, we held cash and cash equivalents of $5.7$4.3 million, compared with $5.6$4.5 million at December 31, 2016.2022. Borrowings outstanding under our Credit Agreement were $37.1 million and $47.7 million as of December 31, 2023 and 2022, respectively.2017 and December 31, 2016, we had $11.7 million and $13.7 million, respectively, of2023, the weighted average interest rate on our borrowings, outstanding under our credit facility. Total debt, net of cash and cash equivalents was $6.0 million at December 31, 2017, compared to $8.1 million at December 31, 2016. In addition, we had an underfunded United Kingdom pension liability of approximately $1.2 million and $3.0 million at December 31, 2017 and December 31, 2016, respectively.30As of December 31, 2017 and December 31, 2016, cash and cash equivalents held by our foreign subsidiaries was $4.8 million and $4.5 million, respectively. Funds held by our foreign subsidiaries are not available for domestic operations unless the funds are repatriated. At December 31, 2017, we changed our indefinite reinvestment assertion to provide that all foreign earnings above the level required for local operating expenses would be repatriated to the U.S. in tax years after 2017. At December 31, 2017, as we were considering a potential U.S. acquisition, we changed our assertion and it was anticipated that U.S. needs would require repatriation of all foreign subsidiaries’ earnings rather than just France and Canada. As a resultinclusive of the Tax Act, all prior unremitted earnings are deemed paid and included in the current provision under the one-time repatriation tax calculation. Prior to 2017, this modified assertion only applied to our subsidiaries in France and Canada. Therefore, no tax liability other than withholding tax has been accrued at December 31, 2017 for these anticipated repatriations.Condensed Cash Flow Statements(unaudited) Year Ended December 31, 2017 2016 2015 (in thousands) Cash flows from operations: Net loss $ (865 ) $ (4,307 ) $ (19,039 ) Changes in assets and liabilities (3,811 ) (41 ) (2,719 ) Other adjustments to operating cash flows 5,733 9,731 22,463 Net cash provided by operating activities 1,057 5,383 705 Investing activities: Additions to property, plant and equipment (890 ) (1,445 ) (2,960 ) Acquisitions, net of cash acquired - - (4,545 ) Dispositions, net of cash on hand - 1,417 - Other investing activities (27 ) (34 ) (12 ) Net cash used by investing activities (917 ) (62 ) (7,517 ) Financing activities: Net repayments of debt (1,952 ) (5,050 ) (2,550 ) Other financing activities 160 182 2,010 Net cash used by financing activities (1,792 ) (4,868 ) (540 ) Effect of exchange rate changes on cash 1,789 (1,601 ) (38 ) Increase (decrease) in cash and cash equivalents $ 137 $ (1,148 ) $ (7,390 ) Our operating activities provided cash of $1.1 million, $5.4 million and $0.7 million for the years ended December 31, 2017, 2016 and 2015, respectively. The decrease in cash flows from operations in 2017 compared to 2016 was primarily due to larger outflows due to working capital changes in 2017 as well as larger noncash charges in 2016. The increase in cash flows from operations in 2016 compared to 2015 was primarily due to a lower net loss with higher noncash charges in 2016, and a decrease in inventory and receivables as compared to 2015.Our investing activities used cash of $0.9 million during the year ended December 31, 2017, $0.1 million for the year ended December 31, 2016, and $7.5 million for the year ended December 31, 2015. Investing activities during 2017, 2016 and 2015 included purchases of property, plant and equipment, proceeds from the sale of property, plant and equipment and expenditures for our catalogs. In addition, investing activities in 2016 included proceeds from the disposition of AHN, net of cash on hand, of $1.4 million. In January 2015, we acquired HEKA for approximately $4.5 million, net of cash acquired. During 2017, 2016 and 2015, capital expenditures were $0.9 million, $1.4 million and $3.0 million, respectively. The increases in capital expenditures in 2016 over 2015 was due to the investment in implementing a new Enterprise Resource Planning (ERP) platform. Capital expenditure decreased in 2017, as a significant amount of the upfront ERP costs had already been incurred.Our financing activities have historically consisted of borrowings and repayments under our revolving credit facility and term loans, payments of debt issuance costs, and the issuance of common stock. During the years ended December 31, 2017, 2016 and 2015, financing activities used cash of $1.8 million, $4.9 million and $0.5 million , respectively. During the year ended December 31, 2017, we borrowed $2.8 million under our credit facility, repaid $4.7 million of debt under our credit facility and term loans and ended the year with $11.7 million of borrowings. Net proceeds from the issuance of common stock for the year ended December 31, 2017 were $0.2 million, which related to the exercise of stock options and the employee stock purchase plan. During the year ended December 31, 2016, we borrowed $4.0 million under our credit facility, repaid $9.0 million of debt under our credit facility and term loans and ended the year with $13.7 million of borrowings. Net proceeds from the issuance of common stock for 2016 were $0.2 million, which related to the exercise of stock options and the employee stock purchase plan. During the year ended December 31, 2015, we borrowed $5.8 million under our credit facility, repaid $8.4 million of debt under our credit facility and term loans and ended the year with $18.9 million of borrowings. Net proceeds from the issuance of common stock for 2015 were $2.0 million, which related to the exercise of stock options and the employee stock purchase plan.31Borrowing ArrangementsOn August 7, 2009, we entered into an Amended and Restated Revolving Credit Loan Agreement related to a $20.0 million revolving credit facility with Bank of America, as agent, and Bank of America and Brown Brothers Harriman & Co as lenders (as amended, the 2009 Credit Agreement). On March 29, 2013, we entered into a Second Amended and Restated Revolving Credit Agreement (as amended, the 2013 Credit Agreement) with Bank of America, as agent, and Bank of America and Brown Brothers Harriman & Co, as lenders that amended and restated the 2009 Credit Agreement. Between September 2011 and May 2017, we entered into a series of amendments that among other things did the following:on September 30, 2011, reduced interest rates to the London Interbank Offered Rate plus 3.0%;on March 29, 2013, converted existing loan advances into a term loan in the principal amount of $15.0 million (the 2013 Term Loan), provided a revolving credit facility in the maximum principal amount of $25.0 million (the 2013 Revolving Line) and a delayed draw term loan (the 2013 DDTL) of up to $15.0 million;on October 31, 2013, reduced the 2013 DDTL from up to $15.0 million to up to $10.0 million;on April 24, 2015, extended the maturity date of the 2013 Revolving Line to March 29, 2018 and reduced the interest rates on the 2013 Revolving Line, 2013 Term Loan and 2013 DDTL;on June 30, 2015, amended its quarterly minimum fixed charge coverage financial covenant;on March 9, 2016, amended the principal payment amortization of the 2013 Term Loan and 2013 DDTL to five years, as well as amended its quarterly minimum fixed charge coverage financial covenant; andon May 2, 2017, entered into a Third Amended and Restated Revolving Credit Agreement (as amended, the Credit Agreement) with Bank of America, as agent, and Bank of America and Brown Brothers Harriman & Co, as lenders that amended and restated the 2013 Credit Agreement.The Credit Agreement was entered into to, among other things, consolidate, combine and restate the outstanding indebtedness, on the date of the Credit Agreement, into a term loan (the Term Loan) in the principal amount of $14.0 million, and also provide for a $25.0 million revolving line of credit (the Revolving Line). The Term Loan and the Revolving Line each have a maturity date of May 1, 2022. Borrowings under the Term Loan accrue interest at a rate based on either the effective LIBOR for certain interest periods selected by us, or a daily floating rate based on the BBA LIBOR as published by Reuters (or other commercially available source providing quotations of BBA LIBOR), plus in either case, a margin of 2.75%. Additionally, the Revolving Line accrues interest at a rate based on either the effective LIBOR for certain interest periods selected by us, or a daily floating rate based on the BBA LIBOR, plus in either case, a margin of 2.25%. The Term Loan and loans under the Revolving Line evidenced by the Credit Agreement, or the Loans, are guaranteed by all of our direct and indirect domestic subsidiaries, and secured by substantially all of the assets of the Company and the guarantors. The Loans are subject to restrictive covenants under the Credit Agreement, and financial covenants that require us and our subsidiaries to maintain certain financial ratios on a consolidated basis, including a maximum leverage, minimum fixed charge coverage and minimum working capital. Prepayment of the Loans is allowed by the Credit Agreement at any time during the terms of the Loans. The Loans also contain limitations on our ability to incur additional indebtedness and requires lender approval for acquisitions funded with cash, promissory notes and/or other consideration in excess of $6.0 million and for acquisitions funded solely with equity in excess of $10.0 million.As of December 31, 2017 and December 31, 2016, we had borrowings of $11.7 million and $13.7 million, net of deferred financing costs, respectively, outstanding under our Credit Agreement. The carrying value of the debt approximates fair value because the interest rate under the obligation approximates market rates of interest available to us for similar instruments.As of December 31, 2017, the weighted effective interest rates, net of the impacteffect of our interest rate swaps, on our Term Loan, was 4.61%.32On January 22, 2018, in connection with the sale of Denville, we terminated the Credit Agreement. All outstanding amounts under the agreement were repaid in full using a portion of the proceeds of the Denville sale. At the time of repayment, there was approximately $11.9 million outstanding.On January 31, 2018, we acquired all of the issued and outstanding shares of Data Sciences International, Inc. (DSI)7.4%, a Delaware corporation for approximately $70.0 million. We funded the acquisition from our existing cash balances, the proceeds of the Denville transaction and the proceeds of the Financing Agreement discussed below.Additionally, on January 31, 2018, we entered into a financing agreement byavailable and among us and certain of our subsidiaries, as borrowers (collectively, the Borrower), certain of our subsidiaries, as guarantors, various lenders from time to time party thereto (the Lenders), and Cerberus Business Finance, LLC, as collateral agent and administrative agent for the Lenders (the Financing Agreement).The Financing Agreement provides for senior secured credit facilities (the Senior Secured Credit Facilities) comprised of a $64.0 million term loan and up to a $25.0 million revolving line of credit. The proceeds of the term loan and $4.8 million of advances under the revolving line of credit were used to fund a portion of the DSI acquisition, and to pay fees and expenses related thereto and the closing of the Senior Secured Credit Facilities. In addition, the revolving facility is available for use by us and our subsidiaries for general corporate and working capital needs, and other purposes to the extent permitted by the Financing Agreement. The Senior Secured Credit Facilities have a maturity of five years. At the closing date of the Financing Agreement, we had approximately $14.5 million of availableunused borrowing capacity under the revolving line of credit.Commencing on March 31, 2018, the outstanding term loans will amortize in equal quarterly installments equal to $0.4 million per quarter on such date and during each of the next three quarters thereafter, $0.6 million per quarter during the next four quarters thereafter and $0.8 million per quarter thereafter, with a balloon payment at maturity.The obligations of the BorrowerCredit Agreement, as amended, was $10.8 million. Total revolver borrowing capacity is limited by our consolidated net leverage ratio as defined under the Senior Secured Credit Facilities are unconditionally guaranteed by us and certain of our existing and subsequently acquired or organized subsidiaries. The Senior Secured Credit Facilities and related guarantees are secured on a first-priority basis (subject to certain liens permitted under the Financing Agreement) by a lien on substantially all the tangible and intangible assets of the Borrower and the subsidiary guarantors, including all of the capital stock held by such obligors (subject to a 65% limitation on pledges of capital stock of foreign subsidiaries), subject to certain exceptions.Interest on all loans under the Senior Secured Credit Facilities is paid monthly. Borrowings under the Financing Agreement accrue interest at a per annum rate equal to, at our option, a base rate plus 4.75% or a LIBOR rate plus 6.25%. The loans are also subject to a 1.25% interest rate floor for LIBOR loans and a 4.25% interest rate floor for base rate loans.As a result of terminating the Credit Agreement, as amended.unwoundexpect that our previously existing swap agreementavailable cash, cash generated from current operations and received an immaterial amountdebt capacity will be sufficient to finance current operations and capital expenditures for at least the next 12 months. This assessment includes consideration of proceeds. On February 16, 2018, we entered into a new interest rate swap contract with PNC bank with a notional amount of $36.0 million and a termination date of January 31, 2023 in order to hedge the risk of changes in the effective benchmark interest rate (LIBOR) associated with the Financing Agreement. The swap contract converted specific variable-rate debt into fixed-rate debt and fixed the LIBOR rate associated with a portionour best estimates of the term loan under the Financing Agreement at 2.72%.The Financing Agreement contains customary representations and warranties and affirmative covenants applicable us andimpact of macroeconomic conditions on our subsidiaries and also contains certain restrictive covenants, including, among others, limitations on the incurrence of additional debt, liens on property, acquisitions and investments, loans and guarantees, mergers, consolidations, liquidations and dissolutions, asset sales, dividends and other payments in respect of the Company’s capital stock, prepayments of certain debt, transactions with affiliates and modifications of organizational documents, material contracts, affiliated practice agreements and certain debt agreements. The Financing Agreement also contains customary events of default.offor 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. Based on Year Ended December 31, $ 14,028 $ 1,152 (1,799 ) (1,590 ) (12,134 ) (2,837 ) (320 ) (38 ) $ (225 ) $ (3,313 ) currentnet loss adjusted for non-cash items and increases in deferred revenue for service contracts. During the year ended December 31, 2022, cash used in operations was negatively impacted by the payment of approximately $4.0 million in connection with the HRGN Settlement.current operating plans, we expect that our available cash, cash generated from current operations and debt capacity will be sufficient to finance current operations, any potential future acquisitions andprimarily consisted of $2.3 million of capital expenditures for the next 12 monthsin manufacturing, information technology infrastructure, and beyond. This may involve incurring additional debt or raising equity capital for our business. Additional capital raising activities will dilute the ownership interests of existing stockholders to the extent we raise capitalcapitalized software costs, offset by issuing equity securities and we cannot guarantee that we will be successful in raising additional capital on favorable terms or at all.33Contractual ObligationsThe following schedule represents our contractual obligations for our continuing operations, excluding interest, as of December 31, 2017. 2023 and Total 2018 2019 2020 2021 2022 Beyond (in thousands) Bank credit facility and notes payable $ 11,899 $ 11,899 $ - $ - $ - $ - $ - Operating leases 8,974 1,744 1,657 1,501 1,110 1,089 1,873 Total $ 20,873 $ 13,643 $ 1,657 $ 1,501 $ 1,110 $ 1,089 $ 1,873 As previously noted, we sold Denville in January 2018, and accordingly the table above excludes its future payments under operating leases. Additionally, we acquired DSI in January 2018, and as such the table above, which is as of December 31, 2017, excludes its future operating payments under its operating lease.We have a liability at December 31, 2017 and 2016 of $0.3$0.5 million and $0.4 million, respectively for uncertain tax positions taken in an income tax return. We do not know the ultimate resolution of these uncertain tax positions and as such, do not know the ultimate timing of payments, if any, related to this liability. Accordingly, this amount is not included in the above table.We have an underfunded United Kingdom pension liability of $1.2 million and $3.0 million as of December 31, 2017 and 2016, respectively, which is recognized as part of the "Other long term liabilities" line item in our consolidated balance sheets. Since we do not know the ultimate timing of payments related to this liability, this amount has not been included in the above table.Critical Accounting PoliciesWe believe that our critical accounting policies are as follows:•revenue recognition;•accounting for income taxes;inventory;valuation of identifiable intangible assets in business combinations;valuation of long-lived and intangible assets and goodwill; andstock-based compensation.Revenue recognition. We follow the provisions of FASB ASC 605, “Revenue Recognition”. We recognize revenue of products when persuasive evidence of a sales arrangement exists, the price to the buyer is fixed or determinable, delivery has occurred, and collectability of the sales price is reasonably assured. Sales of some of our products include provisions to provide additional services such as installation and training. Revenues on these products are recognized when the additional services have been performed. Service agreements on our equipment are typically sold separatelyfrom proceeds from the sale our Hoefer product line. Cash used in investing activities was $1.6 million for the year ended December 31, 2022, and primarily consisted of the equipment. Revenues on these service agreements are recognized ratably over the life of the agreement, typically one year,capital expenditures in accordance with the provisions of FASB ASC 605-20, “Revenue Recognition—Services”.manufacturing and information technology infrastructure.accountalso received proceeds of $0.9 million from the exercise of stock options and the employee stock purchase plan and paid $2.5 million for shipping and handling fees and costs in accordance with the provisions of FASB ASC 605-45-45, “Revenue Recognition—Principal Agent Considerations”, which requires all amounts charged to customers for shipping and handling to be classified as revenues. Our costs incurredtaxes related to shipping and handling are classified as costnet share settlement of product revenues. Warranties and product returns are estimated and accrued for at the time sales are recorded. We have no obligations to customers after the date products are shipped or installed, if applicable, other than pursuant to warranty obligations and service or maintenance contracts. We provideequity awards.estimated amount of future returns upon shipment of products or installation, if applicable, based on historical experience. Historically, product returns and warranty costs have not been significant, and they have been within our expectations and the provisions established, however, there is no assurance that we will continue to experience the same return rates and warranty repair costs that we have in the past. Any significant increase in product return rates or a significant increase in the cost to repair our products could have a material adverse impact on our operating results for the period or periods in which such returns or increased costs materialize.We make estimates evaluating our allowance for doubtful accounts. On an ongoing basis, we monitor collections and payments from our customers and maintain a provision for estimated credit losses based upon our historical experience and any specific customer collection issues that we have identified. Historically, such credit losses have not been significant, and they have been within our expectations and the provisions established, however, there is no assurance that we will continue to experience the same credit loss rates that we have in the past. A significant change in the liquidity or financial position of our customers could have a material adverse impact on the collectability of our accounts receivable and our future operating results.34Accounting for income taxes. We determine our annual income tax provision in each of the jurisdictions in which we operate. This involves determining our current and deferred income tax expense that reflects accounting for differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. The future tax consequences attributable to these differences result in deferred tax assets and liabilities, which are included in our consolidated balance sheets. We assess the recoverability of the deferred tax assets by considering whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. To the extent we believe that recovery does not meetyear ended December 31, 2022. During this “more likely than not” standard as required in FASB ASC 740, “Income Taxes”, we must establish a valuation allowance. If a valuation allowance is established, increased or decreased in a period, we allocatemade term loan payments under the related income tax expense or benefit to income from continuing operations inCredit Agreement of $3.2 million, with net borrowings of $1.4 million under the consolidated statement of operations.Management’s judgment and estimates are required in determining our income tax provision, deferred tax assets and liabilities and any valuation allowance recorded against deferred tax assets. We review the recoverability of deferred tax assets during each reporting period by reviewing estimates of future taxable income, future reversals of existing taxable temporary differences, and tax planning strategies that would, if necessary, be implemented to realize the benefit of a deferred tax asset before expiration. Due to our three year cumulative loss position, we concluded that a full valuation allowance was required to offset most U.S. deferred tax assets, net of deferred tax liabilities except deferred tax liabilities related to indefinite lived intangible assets. At December 31, 2017, we have a valuation allowance of $11.4 million, of which $10.6 million relates to our U.S. deferred tax assets. The remainder relates to deferred tax assets in certain foreign jurisdictions.We assess tax positions taken on tax returns, including recognition of potential interest and penalties, in accordance with the recognition thresholds and measurement attributes outlined in FASB