2 0 1 8 A N N U A L R E P O R T
Revolutionizing Physiologic Monitoring
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Harvard Bioscience Logo
HBIO Logo Wide Tagline
Pantone 548
Pantone 485
Pantone 7542
Cardiovascular Neuroscience Immuno Oncology Diabetes
Financial Highlights
Revenues
($ U.S. in thousands)
2018 Revenues by Region
(Revenues originating from region)
$120,774
$77,407
FY17
FY18
Jeff Duchemin
Jeffrey A. Duchemin was
appointed Chief Executive
Offi cer on August 26,
2013. He assumed
the additional roles of
President on November
1, 2013 and Director on
October 29, 2013. Prior to
joining Harvard Bioscience,
Mr. Duchemin spent
16 years with Becton
Dickinson (BD) in
progressive sales,
marketing and executive
leadership positions
across BD’s three business
segments; BD Medical
Systems, BD Diagnostic
Systems, and BD
Biosciences.
Mr. Duchemin earned an
M.B.A. from Southern
New Hampshire University
and a B.S. in accounting
from the University of
Massachusetts Dartmouth.
Non-GAAP Adjusted Net Income
($ U.S. in thousands)
70% United States
12% United Kingdom
11% Germany
7% Rest of the World
Employees by Country
(As of December 31, 2018)
$7,360
$4,224
FY17
FY18
Non-GAAP Adjusted Diluted EPS
($ U.S.)
$0.20
$0.12
FY17
FY18
63% United States
18% Germany
7% United Kingdom
6% Spain
3% China
1% Canada
<1% Italy
1% Sweden
1% France
In this annual report, we have included non-GAAP financial
information including adjusted net income and adjusted
earnings per diluted share. We believe that this non-GAAP
financial information provides investors with an enhanced
understanding of the underlying operations of the business.
This non-GAAP financial information approximates information
used by our management to internally evaluate our results.
In particular, we believe that the presentation of non-GAAP
adjusted net income, including a number of adjusted line items,
provides investors with a clearer understanding of the full effect
of the adjustments that we make to our GAAP income and
earnings per diluted share in order to derive our non-GAAP
adjusted net income and earnings per diluted share. A tabular
reconciliation of these non-GAAP adjusted results can be found
at Exhibit 1 and 2.
H A R V A R D B I O S C I E N C E , I N C . • 2 0 1 8 A N N U A L R E P O R T
Financial Performance
Selected Financial Data
Statement of Operations Data:
For the Year Ended December 31,
2018
2017
Revenues .....................................................................................................................
$120,774
$ 77,407
Cost of revenues .........................................................................................................
Gross profit............................................................................................................
Operating expenses ....................................................................................................
Operating income (loss) ........................................................................................
Other expense, net ...............................................................................................
Loss from continuing operations before income taxes ................................................
Income tax benefit ......................................................................................................
Loss from continuing operations ...........................................................................
57,593
63,181
62,197
984
(8,959)
(7,975)
(3,676)
(4,299)
Discontinued operations:
Income from discontinued operations, net of tax .................................................
1,377
Net loss .................................................................................................................
$(2,922)
(Loss) earnings per share:
Basic loss per common share from continuing operations ..........................................
Discontinued operations .......................................................................................
Basic loss per common share ................................................................................
Diluted loss per common share from continuing operations ...............................................
Discontinued operations .......................................................................................
Diluted loss per common share ............................................................................
Weighted average common shares:
Basic ......................................................................................................................
Diluted ..................................................................................................................
$(0.12)
0.04
$(0.08)
$(0.12)
0.04
$(0.08)
36,453
36,453
38,237
39,170
39,805
(635)
(1,986)
(2,621)
(605)
(2,016)
1,151
$ (865)
$ (0.06)
0.03
$ (0.02)
$ (0.06)
0.03
$ (0.02)
34,753
34,753
As of December 31,
2018
2017
Balance Sheet Data:
Cash and cash equivalents ....................................................................................
Working capital .....................................................................................................
$8,173
36,326
$5,192
33,494
Total assets ............................................................................................................
168,613
109,354
Long-term debt, net of current portion ................................................................
58,796
Stockholders’ equity ..............................................................................................
82,724
8,983
80,900
Kam Unninayar
Kam Unninayar was appointed
Chief Financial Officer on
November 26, 2018. Prior to
joining the company she was
recently CFO at Tetraphase,
Inc. (NASDAQ:TTPH), a clinical
stage biopharmaceutical
company. Prior to this, she
spent more than eleven
years at Thermo Fisher
Scientific, across multiple
roles leading financial
operations, corporate
financial planning and
analysis, finance for business
strategy, and acquisitions
and integrations. During her
tenure there, she was Vice
President of Finance for the
Customer Channels group,
Laboratory Products and
Services segment, and other
businesses with revenues
that ranged from $200
million to $4 billion.
Ms. Unninayar earned an
Master of Science in Admin-
istration from Wichita State
University, as well as a Master
of Finance and Control and
Bachelor of Commerce from
the University of Delhi, India.
W W W . H A R V A R D B I O S C I E N C E . C O M
HBIO AR 2018 Front End_MS 1
4/1/19 10:24 AM
Dear Fellow Shareholders
2018 was a really important year in the history of Harvard Bioscience. The hard work
and dedication of our team to transform Harvard Bioscience, which we began five years
ago, paid off in January of 2018 when we announced the sale of Denville Scientific and the
acquisition of Data Sciences International.
The sale of Denville and acquisition of DSI transformed Harvard Bioscience into a pure
play life science company with competitive advantages across our portfolio. Sitting here
today, having completed a banner year for the company, we are a larger organization, less
susceptible to fluctuations in academic research funding, with improved profitability. Our
2018 results indicate just that. Among the highlights:
• 2018 adjusted revenue increased 20% to approximately $122 million.
• 2018 adjusted gross margin percentage increased 890 basis points to
approximately 56% as compared to 2017.
• 2018 adjusted operating margin percentage increased 540 basis points
to approximately 12% as compared to 2017.
• 2018 adjusted earnings per share increased 65% to $0.20 per share.
• As most of you know, Harvard Bioscience has historically been heavily weighted
in academia. DSI’s revenue from academic customers is almost an inverse of
Harvard Bioscience’s customer mix. Our 2018 customer mix was closer to 60%
revenue from academic customers and 40% from biopharma, contract research
organizations, and government.This diversification has made our organization
less susceptible to fluctuations in academic research funding, as well as created
tremendous cross selling opportunity of DSI products into more academic labs
and our legacy brands into the biopharma and CRO markets.
• When we announced the acquisition early last year, we spoke about
approximately $2.5 million to $3.5 million in combined revenue and cost
synergies in the first year, post-acquisition. As of today, I am happy to say
we met our expectations and have realized synergies within that range
over the first twelve months of ownership. As we move into 2019 and
beyond, we continue to expect that topline and bottomline synergies will
drive organic revenue growth and earnings expansion.
Other 2018 Highlights
We closed 2018 with several other key highlights and developments that, in addition to the
transformation of the business with the acquisition of DSI and divestiture of Denville, further
creates a foundation of long term success.
Topline growth in China continued a strong trend in 2018. When I started with Harvard
Bioscience five years ago, we had one dedicated channel manager selling our products
in China. Today, in combination of the commercial team at DSI, our company has sixteen
channel managers that are focused exclusively on China, Japan, and the rest of the Asian
life science markets. We have grown our topline in China by more than four times in that
five year span. The dedication and execution of our teams in China has made China and
the Asian region, as a whole, an important growth driver for our company.
2018 was also a great year for innovation with product launches and product line extensions
in telemetry, electrophysiology, and electroporation, expanding our applications in key life
H A R V A R D B I O S C I E N C E , I N C . • 2 0 1 8 A N N U A L R E P O R T
Telemetry
Data Sciences International
(DSI) provides a complete
preclinical platform to
assess physiological data
for research ranging from
basic, to drug discovery,
and drug development.
DSI is best known as the
company who pioneered
the manufacturing of
implantable telemetry
devices for the wireless
collection of physiologic
signals in freely-moving,
unstressed subjects.
Today, implantable
telemetry is considered
the gold standard for
researchers in academia,
pharmaceutical companies,
contract research
organizations, and
government institutions.
Physiologic endpoints
collected include blood
pressure, blood glucose,
ocular pressure, ECG,
EEG, EMG, intracranial
pressure, tumor pressure,
and many more.
HBIO AR 2018 Front End_MS 2
4/1/19 10:24 AM
science research markets in order to better serve our customers. Product development
continues to be an important element of our strategy.
We have spent a lot of time during my tenure consolidating our manufacturing
footprint in order to contain costs and expand margins. Our future expansion
in gross margins and operating margins will continue to be driven by prudent
cost containment measures, as well as improvement from two recent, small site
consolidations. In the U.S., we moved our Hoefer brand from its previous facility in
California to our Holliston, Massachusetts corporate headquarters. In Germany, we
moved our HEKA Electronik manufacturing site to our MCS facility. Both of these
moves took place in Q4 of 2018 and will positively impact our fi nancial results in
2019 and beyond.
Finally, we hired our new Chief Financial Offi cer, Kam Unninayar, in late 2018.
Kam brought a deep knowledge of our industry, having held fi nancial leadership
positions for various business segments at Thermo Fisher Scientifi c for more
than 11 years, as well as most recently as CFO for Tetraphase Pharmaceuticals,
a Nasdaq-listed company. She also held fi nancial roles at other global public
companies, and is well-versed and experienced in the operations of a global
organization. Kam’s proven skills align very well with our strategic initiatives of
commercial excellence, operational effi ciencies, product development,
and acquisitions.
Looking Ahead…
In refl ecting on the last fi ve years at Harvard Bioscience, I am struck by what
we’ve been able to accomplish. Our primary focus has been on our corporate
initiatives – commercial excellence, operational effi ciency, product development,
and acquisitions. In that time we can point to successes in each area of our
corporate initiatives, including this year – a true infl ection point in the history of
our organization. I am extremely proud of the global team we have assembled
and the dedication they have shown to the success of our company. With the
foundation strengthened, today we are more confi dent than ever of our position
to achieve our growth goals in the years ahead.
We appreciate the commitment and continued support and look forward to
sharing the future success of Harvard Bioscience with you all.
Sincerely,
Jeffrey A. Duchemin
President & Chief Executive Offi cer
W W W . H A R V A R D B I O S C I E N C E . C O M
Ponemah,
FinePointe and
Neuroscore software
DSI offers three unique
software platforms for the
acquisition and analysis of
physiological data. DSI’s
Ponemah software is a
robust, yet fl exible software
platform. Ponemah is the
leading choice for research-
ers seeking a comprehen-
sive set of software tools
designed for use with telem-
etry in a GLP environment.
FinePointe software is used
for collecting, analyzing, and
reporting respiratory data
from DSI’s Buxco respiratory
hardware. NeuroScore is
the leading software choice
for scientists involved with
central nervous system
monitoring.
HBIO AR 2018 Front End_MS 3
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Corporate Information
Our Company
Harvard Bioscience, Inc., a Delaware corporation, is a global developer, manufacturer, marketer
and provider of a broad range of scientific instruments, systems, software and services used
to advance life science for basic research, drug discovery, physiologic monitoring, clinical and
environmental testing. Our products and services are sold to thousands of researchers in over
100 countries through our global sales organization, websites, catalogs, and through distributors
including Thermo Fisher Scientific Inc., VWR and other specialized distributors. We have sales
and manufacturing operations in the United States, the United Kingdom, Germany, Sweden,
Spain, France, Canada, Italy and China. Our vision is to be a world-leading life science company
that excels in meeting the needs of our customers by providing a wide breadth of innovative
products and solutions, while providing exemplary customer service.
Board of Directors
Jeffrey A. Duchemin
Our President &
Chief Executive Officer
Katherine A. Eade
Deputy General Counsel
La-Z-Boy, Inc.
James W. Green
General Partner
Grantchester Group
John F. Kennedy
Formerly President & CFO
Nova Ventures Corporation
Thomas W. Loewald
Division President
ProAmpac
Bertrand Loy
President & CEO
Entegris, Inc.
Price Range of
Common Stock
Year Ended December 31, 2018
Quarter
First
Second
Third
Fourth
High
$ 5.15
$ 5.95
$ 6.65
$ 5.00
FY 2018 average
FY 2018 closing
Low
$ 3.30
$ 4.20
$ 5.00
$ 3.03
$ 4.79
$ 3.18
Year Ended December 31, 2017
Quarter
First
Second
Third
Fourth
High
$ 3.25
$ 2.75
$ 3.75
$ 3.80
FY 2017 average
FY 2017 closing
Low
$ 2.55
$ 2.30
$ 2.35
$ 3.08
$ 2.92
$ 3.30
Management
Jeffrey A. Duchemin
President &
Chief Executive Officer
Kam Unninayar
Chief Financial Officer
Stock Profile
Since the Company’s initial public
offering on December 7, 2000,
shares of Harvard Bioscience, Inc.
have been quoted on the Nasdaq
Global Market, and currently trade
under the symbol “HBIO”.
As of March 7, 2019, the Company
had 109 stockholders of record.
The Company believes that the
number of beneficial owners of
our common stock at that date was
substantially greater.
Corporate Address
Harvard Bioscience, Inc.
84 October Hill Road
Holliston, Massachusetts 01746
www.harvardbioscience.com
Independent Registered
Public Accounting Firm
Grant Thorton LLP
75 State Street
Boston, Massachusetts 02109
www.grantthornton.com
General Counsel
Burns & Levinson LLP
125 Summer Street
Boston, Massachusetts 02110
Transfer Agent
& Registrar
Computershare Limited
250 Royall Street
Canton, MA 02021
Annual Meeting
of Stockholders
The Annual Meeting of
Stockholders of Harvard
Bioscience, Inc. will be held on
Thursday, May 16, 2019 at 11:00 a.m.
local time, at the offices of
Burns & Levinson LLP, 125 Summer
Street, Boston, MA 02110.
Investor Relations
To obtain copies of this annual
report or other financial
information, please write or call:
Investor Relations
Harvard Bioscience, Inc.
84 October Hill Road
Holliston, Massachusetts 01746
508-893-8066
Dividends
Harvard Bioscience, Inc. has never
declared or paid cash dividends
on its common stock and currently
has no plans to do so in the
foreseeable future.
Patch Clamp
Developed by Nobel Prize
winners Erwin Neher and
Bert Sakmann, this trusted
technique is used in electro-
physiological studies of ion
channels in tissue sections,
individual living cells or
patches of cell membrane.
Voltage clamp or current
clamp technique is
performed in any type of
excitable cells, mostly
neurons, cardiomyocytes,
pancreatic beta cells or
muscle fibers. Experiments
include slice-recordings,
single-cell-layer-recordings,
in vivo-recordings, whole-
cell-recordings, and
single-channel-recordings.
H A R V A R D B I O S C I E N C E , I N C . • 2 0 1 8 A N N U A L R E P O R T
HBIO AR 2018 Front End_MS 4
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒
☐
Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 2018
or
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from to
Commission File Number 001-33957
HARVARD BIOSCIENCE, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or other jurisdiction of Incorporation or organization)
04-3306140
(I.R.S. Employer Identification No.)
84 October Hill Road, Holliston, Massachusetts 01746
(Address of Principal Executive Offices, including zip code)
(508) 893-8999
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, $0.01 par value
Name of each exchange on which registered
The NASDAQ Global Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ☐ NO ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES ☐ NO ☒
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 and posted on its corporate web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files). ☒ YES ☐ NO
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment
to this Form 10-K. ☐
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. (Check one):
Large accelerated filer ☐
Non-accelerated filer ☐
(Do not check if a smaller reporting company)
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 ☒
The aggregate market value of 28,753,642 shares of voting common equity held by non-affiliates of the registrant as of June 30, 2018 was
approximately $153,831,985 based on the closing sales price of the registrant’s common stock, par value $0.01 per share on that date. Shares of the
registrant’s common stock held by each officer and director and each person known to the registrant to own 10% or more of the outstanding voting power
of the registrant have been excluded in that such persons may be deemed affiliates. This determination of affiliate status is not a determination for other
purposes. The registrant has no shares of non-voting common stock authorized or outstanding.
At March 7, 2019, there were 37,667,783 shares of the registrant’s common stock issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company’s definitive Proxy Statement in connection with the 2019 Annual Meeting of Stockholders (the “Proxy Statement”), to be
filed within 120 days after the end of the Registrant’s fiscal year, are incorporated by reference into Part III of this Form 10-K. Except with respect to
information specifically incorporated by reference in this Form 10-K, the Proxy Statement is not deemed to be filed as part hereof.
HARVARD BIOSCIENCE, INC.
TABLE OF CONTENTS
ANNUAL REPORT ON FORM 10-K
For the Year Ended December 31, 2018
INDEX
PART I
Page
Item 1.
Business ........................................................................................................................................................ 1
Item 1A. Risk Factors .................................................................................................................................................. 7
Item 1B. Unresolved Staff Comments ......................................................................................................................... 19
Item 2.
Properties ...................................................................................................................................................... 19
Item 3.
Legal Proceedings ......................................................................................................................................... 19
Item 4. Mine Safety Disclosures ............................................................................................................................... 19
PART II
Item 5.
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities ....................................................................................................................................................... 20
Item 6.
Selected Financial Data ................................................................................................................................. 20
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations ........................ 20
Item 7A. Quantitative and Qualitative Disclosures about Market Risk ....................................................................... 32
Item 8.
