UNITED STATES

SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549

FORM 10-Q

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

For the quarterly period ended ~~September 30, 2021~~March 31, 2022

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

For the transition period ~~from~~~~_____to~~from_____to _____

Commission file number 001-33957

HARVARD BIOSCIENCE, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware 04-3306140

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

Incorporation or organization) Identification No.)

84 October Hill Road, Holliston, Massachusetts 01746

(Address of Principal Executive Offices, including zip code)

(508) 893-8999

(Registrant’s telephone number, including area code)

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

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

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

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

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

~~Large accelerated filer ☐ Accelerated filer ☒~~

~~Non-accelerated filer ☐ Smaller reporting company ☒~~

~~Emerging growth company ☐~~

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

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

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

As of ~~November 1, 2021,~~April 29, 2022, there were ~~40,810,515~~41,241,449 shares of the registrant’s common stock issued and outstanding.

	September 30,			December 31,			March 31,			December 31,
	2021			2020			2022			2021
Assets
Current assets:
Cash and cash equivalents	$	5,548		$	8,317		$	5,433		$	7,821
Accounts receivable, net		18,340			17,766			20,274			21,834
Inventories		25,978			22,262			28,711			27,587
Other current assets		5,820			3,355			5,030			4,341
Total current assets		55,686			51,700			59,448			61,583
Property, plant and equipment, net		3,453			3,960			3,499			3,415
Operating lease right-of-use assets		7,081			7,761			6,605			6,897
Goodwill		57,987			58,590			57,356			57,689
Intangible assets, net		28,941			33,151			25,878			27,385
Other long-term assets		724			1,092			5,258			5,375
Total assets	$	153,872		$	156,254		$	158,044		$	162,344
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt	$	2,470		$	1,721		$	2,720		$	3,235
Current portion of operating lease liabilities		2,127			2,111			2,151			2,142
Accounts payable		5,616			5,972			6,218			4,911
Deferred revenue		3,623			3,771			3,956			4,266
Other current liabilities		9,670			7,478			12,181			10,762
Total current liabilities		23,506			21,053			27,226			25,316
Long-term debt		42,740			46,286
Long-term debt, net								46,244			45,095
Deferred tax liability		1,549			1,899			1,442			1,558
Operating lease liabilities		6,716			7,481			6,159			6,488
Other long-term liabilities		2,474			2,854			598			486
Total liabilities		76,985			79,573			81,669			78,943
Commitments and contingencies - Note 13
Commitments and contingencies - Note 12
Stockholders' equity:
Preferred stock, par value $0.01 per share, 5,000,000 shares authorized		0			0			0			0
Common stock, par value $0.01 per share, 80,000,000 shares authorized; 40,809,018 and 47,152,587 shares issued and 40,809,018 and 39,407,080 shares outstanding, respectively		451			444
Common stock, par value $0.01 per share, 80,000,000 shares authorized: 41,241,449 shares issued and outstanding at March 31, 2022; 41,142,876 shares issued and outstanding at December 31, 2021								452			452
Additional paid-in-capital		225,074			232,357			226,203			225,650
Accumulated deficit		(133,635	)		(132,386	)		(139,554	)		(132,674	)
Accumulated other comprehensive loss		(15,003	)		(13,066	)		(10,726	)		(10,027	)
Treasury stock at cost, -0- and 7,745,507 common shares, respectively		0			(10,668	)
Total stockholders' equity		76,887			76,681			76,375			83,401
Total liabilities and stockholders' equity	$	153,872		$	156,254		$	158,044		$	162,344

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Net loss
$ (170 ) $ (1,098 ) $ (1,249 ) $ (7,195 )
Other comprehensive (loss) income:

Foreign currency translation adjustments
(1,135 ) 1,638 (1,937 ) 681
Derivatives qualifying as hedges, net of tax
0 92 0 34
Other comprehensive (loss) income
(1,135 ) 1,730 (1,937 ) 715
Comprehensive (loss) income
$ (1,305 ) $ 632 $ (3,186 ) $ (6,480 )

	Three Months Ended March 31,
	2022			2021

Net loss	$	(6,880	)	$	(669	)
Other comprehensive loss:
Foreign currency translation adjustments		(699	)		(1,325	)
Comprehensive loss	$	(7,579	)	$	(1,994	)

Accumulated

Three Months Ended

Number

Additional

Other

Total

September 30, 2021

of Shares

Common

Paid-in

Accumulated

Comprehensive

Treasury

Stockholders’

Issued

Stock

Capital

Deficit

Loss

Stock

Equity

Balance at June 30, 2021
40,486 $ 451 $ 225,583 $ (133,465 ) $ (13,868 ) $ 0 $ 78,701
Stock option exercises
38 0 150 0 0 0 150
Vesting of restricted stock units
493 0 0 0 0 0 0
Shares withheld for taxes
(208 ) 0 (1,663 ) 0 0 0 (1,663 )
Stock compensation expense
- 0 1,004 0 0 0 1,004
Net loss
- 0 0 (170 ) 0 0 (170 )
Other comprehensive loss
- 0 0 0 (1,135 ) 0 (1,135 )
Balance at September 30, 2021
40,809 $ 451 $ 225,074 $ (133,635 ) $ (15,003 ) $ 0 $ 76,887

Accumulated

Three Months Ended

Number

Additional

Other

Total

September 30, 2020

of Shares

Common

Paid-in

Accumulated

Comprehensive

Treasury

Stockholders’

Issued

Stock

Capital

Deficit

Loss

Stock

Equity

Balance at June 30, 2020
46,414 $ 438 $ 230,675 $ (130,673 ) $ (13,704 ) $ (10,668 ) $ 76,068
Stock option exercises
3 0 7 0 0 0 7
Stock purchase plan
0 0 1 0 0 0 1
Vesting of restricted stock units
467 0 0 0 0 0 0
Shares withheld for taxes
(164 ) 0 (620 ) 0 0 0 (620 )
Stock compensation expense
- 0 1,079 0 0 0 1,079
Net loss
- 0 0 (1,098 ) 0 0 (1,098 )
Other comprehensive income
- 0 0 0 1,730 0 1,730
Balance at September 30, 2020
46,720 $ 438 $ 231,142 $ (131,771 ) $ (11,974 ) $ (10,668 ) $ 77,167

Accumulated

Nine Months Ended

Number

Additional

Other

Total

September 30, 2021

of Shares

Common

Paid-in

Accumulated

Comprehensive

Treasury

Stockholders’

Issued

Stock

Capital

Deficit

Loss

Stock

Equity

Balance at December 31, 2020
47,153 $ 444 232,357 $ (132,386 ) $ (13,066 ) $ (10,668 ) $ 76,681
Retirement of treasury stock
(7,746 ) 0 (10,668 ) 0 0 10,668 0
Stock option exercises
535 7 2,700 0 0 0 2,707
Stock purchase plan
56 0 202 0 0 0 202
Vesting of restricted stock units
1,196 0 0 0 0 0 0
Shares withheld for taxes
(385 ) 0 (2,653 ) 0 0 0 (2,653 )
Stock compensation expense
- 0 3,136 0 0 0 3,136
Net loss
- 0 0 (1,249 ) 0 0 (1,249 )
Other comprehensive loss
- 0 0 0 (1,937 ) 0 (1,937 )
Balance at September 30, 2021
40,809 $ 451 $ 225,074 $ (133,635 ) $ (15,003 ) $ 0 $ 76,887

Accumulated

Nine Months Ended

Number

Additional

Other

Total

September 30, 2020

of Shares

Common

Paid-in

Accumulated

Comprehensive

Treasury

Stockholders’

Issued

Stock

Capital

Deficit

Loss

Stock

Equity

Balance at December 31, 2019
45,934 $ 438 $ 229,189 $ (124,576 ) $ (12,689 ) $ (10,668 ) $ 81,694
Stock option exercises
10 0 26 0 0 0 26
Stock purchase plan
64 0 168 0 0 0 168
Vesting of restricted stock units
981 0 0 0 0 0 0
Shares withheld for taxes
(269 ) 0 (882 ) 0 0 0 (882 )
Stock compensation expense
- 0 2,641 0 0 0 2,641
Net loss
- 0 0 (7,195 ) 0 0 (7,195 )
Other comprehensive income
- 0 0 0 715 0 715
Balance at September 30, 2020
46,720 $ 438 $ 231,142 $ (131,771 ) $ (11,974 ) $ (10,668 ) $ 77,167

												Accumulated
	*Number*					*Additional*						*Other*						*Total*
	*of Shares*			*Common*		*Paid-in*			*Accumulated*			*Comprehensive*			*Treasury*			*Stockholders*’
	*Issued*			*Stock*		*Capital*			*Deficit*			*Loss*			*Stock*			*Equity*
Balance at December 31, 2021		41,143		$	452	$	225,650		$	(132,674	)	$	(10,027	)	$	0		$	83,401
Stock option exercises		11			0		31			0			0			0			31
Vesting of restricted stock units		151			0		0			0			0			0			0
Shares withheld for taxes		(64	)		0		(501	)		0			0			0			(501	)
Stock-based compensation expense		-			0		1,023			0			0			0			1,023
Net loss		-			0		0			(6,880	)		0			0			(6,880	)
Other comprehensive loss		-			0		0			0			(699	)		0			(699	)
Balance at March 31, 2022		41,241		$	452	$	226,203		$	(139,554	)	$	(10,726	)	$	0		$	76,375

Balance at December 31, 2020		47,153		$	444	$	232,357		$	(132,386	)	$	(13,066	)	$	(10,668	)	$	76,681
Stock option exercises		311			4		1,920			0			0			0			1,924
Vesting of restricted stock units		340			0		0			0			0			0			0
Shares withheld for taxes		(108	)		0		(464	)		0			0			0			(464	)
Stock-based compensation expense		-			0		968			0			0			0			968
Net loss		-			0		0			(669	)		0			0			(669	)
Other comprehensive loss		-			0		0			0			(1,325	)		0			(1,325	)
Balance at March 31, 2021		47,696		$	448	$	234,781		$	(133,055	)	$	(14,391	)	$	(10,668	)	$	77,115