ASC 740. Interest and penalties recognized, if any, would be classified as a component of income tax expense.Inventory. We value our inventory at the lower of the actual cost to purchase (first-in, first-out method) and/or manufacture the inventory or the current estimated market value of the inventory. We regularly review inventory quantities on hand and record a provision to write down excess and obsolete inventory to its estimated net realizable value if less than cost, based primarily on historical inventory usage and estimated forecast of product demand. Since forecasted product demand quite often is a function of previous and current demand, a significant decrease in demand could result in an increase in the charges for excess inventory quantities on hand. In addition, our industry is subject to technological change and new product development, and technological advances could result in an increase in the amount of obsolete inventory quantities on hand. Therefore, any significant unanticipated changes in demand or technological developments could have a significant adverse impact on the value of our inventory and our reported operating results.Valuation of identifiable intangible assets acquired in business combinations. The determination of the fair value of intangible assets, which represents a significant portion of the purchase price in our acquisitions, requires the use of significant judgment with regard to (i) the fair value; and (ii) whether such intangibles are amortizable or not amortizable and, if the former, the period and the method by which the intangibles asset will be amortized. We estimate the fair value of acquisition-related intangible assets principally based on projections of cash flows that will arise from identifiable assets of acquired businesses. The projected cash flows are discounted to determine the present value of the assets at the dates of acquisitions. At December 31, 2017, amortizable intangible assets include existing technology, trade names, distribution agreements, customer relationships and patents. These amortizable intangible assets are amortized on a straight-line basis over 7 to 15 years, 10 to 15 years, 4 to 5 years, 5 to 15 years and 5 to 15 years, respectively.Valuation of long-lived and intangible assets. In accordance with the provisions of FASB ASC 360,“Property, Plant and Equipment”, we assess the value of identifiable intangibles with finite lives and long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors we consider important which could trigger an impairment review include the following: significant underperformance relative to expected historical or projected future operating results; significant changes in the manner of our use of the acquired assets or the strategy for our overall business; significant negative industry or economic trends; significant changes in who our competitors are and what they do; significant changes in our relationship with our distributors; significant decline in our stock price for a sustained period; and our market capitalization relative to net book value.35If we were to determine that the value of long-lived assets and identifiable intangible assets with finite lives was not recoverable based on the existence of one or more of the aforementioned factors, then the recoverability of those assets to be held and used would be measured by a comparison of the carrying amount of those assets to undiscounted future net cash flows before tax effects expected to be generated by those assets. If such assets are considered to be impaired, the impairment to be recognized would be measured by the amount by which the carrying value of the assets exceeds the fair value of the assets.As a result of our initiation of plans to sell the operations of AHN during the third quarter of 2016, we conducted an evaluation of AHN’s assets for impairment. Based on this evaluation, we recognized an impairment charge of $0.7 million on its long-lived assets.Goodwill and Other Intangible Assets. FASB ASC 350,“Intangibles-Goodwill and Others” addresses financial accounting and reporting for acquired goodwill and other intangible assets. Among other things, FASB ASC 350 requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but rather tested annually for impairment or more frequently if events or circumstances indicate that there may be impairment. Goodwill is also subject to an annual impairment test, or more frequently, if indicators of potential impairment arise. ASU 2011-08 intends to simplify goodwill impairment testing by permitting an assessment of qualitative factors to determine when events and circumstances lead to the conclusion that it is necessary to perform the two-step goodwill impairment test required under ASC 350. The two-step goodwill impairment test consists of a comparison of the fair value of our reporting units with their carrying amount. If the carrying amount exceeds its fair value, we are required to perform the second step of the impairment test, as this is an indication that goodwill may be impaired. The impairment loss is measured by comparing the implied fair value of the reporting unit’s goodwill with its carrying amount. If the carrying amount exceeds the implied fair value, an impairment loss shall be recognized in an amount equal to the excess. After an impairment loss is recognized, the adjusted carrying amount of the intangible asset shall be its new accounting basis. Subsequent reversal of a previously recognized impairment loss is prohibited. For unamortizable intangible assets, if the carrying amount were to exceed the fair value of the asset we would write down the unamortizable intangible asset to fair value.For the purpose of our goodwill analysis, we have one reporting unit. We conducted our annual impairment analysis in the fourth quarter of fiscal year 2017. The determination of the fair value of the reporting unit requires us to make a significant estimate on control premiums appropriate of industries in which we compete. We compared our carrying value to our overall market capitalization.The results of our test for goodwill impairment showed that the estimated fair value of our business substantially exceeded its carrying value. We concluded that none of our goodwill was impaired.revolving facility. We also concluded thatreceived proceeds of $0.6 million from the fair valueexercise of the unamortized intangible assets significantly exceeds the carrying amounts.Stock-based compensation. We account for stock-based payment awards in accordance with the provisions of FASB ASC 718,“Compensation—Stock Compensation”, which requires us to recognize compensation expense for all stock-based payment awards made to employees and directors including stock options restricted stock units, restricted stock units with a market condition and employee stock purchase plan purchases and paid $1.6 million for taxes related to our Employee Stock Purchase Plan (as amended, ESPP). We issue new shares upon stock option exercises, upon the vestingnet share settlement of restricted stock units and restricted stock units with a market condition, and under our ESPP.equity awards.FASB ASC 718 requires companies to estimate the fair value of stock-based payment awards on the date of grant using an option-pricing model. The value of the award that vests is recognized as expense over the requisite service periods in our consolidated statement of operations. We adopted ASU 2016-09 as of January 1, 2017. As a result of this adoption, we have elected as an accounting policy to account for forfeitures for service based awards as they occur, with no adjustment for estimated forfeitures.We value stock-based payment awards, except restricted stock awards, at the grant date using the Black-Scholes option-pricing model. We value the restricted stock units with a market condition at the grant date using a Monte-Carlo valuation simulation. Our determination of fair value of stock-based payment awards on the date of grant using an option-pricing model or Monte-Carlo valuation simulation is affected by our stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to our expected stock price volatility over the term of the awards and actual and projected stock option exercise behaviors.The fair value of restricted stock units are based on the market price of our common stock on the date of grant and are recorded as compensation expense ratably over the applicable service period, which ranges from one to four years. Unvested restricted stock units are forfeited in the event of termination of employment or engagement with our Company.We record stock compensation expense on a straight-line basis over the requisite service period for all awards granted.36inas 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, especiallyprimarily the euro and the British pound sterling, the Euro, the Canadian dollar and the Swedish krona.Forpound. During the year ended December 31, 2017, the U.S dollar’s strengthening in relation to those currencies resulted in an unfavorable translation effect on our consolidated revenues and a neutral effect on our consolidated net loss. Changes2023, changes in foreign currency exchange rates resulted in an unfavorablea favorable effect on revenues of approximately $0.3$0.7 million and a favorablean unfavorable effect on expenses of approximately $0.3 million. During 2016, the U.S dollar’s strengthening in relation to those currencies resulted in an unfavorable translation effect on our consolidated revenues and our consolidated net loss. Changes in foreign currency exchange rates resulted in an unfavorable effect on revenues of approximately $2.1 million and a favorable effect on expenses of approximately $1.9 million. Similarly, during 2015, the U.S dollar’s strengthening in relation to those currencies resulted in an unfavorable translation effect on our consolidated revenues and our net income. Changes in foreign currency exchange rates resulted in an unfavorable effect on revenues of $4.0 million and a favorable effect on expenses of $3.6$0.5 million.The gain associated withDuring the years ended December 31, 2023 and 2022, the translation of foreign equitycurrency into U.S. dollars included as a component of comprehensive incomeloss resulted in a gain (loss) for the year ended December 31, 2017, was approximately $4.4 million, compared to losses of $4.6$1.5 million and $4.9$(2.6) million, for the years ended December 31, 2016 and 2015, respectively.approximately $0.5 million during the year ended December 31, 2017, compared to currency gains of approximately $0.7$(0.2) million and $0.2$(0.4) million during the years ended December 31, 20162023 and 2015,2022, respectively.Recently IssuedRecent Accounting PronouncementsIn February 2016, the FASB issued ASU 2016-02,Leases, which is intended to improve financial reporting about leasing transactions. The update requires a lessee to record on the balance sheet the assets and liabilities for the rights and obligations created by lease terms of more than 12 months. The update is effective for fiscal years beginning after December 15, 2018. We have commenced the process of evaluating the requirements of the standard as well as collectingFor information on allrecent accounting pronouncements impacting our leases. We have not yet concluded onbusiness, see “Recent Accounting Pronouncements” included in Note 2 to the impactConsolidated Financial Statements included in “Part IV, Item 15. Exhibits, Financial Statement Schedules” of the adoption onthis report.position, results of operations and cash flows, however, assets and liabilities will increase upon adoption for right-of-use assets and lease liabilities. Our future commitments under lease obligations are summarized under the “Contractual Obligations” heading above.In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326), Measurement of credit losses on Financial Instruments. The update amends the FASB’s guidance on the impairment of financial instruments. The ASU adds to U.S. GAAP an impairment model (known as the current expected credit loss (CECL) model) that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes as an allowance its estimate of expected credit losses,statements, which the FASB believes will result in more timely recognition of such losses. The ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. We are evaluating the impact of ASU 2016-13 on our consolidated financial statements.In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815) which amends the hedge accounting recognition and presentation requirements in ASC 815. The Board’s objectives in issuing the ASU are to (1) improve the transparency and understandability of information conveyed to financial statement users about an entity’s risk management activities by better aligning the entity’s financial reporting for hedging relationships with those risk management activities and (2) reduce the complexity of and simplify the application of hedge accounting by preparers. The ASU is effective for annual reporting periods, including interim periods within those annual reporting periods, beginning after December 15, 2018. Early adoption is permitted, including adoption in any interim period. We are evaluating the requirements of this guidance and have not yet determined the impact of the adoption on our consolidated financial position, results of operations and cash flows.Recently Adopted Accounting PronouncementsAdopted in 2017In March 2016, the FASB issued ASU 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, which simplifies the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows.37The standard requires an entity to recognize all excess tax benefits and tax deficiencies as income tax benefit or expense in the income statement as discrete items in the reporting period in which they occur, and such tax benefits and tax deficiencies are not included in the estimate of an entity’s annual effective tax rate, applied on a prospective basis. Further, the standard eliminates the requirement to defer the recognition of excess tax benefits until the benefit is realized through a reduction to taxes payable. All excess tax benefits previously unrecognized, along with any valuation allowance, should be recognized on a modified retrospective basis as a cumulative adjustment to retained earnings as of the date of adoption. Under ASU 2016-09, an entity that applies the treasury stock method in calculating diluted earnings per share is required to exclude excess tax benefits and deficiencies from the calculation of assumed proceeds since such amounts are recognized in the income statement. Excess tax benefits should also be classified as operating activities in the same manner as other cash flows related to income taxes on the statement of cash flows, as such excess tax benefits no longer represent financing activities since they are recognized in the income statement, and should be applied prospectively or retrospectively to all periods presented.We adopted ASU 2016-09 as of January 1, 2017. We recorded a cumulative increase in retained earnings of $0.5 million at the beginning of the first quarter of 2017 with a corresponding increase in deferred tax assets related to the prior years’ unrecognized excess tax benefits. An equal amount of valuation allowance was also recorded against these deferred tax assets with a corresponding decrease to retained earnings resulting in no net impact to retained earnings and deferred tax assets. In addition, tax deficiencies related to vested restricted stock units and canceled stock options during the year ended December 31, 2017 have been recognizedprepared in the current period’s income statement.ASU 2016-09 also allows an entity to elect as anaccordance with accounting policy either to continue to estimate the total number of awards for which the requisite service period will not be rendered or to account for forfeitures for service based awards as they occur. An entity that elects to account for forfeitures as they occur should apply the accounting change on a modified retrospective basis as a cumulative effect adjustment to retained earnings as of the date of adoption. We elected as an accounting policy to account for forfeitures for service based awards as they occur, and as a result, we recorded a cumulative effect adjustment of $0.1 million to reduce retained earnings with a corresponding increase in additional paid in capital related to the prior years’ stock-based compensation expense as required under the modified retrospective approach. The tax effect of this adjustment, which included the impact of a valuation allowance was immaterial.Adopted in 2018In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers, a new accounting standard that provides for a comprehensive model to use in the accounting for revenue arising from contracts with customers that will replace most existing revenue recognition guidance withinprinciples generally accepted accounting principles in the United States. Under this standard,The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue will be recognizedand expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to depict the transfer of promised goods or services to customers in an amountrevenue recognition, investments, income taxes, litigation and other contingencies. We base our estimates on historical experience and on various other assumptions that reflects the consideration to which we expectare believed to be entitledreasonable 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.exchange for those goods or services.the preparation of our consolidated financial statements:have completedare subject to income taxes in the processU.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. We regularly assess the likelihood of evaluating the impacttax adjustments in each of the new standard on its consolidated financial position, results oftax jurisdictions in which we have operations and cash flows.account for the related financial statement implications. We adopted this standard ashave established tax reserves that we believe are appropriate given the possibility of January 1, 2018 usingtax adjustments. Determining the modified retrospective approach. As partappropriate level of tax reserves requires significant judgment regarding the implementationuncertain application of the standard, we identified our significant revenue streams, which currently consist primarily of product revenue transactions, and totax laws. Reserves are adjusted when information becomes available or when an event occurs indicating a lesser extent, extended warranty transactions on certain product sales, and revenues from government contracts. The timing of recognizing revenues for these revenue streams is not expected to materially change. Additionally, no material changes to business processes, systems and controls are expected. We are drafting enhanced revenue disclosures which will be presented prospectively startingchange in the first quarter of 2018.In May 2017, the FASB issued ASU 2017-09, Stock compensation (Topic 718): Scope of modification accounting which amends the scope of modification accounting for share-based payment arrangements. The ASU provides guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting under ASC 718. Specifically, an entity would not apply modification accounting if the fair value, vesting conditions, and classification of the awards are the same immediately before and after the modification. The ASUreserve is effective for annual reporting periods, including interim periods within those annual reporting periods, beginning after December 15, 2017. We adopted this guidance on January 1, 2018, and the new standard did notappropriate. Changes in tax reserves could have a material impact on our consolidated financial position,condition or results of operations and cash flows.operations.38Item 7A.The majority of our manufacturing and testing of products occurs in our facilities in the United States, Germany, Sweden and Spain. We sell our products globally through our distributors, direct sales force, websites and catalogs. As a result, our financial results are affected by factors such as changes in foreign currency exchange rates and weak economic conditions in foreign markets.Not Applicable.We collect amounts representing a substantial portion of our revenues and pay amounts representing a substantial portion of our operating expenses in foreign currencies. As a result, changes in currency exchange rates from time to time may affect our operating results.We are exposed to market risk from changes in interest rates primarily through our financing activities. As of December 31, 2017, we had $11.7 million outstanding under our Credit Agreement.As noted above under the heading “Borrowing Arrangements”, on May 2, 2017, we entered into the Credit Agreement to amend our credit facility with Bank of America, as agent, and Bank of America and Brown Brothers Harriman & Co. as lenders. Immediately after entering into this Credit Agreement, we entered into a new interest rate swap contract with Bank of America with a notional amount of $14.0 million and a termination date of March 30, 2022 in order to hedge the risk of changes in the effective benchmark interest rate (LIBOR) associated with our Term Loan. The swap contract converted specific variable-rate debt into fixed-rate debt and fixed the LIBOR rate associated with the Term Loan at 1.86%. The interest rate swap was designated as a cash flow hedge instrument in accordance with ASC 815 “Derivatives and Hedging”. As a result of entering into the new interest rate swap contract, we unwound the previous interest rate swap contracts, and received an immaterial amount in proceeds.As further noted under the “Borrowing Arrangements” heading, on January 22, 2018, we terminated the Credit Agreement, and on January 31, 2018, entered into the Financing Agreement. As a result of terminating the Credit Agreement, we unwound our previously existing swap agreement and received an immaterial amount of proceeds. On February 16, 2018, we entered into a new interest rate swap contract with PNC bank with a notional amount of $36.0 million and a termination date of January 31, 2023 in order to hedge the risk of changes in the effective benchmark interest rate (LIBOR) associated with the Financing Agreement. The swap contract converted specific variable-rate debt into fixed-rate debt and fixed the LIBOR rate associated with a portion of the term loan under the Financing Agreement at 2.72%.As of December 31, 2017, the weighted effective interest rate, net of the impact of our interest rate swap, on our Term Loan was 4.61%. Following our entering into the Financing Agreement, our weighted effective interest rate on outstanding borrowings was approximately 8.42%.Assuming no other changes which would affect the margin of the interest rate, the estimated effect of interest rate fluctuations on outstanding borrowings under our Financing Agreement over the next twelve months from January 31, 2018 is quantified and summarized as follows: Interest expense