Financial Statements and Supplementary Data ............................................................................................. 32
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ....................... 32
Item 9A. Controls and Procedures ............................................................................................................................... 32
Item 9B. Other Information ......................................................................................................................................... 35
PART III
Item 10. Directors, Executive Officers and Corporate Governance ............................................................................ 35
Item 11. Executive Compensation............................................................................................................................... 35
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ..... 35
Item 13. Certain Relationships and Related Transactions, and Director Independence .............................................. 35
Item 14. Principal Accounting Fees and Services ....................................................................................................... 35
PART IV
Item 15. Exhibits, Financial Statement Schedules ...................................................................................................... 36
Index to Consolidated Financial Statements ................................................................................................. F-1
Signatures
This Annual Report on Form 10-K contains statements that are not statements of historical fact and are forward-
looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934 (the “Exchange Act”), each as amended. The forward-looking statements are principally, but not exclusively,
contained in “Item 1: Business” and “Item 7: 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, our business strategy, our ability to raise capital or borrow
funds to consummate acquisitions and the availability of attractive acquisition candidates, our expectations regarding future
costs of product revenues, our anticipated compliance with the covenants contained in our credit facility, the adequacy of
our financial resources 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,” “strategy,”
“potential,” “objectives,” “optimistic,” “new,” “goal” 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. We discuss many of these risks in detail under the heading “Item 1A. Risk Factors” beginning on page 7 of this
Annual Report on Form 10-K. 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 factors, including factors of which we are not currently 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. Harvard Bioscience, Inc. is referred to herein as “we,” “our,” “us,” and “the Company.”
PART I
Item 1.
Business.
Overview
Harvard Bioscience, Inc., a Delaware corporation, is a global developer, manufacturer, marketer and provider of a
broad range of scientific instruments, systems, software and services used to advance life science for basic research, drug
discovery, physiologic monitoring, clinical and environmental testing. Our products and services are sold to thousands of
researchers in over 100 countries through our global sales organization, websites, catalogs, and through distributors including
Thermo Fisher Scientific Inc., VWR and other specialized distributors. We have sales and manufacturing operations in the
United States, the United Kingdom, Germany, Sweden, Spain, France, Canada, Italy and China.
Our History
Our business began in 1901 under the name Harvard Apparatus. It was founded by Dr. William T. Porter, a Professor
of Physiology at Harvard Medical School and a pioneer of physiology education. We have grown over the years with the
development and evolution of modern life science research and education. Our early inventions included ventilators based
on Dr. Porter’s design, the mechanical syringe pump for drug infusion in the 1950s, and the microprocessor controlled syringe
pump in the 1980s.
In March of 1996, a group of investors acquired a majority of the then existing business of our predecessor, Harvard
Apparatus, Inc. Following this acquisition, our focus was redirected to acquiring complimentary companies with innovative
technologies while continuing to grow the existing business through internal product development. Since 1996, we have
completed multiple business or product line acquisitions related to our continuing operations.
We are pursuing a strategy to grow the business organically as well as through strategic, accretive acquisitions,
including five acquisitions since the fourth quarter of 2014. In January 2018, we acquired Data Sciences International, Inc.
(DSI) for approximately $71.1 million. DSI, a St. Paul, Minnesota-based life science research company, is a recognized leader
in physiologic monitoring focused on delivering preclinical products, systems, services and solutions to its customers. Its
customers include pharmaceutical and biotechnology companies, as well as contract research organizations, academic labs
and government researchers. This acquisition diversifies our customer base into the biopharmaceutical and contract research
organization markets and offers revenue and cost synergies. The acquisition also helped to increase our gross profit margins.
We have also conducted a multi-year restructuring program to reduce costs, align global functions and consolidate
facilities to optimize our global footprint, divest non-core businesses and to reinvest in key areas such as sales and marketing
1
and new product development through research and development. As part of these efforts, during the first quarter of 2018,
we sold substantially all the assets of our wholly-owned subsidiary, Denville Scientific, Inc. (Denville) for approximately
$20.0 million, which included a $3.0 million earn-out provision. Denville was a laboratory products supplier that was no
longer core to our vision.
We have also developed many new product lines including: new generation Harvard Apparatus laboratory syringe
pumps, Hoefer Gel Electrophoresis systems, Biochrom spectrophotometers and amino acid analysis products, Warner
Instruments micro-incubation and perfusion products, CMA Microdialysis probes and guides, Panlab behavioral research
products, Harvard Apparatus touch screen ventilators, HEKA PatchMaster data acquisition system, Harvard Apparatus
physiological monitoring system, Warner valve control system, BTX electroporation generators, TBSI wireless in vivo
telemetry implants and MCS beta screen for diabetic research. Additionally, in 2018, following the DSI acquisition, we
introduced into the marketplace, the PhysioTel miniature telemetry devices and Buxco inhalation exposure systems.
Our Strategy
Our vision is to be a world leading life science company that excels in meeting the needs of our customers by providing
a wide breath of innovative products and solutions, while providing exemplary customer service. Our business strategy is to
grow our top-line and bottom-line, and build shareholder value through a commitment to:
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(cid:120)
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(cid:120)
commercial excellence;
organic growth;
operational efficiencies;
new product development; and
strategic acquisitions.
Our Products
Our broad core product range is currently organized into three commercial product families: Physiology, Cell,
Molecular Instruments (PCMI), Data Sciences International (DSI), and Electrophysiology (Ephys). We primarily sell our
products under brand names, including Harvard Apparatus, DSI, Ponemah, Buxco, KD Scientific, Hoefer, Biochrom, BTX,
Warner Instruments, MCS, HEKA, Hugo Sachs Elektronik, Panlab, Coulbourn Instruments, TBSI, and CMA Microdialysis.
Our products consist of instruments, consumables, systems and software. Our products include scientific instruments
like spectrophotometers and plate readers that analyze light to detect and quantify a wide range of molecular and cellular
processes, or apparatus like gel electrophoresis units. Other products and services are wireless monitors, data acquisition and
analysis products and software, and ancillary services including post-contract customer support, training and installation.
Sales prices of these products and services range from under $100 to over $100,000. We manufacture our products at our
locations in the United States, Germany, Sweden and Spain.
In addition to our proprietary manufactured products, we sell many products that are made by other manufacturers.
These distributed products accounted for approximately 15% of our revenues for the year ended December 31, 2018.
Distributed products enable us to provide our customers with a single source for their research needs, and consist of a large
variety of devices, instruments and consumable items used in experiments involving fluid handling, molecular and cell
biology, tissue, organ and animal research. Many of our proprietary manufactured products are leaders in their fields;
however, researchers often need complementary products in order to conduct particular experiments. Following is a
description of each product family.
Physiology, Cell and Molecular Instruments Product Family
Our PCMI product family includes our traditional syringe pump and peristaltic pump product lines, as well as a broad
range of instruments and accessories for tissue, organ and animal based lab research, including surgical products, infusion
systems, microdialysis instruments, behavior research systems, and isolated organ and tissue bath systems. Our product
offerings are marketed through our Harvard Apparatus, CMA Microdialysis, Panlab, Coulbourn, Hugo Sachs brands and
entities. We sell these products through our global sales force, technical service team and our global distribution channel.
The PCMI product family also includes spectrophotometers, microplate readers, amino acid analyzers, gel
electrophoresis equipment, sample preparation plates and columns, electroporation and electrofusion instruments. We market
them under the names Biochrom, BioDrop, Hoefer, Scie-plas, QuikPrep, and BTX. We sell them primarily through our
distribution arrangements with various distributors.
2
Our PCMI product family made up approximately 47.3% of our global revenues for the year ended December 31, 2018.
Data Sciences International Family
Data Sciences International (DSI) provides a complete preclinical platform to assess physiological data for research
ranging from basic research, to drug discovery, and drug development services. The Data Sciences International family
consists of the DSI and Buxco brands.
DSI develops and manufactures products and provides services for monitoring physiological parameters of animal
models used in biomedical research including:
(cid:120) The most comprehensive portfolio of implantable and externally-worn telemetry systems. These are
commonly used in research to collect cardiovascular, central nervous system, respiratory, metabolic data.
(cid:120) Turn-key respiratory system solutions encompassing plethysmograph chambers, data acquisition hardware,
(cid:120)
physiological signal analysis software, and final report generation.
Inhalation and exposure systems providing precise, homogenous aerosol delivery for up to 42 subjects, while
integrating respiratory parameters for the ultimate Delivered Dose system.
(cid:120) Powerful, GLP-capable data acquisition and analysis systems, capable of integrating third party sensors for a
more comprehensive study design.
DSI’s direct sales force supports North America, Europe, and China, with distributors supporting the rest of the world.
Our DSI family made up approximately 35.2% of our global revenues for the year ended December 31, 2018.
Electrophysiology Family
The Electrophysiology product family includes the brands Multi-Channel Systems, HEKA, TBSI and Warner
Instruments.
Multi-Channel Systems focuses on the development and manufacture of precision scientific measuring instrumentation
and equipment in the field of electrophysiology including:
(cid:120) Data acquisition systems, for use with custom amplifier configurations.
(cid:120) Complete in vivo-systems, the solution for in vivo recordings with microelectrode arrays.
(cid:120) Complete in vitro-systems for extracellular recordings from microelectrode arrays in vitro.
HEKA also develops, designs and manufactures precision electrophysiology equipment specializing in Patch Clamp
Amplifiers and both manual and automated Patch Clamp Systems along with the associated software. The brand also
specializes in instrumentation and equipment for Electrochemistry.
Warner Instruments manufactures specialized tools for Electrophysiology and Cell Biology research including cell
chambers, perfusion controllers, temperature controllers, microincubation systems and bio-sensing systems.
TBSI designs and develops in vivo neural interface systems research to aid neuroscience research, especially in the
fields of electrophysiology, psychology, neurology and pharmacology. This includes both wireless and tethered systems for
both stimulation and recording.
Our Electrophysiology product family made up approximately 17.5% of our global revenues for the year ended
December 31, 2018.
Our Customers
Our end-user customers are primarily research scientists at pharmaceutical and biotechnology companies, universities,
hospitals, government laboratories, including the United States National Institute of Health (NIH), and contract research
organizations (CROs). Our pharmaceutical and biotechnology customers have included pharmaceutical companies and
research laboratories such as Pfizer, Amgen, Inc., AstraZeneca plc, Genentech, Inc. and Johnson & Johnson. Our academic
customers include major colleges and universities such as Harvard University, Cambridge University, Johns Hopkins
University, Massachusetts Institute of Technology, Yale University, the University of California system, Baylor College of
Medicine, and the University of Texas - MD Anderson Center. Our CRO customers include Covance and Charles River
3
Laboratories. We have tens of thousands of customers worldwide and no customer accounted for more than 10% of our
revenues in 2018.
Sales and Marketing
We conduct direct sales in the United States, the United Kingdom, Germany, France, Italy, Spain, Sweden, Canada and
China. We sell primarily through distributors in other countries. For the year ended December 31, 2018, revenues from direct
sales to end-users represented approximately 59% of our revenues; and revenues from sales of our products through
distributors represented approximately 41% of our revenues.
Direct Sales
We have a global sales organization managing both direct sales and distributors. Our websites and catalogs serve as the
primary sales tool for our product lines, which includes both proprietary manufactured products and complementary products
from various suppliers. Our reputation as a leading producer of many of our manufactured products creates traffic to our
websites, enables cross-selling and facilitates the introduction of new products.
Distributors
We engage distributors for the sales of our own branded and private label products in certain areas of the world and for
certain product lines.
Research and Development
Our principal research and development mission is to develop products that address growth opportunities within the
life science research process, as well as to maintain and optimize our existing product portfolios. We maintain development
staff in many of our manufacturing facilities to design and develop new products and to re-engineer existing products to bring
them to the next generation. Our research and development expenses from continuing operations were approximately $11.0
million, and $5.6 million for the years ended December 31, 2018 and 2017, respectively. We anticipate that we will continue
to make investments in research and development activities as we deem appropriate. We plan to continue to pursue a balanced
development portfolio strategy of originating new products from internal research and acquiring products through business
and technology acquisitions.
Manufacturing
We manufacture and test the majority of our products in our principal manufacturing facilities located in the United
States, Sweden, Spain and Germany. We have considerable manufacturing flexibility at our various facilities, and each facility
can manufacture multiple products at the same time. We maintain in-house manufacturing expertise, technologies and
resources. We seek to maintain multiple suppliers for key components that are not manufactured in-house, and while some
of our products are dependent on sole-source suppliers, we do not believe our dependence upon these suppliers creates any
significant risks.
Our manufacturing operations primarily involve assembly and testing activities along with some machine based
processes.
Manufacturing Activity
Manufacturing Facility
syringe pumps, ventilators, cell injectors, molecular sample preparation products,
electroporation products, electrophysiology products, spectrophotometers, amino acid
analysis systems, low-volume, high-throughput liquid dispensers, plate readers,
behavioral research products, electrophoresis products and microdialysis products
physiological monitoring products and systems
electrophysiology products
electrophysiology products
complete organ testing systems
behavioral research products
behavioral research products
microdialysis products
Holliston, Massachusetts
New Brighton, Minnesota
Hamden, Connecticut
Reutlingen, Germany
March-Hugstetten, Germany
Barcelona, Spain
Durham, North Carolina
Kista, Sweden
4
Going forward we will continue to evaluate our manufacturing facilities and operations in order to achieve an optimal
manufacturing footprint.
Competition
The markets into which we sell our products are highly competitive, and we expect the intensity of competition to
continue or increase. We compete with many companies engaged in developing and selling tools for life science research.
Many of our competitors have greater financial, operational, sales and marketing resources, and more experience in research
and development and commercialization than we have. Moreover, our competitors may have greater name recognition than
we do, and many offer discounts as a competitive tactic. These competitors and other companies may have developed or
could in the future develop new technologies that compete with our products, which could render our products obsolete. We
cannot assure you that we will be able to make the enhancements to our technologies necessary to compete successfully with
newly emerging technologies. We believe that we offer one of the broadest selections of products to organizations engaged
in life science research. We have numerous competitors on a product line basis. We believe that we compete favorably with
our competitors on the basis of product performance, including quality, reliability and speed, technical support, price and
delivery time.
We compete with several companies that provide instruments for life science research including, Lonza Group Ltd.,
Becton Dickinson, Eppendorf AG, Kent Scientific Corporation, Razel Scientific Instruments, Inc., Ugo Basile, Danaher
Corporation, Bio-Rad Laboratories, Inc., PerkinElmer, Inc., Thermo Fisher Scientific, Inc. Notocord, Emka Technologies
and TSE Systems.
We cannot forecast if or when these or other companies may develop competitive products. We expect that other
products will compete with our products and potential products based on efficacy, safety, cost and intellectual property
positions. While we believe that these will be the primary competitive factors, other factors include, in certain instances,
availability of supply, manufacturing, marketing and sales expertise and capability.
Seasonality
Sales and earnings in our third quarter are usually flat or down from the second quarter primarily because there are a
large number of holidays and vacations during such quarter, especially in Europe. Our fourth quarter revenues and earnings
are often the highest in any fiscal year compared to the other three quarters, primarily because many of our customers tend
to spend budgeted money before their own fiscal year ends.
Intellectual Property
To establish and protect our proprietary technologies and products, we rely on a combination of patent, copyright,
trademark and trade-secret laws, as well as confidentiality provisions in our contracts. Patents or patent applications cover
certain of our new technologies. Most of our more mature product lines are protected by trade names and trade secrets only.
We have implemented a patent strategy designed to provide us with freedom to operate and facilitate commercialization
of our current and future products. Our success depends, to a significant degree, upon our ability to develop proprietary
products and technologies. We intend to continue to file patent applications as we develop new products and technologies.
Patents provide some degree of protection for our intellectual property. However, the assertion of patent protection
involves complex legal and factual determinations and is therefore uncertain. The scope of any of our issued patents may not
be sufficiently broad to offer meaningful protection. In addition, our issued patents or patents licensed to us may be
successfully challenged, invalidated, circumvented or unenforceable so that our patent rights would not create an effective
competitive barrier. Moreover, the laws of some foreign countries may protect our proprietary rights to a greater or lesser
extent than the laws of the United States. In addition, the laws governing patentability and the scope of patent coverage
continue to evolve, particularly in areas of interest to us. As a result, there can be no assurance that patents will be issued
from any of our patent applications or from applications licensed to us. As a result of these factors, our intellectual property
positions bear some degree of uncertainty.
We also rely in part on trade-secret protection of our intellectual property. We attempt to protect our trade secrets by
entering into confidentiality agreements with third parties, employees and consultants. Our employees and consultants also
sign agreements requiring that they assign to us their interests in patents and copyrights arising from their work for us.
Although many of our United States employees have signed agreements not to compete unfairly with us during their
employment and after termination of their employment, through the misuse of confidential information, soliciting employees,
soliciting customers and the like, the enforceability of these provisions varies from jurisdiction to jurisdiction and, in some
5
circumstances, they may not be enforceable. In addition, it is possible that these agreements may be breached or invalidated
and if so, there may not be an adequate corrective remedy available. Despite the measures we have taken to protect our
intellectual property, we cannot assure you that third parties will not independently discover or invent competing
technologies, or reverse engineer our trade secrets or other technologies. Therefore, the measures we are taking to protect our
proprietary rights may not be adequate.
We do not believe that our products infringe on the intellectual property rights of any third party. We cannot assure
you, however, that third parties will not claim such infringement by us or our licensors with respect to current or future
products. We expect that product developers in our market will increasingly be subject to such claims as the number of
products and competitors in our market segment grows and the product functionality in different market segments overlaps.