		Nine Months Ended September 30,							Three Months Ended March 31,
		2021			2020				2022			2021
Cash flows from operating activities:
Net loss		$	(1,249	)	$	(7,195	)		$	(6,880	)	$	(669	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation			1,311			1,453				382			445
Amortization of intangible assets			4,388			4,258				1,466			1,464
Amortization of deferred financing costs			210			295				70			70
Stock-based compensation expense			3,136			2,641				1,023			968
Deferred income taxes and other			(498	)		29				(123	)		(53	)
Changes in operating assets and liabilities:
Accounts receivable			(727	)		6,805				1,506			584
Inventories			(4,048	)		(511	)			(1,308	)		(602	)
Other assets			(2,088	)		(878	)			(466	)		(94	)
Accounts payable and accrued expenses			1,901			586				2,729			(245	)
Deferred revenue			(142	)		(380	)			(300	)		(135	)
Other liabilities			(1,049	)		(262	)			(85	)		(696	)
Net cash provided by operating activities			1,145			6,841
Net cash (used in) provided by operating activities										(1,986	)		1,037

Cash flows from investing activities:
Additions to property, plant, and equipment			(837	)		(1,088	)
Additions to property, plant and equipment										(471	)		(151	)
Additions to intangible assets			(150	)		0				0			(150	)
Net cash used in investing activities			(987	)		(1,088	)			(471	)		(301	)

Cash flows from financing activities:
Proceeds from issuance of debt			2,500			9,615
Repayments of debt			(5,500	)		(20,251	)
Borrowing from revolving line of credit										1,500			0
Repayment of revolving line of credit										0			(4,000	)
Repayment of term debt										(936	)		(500	)
Debt issuance costs			(102	)		0				0			(101	)
Proceeds from exercise of stock options			2,909			194				31			1,924
Taxes paid related to net share settlement of equity awards			(2,653	)		(882	)			(501	)		(464	)
Net cash used in financing activities			(2,846	)		(11,324	)
Net cash provided by (used in) financing activities										94			(3,141	)

Effect of exchange rate changes on cash			(81	)		42				(25	)		(97	)
Decrease in cash and cash equivalents			(2,769	)		(5,529	)			(2,388	)		(2,502	)
Cash and cash equivalents at beginning of period			8,317			8,335				7,821			8,317
Cash and cash equivalents at end of period		$	5,548		$	2,806			$	5,433		$	5,815

Supplemental disclosures of cash flow information:	Supplemental disclosures of cash flow information:							Supplemental disclosures of cash flow information:
Cash paid for interest		$	836		$	3,795			$	383		$	458
Cash paid for income taxes, net of refunds		$	506		$	410
Cash paid (received) for income taxes, net of refunds									$	107		$	(113	)

The unaudited consolidated financial statements of Harvard Bioscience, Inc. and its wholly-owned subsidiaries (collectively, ~~Harvard Bioscience~~“Harvard Bioscience” or the ~~Company)~~“Company”) as of ~~September 30, 2021~~March 31, 2022 and for the three ~~and~~ ~~nine~~months ended ~~September 30, 2021~~March 31, 2022 and ~~2020,~~2021, have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission ~~(SEC)~~(the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles ~~(U.S. GAAP)~~(“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations. The December 31, ~~2020,~~2021, consolidated balance sheet was derived from audited financial statements but does not include all disclosures required by U.S. GAAP. However, the Company believes that the disclosures are adequate to make the information presented not misleading. These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020.~~2021.

In the opinion of management, all adjustments, which include normal recurring adjustments necessary to present a fair statement of financial position as of ~~September 30, 2021,~~March 31, 2022, results of operations and comprehensive ~~income (loss)~~loss and cash flows for the three months ~~and~~ ~~nine~~ ~~months~~ ended ~~September 30, 2021~~March 31, 2022 and ~~2020,~~2021, as applicable, have been made. The results of operations for the three months ~~and~~ ~~nine~~ ~~months~~ ended ~~September 30, 2021,~~March 31, 2022, are not necessarily indicative of the operating results for the full fiscal year or any future periods.

The accounting policies underlying the accompanying unaudited consolidated financial statements are ~~those~~ set forth in Note 2 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021. There have been no material changes in the Company’s significant accounting policies during the three ~~and~~ ~~nine~~months ended ~~September 30, 2021.~~March 31, 2022.

On March 11, 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic. The COVID-19 pandemic has had a negative impact on the Company’s operations to date and the future impacts of the pandemic and any resulting economic impact are largely unknown and rapidly evolving. Since the global outbreak of COVID-19, many customers, particularly academic research institutions, have reduced laboratory work which has negatively impacted, and will continue to negatively impact, the Company’s sales. ~~While many~~Also, countries world-wide continue to issue COVID-19 related policies in an attempt to control the pandemic. In particular, during the beginning of 2022, China implemented area-wide shutdowns in order to control the ~~Company's customers, including academic labs, have reopened, a significant number~~spread of ~~them remained closed or at significantly lower capacity levels through the~~ COVID-~~third~~19. ~~quarter of~~ ~~2021.~~ ~~Additionally, to~~To ensure business continuity while maintaining a safe environment for employees aligned with guidance from government and health organizations, the Company transitioned a significant portion of its workforce to work-from-home while implementing social distancing requirements and other measures to allow manufacturing and other personnel essential to production to continue work within the Company's facilities. Business travel was significantly reduced during this period. While a portion of the workforce has returned to in-office work and travel is less restricted, the Company continued to have restrictions which represent disruptions ~~which~~that can impact productivity including sales and marketing activities.

The global supply chain has experienced significant disruptions ~~during~~ ~~2021~~ due to electronic component and labor shortages and other macroeconomic factors which have emerged since the onset of COVID-19, leading to increased cost of freight, ~~and~~ purchased materials, and manufacturing labor costs, while also delaying customer shipments. Accordingly, these conditions in addition to the overall impact on the global economy have negatively impacted results of operations and cash flows.

In ~~December 2019,~~November 2021, the Financial Accounting Standards Board ~~(FASB)~~(“FASB”) issued Accounting Standards Update ~~(ASU)~~(“ASU”) ~~2019~~2021-~~12,~~10, ~~Income Taxes~~Government Assistance (Topic ~~740~~~~): Simplifying the Accounting for Income Taxes (ASU~~ ~~2019~~-12832), Disclosures by Business Entities About Government Assistance, which ~~enhances and simplifies various aspects~~requires entities to provide disclosures on material government assistance transactions for annual reporting periods. The disclosures include information around the nature of the ~~income tax~~assistance, the related accounting ~~guidance related~~policies used to ~~intra-period tax allocation, interim period accounting~~account for ~~enacted changes in tax law,~~government assistance, the effect of government assistance on the entity’s financial statements, and ~~the year-to-date loss limitation in interim period tax accounting. ASU~~ ~~2019~~-12 ~~also amends other aspects~~any significant terms and conditions of the ~~guidance to reduce complexity in certain areas.~~agreements, including commitments and contingencies. The new standard impacts footnote disclosures and is effective for the Company’s December 31, 2022 annual financial statements. The Company ~~adopted~~is currently evaluating the ~~provisions~~potential impact of adopting ASU ~~2019~~2021-1210 ~~effective~~will have on ~~January 1, 2021.~~ ~~The adoption of this new accounting guidance did~~ ~~not~~ ~~have a material impact on the Company’s~~its consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04,~~Accounting Pronouncements to be Adopted~~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. ASU 2017-04 is effective for the Company for fiscal years beginning after December 15, 2022. The Company is currently evaluating the potential impact that adopting ASU 2017-04 will have on its consolidated financial statements.

In September 2016, the FASB issued ASU No.2016-13, Financial ~~Instruments—~~Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on FinancialInstruments (ASU 2016-13), which amends the impairment model by requiring entities to use a forward-looking approach based on expected losses rather than incurredlosses 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. ASU 2016-13 is effective for the Company for fiscal years beginning after December 15, 2022, with early adoption permitted. The Company is evaluating the impact that adopting ASU 2016-13 and related amendments will have on its consolidated financial ~~position, results of operations and cash flows.~~statements.

The change in the carrying amount of goodwill for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, were as follows:

Identifiable intangible assets at March 31, 2022 and December 31, 2021 consist of the following:

Intangible asset amortization expense was $1.5 million ~~and $1.4 million~~ for each the three months ended ~~September 30, 2021~~March 31, 2022 and ~~2020,~~2021. ~~respectively, and was $4.4 million and $4.3 million for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2021~~ ~~and~~ ~~2020,~~ ~~respectively.~~ Estimated amortization expense of existing amortizable intangible assets for each of the five succeeding years and thereafter as of ~~September 30, 2021,~~March 31, 2022, is as follows:

The following tables provide details of selected balance sheet items as of the periods indicated:

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 restructuring-type 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.

~~The following table summarizes~~During 2019, the ~~changes~~Company initiated a restructuring program to improve operational efficiency and reduce costs which entailed consolidating and downsizing several sites and headcount reductions in ~~the restructuring liabilities for the~~Europe and North America. This program was completed in ~~nine~~2021. ~~months ended~~ ~~September 30, 2021:~~

~~The restructuring liability has been included in other current liabilities in the consolidated balance sheet and is payable within the next~~ ~~twelve~~ ~~months.~~ Restructuring costs under this program were ~~$0.1~~ ~~million and $0.3~~$0.6 million for the three months ended ~~September 30,~~March 31, 2021, ~~and~~ ~~2020,~~ ~~respectively. Restructuring costs were $1.3 million and $1.9 million for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2021~~ ~~and~~ ~~2020,~~ ~~respectively. Substantially~~substantially all of ~~these restructuring costs~~which have been included as a component of general and administrative expenses.