increase (in thousands) Interest rates increase by 1% $ 328 Interest rates increase by 2% $ 656 Item 8.consolidated financial statements filed as partreferenced in “Part IV, Item 15. Exhibits, Financial Statement Schedules” of this Annual Reportreport, which financial statements are appended to this report. An index of those financial statements is found on Form 10-K are listed under Item 15 of Part IV below.page F-1.Item 9.Item 9A.39TableContents(a) Evaluation of Disclosure Controls and ProceduresDisclosure 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.Chief Executive Officerprincipal executive officer and Chief Financial Officer,principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, (asas defined in RulesRule 13a-15(e) and 15d-15(e) underof the Exchange Act)1934 Act, as of the end of the period covered inDecember 31, 2023. Based on this Report. Based upon the evaluation, described above, our Chief Executive Officerprincipal executive officer and Chief Financial Officer haveprincipal financial officer concluded that, they believe thatas of December 31, 2023, our disclosure controls and procedures were effective as of December 31, 2017, in providingto provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange1934 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’sSEC’s rules and forms.forms and to provide reasonable assurance that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.(b) Management’s Report on Internal Control Over Financial ReportingOur managementManagement is responsible for establishing and maintaining adequate internal control over financial reporting, (asas defined in RulesRule 13a-15(f) and 15d-15(f) underof 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 evaluated1934 Act. Management has assessed the effectiveness of our internal control over financial reporting as of December 31, 2017 using the2023 based on criteria set forthestablished in Internal Control –— Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).Commission. As a result of that evaluation,this assessment, management has concluded that, as of December 31, 2023, our internal control over financial reporting was effective asin providing reasonable assurance regarding the reliability of December 31, 2017.Thefinancial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Grant Thornton LLP has independently assessed the effectiveness of our internal control over financial reporting as of December 31, 2017 has also been audited by Grant Thornton LLP, our independent registered public accounting firm, as stated in theirand its report which is included below in Item 9A(e).below.(c) Changes in Internal Controls Over Financial ReportingThe Company identified control deficiencies related to current and deferred income taxes and inventory costing and reserves for the year-ended December 31, 2016, whichThere were assessed as material weaknesses. We developed a remediation plan at the time, and designed and implemented certain new internal controlsno changes in an effort to remediate the material weaknesses. During the fourth quarter of fiscal 2017, we successfully completed the testing necessary to conclude that the material weaknesses had been remediated.40Except as noted above, there has been no change in the Company'sour internal control over financial reporting as ofduring the last quarter ended December 31, 2017,2023, that has materially affected, or isare reasonably likely to materially affect, the Company'sour internal control over financial reporting.(d) Inherent Limitations on Effectiveness of ControlsThe designOur disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of anyachieving their objectives as specified above. Management does not expect, however, that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all error and fraud. Any control system, of controlno matter how well designed and operated, 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, not absolute, assurance that its objectives will be met. Further, no evaluation of achieving theircontrols can provide absolute assurance that misstatements due to error or fraud will not occur or that all control objectives.41(e) Report of Independent Registered Public Accounting FirmThe Board of Directors and ShareholdersStockholders:2017,2023, based on criteria established in the 2013Internal 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, 2017,2023, based on criteria established in the 2013Internal Control—Integrated Framework issued by COSO.2017,2023, and our report dated March 16, 20187, 2024 expressed an unqualified opinion on those financial statements.Overover Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.Boston, MassachusettsMarch 16, 201842Item 9B.Other Information.None.Item 10.20182024 Annual Meeting of Stockholders. Information concerning executive officers of our Company is included in Part I of this Annual Report on Form 10-K as Item 1. Business- Executive Officers of the Registrant and incorporated herein by reference.Item 11.20182024 Annual Meeting of Stockholders.Item 12.20182024 Annual Meeting of Stockholders.Item 13.20182024 Annual Meeting of Stockholders.Item 14.20182024 Annual Meeting of Stockholders.43 (a) Documents Filed. 1Financial Statements. The consolidated financial statements of Harvard Bioscience, Inc. and its subsidiaries filed under this Item 15:PageF-1ReportsReport of Independent Registered Public Accounting FirmsFirm (PCAOB ID Number 248) Balance Sheets asStatements of December 31, 2017 and 2016Operations Consolidated Statements of Operations for the years ended December 31, 2017, 2016 and 2015F-5Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2017, 2016 and 2015F-6 for the years ended December 31, 2017, 2016 and 2015 for the years ended December 31, 2017, 2016 and 2015 F-92Exhibits and Exhibit Index. See the Exhibit Index included as the last part of this Annual Report on Form 10-K, which is incorporated herein by reference.44Report of Independent Registered Public Accounting FirmThe Board of Directors and ShareholdersStockholders:sheetsheets of Harvard Bioscience, Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2017,2023 and 2022, the related consolidated statements of operations, comprehensive loss, stockholders’ equity, and cash flows for each of the yeartwo years in the period ended December 31, 2017,2023, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017,2023 and 2022, and the results of its operations and its cash flows for each of the yeartwo years in the period ended December 31, 2017,2023, in conformity with accounting principles generally accepted in the United States of America.2017,2023, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated March 16, 2018,7, 2024, expressed an unqualified opinion.audit.audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.auditaudits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our auditaudits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supportingregarding the amounts and disclosures in the financial statements. Our auditaudits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit providesaudits provide a reasonable basis for our opinion.Boston, MassachusettsHartford, Connecticut16, 20187, 2024F-2Table of Contents $ 4,283 $ 4,508 16,099 16,705 24,716 26,439 3,940 3,472 49,038 51,124 3,981 3,366 4,773 5,816 57,065 56,260 16,036 21,014 6,473 7,780 $ 137,366 $ 145,360 $ 5,859 $ 3,811 1,416 2,135 5,554 6,447 4,508 3,370 9,205 7,486 26,542 23,249 30,704 43,013 776 590 4,794 5,282 1,476 1,006 64,292 73,140 - - 434 454 232,435 229,008 (145,605 ) (142,190 ) (14,190 ) (15,052 ) 73,074 72,220 $ 137,366 $ 145,360 Report of Independent Registered Public Accounting FirmSee accompanying notes to condensed consolidated financial statements.The Board of Directors and StockholdersHarvard Bioscience, Inc.:We have audited the accompanying consolidated balance sheet of Harvard Bioscience, Inc. and subsidiaries (the Company) as of December 31, 2016, and the related consolidated statements of operations, comprehensive (loss) income, stockholders’ equity and cash flows for each of the years in the two-year period ended December 31, 2016. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Harvard Bioscience, Inc. and subsidiaries as of December 31, 2016, and the results of their operations and their cash flows for each of the years in the two-year period ended December 31, 2016, in conformity with U.S. generally accepted accounting principles./s/ KPMG LLPCambridge, MassachusettsMarch 16, 2017F-3Table of Contents $ 112,250 $ 113,335 46,179 52,516 66,071 60,819 24,108 25,041 22,780 24,493 11,764 12,329 5,525 6,122 - (233 ) 64,177 67,752 1,894 (6,933 ) (3,591 ) (2,548 ) (632 ) - (227 ) 302 (4,450 ) (2,246 ) (2,556 ) (9,179 ) 859 337 $ (3,415 ) $ (9,516 ) $ (0.08 ) $ (0.23 ) 42,420 41,413 HARVARD BIOSCIENCE, INC.(In thousands, except share and per share data)See accompanying notes to condensed consolidated financial statements. December 31, December 31, 2017 2016 Assets Current assets: Cash and cash equivalents $ 5,733 $ 5,596 Accounts receivable, net of allowance for doubtful accounts of $454 and $611,
respectively 16,236 15,746 Inventories 21,353 19,955 Other receivables and other assets 4,213 4,175 Total current assets 47,535 45,472 Property, plant and equipment, net 4,140 4,296 Deferred income tax assets 182 1,157 Amortizable intangible assets, net 15,960 17,471 Goodwill 39,969 38,032 Indefinite lived intangible assets 1,244 1,209 Other assets 324 128 Total assets $ 109,354 $ 107,765 Liabilities and Stockholders' Equity Current liabilities: Current portion, long-term debt $ 2,765 $ 2,372 Accounts payable 5,404 6,196 Deferred revenue 633 500 Accrued income taxes 387 223 Accrued expenses 4,551 4,550 Other liabilities - current 301 760 Total current liabilities 14,041 14,601 Long-term debt, less current installments 8,983 11,374 Deferred income tax liabilities 3,964 6,417 Other long term liabilities 1,466 3,177 Total liabilities 28,454 35,569 Commitments and contingencies Stockholders' equity: Preferred stock, par value $0.01 per share, 5,000,000 shares authorized - - Common stock, par value $0.01 per share, 80,000,000 shares authorized; 42,763,985 and 42,186,827 shares issued and 35,018,478 and 34,441,320 shares outstanding, respectively 419 418 Additional paid-in-capital 218,792 215,134 Accumulated deficit (116,967 ) (116,030 ) Accumulated other comprehensive loss (10,676 ) (16,658 ) Treasury stock at cost, 7,745,507 common shares (10,668 ) (10,668 ) Total stockholders' equity 80,900 72,196 Total liabilities and stockholders' equity $ 109,354 $ 107,765 $ (3,415 ) $ (9,516 ) 1,507 (2,614 ) (446 ) (2,411 ) (199 ) - 862 (5,025 ) $ (2,553 ) $ (14,541 ) HARVARD BIOSCIENCE, INC.CONSOLIDATED STATEMENTS OF OPERATIONS(In thousands, except per share data) 41,143 $ 452 $ 225,650 $ (132,674 ) $ (10,027 ) $ 83,401 40 2 106 - - 108 176 - 469 - - 469 1,135 - - - - - (412 ) - (1,628 ) - - (1,628 ) - - 4,411 - - 4,411 - - - (9,516 ) - (9,516 ) - - - - (5,025 ) (5,025 ) 42,082 454 229,008 (142,190 ) (15,052 ) 72,220 214 - 506 - - 506 137 - 424 - - 424 1,460 - - - - - (498 ) - (2,523 ) - - (2,523 ) - - 5,000 - - 5,000 - - - (3,415 ) - (3,415 ) - - - - 862 862 - (20 ) 20 - - - 43,395 $ 434 $ 232,435 $ (145,605 ) $ (14,190 ) $ 73,074 Year Ended December 31, 2017 2016 2015 Revenues $ 101,882 $ 104,521 $ 108,664 Cost of revenues (exclusive of items shown separately below) 54,285 56,106 59,941 Gross profit 47,597 48,415 48,723 Sales and marketing expenses 21,036 20,486 20,577 General and administrative expenses 18,575 20,950 19,832 Research and development expenses 5,645 5,392 6,420 Restructuring (credits) charges - (4 ) 788 Amortization of intangible assets 2,442 2,722 2,819 Impairment charges - 676 - Loss on sale of AHN - 1,190 - Total operating expenses, net 47,698 51,412 50,436 Operating loss (101 ) (2,997 ) (1,713 ) Other income (expense): Foreign exchange (534 ) 737 210 Interest expense, net (713 ) (639 ) (846 ) Other expense, net (740 ) (179 ) (1,259 ) Other expense, net (1,987 ) (81 ) (1,895 ) Loss before income taxes (2,088 ) (3,078 ) (3,608 ) Income tax (benefit) expense (1,223 ) 1,229 15,431 Net loss (865 ) (4,307 ) (19,039 ) Loss per share: Basic loss per common share $ (0.02 ) $ (0.13 ) $ (0.57 ) Diluted loss per common share $ (0.02 ) $ (0.13 ) $ (0.57 ) Weighted average common shares: Basic 34,753 34,212 33,593 Diluted 34,753 34,212 33,593 HARVARD BIOSCIENCE, INC.CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)(In thousands) $ (3,415 ) $ (9,516 ) 1,473 1,453 5,525 6,122 280 280 5,000 4,411 336 (414 ) 632 - - (3,900 ) (403 ) - 810 4,780 1,524 252 1,651 474 555 (1,399 ) Contract liabilities 1,138 (896 ) (1,078 ) (495 ) 14,028 1,152 (1,788 ) (1,590 ) (523 ) - 512 - (1,799 ) (1,590 ) 4,500 7,800 (10,950 ) (6,400 ) (4,091 ) (3,186 ) 930 577 (2,523 ) (1,628 ) (12,134 ) (2,837 ) (320 ) (38 ) (225 ) (3,313 ) 4,508 7,821 $ 4,283 $ 4,508 $ 3,795 $ 2,314 $ 207 $ 534 Year Ended December 31, 2017 2016 2015 Net loss $ (865 ) $ (4,307 ) $ (19,039 ) Other comprehensive income (loss): Foreign currency translation adjustments 4,445 (4,606 ) (4,936 ) Derivatives qualifying as hedges, net of tax: Loss on derivative instruments designated and qualifying as cash flow hedges (24 ) (29 ) (85 ) Amounts reclassified from accumulated other comprehensive income (loss) to net loss 61 39 93 Derivatives qualifying as hedges, net of tax 37 10 8 Defined benefit pension plans, net of tax: Amortization of net losses included in net periodic pension costs, net of tax expense of $62, $52 and $58 in 2017, 2016 and 2015, respectively 300 252 248 Net gain (loss), net of tax (benefit) expense of ($246), $88 and $241 in 2017, 2016 and 2015, respectively 1,200 (430 ) 1,029 Defined benefit pension plans, net of tax 1,500 (178 ) 1,277 Other comprehensive income (loss) 5,982 (4,774 ) (3,651 ) Comprehensive income (loss) $ 5,117 $ (9,081 ) $ (22,690 ) CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY(In thousands) Accumulated Number Additional Other Total of Shares Common Paid-in Accumulated Comprehensive Treasury Stockholders’ Issued Stock Capital Deficit Income (Loss) Stock Equity Balance at December 31, 2014 40,309 $ 397 $ 206,656 $ (92,684 ) $ (8,233 ) $ (10,668 ) $ 95,468 Stock option exercises 1,772 25 2,605 - - - 2,630 Stock purchase plan 59 - 208 - - - 208 Vesting of restricted stock units 237 - - - - - - Shares withheld for taxes (652 ) (6 ) (767 ) - - - (773 ) Stock compensation expense - - 2,755 - - - 2,755 Net income - - - (19,039 ) - - (19,039 ) Other comprehensive loss - - - - (3,651 ) - (3,651 ) Balance at December 31, 2015 41,725 416 211,457 (111,723 ) (11,884 ) (10,668 ) 77,598 Stock option exercises 375 4 167 - - - 171 Stock purchase plan 81 - 196 - - - 196 Vesting of restricted stock units 302 - - - - - - Shares withheld for taxes (296 ) (2 ) (183 ) - - - (185 ) Stock compensation expense - - 3,497 - - - 3,497 Net loss - - - (4,307 ) - - (4,307 ) Other comprehensive loss - - - - (4,774 ) - (4,774 ) Balance at December 31, 2016 42,187 418 215,134 (116,030 ) (16,658 ) (10,668 ) 72,196 Share based payment change in accounting principle - - 72 (72 ) - - - Stock option exercises 143 2 188 - - - 190 Stock purchase plan, net 76 - 140 - - - 140 Vesting of restricted stock units 489 - - - - - - Shares withheld for taxes (131 ) (1 ) (242 ) - - - (243 ) Stock compensation expense - - 3,500 - - - 3,500 Net loss - - - (865 ) - - (865 ) Other comprehensive income - - - - 5,982 - 5,982 Balance at December 31, 2017 42,764 $ 419 $ 218,792 $ (116,967 ) $ (10,676 ) $ (10,668 ) $ 80,900 See accompanying notes to consolidated financial statements.F-7HARVARD BIOSCIENCE, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(In thousands) Year Ended December 31, 2017 2016 2015 Cash flows from operating activities: Net loss $ (865 ) $ (4,307 ) $ (19,039 ) Adjustments to reconcile net loss to net cash provided by operating activities: Stock compensation expense 3,500 3,497 2,755 Depreciation 1,317 1,532 1,745 Impairment charges - 676 - Loss on sale of AHN 93 1,190 - (Gain) loss on sale of assets, net (12 ) - 25 Non-cash restructuring (credit) - (27 ) (85 ) Amortization of catalog costs 42 20 9 (Recovery of) provision for allowance for doubtful accounts (109 ) 309 (7 ) Amortization of intangible assets 2,442 2,722 2,819 Amortization of deferred financing costs 44 91 86 Deferred income taxes (1,584 ) (279 ) 15,116 Changes in operating assets and liabilities: Decrease (increase) in accounts receivable 196 566 (1,340 ) (Increase) decrease in inventories (548 ) 1,248 (1,223 ) (Increase) decrease in other receivables and other assets (102 ) (658 ) 755 (Decrease) increase in trade accounts payable (918 ) (2,413 ) 2,577 Decrease (increase) in accrued income taxes 212 (195 ) (311 ) (Decrease) increase in accrued expenses (736 ) 871 (1,511 ) Increase (decrease) in deferred revenue 95 (187 ) 120 (Decrease) increase in other liabilities (2,010 ) 727 (1,786 ) Net cash provided by operating activities 1,057 5,383 705 Cash flows (used in) provided by investing activities: Additions to property, plant and equipment (890 ) (1,445 ) (2,960 ) Additions to catalog costs (39 ) (34 ) (18 ) Proceeds from disposition - 1,417 - Proceeds from sales of property, plant and equipment 12 - 6 Acquisitions, net of cash acquired - - (4,545 ) Net cash used in investing activities (917 ) (62 ) (7,517 ) Cash flows provided by (used in) financing activities: Proceeds from issuance of debt 2,750 4,000 5,800 Repayments of debt (4,702 ) (9,050 ) (8,350 ) Payments of debt issuance costs - - (32 ) Net proceeds from issuance of common stock 160 182 2,042 Net cash used in financing activities (1,792 ) (4,868 ) (540 ) Effect of exchange rate changes on cash 1,789 (1,601 ) (38 ) Increase (decrease) in cash and cash equivalents 137 (1,148 ) (7,390 ) Cash and cash equivalents at the beginning of period 5,596 6,744 14,134 Cash and cash equivalents at the end of period $ 5,733 $ 5,596 $ 6,744 Supplemental disclosures of cash flow information: Cash paid for interest $ 686 $ 620 $ 854 Cash paid for income taxes, net of refunds $ (13 ) $ 928 $ 963 See accompanying notes to consolidated financial statements.F-8HARVARD BIOSCIENCE, INC. ( “Harvard Bioscience” or “the Company”, a Delaware corporation (the “Company”), is a globalleading developer, manufacturer and marketerseller of a broad range of scientific instrumentstechnologies, products and systems used to advanceservices that enable fundamental advances in life science applications, including research, pharmaceutical and therapy discovery, bioproduction and preclinical testing for basic research, drug discovery, clinicalpharmaceutical and environmental testing.therapy development. The Company’s products and services are sold globally to thousands of researchers in over 100 countries through its global sales organization, websites, catalogs,customers ranging from renowned academic institutions and through distributors including Thermo Fisher Scientific Inc., VWRgovernment laboratories to the world’s leading pharmaceutical, biotechnology and other specialized distributors. The Company has sales and manufacturingcontract research organizations. With operations in the United States, Europe and China, the United Kingdom, Germany, Sweden, Spain, France, CanadaCompany sells through a combination of direct and China.distribution channels to customers around the world.(a) Principles of Consolidation(b)Use of Estimates generally accepted in the United States requires the use of management estimates. Such estimates include the determination and establishment of certain accruals and provisions, including those for inventory excessincome taxes, credit losses on receivables. and obsolescence, income tax and reserves for bad debts. In addition, certain estimates are required in order to determine the value of assets and liabilities associated with acquisitions, as well as the Company’s defined benefit pension obligations. Estimates are also required to evaluate the value for inventories reported at lower of cost or net realizable value, stock-based compensation expense, and the recoverability of existing long-lived and intangible assets, including goodwill. On an ongoing basis, the Company reviews its estimates based upon currently available information. Actual results could differ materially from those estimates.(c)Cash and Cash EquivalentsFor purposes of the consolidated balance sheetsstatements of cash flows, theCash EquivalentsForApproximately 49% of the purposes of reporting consolidated cash flows,Company’s cash and cash equivalents include cash on handat December 31, 2023 was held by the Company’s foreign subsidiaries and amounts due from banks. The Company maintains a portion of its cashsubject to repatriation tax considerations. These foreign funds were held primarily by subsidiaries in bank deposit accounts which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts. The Company believes it is not exposed to any significant risk with respect to these accounts.the United Kingdom, Germany and Spain.(d)Allowance for Doubtful AccountsAllowance for doubtful accounts isEquity securities traded in active markets are marked to market at each balance sheet date based on prices as quoted on the relevant stock exchange. Fair value mark-to-market adjustments are recorded as non-operating gains (losses) in the consolidated statement of operations. The Company’s investments in marketable equity securities are classified in the consolidated balance sheet based on the nature of the securities and their availability for use in current operations.assessmentestimate of collectabilitythe receivables expected to be collected from customers. The allowance represents an estimate of customer accounts.expected credit losses over the lifetime of the receivables, even if the loss is considered remote, and reflects expected recoveries of amounts previously written off. The Company regularly reviewsestimates the allowance on the basis of specifically identified receivables that are evaluated individually for impairment and an analysis of the remaining receivables determined by considering factors such asreference to past default experience. The Company considers the need to adjust historical experience, credit quality,information to reflect the extent to which current conditions and reasonable forecasts are expected to differ from the conditions that existed for the historical period considered. Losses on receivables have not historically been significant.accounts receivable, balancescredit quality of the customer, current economic conditions, and other factors that may affect a customer’s ability and intent to pay. Customers are generally not required to provide collateral for purchases.(e)Inventoriesits inventories at the lower of the actual cost to purchase (first-in, first-out(determined on a first-in, first-out method) and/or manufacture the inventories or the current estimated market value of the inventories.net realizable value. The Company regularly reviews inventory quantities on hand and records a provision to writewrites down excess and obsolete inventories to its estimated net realizable value if less than cost, based primarily on historical inventory usage and estimated forecast of product demand.(f)Property, Plant and Equipment Buildings 40 years Machinery and equipment 3 - 10 years Computer equipment and software 3 - 7 years Furniture and fixtures 5 - 10 years Automobiles 3 - 6 years F-9Property and equipment held under capital leases and leaseholdLeasehold improvements are amortized using the straight linestraight-line method over the shorter of the lease term or estimated useful life of the asset.(g)Catalog CostsSignificant costsproduct catalog design, development and productionthe identified property, plant or equipment for a period of time in exchange for consideration. Leases with an initial term of 12 months or less are capitalized and amortizednot recorded on the balance sheet. The Company recognizes these lease expenses on a straight-line basis over the expected useful lifelease term.catalog (usually oneCompany’s leases do not provide an implicit rate, the Company determines an incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The incremental borrowing rate represents a significant judgment that is based on an analysis of the Company’s credit rating, country risk, treasury and corporate bond yields, as well as comparison to three years).the Company’s borrowing rate on its most recent loan. The Company uses the implicit rate when readily determinable. The Company has lease agreements with lease and non-lease components, which are generally accounted for separately.