In addition, patents on production and business methods are becoming more common and we expect that more patents will
be issued in our technical field. Any such claims, with or without merit, could be time-consuming, result in costly litigation
and diversion of management’s attention and resources, cause product shipment delays or require us to enter into royalty or
licensing agreements. Moreover, such royalty or licensing agreements, if required, may not be on terms advantageous to us,
or acceptable at all, which could seriously harm our business or financial condition.
“Harvard” is a registered trademark of Harvard University. The marks “Harvard Apparatus” and “Harvard Bioscience”
are being used pursuant to a license agreement entered into in December 2002 between us and Harvard University.
Government Regulation
We are not subject to direct governmental regulation other than the laws and regulations generally applicable to
businesses in the domestic and foreign jurisdictions in which we operate. In particular, our current products are not subject
to pre-market approval by the United States Food and Drug Administration (“FDA”) for use on human clinical patients. In
addition, we believe we are currently in compliance with all relevant environmental laws.
Employees
As of December 31, 2018, we employed 547 employees, of which 519 are full-time and 28 are part-time. As of
December 31, 2017, we employed 434 employees, of which 413 were full-time and 21 were part-time. The increase in the
number of employees was primarily due to our acquisition of DSI in 2018, partially offset by the disposition of Denville
during 2018.
Geographical residence information for these employees is summarized in the table below:
As of December 31, 2018
United States ...........................................................................................................................................
Germany ..................................................................................................................................................
United Kingdom ......................................................................................................................................
Spain ........................................................................................................................................................
China .......................................................................................................................................................
Canada .....................................................................................................................................................
Sweden ....................................................................................................................................................
France ......................................................................................................................................................
Italy .........................................................................................................................................................
Total ........................................................................................................................................................
346
97
41
28
16
7
6
5
1
547
Geographic Area
Financial information regarding geographic areas in which we operate is provided in Note 22 of the “Notes to
Consolidated Financial Statements,” which are included elsewhere in this report.
6
Executive Officers of the Registrant
The following table shows information about our executive officers as of December 31, 2018.
Name
Jeffrey Duchemin .................
Kam Uninayar ......................
Yong Sun* ............................
Age Position
53 Chief Executive Officer, President and Director
51 Chief Financial Officer
55 Vice President and General Manager, PCMI
*Resigned effective as of January 4, 2019.
Jeffrey A. Duchemin was appointed Chief Executive Officer on August 26, 2013. He assumed the additional roles of
President on November 1, 2013 and Director on October 29, 2013. Prior to joining Harvard Bioscience, Mr. Duchemin spent
16 years with Becton Dickinson (“BD”) in progressive sales, marketing and executive leadership positions across BD’s three
business segments; BD Medical Systems, BD Diagnostic Systems, and BD Biosciences. In October 2012, BD Biosciences
Discovery Labware was acquired by Corning Life Sciences. Mr. Duchemin was a Global Business Director for Corning Life
Sciences until his departure to Harvard Bioscience. Mr. Duchemin is a transformational leader with demonstrated business
results. The depth of his experience spans across a broad range of life science research and medical device products resulting
in growth on a global basis. Mr. Duchemin earned an M.B.A. from Southern New Hampshire University and a B.S. in
accounting from the University of Massachusetts Dartmouth.
Kam Unninayar was appointed Chief Financial Officer on November 26, 2018. Prior to joining the company she was
recently Chief Financial Officer at Tetraphase, Inc. (NASDAQ:TTPH), a clinical stage biopharmaceutical company. Prior to
this, she spent more than eleven years at Thermo Fisher Scientific, a global leader in serving science, across multiple roles
leading financial operations, corporate financial planning and analysis, finance for business strategy, and acquisitions and
integrations. During her tenure there, she was Vice President of Finance for the Customer Channels group, Laboratory
Products and Services segment, and other businesses with revenues that ranged from $200 million to $4 billion. Earlier in her
career, Ms. Unninayar held finance roles with increasing responsibilities at Fortune 500 consumer companies. Ms. Unninayar
earned an M.B.A. from Wichita State University, as well as a Master of Finance and Control and Bachelor of Commerce
from the University of Delhi, India.
Yong Sun resigned as Vice President and General Manager of our PCMI product family, effective as of January 4,
2019. Previously Mr. Sun held the positions of Vice President, Commercial Operations since October 28, 2015, Vice
President, Strategic Marketing and Business Development since October 28, 2013 and Vice President, R&D since March 10,
2014. Prior to joining Harvard Bioscience, he served as Vice President of Global Marketing and Americas Sales at Beaver-
Visitec International, a company combining former ophthalmic business units from BD and Medtronic; in this role he led
global marketing to develop and implement strategic marketing plans in target surgical markets. Prior to this, he served in
progressive positions at BD, including Director of Global Marketing & United States Sales. Earlier, he served as Marketing
Manager, Global Life Sciences Market & Greater China Region at Eli Lilly & Company’s eLilly Unit (now InnoCentive,
Inc.). Mr. Sun, holds an M.B.A. from the MIT Sloan School of Management, a M.S. in environmental science & engineering
from Northeastern University and a B.S. in biochemistry from Peking University.
Available Information and Website
Our website address is www.harvardbioscience.com. Our Annual Report on Form 10-K, Quarterly Reports on
Form 10-Q, Current Reports on Form 8-K, and exhibits and amendments to those reports filed or furnished with the Securities
and Exchange Commission pursuant to Section 13(a) of the Exchange Act are available for review on our website and the
Securities and Exchange Commission’s website at www.sec.gov. Any such materials that we file with, or furnish to, the SEC
in the future will be available on our website as soon as reasonably practicable after they are electronically filed with, or
furnished to, the SEC. The information on our website is not incorporated by reference into this Annual Report on Form 10-
K.
Item 1A.
Risk Factors.
The following factors should be reviewed carefully, in conjunction with the other information contained in this Annual
Report on Form 10-K. As previously discussed, our actual results could differ materially from our forward-looking
statements. Our business faces a variety of risks. These risks include those described below and may include additional risks
and uncertainties not presently known to us or that we currently deem immaterial. If any of the events or circumstances
described in the following risk factors occur, our business operations, performance and financial condition could be
adversely affected and the trading price of our common stock could decline.
7
Reductions in customers’ research budgets or government funding may adversely affect our business.
Many of our customers representing a significant portion of our revenues are universities, government research
laboratories, private foundations and other institutions who are dependent for their funding upon grants from U.S. government
agencies, such as the United States National Institutes of Health (NIH), and similar agencies in other countries. Research and
development spending of our customers can fluctuate based on spending priorities and general economic conditions. The
level of government funding of research and development is unpredictable. There have been instances where NIH grants have
been frozen or otherwise unavailable for extended periods or directed for certain products. Any reduction or delay in
governmental spending could cause our customers to delay or forego purchases of our products. If government funding
necessary to purchase our products were to decrease, our business and results of operations could be materially adversely
affected. Spending by some of these customers fluctuates based on budget allocations and the timely passage of the annual
federal budget. An impasse in federal government budget decisions could lead to substantial delays or reductions in federal
spending.
With respect to acquisitions we have completed or may seek to consummate in the future, we have and will incur a variety
of costs, and may never realize the anticipated benefits of the acquisitions due in part to difficulties integrating the
businesses, operations and product lines.
Our business strategy includes the acquisition of businesses, technologies, services or products that we believe are a
strategic fit with our business. Most recently, in January 2018, we completed the acquisition of Data Sciences International,
Inc., (DSI) a privately held physiologic monitoring business with headquarters in St. Paul, Minnesota. With respect to these
recent acquisitions or if we undertake any future acquisition, the process of integrating the acquired business, technology,
service or product may result in unforeseen operating difficulties and expenditures and may absorb significant management
attention that would otherwise be available for ongoing development of our business. Moreover, we may fail to realize the
anticipated benefits of any acquisition as rapidly as expected or at all. Such transactions are inherently risky, and any such
recent or future acquisitions could reduce stockholders’ ownership, cause us to incur debt, expose us to future liabilities and
result in amortization expenses related to intangible assets with definite lives, which may adversely impact our ability to
undertake future acquisitions on substantially similar terms. We may also incur significant expenditures in anticipation of an
acquisition that is never realized.
Our ability to achieve the benefits of acquisitions depends in part on the integration and leveraging of technology,
operations, sales and marketing channels and personnel. The integration process is a complex, time-consuming and expensive
process and may disrupt our business if not completed in a timely and efficient manner. We may have difficulty successfully
integrating acquired businesses, and their domestic and foreign operations or product lines, and as a result, we may not realize
any of the anticipated benefits of the acquisitions we make. We cannot assure that our growth rate will equal the growth rates
that have been experienced by us and these and other acquired companies, respectively, operating as separate companies in
the past.
We have substantial debt and other financial obligations and we may incur even more debt. Any failure to meet our debt
and other financial obligations could harm our business, financial condition and results of operations.
We have substantial debt and other financial obligations and significant unused borrowing capacity. On January 31,
2018, we entered into a Financing Agreement with Cerberus Business Finance, LLC, as agent and lender (the Financing
Agreement). As of December 31, 2018, we had borrowings of $62.4 million under the Financing Agreement. The Financing
Agreement includes financial covenants relating to leverage and fixed charges, as well as other customary affirmative and
negative covenants, including limitations on our ability to incur additional indebtedness and requires lender approval for
acquisitions funded with cash, promissory notes and/or other consideration in excess of $1.0 million and for acquisitions in
excess of $0.5 million. If we are not in compliance with certain of these covenants, in addition to other actions the creditor
may require, the amounts outstanding under the Financing Agreement may become immediately due and payable. This
immediate payment may negatively impact our financial condition. In addition, any failure to make scheduled payments of
interest and principal on our outstanding indebtedness would likely harm our ability to incur additional indebtedness on
acceptable terms. Our cash flow and capital resources may be insufficient to pay interest and principal on our debt in the
future. If that should occur, our capital raising or debt restructuring measures may be unsuccessful or inadequate to meet our
scheduled debt service obligations, which could cause us to default on our obligations and further impair our liquidity.
8
The obligations under the Financing Agreement and related guarantees are secured on a first-priority basis (subject to
certain liens permitted under the Financing Agreement) by a lien on substantially all the tangible and intangible assets of our
company and the subsidiary guarantors, including all of the capital stock held by such obligors, subject to a 65% limitation
on pledges of capital stock of certain foreign subsidiaries and certain other exceptions. Our Financing Agreement and related
obligations:
(cid:120) Require us to dedicate significant cash flow to the payment of principal and interest on our debt, which reduces the
funds we have available for other purposes;
(cid:120) May limit our flexibility in planning for or reacting to changes in our business and market conditions or funding our
strategic growth plan;
(cid:120)
Impose on us additional financial and operational restrictions;
(cid:120) Expose us to interest rate risk since a portion of our debt obligations is at variable rates (which is mitigated to a
certain extent, by interest rate hedging transactions we entered into in connection with our Financing Agreement);
and
(cid:120) Restrict our ability to fund certain acquisitions.
In addition, investors may be apprehensive about investing in companies such as ours that carry a substantial amount
of leverage on their balance sheets, and this apprehension may adversely affect the price of our common stock.
Further, based upon our actual performance levels, our covenants relating to leverage and fixed charges could limit our
ability to incur additional debt, which could hinder our ability to execute our current business strategy.
Our ability to make scheduled payments on our debt and other financial obligations and comply with financial
covenants depends on our financial and operating performance. Our financial and operating performance will continue to be
subject to prevailing economic conditions and to financial, business and other factors, some of which are beyond our control.
Failure within any applicable grace or cure periods to may such payments, comply with the financial covenants, or any other
non-financial or restrictive covenant, would create a default under our Financing Agreement. The maturity date with respect
to the loans under the Financing Agreement is currently January 31, 2023. Our cash flow and existing capital resources may
be insufficient to repay our debt at maturity, in which such case prior thereto we would have to extend such maturity date, or
otherwise repay, refinance and or restructure the obligations under the Financing Agreement, including with proceeds from
the sale of assets, and additional equity or debt capital. If we are unsuccessful in obtaining such extension, or entering into
such repayment, refinance or restructure prior to maturity, or any other default existed under the Financing Agreement, our
lenders could accelerate the indebtedness under the Financing Agreement, foreclose against their collateral or seek other
remedies, which would jeopardize our ability to continue our current operations.
A portion of our revenues are derived from customers from the pharmaceutical and biotechnology industries and are
subject to risks faced by those industries. Such risks may adversely affect our financial results.
We derive a significant portion of our revenues from pharmaceutical and biotechnology companies. We expect that
pharmaceutical and biotechnology companies will continue to be a significant source of our revenues for the foreseeable
future, including in our PCMI, Ephys and Data Sciences commercial product families. As a result, we are subject to risks and
uncertainties that affect the pharmaceutical and biotechnology industries, such as government regulation, ongoing
consolidation, uncertainty of technological change, and reductions and delays in research and development expenditures by
companies in these industries.
In particular, the biotechnology industry is largely dependent on raising capital to fund its operations. If biotechnology
companies that are our customers are unable to obtain the financing necessary to purchase our products, our business and
results of operations could be adversely affected. In addition, we are dependent, both directly and indirectly, upon general
health care spending patterns, particularly in the research and development budgets of the pharmaceutical and biotechnology
industries, as well as upon the financial condition and purchasing patterns of various governments and government agencies.
As it relates to both the biotechnology and pharmaceutical industries, many companies have significant patents that have
expired or are about to expire, which could result in reduced revenues for those companies. If pharmaceutical or
biotechnology companies that are our customers suffer reduced revenues as a result of these patent expirations, they may be
unable to purchase our products, and our business and results of operations could be adversely affected.
9
Customer, vendor and employee uncertainty about the effects of any of our acquisitions could harm us.
The customers of any company we acquire, including DSI and others in the future, may, in response to the
consummation of the acquisition, delay or defer purchasing decisions. Any delay or deferral in purchasing decisions by
customers could adversely affect our business. Similarly, employees of acquired companies may experience uncertainty about
their future role until or after we execute our post-acquisition strategies. This may adversely affect our ability to attract and
retain key management, sales, marketing and technical personnel following an acquisition.
Our business is subject to economic, political and other risks associated with international revenues and operations.
We manufacture and sell our products worldwide and as a result, our business is subject to risks associated with doing
business internationally. A substantial amount of our revenues are derived from international operations, and we anticipate
that a significant portion of our sales will continue to come from outside the United States in the future. We anticipate that
revenues from international operations will likely continue to increase as a result of our efforts to expand our business in
markets abroad. In addition, a number of our manufacturing facilities and suppliers are located outside the United States. Our
foreign operations subject us to certain risks, including: effects of fluctuations in foreign currency exchange rates (discussed
below); the impact of local economic conditions; local product preferences and seasonality (discussed below) and product
requirements; local difficulty to effectively establish and expand our business and operations in international markets;
disruptions of capital and trading markets; restrictions and potentially negative tax implications of transfer of capital across
borders; differing labor regulations; other factors beyond our control, including potential political instability, terrorism, acts
of war, natural disasters and diseases; unexpected changes and increased enforcement of regulatory requirements and various
state, federal and international, intellectual property, environmental, antitrust, anti-corruption, fraud and abuse (including
anti-kickback and false claims laws) and employment laws; interruption to transportation flows for delivery of parts to us and
finished goods to our customers; and laws and regulations on foreign investment in the United States under the jurisdiction
of the Committee on Foreign Investment in the United States, or CFIUS, and other agencies, including the Foreign Investment
Risk Review Modernization Act, or FIRRMA, adopted in August 2018.
Specifically with respect to the expansion of our business into China, our financial performance may be subject to the
following risks, among others affecting companies that operate in China: the impact of declining economic growth in China;
regulation of foreign investment and business activities by the Chinese government, including recent scrutiny of foreign
companies, may limit our ability to expand our business in China; uncertainties with respect to the legal system in China may
limit the legal protections available to us in China; government restrictions on the remittance of currency out of China and
the ability of any subsidiary we may establish in China to pay dividends and make other distributions to us; and potential
unfavorable tax consequences as a result of our operations in China.
If we incur higher costs as a result of trade policies, treaties, government regulations or tariffs, we may become less
profitable.
There is currently significant uncertainty about the future relationship between the United States and China, including
with respect to trade policies, treaties, government regulations and tariffs. The current U.S. administration has called for
substantial changes to U.S. foreign trade policy including greater restrictions on international trade and significant increases
in tariffs on goods imported into the U.S. Under the current status, we do not expect that this tariff will significantly impact
any Harvard Bioscience products and thus the tariff should not have a material adverse effect on our business, financial
condition or results of operations. We are unable to predict whether or when additional tariffs will be imposed or the impact
of any such future tariff increases.
Recently enacted U.S. government tax reform could have a negative impact on the results of future operations.
On December 22, 2017, the President of the United States signed into law H.R. 1, originally known as the “Tax Cuts
and Jobs Act”, hereafter referred to as “the Tax Act”, to be effective as of January 1, 2018. The Tax Act contained certain
substantial changes to the Internal Revenue Code, some of which could have an adverse effect on our business. Among other
things, the Tax Act reduces the U.S. corporate tax rate from 35% to 21%, imposes significant additional limitations on the
deductibility of interest, and allows the expensing of capital expenditures. The Tax Act is highly complex and subject to
interpretation. The presentation of our financial condition and results of operations is based upon our current interpretation
of the provisions contained in the Tax Reform Act. The Treasury Department and the Internal Revenue Service continue to
release regulations relating to and interpretive guidance of the legislation contained in the Tax Act. Any significant variance
of our current interpretation of such legislation from any future regulations or interpretive guidance could result in a change
to the presentation of our financial condition and results of operations and could negatively affect our business.