In connection with the 2014 acquisitions of Multi Channel Systems MCS GmbH (“MCS”), the Company entered into a facility lease agreement with the former principal owner of MCS who became an employee of the Company at the time of the acquisition and subsequently retired in 2021. The MCS agreement expires on December 31, 2024. Pursuant to this lease agreement, the Company made rent payments of approximately $0.1 million for each of the three months ended ~~September 30, 2021~~March 31, 2022 and ~~2020,~~2021. ~~respectively, and $0.2 million for each of the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2021~~ ~~and~~ ~~2020,~~ ~~respectively.~~

The Company has noncancelable operating leases for offices, manufacturing facilities, warehouse space, automobiles and equipment expiring at various dates through 2030.

The components of lease expense for the three ~~and~~ ~~nine~~months ended ~~September 30, 2021~~March 31, 2022 and ~~2020,~~2021, are as follows:

Supplemental cash flow information related to the Company's operating leases was as follows:

Supplemental balance sheet information related to the Company's operating leases was as follows:

~~Maturities of~~Future minimum lease payments for operating ~~lease liabilities~~leases for each twelve-month period subsequent to ~~September 30, 2021,~~March 31, 2022, are as follows:

In ~~May 2021,~~ ~~the Company retired the 7,745,507 shares of common stock held by the Company as treasury shares and returned these shares to the status of authorized and unissued shares of common stock.~~

Stock-based awards consist of stock options, time-based restricted stock units (“RSUs”), performance-based RSU’s and shares issued under the Company’s employee stock purchase plan. Activity under the Company’s equity incentive plans for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, was as follows:

Stock-based compensation expense ~~related to stock options, restricted stock units, Market Condition RSU’s and the Company’s employee stock purchase plan~~ for the three ~~and~~ ~~nine~~months ended ~~September 30, 2021~~March 31, 2022 and ~~2020,~~2021, was allocated as follows:

As of ~~September 30, 2021,~~March 31, 2022, the total compensation costs related to unvested awards not yet recognized is ~~$6.0~~$8.2 million and the weighted average period over which it is expected to be recognized is approximately ~~2.0~~2.2 years. The Company did not capitalize any stock-based compensation.

The weighted average estimated fair value of the ~~Market Condition~~performance-based RSUs that were granted during the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 was ~~$4.61~~$5.92 per unit. The following assumptions were used to estimate the fair value of the ~~Market Condition~~performance-based RSUs granted during the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 using a Monte-Carlo valuation simulation:

Basic earnings (loss) per share (EPS) is calculated by dividing net income (loss) by the number of weighted average shares of common stock outstanding during the period. The calculation of diluted earnings per share assumes conversion of stock options, ~~restricted stock units~~time-based RSUs, and ~~Market Condition~~performance-based RSUs 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:

~~The~~For the three months ended March 31, 2022, and 2021, the Company ~~has~~ excluded from the ~~shares used in calculating the~~calculations of diluted earnings per ~~common~~ share ~~options, restricted stock units~~approximately 3.5 million shares and ~~Market Condition RSUs totaling 3,816,362 and~~ ~~5,473,292~~ as4.5 million shares, respectively, of ~~September 30, 2021~~ ~~and~~ ~~2020~~ ~~respectively,~~weighted average shares of underlying stock-based awards as the impact of including these potential shares would be anti-dilutive.

As of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the Company’s borrowings were comprised of:

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”). The Credit Agreement provides for a term loan of $40.0 million and a $25.0 million senior revolving credit facility (including a $10.0 million sub-facility for the issuance of letters of credit and a $10.0 million swingline loan sub facility) (collectively, the “Credit Facility”). The Company’s obligations under the Credit Agreement are guaranteed by certain of the Company’s direct, domestic wholly-owned subsidiaries; none of the Company’s direct or indirect foreign subsidiaries has guaranteed the Credit Facility. The Company’s obligations under the Credit Agreement are secured by substantially all of the assets of Harvard Bioscience, Inc., and each guarantor (including all or a portion of the equity interests in certain of the Company’s domestic and foreign subsidiaries). The Credit Facility matures on December 22, 2025. Issuance costs of $1.4 million are amortized over the contractual term to maturity date on a straight-line basis, which approximates the effective interest method. ~~As of~~ ~~September 30, 2021,~~ ~~available~~Available and unused borrowing capacity under the revolving line of credit was ~~$17.1 million.~~$6.8 million as of March 31, 2022. Total revolver borrowing capacity is limited by the Maximum Leverage ratio as defined under the Credit Agreement. The Credit Facility replaced the Company’s prior credit facility, which was repaid with borrowings under the Credit Facility.

Borrowings under the Credit Facility will, at the option of the Company, bear interest at either (i) a rate per annum based on LIBOR for an interest period of one, two, three or ~~nine~~six months, plus an applicable interest rate margin determined as provided in the Credit Agreement (a “LIBOR 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”). LIBOR 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 LIBOR 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. The LIBOR index is expected to be phased out over time and the terms of the Credit Agreement allow for a replacement when that occurs. Interest on LIBOR 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 LIBOR breakage and redeployment costs in certain circumstances.

As of ~~September 30, 2021,~~March 31, 2022, the weighted average interest rate on the Credit Agreement borrowings was ~~3.0%~~3.4%. The effective interest rate for the three months ended ~~September 30, 2021~~March 31, 2022 and ~~2020,~~2021, was ~~3.2%~~3.1% and ~~10.1%~~3.3%, respectively. The ~~effective~~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 ~~the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2021~~ ~~and~~ ~~2020,~~ ~~was 3.3% and 9.8%, respectively.~~similar instruments.

Commencing on March 31, 2021, the outstanding term loans amortizes in quarterly installments of $0.5 million per quarter on such date and during each of the next three quarters thereafter, $0.75 million per quarter during the next eight quarters thereafter and $1.0 million per quarter thereafter, with a balloon payment at maturity. Furthermore, within ninety days after the end of the Company’s fiscal year ended December 31, 2021, and for each fiscal year thereafter, the term loans may be permanently reduced pursuant to certain mandatory prepayment events including an annual “excess cash flow sweep” of 50% of the consolidated excess cash flow, 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. Amounts outstanding under the revolving credit facility can be repaid at any time but are due in full at maturity. The Company made an excess cash flow sweep payment of $0.2 million during the three months ended March 31, 2022.

The Credit Agreement includes customary affirmative, negative, and financial covenants binding on the Company. The negative covenants limit the ability of the Company, among other things, to incur debt, incur liens, make investments, sell assets and pay dividends on its capital stock. The financial covenants include a maximum consolidated net leverage ratio and a minimum consolidated fixed charge coverage ratio. The Credit Agreement also includes customary events of default.

On April 28, 2022, the Company entered into an amendment to the Credit Agreement and Pledge and Security Agreement (the “Amendment”), among the Company, the Lenders, and Citizens Bank, N.A., as the administrative agent (the “Administrative Agent”). Pursuant to the Amendment, the Lenders and the Administrative Agent have agreed, among other things, (i) to modify the financial covenant relating to the consolidated net leverage ratio and (ii) to consent to the Settlement described in Note 13- “Subsequent Events”. In consideration for the Amendment, the Company paid a fee of $0.2 million to the Lenders and the Administrative Agent. The ~~carrying value~~Company was in compliance with the covenants of the ~~debt approximates fair value because~~Credit Agreement, as amended by the ~~interest rate under the obligation approximates market rates~~Amendment, as of ~~interest available to the Company for similar instruments.~~March 31, 2022.

The Company monitors interest rate risk attributable to both its outstanding and forecasted debt obligations by the use of cash flow sensitivity analysis which estimates the expected impact of changes in interest rates on the Company’s future cash flows.

On ~~January 31, 2018,~~ ~~the Company entered into an interest rate swap contract with a notional amount of $36.0 million and a termination date of~~ ~~January 1, 2023.~~ This swap contract, which converted specific variable-rate debt into fixed-rate debt and fixed the LIBOR rate associated with a portion of the term loan under the Company’s prior credit facility at 2.72% was cancelled on ~~December 22, 2020,~~ ~~in connection with the new Credit Agreement as described in Note~~ 9. ~~The Company structured this interest rate swaps to be fully effective in accordance with ASC~~ ~~815~~ “Derivatives and Hedging”, and therefore changes in the fair value of the swap offset the variability of cash flows associated with the variable-rate, long-term debt obligations and were reported in accumulated other comprehensive income (AOCI). These amounts subsequently were 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 following table summarizes the effect of derivatives designated as cash flow hedging instruments and their classification within comprehensive loss for the~~ ~~three~~ ~~and~~ ~~nine~~ ~~months ended~~ ~~September 30, 2020:~~

The following tables represent a disaggregation of revenue from contracts with customers for the three ~~and~~ ~~nine~~months ended ~~September 30, 2021~~March 31, 2022 and ~~2020:~~2021:

The following tables represent a disaggregation of revenue by geographic destination for the three ~~and~~ ~~nine~~months ended ~~September 30, 2021~~March 31, 2022 and ~~2020:~~2021:

No ~~customer accounted for more than~~ ~~10%~~ ~~of revenues for the~~ ~~three~~ ~~and~~ ~~nine~~ ~~months ended~~ ~~September 30, 2021~~ ~~and~~ ~~2020.~~

The following tables provide details of deferred revenue as of the periods indicated:

During the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 and ~~2020,~~2021, the Company recognized revenue of ~~$1.4~~$0.7 million and ~~$1.7~~$1.2 million from contract liabilities existing at December 31, ~~2020~~2021 and ~~2019,~~2020, respectively.

Allowance for doubtful accounts is based on the Company’s assessment of the collectability of accounts receivable. ~~A rollforward of~~Activity in the allowance for doubtful accounts is as follows:

Income tax ~~expense (benefit)~~benefit was ~~$0.2 million and $(0.3)~~$0.1 million for the three months ended ~~September 30, 2021~~March 31, 2022 ~~and~~ ~~2020,~~ ~~respectively,~~ and was less than ~~$(0.1) million and $0.5~~$0.1 million for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2021. ~~and~~ ~~2020.~~The effective tax rates for the three months ended ~~September 30, 2021~~March 31, 2022 and ~~2020,~~2021, were ~~477.8%~~2.0% and ~~22.4%, respectively. The effective tax rates for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2021~~ ~~and~~ ~~2020,~~ ~~were 1.7% and (6.7)%~~2.2%, respectively.