(h) Income Taxes(i)Foreign Currency Translation its foreign subsidiaries are translated at exchange rates in effect at period-end. Income and expenses are translated at rates which approximate those in effect on the transaction dates. The resulting translation adjustment is recorded as a separate component of stockholders’ equity in accumulated other comprehensive income (loss) income (AOCI)(“AOCI”) in the consolidated balance sheets. Gains and losses resulting from foreign currency transactions are included in other expense (income), net, (loss) income.in the Company’s consolidated statements of operations.(j)Earnings per Share(k)Comprehensive Income (Loss) $ (3,415 ) $ (9,516 ) 42,420 41,413 - - 42,420 41,413 $ (0.08 ) $ (0.23 ) $ (0.08 ) $ (0.23 ) 3,868 3,661 The Company followsprovisions of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 220, “Comprehensive Income”. FASB ASC 220 requires companies to report all changeschange in equity during a period, resulting from net (loss) incomeitems other than shareholder investments and transactions from non-owner sources, in a financial statement in the period in which they are recognized.distributions. The Company has chosen to disclose comprehensive income (loss), which encompasses net loss,Company’s foreign currency translation adjustments, gainsinterest rate swap - cash flow hedge and losses on derivatives, the underfunded statusminimum pension liability adjustments are included in AOCI. The components of its pension plans, and pension minimum additional liability adjustments,other comprehensive income are reclassified as net income, net of tax, when the underlying component impacts earnings. Comprehensive income (loss) and the components of AOCI are presented in the accompanying consolidated statements of comprehensive income (loss).loss and consolidated statements of equity.(l)Revenue RecognitionCompany followsCompany’s contracts are primarily of short duration and are mostly based on the provisionsreceipt and fulfilment of FASB ASC 605, “Revenue Recognition”.purchase orders. The purchase orders are binding and include pricing and all other relevant terms and conditions.recognizes product revenues when persuasive evidencealso has global and regional distribution partners, and original equipment manufacturer customers who incorporate its products into their products under their own brands.sales arrangement exists, the price to the buyer is fixed or determinable, delivery has occurred, and collectabilityrange of products that are used in life sciences research. Revenues from the sales price is reasonably assured. Sales of some of its products include provisions to provide additional services such as installation and training. Revenues on these productsitems are recognized when transfer of control of these products to the additional services have been performed. Service agreements on itscustomer occurs. Transfer of control occurs when the Company has a right to payment and the customer has legal title to the asset and the customer or their selected carrier has possession, which is typically upon shipment. Sales of these items are therefore generally recognized at a point in time.are typically sold separately fromrevenue also includes the sale of wireless implantable monitors that are used for life science research purposes. The Company sells these wireless implantable monitors to pharmaceutical companies, contract research organizations and academic laboratories. In addition to sales generated from new and existing customers, these implantable devices are also sold under a program called the equipment. Cash received prior“exchange program.” Under this program, customers may return an implantable monitor to renderingthe Company after use, and if the returned monitor can be reprocessed and resold, they may, in exchange, purchase a replacement implantable monitor of the same model at a lower price than a new monitor. The implantable monitors that are returned by customers are reprocessed and made available for future sale. The initial sale of implantable monitors and subsequent sale of replacement implantable monitors are independent transactions. The Company has no obligation in connection with the initial sale to sell replacement implantable monitors at any future date under any fixed terms and may refuse returned implantable monitors that cannot be recovered or are obsolete. The Company has concluded that the offer to its customers that they may purchase a discounted product in the future is not a material right. on theseis performed. Maintenance revenue consists of post-contract support provided in relation to software that is embedded within the equipment that is sold to the customer. The Company provides standard warranties that promise the customer that the product will work as promised and are not a separate performance obligation. Extended warranties relate to warranties that are separately priced and purchased in addition to a standard warranty, and are therefore a separate performance obligation. The Company has made the judgment that the customer benefits as the Company performs over the period of the contract, and therefore revenues from maintenance and warranty contracts is recorded as deferred revenue and the revenues are recognized ratablyover time. The Company uses the input method to recognize revenue over time, which is generally on a straight-line basis over the life of the agreement, typically one year, in accordance with the provisions of FASB ASC 605-20, “Revenue Recognition—Services”.service period.F-10TheFor sales for which transfer of control occurs upon shipment, the Company accounts for shipping and handling feescosts as fulfilment costs. As such, the Company records the amounts billed to the customer for shipping costs as revenue and the costs in accordance with the provisionswithin cost of FASB ASC 605-45-45, “Revenue Recognition—Principal Agent Considerations”,revenues upon shipment. For sales, for which requires all amounts chargedcontrol transfers to customers after shipment, the Company has elected to account for shipping and handling as activities to be classified as revenues.fulfill the promise to transfer the goods to the customer. The Company therefore accrues for the costs incurred relatedof shipping undelivered items in the period of shipment.shippingcertain types of variable consideration, including in limited cases volume and handling is classified as costpayment discounts. The Company analyzes sales that could include variable consideration and estimates the expected or most likely amount of product revenues. Warrantiesrevenue after returns, trade-ins, discounts, rebates, credits, and productincentives. Product returns are estimated and accrued for, based on historical information. In making these estimates, the Company considers whether the amount of variable consideration is constrained and is included in revenue only to the extent that it is probable that a significant reversal of the revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Variable consideration, and its impact on the Company’s revenue recognition, was not material in any of the periods presented.sales are recorded. The Company has no obligationsof shipment or prior to services being performed. Payment terms vary by the type of customers afterand the date products are shipped or installed, if applicable, other than pursuant to warranty obligations and service or maintenance contracts. The Company provides for the estimated amount of future returns upon shipment of products or installation, if applicable, based on historical experience.(m)Valuation of Identifiable Intangible Assets Acquired in Business CombinationsdeterminationCompany records contract liabilities when cash is collected from customers prior to satisfaction of the fair valueCompany’s performance obligation to the customer. Contract liabilities consist of intangible assets, which representsamounts deferred related to service contracts and revenue deferred as a result of payments received in advance from customers. Contract liabilities are generally expected to be recognized within one year.portionfinancing component as the customer can exercise their discretion as to when they can obtain the products for which they have made a prepayment.purchase price indeferred revenue balances.Company’s acquisitions, requiresproduct is available for general release to customers at which time amortization begins.use of significant judgment with regardamount computed using the ratio that current revenues for a product bear to (i) the fair value;total current and (ii) whetheranticipated future revenues for that product. In the event that future revenues are not estimable, such intangibles are amortizable or not amortizable and, if the former, the period and the method by which the intangibles asset will be amortized. The Company estimates the fair value of acquisition-related intangible assets principally based on projections of cash flows that will arise from identifiable assets of acquired businesses. The projected cash flows are discounted to determine the present value of the assets at the dates of acquisitions. At December 31, 2017, amortizable intangible assets include existing technology, trade names, distribution agreements, customer relationships and patents. These amortizable intangible assetscosts are amortized on a straight-line basis over 7 to 15 years, 10 to 15 years, 4 to 5 years, 5 to 15 years and 5 to 15 years, respectively.the remaining estimated economic life of the product.(n)Goodwill and Other Intangible Assets and unamortizable intangible assets acquired in a business combination and determined to have an indefinite useful life are is not amortized, but instead areis tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired, in accordance with the provisions of FASB ASC 350, “Intangibles—Goodwill and Other”.impaired.conductedconducts its annual impairment analysis in the fourth quarter of the fiscal year 2017. The goodwill impairment test is a two-step process. The first step of the impairment analysis compares the Company’s fair value to its carrying value to determineand more frequently if there is any indicationan indicator of impairment. Step twoThe Company assesses qualitative factors of the analysis comparesreporting unit to determine whether it is more likely than not that the implied fair value of goodwill tothe reporting unit is less than its carrying amountvalue. If the qualitative assessment indicates a potential impairment, a quantitative analysis is performed. The Company compares the fair value of the reporting unit with its carrying amount. The Company typically estimates fair value using the income approach but will also consider market approaches when appropriate. Under the income approach, the Company uses a discounted cash flows model, which indicates the fair value of the reporting unit based on the present value of the cash flows that the Company expects the reporting unit to generate in a manner similar to a purchase price allocation for business combination.the future. The Company's significant estimates in the discounted cash flows model include weighted average cost of capital, long-term rate of growth and profitability of the reporting unit, expected income tax rates and working capital effects. If the carrying amount of goodwilla reporting unit exceeds its implied fair value, an impairmentgoodwill is impaired, and the Company would recognize a loss is recognized equal to the excess.excess. For indefinite-lived intangible assets if the carrying amount exceedsit was more likely than not that the fair value of the asset, the Company would write down the indefinite-lived intangible asset to fair value.At December 31, 2017, the fair value of the Company significantlyreporting unit exceeded the carrying value. The Company concluded that none of its goodwill was impaired.The Company evaluates indefinite-lived intangible assets for impairment annually and when events occur or circumstances change that may reduce the fair valuethe asset below its carrying amount. Events or circumstances that might require an interim evaluation include unexpected adverse business conditions, economic factors, unanticipated technological changes or competitive activities, loss of key personnel and acts by governments and courts. At December 31, 2017, the Company concluded that none of its indefinite-lived intangible assets were impaired.Long-Lived Assets(o)Impairment of Long-Lived Assetsin accordance with FASB ASC 360, “Property, Plant and Equipment” when events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. RecoverabilityFactors which could trigger an impairment review include significant negative industry or economic trends, significant loss of clients, and significant changes in the manner of the Company’s use of the assets or the strategy for its overall business.IfThe Company’s estimate of future cash flows requires significant judgment based on historical and anticipated results and are subject to many factors.or asset groupis not recoverable and exceeds its fair value. Different assumptions and judgments could materially affect the estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amountcalculation of the asset or asset group exceeds its estimated fair value. At value of our assets. For the years ended December 31, 2017,2023 and 2022, the Company concluded that nonethere were no triggering events requiring the Company to assess the recoverability of its long-lived assets were impaired.assets.F-11(p)DerivativesThe Company does not enter into derivative instruments for any purpose other than cash flow hedging. The Company does not speculate using derivative instruments. The Company recognizes all derivative instruments as either assets or liabilities in the balance sheet at their respective fair values. For derivatives designated in hedging relationships, changes in the fair value are either offset through earnings against the change in fair value of the hedged item attributable to the risk being hedged or recognized in AOCI, to the extent the derivative is effective at offsetting the changes in cash flows being hedged until the hedged item affects earnings.. For and does not use derivative financial instruments for trading or speculative purposes. The Company recognizes all hedging relationships,derivative instruments as either assets or liabilities in the balance sheet at their respective fair values.The Company also formally assesses, both at the inception of the hedging relationship and on an ongoing basis, whether the derivatives that are used in hedging relationships are highly effective in offsetting changes in cash flows of hedged transactions. For derivative instruments that are designated and qualify as part of a cash flow hedging relationship, the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income (loss) (“OCI”) and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings.The Company discontinues hedge accounting prospectively when it determines that the derivative is no longer effective in offsetting cash flows attributable to the hedged risk, the derivative expires or is sold, terminated, or exercised, the cash flow hedge is de-designated because a forecasted transaction is not probable of occurring, or management determines to remove the designation of the cash flow hedge.In all situations in which hedge accounting is discontinued and the derivative remains outstanding, the Company continues to carry the derivative at its fair value on the balance sheet and recognizes any subsequent changes in its fair value in earnings. When it is probable that a forecasted transaction will not occur, the Company discontinues hedge accounting and recognizes immediately in earnings gains and losses that were accumulated in other comprehensive income related to the hedging relationship.(q)Fair Value of Financial InstrumentsThe carrying values of the Company’s cash and cash equivalents, trade accounts receivable and trade accounts payable and short-term debt approximate their fair values because of the short maturities of those instruments. The fair value of the Company’s long-term debt approximates its carrying value and is based on the amount of future cash flows associated with the debt discounted using current borrowing rates for similar debt instruments of comparable maturity.Financial reporting standards define a fair value hierarchy that consists of three levels:§Level 1 includes instruments for which quoted prices in active markets for identical assets or liabilities accessible to the Company at the measurement date.§Level 2 includes instruments for which the valuations are based on quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities.§Level 3 includes valuations based on inputs that are unobservable and significant to the overall fair value measurement.(r)Stock-based CompensationThe Company accounts for stock-based payment awards in accordance with the provisions of FASB ASC 718, “Compensation—Stock Compensation”, which requires it to recognize compensation expense for all stock-based payment awards made to employees and directors including stock options, restricted stock units, restricted stock units with a market condition and employee stock purchases (“employee stock purchases”) related to its Employee Stock Purchase Plan (as amended, the ESPP). The Company issues new shares upon stock option exercises, upon vesting of restricted stock units and restricted stock units with a market condition, and under the Company’s ESPP.F-12Stock-based compensation expense recognized is based on the value of the portion of stock-based payment awards that is ultimately expected to vest. The value of the award is recognized as expense as it vests over the requisite service periods in its consolidated statements of operations. The Company values stock-based payment awards, except restricted stock units at grant date using the Black-Scholes option-pricing model (Black-Scholes model). The Company values restricted stock units with a market condition using a Monte-Carlo valuation simulation. The determination of fair value of stock-based payment awards on the date of grant using an option-pricing model or Monte-Carlo valuation simulation is affected by its stock price as well as assumptions regarding certain variables. These variables include, but are not limited to its expected stock price volatility over the term of the awards and actual and projected stock option exercise behaviors.The fair value of restricted stock units are based on the market price of the Company’s stock on the date of grant and are recorded as compensation expense ratably over the applicable service period, which ranges from one to four years. Unvested restricted stock units are forfeited in the event of termination of employment with the Company.Stock-based compensation expense recognized under FASB ASC 718 for the years ended December 31, 2017, 2016 and 2015 consisted of stock-based compensation expense related to stock options, the employee stock purchase plan, and the restricted stock units and was recorded as a component of cost of product revenues, sales and marketing expenses, general and administrative expenses, research and development expenses and discontinued operations. Refer to footnote 19 for further details.(s)Recently Issued Accounting PronouncementsIn February 2016, the FASB issued ASU 2016-02,Leases, which is intended to improve financial reporting about leasing transactions. The update requires a lessee to record on the balance sheet the assets and liabilities for the rights and obligations created by lease terms of more than 12 months. The update is effective for fiscal years beginning after December 15, 2018. The Company has commenced the process of evaluating the requirements of the standard as well as collecting information on all its leases. The Company has not yet concluded on the impact of the adoption on its consolidated financial position, results of operations and cash flows, however, assets and liabilities will increase upon adoption for right-of-use assets and lease liabilities. The Company’s future commitments under lease obligations are summarized in Note 14.In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326), Measurement of credit losses on Financial Instruments. The update amends the FASB’s guidance on the impairment of financial instruments. The ASU adds to U.S. GAAP an impairment model (known as the current expected credit loss (CECL) model) that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes as an allowance its estimate of expected credit losses, which the FASB believes will result in more timely recognition of such losses. The ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company is evaluating the impact of ASU 2016-13 on its consolidated financial statements.In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815) which amends the hedge accounting recognition and presentation requirements in ASC 815. The Board’s objectives in issuing the ASU are to (1) improve the transparency and understandability of information conveyed to financial statement users about an entity’s risk management activities by better aligning the entity’s financial reporting for hedging relationships with those risk management activities and (2) reduce the complexity of and simplify the application of hedge accounting by preparers. The ASU is effective for annual reporting periods, including interim periods within those annual reporting periods, beginning after December 15, 2018. Early adoption is permitted, including adoption in any interim period. The Company is evaluating the requirements of this guidance and has not yet determined the impact of the adoption on its consolidated financial position, results of operations and cash flows.Recently Adopted Accounting PronouncementsAdopted in 2017In March 2016, the FASB issued ASU 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, which simplifies the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows.The standard requires an entity to recognize all excess tax benefits and tax deficiencies as income tax benefit or expense in the income statement as discrete items in the reporting period in which they occur, and such tax benefits and tax deficiencies are not included in the estimate of an entity’s annual effective tax rate, applied on a prospective basis. Further, the standard eliminates the requirement to defer the recognition of excess tax benefits until the benefit is realized through a reduction to taxes payable. All excess tax benefits previously unrecognized, along with any valuation allowance, should be recognized on a modified retrospective basis as a cumulative adjustment to retained earnings as of the date of adoption. Under ASU 2016-09, an entity that applies the treasury stock method in calculating diluted earnings per share is required to exclude excess tax benefits and deficiencies from the calculation of assumed proceeds since such amounts are recognized in the income statement. Excess tax benefits should also be classified as operating activities in the same manner as other cash flows related to income taxes on the statement of cash flows, as such excess tax benefits no longer