10
Foreign currency exchange rate fluctuations may have a negative impact on our reported earnings.
We are also subject to the risks of fluctuating foreign currency exchange rates, which could have an adverse effect on
the sales price of our products in foreign markets, as well as the costs and expenses of our foreign subsidiaries. A substantial
amount of our revenues are derived from international operations, and we anticipate that a significant portion of revenues
will continue to come from outside the United States in the future. As a result, currency fluctuations among the United States
dollar, British pound, euro and the other currencies in which we do business have caused and will continue to cause foreign
currency translation and transaction gains and losses. We have not used forward exchange contracts to hedge our foreign
currency exposures. We attempt to manage foreign currency risk through the matching of assets and liabilities. In the future,
we may undertake to manage foreign currency risk through hedging methods, including foreign currency contracts. We
recognize foreign currency gains or losses arising from our operations in the period incurred. We cannot guarantee that we
will be successful in managing foreign currency risk or in predicting the effects of exchange rate fluctuations upon our future
operating results because of the number of currencies involved, the variability of currency exposure and the potential volatility
of currency exchange rates. We cannot predict with any certainty changes in foreign currency exchange rates or the degree
to which we can address these risks.
Economic conditions and regulatory changes caused by the United Kingdom’s likely exit from the European Union could
adversely affect our business.
In June 2016, the United Kingdom (the U.K.) held a referendum in which voters approved an exit from the European
Union (E.U.), commonly referred to as Brexit. On March 29, 2017, the U.K. formally notified the E.U. of its intention to
withdraw pursuant to the Treaty on European Union. The withdrawal of the U.K. from the E.U. will take effect either when
agreed upon or, in the absence of such an agreement, two years after the U.K. provided its notice of withdrawal. It appears
likely that this withdrawal will involve a process of lengthy negotiations between the U.K. and the E.U. member states to
determine the terms of the withdrawal as well as the U.K.’s relationship with the E.U. going forward. The announcement of
Brexit has resulted in significant volatility in global stock market and currency exchange rate fluctuations that resulted in
strengthening of the U.S. dollar relative to other foreign currencies in which we conduct business. The announcement of
Brexit and the likely withdrawal of the U.K. from the E.U. may also create global economic uncertainty, including an
uncertain funding environment for U.K. customers receiving funding from the E.U, which may cause our customers to closely
monitor their costs and reduce their spending budgets. The effects of Brexit will depend on any agreements the U.K. makes
to retain access to E.U. markets either during a transitional period or more permanently. Since a significant proportion of the
regulatory framework in the U.K. is derived from E.U. directives and regulations, the referendum could materially change
the regulatory regime applicable to the approval of any product candidates in the U.K. In addition, since the EMA is located
in the U.K., the implications for the regulatory review process in the E.U. has not been clarified and could result in relocation
of the EMA or a disruption in the EMA review process.
Further, Brexit could adversely affect European and worldwide economic or market conditions and could contribute to
instability in global financial markets. Brexit is likely to lead to legal uncertainty and potentially divergent national laws and
regulations as the U.K. determines which E.U. laws to replace or replicate. This could adversely affect our business, financial
condition, operating results and cash flows.
Domestic and global economic conditions could adversely affect our operations.
We are subject to the risks arising from adverse changes in domestic and global economic conditions. If global
economic and market conditions, or economic conditions in the United States, deteriorate, we may experience an adverse
effect on our business, operating results and financial condition. Concerns about credit markets, consumer confidence,
economic conditions, government spending to sponsor life science research, volatile corporate profits and reduced capital
spending could negatively impact demand for our products. If economic growth in the United States and other countries slows
or deteriorates, customers may delay or forego purchases of our products. Unstable economic, political and social conditions
make it difficult for our customers, our suppliers and us to accurately forecast and plan future business activities. If such
conditions exist, our business, financial condition and results of operations could suffer. We cannot project the extent of the
impact of the economic environment on our industry or us.
Changes in governmental regulations may reduce demand for our products, adversely impact our revenues, or increase
our expenses.
We compete in many markets in which we and our customers must comply with federal, state, local and international
regulations. We develop, configure and market our products to meet customer needs created by those regulations. These
requirements include, among other things, regulations regarding manufacturing practices, product labeling, and advertising
and post marketing reporting. We must incur expense and spend time and effort to ensure compliance with these complex
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regulations. Possible regulatory actions for non-compliance could include warning letters, fines, damages, injunctions, civil
penalties, recalls, seizures of our products, and criminal prosecution. These actions could result in, among other things,
substantial modifications to our business practices and operations; refunds, recalls, or seizures of our products; a total or
partial shutdown of production in one or more of our facilities while we or our suppliers remedy the alleged violation; and
withdrawals or suspensions of current products from the market. Any of these events could disrupt our business and have a
material adverse effect on our revenues, profitability and financial condition.
We continue to expand our business into foreign countries and international markets. If our products are not accepted in
these new markets our financial performance may suffer.
We continue to aggressively expand our sales and marketing efforts in foreign countries and international markets. The
cost and diversion of resources to these efforts may not result in an increase in revenues in our business. Expansion of our
business into new markets may be more costly and require the devotion of more of our management’s time than we anticipate,
which may hurt our business performance in other markets. Our operating results may suffer to the extent that our efforts to
expand our product sales in these new markets are delayed or prove to be unsuccessful.
The life sciences industry is very competitive.
We expect to encounter increased competition from both established and development-stage companies that continually
enter the market. These include companies developing and marketing life science instruments, systems and lab consumables,
health care companies that manufacture laboratory-based tests and analyzers, diagnostic and pharmaceutical companies,
analytical instrument companies, and companies developing life science or drug discovery technologies. Currently, our
principal competition comes from established companies that provide products that perform many of the same functions for
which we market our products. Many of our competitors have substantially greater financial, operational, marketing and
technical resources than we do. Moreover, these competitors may offer broader product lines and tactical discounts, and may
have greater name recognition. In addition, we may face competition from new entrants into the field. We may not have the
financial resources, technical expertise or marketing, distribution or support capabilities to compete successfully in the future.
In addition, we face changing customer preferences and requirements, including increased customer demand for more
environmentally-friendly products.
The life sciences industry is also subject to rapid technological change and discovery. The development of new or
improved products, processes or technologies by other companies may render our products or proposed products obsolete or
less competitive. In some instances, our competitors may develop or market products that are more effective or commercially
attractive than our current or future products. To meet the evolving needs of customers, we must continually enhance our
current and planned products and develop and introduce new products. However, we may experience difficulties that may
delay or prevent the successful development, introduction and marketing of new products or product enhancements. In
addition, our product lines are based on complex technologies that are subject to change as new technologies are developed
and introduced in the marketplace. We may have difficulty in keeping abreast of the changes affecting each of the different
markets we serve or intend to serve. Our failure to develop and introduce products in a timely manner in response to changing
technology, market demands or the requirements of our customers could cause our product sales to decline, and we could
experience significant losses.
We offer and plan to offer a broad range of products and have incurred and expect to continue to incur substantial
expenses for development of new products and enhanced versions of our existing products. The speed of technological change
in our market may prevent us from being able to successfully market some or all of our products for the length of time required
to recover development costs. Failure to recover the development costs of one or more products or product lines could
decrease our profitability or cause us to experience significant losses.
Ethical concerns surrounding the use of our products and misunderstanding of the nature of our business could adversely
affect our ability to develop and sell our existing products and new products.
Some of our products may be used in areas of research usage involving animal research and other techniques presently
being explored in the life science industry. These techniques have drawn negative attention in the public forum. Government
authorities may regulate or prohibit any of these activities. Additionally, the public may disfavor or reject these activities.
If we are not able to manage our growth, our operating profits may be adversely impacted.
Our success will depend on the expansion of our operations through both organic growth and acquisitions. Effective
growth management will place increased demands on our management team, operational and financial resources and
expertise. To manage growth, we must expand our facilities, optimize our operational, financial and management systems,
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and hire and train additional qualified personnel. Failure to manage this growth effectively could impair our ability to generate
revenues or could cause our expenses to increase more rapidly than revenues, resulting in operating losses or reduced
profitability.
Failure or inadequacy of our information technology infrastructure or software could adversely affect our day-to-day
operations and decision-making processes and have an adverse effect on our performance.
We depend on accurate and timely information and numerical data from key software applications to aid our day-to-
day business, financial reporting and decision-making and, in many cases, proprietary and custom-designed software is
necessary to operate our business. We are upgrading our disaster recovery procedures for our critical systems. However, any
disruption caused by the failure of these systems, the underlying equipment, or communication networks could delay or
otherwise adversely impact our day-to-day business and decision making, could make it impossible for us to operate critical
equipment, and could have an adverse effect on our performance, if our disaster recovery plans do not mitigate the disruption.
Disruptions could be caused by a variety of factors, such as catastrophic events or weather, power outages, or cyber-attacks
on our systems by outside parties.
An information security incident, including a cybersecurity breach, could have a negative impact to our business or
reputation
To meet business objectives, we rely on both internal information technology (IT) systems and networks, and those of
third parties and their vendors, to process and store sensitive data, including confidential research, business plans, financial
information, intellectual property, and personal data that may be subject to legal protection. The extensive information
security and cybersecurity threats, which affect companies globally, pose a risk to the security and availability of these IT
systems and networks, and the confidentiality, integrity, and availability of our sensitive data. We continually assess these
threats and make investments to increase internal protection, detection, and response capabilities, as well as ensure our third
party providers have required capabilities and controls, to address this risk. To date, we have not experienced any material
impact to the business or operations resulting from information or cybersecurity attacks; however, because of the frequently
changing attack techniques, along with the increased volume and sophistication of the attacks, there is the potential for us to
be adversely impacted. This impact could result in reputational, competitive, operational or other business harm as well as
financial costs and regulatory action.
We may experience difficulties implementing IT systems including enterprise resource planning systems.
We have been engaged in a project to upgrade and harmonize our enterprise resource planning (ERP) systems. Our
ERP systems are critical to our ability to accurately maintain books and records, record transactions, provide important
information to our management and prepare our financial statements. The implementation of any IT systems, including ERP
systems has required in the past, and may continue to require, the investment of significant financial and human resources.
In addition, we may not be able to successfully complete the implementation of the ERP systems without experiencing
difficulties. Any disruptions, delays or deficiencies in the design and implementation of any IT system, including ERP
systems could adversely affect our ability to process orders, ship products, provide services and customer support, send
invoices and track payments, fulfill contractual obligations or otherwise operate our business.
We may incur additional restructuring costs or not realize the expected benefits of our initiatives to reduce operating
expenses to date and in the future.
We may not be able to implement all of the actions that we intend to take in the restructuring of our operations and we
may not be able to fully realize the expected benefits from such realignment and restructuring plans or other similar
restructurings in the future. In addition, we may incur additional restructuring costs in implementing such realignment and
restructuring plans or other similar future plans in excess of our expectations. The implementation of our restructuring efforts,
including the reduction of our workforce, may not improve our operational and cost structure or result in greater efficiency
of our organization; and we may not be able to support sustainable revenue growth and profitability following such
restructurings.
Attractive acquisition opportunities may not be available to us in the future.
We will consider the acquisition of other businesses. However, we may not have the opportunity to make suitable
acquisitions on favorable terms in the future, which could negatively impact the growth of our business. In order to pursue
such opportunities, we may require significant additional financing, which may not be available to us on favorable terms, if
at all. We expect that our competitors, many of which have significantly greater resources than we do, will compete with us
to acquire businesses. This competition could increase prices for acquisitions that we would likely pursue.
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We may be the subject of lawsuits from counterparties to acquisitions and divestitures, including an acquiring company
or its stockholders, an acquired company’s previous stockholders, a divested company’s stockholders or our current
stockholders.
We may be the subject of lawsuits from either an acquiring company or its stockholders, an acquired company’s
previous stockholders, a divested company’s stockholders or our current stockholders. Such lawsuits could result from the
actions of the acquisition or divestiture target prior to the date of the acquisition or divestiture, from the acquisition or
divestiture transaction itself or from actions after the acquisition or divestiture. Defending potential lawsuits could cost us
significant expense and detract management’s attention from the operation of the business. Additionally, these lawsuits could
result in the cancellation of or the inability to renew certain insurance coverage that would be necessary to protect our assets.
Failure to raise additional capital or generate the significant capital necessary to implement our acquisition strategy,
expand our operations and invest in new products could reduce our ability to compete and result in less revenues.
We anticipate that our financial resources, which include available cash, cash generated from operations, and debt and
equity capacity, will be sufficient to finance operations and capital expenditures for at least the next twelve months. However,
this expectation is premised on the current operating plan, which may change as a result of many factors, including market
acceptance of new products and future opportunities with collaborators. Consequently, we may need additional funding
sooner than anticipated. In addition, our Financing Agreement is not sufficient to fund our acquisition strategy. In such case,
our inability to raise sufficient capital on favorable terms and in a timely manner (if at all) could seriously harm our business,
product development, and acquisition efforts. In addition, our Financing Agreement contains limitations on our ability to
incur additional indebtedness and requires lender approval for acquisitions funded with cash, promissory notes and/or other
consideration in excess of $1.0 million and for acquisitions in excess of $0.5 million. If future financing is not available or is
not available on acceptable terms, we may have to alter our operations or change our business strategy. We cannot assure you
that the capital required to fund operations or our acquisition strategy will be available in the future.
If we raise additional funds through the sale of equity or convertible debt or equity-linked securities, existing percentages
of ownership in our common stock will be reduced and these transactions may dilute the value of our outstanding common
stock.
We may raise additional funds through the sale of equity or convertible debt or equity-linked securities to repay our
existing indebtedness, implement our acquisition strategy, expand our operations and/or invest in new products. If we so raise
additional funds through such sales, existing percentages of ownership in our common stock will be reduced and these
transactions may dilute the value of our outstanding common stock. We may issue securities that have rights, preferences and
privileges senior to our common stock. If we raise additional funds through collaborations or licensing arrangements, we may
relinquish rights to certain of our technologies or products, or grant licenses to third parties on terms that are unfavorable.
Our stock price has fluctuated in the past and could experience substantial declines in the future.
The market price of our common stock has experienced significant fluctuations and may become volatile and could
decline in the future, perhaps substantially, in response to various factors including, but not limited to:
(cid:120) Significant sales of our common stock, whether by us or our shareholders;
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volatility of the financial markets;
uncertainty regarding the prospects of the domestic and foreign economies;
technological innovations by competitors or in competing technologies;
revenues and operating results fluctuating or failing to meet the expectations of management, securities analysts, or
investors in any quarter;
comments of securities analysts and mistakes by or misinterpretation of comments from analysts, downward
revisions in securities analysts’ estimates or management guidance;
investment banks and securities analysts becoming subject to lawsuits that may adversely affect the perception of
the market;
conditions or trends in the biotechnology and pharmaceutical industries;
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(cid:120)
(cid:120)
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announcements of significant acquisitions or financings or strategic partnerships;
failure to realize the anticipated benefits of the DSI acquisition;
non-compliance with the internal control standards pursuant to the Sarbanes-Oxley Act of 2002; and
a decrease in the demand for our common stock.
In addition, public stock markets have experienced extreme price and trading volatility. The stock market and the
NASDAQ Global Market in general, and the biotechnology industry and small cap markets in particular, have experienced
significant price and volume fluctuations that at times may have been unrelated or disproportionate to the operating
performance of those companies. These broad market and industry factors may further harm the market price of our common
stock, regardless of our operating performance. In the past, securities class action litigation has often been instituted following
periods of volatility in the market price of a company’s securities. A securities class action suit against us could result in
substantial costs, potential liabilities and the diversion of management’s attention and resources.
As a result of our spin-off of Harvard Apparatus Regenerative Technology, Inc., now known as Biostage, together with
certain related transactions, third parties may seek to hold us responsible for Biostage’s liabilities, including liabilities
that Biostage has assumed from us.
Third parties may seek to hold us responsible for Biostage’s liabilities, including any of the liabilities that Biostage
agreed to retain or assume in connection with the separation of the Biostage business from our businesses, and related spin-
off distribution. On April 14, 2017, anticipated representatives for the estate of an individual plaintiff filed a wrongful death
complaint with the Suffolk Superior Court, in the County of Suffolk, Massachusetts, against us and other defendants,
including Biostage, as well as another third party. The complaint seeks payment for an unspecified amount of damages and
alleges that the plaintiff sustained terminal injuries allegedly caused by products, including synthetic trachea scaffolds and
bioreactors, provided by certain of the named defendants and utilized in connection with surgeries performed by third parties
in 2012 and 2013. The litigation is at an early stage and we continue to vigorously defend this case through our liability
insurance carrier from whom we have requested defense and indemnification of any losses incurred in connection with this
lawsuit. Any such product liability insurance coverage may not be sufficient to satisfy all liabilities resulting from this claim.
If claims against us substantially exceed our coverage, then our business could be adversely impacted. While we believe that
such claim is without merit, we are unable to predict the ultimate outcome of such litigation. Pursuant to our agreements with
Biostage, Biostage has agreed to indemnify us for claims and losses relating to certain liabilities that it has assumed from us,
including liabilities in connection with the sale of Biostage’s products, intellectually property infringement and other
liabilities related to the operation of Biostage’s business. However, if those liabilities are significant and we are ultimately
held liable for them, we cannot assure you that Biostage will have the ability to satisfy its obligations to us, in particular due
to Biostage having limited revenues, products in early stage development and a need for additional funds in the future. If
Biostage is unable to satisfy its obligations under its indemnity to us, we may have to satisfy these obligations, which could
have an adverse impact on our financial condition, results of operations or cash flows.