The difference between the Company’s effective tax rates in ~~2021~~2022 and ~~2020~~2021 compared to the U.S. statutory tax rate of 21% is primarily due to changes in valuation allowances associated with the Company’s assessment of the likelihood of the recoverability of deferred tax assets. The Company currently has valuation allowances against substantially all of its net operating loss carryforwards and tax credit carryforwards.

On April 14, 2017, representatives for the estate of an individual plaintiff filed a wrongful death complaint with the Suffolk Superior Court, in the County of Suffolk, Massachusetts, ~~(the “Court”),~~ against the Company and other defendants, including Biostage, Inc. (f/k/a Harvard Apparatus Regenerative Technology, Inc.) (“Biostage”), a former subsidiary of the Company 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 caused by products, including one synthetic trachea scaffold and two bioreactors, provided by certain of the named defendants and utilized in connection with surgeries performed by third parties in Europe in 2012 and 2013.

On ~~October 1, 2019,~~April 28, 2022, ~~the Court entered an order granting plaintiffs’ motion to compel the defendant to produce discovery. Subsequently, the plaintiffs filed a motion for sanctions against the Company on~~ ~~January 6, 2020~~ claiming failure to produce. The Company’s counsel at the time, which had been selected for the case by the Company’s liability insurance carrier, never notified the Company of plaintiffs’ motion and never responded to plaintiff’ motion. As a result of the failure of our former counsel to respond, on ~~January 29, 2020,~~ ~~the Court entered an order allowing plaintiffs’ sanctions against the Company and the other defendants, which establishes a sanction of admitted liability. In~~ ~~June 2021,~~ ~~the Company was informed of these~~ ~~2019~~ ~~and~~ ~~2020~~ ~~court actions by new defense counsel appointed by the Company’s liability insurance carrier. On~~ ~~June 9, 2021,~~ ~~the Company, together with the other defendants, filed a motion to vacate the Court’s order allowing plaintiffs’ motion for sanctions. On~~ ~~August 6, 2021,~~ ~~the Court issued a ruling in the Company’s favor, vacating the sanctions.~~

On ~~September 15, 2021,~~ Biostage’s products liability insurance carrier, which insures the Company as an additional insured and which had appointed defense counsel and had been defending both Biostage and the Company on this case, notified the Company and Biostage ~~that it was denying coverage under~~executed a settlement with the ~~applicable policy for the lawsuit and would~~ no ~~longer be providing a defense~~plaintiffs (the “Settlement”) which resolves all claims relating to the ~~Company or Biostage with respect thereto, or covering related legal expenses incurred after~~litigation. The settlement is described in Note ~~September 30, 2021.~~ ~~The insurance carrier also filed a corresponding complaint for declaratory judgment with the Court asking the Court to declare that said insurance provider is~~ ~~not~~13 required to defend, indemnify or provide coverage to the Company or Biostage with respect to the lawsuit. The Company believes that the insurance carrier’s grounds for denying coverage are without merit, and intends to vigorously defend against this complaint for declaratory judgment and the insurance carrier’s denial of the claim and related matters in order to, among other things, restore the Company’s rights to seek insurance coverage for any damages awarded in the lawsuit. However, there can be no assurance that the Company and Biostage will prevail in the insurance coverage litigation. As such, it is unclear at this point if the Company’s liability insurance coverage will reimburse the Company for all or any portion of any defense costs or damages if the Company were to lose the underlying case on the merits.

~~While there can be~~ no assurance of prevailing, the Company intends to defend the plaintiff’s claims against the Company vigorously. The Company has retained new defense counsel for the lawsuit and a trial date has been set for ~~October 2022.~~ ~~If the Company loses on the merits and a jury awards damages, the Company does~~ ~~not~~ ~~know the exact amount of compensatory and, potentially, punitive damages that could be awarded, but the amounts could be substantial. The Company is also evaluating possible malpractice claims as~~ ~~one~~ ~~source of recovery but has~~ ~~not~~ asserted such a claim and cannot provide assurance that such a claim would provide a recovery. Further, while Biostage has agreed to indemnify the Company for claims and losses relating to certain liabilities that it has assumed from the Company, including liabilities in connection with the sale of Biostage’s products and other liabilities related to the operation of Biostage’s business, the Company cannot be assured that Biostage will have the ability to indemnify the Company against the liabilities the Company ~~may~~ incur in this lawsuit, in particular due to Biostage’s overall financial condition. If Biostage is unable to satisfy its obligations under its indemnity to the Company and if the insurance carrier does ~~not~~ ~~fund the defense of the case, the Company~~ ~~may~~ ~~have to fund the entire defense of the case and satisfy the liabilities in this lawsuit, which could have an adverse impact on the Company’s financial condition or cash flows.~~– “Subsequent Events – Litigation Settlement”.

The Company is involved in various other claims and legal proceedings arising in the ordinary course of business. After consultation with legal counsel, the Company has determined that the ultimate disposition of such proceedings is not likely to have a material adverse effect on its business, financial condition, results of operations or cash flows. Although unfavorable outcomes in the proceedings are possible, the Company has not accrued for loss contingencies relating to any such matters as they are not considered to be probable and reasonably estimable. If one or more of these matters are resolved in a manner adverse to the Company, the impact on the Company’s business, financial condition, results of operations and cash flows could be material.

On April 27, 2022, the Company and Biostage executed a settlement with the plaintiffs and Biostage’s products liability insurance carriers (the “Settlement”), which resolves with prejudice all claims relating to the litigation, including outstanding lawsuits with the plaintiffs and one of the insurance carriers. The Settlement was entered into solely by way of compromise and settlement and is not in any way an admission of liability or fault by the Company or Biostage. The Company has accrued $5.2 million of costs related to the legal fees and the Settlement as of March 31, 2022. Biostage is required to indemnify the Company for all losses and expenses, including legal expenses, the Company incurs in connection with the litigation and the Settlement. The Company and Biostage have agreed in principle that, in satisfaction of $4.0 million of its total indemnification obligations, Biostage will issue senior convertible preferred stock to the Company. The issuance of such preferred stock, and the terms thereof, are subject to the negotiation and execution of definitive documents. Due to Biostage’s current financial condition, there is uncertainty as to whether Biostage’s indemnification obligation together with the value, if any, of such preferred stock will offset the amounts the Company has incurred in connection with the litigation and Settlement, if at all. Accordingly, as of March 31, 2022, the Company has fully reserved any receivables from Biostage and the financial results only reflect expected losses to be paid by the Company.

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

This Quarterly Report on Form 10-Q contains statements that are not statements of historical fact and are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). The forward-looking statements are principally, but not exclusively, contained in “Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations.”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. Forward-looking statements include, but are not limited to, statements about management’s confidence or expectations, and our plans, objectives, expectations, and intentions that are not historical facts. In some cases, you can identify forward-looking statements by terms such as “may,”“will,”“should,”“could,”“would,”“seek,”“expects,”“plans,”“aim,”“anticipates,”“believes,”“estimates,”“projects,”“predicts,”“intends,”“think,”“potential,”“objectives,”“optimistic,”“strategy,”“goals,”“sees,”“new,”“guidance,”“future,”“continue,”“drive,”“growth,”“long-term,”“projects,”“develop,”“possible,”“emerging,”“opportunity,”“pursue”and similar expressions intended to identify 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. Given these uncertainties, you should not place undue reliance on these forward-looking statements. ~~Factors that may cause our actual results to differ materially from those~~We discuss many of these risks in ~~the forward-looking statements include the duration and severity of the COVID-19 pandemic and its impact on our business~~; ~~reductions in customers~~’ ~~research budgets or government funding~~; ~~domestic and global economic conditions~~; ~~economic, political and other risks associated with international revenues and operations~~; ~~recently enacted U.S. government tax reform~~; ~~currency exchange~~~~rate~~~~fluctuations~~; ~~economic and political conditions generally and those affecting pharmaceutical and biotechnology industries~~; ~~the seasonal nature~~of~~purchasing~~~~in Europe~~; ~~our~~~~failure to expand into foreign countries and international markets~~; ~~our inability to manage our growth~~; ~~competition from our competitors~~; ~~our substantial debt and our ability to meet the financial covenants contained in our credit facility~~; ~~failure or inadequacy of the our information technology structure~~; ~~impact of difficulties implementing our enterprise resource planning systems~~; ~~information security incidents or cybersecurity breaches~~; ~~our failure to identify potential acquisition candidates and successfully close such acquisitions with favorable pricing or integrate acquired businesses or technologies~~; ~~unanticipated costs relating to acquisitions and known and unknown costs arising in connection with our consolidation of business functions and our current and any future restructuring initiatives~~; ~~failure of any banking institution in which we deposit our funds or its failure to provide services~~; ~~our failure to raise or generate capital necessary to implement our acquisition and expansion strategy~~; ~~the failure of Biostage to indemnify us for any liabilities associated with Biostage~~’~~s business~~; ~~impact of any impairment of our goodwill or intangible assets~~; ~~our ability to retain key personnel~~; ~~failure or inadequacy or our information technology structure~~; ~~rising commodity and precious metals costs~~; ~~our ability to protect our intellectual property and operate without infringing on others~~’ ~~intellectual property~~; ~~exposure to product and other liability claims~~; ~~global stock market volatility, currency exchange rate fluctuations and regulatory changes caused by the United Kingdom~~’~~s exit from the European Union~~; ~~plus other factors described under the heading~~ “~~Item 1A. Risk Factors~~” detail in our Annual Report on Form 10-K for year ended December 31, ~~2020, or~~2021. You should carefully review all of these factors, as well as other risks described in our public filings, and you should be aware that there may be other ~~public filings. Our results may also be affected by~~factors, including factors of which we are not currently ~~aware.~~aware, that could cause these differences. Also, these forward-looking statements represent our estimates and assumptions only as of the date of this report. We may not update these forward-looking statements, even though our situation may change in the future, unless we have obligations under the federal securities laws to update and disclose material developments related to previously disclosed information.