represent financing activities since they are recognized in the income statement, and should be applied prospectively or retrospectively to all periods presented.F-13The Company adopted ASU 2016-09 as of January 1, 2017. The Company recorded a cumulative increase in retained earnings of $0.5 million at the beginning of the first quarter of 2017 with a corresponding increase in deferred tax assets related to the prior years’ unrecognized excess tax benefits. An equal amount of valuation allowance was also recorded against these deferred tax assets with a corresponding decrease to retained earnings resulting in no net impact to retained earnings and deferred tax assets. In addition, tax deficiencies related to vested restricted stock units and canceled stock options during the year ended December 31, 2017 have been recognized in the current period’s income statement.ASU 2016-09 also allows an entity to elect as an accounting policy either to continue to estimate the total number of awards for which the requisite service period will not be rendered or to account for forfeitures for service based awards as they occur. An entity that elects to account for forfeitures as they occur should apply the accounting change on a modified retrospective basis as a cumulative effect adjustment to retained earnings as of the date of adoption. The Company elected as an accounting policy to account for forfeitures for service based awards as they occur, and as a result, the Company recorded a cumulative effect adjustment of $0.1 million to reduce retained earnings with a corresponding increase in additional paid in capital related to the prior years’ stock-based compensation expense as required under the modified retrospective approach. The tax effect of this adjustment, which included the impact of a valuation allowance was immaterial.Adopted in 2018In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers, a new accounting standard that provides for a comprehensive model to use in the accounting for revenue arising from contracts with customers that will replace most existing revenue recognition guidance within generally accepted accounting principles in the United States. Under this standard, revenue will be recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services.The Company has completed the process of evaluating the impact of the new standard on its consolidated financial position, results of operations and cash flows. The Company adopted this standard as of January 1, 2018 using the modified retrospective approach. As part of the implementation of the standard, the Company identified its significant revenue streams, which currently consist primarily of product revenue transactions, and to a lesser extent, extended warranty transactions on certain product sales, and revenues from government contracts. The timing of recognizing revenues for these revenue streams is not expected to materially change. Additionally, no material changes to business processes, systems and controls are expected. The Company is drafting enhanced revenue disclosures which will be presented prospectively starting in the first quarter of 2018.In May 2017, the FASB issued ASU 2017-09, Stock compensation (Topic 718): Scope of modification accounting which amends the scope of modification accounting for share-based payment arrangements. The ASU provides guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting under ASC 718. Specifically, an entity would not apply modification accounting if the fair value, vesting conditions, and classification of the awards are the same immediately before and after the modification. The ASU is effective for annual reporting periods, including interim periods within those annual reporting periods, beginning after December 15, 2017. The Company adopted this guidance on January 1, 2018, and the new standard did not have a material impact on its consolidated financial position, results of operations and cash flows..3.ConcentrationsNo customer accounted for more than 10% of revenues for the years ended December 31, 2017, 2016 and 2015. At December 31, 2017 and 2016, no customer accounted for more than 10% of net accounts receivable.F-144.Accumulated Other Comprehensive LossChanges in each component of accumulated other comprehensive loss, net of tax are as follows: Foreign currency Derivatives translation qualifying as Defined benefit (in thousands) adjustments hedges pension plans Total Balance at December 31, 2015 $ (9,594 ) $ (10 ) $ (2,280 ) $ (11,884 ) Other comprehensive (loss) income before reclassifications (4,606 ) (29 ) (430 ) (5,065 ) Amounts reclassified from AOCI - 39 252 291 Net other comprehensive (loss) income (4,606 ) 10 (178 ) (4,774 ) Balance at December 31, 2016 (14,200 ) $ - (2,458 ) (16,658 ) Other comprehensive (loss) income before reclassifications 4,445 (24 ) 1,200 5,621 Amounts reclassified from AOCI - 61 300 361 Other comprehensive (loss) income 4,445 37 1,500 5,982 Balance at December 31, 2017 $ (9,755 ) $ 37 $ (958 ) $ (10,676 ) The amounts reclassified out of accumulated other comprehensive (loss) income are as follows: Affected line item in the Year Ended December 31, (in thousands) Statements of Operations 2017 2016 2015 Amounts Reclassified From AOCI Derivatives qualifying as hedges Realized loss on derivatives qualifying as hedges Interest expense $ 61 $ 39 $ 93 Income tax Income tax (benefit) expense - - - 61 39 93 Defined benefit pension plans Amortization of net losses included in net periodic pension costs General and administrative expenses 362 304 306 Income tax Income tax (benefit) expense (62 ) (52 ) (58 ) 300 252 248 Total reclassifications $ 361 $ 291 $ 341 5.InventoriesInventories consist of the following: December 31, December 31, 2017 2016 (in thousands) Finished goods $ 10,284 $ 9,340 Work in process 1,042 823 Raw materials 10,027 9,792 Total $ 21,353 $ 19,955 F-156.Property, Plant and EquipmentProperty, plant and equipment consist of the following: December 31, December 31, 2017 2016 (in thousands) Land, buildings and leasehold improvements $ 2,220 $ 2,095 Machinery and equipment 7,758 7,224 Computer equipment and software 9,149 8,115 Furniture and fixtures 1,243 1,274 Automobiles 120 196 20,490 18,904 Less: accumulated depreciation (16,350 ) (14,608 ) Property, plant and equipment, net $ 4,140 $ 4,296 7.AcquisitionsAs further discussed in Note 25 (Subsequent Events) on January 31, 2018, the Company completed the acquisition of Data Sciences International, Inc.HEKA ElektronikOn January 8, 2015, the Company, through its wholly-owned Ealing Scientific Limited and Multi-Channel Systems MCS GmbH (MCS) subsidiaries, acquired all of the issued and outstanding shares of HEKA Elektronik (HEKA) for approximately $5.9 million, or $4.5 million, net of cash acquired. Included in the acquisition of HEKA were: HEKA Electronik Dr. Schulze GmbH, based in Lambrecht, Germany (HEKA Germany); HEKA Electronics Incorporated, based in Chester, Nova Scotia, Canada (HEKA Canada); and HEKA Instruments Incorporated, based in Bellmore, New York. The Company funded the acquisition from its existing cash balances.HEKA is a developer, manufacturer and marketer of sophisticated electrophysiology instrumentation and software for biomedical and industrial research applications. This acquisition is complementary to the electrophysiology line currently offered by the Company’s wholly-owned Warner Instruments and MCS subsidiaries.The aggregate purchase price for this acquisition was allocated to tangible and intangible assets acquired as follows: (in thousands) Tangible assets $ 4,165 Liabilities assumed (2,426 ) Net assets 1,739 Goodwill and intangible assets: Goodwill 1,668 Trade name 774 Customer relationships 1,627 Developed technology 1,338 Non-compete agreements 27 Deferred tax liabilities (1,245 ) Total goodwill and intangible assets, net of tax 4,189 Acquisition purchase price $ 5,928 F-16Goodwill recorded as a result of the acquisition of HEKA is not deductible for tax purposes.In the second quarter of 2016, an immaterial correction was made to the allocation of the aggregate purchase price to the tangible and intangible assets acquired to increase both accrued liabilities and goodwill by $50,000 as of June 30, 2016. This correction has been reflected in the table above.The results of operations for HEKA have been included in the Company’s consolidated financial statements from the date of acquisition.The following consolidated pro forma information is based on the assumption that the acquisition of HEKA occurred on January 1, 2015. Accordingly, the historical results have been adjusted to reflect amortization expense that would have been recognized on such a pro forma basis. The pro forma information is presented for comparative purposes only and is not necessarily indicative of the financial position or results of operations which would have been reported had we completed the acquisition during these periods or which might be reported in the future. Year Ended
December 31, 2015 (in thousands) Pro Forma Revenues $ 108,761 Net (loss) income (19,027 ) Direct transaction costs recorded in other expense, net, in relation to all current or prospective acquisitions in the Company’s consolidated statements of operations were $0.5 million, $0.1 million and $1.2 million for the years ended December 31, 2017, 2016 and 2015, respectively.8.DispositionsAs further discussed in Note 25 (Subsequent Events) on January 22, 2018, the Company sold substantially all the assets of its wholly owned subsidiary, Denville Scientific, Inc.AHN Biotechnologie GmbHOn October 26, 2016, the Company sold the operations of its AHN Biotechnologie GmbH subsidiary (AHN), a manufacturer of liquid handling products, located in Nordhausen, Germany for gross cash proceeds of approximately $1.7 million. Proceeds received at closing, net of cash on hand, were approximately $1.4 million. The results of operations of AHN, through the date of sale, were reported in the Company’s consolidated statements of operations for the year ended December 31, 2016.As a result of the initiation of plans to sell the operations of AHN, during the third quarter of 2016, the Company evaluated the long-lived assets of AHN for impairment, pursuant to ASC 360-10. Based on the impairment analysis, the carrying amount of the long-lived assets exceeded the fair value of the long-lived assets as determined using the probability weighted present value of future cash flows. Consequently, the Company recognized an impairment charge of $0.7 million for the year ended December 31, 2016 in operating expenses within its statements of operations. Of the overall charge, approximately $0.1 million was allocated to AHN’s intangible assets (trade name and customer relationships), while $0.6 million was allocated to its property, plant and equipment (machinery and equipment).F-17Upon the closing of the transaction, the Company recorded a loss on sale of $1.2 million for the year ended December 31, 2016 in operating expenses within the statements of operations. On October 26, 2016, the major classes of assets and liabilities of AHN disposed of, including an allocation of goodwill, were comprised of the following: (in thousands) Assets Accounts receivable, net $ 279 Inventory 438 Property, plant and equipment, net 919 Amortizable intangibles, net 196 Allocation of goodwill Liabilities Accounts payable and accrued expenses $ 245 9.Goodwill and Other Intangible AssetsIntangible assets consist of the following: Weighted Average December 31, 2017 December 31, 2016 Life (a) (in thousands) Amortizable intangible assets: Gross Accumulated Amortization Gross Accumulated Amortization Existing technology $ 16,173 $ (13,179 ) $ 15,082 $ (11,710 ) 6.5 Years Trade names 7,646 (4,060 ) 7,379 (3,479 ) 7.1 Years Distribution agreements/customer relationships 23,744 (14,413 ) 22,976 (12,862 ) 8.1 Years Patents 223 (174 ) 204 (119 ) 1.2 Years Total amortizable intangible assets 47,786 $ (31,826 ) 45,641 $ (28,170 ) Indefinite-lived intangible assets: Goodwill 39,969 38,032 Other indefinite-lived intangible assets 1,244 1,209 Total goodwill and other indefinite-lived intangible assets 41,213 39,241 Total intangible assets $ 88,999 $ 84,882 (a) Weighted average life as of December 31, 2017. The change in the carrying amount of goodwill for the years ended December 31, 2017 and 2016 is as follows: (in thousands) Balance at December 31, 2015 $ 40,357 Adjustment to purchase price allocation of prior year acquisition 50 Adjustment to goodwill for AHN disposition (484 ) Effect of change in currency translation (1,891 ) Balance at December 31, 2016 38,032 Effect of change in currency translation 1,937 Balance at December 31, 2017 $ 39,969 F-18Intangible asset amortization expense was $2.4 million, $2.7 million and $2.8 million for the years ended December 31, 2017, 2016 and 2015, respectively. Amortization expense of existing amortizable intangible assets is currently estimated to be $2.4 million for the year ending December 31, 2018, $2.2 million for the year ending December 31, 2019, $2.2 million for the year ending December 31, 2020, $2.2 million for the year ending December 31, 2021 and $2.1 million for the year ending December 31, 2022.10.Restructuring and Other Exit CostsDuring 2014 and 2015, the Company entered into various restructuring plans, which included eliminating certain positions made redundant as a result of its site consolidations, as well as a realignment of its commercial sales team. These restructuring plans also included the relocation of the distribution operations of the Company’s Denville Scientific subsidiary from New Jersey to North Carolina, as well as the consolidation of the manufacturing operations of its Biochrom subsidiary to its headquarters in Holliston, MA. Activity and liability balances related to these charges for the year ended December 31, 2016, were as follows: Severance Costs Other Total (in thousands) Restructuring balance at December 31, 2015 $ 132 $ - $ 132 Restructuring charges - 23 23 Non-cash reversal of restructuring charges (27 ) - (27 ) Cash payments (104 ) (28 ) (132 ) Effect of change in currency translation (1 ) 5 4 Restructuring balance at December 31, 2016 $ - $ - $ - For the year ended December 31, 2015, the activity and liability balances related to these charges were as follows: Severance Costs Other Total (in thousands) Restructuring balance at December 31, 2014 $ 626 $ - $ 626 Restructuring charges 434 439 873 Non-cash reversal of restructuring charges (85 ) - (85 ) Cash payments (833 ) (439 ) (1,272 ) Effect of change in currency translation (10 ) - (10 ) Restructuring balance at December 31, 2015 $ 132 $ - $ 132 Aggregate net restructuring charges for the years ended December 31, 2017, 2016 and 2015 were as follows: Year Ended December 31, 2017 2016 2015 (in thousands) Restructuring (credits) charges $ - $ (4 ) $ 788 F-1911.Long Term DebtOn August 7, 2009, the Company entered into an Amended and Restated Revolving Credit Loan Agreement related to a $20.0 million revolving credit facility with Bank of America, as agent, and Bank of America and Brown Brothers Harriman & Co as lenders (as amended, the 2009 Credit Agreement). On March 29, 2013, the Company entered into a Second Amended and Restated Revolving Credit Agreement (as amended, the 2013 Credit Agreement) with Bank of America, as agent, and Bank of America and Brown Brothers Harriman & Co, as lenders that amended and restated the 2009 Credit Agreement. Between September 2011 and May 2017, the Company entered into a series of amendments that among other things did the following:on September 30, 2011, reduced interest rates to the London Interbank Offered Rate plus 3.0%;on March 29, 2013, converted existing loan advances into a term loan in the principal amount of $15.0 million (the 2013 Term Loan), provided a revolving credit facility in the maximum principal amount of $25.0 million (the 2013 Revolving Line) and a delayed draw term loan (the 2013 DDTL) of up to $15.0 million;on October 31, 2013, reduced the 2013 DDTL from up to $15.0 million to up to $10.0 million;on April 24, 2015, extended the maturity date of the 2013 Revolving Line to March 29, 2018 and reduced the interest rates on the 2013 Revolving Line, 2013 Term Loan and 2013 DDTL;on June 30, 2015, amended its quarterly minimum fixed charge coverage financial covenant;on March 9, 2016, amended the principal payment amortization of the 2013 Term Loan and 2013 DDTL to five years, as well as amended its quarterly minimum fixed charge coverage financial covenant; andon May 2, 2017, entered into a Third Amended and Restated Revolving Credit Agreement (as amended, the Credit Agreement) with Bank of America, as agent, and Bank of America and Brown Brothers Harriman & Co, as lenders that amended and restated the 2013 Credit Agreement.The Credit Agreement was entered into to, among other things, consolidate, combine and restate the outstanding indebtedness, on the date of the Credit Agreement, into a term loan (the Term Loan) in the principal amount of $14.0 million, and also provide for a $25.0 million revolving line of credit (the Revolving Line). The Term Loan and the Revolving Line each have a maturity date of May 1, 2022. Borrowings under the Term Loan accrue interest at a rate based on either the effective LIBOR for certain interest periods selected by the Company, or a daily floating rate based on the BBA LIBOR as published by Reuters (or other commercially available source providing quotations of BBA LIBOR), plus in either case, a margin of 2.75%. Additionally, the Revolving Line accrues interest at a rate based on either the effective LIBOR for certain interest periods selected by the Company, or a daily floating rate based on the BBA LIBOR, plus in either case, a margin of 2.25%. The Term Loan and loans under the Revolving Line evidenced by the Credit Agreement, or the Loans, are guaranteed by all of the Company’s direct and indirect domestic subsidiaries, and secured by substantially all of the assets of the Company and the guarantors. The Loans are subject to restrictive covenants under the Credit Agreement, and financial covenants that require the Company and its subsidiaries to maintain certain financial ratios on a consolidated basis, including a maximum leverage, minimum fixed charge coverage and minimum working capital. Prepayment of the Loans is allowed by the Credit Agreement at any time during the terms of the Loans. The Loans also contain limitations on the Company’s ability to incur additional indebtedness and requires lender approval for acquisitions funded with cash, promissory notes and/or other consideration in excess of $6.0 million and for acquisitions funded solely with equity in excess of $10.0 million.As of December 31, 2017 and December 31, 2016, the Company had borrowings of $11.7 million and $13.7 million, net of deferred financing costs, respectively, outstanding under its Credit Agreement. The carrying value of the debt approximates fair value because the interest rate under the obligation approximates market rates of interest available to the Company for similar instruments.As of December 31, 2017, the weighted effective interest rates, net of the impact of the Company’s interest rate swaps, on its Term Loan was 4.61%.F-20As of December 31, 2017 and December 31, 2016, the Company’s borrowings were comprised of: December 31, December 31, 2017 2016 (in thousands) Long-term debt: Term loan $ 11,899 $ 5,400 DDTL - 4,400 Revolving line - 4,050 Total unamortized deferred financing costs (151 ) (104 ) Total debt 11,748 13,746 Less: current installments (2,800 ) (2,450 ) Current unamortized deferred financing costs 35 78 Long-term debt $ 8,983 $ 11,374 The aggregate amounts of debt maturing during the next five years are as follows: (in thousands) 2018 $ 11,899 2019 - 2020 - 2021 - 2022 - Total $ 11,899 As further discussed in Note 25, on January 22, 2018, the Company terminated the Credit Agreement and all outstanding amounts under the agreement were repaid in full. At the time of repayment, there was approximately $11.9 million of debt balances outstanding. Accordingly, the table above reflects the repayment of the debt in 2018. Additionally, as further disclosed in Note 25, on January 31, 2018, the Company entered into a financing agreement with Cerberus Business Finance, LLC, which provided for a $64.0 million term loan and up to a $25.0 million revolving line of credit. The $64.0 million term loan has a maturity of five years. The payment schedule of this financing agreement is detailed in Note 25.12.DerivativesThe Company uses interest-rate-related derivative instruments to manage its exposure related to changes in interest rates on its variable-rate debt instruments. The Company does not enter into derivative instruments for any purpose other than cash flow hedging. The Company does not speculate using derivative instruments.exposuresexposure to changes in interest rates, the Company exposes itself to credit risk and market risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes the Company, which creates credit risk for the Company. When the fair value of a derivative contract is negative, the Company owes the counterparty and, therefore, the Company is not exposed to the counterparty’s credit risk in those circumstances. The Company minimizes counterparty credit risk in derivative instruments by entering into transactions with carefully selected major financial institutions based upon their credit profile.assesses interest rate risk by continually identifying and monitoring changes in interest rate exposures that may adversely impact expected future cash flows and by evaluating hedging opportunities. The Company maintains risk management control systems to monitormonitors interest rate risk attributable to both the Company’sits outstanding orand forecasted debt obligations as well as the Company’s offsetting hedge positions. The risk management control systems involveby the use of analytical techniques, including cash flow sensitivity analysis, to estimatewhich estimates the expected impact of changes in interest rates on the Company’s future cash flows.The Company uses variable-rate London Interbank Offered Rate (LIBOR) debt to finance its operations. The debt obligations expose the Company to variability in interest payments due to changes in interest rates. Management believes that it is prudent to limit the variability of a portion of its interest payments. To meet this objective, management enters into LIBOR based interest rate swap agreements to manage fluctuations in cash flows resulting from changes in the benchmark interest rate of LIBOR. These swaps change the variable-rate cash flow exposure on the debt obligations to fixed cash flows. Under the terms of the interest rate swaps, the Company receives LIBOR based variable interest rate payments and makes fixed interest rate payments, thereby creating the equivalent of fixed-rate debt for the notional amount of its debt hedged.F-21As disclosed in Note 11, on May 2, 2017, the Company entered into a Credit Agreement that amended its then existing credit facility with BankFair Value of America, as agent, and Bank of America and Brown Brothers Harriman & Co. as lenders. Immediately after entering into this Credit Agreement, the Company entered into an interest rate swap contract with Bank of America with a notional amount of $14.0 million and a termination date of March 30, 2022 in order to hedge the risk of changes in the effective benchmark interest rate (LIBOR) associated with the Company’s Term Loan. The swap contract converted specific variable-rate debt into fixed-rate debt and fixed the LIBOR rate associated with the Term Loan at 1.86% plus a bank margin of 2.75%. The interest rate swap was designated as a cash flow hedge instrument in accordance with ASC 815 “Derivatives and Hedging”.Financial InstrumentsThe notional amount of the Company’s derivative instruments as of December 31, 2017 was $11.9 million.The following table presents the notional amount and fair value of the Company’s derivative instruments as of December 31, 2017 and December 31, 2016. December 31, 2017 December 31, 2017 Notional Amount Fair Value (a) Derivatives designated as hedging instruments under ASC 815 Balance sheet classification (in thousands) Interest rate swaps Other assets $ 11,900 $ 37 December 31, 2016 December 31, 2016 Notional Amount Fair Value (a) Derivatives designated as hedging instruments under ASC 815 Balance sheet classification (in thousands) Interest rate swaps Other assets $ 5,500 $ - (a) See Note 13 for the fair value measurements related to these financial instruments.All of the Company’s derivative instruments are designated as hedging instruments.The Company has structured its interest rate swap agreements to be 100% effective and asFinancial reporting standards define a result, there was no impact to earnings resulting from hedge ineffectiveness. Changes in the fair value of interest rate swaps designated as hedging instruments that effectively offset the variability of cash flows associated with variable-rate, long-term debt obligations are reported in accumulated other comprehensive income (“AOCI”). These amounts subsequently are reclassified into interest expense as a yield adjustment of the hedged interest payments in the same period in which the related interest affects earnings. The Company’s interest rate swap agreement was deemed to be fully effective in accordance with ASC 815, and, as such, unrealized gains and losses related to these derivatives were recorded as AOCI.The following table summarizes the effect of derivatives designated as cash flow hedging instruments and their classification within comprehensive loss for the years ended December 31, 2017, 2016 and 2015:Derivatives in Hedging Relationships Amount of gain or (loss) recognized in OCI