If our goodwill or intangible assets become impaired, we may be required to record a significant charge to earnings.
Under accounting principles generally accepted in the United States, we review our goodwill and intangible assets for
impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Goodwill is also
required to be tested for impairment at least annually. Factors that may be considered a change in circumstances indicating
that the carrying value of our goodwill or other intangible assets may not be recoverable include a decline in our stock price
and market capitalization, future cash flows, and slower growth rates in our industry. We may be required to record a
significant charge to earnings in our financial statements during the period in which any impairment of our goodwill or other
intangible assets is determined, which could adversely impact our results of operations.
Accounting for goodwill, other intangible assets and long-lived assets may have an adverse effect on us.
We assess the recoverability of identifiable intangibles with finite lives and other long-lived assets, such as property,
plant and equipment, for impairment whenever events or changes in circumstances indicate that the carrying value may not
be recoverable in accordance with the provisions of Financial Accounting Standards Board (FASB) Accounting Standards
Codification (ASC) 360, “Property, Plant and Equipment”. In accordance with FASB ASC 350, “Intangibles-Goodwill and
Other”, goodwill and intangible assets with indefinite lives from acquisitions are evaluated annually, or more frequently, if
events or circumstances indicate there may be an impairment, to determine whether any portion of the remaining balance of
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goodwill and indefinite lived intangibles may not be recoverable. If it is determined in the future that a portion of our goodwill
and other intangible assets is impaired, we will be required to write off that portion of the asset according to the methods
defined by FASB ASC 360 and FASB ASC 350, which could have an adverse effect on net income for the period in which
the write-off occurs. At December 31, 2018, we had goodwill and intangible assets of $103.1 million, or 61%, of our total
assets and we concluded that none of our goodwill or other intangible assets was impaired.
If our accounting estimates are not correct, our financial results could be adversely affected.
Management judgment and estimates are required in the application of our Critical Accounting Policies. We discuss
these estimates in the subsection entitled critical accounting policies beginning on page 28 in Item 7, Management’s
Discussion and Analysis of Financial Condition and Results of Operations in this Annual Report. If our estimates are
incorrect, our future financial operating results and financial condition could be adversely affected.
If we fail to retain key personnel and hire, train and retain qualified employees, we may not be able to compete effectively,
which could result in reduced revenue or increased costs.
Our success is highly dependent on the continued services of key management, technical and scientific personnel. Our
management and other employees may voluntarily terminate their employment at any time upon short notice. The loss of the
services of any member of the senior management team, including the Chief Executive Officer, Jeffrey A. Duchemin; the
Chief Financial Officer, Kam Unninayar; or any of the managerial, technical or scientific staff may significantly delay or
prevent the achievement of product development, our growth strategies and other business objectives. Our future success will
also depend on our ability to identify, recruit and retain additional qualified scientific, technical and managerial personnel.
We operate in several geographic locations where labor markets are particularly competitive, including the Boston,
Massachusetts metropolitan area, England, and Germany where demand for personnel with these skills is extremely high and
is likely to remain high. As a result, competition for qualified personnel is intense, particularly in the areas of general
management, finance, information technology, engineering and science, and the process of hiring suitably qualified personnel
is often lengthy and expensive, and may become more expensive in the future. If we are unable to hire and retain a sufficient
number of qualified employees, our ability to conduct and expand our business could be seriously reduced.
If we are unable to effectively protect our intellectual property, third parties may use our technology, which would impair
our ability to compete in our markets.
Our continued success will depend in significant part on our ability to obtain and maintain meaningful patent protection
for certain of our products throughout the world. Patent law relating to the scope of claims in the technology fields in which
we operate is still evolving. The degree of future protection for our proprietary rights is uncertain. We also own numerous
United States registered trademarks and trade names and have applications for the registration of trademarks and trade names
pending. We rely on patents to protect a significant part of our intellectual property and to enhance our competitive position.
However, our presently pending or future patent applications may not be accepted and patents might not be issued, and any
patent previously issued to us may be challenged, invalidated, held unenforceable or circumvented. Furthermore, the claims
in patents which have been issued or which may be issued to us in the future may not be sufficiently broad to prevent third
parties from producing competing products similar to our products. In addition, the laws of various foreign countries in which
we compete may not protect our intellectual property to the same extent, as do the laws of the United States. If we fail to
obtain adequate patent protection for our proprietary technology, our ability to be commercially competitive could be
materially impaired.
In addition to patent protection, we also rely on protection of trade secrets, know-how and confidential and proprietary
information. To maintain the confidentiality of trade-secrets and proprietary information, we generally seek to enter into
confidentiality agreements with our employees, consultants and strategic partners upon the commencement of a relationship.
However, we may not be able to obtain these agreements in all circumstances in part due to local regulations. In the event of
unauthorized use or disclosure of this information, these agreements, even if obtained, may not provide meaningful protection
for our trade-secrets or other confidential information. In addition, adequate remedies may not exist in the event of
unauthorized use or disclosure of this information. The loss or exposure of our trade secrets and other proprietary information
would impair our competitive advantages and could have an adverse effect on our operating results, financial condition and
future growth prospects.
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The manufacture, sale and use of products and services may expose us to product liability claims for which we could have
substantial liability.
We face an inherent business risk of exposure to product liability claims if our products, services or product candidates,
including without limitation, any of our life science research tools are alleged or found to have caused injury, damage or loss.
We may in the future be unable to obtain insurance with adequate levels of coverage for potential liability on acceptable
terms or claims of this nature may be excluded from coverage under the terms of any insurance policy that we can obtain. If
we are unable to obtain such insurance or the amounts of any claims successfully brought against us substantially exceed our
coverage, then our business could be adversely impacted.
We may be involved in lawsuits to protect or enforce our patents that would be expensive and time-consuming.
In order to protect or enforce our patent rights, we may initiate patent litigation against third parties. We may also
become subject to interference proceedings conducted in the patent and trademark offices of various countries to determine
the priority of inventions. Several of our products are based on patents that are closely surrounded by patents held by
competitors or potential competitors. As a result, we believe there is a greater likelihood of a patent dispute than would be
expected if our patents were not closely surrounded by other patents. The defense and prosecution, if necessary, of intellectual
property suits, interference proceedings and related legal and administrative proceedings would be costly and divert our
technical and management personnel from their normal responsibilities. We may not prevail in any of these suits should they
occur. An adverse determination of any litigation or defense proceedings could put our patents at risk of being invalidated or
interpreted narrowly and could put our patent applications at risk of being rejected and no patents being issued.
Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation,
there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation.
For example, during the course of this kind of litigation, there could be public announcements of the results of hearings,
motions or other interim proceedings or developments in the litigation. Securities analysts or investors may perceive these
announcements to be negative, which could cause the market price of our stock to decline.
Our success will depend partly on our ability to operate without infringing on or misappropriating the intellectual property
rights of others.
We may be sued for infringing on the intellectual property rights of others, including the patent rights, trademarks and
trade names of third parties. Intellectual property litigation is costly and the outcome is uncertain. If we do not prevail in any
intellectual property litigation, in addition to any damages we might have to pay, we could be required to stop the infringing
activity, or obtain a license to or design around the intellectual property in question. If we are unable to obtain a required
license on acceptable terms, or are unable to design around any third party patent, we may be unable to sell some of our
products and services, which could result in reduced revenue.
Rising commodity and precious metals costs could adversely impact our profitability.
Raw material commodities such as resins, and precious metal commodities such as platinum are subject to wide price
variations. Increases in the costs of these commodities and the costs of energy, transportation and other necessary services
may adversely affect our profit margins if we are unable to pass along any higher costs in the form of price increases or
otherwise achieve cost efficiencies such as in manufacturing and distribution.
Regulations related to conflict minerals may force us to incur additional expenses and otherwise adversely impact our
business.
The SEC has promulgated final rules mandated by the Dodd-Frank Act regarding disclosure of the use of tin, tantalum,
tungsten and gold, known as conflict minerals, in products manufactured by public companies. These new rules require
ongoing due diligence to determine whether such minerals originated from the Democratic Republic of Congo (the DRC) or
an adjoining country and whether such minerals helped finance the armed conflict in the DRC. Reporting obligations for the
rule began on May 31, 2014 and are required annually thereafter. There will be costs associated with complying with these
disclosure requirements, including costs to determine the origin of conflict minerals in our products. The implementation of
these rules and their effect on customer, supplier and/or consumer behavior could adversely affect the sourcing, supply and
pricing of materials used in our products. As a result, we may also incur costs with respect to potential changes to products,
processes or sources of supply. We may face disqualification as a supplier for customers and reputational challenges if the
due diligence procedures we implement do not enable us to verify the origins for all conflict minerals used in our products,
including that such minerals did not originate from any of the covered conflict countries. Accordingly, the implementation
of these rules could have an adverse effect on our business, results of operations and/or financial condition.
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Provisions of Delaware law, of our charter and bylaws may make a takeover more difficult, which could cause our stock
price to decline.
Provisions in our certificate of incorporation and bylaws and in the Delaware corporate law may make it difficult and
expensive for a third party to pursue a tender offer, change in control or takeover attempt, which is opposed by management
and the board of directors. Public stockholders who might desire to participate in such a transaction may not have an
opportunity to do so. We have a staggered board of directors that makes it difficult for stockholders to change the composition
of the board of directors in any one year. These anti-takeover provisions could substantially impede the ability of public
stockholders to change our management and board of directors. Such provisions may also limit the price that investors might
be willing to pay for shares of our common stock in the future.
An active trading market for our common stock may not be sustained.
Although our common stock is quoted on the NASDAQ Global Market, an active trading market for the shares may
not be sustained. This could negatively affect the price for our common stock, including investors’ ability to buy or sell our
common stock and the listing thereof.
Your percentage ownership will be diluted in the future because of equity award issuances.
Your percentage ownership will be diluted in the future because of equity awards that we expect will be granted to
our directors, officers and employees, as well as shares of common stock, or securities convertible into common stock, we
issue in connection with future capital raising or strategic transactions. Our Third Amended and Restated 2000 Stock Option
and Incentive Plan provides for the grant of equity-based awards, including restricted stock, restricted stock units, stock
options, stock appreciation rights and other equity-based awards to our directors, officers and other employees, advisors and
consultants. The issuance of any shares of our stock would dilute the proportionate ownership and voting power of existing
security holders.
Any issuance of preferred stock in the future may dilute the rights of our common stockholders.
Our board of directors has the authority to issue up to 5,000,000 shares of preferred stock and to determine the price,
privileges and other terms of these shares. The board of directors may exercise this authority without any further approval of
stockholders. The rights of the holders of common stock may be adversely affected by the rights of future holders of preferred
stock.
Cash dividends will not likely be paid on our common stock.
Currently, we intend to retain all of our earnings to finance the expansion and development of our business and do not
anticipate paying any cash dividends to holders of our common stock in the near future. As a result, capital appreciation, if
any, of our common stock will be a stockholder’s sole source of gain for the near future.
Changes in the European regulatory environment regarding privacy and data protection regulations could have a material
adverse impact on our results of operations.
The E.U. has recently adopted a comprehensive overhaul of its data protection regime in the form of the General Data
Protection Regulation (GDPR), which comes into effect in May 2018. GDPR extends the scope of the existing E.U. data
protection law to foreign companies processing personal data of E.U. residents. The regulation imposes a strict data protection
compliance regime with severe penalties of 4% of worldwide turnover or €20 million, whichever is greater, and includes new
rights such as the right of erasure of personal data. Although the GDPR will apply across the E.U., as has been the case under
the current data protection regime, E.U. Member States have some national derogations and local data protection authorities
(DPAs) will still have the ability to interpret the GDPR, which has the potential to create inconsistencies on a country-by-
country basis. Implementation of, and compliance with the GDPR could increase our cost of doing business and/or force us
to change our business practices in a manner adverse to our business. In addition, violations of the GDPR may result in
significant fines, penalties and damage to our brand and business which could, individually or in the aggregate, materially
harm our business and reputation.
We are subject to new U.S. foreign investment regulations which may impose additional burdens on or may limit certain
investors' ability to purchase our common stock, potentially making our common stock less attractive to investors.
In October 2018, the U.S. Department of Treasury announced a pilot program to implement part of the Foreign
Investment Risk Review Modernization Act, or FIRRMA, effective November 10, 2018. The pilot program expands the
18
jurisdiction of the Committee on Foreign Investment in the United States, or CFIUS, to include certain direct or indirect
foreign investments in a defined category of U.S. companies. Among other things, FIRRMA empowers CFIUS to require
certain foreign investors to make mandatory filings and permits CFIUS to charge filing fees related to such filings. Such
filings are subject to review by CFIUS. Any such restrictions on the ability to purchase shares of our common stock that
have the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a
premium for their shares of our common stock and could also affect the price that some investors are willing to pay for our
common stock.
Item 1B.
Unresolved Staff Comments.
None.
Item 2.
Properties.
Our twelve principal facilities incorporate manufacturing, research and development, sales and marketing, and
administration functions. Our facilities consist of:
(cid:121) a leased 95,529 square foot facility in New Brighton, Minnesota;
(cid:121) a leased 83,123 square foot facility in Holliston, Massachusetts, which includes our corporate headquarters;
(cid:121) a leased 22,449 square foot facility in Reutlingen, Germany;
(cid:121) a leased 20,853 square foot facility in Barcelona, Spain;
(cid:121) a leased 12,031 square foot facility in March-Hugstetten, Germany.
We also lease additional facilities in Cambourne, England; Hamden, Connecticut; Kista, Sweden; Shanghai, China;
Les Ulis, France; St. Augustin, Germany; and Montreal, Canada.
We believe our current facilities are adequate for our needs for the foreseeable future.
Item 3.
Legal Proceedings.
On April 14, 2017, anticipated representatives for the estate of an individual plaintiff filed a wrongful death complaint
with the Suffolk Superior Court, in the County of Suffolk, Massachusetts, against the Company and other defendants,
including Biostage, Inc. (f/k/a Harvard Apparatus Regenerative Technology, Inc.), our former subsidiary that was spun off
in 2013, as well as another third party. The complaint seeks payment for an unspecified amount of damages and alleges that
the plaintiff sustained terminal injuries allegedly caused by products, including synthetic trachea scaffolds and bioreactors,
provided by certain of the named defendants and utilized in connection with surgeries performed by third parties in 2012 and
2013. The litigation is at an early stage and the Company intends to vigorously defend this case and has contacted its liability
insurance carrier to request defense and indemnification of any losses incurred in connection with this lawsuit. While we
believe that such claim is without merit, we are unable to predict the ultimate outcome of such litigation.
Item 4.
Mine Safety Disclosures
Not Applicable.
19
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities.
Price Range of Common Stock
Our common stock has been quoted on the NASDAQ Global Market since our initial public offering on December 7,
2000, and currently trades under the symbol “HBIO.” The following table sets forth the range of the high and low sales prices
per share of our common stock as reported on the NASDAQ Global Market for the quarterly periods indicated.
Fiscal Year Ended December 31, 2018
First Quarter ............................................................................................................................ $
Second Quarter ........................................................................................................................ $
Third Quarter ........................................................................................................................... $
Fourth Quarter ......................................................................................................................... $
High
Low
5.15 $
5.95 $
6.65 $
5.00 $
3.30
4.20
5.00
3.03
Fiscal Year Ended December 31, 2017
First Quarter ............................................................................................................................ $
Second Quarter ........................................................................................................................ $
Third Quarter ........................................................................................................................... $
Fourth Quarter ......................................................................................................................... $
High
Low
3.25 $
2.75 $
3.75 $
3.80 $
2.55
2.30
2.35
3.08
On March 7, 2019, the closing sale price of our common stock on the NASDAQ Global Market was $3.79 per share.
There were 109 holders of record of our common stock as of March 7, 2019. We believe that the number of beneficial owners
of our common stock at that date was substantially greater.
Dividend Policy
We have never declared or paid cash dividends on our common stock in the past and do not intend to pay cash dividends
on our common stock in the foreseeable future. Any future determination to pay cash dividends will be at the discretion of
our Board of Directors and will depend on our financial condition, results of operations, capital requirements and other factors
our Board of Directors deems relevant.
Item 6.
Selected Financial Data
Not applicable.
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Forward-Looking Statements
The following section of this Annual Report on Form 10-K entitled “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” contains statements that are not statements of historical fact and are
forward-looking statements within the meaning of federal securities laws. These statements involve known and unknown
risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially
different from any future results, performance or achievements expressed or implied by the forward-looking statements. These
statements reflect our current views with respect to future events and are based on assumptions and subject to risks and
uncertainties. Factors that may cause our actual results to differ materially from those in the forward-looking statements
include those factors described in “Item 1A. Risk Factors” beginning on page 7 of this Annual Report on Form 10-K. You
should carefully review all of these factors, as well as the comprehensive discussion of forward-looking statements on page 1
of this Annual Report on Form 10-K.
Overview
Harvard Bioscience, Inc., a Delaware corporation, is a global developer, manufacturer, marketer and provider of a
broad range of scientific instruments, systems, software and services used to advance life science for basic research, drug
discovery, physiologic monitoring, clinical and environmental testing. Our products and services are sold to thousands of
researchers in over 100 countries through our global sales organization, websites, catalogs, and through distributors including
20
Thermo Fisher Scientific Inc., VWR and other specialized distributors. We have sales and manufacturing operations in the
United States, the United Kingdom, Germany, Sweden, Spain, France, Canada, Italy and China.