~~Unless the context requires otherwise, references in this Quarterly Report to “we,” “us” and “our” refer to Harvard Bioscience, Inc., and its subsidiaries.~~

Harvard Bioscience, Inc. is ~~a leading developer, manufacturer~~referred to herein as “we,”“our,”“us,” and seller of technologies, products and services that enable fundamental research, discovery, and preclinical testing for drug development. Our customers range from renowned academic institutions and government laboratories to “the world’s leading pharmaceutical, biotechnology and contract research organizations. With operations in North America, Europe, and China, we sell through a combination of direct and distribution channels to customers around the world.Company.”

On March 11, 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic. The COVID-19 pandemic has had a negative impact on our operations to date and the future impacts of the pandemic and any resulting economic impact remain unknown and ~~rapidly~~continuously evolving. Since the global outbreak of COVID-19, many customers, particularly academic research institutions, reduced laboratory work which has negatively impacted, and will continue to negatively impact, our sales. ~~While many~~Also, countries world-wide continue to issue COVID-19 related policies in an attempt to control the pandemic. In particular, during the beginning of ~~our customers, including academic labs, have reopened, a significant number~~2022, China implemented area-wide shutdowns in order to control the spread of ~~them remained closed or at significantly lower capacity levels through the third quarter of 2021.~~COVID-19. Additionally, to ensure business continuity while maintaining a safe environment for employees aligned with guidance from government and health organizations, we transitioned a significant portion of our workforce to work-from-home while implementing social distancing requirements and other measures to allow manufacturing and other personnel essential to production to continue work within our facilities. Business travel was significantly reduced during this period. While a portion of the workforce has returned to in-office work and travel is less restricted, we continue to have restrictions which represent disruptions ~~which~~that can impact productivity including sales and marketing activities.

The global supply chain has experienced significant disruptions ~~during 2021~~ due to electronic component and labor shortages and other macroeconomic factors which have emerged since the onset of COVID-19, leading to increased cost of freight, purchased materials and manufacturing labor costs, while also delaying customer shipments. We believe these supply chain trends will continue through the rest of ~~2021.~~2022. These conditions in addition to the overall impact on the global economy have negatively impacted our results of operations and cash flows.

~~Revenue for the three and nine months ended September 30, 2021, and for the year ending December 31, 2020, was negatively impacted due to the conditions noted.~~ If business interruptions resulting from COVID-19 were to be prolonged or expanded in scope, our business, financial condition, results of operations and cash flows would be negatively impacted. We will continue to actively monitor this situation and will implement actions necessary to maintain business continuity.

In December 2019, we implemented a restructuring plan (the “2019 Restructuring Plan”) to deliver significant cost savings beginning in 2020 and support delivery of a strategic action plan announced in September, 2019. The 2019 Restructuring Plan includes consolidation of our Connecticut manufacturing plant with our existing Massachusetts site, downsizing of operations in the United Kingdom and a reduction in force across the business equal to approximately 10% of our headcount. The 2019 Restructuring Plan is expected to deliver approximately $4.5 million of annualized run-rate savings. The original initiatives under the 2019 Restructuring Plan were completed in the second half of 2020.

We continued to execute the 2019 Restructuring Plan during the COVID-19 pandemic and expanded the scope of the restructuring by realigning our organizational structure to reduce management layers and accelerated our efforts to move to a leaner organization and operation. As a result of this expanded scope, we eliminated additional headcount during 2020 and in the first quarter of 2021 communicated to employees our plan to consolidate certain engineering operations and eliminate two small facilities in Europe. These incremental actions are expected to generate additional annualized cost savings of approximately $2.0 million and were substantially complete as of June 30, 2021.

We incurred cash outlays of approximately $9.0 million as a result of the actions taken under the 2019 Restructuring Plan and incremental cost reductions and other business improvements. We believe these strategic actions will position the business for improved financial performance.

Three months ended ~~September 30, 2021,~~March 31, 2022 compared to three months ended ~~September 30, 2020.~~March 31, 2021.

Revenues for the three months ended ~~September 30, 2021,~~March 31, 2022, were ~~$29.7~~$28.8 million, an increase of approximately ~~$5.7~~$1.8 million, or ~~23.4%~~6.6%, compared to revenues of ~~$24.0~~$27.0 million for the three months ended September 30, 2020. Revenue improved significantly due to academic labs reopening in 2021 as a number of academic labs remained closed during the third quarter of 2020. We believe that academic lab activity has not yet returned to pre-COVID levels, but activity is significantly higher than the prior year period. Revenue alsoMarch 31, 2021. Revenues increased due to improved sales of products from our preclinical product family associated with improved sales processes as well as ~~significant growth~~improvements in ~~China.~~order fulfillment processes which reduce order backlog. These improvements were offset by lower orders from customers in Asia than the prior year due to COVID lockdowns in China in 2022 which delayed orders. We expect sales to China customers to remain at reduced levels until lockdown conditions are removed.

Gross profit increased ~~$2.8~~$0.7 million, or ~~20.8%~~4.8%, to ~~$16.3~~$16.2 million for the three months ended ~~September 30, 2021,~~March 31, 2022, compared with ~~$13.5~~$15.4 million for the three months ended ~~September 30, 2020,~~March 31, 2021, due primarily to the increase in revenue noted. Gross margin decreased to ~~55.0%~~56.2% for the three months ended ~~September 30, 2021,~~March 31, 2022, compared with ~~56.1%~~57.2% for the three months ended ~~September 30, 2020.~~March 31, 2021. The decrease in gross margin was due to higher supply chain, logistics and manufacturing labor costs. The global supply chain has experienced significant disruptions ~~during 2021~~ due to electronic component and labor shortages and other macroeconomic factors, leading to the increased cost noted. We believe these supply chain trends will continue through the rest of ~~2021.~~2022. These costs were partially offset by volume increases and improved product ~~mix.~~mix and pricing.

Sales and marketing expenses increased ~~$1.6~~$1.3 million, or ~~34.8%~~24.2%, to ~~$6.2~~$6.7 million for the three months ended ~~September 30, 2021,~~March 31, 2022, compared to ~~$4.6~~$5.4 million during the same period in ~~2020.~~2021. The increase was primarily due to investments in new marketing and sales support personnel and ~~higher related~~increases in travel and attendance at in-person trade shows. Travel and tradeshow costs ~~as our employees returned from part-time~~were lower in the prior year quarter due to full-time status. During the third quarter of 2020 part-time work and other temporary cost reduction measures were in place in response to the rapid reduction of revenue following the onset of COVID-19.COVID restrictions.

General and administrative expenses were ~~$5.5~~$6.3 million for both the three months ended March 31, 2022, and March 31, 2021. General and administrative expenses for the three months ended ~~September 30, 2021, an increase of $0.1 million, or 1.1%, compared with $5.4 million for the three months ended September 30, 2020. The increase was due to higher~~March 31, 2022 experienced lower restructuring expenses and variable compensation which were offset by ~~lower restructuring and turnaround related~~higher consulting costs ~~as compared to the prior period.~~associated with enterprise-level operational improvement planning.

Research and development expenses were ~~$2.7~~$3.2 million for the three months ended ~~September 30, 2021,~~March 31, 2022, an increase of ~~$0.8~~$0.7 million, or ~~36.5%~~29.5%, compared with ~~$1.9~~$2.5 million for the three months ended ~~September 30, 2020.~~March 31, 2021. The increase was primarily due to ~~higher compensation as~~costs involving investments in our employees returned from part-time to full-time status and higher project related costs. During the third quarter of 2020 part-time work and other temporary cost reduction measures were in place in response to the rapid reduction of revenue following the onset of COVID-19.preclinical product lines.

Amortization of intangible asset expenses ~~was~~were $1.5 million for both the three months ended ~~September 30, 2021, compared to$1.4~~March 31, 2022, and March 31, 2021.

On April 27, 2022, the Company and Biostage executed a settlement with the plaintiffs and Biostage’s products liability insurance carriers (the “Settlement”), which resolves with prejudice all claims relating to the litigation, including outstanding lawsuits with the plaintiffs and one of the insurance carriers (see “Subsequent Events” – Litigation Settlement ” included in Note 13 to our Condensed Consolidated Financial Statements included in “Part I, Item 1. Financial Statement” of this report). We have accrued approximately $5.2 million of costs as of March 31, 2022, and expect to incur an additional $0.8 million of expenses as a result of legal fees and the Settlement. Biostage is required to indemnify us for all losses and expenses, including legal expenses, we incur in connection with the ~~three months ended September 30, 2020.~~Settlement. We and Biostage have agreed in principle that, in satisfaction of $4.0 million of its total indemnification obligations, Biostage will issue senior convertible preferred stock to the Company. The issuance of such preferred stock, and the terms thereof, are subject to the negotiation and execution of definitive documents. Due to Biostage’s current financial condition, there is uncertainty as to whether Biostage’s indemnification obligation together with the value, if any, of such preferred stock will offset the amounts the Company has incurred in connection with the litigation and Settlement, if at all. Accordingly, as of March 31, 2022, we have fully reserved any receivables from Biostage and the financial results only reflect expected losses to be paid by us.

Interest expense was $0.4 million for both the three months ended ~~September 30, 2021, a decrease of $0.8~~March 31, 2022, and March 31, 2021.