on derivative (effective portion) Year Ended December 31, 2017 2016 2015 (in thousands) Interest rate swaps $ (24 ) $ (29 ) $ (85 ) F-22The following table summarizes the reclassifications out of accumulated other comprehensive loss for the years ended December 31, 2017, 2016 and 2015:Details about AOCI Components Amount reclassified from AOCI into
income (effective portion) Location of amount Year Ended December 31, reclassified from AOCI 2017 2016 2015 into income (effective portion) (in thousands) Interest rate swaps $ 61 $ 39 $ 93 Interest expense As of December 31, 2017, the deferred gains or losses on derivative instruments accumulated in AOCI expected to be reclassified to earnings during the next twelve months were immaterial.As disclosed in Note 25, on January 22, 2018, the Company terminated its Credit Agreement with Bank of America, as agent, and Bank of America and Brown Brothers Harriman & Co. as lenders. As a result of terminating this Credit Agreement, the Company unwound the interest rate swap contract and received an immaterial amount in proceeds. In addition, as further described in Note 25, in February 2018, the Company entered into a new interest rate swap agreement with PNC bank as a result of entering into the previously described financing agreement with Cerberus Financing LLC. ..13.Fair Value MeasurementsFair value measurement is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. A fair value hierarchy is established, which prioritizes the inputs used in measuring fair value into that consists of three broad levels as follows: levels:Level 1—Quoted prices in active markets for identical assets or liabilities.Level 2—Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly.Level 3—Unobservable inputs based on the Company’s own assumptions.The following tables present the fair value hierarchy for those liabilities measured at fair value on a recurring basis: Fair Value as of December 31, 2017 (In thousands) Level 1 Level 2 Level 3 Total Interest rate swap agreements $ - $ 37 $ - $ 37 Fair Value asDecember 31, 2016the assets or liabilities.(In thousands) Level 1Level 2Level 3TotalAssets (Liabilities):●Interest rate swap agreements$-$-$-$-Company uses the market approach technique to value its financial liabilities. The Company’s financial liabilities carried at fair value include derivative instruments used to hedgecarrying values of the Company’s interest rate risks.cash and cash equivalents, trade accounts receivable, trade accounts payable and short-term debt approximate their fair values because of the short maturities of those instruments. The fair value of the Company’s interest rate swap agreements waslong-term debt approximates its carrying value and is based on LIBOR yield curves at the reporting date. amount of future cash flows associated with the debt discounted using current borrowing rates for similar debt instruments of comparable maturity (Level 2).14.Leaseshas noncancelable operating leasesrecognizes compensation expense for officeall stock-based payment awards made to employees and warehouse space expiring at various dates through 2022directors including stock options, restricted stock units, and thereafter. Rentrestricted stock units with a market condition. The Company issues awards under the 2021 Incentive Plan (the “2021 Incentive Plan”) and the Fourth Amended and Restated 2000 Stock Option and Incentive Plan (the “2000 Incentive Plan” and together with the 2021 Incentive Plan, the “Incentive Plans”), as well as issues shares for employee stock purchases related to its Employee Stock Purchase Plan (as amended, the “ESPP”). The Company issues new shares from its registered but unissued stock pool to satisfy stock option exercises and vesting of the restricted stock units. Stock-based compensation expense which is recorded on a straight-line basis was $1.9over the applicable service period, which ranges from one to four years. The Company has elected as an accounting policy to account for forfeitures for service-based awards as they occur, with no adjustment for estimated forfeitures.$1.8shares of preferred stock and to determine the price privileges and other terms of the shares. The board of directors may exercise this authority without any further approval from stockholders. As of December 31, 2023 and 2022, the Company had no preferred stock issued or outstanding.$2.1$5.1 million and understated the amount attributed to foreign currency translation adjustments by $(5.4) million and $(5.1) million as of December 31, 2022 and 2021, respectively. These misclassifications had no impact on total OCI for the year ended December 31, 2022, included in the consolidated statements of comprehensive loss, or the total AOCI included in the consolidated balance sheets as of December 31, 2022, and also had no impact on any of the Company’s previously reported consolidated statements of operations, stockholders’ equity, or cash flows. The correction of these offsetting misclassifications is included in these consolidated financial statements. See Note 3 below for further details. $ (8,778 ) $ (1,249 ) $ - $ (10,027 ) (2,614 ) (2,411 ) - (5,025 ) (11,392 ) (3,660 ) - (15,052 ) 1,507 (446 ) (199 ) 862 $ (9,885 ) $ (4,106 ) $ (199 ) $ (14,190 ) $ 56,260 $ 57,689 805 (1,429 ) $ 57,065 $ 56,260 6 $ 16,038 $ (9,706 ) $ 6,332 $ 16,124 $ (8,727 ) $ 7,397 2 35,007 (27,029 ) 7,978 37,549 (26,482 ) 11,067 3 7,613 (6,094 ) 1,519 7,523 (5,197 ) 2,326 $ 58,658 $ (42,829 ) $ 15,829 $ 61,196 $ (40,406 ) $ 20,790 207 224 $ 16,036 $ 21,014 2017, 2016 2023 and 2015,2022, respectively. Estimated amortization expense of existing amortizable intangible assets for each of the five succeeding years and thereafter is as follows: $ 5,281 4,027 2,366 1,269 1,546 1,340 $ 15,829 $ 5,120 $ 5,223 4,188 3,776 15,408 17,440 $ 24,716 $ 26,439 $ 8,154 $ 7,500 6,493 6,781 2,417 2,507 1,244 1,386 58 38 18,366 18,212 (14,385 ) (14,846 ) $ 3,981 $ 3,366 $ 3,929 $ 3,476 3,201 2,368 499 392 336 268 1,240 982 $ 9,205 $ 7,486 F-23Future minimumLong-lived assets by geographic area, which include operating lease payments for operating leases, with initial or remaining terms in excess of one year at December 31, 2017,right-of-use assets, property, plant and equipment, and amortizable intangible assets, are as follows: Operating Leases (in thousands) 2018 $ 1,744 2019 1,657 2020 1,501 2021 1,110 2022 1,089 Thereafter 1,873 Net minimum lease payments $ 8,974 $ 21,558 $ 26,051 1,703 2,432 1,322 1,489 $ 24,583 $ 29,972 As further discussed in Note 25, on January 22, 2018, the Company sold substantially all the assets15.Accrued ExpensesAccrued expenses consist of:On an ongoing basis, the Company reviews the global economy, the healthcare industry, and the markets in which it competes to identify operational efficiencies, enhance commercial capabilities and align its cost base and infrastructure with customer needs and its strategic plans. In order to realize these opportunities, the Company undertakes activities from time to time to transform its business. A portion of these transformation activities are considered restructuring costs under ASC 420, Exit or Disposal Cost Obligations, and are discussed below. December 31, 2017 2016 (in thousands) Accrued compensation and payroll $ 1,772 $ 1,468 Accrued professional fees 580 1,105 Warranty costs 246 193 Other 1,953 1,784 Total $ 4,551 $ 4,550 16.Income TaxIncome tax expense attributable to income from operationsDuring the year ended December 31, 2022, the Company reviewed its product portfolio and identified certain non-strategic products for discontinuation and incurred severance expenses in connection with headcount reductions in Europe and North America. The following table summarizes the restructuring activity for the years ended December 31, 2017, 2016 2023 and 2015 consisted of:2022: Year Ended December 31, 2017 2016 2015 (in thousands) Current income tax expense: Federal and state $ 262 $ 170 $ (4 ) Foreign 297 790 677 559 960 673 Deferred income tax (benefit) expense: Federal and state (2,357 ) 166 15,598 Foreign 575 103 (840 ) (1,782 ) 269 14,758 Total income tax (benefit) expense $ (1,223 ) $ 1,229 $ 15,431 $ - $ - $ - $ - 1,471 877 46 2,394 (1,471 ) - - (1,471 ) - (241 ) (46 ) (287 ) - 636 - 636 320 42 29 391 (142 ) - - (142 ) (94 ) (678 ) (29 ) (801 ) $ 84 $ - $ - $ 84 F-24Income tax expense for the years ended December 31, 2017, 2016 and 2015 differed from the amount computed by applying the U.S. federal income tax rate of 34% to pre-tax operations income as a resultSubstantially all of the following: Year Ended December 31, 2017 2016 2015 (in thousands) Computed "expected" income tax (benefit) expense $ (710 ) $ (1,046 ) $ (1,227 ) Increase (decrease) in income taxes resulting from: Permanent differences, net (108 ) (128 ) 32 Foreign tax rate differential 23 165 (12 ) State income taxes, net of federal income tax benefit (71 ) (93 ) 82 Non-deductible stock compensation expense 174 110 (161 ) Impact of foreign rate change - 30 89 Impact of U.S. rate change 2,521 - - Tax credits (14 ) (89 ) (169 ) Change in reserve for uncertain tax position (58 ) 127 35 Impact of change to prior year tax accruals 72 291 370 Impact of adoption of ASU 2016-09,Improvements to Employee Share-based Payment Accounting (486 ) - - U.S. tax on foreign dividends 3,149 497 - Foreign withholding taxes 38 74 - Conversion of U.S. foreign tax credits from credit to deduction 648 1,772 - Non-deductible loss on subsidiary stock sale - 501 - Change in valuation allowance allocated to income tax expense (benefit) (6,393 ) (983 ) 16,401 Other (8 ) 1 (9 ) Total income tax (benefit) expense $ (1,223 ) $ 1,229 $ 15,431 Income tax (benefit) expense is based on the following pre-tax loss from operations for the years ended December 31, 2017, 2016severance and 2015: Year Ended December 31, 2017 2016 2015 (in thousands) Domestic $ (3,129 ) $ (3,107 ) $ (3,331 ) Foreign 1,041 29 (277 ) Total $ (2,088 ) $ (3,078 ) $ (3,608 ) The tax effects of temporary differences that give rise to significant components of the deferred tax assets and deferred tax liabilities from operations at December 31, 2017 and 2016 are as follows: December 31, 2017 2016 (in thousands) Deferred tax assets: Accounts receivable $ 93 $ 170 Inventory 891 1,336 Operating loss and credit carryforwards 8,287 12,586 Property, plant and equipment 3 5 Pension liabilities 151 631 Contingent consideration 2,273 3,262 Stock compensation expense 1,667 2,076 Other assets 119 23 Total gross deferred assets 13,484 20,089 Less: valuation allowance (11,447 ) (17,840 ) Deferred tax assets $ 2,037 $ 2,249 Deferred tax liabilities: Indefinite-lived intangible assets $ 3,166 $ 4,567 Definite-lived intangible assets 2,383 2,593 Other accrued liabilities 270 349 Total deferred tax liabilities 5,819 7,509 Net deferred tax liabilities $ (3,782 ) $ (5,260 ) F-25Certain prior year amounts in theother costs detailed above table have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the Company’s consolidated financial statements.The Company adopted the provisions of ASU 2016-09,Improvements to Employee Share-based Payment Accounting, on January 1, 2017. Upon adoption, the company recorded previously unrecognized excess tax benefits from the exercise of employee stock options as an increase in its deferred tax asset for net operating losses of approximately $0.5 million. The tax benefit of this increased deferred tax asset is fully offset by an increase in the valuation allowance. Following adoption, excess tax benefits or tax deficit is reflected as income tax benefit or expense in the year the tax impact is generated. Approximately $96 thousand of tax deficit was recorded as income tax expense in 2017. Prior to the adoption of ASU 2016-09, these excess tax benefits could only be recognized when the related tax deduction reduces income taxes payable and the benefit would be reflected as a credit to additional paid-in capital if realized.The amounts recorded as deferred tax assets as of December 31, 2017 and 2016 represent the amount of tax benefits of existing deductible temporary differences and carryforwards that are more likely than not to be realized through the generation of sufficient future taxable income within the carryforward period. Significant management judgment is required in determining any valuation allowance recorded against deferred tax assets and liabilities. During the year ended December 31, 2015, the Company determined that it was more likely than not that its U.S. deferred tax assets would not be realized and therefore recorded a net increase to the valuation allowance of $16.4 million to offset U.S. deferred tax assets net of deferred tax liabilities except for deferred tax liabilities associated with certain indefinite-lived intangible assets. The Company’s judgment was based on consideration of all available evidence. At December 31, 2017 and 2016, the Company continues to maintain a valuation allowance against substantially all net U.S. deferred tax assets, exclusive of deferred tax liabilities associated with certain indefinite-lived intangible assets. During the year ended December 31, 2017, the Company determined that it was more likely than not that deferred tax assets of certain foreign subsidiaries would not be realized and therefore recorded a valuation allowance of $0.5 million on net deferred tax assets.On December 22, 2017, tax reform legislation known as the Tax Cuts and Jobs Act (the Tax Act) was signed into law. The Tax Act makes broad and complex changes to the U.S. Internal Revenue Code, including the reduction of the corporate income tax rate from 35% to 21% and the implementation of a modified territorial tax system; the latter includes a one-time transition tax on previously unremitted earnings of foreign subsidiaries. Recent SEC guidance under Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (SAB 118) provides for a measurement-period approach for the recording of income tax effects related to tax reform for which the accounting is incomplete. The accounting for the impact of the Tax Act is incomplete, however the Company has recorded provisional estimates for the impact of changes related to the revaluation of deferred taxes, the impact of the mandatory repatriation of foreign earnings after electing the utilization of existing tax attributes, and for the reduction in valuation allowance on net federal deferred tax assets. Since these provisions were based on estimates, the Company will continue to measure the impact of these areas and record any changes in subsequent quarters when information and guidance become available. Those areas include the analysis of various elections available including the transition tax, state-tax impact and adoption by the various states, completion of foreign earnings and profits calculations and additional guidance from the Treasury on various provisions under the new law.Other law changes implemented by the Act such as changes to the calculation for Section 162(m) executive compensation deduction, interest deduction limitation and Global Intangible Low Taxed Income (GILTI), and others will not have any impact on the Company until the year ended December 31, 2018. The Company will continue to monitor guidance regarding these changes for how it will impact the financial statements in later periods.At December 31, 2017, the Company had federal net operating loss carryforwards of $14.4 million, which begin to expire in 2021 and state net operating loss carryforwards of $8.6 million, which begin to expire in 2018. Approximately $8.0 million of federal net operating loss carryforwards are expected to be utilized during 2017 to offset the transition impact. The Company also had research and development tax credit carryforwards of $1.7 million which begin to expire in 2020. The Company had $0.4 million of alternative minimum tax credit carryforwards which are not subject to expiration and become refundable under the Tax Act beginning in 2018 subject to sequestration. In addition, the Company had a total of $1.1 million of state investment tax credit carryforwards, research and development tax credit carryforwards, and EZ credit carryforwards, which begin to expire in 2018. Approximately $3.3 million of net operating losses are subject to an annual limitation of $0.7 million imposed by change in ownership provisions of Section 382 of the Internal Revenue Code. As mentioned above, these net operating loss and credit carryforwards have full valuation allowances set up against them.F-26Undistributed earnings of the Company’s foreign subsidiaries amounted to approximately $49.2 million, $48.6 million, and $48.7 million at December 31, 2017, 2016 and 2015, respectively. As of December 31, 2017, the Company changed its indefinite reinvestment assertion to provide that all foreign earnings above the level required for local operating expenses would be repatriated to the U.S. in tax years after 2017. Prior to 2017, this modified assertion only applied to the Company’s subsidiaries in France and Canada. At December 31, 2017, as the Company was considering a potential U.S. acquisition, the Company changed its assertion and it was anticipated that U.S. needs would require repatriation of all foreign subsidiaries’ earnings rather than just France and Canada. As a result of the Tax Act, all prior unremitted earnings are deemed paid and included in the current provision under the one-time repatriation tax calculation. Therefore, as a result of the change in this assertion, only $38 thousand of additional withholding has been accrued as of December 31, 2017.In 2016, the Company recorded a tax reserve in the amount of $59 thousand related to the disposition of a foreign subsidiary. Additionally in 2016, the Company recorded a reserve for $62 thousand related to issues raised in an ongoing German income tax audit. In 2017, the Company recorded a $21 thousand adjustment to the reserve related to the disposition of a foreign subsidiary. Also in 2017, the German income tax audit was settled for $30 thousand and $32 thousand of the remaining reserve was reversed. A reconciliation of uncertain tax liabilities is as follows: (in thousands) Balance at December 31, 2015 $ 285 Additions based on current year tax positions 59 Additions based on tax positions of prior years 62 Balance at December 31, 2016 406 Decreases based on tax positions of prior years (53 ) Settlements (30 ) Balance at December 31, 2017 $ 323 At December 31, 2017 and 2016 the amount of unrecognized tax benefits that would affect the Company’s effective tax rate was $0.3 million and $0.4 million, respectively. The Company classifies interest and penalties related to unrecognized tax benefits as a component of income tax expense. For the years ended December 31, 2017general and 2016, respectively, interest recognizedadministrative expenses, and all inventory-related charges are included in the consolidated statementcost of operations was immaterial, and there were no penalties recognized.revenues.The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction, and various states and foreign jurisdictions. With few exceptions, the Company is no longer subject to income tax examinations by tax authorities in foreign jurisdictions for years before 2013. In the U.S., the Company's net operating loss and tax credit carryforward amounts remain subject to federal and state examination for tax years starting in 2000 as a result of tax losses incurred in prior years. There are currently no pending federal or state tax examinations. The Company is subject to audits by various taxing jurisdictions. Additional reserves are established when necessary. No ongoing audits are expected to have a material impact.17.profit sharingvarious qualified employee retirement savings plans and makes discretionary contributions to match a certain portion of employee contributions. The Company contributed $1.1 million to these plans for its U.S. employees, which includes employee savings plans established under Section 401(k)each of the U.S. Internal Revenue Code (the 401(k) Plans). The 401(k) Plans cover substantially all full-time employees who meet certain eligibility requirements. Contributions to the profit sharing retirement plans are at the discretion of management. For the years ended December 31, 2017, 2016 2023 and 2015, the Company contributed approximately $0.6 million, $0.6 million and $0.5 million, respectively, to the 401(k) Plans.2022.contributory, defined benefit or defined contribution pension plans for substantially all of its employees. Thesetwo defined benefit pension plans have beenfor its employees. In 2014, these defined benefit pension plans were closed to new employees, since 2014, as well as closed to the future accrual of benefits for existing employees. The provisions of FASB ASC 715-20 require thatCompany recognizes the funded status of the Company’s pension plans be recognizedas an asset or liability in itsthe consolidated balance sheet. FASB ASC 715-20 does not changesheets. The funded status equals the measurement or income statement recognitiondifference between the fair value of these plans, although it does require that planthe plan’s assets and their benefit obligations be measured as of the balance sheet date. The Companyand has historically measured the plan assets and benefit obligationseach year as of December 31. The Company records net period benefit