We are pursuing a strategy to grow the business organically as well as through strategic, accretive acquisitions,
including five acquisitions since the fourth quarter of 2014. In January 2018, we acquired Data Sciences International, Inc.
(DSI) for approximately $71.1 million. DSI, a St. Paul, Minnesota-based life science research company, is a recognized leader
in physiologic monitoring focused on delivering preclinical products, systems, services and solutions to its customers. Its
customers include pharmaceutical and biotechnology companies, as well as contract research organizations, academic labs
and government researchers. This acquisition diversifies our customer base into the biopharmaceutical and contract research
organization markets and offers revenue and cost synergies. The acquisition also helped to increase our gross profit margins.
We have also conducted a multi-year restructuring program to reduce costs, align global functions and consolidate
facilities to optimize our global footprint, divest non-core businesses and to reinvest in key areas such as sales and marketing
and new product development through R&D. As part of these efforts, during the first quarter of 2018, we sold substantially
all the assets of our wholly-owned subsidiary, Denville Scientific, Inc. (Denville) for approximately $20.0 million, which
included a $3.0 million earn-out provision. Denville was a laboratory products supplier that was no longer core to our vision.
Our Strategy
Our vision is to be a world leading life science company that excels in meeting the needs of our customers by providing
a wide breadth of innovative products and solutions, while providing exemplary customer service. Our business strategy is
to grow our top-line and bottom-line, and build shareholder value through a commitment to:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
commercial excellence;
organic growth;
operational efficiencies;
new product development; and
strategic acquisitions.
In the table below, we provide an overview of selected operating metrics.
Revenues .............................................................................. $
Cost of revenues ...................................................................
Sales and marketing expenses ..............................................
General and administrative expenses ...................................
Research and development expenses ....................................
Amortization of intangible assets .........................................
Other expense, net ................................................................
Income from discontinued operations ..................................
Components of Operating Income
2018
120,774
57,593
24,443
21,382
10,988
5,384
8,959
1,377
% of
Revenues
2017
(dollars in thousands)
$
47.7 %
20.2 %
17.7 %
9.1 %
4.5 %
7.4 %
1.1 %
77,407
38,237
15,082
17,525
5,645
1,553
1,986
1,151
% of
Revenues
49.4 %
19.5 %
22.6 %
7.3 %
2.0 %
2.6 %
1.5 %
As previously described above, on January 22, 2018, we sold substantially all the assets of our operating subsidiary,
Denville. The sale of Denville represented a strategic shift that had a major effect on our operations and financial results. As
such and pursuant to the accounting standards, the operating results of Denville for the years ended December 31, 2018 and
2017 have been presented in discontinued operations in the consolidated statements of operations. Therefore the amounts and
percentages discussed below exclude the revenues and expenses of Denville unless otherwise described.
Revenues. We generate revenues by selling apparatus, instruments, devices, systems, software and consumables
through our distributors, direct sales force, websites and catalogs. Our websites and catalogs serve as the primary sales tools
for our various product lines. These product lines include both proprietary manufactured products and complementary
products from various suppliers. Our reputation as a leading producer in many of our manufactured products creates traffic
21
to our website, enables cross-selling and facilitates the introduction of new products. We have field sales teams in the U.S.,
Canada, the United Kingdom, Germany, France, Spain and China. In those regions where we do not have a direct sales team,
we use distributors. Revenues from direct sales to end users included in continuing operations represented approximately
59% and 55% of our revenues for the years ended December 31, 2018 and 2017, respectively.
Our products consist of instruments, consumables, and systems that are made up of several individual products. Sales
prices of these products range from under $100 to over $100,000, although are mostly priced in the range of $5,000 to
$15,000. They are mainly scientific instruments like spectrophotometers and plate readers that analyze light to detect and
quantify a wide range of molecular and cellular processes, or apparatus like gel electrophoresis units. Following the
acquisition of DSI, our products and services also include wireless monitors, data acquisition and analysis products and
software, and ancillary services including post-contract customer support, training and installation.
We use distributors for both our catalog products and our higher priced products, as well as for sales in locations where
we do not have subsidiaries or where we have existing distributors in place from acquired businesses. For the years ended
December 31, 2018 and 2017, approximately 41% and 45% of our total revenues from continuing operations, respectively,
were derived from sales to distributors.
For the years ended December 31, 2018 and 2017, approximately 85% and 82% of our revenues from continuing
operations, respectively, were derived from products we manufacture and approximately 15% and 18%, respectively, were
derived from complementary products we distribute in order to provide the researcher with a single source for all equipment
needed to conduct a particular experiment.
For the years ended December 31, 2018 and 2017, approximately 30% and 46% of our revenues from continuing
operations, respectively, were derived from sales made by our non-United States operations. As discussed later under
“Selected Results of Operations”, the increase in revenues is primarily attributable to the acquisition of DSI and the effect of
currency translation.
Changes in the relative proportion of our revenue sources between direct sales and distribution sales, and the proportion
of U.S. and non-U.S sales are primarily the result of the acquisition of DSI.
Cost of revenues. Cost of revenues includes material, labor and manufacturing overhead costs, obsolescence
charges, packaging costs, warranty costs, shipping costs and royalties. Our cost of revenues may vary over time based on the
mix of products sold. We sell products that we manufacture and products that we purchase from third parties. The products
that we purchase from third parties typically have a higher cost of revenues as a percent of revenues because the profit is
effectively shared with the original manufacturer. We anticipate that our manufactured products will continue to have a lower
cost of revenues as a percentage of revenues as compared with the cost of non-manufactured products for the foreseeable
future. Additionally, our cost of revenues as a percent of revenues will vary based on mix of direct to end user sales and
distributor sales, mix by product line and mix by geography.
Sales and marketing expenses. Sales and marketing expense consists primarily of salaries and related expenses for
personnel in sales, marketing and customer support functions. We also incur costs for travel, trade shows, demonstration
equipment, public relations and marketing materials, consisting primarily of the printing and distribution of catalogs,
supplements and the maintenance of our websites. We may from time to time expand our marketing efforts by employing
additional technical marketing specialists in an effort to increase sales of selected categories of products. We may also from
time to time expand our direct sales organizations in an effort to concentrate on key accounts or promote certain product
lines.
General and administrative expenses. General and administrative expense consists primarily of salaries and other
related costs for personnel in executive, finance, accounting, information technology and human resource functions. Other
costs include professional fees for legal and accounting services, information technology infrastructure, facility costs, investor
relations, insurance and provision for doubtful accounts.
Research and development expenses. Research and development expense consists primarily of salaries and related
expenses for personnel and spending to develop and enhance our products. Other research and development expense includes
fees for consultants and outside service providers, and material costs for prototype and test units. We expense research and
development costs as incurred. Grants received from governmental entities related to research projects are accounted for as
a reduction in research and development expense over the period of the project. We believe that investment in product
development is a competitive necessity and plan to continue to make these investments in order to realize the potential of
new technologies that we develop, license or acquire for existing markets.
22
Stock-based compensation expenses. Stock-based compensation expense for the years ended December 31, 2018
and 2017 was $3.0 million and $3.5 million, respectively. Included in stock-based compensation expense for the years ended
December 31, 2018 and 2017 was stock-based compensation related to discontinued operations of $0.2 million and $0.1
million, respectively. The stock-based compensation expense related to stock options, restricted stock units, restricted stock
units with a market condition and the employee stock purchase plan was recorded as a component of cost of revenues, sales
and marketing expenses, general and administrative expenses, research and development expenses, and income from
discontinued operations.
Selected Results of Operations
Year ended December 31, 2018 compared to year ended December 31, 2017
Unless otherwise described, the amounts and percentages in the table above and those amounts and percentages
discussed below exclude the revenues and expenses of Denville.
Revenues
Revenues for the year ended December 31, 2018 were $120.8 million, an increase of 56.0%, or $43.4 million, compared
to revenues of $77.4 million for the same period in 2017.
The increase in revenues reflects the addition of revenues from DSI in the year ended December 31, 2018 of
approximately $42.6 million, while the impact of currency translation positively impacted revenues in the period by
approximately $1.3 million. The favorability in currency translation for the year was primarily from the strengthening of the
euro and British pound against the U.S. dollar.
Reconciliation of Changes In Revenues Compared to the Same Period of the Prior Year
For the Year
Ended
December 31,
2018
Organic and DSI change ....................................................................................................................................
54.3 %
Foreign exchange effect ....................................................................................................................................
1.7 %
Total revenue change.........................................................................................................................................
56.0 %
Each reporting period, we face currency exposure that arises from translating the results of our worldwide operations
to the United States dollar at exchange rates that fluctuate from the beginning of such period. We evaluate our results of
operations on both a reported and a foreign currency-neutral basis, which excludes the impact of fluctuations in foreign
currency exchange rates. We believe that disclosing this non-GAAP financial information provides investors with an
enhanced understanding of the underlying operations of the business. This non-GAAP financial information approximates
information used by our management to internally evaluate our operating results. The non-GAAP financial information
provided in the table above should be considered in addition to, not as a substitute for, the financial information provided and
presented in accordance with accounting principles generally accepted in the United States, or GAAP.
Cost of revenues
Cost of revenues increased $19.4 million, or 50.6%, to $57.6 million for the year ended December 31, 2018 compared
with $38.2 million for the year ended December 31, 2017. The increase in cost of revenues was primarily due to the effect
on cost of revenues of the acquisition of DSI which was approximately $18.5 million. Gross profit margin as a percentage of
revenues increased to 52.3% for the year ended December 31, 2018 compared with 50.6% for 2017. The increase in gross
profit margin is primarily attributable to the effect of higher margin products following the acquisition of DSI. The increase
in gross profit margin was offset by the effect of a $3.8 million charge recognized in cost of revenues during the year ended
December 31, 2018 related to a purchase accounting inventory fair value step up amortization. This inventory fair value step
up was fully recognized into cost of revenues over approximately six months.
23
Sales and marketing expenses
Sales and marketing expenses increased $9.3 million, or 62.1%, to $24.4 million for the year ended December 31, 2018
compared with $15.1 million for the year ended December 31, 2017. The increase in sales and marketing expenses was
primarily due to the impact of the acquisition of DSI, as well as to a lesser extent, increases in employee, consulting, and
travel costs.
General and administrative expenses
General and administrative expenses increased $3.9 million, or 22.0%, to $21.4 million for the year ended December
31, 2018 compared with $17.5 million for the year ended December 31, 2017. The increase was primarily attributable to the
impact of the acquisition of DSI, as well as an increase in accrued bonus compensation. This increase was partially offset by
a decrease in stock-based compensation expense and employee costs.
Research and development expenses
Research and development expenses were $11.0 million for the year ended December 31, 2018, an increase of $5.4
million, or 94.7%, compared with $5.6 million for the year ended December 31, 2017. The increase was primarily due to the
impact of the acquisition of DSI.
Amortization of intangible assets
Amortization of intangible asset expenses was $5.4 million and $1.6 million for the years ended December 31, 2018
and 2017, respectively. The increase in amortization expense was primarily due to the addition of definite-lived intangible
assets as a result of the DSI acquisition.
Other expense, net
Other expense, net, was $9.0 million and $2.0 million for the years ended December 31, 2018 and 2017, respectively.
The increase in other expense, net was primarily due to an increase in interest expense, net as a result of higher debt balances
during the current period compared to the same period last year as well as transaction costs incurred in 2018 of approximately
$3.4 million, related to the acquisition of DSI and divestiture of Denville. These increases were offset by a decrease in foreign
currency losses as compared to the prior period. Interest expense was $5.4 million and $0.7 million for the years ended
December 31, 2018 and 2017, respectively. Currency exchange rate fluctuations included as a component of net loss resulted
in approximately $0.1 million of currency gains and $0.5 million in currency losses during the years ended December 31,
2018 and 2017, respectively.
Income taxes
Income tax from continuing operations was a benefit of $3.7 million and $0.6 million for the years ended December
31, 2018 and 2017, respectively. The effective income tax rate was 46.1% for the year ended December 31, 2018, compared
with 23.1% for the same period in 2017. The difference in our effective tax rate year over year was primarily attributable to
lower pre-tax income at certain individual subsidiaries in 2018 versus the impact of certain provisions of U.S. tax reform in
2017.
On December 22, 2017, tax reform legislation known as the Tax Cuts and Jobs Act (the Tax Act) was signed into law.
A majority of the provisions of the Tax Act are effective January 1, 2018. The Tax Act makes broad and complex changes to
the U.S. Internal Revenue Code which include, but are not limited to: (1) the reduction of the corporate income tax rate from
35% to 21%; (2) the implementation of a modified territorial tax system with a one-time transition tax on previously
unremitted earnings of foreign subsidiaries; (3) a new provision designed to tax global intangible low-taxed income (GILTI);
(4) the deduction for foreign-derived intangible income (FDII); (5) a new limitation on deductible interest expense; and (6)
limitations on the deductibility of certain executive compensation. The impacts of the Tax Act have been recorded in expense
from continuing operations and the details are discussed more fully in Note 20, Income Taxes, in the Notes to Consolidated
Financial Statements.
24
Income from discontinued operations
Discontinued operations resulted in income of $1.4 million and $1.2 million for the years ended December 31, 2018
and 2017, respectively. On January 22, 2018, we sold substantially all the assets of Denville, for approximately $20.0 million,
which included a $3.0 million earn-out provision. The results of Denville were presented in discontinued operations for both
the years ended December 31, 2018 and 2017. Income from discontinued operations for the year ended December 31, 2018
included a gain on sale of Denville of $1.3 million and an income tax benefit of $0.4 million. The income tax benefit was
mainly due to the reversal of deferred tax liabilities associated with indefinite lived intangibles following the Denville
Transaction.
Liquidity and Capital Resources
Historically, we have financed our business through cash provided by operating activities, bank borrowings, and the
issuance of common stock. Our liquidity requirements arise primarily from investing activities, including funding of
acquisitions, and other capital expenditures.
On January 22, 2018, we sold the operations of Denville, and received approximately $15.8 million, net of cash on
hand. Simultaneously, we retired the existing debt balances of approximately $11.9 million. On January 31, 2018, we entered
into a financing agreement, which comprised of a $64.0 million term loan and up to a $25.0 million line of credit. Finally, on
January 31, 2018, we acquired DSI for approximately $68.0 million, net of cash acquired.
As of December 31, 2018, we held cash and cash equivalents from continuing operations of $8.2 million, compared
with $5.2 million at December 31, 2017. As of December 31, 2018 and December 31, 2017, we had $60.8 million and $11.7
million of borrowings outstanding under our credit facility, net of deferred financing costs, respectively. Total debt, net of
cash and cash equivalents was $52.6 million at December 31, 2018, compared to $6.5 million at December 31, 2017. In
addition, we had an underfunded United Kingdom pension liability of approximately $0.9 million and $1.2 million at
December 31, 2018 and December 31, 2017, respectively.
As of December 31, 2018 and December 31, 2017, cash and cash equivalents held by our foreign subsidiaries was $3.2
million and $4.8 million, respectively. As of December 31, 2017, we changed our indefinite reinvestment assertion to provide
that all foreign cash balances above the level required for local operating expenses would be repatriated to the U.S. in tax
years after 2017. We maintain this modified assertion at December 31, 2018. As a result of the 2017 Tax Act, post-2017
dividends from qualifying Controlled Foreign Corporations are no longer taxed in the U.S. However, any dividends to the
U.S. must still be assessed for withholding tax liability as well as income state tax liability. As a result of our assertion, we
determined the potential state income tax liability related to available cash balances at foreign subsidiaries would be
immaterial in both 2018 and 2017, and we had an accrued withholding tax liability of $38 thousand as of both December 31,
2018 and December 31, 2017, related to amounts determined to be available for repatriation.
25
Condensed Cash Flow Statements
(unaudited)
Year Ended
December 31,
2018
2017
(in thousands)
Cash flows from operations:
Net loss ................................................................................................................................ $
Other adjustments to operating cash flows ..........................................................................
Changes in assets and liabilities ..........................................................................................
Net cash provided by operating activities ........................................................................
(2,922 ) $
7,481
(1,675 )
2,884
(865 )
5,733
(3,811 )
1,057
Investing activities:
Additions to property, plant and equipment ........................................................................
Acquisition, net of cash acquired ........................................................................................
Disposition, net of cash sold ................................................................................................
Other investing activities .....................................................................................................
Net cash used in investing activities ................................................................................
(986 )
(68,548 )
15,754
(16 )
(53,796 )
(890 )
-
-
(27 )
(917 )
Financing activities:
Net proceeds from issuance of debt .....................................................................................
Other financing activities ....................................................................................................
Net cash provided by (used in) financing activities .........................................................
50,502
2,551
53,053
(1,952 )
160
(1,792 )
Effect of exchange rate changes on cash .................................................................................
299
1,789
Increase in cash and cash equivalents ..................................................................................... $
2,440 $
137
Our operating activities provided cash of $2.9 million and $1.1 million for the year ended December 31, 2018 and
2017, respectively. The decrease in net cash flow from operations was primarily due to the increase in net loss as well as the
effect of changes in working capital period over period.
Our investing activities used cash of $53.8 million and $0.9 million for the year ended December 31, 2018 and 2017,
respectively. Investing activities during the year ended December 31, 2018 primarily consisted of $68.5 million paid for the
acquisition of DSI and $15.8 million received from the disposition of Denville. Investing activities during the year ended
December 31, 2017 primarily included cash used for purchases of property, plant and equipment. We spent $1.0 million and
$0.9 million on capital expenditures during the year ended December 31, 2018 and 2017, respectively.