Income tax benefit for the three months ended March 31, 2022 was $0.1 million ~~or 69.0%, compared with $1.2~~and was less than $0.1 million for the three months ended ~~September 30, 2020.~~March 31, 2021. The ~~decrease was primarily due to lower interest~~effective tax rates ~~under our new Credit Agreement entered into on December 22, 2020.~~

~~Income tax expense (benefit)~~ for the three months ended ~~September 30,~~March 31, 2022 and 2021 were 2.0% and ~~2020 was $0.2 million and $(0.3) million, respectively.~~2.2%, respectively The difference between our effective tax rates in ~~2021~~2022 and ~~2020~~2021 compared to the U.S. statutory tax rate of 21% is primarily due to changes in valuation allowances associated with our assessment of the likelihood of the recoverability of our deferred tax assets. We currently have valuation allowances against substantially all of our net operating loss carryforwards and tax credit carryforwards.

~~Nine months ended September 30, 2021, compared to nine months ended September 30, 2020.~~

Revenues for the nine months ended September 30, 2021, were $85.8 million, an increase of approximately $14.7 million, or 20.7%, compared to revenues of $71.1 million for the nine months ended September 30, 2020. Revenue improved significantly due to academic labs reopening in 2021. A large number of academic labs remained closed during 2020. We believe that academic lab activity has not yet returned to pre-COVID levels, but activity is significantly higher than prior year. Revenue also increased due to improved sales of products from our preclinical product family associated with improved sales processes, product enhancements released in 2020 and significant growth in China.

Gross profit increased $7.8 million, or 19.2%, to $48.1 million for the nine months ended September 30, 2021, compared with $40.3 million for the nine months ended September 30, 2020, due primarily to the increase in revenue noted. Gross margin decreased slightly to 56.0% for the nine months ended September 30, 2021, compared with 56.7% for the nine months ended September 30, 2020. The decrease in gross margin was due to supply chain cost increases which were offset by gross margin increases due to higher volumes and improved product mix.

Sales and marketing expenses increased $2.9 million, or 19.7%, to $17.3 million for the nine months ended September 30, 2021, compared to $14.4 million during the same period in 2020. The increase was primarily due to investments in new marketing and sales support personnel and related costs as our employees returned from part-time to full-time status and higher variable sales costs.

General and administrative expenses were $18.2 million for the nine months ended September 30, 2021, an increase of $0.4 million, or 2.0%, compared with $17.8 million for the nine months ended September 30, 2020. The increase was due to higher compensation costs as our employees returned from part-time to full-time status and higher stock-based compensation costs which were partially offset by lower cost reduction initiatives and restructuring costs as compared to the prior period.

Research and development expenses were $7.8 million for the nine months ended September 30, 2021, an increase of $1.5 million, or 23.9%, compared with $6.3 million for the nine months ended September 30, 2020. The increase was due to higher compensation costs as our employees returned from part-time to full-time status and higher project related costs.

~~Amortization of intangible asset expenses was $4.4 million for the nine months ended September 30, 2021, compared to $4.3 million for the nine months ended September 30, 2020.~~

Interest expense was $1.2 million for the nine months ended September 30, 2021, a decrease of $2.6 million, or 68.9%, compared with $3.7 million for the nine months ended September 30, 2020. The decrease was due to lower interest rates under our new Credit Agreement entered into on December 22, 2020, as well as reduced average borrowing as compared to the prior period.

Income tax expense (benefit) for the nine months ended September 30, 2021 and 2020, was less than $(0.1) million and $0.4 million, respectively. The effective tax rates for the nine months ended September 30, 2021 and 2020, were 1.7% and (6.7)%, respectively. The difference between our effective tax rates in 2021 and 2020 compared to the U.S. statutory tax rate of 21% is primarily due to changes in valuation allowances associated with our assessment of the likelihood of the recoverability of our deferred tax assets. We currently have valuation allowances against substantially all of our net operating loss carryforwards and tax credit carryforwards.

Our primary sources of liquidity are cash and cash equivalents, internally generated cash flow from operations and our revolving credit facility. Our expected cash outlays relate primarily to cash payments due under our Credit Agreement described below as well as capital expenditures, ~~severance and other~~ payments associated with ongoing ~~restructuring~~business improvement initiatives and ~~cost reduction initiatives.~~the litigation settlement.

As of ~~September 30, 2021,~~March 31, 2022, we held cash and cash equivalents of ~~$5.5~~$5.4 million, compared with ~~$8.3~~$7.8 million at December 31, ~~2020. As of September 30, 2021 and December 31, 2020, we had $46.4~~2021. Borrowings outstanding was $50.0 million and $49.4 million as of ~~borrowings outstanding under our Credit Facility, respectively. Total debt, net of cash~~March 31, 2022 and ~~cash equivalents, was $40.9 million at September, 2021, compared to $41.1 million at~~ December 31, ~~2020.~~2021, respectively.

On December 22, 2020, we entered into ~~the~~a Credit ~~Facility~~Agreement which provides for a term loan of $40.0 million and a $25.0 million senior revolving credit ~~facility. Obligations under the Credit Agreement are secured by substantially all of our assets~~facility and ~~are guaranteed by certain of our direct, domestic wholly-owned subsidiaries. The Credit Facility~~ matures on December 22, ~~2025. See~~2025 (See Note 9 to the Condensed Consolidated Financial Statements ~~for a detailed discussion regarding our Credit Agreement.~~

included in “Part I, Item 1. Financial Statement” of this report). As of ~~September 30, 2021,~~March 31,2022, the weighted average interest rate on our borrowings was ~~3.0%,~~3.4%. Available and ~~our available~~unused borrowing capacity under the revolving line of credit was ~~$17.1 million.~~$6.8 million as of March 31, 2022. Total revolver borrowing capacity is limited by our Maximum Leverage ratio as defined under the Credit Agreement.

On April 28, 2022, we entered into an amendment to the Credit Agreement and Pledge and Security Agreement (the “Amendment”), among the Company, the Lenders, and Citizens Bank, N.A., as the administrative agent (see Note 13- “Subsequent Events” to our Condensed Consolidated Financial Statements). We are ~~compliant~~in compliance with ~~all~~the covenants ~~under~~of the Credit Agreement, as amended by the Amendment, as of ~~September 30, 2021.~~March 31, 2022.

Based on our 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 costs associated with restructuring activities and capital expenditures for at least the next 12 months. This assessment includes consideration of our best estimates of the impact of the COVID-19 pandemic on our financial results described above. Our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary as a result of a number of factors.

Cash (used in) provided by ~~operations~~operating activities was ~~$1.1~~$(2.0) million and ~~$6.8~~$1.0 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively. Cash flow from operations for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, was lower than the same prior year period due to higher ~~levels of working capital due to higher inventory levels. Order backlog has increased over 2021 due to longer supplier lead times associated with the global supply chain disruptions noted~~variable compensation payments as well as ~~an overall increase~~increases in ~~customer demand~~marketing and orders. Accordingly, inventory purchasing has increased to ensure continuity of supply for order fulfillment. Cash flow from operations for the nine months ended September 30, 2020, was positively impacted by reductions in working capital due to lower revenue and management efforts to offset the initial significant negative impacts that the COVID-19 pandemic had on revenue.R&D investments as discussed above.

Cash used in investing activities was ~~$1.0~~$0.5 million and ~~$1.1~~$0.3 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively, primarily consisting of capital ~~expenditures. Capital~~ expenditures ~~in 2021 include investments~~ in manufacturing and information technology ~~infrastructure to support revenue growth~~infrastructure.

Cash ~~used in~~provided by (used in) financing activities was ~~$2.8~~$0.1 million and ~~$11.3~~$(3.1) million for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively. During the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, we ~~reduced~~increased total debt outstanding under our credit facility by ~~$3.0~~$0.6 million. This ~~reduction~~increase included ~~$1.5~~$0.9 million paid under the term loan ~~installments~~ and ~~a net reduction~~an increase in revolver borrowings of $1.5 million. We also ~~received proceeds of $2.9 million from the exercise of stock options and~~ paid ~~$2.7~~$0.5 million for taxes related to net share settlement of equity awards. During the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, we repaid ~~$11.1~~$4.5 million of debt, which included a term loan installment payment of ~~$2.4~~$0.5 million and ~~an excess cash flow payment~~paydown of debt under our revolving facility of $4.0 million. Net cash proceeds from the issuance of common stock associated with stock option exercises were $1.5 million ~~and an additional payment of $4.7 million.~~during the three months ended March 31, 2021.

Our international operations in some instances operate in a natural hedge as we sell our products in many countries and a substantial portion of our revenues, costs and expenses are denominated in foreign currencies, especially the British pound, the euro, the Canadian dollar, and the Swedish krona.

During the three months ended ~~September 30, 2021,~~March 31, 2022, changes in foreign currency exchange rates resulted in ~~a favorable~~an unfavorable translation effect on our consolidated revenues of approximately ~~$0.2~~$0.5 million and ~~an unfavorable~~a favorable effect on expenses of approximately $0.3 million. During the nine months ended September 30, 2021, changes in foreign currency exchange rates resulted in a favorable translation effect on our consolidated revenues of approximately $1.9 million and an unfavorable effect on expenses of approximately $1.9$0.4 million.

The loss associated with the translation of foreign equity into U.S. dollars included as a component of comprehensive ~~income (loss)~~loss was $0.7 million and $1.3 million during each of the three months ended ~~September 30,~~March 31, 2022 and 2021, was $1.1 million, compared to a gain of $1.6 million for the three months ended September 30, 2020. The loss associated with the translation of foreign equity into U.S. dollars included as a component of comprehensive income (loss) during the nine months ended September 30, 2021 was $1.9 million, compared to a gain of $0.7 million for the nine months ended September 30, 2020.respectively.

In addition, currency exchange rate fluctuations included as a component of net income resulted in currency (losses) gains ~~(losses)~~ of ~~less than $0.1~~$(0.1) million and ~~$(0.3)~~$0.1 million during each of the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020, and currency gains (losses) of $(0.1) million and $(0.2) million during each of the nine months ended September 30, 2021 and 2020,~~ respectively.