expense (credit) as a component of other expense in the balance sheet date.Consolidated Statement of Operations.F-27definednet period benefit pension expense (credit) were as follows: Year Ended December 31, 2017 2016 2015 (in thousands) Components of net periodic benefit cost: Interest cost $ 524 $ 632 $ 711 $ 670 $ 371 Expected return on plan assets (663 ) (683 ) (668 ) (788 ) (818 ) Net amortization loss 362 304 306 328 27 Net periodic benefit cost $ 223 $ 253 $ 349 $ 210 $ (420 ) $ 15,576 $ 27,252 351 (9,098 ) 622 619 (563 ) (592 ) 954 (2,605 ) $ 16,940 $ 15,576 $ 13,263 $ 22,562 665 371 479 (6,912 ) (563 ) (592 ) 819 (2,166 ) $ 14,663 $ 13,263 $ 16,940 $ 15,576 14,663 13,263 $ 2,277 $ 2,313 The measurement date is December 31 for these plans. The funded status of the Company’s defined benefit pension plans and the amount recognizedChanges in the consolidated balance sheets at December 31, 2017actuarial loss (gain) disclosed above are primarily the result of changes in the discount rate and 2016 is as follows:inflation assumptions due to underlying market conditions. December 31, 2017 2016 (in thousands) Change in benefit obligation: Balance at beginning of year $ 19,214 $ 18,582 Interest cost 524 632 Actuarial loss 26 4,636 Benefits paid (514 ) (982 ) Currency translation adjustment 1,876 (3,654 ) Balance at end of year $ 21,126 $ 19,214 December 31, 2017 2016 (in thousands) Change in fair value of plan assets: Balance at beginning of year $ 16,252 $ 15,767 Actual return on plan assets 1,871 3,868 Employer contributions 689 694 Benefits paid (514 ) (982 ) Currency translation adjustment 1,674 (3,095 ) Balance at end of year $ 19,972 $ 16,252 December 31, 2017 2016 (in thousands) Change in benefit obligation: Funded status $ (1,154 ) $ (2,962 ) Unrecognized net loss N/A N/A Net amount recognized $ (1,154 ) $ (2,962 ) The accumulated benefit obligation for all defined benefit pension plans was $21.1 million and $19.2 million at December 31, 2017 and 2016, respectively.F-28 December 31, 2017 2016 (in thousands) Deferred income tax assets $ 196 $ 504 Other long term liabilities (1,154 ) (2,962 ) Net amount recognized $ (958 ) $ (2,458 ) The amounts recognized in accumulated other comprehensive loss, net of tax consist of: December 31, 2017 2016 (in thousands) Underfunded status of pension plans $ (958 ) $ (2,458 ) Net amount recognized $ (958 ) $ (2,458 ) $ 2,277 $ 2,313 5,909 5,326 Year Ended December 31, 2017 2016 2015 Discount rate 2.43 % 2.62 % 3.57 % 4.6 % 5.0 % Expected return on assets 3.86 % 4.68 % 4.43 % 5.3 % 5.0 % The Company uses the iBoxx AA 15yr+ index, which matches the average duration of its pension plan liability of approximately 15 years. With the current base of assets in the pension plans, a one percent increase/decrease in the discount rate assumption would decrease/increase annual pension expense by approximately $12,000.2017, 2023, the Company’s actual asset mix approximated its target mix. Differences between actual and expected returns are recognized in the calculation of net periodic pension (income)/cost over the average remaining expected future working lifetime, which is approximately 157 years offor active plan participants. With the current base of assets, a one percent increase/decrease in the asset return assumption would decrease/increase annual pension expense by approximately $200,000. and asset allocations of the Company’s pension benefits as of December 31, 2017 2023 and 2016 measurement dates2022, were as follows: December 31, 2017 2016 (in thousands) Asset category: $ 11,761 69 % $ 11,714 75 % Equity securities $ 10,774 54 % $ 8,577 53 % 3,567 21 % 3,507 23 % Debt securities 3,204 16 % 7,447 46 % Liability driven investment funds 4,685 24 % - 0 % Cash and cash equivalents 856 4 % 228 1 % 304 2 % 185 1 % Other 453 2 % - 0 % 1,308 8 % 170 1 % Total $ 19,972 100 % $ 16,252 100 % $ 16,940 100 % $ 15,576 100 % F-29Financial reporting standards define a fair value hierarchy that consists of three levels. The fair values of the plan assets by fair value hierarchy level as of December 31, 2017 and 2016 is as follows: December 31, 2017 2016 (in thousands) Quoted Prices in Active Markets for Identical Assets (Level 1) $ 856 $ 228 $ 304 $ 185 Significant Other Observable Inputs (Level 2) 19,116 16,024 16,636 15,391 Significant Other Unobservable Inputs (Level 3) - - - - Total $ 19,972 $ 16,252 $ 16,940 $ 15,576 plans at December 31, 2017.plans. The Level 2 assets primarily consist of investments in private investment funds that are valued using the net asset values provided by the trust or fund, including an insurance contract. Although these funds are not traded in an active market with quoted prices, the investments underlying the net asset value are based on quoted prices.$0.7$0.6 million to its pension plans during 2018.$0.5$0.9 million in 2018, $0.6 million in 2019, $0.6 million in 2020, $0.6 million in 2021 and2024, $0.7 million in 2022.2025, $0.8 million in 2026, $1.0 million in 2027 and $0.8 million in 2028. The expected benefits to be paid in the five years from 2023—20272029 to 2033 are $4.2$5.0 million. The expected benefits are based on the same assumptions used to measure the Company’s benefit obligationobligations at December 31, 2017.2023.18.Commitments and Contingent LiabilitiesFrom time to time, the Company may be involved in various claims and legal proceedings arising in the ordinary course of business. The Company is not currently a party to any such material claims or proceedings.19.Capital StockCommon StockOn February 5, 2008, the Company’s Board of Directors adopted a Shareholder Rights Planhas noncancelable operating leases for office space, manufacturing facilities, warehouse space, automobiles and declared a dividend distribution of one preferred stock purchase right for each outstanding share of the Company’s common stock to shareholders of record as of the close of business on February 6, 2008. Initially, these rights would not be exercisable and would trade with the shares of the Company’s common stock. Under the Shareholder Rights Plan, the rights generally would become exercisable if a person became an “acquiring person” by acquiring 20% or more of the common stock of the Company or if a person commences a tender offer that could result in that person owning 20% or more of the common stock of the Company. If a person became an acquiring person, each holder of a right (other than the acquiring person) would be entitled to purchase,equipment expiring at the then-current exercise price, such number of shares of preferred stock which are equivalent to shares of the Company’s common stock having a value of twice the exercise price of the right. If the Company were acquired in a merger or other business combination transaction after any such event, each holder of a right would then be entitled to purchase, at the then-current exercise price, shares of the acquiring company’s common stock having a value of twice the exercise price of the right. The Shareholder Rights Plan expired in accordance with its terms on the close of business on February 6, 2018.Preferred Stockvarious dates through 2030. $ 2,013 $ 1,971 199 233 (102 ) (102 ) $ 2,110 $ 2,102 Boardoperating leases was as follows: $ 4,773 $ 5,816 1,416 2,135 4,794 5,282 $ 6,210 $ 7,417 5.7 6.2 9.5 % 9.4 % authority to issue up to 5.0 million sharesCompany’s operating leases was as follows: $ 2,367 $ 2,347 293 295 preferred stock one year at December 31, 2023, are as follows: 1,938 1,166 1,060 1,047 1,057 1,926 8,194 (1,984 ) $ 6,210 to determine2022, the price privileges and other termsCompany’s borrowings were comprised of the shares. following: $ 30,723 $ 34,814 6,400 12,850 (560 ) (840 ) 36,563 46,824 (6,139 ) (4,091 ) 280 280 $ 30,704 $ 43,013 Boardaggregate amounts of Directors may exercise this authority without any further approvaldebt maturities are as follows: $ 6,139 30,984 $ 37,123 stockholders. As$40.0 million and a $25.0 million senior revolving credit facility (including a $10.0 million sub-facility for the issuance of letters of credit and a $10.0 million swingline loan sub-facility) (collectively, the “Credit Facility”). The Company’s obligations under the Credit Agreement are guaranteed by certain of the Company’s direct, domestic wholly-owned subsidiaries; none of the Company’s direct or indirect foreign subsidiaries has guaranteed the Credit Facility. The Company’s obligations under the Credit Agreement are secured by substantially all of the assets of Harvard Bioscience, Inc. and each guarantor (including all or a portion of the equity interests in certain of the Company’s domestic and foreign subsidiaries). The Credit Facility matures on December 22, 2025. Issuance costs of $1.4 million are amortized over the contractual term to maturity date on a straight-line basis, which approximates the effective interest method. Available and unused borrowing capacity under the revolving line of credit was $10.8 million as of December 31, 2017,2023, based on the Credit Agreement, as amended pursuant to the April 2022 Amendment and November 2022 Amendment as described below. Total revolver borrowing capacity is limited by the consolidated net leverage ratio as defined under the amended Credit Agreement.had no preferred stock issuedbear interest at either (i) a rate per annum based on the Secured Overnight Financing Rate (“SOFR”) for an interest period of one, two, three or outstanding.six months, plus an applicable interest rate margin determined as provided in the Credit Agreement, as amended (a “SOFR Loan”), or (ii) an alternative base rate plus an applicable interest rate margin, each as determined as provided in the Credit Agreement (an “ABR Loan”). SOFR interest under the Credit Agreement is subject to applicable market rates and a floor of 0.50%. The alternative base rate is based on the Citizens Bank prime rate or the federal funds effective rate of the Federal Reserve Bank of New York and is subject to a floor of 1.0%. The applicable interest rate margin varies from 2.0% per annum to 3.25% per annum for SOFR Loans, and from 1.5% per annum to 3.0% per annum for ABR Loans, in each case depending on the Company’s consolidated leverage ratio and is determined in accordance with a pricing grid set forth in the Credit Agreement. Interest on SOFR Loans is payable in arrears on the last day of each applicable interest period, and interest on ABR Loans is payable in arrears at the end of each calendar quarter. There are no prepayment penalties in the event the Company elects to prepay and terminate the Credit Facility prior to its scheduled maturity date, subject to SOFR Loan breakage and redeployment costs in certain circumstances.Employee Stock Purchase Plan (asThe effective interest rate on the Company’s borrowings for the years ended December 31, 2023 and 2022, was 8.1% and 5.0%, respectively. The weighted average interest rate as of December 31, 2023, inclusive of the effect of the Company’s interest rate swaps, was 7.4%. The carrying value of the debt approximates fair value because the interest rate under the obligation approximates market rates of interest available to the Company for similar instruments.“ESPP”)Company. The negative covenants limit the ability of the Company, among other things, to incur debt, incur liens, make investments, sell assets and pay dividends on its capital stock. The financial covenants include a maximum consolidated net leverage ratio and a minimum consolidated fixed charge coverage ratio. The Credit Agreement, as amended, also includes customary events of default.2000, April 2022, the Company approvedentered into an amendment to the ESPP. Under this ESPP, participating employees can authorize Credit Agreement (the “April 2022 Amendment”) which modified, among other things, the financial covenant relating to the consolidated net leverage ratio, and provided consent for the HRGN Settlement (as defined in Note 16). In November 2022, the Company entered into a subsequent amendment to withholdthe Credit Agreement which modified, among other things, the financial covenant relating to the consolidated net leverage ratio, and the definition of Consolidated EBITDA used in the calculation of certain financial covenants (the “November 2022 Amendment”). The Company was in compliance with the covenants of the Credit Agreement, as amended, as of December 31, 2023.their base pay during consecutive six-month payment periods for the purchaseinterest payable under the Credit Agreement into fixed-rate debt at an annual rate of shares4.75%. The swap contract does not impact the additional interest related to the applicable interest rate margin as discussed above in Note 9, Long-Term Debt. The swap contract is considered an effective cash flow hedge, and as a result, net gains or losses are reported as a component of OCI in the Company’s common stock. Atconsolidated financial statements and are reclassified as net income when the conclusion ofunderlying hedged interest impacts earnings. An assessment is performed quarterly to evaluate the period, participating employees can purchase shares ofongoing hedge effectiveness.Company’s common stock at 85% of the lower of thenotional amount and fair market value of the Company’s derivative instrument as of December 31, 2023: $ 27,375 $ (199 ) $ 199 120 $ 3,511 $ - $ - $ 3,511 - (199 ) - (199 ) beginning or endreporting date. The fair value of the period. Shares are issued underCompany’s interest rate swap agreements was based on SOFR-yield curves at the ESPPreporting date.six-month periods ending June 30 and December 31. Under this plan, 1,050,000 shares of common stock are authorized for issuance of which 801,454 shares were issued as of years ended December 31, 2017.2023 and 2022, is allocated as follows: $ 308 $ 121 746 557 3,560 3,487 386 246 $ 5,000 $ 4,411 2017, 2016 2023 and 2015,2022, the Company issued 76,215 shares, 81,228 shares and 58,823 shares, respectively, of the Company’s common stock under the ESPP.did not capitalize any stock-based compensation.F-30Third Amended and Restated 2000 Stock Option andEquity Incentive Plan (as amended, the “Third A&R Plan”)PlansThe Second Amendment to the Third A&R Plan (the “Amendment”) was adopted by the Board of Directors on April 3, 2015. Such Amendment was approved by the stockholders atDuring 2021, the Company’s 2015 Annual Meetingboard of Stockholders. Pursuantdirectors and stockholders adopted the 2021 Incentive Plan which authorized additional shares available for grants to officers, employees, non-employee directors and other key persons of the Amendment, the aggregate numberCompany and its subsidiaries. As of December 31, 2023, there were approximately 3.1 million shares authorizedavailable for issuance under the Third A&R Plan was increased by 2,500,000 shares to 17,508,929.2021 Incentive Plan.Through December 31, 2017, 2016 and 2015, incentive stock options to purchase 10,218,057 shares and non-qualified stock options to purchase 13,369,074, 13,131,374 and 13,088,374 shares, respectively, had been granted to employees and directors under the Stock Plans. Generally, both the incentive stock options and non-qualified stock options become fully vested over a range of one to four-year periods.RSU’s”RSUs”)On August 3, 2015, the Compensation Committee of the Board of Directors of the Company approved and granted deferred stock awards of Market Condition RSU’s to certain members of the Company’s management team under the Third A&R Plan.team. The vesting of thesethe Market Condition RSU’sRSUs is cliff-based and linked to the achievement of a relative total shareholder return (“TSR”) of the Company’s common stock measured from August 3, 2015 to the earlier of (i) August 3, 2018the measurement period as set out in the award agreement or (ii) upon a change of control (measured relative to the Nasdaq Biotechnology or Russell 30002000 index and based on the 20-daya 20-day trading average price before each such date). As of price) and is subject to a one-year holding period after vesting.2017, 2023, the target numberTSR of these restrictedthe Company’s common stock units that may be earned is 164,127 shares;relative to the maximum amount isapplicable index resulted in achieving 100% of the target. Market Condition RSUs outstanding as of December 31, 2023 remain subject to a TSR measurement which can result in vesting rates ranging from 0% to 150% of the target number. 56.8 % 62.6 % 4.6 % 2.1 % 41.7 % 41.5 % - % - % 14.1 % 11.7 % The Company accounts for stock-based payment awards in accordance with the provisions of FASB ASC 718, which requires it to recognize compensation expense for all stock-based payment awards made to employees and directors including stock options, restricted stock units, Market Condition RSU’s and employee stock purchases related to the ESPP.FASB ASC 718 requires companies to estimate the fair value of stock-based payment awards, except restricted stock units, on the date of grant using an option-pricing model. The value of the award is recognized as expense as it vests over the requisite service periods in the Company’s consolidated statements of operations.The Company adopted ASU 2016-09 as of January 1, 2017. As disclosed in footnote 2, as a result of this adoption, the Company has elected as an accounting policy to account for forfeitures for service based awards as they occur, with no adjustment for estimated forfeitures. The Company recognized as of January 1, 2017, a cumulative effect adjustment of $0.1 million to reduce retained earnings as required under the modified retrospective approach.The Company values stock-based payment awards, except restricted stock units, using the Black-Scholes option-pricing model. The Company values the Market Condition RSU’s using a Monte-Carlo valuation simulation. The determination of fair value of stock-based payment awards on the date of grant using an option-pricing model or Monte-Carlo valuation simulation is affected by its stock price as well as assumptions regarding certain variables. These variables include, but are not limited to its expected stock price volatility over the term of the awards and actual and projected stock option exercise behaviors. The Company records stock compensation expense on a straight-line basis over the requisite service period for all awards granted since the adoption of FASB ASC 718.Earnings per shareBasic earnings per share is based upon net income divided by the number of weighted average common shares outstanding during the period. The calculation of diluted earnings per share assumes conversion of stock options, restricted stock unitsRSU and Market Condition RSU’s into common stock using the treasury method. The weighted average number of shares used to compute basic and diluted earnings per share consists of the following: Year Ended December 31, 2017 2016 2015 Basic 34,753,325 34,211,521 33,592,775 Effect of assumed conversion of employee and director stock options, restricted stock units and Market Condition RSU's - - - Diluted 34,753,325 34,211,521 33,592,775 F-31Excluded from the shares used in calculating the diluted earnings per common share in the above table are options, restricted stock units and Market Condition RSU’s of approximately 5,741,298, 5,351,261 and 5,521,283 shares of common stockRSU activity for the years ended December 31, 2017, 2016 2023 and 2015, respectively,2022, is as the impact of these shares would be anti-dilutive.follows: 1,141,164 $ 3.57 860,155 $ 3.13 918,870 4.64 320,272 5.08 (733,611 ) 4.08 (401,308 ) 2.11 (232,622 ) 4.44 (132,884 ) 4.21 1,093,801 $ 3.94 646,235 $ 4.51 1,350,125 2.87 558,958 2.61 (1,144,065 ) 3.38 (316,210 ) 4.01 (134,865 ) 3.71 (87,138 ) 4.64 1,164,996 $ 3.28 801,845 $ 3.37 General Option InformationThe following is a summary of stock option and the restricted stock unit activity: Stock Options Restricted Stock Units Market Condition RSU's Weighted Stock Average Restricted Market Options Exercise Stock Units Grant Date Condition RSU's Grant Date Outstanding Price Outstanding Fair Value Outstanding Fair Value Balance at December 31, 2014 6,263,112 $ 3.42 306,397 $ 4.30 - $ - Granted 945,000 5.31 254,685 5.56 196,785 4.81 Exercised (1,772,062 ) 3.04 - - - - Vested (RSUs) - - (237,188 ) 5.65 - - Cancelled / forfeited (413,864 ) 4.15 (10,335 ) 5.56 (11,247 ) 4.81 Balance at December 31, 2015 5,022,186 3.85 313,559 5.29 185,538 4.81 Granted 43,000 3.10 1,095,190 2.92 - 4.81 Exercised (374,772 ) 2.80 - - - - Vested (RSUs) - - (301,520 ) 4.45 - - Cancelled / forfeited (593,596 ) 3.84 (34,576 ) 3.89 (3,388 ) 4.81 Balance at December 31, 2016 4,096,818 3.94 1,072,653 3.15 182,150 4.81 Granted 237,700 3.24 1,298,371 2.49 - - Exercised (143,391 ) 2.48 - - - - Vested (RSUs) - - (488,570 ) 3.08 - - Cancelled / forfeited (410,883 ) 3.93 (85,527 ) 3.05 (18,023 ) 4.81 Balance at December 31, 2017 3,780,244 $ 3.95 1,796,927 $ 2.69 164,127 $ 4.81 The Company’s policy is to issue stock available from its registered but unissued stock pool through its transfer agent to satisfy stock option exercises and vesting of the restricted stock units.The following table summarizes information concerning currently outstanding and exercisable options as of December 31, 2017 (Aggregate Intrinsic Value, in thousands): Options Outstanding Options Exercisable Weighted Weighted Average Weighted Average Weighted Range of Shares Remaining Average Aggregate Shares Remaining Average Aggregate Exercise Outstanding at Contractual Life Exercise Intrinsic Exercisable at Contractual Life Exercise Intrinsic Price Dec. 31, 2017 in Years Price Value Dec. 31, 2017 in Years Price Value $2.02-2.37 415,024 1.22 $ 2.20 $ 457 415,024 1.22 $ 2.20 $ 457 2.38-2.94 357,095 4.78 2.58 257 315,845 4.25 2.57 231 2.95-3.59 321,239 7.89 3.30 - 79,039 2.93 3.35 - 3.60-3.95 277,429 5.47 3.65 - 273,679 5.46 3.65 - 3.96-4.11 252,282 3.49 4.04 - 250,782 3.47 4.04 - 4.12-4.17 607,875 6.41 4.12 - 452,750 6.41 4.12 - 4.18-4.26 71,500 6.66 4.21 - 55,500 6.63 4.21 - 4.27-4.41 750,000 5.88 4.31 - 750,000 5.88 4.31 - 4.42-5.51 462,300 7.14 5.37 - 273,175 7.11 5.31 - 5.52-5.63 265,500 7.41 5.56 - 132,750 7.41 5.56 - $2.02-5.63 3,780,244 5.61 $ 3.95 $ 714 2,998,544 5.02 $ 3.84 $ 688 F-32 1,404,816 $ 3.10 (40,267 ) 2.64 (125,773 ) 2.77 1,238,776 $ 3.15 (213,644 ) 2.38 (101,065 ) 2.71 924,067 $ 3.37 3.4 $ 1,836 $3.30$5.35 as of December 31, 2017, 2023, which would have been received by the option holders had all option holders exercised their options as of that date. The aggregate intrinsic value of options exercised was $0.6 million and $0.1 million for the years ended December 31, 2017 2023 and 2016 was approximately $0.1 million,2022, respectively. The aggregate intrinsic value of options exercised for the year ended December 31, 2015 was $0.8 million. The total number of in-the-money options that were exercisable as of December 31, 2017 was 824,869.For the year ended December 31, 2017, the total compensation costs related to unvested awards not yet recognized is $4.0 million and the weighted average period over which it is expected to be recognized is 2.18 years.Valuation and Expense Information under Stock-Based-Payment AccountingEmployee Stock Purchase Plan (Stock-based compensation expense related to stock options, restricted stock units, Market Condition RSU’s and the employee stock purchase plan for the years ended December 31, 2017, 2016 and 2015 was allocated as follows: Year Ended December 31, 2017 2016 2015 (in thousands) Cost of revenues $ 63 $ 60 $ 70 Sales and marketing 595 546 418 General and administrative 2,703 2,780 2,170 Research and development 139 111 97 Total stock-based compensation $ 3,500 $ 3,497 $ 2,755 On April 28, 2015, the Company announced the appointment of James Green to its Board of Directors and the retirement of Robert Dishman from its Board of Directors. As part of Dr. Dishman’s retirement, the Company (i) awarded an unrestricted stock award to Dr. Dishman on April 28, 2015, having an aggregate cash value of $80,000, (ii) accelerated the vesting of all outstanding stock options and restricted stock units that were unvested as of April 28, 2015, and (iii) extended the post-retirement option exercise period for each option to the earlier to occur of the respective scheduled expiration date or April 28, 2016. Total compensation expense recognized as part of general and administrative expenses for the year ended December 31, 2015, as part of these modifications, was approximately $0.1 million.