Our financing activities have historically consisted of borrowings and repayments under our revolving credit facility
and term loans, payments of debt issuance costs and the issuance of common stock. During the year ended December 31,
2018, financing activities provided cash of $53.1 million, compared with $1.8 million of cash used by financing activities for
the year ended December 31, 2017. During the year ended December 31, 2018, we borrowed $70.7 million, repaid $20.2
million of debt and ended the year with $60.8 million of borrowings, net of deferred financing costs of $1.6 million. During
the year ended December 31, 2017, we borrowed $2.8 million under our credit facility, repaid $4.7 million of debt under our
credit facility and term loans and ended the year with $11.7 million of borrowings, net of deferred financing costs of $0.2
million. Net cash proceeds from the issuance of common stock for the years ended December 31, 2018 and 2017 was $4.6
million and $0.2 million, respectively.
Borrowing Arrangements
On January 22, 2018, in connection with the closing of the sale of Denville, we terminated the Third Amended and
Restated Credit Agreement (the Credit Agreement), dated as of May 1, 2017, among us, Brown Brothers Harriman & Co.
and each of the other lenders party thereto, and Bank of America, as administrative agent. All outstanding amounts under the
agreement were repaid in full using a portion of the proceeds of the Denville sale. At the time of repayment, there was
approximately $11.9 million of borrowings outstanding.
26
On January 31, 2018, we entered into a financing agreement by and among us and certain of our subsidiaries, as
borrowers (collectively, the Borrower), certain of our subsidiaries thereto, as guarantors, various lenders from time to time
party thereto (the Lenders), and Cerberus Business Finance, LLC, as collateral agent and administrative agent for the Lenders
(the Financing Agreement). On August 16, 2018, we and Cerberus Business Finance, LLC entered into a First Amendment
to the Financing Agreement, which such amendment modified certain provisions relating to the borrowing base and reporting,
among other things.
The Financing Agreement provides for senior secured credit facilities (the Senior Secured Credit Facilities) comprised
of a $64.0 million term loan and up to a $25.0 million revolving line of credit. The proceeds of the term loan and $4.8 million
of advances under the revolving line of credit were used to fund a portion of the DSI acquisition, and to pay fees and expenses
related thereto and the closing of the Senior Secured Credit Facilities. In addition, the revolving facility is available for use
by us and our subsidiaries for general corporate and working capital needs, and other purposes to the extent permitted by the
Financing Agreement. The Senior Secured Credit Facilities have a maturity of five years. At the closing date of the Financing
Agreement, we had approximately $14.5 million of available borrowing capacity under the revolving line of credit.
Commencing on March 31, 2018, the outstanding term loans amortize in equal quarterly installments equal to $0.4
million per quarter on such date and during each of the next three quarters thereafter, $0.6 million per quarter during the next
four quarters thereafter and $0.8 million per quarter thereafter, with a balloon payment at maturity.
The obligations under the Senior Secured Credit Facilities are unconditionally guaranteed by us and certain of our
existing and subsequently acquired or organized subsidiaries. The Senior Secured Credit Facilities and related guarantees are
secured on a first-priority basis (subject to certain liens permitted under the Financing Agreement) by a lien on substantially
all the tangible and intangible assets of the Company and its subsidiary guarantors, including all of the capital stock held by
such obligors (subject to a 65% limitation on pledges of capital stock of foreign subsidiaries), subject to certain exceptions.
Interest on all loans under the Senior Secured Credit Facilities is paid monthly. Borrowings under the Financing
Agreement accrue interest at a per annum rate equal to a LIBOR rate plus 6.25%. The loans are also subject to a 1.25%
interest rate floor for LIBOR loans and a 4.25% interest rate floor for base rate loans. As further described under Item 7A,
we have hedged a portion of the Financing Agreement using an interest rate swap.
The Financing Agreement contains customary representations and warranties and affirmative covenants applicable to
us and our subsidiaries and also contains certain restrictive covenants, including, among others, limitations on the incurrence
of additional debt, liens on property, acquisitions and investments, loans and guarantees, mergers, consolidations, liquidations
and dissolutions, asset sales, dividends and other payments in respect of our capital stock, prepayments of certain debt,
transactions with affiliates and modifications of organizational documents, material contracts, affiliated practice agreements
and certain debt agreements. The Financing Agreement also contains customary events of default.
As of December 31, 2018 and December 31, 2017, we had borrowings net of debt issuance costs of $60.8 million and
$11.7 million respectively, outstanding. The carrying value of the debt approximates fair value because the interest rate under
the obligation approximates market rates of interest available to us for similar instruments. As of December 31, 2018, we
were in compliance with all financial covenants contained in the Financing Agreement, were subject to covenant and working
capital borrowing restrictions and had available borrowing capacity under our Financing Agreement of $9.8 million.
As of December 31, 2018, the weighted effective interest rate, net of the impact of our interest rate swap, on our Term
Loan was 8.88%.
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. Based on our current operations and current operating plans, we expect that our available cash, cash generated from
current operations and debt capacity will be sufficient to finance current operations, fund our pension obligations, and finance
capital expenditures for the next 12 months and beyond. We may however need to incur additional debt or raise equity capital
for our business. Additional capital raising activities will dilute the ownership interests of existing stockholders to the extent
we raise capital by issuing equity securities and we cannot guarantee that we will be successful in raising additional capital
on favorable terms or at all.
27
Critical Accounting Policies
We believe that our critical accounting policies are as follows:
(cid:121)
(cid:121)
(cid:121)
(cid:121)
(cid:121)
(cid:121)
revenue recognition;
accounting for income taxes;
inventory;
valuation of identifiable intangible assets in business combinations;
valuation of long-lived and intangible assets and goodwill; and
stock-based compensation.
Revenue recognition. We follow the provisions of FASB ASC 606, “Revenue from Contracts with Customers”. We
recognize revenue of our products when transfer of control of these products to the customer occurs. Transfer of control
occurs when the Company has a right to payment, and the customer has legal title to the asset and the customer or their
selected carrier has possession, which is typically upon shipment. Revenues on products are generally recognized at a point
in time. We recognize revenue on our services when services are performed or over the period of time over which the customer
benefits from the service.
For sales for which transfer of control occurs upon shipment, we account for shipping and handling costs as
fulfilment costs. As such, we record the amounts billed to the customer for shipping costs as revenue and the costs within
cost of revenues upon shipment. For sales, for which control transfers to customers after shipment, we have elected to account
for shipping and handling as activities to fulfill the promise to transfer the goods to the customer. We therefore accrue for the
costs of shipping undelivered items in the period of shipment.
We make estimates evaluating our allowance for doubtful accounts. On an ongoing basis, we monitor collections and
payments from our customers and maintain a provision for estimated credit losses based upon our historical experience and
any specific customer collection issues that we have identified. Historically, such credit losses have not been significant, and
they have been within our expectations and the provisions established, however, there is no assurance that we will continue
to experience the same credit loss rates that we have in the past. A significant change in the liquidity or financial position of
our customers could have a material adverse impact on the collectability of our accounts receivable and our future operating
results.
Accounting for income taxes. We determine our annual income tax provision in each of the jurisdictions in which
we operate. This involves determining our current and deferred income tax expense that reflects accounting for differences
between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. The future
tax consequences attributable to these differences result in deferred tax assets and liabilities, which are included in our
consolidated balance sheets. We assess the recoverability of the deferred tax assets by considering whether it is more likely
than not that some portion or all of the deferred tax assets will not be realized. To the extent we believe that recovery does
not meet this “more likely than not” standard as required in FASB ASC 740, “Income Taxes”, we must establish a valuation
allowance. If a valuation allowance is established, increased or decreased in a period, we allocate the related income tax
expense or benefit to income from continuing operations in the consolidated statement of operations.
Management’s judgment and estimates are required in determining our income tax provision, deferred tax assets and
liabilities and any valuation allowance recorded against deferred tax assets. We review the recoverability of deferred tax
assets during each reporting period by reviewing estimates of future taxable income, future reversals of existing taxable
temporary differences, and tax planning strategies that would, if necessary, be implemented to realize the benefit of a deferred
tax asset before expiration. Due to our three year cumulative loss position, we concluded that a full valuation allowance was
required to offset most U.S. deferred tax assets, net of deferred tax liabilities except deferred tax liabilities related to indefinite
lived intangible assets. At December 31, 2018, we have a valuation allowance of $13.9 million, of which $13.0 million relates
to our U.S. deferred tax assets. The remainder relates to deferred tax assets in certain foreign jurisdictions.
We assess tax positions taken on tax returns, including recognition of potential interest and penalties, in accordance
with the recognition thresholds and measurement attributes outlined in FASB ASC 740. Interest and penalties recognized, if
any, would be classified as a component of income tax expense.
28
Inventory. We value our inventory at the lower of the actual cost to purchase (first-in, first-out method) and/or
manufacture the inventory or the net realizable value of the inventory. We regularly review inventory quantities on hand and
record a provision to write down excess and obsolete inventory to its estimated net realizable value if less than cost, based
primarily on historical inventory usage and estimated forecast of product demand. Since forecasted product demand quite
often is a function of previous and current demand, a significant decrease in demand could result in an increase in the charges
for excess inventory quantities on hand. In addition, our industry is subject to technological change and new product
development, and technological advances could result in an increase in the amount of obsolete inventory quantities on hand.
Therefore, any significant unanticipated changes in demand or technological developments could have a significant adverse
impact on the value of our inventory and our reported operating results.
Valuation of identifiable intangible assets acquired in business combinations. The determination of the fair value of
intangible assets, which represents a significant portion of the purchase price in our acquisitions, requires the use of significant
judgment with regard to (i) the fair value; and (ii) whether such intangibles are amortizable or not amortizable and, if the
former, the period and the method by which the intangibles asset will be amortized. We estimate the fair value of acquisition-
related intangible assets principally based on projections of cash flows that will arise from identifiable assets of acquired
businesses. The projected cash flows are discounted to determine the present value of the assets at the dates of acquisitions.
At December 31, 2018, amortizable intangible assets include existing technology, trade names, distribution agreements, in-
process research and development, customer relationships and patents. These amortizable intangible assets are amortized on
a straight-line basis over 7 to 15 years, 10 to 15 years, 4 to 5 years, 5 to 15 years, 5 to 15 years and 5 to 15 years, respectively.
Valuation of long-lived and intangible assets. In accordance with the provisions of FASB ASC 360, “Property,
Plant and Equipment”, we assess the value of identifiable intangibles with finite lives and long-lived assets for impairment
whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors we consider
important which could trigger an impairment review include the following: significant underperformance relative to expected
historical or projected future operating results; significant changes in the manner of our use of the acquired assets or the
strategy for our overall business; significant negative industry or economic trends; significant changes in who our competitors
are and what they do; significant changes in our relationship with our distributors; significant decline in our stock price for a
sustained period; and our market capitalization relative to net book value.
If we were to determine that the value of long-lived assets and identifiable intangible assets with finite lives was not
recoverable based on the existence of one or more of the aforementioned factors, then the recoverability of those assets to be
held and used would be measured by a comparison of the carrying amount of those assets to undiscounted future net cash
flows before tax effects expected to be generated by those assets. If such assets are considered to be impaired, the impairment
to be recognized would be measured by the amount by which the carrying value of the assets exceeds the fair value of the
assets.
Goodwill and Other Intangible Assets. FASB ASC 350, “Intangibles-Goodwill and Others” addresses financial
accounting and reporting for acquired goodwill and other intangible assets. Among other things, FASB ASC 350 requires
that goodwill and intangible assets with indefinite useful lives no longer be amortized, but rather tested annually for
impairment or more frequently if events or circumstances indicate that there may be impairment. Goodwill is also subject to
an annual impairment test, or more frequently, if indicators of potential impairment arise. ASU 2011-08 intends to simplify
goodwill impairment testing by permitting an assessment of qualitative factors to determine when events and circumstances
lead to the conclusion that it is necessary to perform the two-step goodwill impairment test required under ASC 350. The
two-step goodwill impairment test consists of a comparison of the fair value of our reporting units with their carrying amount.
If the carrying amount exceeds its fair value, we are required to perform the second step of the impairment test, as this is an
indication that goodwill may be impaired. The impairment loss is measured by comparing the implied fair value of the
reporting unit’s goodwill with its carrying amount. If the carrying amount exceeds the implied fair value, an impairment loss
shall be recognized in an amount equal to the excess. After an impairment loss is recognized, the adjusted carrying amount
of the intangible asset shall be its new accounting basis. Subsequent reversal of a previously recognized impairment loss is
prohibited. For unamortizable intangible assets, if the carrying amount were to exceed the fair value of the asset we would
write down the unamortizable intangible asset to fair value.
For the purpose of our goodwill analysis, we have one reporting unit. We conducted our annual impairment analysis
in the fourth quarter of fiscal year 2018. The determination of the fair value of the reporting unit requires us to make a
significant estimate on control premiums appropriate of industries in which we compete. We compared our carrying value to
our overall market capitalization.
29
The results of our test for goodwill impairment showed that the estimated fair value of our business substantially
exceeded its carrying value. We concluded that none of our goodwill was impaired. We also concluded that the fair value of
the unamortized intangible assets significantly exceeds the carrying amounts.
Stock-based compensation. We account for stock-based payment awards in accordance with the provisions of FASB
ASC 718, “Compensation—Stock Compensation”, which requires us to recognize compensation expense for all stock-based
payment awards made to employees and directors including stock options, restricted stock units and restricted stock units
with a market condition related to our Third Amended and Restated 2000 Stock Option and Incentive Plan, as well as
employee stock purchases related to our Employee Stock Purchase Plan (as amended, ESPP). We issue new shares upon
stock option exercises, upon the vesting of restricted stock units and restricted stock units with a market condition, and under
our ESPP.
FASB ASC 718 requires companies to estimate the fair value of stock-based payment awards on the date of grant
using an option-pricing model. The value of the award that vests is recognized as expense over the requisite service periods
in our consolidated statement of operations. We adopted ASU 2016-09 as of January 1, 2017. As a result of this adoption, we
have elected as an accounting policy to account for forfeitures for service based awards as they occur, with no adjustment for
estimated forfeitures.
We value stock-based payment awards, except restricted stock awards, at the grant date using the Black-Scholes
option-pricing model. We value the restricted stock units with a market condition at the grant date using a Monte-Carlo
valuation simulation. Our determination of fair value of stock-based payment awards on the date of grant using an option-
pricing model or Monte-Carlo valuation simulation is affected by our stock price as well as assumptions regarding a number
of highly complex and subjective variables. These variables include, but are not limited to our expected stock price volatility
over the term of the awards and actual and projected stock option exercise behaviors.
The fair value of restricted stock units are based on the market price of our common stock on the date of grant and are
recorded as compensation expense ratably over the applicable service period, which ranges from one to four years. Unvested
restricted stock units are forfeited in the event of termination of employment or engagement with our Company.
We record stock compensation expense on a straight-line basis over the requisite service period for all awards granted.
Impact of Foreign Currencies
Our international operations in some instances operate in a natural hedge as we sell our products in many countries and
a substantial portion of our revenues, costs and expenses are denominated in foreign currencies, especially the British pound,
the euro, the Canadian dollar and the Swedish krona.
During the year ended December 31, 2018, changes in foreign currency exchange rates resulted in a favorable
translation effect on our consolidated revenues and a favorable effect on our consolidated net loss. Changes in foreign
currency exchange rates resulted in a favorable effect on revenues of approximately $1.3 million and an unfavorable effect
on expenses of approximately $1.0 million.
The loss associated with the translation of foreign equity into U.S. dollars included as a component of comprehensive
(loss) gain during the year ended December 31, 2018, was approximately $2.9 million, compared to a gain of $4.4 million
for the year ended December 31, 2017.
Currency exchange rate fluctuations included as a component of net loss resulted in approximately $0.1 million in
currency gains and $0.5 million in currency losses during the year ended December 31, 2018 and 2017, respectively.
Recently Issued Accounting Pronouncements
In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU)
2016-02, Leases, which is intended to improve financial reporting about leasing transactions. The update requires a lessee to
record on the balance sheet the assets and liabilities for the rights and obligations created by lease terms of more than
12 months. The update is effective for fiscal years beginning after December 15, 2018. A modified retrospective transition
approach is required for leases existing at, or entered into after, the beginning of the earliest comparative period presented in
the financial statements, with certain practical expedients available. We expect to utilize a practical expedient in our method
of adoption of the standard. Under this expedient, which is a “current-period adjustment method,” we would apply ASC 842
as of January 2019 and record a cumulative-effect adjustment to retained earnings as of that date.
30
We have made substantial progress in our assessment over the impact of the standard and determined that only material
leases that we hold are our building leases. Upon adoption of the standard, we preliminarily expect to record a right of use
asset in the range of approximately $9 to $11 million and a lease liability in the range of approximately $10 to $12 million on
our consolidated balance sheet. The finalization of our assessment may result in changes to our estimates that may impact
our preliminary estimate of the cumulative effect.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement
of Credit Losses on Financial Instruments, which amends the impairment model by requiring entities to use a forward-looking
approach based on expected losses rather than incurred losses to estimate credit losses on certain types of financial
instruments, including trade receivables. This may result in the earlier recognition of allowances for losses. The ASU is
effective for public entities for fiscal years beginning after December 15, 2019, with early adoption permitted. In November
2018, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments—Credit Losses,
which provided additional implementation guidance on the previously issued ASU. We have not yet completed our
assessment of the impact of the new standard on our consolidated financial statements. Currently, we believe that the most
notable impact of this ASU will relate to our processes around the assessment of the adequacy of our allowance for doubtful
accounts on trade accounts receivable and the recognition of credit losses.