The critical accounting policies underlying the accompanying unaudited consolidated financial statements are those set forth in Part II, Item 7 included in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020.~~2021.

For information on recent accounting pronouncements impacting our business, see “Recently Issued Accounting Pronouncements” included in Note 2 to our Condensed Consolidated Financial Statements included in “Part I, Item 1. Financial Statement” of this report.

~~Not applicable.~~Most 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. In addition, we are subject to the broad market risk that is created by the global market disruptions and uncertainties resulting from the COVID-19 pandemic.

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 (see “Impact of Foreign Currencies” included in “Part I, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this report). For example, we estimate that a 10% increase in foreign currency exchange rates during the three months ended March 31, 2022 as compared to the actual rates incurred, would have resulted in a favorable translation effect on our consolidated revenues of approximately $0.9 million and an unfavorable effect on expenses of approximately $0.8 million.

We are exposed to market risk from changes in interest rates primarily through our financing activities. Our Credit Facility provides for a term loan of $40.0 million and a $25.0 million senior revolving credit facility. Borrowings under the Credit Facility bear interest at variable rates (see Note 9 to our Condensed Consolidated Financial Statements included in “Part I, Item 1. Financial Statement” of this report). As of March 31, 2022, we had $50.0 million outstanding under our Credit Facility with a weighted average interest rate of 3.4%.

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 Credit Facility over the next twelve months from March 31, 2022, is as follows:

As of ~~September 30, 2021,~~March 31, 2022, the end of the period covered by this report, our management, including our Chief Executive Officer and our Chief Financial Officer, reviewed and evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e) of the Exchange Act). Based upon management's review and evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified by the SEC and is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

There were no changes in our internal control over financial reporting during the ~~third~~first quarter of fiscal ~~2021~~2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We continue to monitor the impact of the COVID-19 pandemic and, despite many of our employees working remotely, have not experienced any changes that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

In designing and evaluating our controls and procedures, 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 is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud within the Company have been detected.

The information included in Note 12 and Note 13 to the Condensed Consolidated Financial Statements (Unaudited) included in Part I, Item 1 of this quarterly report is incorporated herein by reference.

You should carefully consider the risk factors set forth below together with the risk factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020,~~2021, which could materially affect our business, financial position, or future results of operations. The risks described below and in our Annual Report on Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business, financial position, or future results of operations.

As a result of our spin-off of Harvard Apparatus Regenerative Technology, Inc., now known as Biostage, together with certain related transactions, third parties may seek to hold us responsible for Biostage’~~s liabilities, including liabilities that Biostage has assumed from us.~~

Third parties may continue to seek to hold us responsible for Biostage’s liabilities, including any of the liabilities that Biostage agreed to retain or assume in connection with the separation of the Biostage business from our businesses, and related spin-off distribution. On April 14, 2017, representatives for the estate of an individual plaintiff filed a wrongful death complaint with the Suffolk Superior Court, in the County of Suffolk, Massachusetts, against us and other defendants, including Biostage, as well as another third party. The complaint seeks payment for an unspecified amount of damages and alleges that the plaintiff sustained terminal injuries allegedly caused by products, including one synthetic trachea scaffold and two bioreactors, provided by certain of the named defendants and utilized in connection with surgeries performed by third parties in Europe in 2012 and 2013.

On October 1, 2019, the Court entered an order granting plaintiffs’ motion to compel the defendant to produce discovery. Subsequently, the plaintiffs filed a motion for sanctions against us on January 6, 2020, claiming failure to produce. Our counsel at the time, which had been selected for the case by our liability insurance carrier, never notified us of plaintiffs’ motion and never responded to plaintiffs’ motion. As a result of the failure of our former counsel to respond, on January 29, 2020, the Court entered an order allowing plaintiffs’ sanctions against us and the other defendants, which establishes a sanction of admitted liability. In June 2021, we were informed of these 2019 and 2020 court actions by new defense counsel appointed by our liability insurance carrier. On June 9, 2021, we, together with the other defendants, filed a motion to vacate the Court’s order allowing plaintiffs’ motion for sanctions. On August 6, 2021, the Court issued a ruling in our favor, vacating the sanctions.

On September 15, 2021, Biostage’s products liability insurance carrier, which insures us as an additional insured and which had appointed defense counsel and had been defending both Biostage and us on this case, notified us and Biostage that it was denying coverage under the applicable policy for the lawsuit and would no longer be providing a defense to us or Biostage with respect thereto, or covering related legal expenses incurred after September 30, 2021. The insurance carrier also filed a corresponding complaint for declaratory judgment with the Court asking the Court to declare that said insurance provider is not required to defend, indemnify or provide coverage to the us or Biostage with respect to the lawsuit. We believe that the insurance carrier’s grounds for denying coverage are without merit and intend to vigorously defend against this complaint for declaratory judgment and the insurance carrier’s denial of the claim and related matters in order to, among other things, restore our rights to seek insurance coverage for any damages awarded in the lawsuit. However, there can be no assurance that we and Biostage will prevail in the insurance coverage litigation. As such, it is unclear at this point if the liability insurance coverage will reimburse us for all or any portion of any defense costs or damages if we were to lose the underlying case on the merits.

While there can be no assurance of prevailing, we intend to defend the plaintiff’s claims against us vigorously. We have retained new defense counsel for the lawsuit and a trial date has been set for October 2022. If we lose on the merits and a jury awards damages, we do not know the exact amount of compensatory and, potentially, punitive damages that could be awarded, but the amounts could be substantial. We are also evaluating possible malpractice claims as one source of recovery but have not asserted such a claim and cannot provide assurance that such a claim would provide a recovery. Further, while 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 and other liabilities related to the operation of Biostage’s business, we cannot be assured that Biostage will have the ability to indemnify us against the liabilities we may incur in this lawsuit, in particular due to Biostage’s overall financial condition. If Biostage is unable to satisfy its obligations under its indemnity to us and if the insurance carrier does not fund the defense of the case, we may have to fund the entire defense of the case and satisfy the liabilities in this lawsuit, which could have an adverse impact on our financial condition or cash flows.

There were no unregistered sales of equity securities during the period covered by this report.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by undersigned thereunto duly authorized.

	Page

PART I - FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements (unaudited)	3

Consolidated Balance Sheets ~~as of September 30, 2021 and December 31, 2020 (unaudited)~~	3

Consolidated Statements of Operations ~~for the Three and Nine Months Ended September 30, 2021 and 2020 (unaudited)~~	4

Consolidated Statements of Comprehensive ~~Income (Loss) for the Three and Nine Months Ended September 30, 2021 and 2020 (unaudited)~~Loss	5

Consolidated Statements of Stockholders' Equity ~~for the Three and Nine Months Ended September 30, 2021 and 2020 (unaudited)~~	6

Consolidated Statements of Cash Flows ~~for the Nine Months Ended September 30, 2021 and 2020 (unaudited)~~	7

Notes to Unaudited Consolidated Financial Statements	8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	1716

Item 3. Quantitative and Qualitative Disclosures about Market Risk	2320

Item 4. Controls and Procedures	2320

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	2421

~~Item 1A.~~	Item1A. Risk Factors	2421

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	2521

Item 3.	Default Upon Senior Securities	2521

Item 4.	Mine Safety Disclosures	2521

Item 5.	Other Information	2521

Item 6.	Exhibits	2521

SIGNATURES	2622

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020			Three Months Ended March 31,
													2022			2021
Revenues	$	29,663		$	24,037		$	85,849		$	71,116		$	28,778		$	26,989
Cost of revenues		13,355			10,542			37,757			30,783			12,601			11,558
Gross profit		16,308			13,495			48,092			40,333			16,177			15,431

Sales and marketing expenses		6,183			4,588			17,299			14,446			6,687			5,386
General and administrative expenses		5,458			5,399			18,190			17,828			6,325			6,333
Research and development expenses		2,660			1,949			7,848			6,336			3,220			2,487
Amortization of intangible assets		1,459			1,377			4,388			4,258			1,466			1,464
Settlement of litigation - Note 13														5,191			0
Total operating expenses		15,760			13,313			47,725			42,868			22,889			15,670

Operating income (loss)		548			182			367			(2,535	)
Operating loss														(6,712	)		(239	)

Other (expense) income:
Interest expense		(373	)		(1,205	)		(1,161	)		(3,737	)		(384	)		(411	)
Other, net		(130	)		(392	)		(477	)		(472	)
Other income (expense), net														78			(34	)
Total other expense		(503	)		(1,597	)		(1,638	)		(4,209	)		(306	)		(445	)

Income (loss) before income taxes		45			(1,415	)		(1,271	)		(6,744	)
Income tax expense (benefit)		215			(317	)		(22	)		451
Loss before income taxes														(7,018	)		(684	)
Income tax benefit														(138	)		(15	)
Net loss	$	(170	)	$	(1,098	)	$	(1,249	)	$	(7,195	)	$	(6,880	)	$	(669	)

Loss per share:
Basic and diluted loss per common share	$	(0.00	)	$	(0.03	)	$	(0.03	)	$	(0.19	)	$	(0.17	)	$	(0.02	)

Weighted-average common shares:
Basic and diluted		40,754			38,920			40,202			38,540			41,219			39,787

(in thousands)
Carrying amount at December 31, 2020	$	58,590
Carrying amount at December 31, 2021				$	57,689
Effect of change in currency translation		(603	)		(333	)
Carrying amount at September 30, 2021	$	57,987
Carrying amount at March 31, 2022				$	57,356

				September 30, 2021							December 31, 2020
	Weighted		(in thousands)
Amortizable intangible assets:	Average Life*			Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net
Distribution agreements/customer relationships		8.1		$	17,874	$	(8,482	)	$	9,392	$	18,237	$	(7,746	)	$	10,491
Existing technology		4.4			38,861		(23,179	)		15,682		38,761		(20,674	)		18,087
Trade names and patents		4.7			8,559		(4,935	)		3,624		8,681		(4,362	)		4,319
Total amortizable intangible assets				$	65,294	$	(36,596	)	$	28,698	$	65,679	$	(32,782	)	$	32,897
Indefinite-lived intangible assets:										243							254
Total intangible assets									$	28,941						$	33,151