“ESPP”)did not capitalize any stock-based compensation.has an employee stock purchase plan under which eligible employees may purchase a limited number of shares of common stock at a discount of up to 15% of the market value of such stock at pre-determined and plan-defined dates. There were 0.1 million and 0.2 million shares issued under the ESPP during the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, there were 0.3 million shares available for issuance under the ESPP. The weighted-average estimated fair value per shareF-33The weighted average fair value of the Market Condition RSU’s granted under the Third A&R Plan during the year ended December 31, 2015 was $4.81. The following assumptions were used to estimate the fair value, using a Monte-Carlo valuation simulation, of the Market Condition RSU’s granted during the year ended December 31, 2015:Year EndedDecember 31,2015Volatility35.88%Risk-free interest rate0.99%Correlation coefficient0.25%Dividend yield-%Company used historical volatility to calculate the expected volatility asfollowing table represents a disaggregation of December 31, 2017. Historical volatility was determined by calculating the mean reversion of the daily adjusted closing stock price. The risk-free interest rate assumption is based upon observed U.S. Treasury bill interest rates (risk-free) appropriate for the term of the Company’s stock options. The expected holding period of stock options represents the period of time options are expected to be outstanding and were based on historical experience. The vesting period rangesrevenue from one to four years and the contractual life is ten years.Stock-based compensation expense recognized in the consolidated statements of operationscontracts with customers for the years ended December 31, 2017, 2016 2023 and 2015 is recognized on awards as they vest and was reduced for annualized estimated forfeitures of 0.00%, 8.41% and 8.06%, respectively. As previously noted, the Company adopted ASU 2016-09 as of January 1, 2017, and accordingly recorded a cumulative effect adjustment for this adoption. As of that date onward, the Company has accounted for forfeitures as they occur. Prior to the adoption of ASU 2016-09, stock-based-payment accounting required forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.2022:20.Related Party Transactions $ 105,716 $ 108,165 6,534 5,170 $ 112,250 $ 113,335 As partRevenues by timing of the acquisitions of MCS and Triangle BioSystems, Inc. (TBSI), the Company signed lease agreements with the former owners of the acquired companies. The principals of such former owners were employees of the Companyrecognition are as of December 31, 2017. Pursuant to a lease agreement, the Company incurred rent expense of approximately $0.2 million to the former owners of MCS for each of the years ended December 31, 2017 and 2016 and 2015, respectively. Pursuant to a lease agreement, the Company incurred rent expense of approximately $42,000 to the former owner of TBSI for each of the years ended December 31, 2017 and 2016 and 2015, respectively.follows:21.Segment and Related Information $ 108,558 $ 111,927 3,692 1,408 $ 112,250 $ 113,335 Operating segmentsRevenues by geographic destination are determined by products and services provided by each segment, internal organization structure, the manner in which operations are managed, criteria used by the Chief Operating Decision Maker, or CODM, to assess the segment performance, as well as resource allocation and the availability of discrete financial information. The Company has one operating segment. As such, segment results and consolidated results are the same.follows: $ 48,205 $ 49,912 32,801 30,687 18,488 16,393 12,756 16,343 $ 112,250 $ 113,335 summarize selected financial informationprovide details of contract liabilities as of the periods indicated: $ 2,849 $ 1,530 $ 1,319 1,530 $ 1,976 $ (446 ) 1,659 1,840 (181 ) 1,840 2,290 (450 ) $ 4,508 $ 3,370 $ 1,138 3,370 $ 4,266 $ (896 ) continuing operations by geographic location:contract liabilities are primarily due to the timing of receipt of payments under service and warranty contracts. During the years ended December 31, 2023 and 2022, the Company recognized revenue of $2.1 million and $2.5 million from contract liabilities existing at December 31, 2022 and 2021, respectively.Revenues originating from the following geographic areas consist of: Year Ended December 31, 2017 2016 2015 (in thousands) United States $ 66,198 $ 65,179 $ 64,766 Germany 11,162 13,477 15,755 United Kingdom 15,042 16,421 18,051 Rest of the world 9,480 9,444 10,092 Total revenues $ 101,882 $ 104,521 $ 108,664 F-34Long-lived assets by geographic area consist ofActivity in the following: December 31, 2017 2016 (in thousands) United States $ 10,127 $ 12,004 Germany 5,793 5,504 United Kingdom 966 918 Rest of the world 3,214 3,341 Total long-lived assets (1) $ 20,100 $ 21,767 (1) Total long-lived assets includes property, plant and equipment, net and amortizable intangible assets, net.Net assets by geographic area consist of the following: December 31, 2017 2016 (in thousands) United States $ 30,698 $ 22,312 Germany 18,354 18,512 United Kingdom 14,376 17,908 Rest of the world 17,472 18,866 Total net assets $ 80,900 $ 77,598 22.Allowance for Doubtful AccountsAllowanceprovision for doubtful accounts is basedexpected losses on the Company’s assessment of the collectability of customer accounts. A rollforward of allowance for doubtful accountsreceivables is as follows: Charged (credited) to Beginning Bad Debt Charged to Ending Balance Expense (Recoveries) Allowance (1) Other (2) Balance (in thousands) Year ended December 31, 2015 $ 328 (4 ) 4 (18 ) $ 310 Year ended December 31, 2016 $ 310 309 11 (19 ) $ 611 Year ended December 31, 2017 $ 611 (109 ) (68 ) 20 $ 454 $ 191 $ 136 29 62 (60 ) (7 ) $ 160 $ 191 (1) Consists of accounts written off, net of recoveries.(2) ConsistsNo customer accounted for more than 10% of the effectrevenues for the years ended December 31, 2023 and 2022, or for more than 10% of currency translation.net accounts receivable at December 31, 2023 and 2022.23.WarrantiesWarranties are estimated and accrued atActivity in the time revenues are recorded. A rollforward of the Company’s product warranty accrual is as follows: Beginning Additions/ Ending Balance Payments (Credits) Balance (in thousands) Year ended December 31, 2015 $ 252 (81 ) (24 ) $ 147 Year ended December 31, 2016 $ 147 (97 ) 143 $ 193 Year ended December 31, 2017 $ 193 (7 ) 60 $ 246 $ 268 $ 240 381 408 (313 ) (380 ) $ 336 $ 268 $ 570 $ 641 61 194 631 835 132 (468 ) 96 (30 ) 228 (498 ) $ 859 $ 337 F-35 $ (537 ) $ (1,927 ) (89 ) 375 324 346 537 552 (19 ) (295 ) (329 ) 69 (51 ) 492 1,140 431 239 688 (171 ) (232 ) 631 (102 ) (816 ) (60 ) $ 859 $ 337 $ (2,951 ) $ (9,099 ) 395 (80 ) $ (2,556 ) $ (9,179 ) $ 1,489 $ 1,696 11,550 14,883 3,908 2,000 1,435 - 1,317 1,538 818 621 670 675 386 881 934 726 22,507 23,020 (15,222 ) (14,506 ) $ 7,285 $ 8,514 $ 1,964 $ 1,914 3,733 4,875 959 1,148 569 579 400 255 7,625 8,771 $ (340 ) $ (257 ) $ 436 $ 333 (776 ) (590 ) $ (340 ) $ (257 ) $ 1,332 534 (34 ) 237 (86 ) 1,983 13 57 245 (76 ) $ 2,222 24.Quarterly Financial Information (unaudited)Statement of Operations Data: First Second Third Fourth Fiscal 2017 Quarter Quarter Quarter Quarter Year (in thousands, except per share data) Revenues $ 24,156 $ 25,213 $ 25,050 $ 27,463 $ 101,882 Cost of revenues 12,657 13,926 13,411 14,291 54,285 Gross profit 11,499 11,287 11,639 13,172 47,597 Total operating expenses 12,138 11,286 11,775 12,499 47,698 Operating (loss) income (639 ) 1 (136 ) 673 (101 ) Other (expense) (404 ) (463 ) (274 ) (846 ) (1,987 ) Loss before income taxes (1,043 ) (462 ) (410 ) (173 ) (2,088 ) Income tax expense (benefit) 23 (81 ) 7 (1,172 ) (1,223 ) Net (loss) income $ (1,066 ) $ (381 ) $ (417 ) $ 999 $ (865 ) Loss per share: Basic (loss) earnings per common share $ (0.03 ) $ (0.01 ) $ (0.01 ) $ 0.03 $ (0.02 ) Diluted (loss) earnings per common share $ (0.03 ) $ (0.01 ) $ (0.01 ) $ 0.03 $ (0.02 ) F-36StatementThe Company is involved in various other claims and legal proceedings arising in the ordinary course of Operations Data: First Second Third Fourth Fiscal 2016 Quarter Quarter Quarter Quarter Year (in thousands, except per share data) Revenues $ 26,963 $ 26,136 $ 25,007 $ 26,415 $ 104,521 Cost of revenues 14,018 14,461 13,317 14,310 56,106 Gross profit 12,945 11,675 11,690 12,105 48,415 Total operating expenses 13,166 12,515 12,503 13,228 51,412 Operating loss (221 ) (840 ) (813 ) (1,123 ) (2,997 ) Other (expense) income, net (222 ) 73 (67 ) 135 (81 ) Loss before income taxes (443 ) (767 ) (880 ) (988 ) (3,078 ) Income tax expense (benefit) 193 (54 ) 758 332 1,229 Net loss $ (636 ) $ (713 ) $ (1,638 ) $ (1,320 ) $ (4,307 ) Loss per share: Basic loss per common share $ (0.02 ) $ (0.02 ) $ (0.05 ) $ (0.04 ) $ (0.13 ) Diluted loss per common share $ (0.02 ) $ (0.02 ) $ (0.05 ) $ (0.04 ) $ (0.13 ) 25.Subsequent EventsDenville TransactionOn January 22, 2018,business. After consultation with legal counsel, the Company sold substantially allhas determined that the assetsultimate disposition of such proceedings is not likely to have a material adverse effect on its wholly owned subsidiary, Denville Scientific, Inc. (Denville), for approximately $20.0 million, which includes a $3.0 million earn-out provision (the Denville Transaction). Uponbusiness, financial condition, results of operations or cash flow. Although unfavorable outcomes in the closing of the transaction,proceedings are possible, the Company received $17.0 million. The remaining $3.0 million represents consideration that is contingenthas not accrued loss contingencies relating to any such matters as they are not considered to be probable and reasonably estimable. If one or more of these matters are resolved in a manner adverse to the Company, the impact on Denville achieving certain performance metrics over a period of two years. Denville is a Charlotte, North Carolina-based life science research consumables distributor. Thethe Company’s business, financial condition, results of operations and financial positioncash flows could be material.Denville have been reportedprior indemnification claims and the unique facts and circumstances involved in each particular agreement. The Company has not recorded any liability for costs related to contingent indemnification obligations as of December 31, 2023.and balance sheeteither as a deduction of the related expense or reported separately in other income. The Company recognizes government assistance that supplements salaries or research activities as a reduction of the related operating expense over the period for all periods presented.which it is intended to compensate. Government assistance that is not directly related to expense reimbursement or relates to costs incurred in a previous fiscal period is recorded as other income.AsFor the years ended December 31, 2023 and 2022, the Company received $0.2 million and $0.7 million, respectively, under government assistance programs. The majority of the assistance was a result of the Company’s initiationGerman subsidiaries participating in programs established to offset the negative impact of plansCOVID-19 on profitability, to sell the operations of Denvillesupport employment during the fourth quarterCOVID-19 pandemic, and to offset the costs of 2017, management conducted an evaluation of Denville’s assetsqualifying research and development activities.impairment. Based on this evaluation,the Employee Retention Credit (“ERC”), which consisted of comparing the probable cash flows to the net book valuewas enacted as part of the assets, management concluded thatCoronavirus Aid, Relief, and Economic Security Act of 2020 (“CARES Act”) to provide financial incentives to eligible businesses to retain their workforce through the assets were not impaired.period of financial hardship resulting from the COVID-19 pandemic.AsF-37Termination of Third Amended and Restated Credit AgreementSIGNATURESOn January 22, 2018, in connection with the closing of the Denville Transaction, the Company terminated the Third Amended and Restated Credit Agreement, dated as of May 1, 2017, among the Company, Brown Brothers Harriman & Co. and each of the other lenders party thereto, and Bank of America, as administrative agent. All outstanding amounts under the agreement were repaid in full using a portion of the proceeds of the Denville Transaction. At the time of repayment, there was approximately $11.9 million outstanding.Interest Rate SwapAs a result of terminating the Third Amended and Restated Credit Agreement, the Company unwound its existing swap agreement and received an immaterial amount of proceeds. On February 16, 2018, the Company entered into a new interest rate swap contract with PNC bank with a notional amount of $36.0 million and a termination date of January 31, 2023 in order to hedge the risk of changes in the effective benchmark interest rate (LIBOR) associated with the Financing Agreement (defined below). The swap contract converted specific variable-rate debt into fixed-rate debt and fixed the LIBOR rate associated with a portion of the term loan under the Financing Agreement at 2.72%.Data Sciences International TransactionOn January 31, 2018, the Company acquired all of the issued and outstanding shares of Data Sciences International, Inc. (DSI), a Delaware corporation for approximately $70.0 million. The Company funded the acquisition from its existing cash balances, the remaining proceeds of the Denville Transaction and the proceeds of the Financing Agreement discussed below.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 diversifies the Company’s customer base into the biopharmaceutical and contract research organization markets.The Company is in the process of determining the fair value of the various tangible and intangible assets acquired as a result of this acquisition.Financing AgreementOn January 31, 2018, the Company entered into a financing agreement by and among the Company and certain subsidiaries of the Company parties thereto, as borrowers (collectively, the Borrower), certain subsidiaries of the Company parties thereto, as guarantors, various lenders from time to time party thereto (the Lenders), and Cerberus Business Finance, LLC, as collateral agent and administrative agent for the Lenders (the Financing Agreement).The Financing Agreement provides for senior secured credit facilities (the Senior Secured Credit Facilities) comprised of a $64.0 million term loan and up to a $25.0 million revolving line of credit. The proceeds of the term loan and $4.8 million of advances under the revolving line of credit were used to fund a portion of the DSI acquisition, and to pay fees and expenses related thereto and the closing of the Senior Secured Credit Facilities. In addition, the revolving facility is available for use by the Company and its subsidiaries for general corporate and working capital needs, and other purposes to the extent permitted by the Financing Agreement. The Senior Secured Credit Facilities have a maturity of five years. At the closing date of the Financing Agreement, the Company had approximately $14.5 million of available borrowing capacity under the revolving line of credit.Commencing on March 31, 2018, the outstanding term loans will amortize in equal quarterly installments equal to $0.4 million per quarter on such date and during each of the next three quarters thereafter, $0.6 million per quarter during the next four quarters thereafter and $0.8 million per quarter thereafter, with a balloon payment at maturity.The obligations of the Borrower under the Senior Secured Credit Facilities are unconditionally guaranteed by the Company and certain of the Company’s existing and subsequently acquired or organized subsidiaries. The Senior Secured Credit Facilities and related guarantees are secured on a first-priority basis (subject to certain liens permitted under the Financing Agreement) by a lien on substantially all the tangible and intangible assets of the Borrower and the subsidiary guarantors, including all of the capital stock held by such obligors (subject to a 65% limitation on pledges of capital stock of foreign subsidiaries), subject to certain exceptions.Interest on all loans under the Senior Secured Credit Facilities is paid monthly. Borrowings under the Financing Agreement accrue interest at a per annum rate equal to, at the Borrower’s option, a base rate plus 4.75% or a LIBOR rate plus 6.25%. The loans are also subject to a 1.25% interest rate floor for LIBOR loans and a 4.25% interest rate floor for base rate loans.The Financing Agreement contains customary representations and warranties and affirmative covenants applicable to the Company and its subsidiaries and also contains certain restrictive covenants, including, among others, limitations on the incurrence of additional debt, liens on property, acquisitions and investments, loans and guarantees, mergers, consolidations, liquidations and dissolutions, asset sales, dividends and other payments in respect of the Company’s capital stock, prepayments of certain debt, transactions with affiliates and modifications of organizational documents, material contracts, affiliated practice agreements and certain debt agreements. The Financing Agreement also contains customary events of default.F-38 16, 20187, 2024By: JEFFREY A. DUCHEMINJAMES GREEN Jeffrey A. Duchemin indicated:indicated. /s/ JEFFREY A. DUCHEMINJeffrey A. DucheminChief Executive Officer and Director(Principal Executive Officer)March 16, 2018/s/ ROBERT E. GAGNONRobert E. GagnonChief Financial Officer(Principal Financial Officer and PrincipalAccounting Officer)March 16, 2018 DirectorMarch 16, 2018 JOHN F. KENNEDYJohn F. KennedyDirector16, 20187, 2024 EARL R. LEWISEarl R. LewisDirector16, 20187, 2024 BERTRAND LOYBertrand LoyDirector16, 20187, 2024 /s/ GEORGE UVEGESGeorge UvegesDirectorMarch 16, 2018 DirectorMarch 16, 2018 KATHERINE A. EADEKatherine A. EadeDirector16, 20187, 2024 NumberDescription2.1§Previously filed as an exhibit Company’s Current Report on Form 8-K (filedfiled November 6, 2013)2013, and incorporated by reference theretothereto. 2.2§Share Purchase Agreement between Biochrom Limited, as Buyer, and Multi-Channel Systems Holding GmbH, as Seller, dated as of October 1, 2014Previously filed as an exhibit to the Company’s Current Report on Form 8-K (filed October 1, 2014) and incorporated by reference thereto3(ii)Previously filed as an exhibit Company’s Registration Statement on Form S-1/A (File No. 333-45996) (filed on November 9, 2000) and incorporated by reference theretothereto. 3.1Previously filed as an exhibit Company’s Current Report on Form 8-K (filed on November 1, 2007) and incorporated by reference thereto10.3Previously filedan exhibitAppendix A to the Company’s RegistrationProxy Statement on Form S-1/A (File No. 333-45996) (filed on November 9, 2000)Schedule 14A filed April 7, 2022, and incorporated by reference theretothereto. 10.4Previously filed as an exhibitCompany’s Registration StatementQuarterly Report on Form S-1/A (File No. 333-45996) (filed on October 25, 2000)10-Q filed May 8, 2020, and incorporated by reference thereto10.7 +Trademark License Agreement, dated December 19, 2002, by and between Harvard Bioscience, Inc. and President and Fellows of Harvard College. Previously filed as an exhibitCompany’s QuarterlyAnnual Report on Form 10-Q (filed May 15, 2003)10-K filed March 9, 2023, and incorporated by reference thereto10.8Lease Agreement Between Seven October Hill, LLC and Harvard Bioscience, Inc. dated December 30, 2005.Previously filed as an exhibit to the Company’s Current Report on Form 8-K (filed January 4, 2006) and incorporated by reference thereto 10.9Previously filed as an exhibit Company’s Annual Report on Form 10-K (filedfiled March 16, 2006)2006, and incorporated by reference theretothereto. 10.10Previously filed as an exhibit Company’s Annual Report on Form 10-K (filedfiled March 16, 2006)2006, and incorporated by reference theretothereto. 10.30 #Previously filed as an exhibit Company’s Current Report on Form 8-K (filed July 31, 2014)filed March 6, 2020, and incorporated by reference theretothereto. 10.31Previously filed as an exhibitCompany’s QuarterlyCurrent Report on Form 10-Q (filed August 7, 2014)8-K filed December 23, 2020, and incorporated by reference theretothereto. 10.32 #Previously filed as an exhibitCompany’s QuarterlyCurrent Report on Form 10-Q (filed May 7, 2015)8-K filed December 23, 2020, and incorporated by reference thereto10.33Third Amendment to Second Amended and Restated Credit Agreement and Waiver dated as of April 24, 2015, by and among Harvard Bioscience, Inc. Bank of America, N.A. and Brown Brothers Harriman & Co.Previously filed as an exhibit to the Company’s Quarterly Report on Form 10-Q (filed August 6, 2015) and incorporated by reference thereto 10.34Previously filed as an exhibitCompany’s QuarterlyCurrent Report on Form 10-Q (filed August 6, 2015)8-K filed April 28, 2022, and incorporated by reference theretothereto. 10.35Previously filed as an exhibitCompany’s Quarterly Report on Form 10-Q (filedfiled November 5, 2015)9, 2022, and incorporated by reference theretothereto. 10.36Previously filed as an exhibitCompany’s AnnualCurrent Report on Form 10-K (filed April 29, 2016)8-K filed December 23, 2020, and incorporated by reference theretothereto. 10.37Previously filed as an exhibitCompany’s QuarterlyCurrent Report on Form 10-Q (filed8-K filed May 16, 2016)19, 2021, and incorporated by reference theretothereto. 10.38Previously filed as an exhibitCompany’s QuarterlyAnnual Report on Form 10-Q (filed August 4, 2016)10-K filed March 11, 2022, and incorporated by reference theretothereto. 10.39 #Previously filed as an exhibitCompany’s CurrentAnnual Report on Form 8-K (filed May 27, 2016)10-K filed March 11, 2022, and incorporated by reference theretothereto. 10.40 #Previously filed as an exhibitCompany’s CurrentAnnual Report on Form 8-K (filed May 27, 2016)10-K filed March 11, 2022, and incorporated by reference theretothereto. 10.41 #Previously filed as an exhibit Company’s Current Report on Form 8-K (filed May 27, 2016)filed January 28, 2022, and incorporated by reference theretothereto. 10.42Previously filed as an exhibitCompany’s AnnualCurrent Report on Form 10-K (filed March 17, 2017)8-K filed January 19, 2023, and incorporated by reference theretothereto. *101.INSXBRL Instance Document *Certain portionsdocumentexhibit have been granted confidential treatment by the Securities and Exchange Commission (the Commission).redacted in compliance with Item 601(b)(10) of Regulation S-K.*# to the Separation and Distribution Agreement have been omitted. A copy of any omitted schedule or exhibit will be furnished to the SEC supplementally upon request.