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

												Accumulated
Three Months Ended	*Number*					*Additional*						*Other*					*Total*
September 30, 2021	*of Shares*			*Common*		*Paid-in*			*Accumulated*			*Comprehensive*			*Treasury*		*Stockholders*’
	*Issued*			*Stock*		*Capital*			*Deficit*			*Loss*			*Stock*		*Equity*

Balance at June 30, 2021		40,486		$	451	$	225,583		$	(133,465	)	$	(13,868	)	$	0	$	78,701
Stock option exercises		38			0		150			0			0			0		150
Vesting of restricted stock units		493			0		0			0			0			0		0
Shares withheld for taxes		(208	)		0		(1,663	)		0			0			0		(1,663	)
Stock compensation expense		-			0		1,004			0			0			0		1,004
Net loss		-			0		0			(170	)		0			0		(170	)
Other comprehensive loss		-			0		0			0			(1,135	)		0		(1,135	)
Balance at September 30, 2021		40,809		$	451	$	225,074		$	(133,635	)	$	(15,003	)	$	0	$	76,887

												Accumulated
Nine Months Ended	*Number*					*Additional*						*Other*						*Total*
September 30, 2021	*of Shares*			*Common*		*Paid-in*			*Accumulated*			*Comprehensive*			*Treasury*			*Stockholders*’
	*Issued*			*Stock*		*Capital*			*Deficit*			*Loss*			*Stock*			*Equity*
Balance at December 31, 2020		47,153		$	444		232,357		$	(132,386	)	$	(13,066	)	$	(10,668	)	$	76,681
Retirement of treasury stock		(7,746	)		0		(10,668	)		0			0			10,668			0
Stock option exercises		535			7		2,700			0			0			0			2,707
Stock purchase plan		56			0		202			0			0			0			202
Vesting of restricted stock units		1,196			0		0			0			0			0			0
Shares withheld for taxes		(385	)		0		(2,653	)		0			0			0			(2,653	)
Stock compensation expense		-			0		3,136			0			0			0			3,136
Net loss		-			0		0			(1,249	)		0			0			(1,249	)
Other comprehensive loss		-			0		0			0			(1,937	)		0			(1,937	)
Balance at September 30, 2021		40,809		$	451	$	225,074		$	(133,635	)	$	(15,003	)	$	0		$	76,887

	Amortization
Year Ending December 31,	Expense
	(in thousands)
2021 (remainder of year)	$	1,456
2022		5,791
2023		5,684
2024		5,379
2025		4,271
Thereafter		6,117
Total	$	28,698

Inventories:	September 30,		December 31,		March 31,		December 31,
(in thousands)	2021		2020		2022		2021
Finished goods	$	5,510	$	4,938	$	6,798	$	5,646
Work in process		3,506		3,513		3,439		3,410
Raw materials		16,962		13,811		18,474		18,531
Total	$	25,978	$	22,262	$	28,711	$	27,587

Other Current Liabilities:	September 30,		December 31,		March 31,		December 31,
(in thousands)	2021		2020		2022		2021
Compensation	$	3,992		3,715	$	2,878	$	6,048
Professional fees		793		432		396		480
Warranty costs		228		185		242		240
Customer related costs		1,992		1,093		2,058		2,265
Interest		369		46
Settlement of litigation						4,814		0
Accrued income taxes		246		286		141		224
Other		2,050		1,721		1,653		1,505
Total	$	9,670	$	7,478	$	12,181	$	10,762

(in thousands)	Severance			Other			Total
Balance at December 31, 2020	$	270		$	18		$	288
Restructuring and other exit costs		1,160			116			1,276
Non-cash charges		0			(41	)		(41	)
Cash payments		(1,319	)		(93	)		(1,412	)
Balance at September 30, 2021	$	111		$	0		$	111

(in thousands)
2021	$	2,127
2022		2,057
2023		1,964
2024		1,047
2025		974
Thereafter		4,129
Total lease payments		12,298
Less imputed interest		(3,455	)
Total operating lease liabilities	$	8,843

Year Ending December 31,
(in thousands)
2022 (remainder of year)	$	1,611
2023		2,133
2024		1,765
2025		1,019
2026		980
Thereafter		3,871
Total lease payments		11,379
Less imputed interest		(3,069	)
Total operating lease liabilities	$	8,310

	Stock Options					Restricted Stock Units					Market Condition RSU's								Weighted
				Weighted												*Stock*			*Average*		*Time-Based*					*Performance-*
	*Stock*			*Average*		*Restricted*					*Market*					*Options*			*Exercise*		*RSUs*			*Grant Date*		*Based RSUs*		*Grant Date*
	*Options*			*Exercise*		*Stock Units*			*Grant Date*		*Condition RSU's*			*Grant Date*		*Outstanding*			*Price*		*Outstanding*			*Fair Value*		*Outstanding*		*Fair Value*
	*Outstanding*			*Price*		*Outstanding*			*Fair Value*		*Outstanding*			*Fair Value*
Balance at December 31, 2020		2,637,339		$	3.51		1,560,461		$	2.44		813,031			2.12
Balance at December 31, 2021																	1,404,816		$	3.10		1,141,164		$	3.57		860,155	$	3.13
Granted		0			0		793,968			4.65		293,509			4.61		0			0		518,163			5.52		205,122		5.92
Exercised		(534,862	)		3.78		-			-		-			-		(10,987	)		2.78		-			-		-		-
Vested (RSUs)		-			-		(799,264	)		2.48		(396,274	)		2.09		-			-		(151,185	)		2.30		0		0
Cancelled/Forfeited		(651,368	)		4.24		(57,215	)		3.65		(6,179	)		2.98		(3,126	)		3.79		(12,917	)		3.07		0		0
Performance Factor Adjustment		-			-		0			0		163,216			2.98
Balance at September 30, 2021		1,451,109		$	3.12		1,497,950		$	3.54		867,303		$	3.13
Balance at March 31, 2022																	1,390,703		$	3.10		1,495,225		$	4.37		1,065,277	$	3.67

	~~2021~~2022
Volatility		65.1	%
Risk-free interest rate		~~0.3~~1.4	%
Correlation coefficient		~~35.7~~38.5	%
Dividend yield		0	%

	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
(in thousands)	2021		2020		2021		2020		2022		2021
Basic		40,754		38,920		40,202		38,540		41,219		39,787
Dilutive effect of equity awards		0		0		0		0		0		0
Diluted		40,754		38,920		40,202		38,540		41,219		39,787

	Three Months Ended			Nine Months Ended
(in thousands)	September 30, 2020			September 30, 2020
Amount of loss recognized in OCL on derivatives (effective portion)	$	(1	)	$	(228	)
Amounts reclassified from accumulated other comprehensive loss to interest expense		93			262
Total	$	92		$	34

	Three Months Ended September 30,											Three Months Ended March 31,
(dollars in thousands)	2021		% of revenue			2020			% of revenue			2022			% of revenue			2021			% of revenue
Revenues	$	29,663				$	24,037					$	28,778					$	26,989
Gross profit		16,308		55.0	%		13,495			56.1	%		16,177			56.2	%		15,431			57.2	%
Sales and marketing expenses		6,183		20.8	%		4,588			19.1	%		6,687			23.2	%		5,386			20.0	%
General and administrative expenses		5,458		18.4	%		5,399			22.5	%		6,325			22.0	%		6,333			23.5	%
Research and development expenses		2,660		9.0	%		1,949			8.1	%		3,220			11.2	%		2,487			9.2	%
Amortization of intangible assets		1,459		4.9	%		1,377			5.7	%		1,466			5.1	%		1,464			5.4	%
Settlement of litigation													5,191			18.0	%		-			-
Interest expense		373		1.3	%		1,205			5.0	%		384			1.3	%		411			1.5	%
Income tax (benefit) expense		215		0.7	%		(317	)		-1.3	%
Income tax benefit													(138	)		-0.5	%		(15	)		-0.1	%

CONDENSED CONSOLIDATED CASH FLOW STATEMENTS

	Nine Months Ended September 30,
(in thousands)	2021			2020
Cash provided by operating activities	$	1,145		$	6,841
Cash used in investing activities		(987	)		(1,088	)
Cash used in financing activities		(2,846	)		(11,324	)
Effect of exchange rate changes on cash		(81	)		42
Decrease in cash and cash equivalents	$	(2,769	)	$	(5,529	)

(in thousands)	Interest expense increase
Interest rates increase by 1%	$	500
Interest rates increase by 2%	$	1,000

10.1	Separation Agreement and Release between Harvard Bioscience, Inc. and Ken Olson, dated as of January 26, 2022 (previously filed as an exhibit to the Company’s Current Report on Form 8-K on January 28, 2022 and incorporated by reference thereto).
10.2	First Amendment to Credit Agreement and Amendment to Pledge and Security Agreement, dated April 27, 2022, among Harvard Bioscience, Inc., Citizens Bank, N.A., as the administrative agent, and the lenders party thereto (previously filed as an exhibit to the Company’s Current Report on Form 8-K on April 28, 2022 and incorporated by reference thereto).
31.1	Certification of Chief Financial Officer of Harvard Bioscience, Inc., pursuant to Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.2*	Certification of Chief ~~Executive~~Financial Officer of Harvard Bioscience, Inc., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the ~~Sarbanes- Oxley~~Sarbanes-Oxley Act of 2002.

101.INS	Inline XBRL Instance Document
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Labels Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)
*
*	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.

		HARVARD BIOSCIENCE, INC.
Date: May 4, 2022
	By:	/s/ JAMES GREEN

	~~By:~~	~~/s/ JAMES GREEN~~ James Green
		~~James Green~~
		Chief Executive Officer




	By:	/s/ MICHAEL A. ROSSI
		Michael A. Rossi
		Chief Financial Officer