In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815) which amends the hedge
accounting recognition and presentation requirements in ASC 815 Derivatives and Hedging. The Board’s objectives in
issuing the ASU are to (1) improve the transparency and understandability of information conveyed to financial statement
users about an entity’s risk management activities by better aligning the entity’s financial reporting for hedging relationships
with those risk management activities and (2) reduce the complexity of and simplify the application of hedge accounting by
preparers. The ASU is effective for annual reporting periods, including interim periods within those annual reporting periods,
beginning after December 15, 2018. Early adoption is permitted, including adoption in any interim period. We are evaluating
the requirements of this guidance and have not yet determined the impact of the adoption on our consolidated financial
position, results of operations and cash flows.
In August 2018, the FASB issued ASU No. 2018-14, Disclosure Framework—Changes to the Disclosure Requirements
for Defined Benefit Plans, which amends ASC 715 to add, remove and clarify disclosure requirements related to defined
benefit pension and other postretirement plans. The ASU is effective for public entities for fiscal years beginning after
December 15, 2020, with early adoption permitted. We have not yet completed our assessment of the impact of the new
standard on our consolidated financial statements.
Recently Adopted Accounting Pronouncements
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, a new accounting standard that
provides for a comprehensive model to use in the accounting for revenue arising from contracts with customers that will
replace most existing revenue recognition guidance within generally accepted accounting principles in the United States.
Under this standard, revenue will be recognized to depict the transfer of promised goods or services to customers in an amount
that reflects the consideration to which we expect to be entitled in exchange for those goods or services.
We adopted this standard as of January 1, 2018 using the modified retrospective approach. As part of the
implementation of the standard, we identified our significant revenue streams, which currently consist primarily of product
revenue transactions, and service, maintenance and extended warranty transactions on certain product sales. The timing of
recognizing revenues for these revenue streams did not materially change. Additionally, there were no material changes to
business processes, systems and controls. Our updated revenue recognition policy and additional disclosures are presented in
Note 17.
In May 2017, the FASB issued ASU 2017-09, Stock compensation (Topic 718): Scope of modification
accounting which amends the scope of modification accounting for share-based payment arrangements. The ASU provides
guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be
required to apply modification accounting under ASC 718. Specifically, an entity would not apply modification accounting
if the fair value, vesting conditions, and classification of the awards are the same immediately before and after the
modification. The ASU is effective for annual reporting periods, including interim periods within those annual reporting
periods, beginning after December 15, 2017. We adopted this guidance on January 1, 2018, and the new standard did not
have a material impact on our consolidated financial position, results of operations and cash flows.
31
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
The majority of our manufacturing and testing of products occurs in our facilities in the United States, Germany,
Sweden and Spain. We sell our products globally through our distributors, direct sales force, websites and catalogs. As a
result, our financial results are affected by factors such as changes in foreign currency exchange rates and weak economic
conditions in foreign markets.
We collect amounts representing a substantial portion of our revenues and pay amounts representing a substantial
portion of our operating expenses in foreign currencies. As a result, changes in currency exchange rates from time to time
may affect our operating results.
We are exposed to market risk from changes in interest rates primarily through our financing activities. As of December
31, 2018, we had $60.8 million outstanding under our Financing Agreement, net of deferred financing costs.
As noted above under the heading “Borrowing Arrangements”, on January 22, 2018, we terminated the Credit
Agreement, and on January 31, 2018, entered into the Financing Agreement. As a result of terminating the Credit Agreement,
we unwound our previously existing swap agreement and received an immaterial amount of proceeds. On February 16, 2018,
we entered into a new interest rate swap contract with PNC bank with a notional amount of $36.0 million and a termination
date of January 31, 2023 in order to hedge the risk of changes in the effective benchmark interest rate (LIBOR) associated
with the Financing Agreement. The swap contract converted specific variable-rate debt into fixed-rate debt and fixed the
LIBOR rate associated with a portion of the term loan under the Financing Agreement at 2.72%.
As of December 31, 2018, the weighted effective interest rates, net of the impact of our interest rate swaps, on our
Term Loan was 8.88%. Assuming no other changes which would affect the margin of the interest rate, the estimated effect
of interest rate fluctuations on outstanding borrowings under our Financing Agreement as of December 31, 2018 is quantified
and summarized as follows:
Interest
expense
increase
(in thousands)
283
566
If compared to the rate as of December 31, 2018
Interest rates increase by 1% ............................................................................................................................. $
Interest rates increase by 2% ............................................................................................................................. $
Item 8.
Financial Statements and Supplementary Data.
The information required by this item is contained in the consolidated financial statements filed as part of this Annual
Report on Form 10-K and is listed under Item 15 of Part IV below.
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
This Report includes the certifications of our Chief Executive Officer and Chief Financial Officer required by Rule
13a-14 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). See Exhibits 31.1 and 31.2. This Item 9A
includes information concerning the controls and control evaluations referred to in those certifications.
(a) Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures refer to controls and other procedures designed to ensure that information required
to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported,
within the time periods specified in the rules and forms of the U.S. Securities and Exchange Commission. Disclosure controls
and procedures include, without limitation, controls and procedures designed to ensure that information required to be
disclosed by us in our reports that we file or submit under the Exchange Act is accumulated and communicated to our
management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions
regarding our required disclosure. In designing and evaluating our disclosure controls and procedures, our management
recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable
assurance of achieving the desired control objectives, and management was required to apply its judgment in evaluating and
implementing possible controls and procedures.
32
We carried out an evaluation, under the supervision and with the participation our Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered in this Report. Based upon the
evaluation described above, our Chief Executive Officer and Chief Financial Officer have concluded that they believe that
our disclosure controls and procedures were effective, as of December 31, 2018, in providing reasonable assurance that
information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and
communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely
decisions regarding required disclosures, and is recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission’s rules and forms.
(b) Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Our internal control over financial reporting is a process
designed by and under the supervision of our Chief Executive Officer and Chief Financial Officer and effected by our
management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting
principles. Our internal control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets,
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial
statements for external purposes in accordance with generally accepted accounting principles, (3) provide reasonable
assurance that receipts and expenditures are being made only in accordance with authorizations of management and directors,
and (4) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition
of assets that could have a material effect on the consolidated financial statements.
Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. It is
a process that involves human diligence and compliance and is therefore subject to human error and misjudgment. In general,
evaluations of effectiveness for future periods are subject to risk as controls may become inadequate due to changes in
conditions or the degree of compliance with key processes or procedures could deteriorate.
Our management evaluated the effectiveness of our internal control over financial reporting as of December 31, 2018
using the criteria set forth in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). As a result of that evaluation, management has concluded that our
internal control over financial reporting was effective as of December 31, 2018.
The Company closed the acquisition of DSI on January 31, 2018. DSI's total assets and revenue constituted 47.6% and
35.2%, respectively, of the Company’s consolidated total assets and revenue as shown on our consolidated financial
statements as of and for the year ended December 31, 2018. As the acquisition occurred in the first quarter of fiscal 2018, the
Company excluded DSI's internal control over financial reporting from the scope of the assessment of the effectiveness of
the Company’s disclosure controls and procedures. This exclusion is in accordance with the general guidance issued by the
Staff of the Securities and Exchange Commission that an assessment of a recently-acquired business may be omitted from
the scope in the year of acquisition, if specified conditions are satisfied.
The effectiveness of our internal control over financial reporting as of December 31, 2018 has also been audited by
Grant Thornton LLP, our independent registered public accounting firm, as stated in their report, which is included below in
Item 9A(e).
(c) Changes in Internal Controls Over Financial Reporting
There has been no change in the Company's internal control over financial reporting as of December 31, 2018, that
has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.
(d) Inherent Limitations on Effectiveness of Controls
The design of any system of control is based upon certain assumptions about the likelihood of future events, and there
can be no assurance that any design will succeed in achieving its stated objectives under all future events, no matter how
remote, that controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may not deteriorate. Because of their inherent limitations, systems of control may not prevent or detect
all misstatements. Accordingly, even effective systems of control can provide only reasonable assurance of achieving their
control objectives.
33
(e) Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
Harvard Bioscience, Inc.:
Opinion on internal control over financial reporting
We have audited the internal control over financial reporting of Harvard Bioscience, Inc.(a Delaware corporation) and
subsidiaries (the “Company”) as of December 31, 2018, based on criteria established in the 2013 Internal Control—Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion,
the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018,
based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December 31, 2018, and our
report dated March 18, 2019 expressed an unqualified opinion on those financial statements.
Basis for opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s
Report on Internal Control Over Financial Reporting (“Management’s Report”). Our responsibility is to express an opinion
on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered
with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in
all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the
risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based
on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that
our audit provides a reasonable basis for our opinion.
Our audit of, and opinion on, the Company’s internal control over financial reporting does not include the internal control
over financial reporting of Data Sciences International, Inc. (DSI), a wholly-owned subsidiary, whose financial statements
reflect total assets and revenues constituting 47.6 and 35.2 percent, respectively, of the related consolidated financial
statement amounts as of and for the year ended December 31, 2018. As indicated in Management’s Report, DSI was acquired
during 2018. Management’s assertion on the effectiveness of the Company’s internal control over financial reporting
excluded internal control over financial reporting of DSI.
Definition and limitations of internal control over financial reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ GRANT THORNTON LLP
Boston, Massachusetts
March 18, 2019
34
Item 9B. Other Information.
None.
Item 10. Directors, Executive Officers and Corporate Governance.
PART III
Incorporated by reference to our definitive Proxy Statement to be filed pursuant to Regulation 14A under the Exchange
Act, in connection with our 2019 Annual Meeting of Stockholders. Information concerning executive officers of our
Company is included in Part I of this Annual Report on Form 10-K as Item 1. Business- Executive Officers of the Registrant
and incorporated herein by reference.
Item 11. Executive Compensation.
Incorporated by reference to our definitive Proxy Statement to be filed pursuant to Regulation 14A under the Exchange
Act in connection with our 2019 Annual Meeting of Stockholders.
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Incorporated by reference to our definitive Proxy Statement to be filed pursuant to Regulation 14A under the Exchange
Act in connection with our 2019 Annual Meeting of Stockholders.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Incorporated by reference to our definitive Proxy Statement to be filed pursuant to Regulation 14A under the Exchange
Act in connection with our 2019 Annual Meeting of Stockholders.
Item 14. Principal Accounting Fees and Services.
Incorporated by reference to our definitive Proxy Statement to be filed pursuant to Regulation 14A under the Exchange
Act in connection with our 2019 Annual Meeting of Stockholders.
35
Item 15. Exhibits, Financial Statement Schedules.
(a) Documents Filed. The following documents are filed as part of this Annual Report on Form 10-K or incorporated by
reference as indicated:
1
Financial Statements. The consolidated financial statements of Harvard Bioscience, Inc. and its subsidiaries filed
under this Item 15:
Page
Index to Consolidated Financial Statements .................................................................................................. F-1
Report of Independent Registered Public Accounting Firm .......................................................................... F-2
Consolidated Balance Sheets as of December 31, 2018 and 2017 ................................................................ F-3
Consolidated Statements of Operations for the years ended December 31, 2018 and 2017 ......................... F-4
Consolidated Statements of Comprehensive (Loss) Income for the years ended December 31, 2018 and
2017 ............................................................................................................................................................... F-5
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2018 and 2017.......... F-6
Consolidated Statements of Cash Flows for the years ended December 31, 2018 and 2017......................... F-7
Notes to Consolidated Financial Statements ................................................................................................. F-8
2
Exhibits and Exhibit Index. See the Exhibit Index included as the last part of this Annual Report on Form 10-K,
which is incorporated herein by reference.
36
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
HARVARD BIOSCIENCE, INC.
Page
Report of Independent Registered Public Accounting Firm .......................................................................................... F-2
Consolidated Balance Sheets as of December 31, 2018 and 2017 ................................................................................ F-3
Consolidated Statements of Operations for the years ended December 31, 2018 and 2017 ......................................... F-4
Consolidated Statements of Comprehensive (Loss) Income for the years ended December 31, 2018 and 2017 .......... F-5
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2018 and 2017 ......................... F-6
Consolidated Statements of Cash Flows for the years ended December 31, 2018 and 2017 ........................................ F-7
Notes to Consolidated Financial Statements ................................................................................................................. F-8
F-1
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
Harvard Bioscience, Inc.:
Opinion on the financial statements
We have audited the accompanying consolidated balance sheets of Harvard Bioscience, Inc. (a Delaware corporation) and
subsidiaries (the “Company”) as of December 31, 2018 and 2017, the related consolidated statements of operations,
comprehensive loss, changes in stockholders’ equity, and cash flows for each of the two years in the period ended December
31, 2018, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements
present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the
results of its operations and its cash flows for each of the two years in the period ended December 31, 2018, in conformity
with accounting principles generally accepted in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2018, based on criteria established
in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (“COSO”), and our report dated March 18, 2019 expressed an unqualified opinion.
Basis for opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion
on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and
are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether
due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our audits also
included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the
overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ GRANT THORNTON LLP
We have served as the Company’s auditor since 2017.
Boston, Massachusetts
March 18, 2019
F-2
HARVARD BIOSCIENCE, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
December 31,
2018
December 31,
2017
Assets
Current assets:
Cash and cash equivalents ................................................................................................... $
Accounts receivable, net of allowance for doubtful accounts of $332 and $193,
respectively ......................................................................................................................
Inventories ...........................................................................................................................
Other receivables and other assets .......................................................................................
Current assets held for sale ..................................................................................................
Total current assets ..........................................................................................................
Property, plant and equipment, net ..........................................................................................
Deferred income tax assets ......................................................................................................
Amortizable intangible assets, net ...........................................................................................
Goodwill ..................................................................................................................................
Indefinite lived intangible assets .............................................................................................
Other assets .............................................................................................................................
Long term assets held for sale .................................................................................................
Total assets .............................................................................................................................. $
8,173 $
5,192
21,463
25,087
3,109
-
57,832
5,898
211
44,532
57,304
1,232
1,604
-
168,613 $
13,382
16,848
3,709
8,404
47,535
3,743
182
10,030
36,336
1,244
324
9,960
109,354
Liabilities and Stockholders' Equity
Current liabilities:
Current portion, long-term debt ........................................................................................... $
Accounts payable ................................................................................................................
Deferred revenue .................................................................................................................
Accrued income taxes .........................................................................................................
Accrued expenses ................................................................................................................
Other liabilities – current .....................................................................................................
Current liabilities held for sale ............................................................................................
Total current liabilities ....................................................................................................
Long-term debt, less current installments ................................................................................
Deferred income tax liabilities - non-current ..........................................................................
Other long term liabilities ........................................................................................................
Long term liabilities held for sale ............................................................................................
Total liabilities.........................................................................................................................
1,999 $
7,359
3,820
978
5,762
1,588
-
21,506
58,796
2,301
3,286
-
85,889
2,765
4,410
505
395
3,816
293
1,857
14,041
8,983
2,653
1,466
1,311
28,454
Commitments and contingencies
Stockholders' equity:
Preferred stock, par value $0 per share, 5,000,000 shares authorized .................................
Common stock, par value $0 per share, 80,000,000 shares authorized; 45,124,309 and
42,763,985 shares issued and 37,378,802 and 35,018,478 shares outstanding,
respectively ......................................................................................................................
Additional paid-in-capital ....................................................................................................
Accumulated deficit ............................................................................................................
Accumulated other comprehensive loss ..............................................................................
Treasury stock at cost, 7,745,507 common shares ..............................................................
Total stockholders' equity ................................................................................................
Total liabilities and stockholders' equity ................................................................................. $
-
-
436
226,377
(119,889 )
(13,532 )
(10,668 )
82,724
168,613 $
419
218,792
(116,967 )
(10,676 )
(10,668 )
80,900
109,354
See accompanying notes to consolidated financial statements.
F-3
HARVARD BIOSCIENCE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Year Ended December 31,
2018
2017
Revenues ................................................................................................................................. $
Cost of revenues (exclusive of items shown separately below) ..............................................
Gross profit ..........................................................................................................................
120,774 $
57,593
63,181
Sales and marketing expenses .................................................................................................
General and administrative expenses ......................................................................................
Research and development expenses .......................................................................................
Amortization of intangible assets ............................................................................................
Total operating expenses, net ..............................................................................................
24,443
21,382
10,988
5,384
62,197
77,407
38,237
39,170
15,082
17,525
5,645
1,553
39,805
Operating income (loss) .........................................................................................................
984
(635 )
Other income (expense):
Foreign exchange ................................................................................................................
Interest expense, net ............................................................................................................
Other expense, net ...............................................................................................................
Other expense, net ...................................................................................................................
Loss from continuing operations before income taxes ............................................................
Income tax benefit ...................................................................................................................
Loss from continuing operations .............................................................................................
Discontinued operations:
Income from discontinued operations before income taxes ................................................
Income tax benefit ...............................................................................................................
Income from discontinued operations, net of tax ................................................................
Net loss .................................................................................................................................... $
(Loss) earnings per share:
Basic loss per common share from continuing operations .................................................. $
Discontinued operations ......................................................................................................
Basic loss per common share .............................................................................................. $
Diluted loss per common share from continuing operations ............................................... $
Discontinued operations ......................................................................................................
Diluted loss per common share ........................................................................................... $
148
(5,367 )
(3,740 )
(8,959 )
(7,975 )
(3,676 )
(4,299 )
936
(441 )
1,377
(2,922 ) $
(0.12 ) $
0.04
(0.08 ) $
(0.12 ) $
0.04
(0.08 ) $
(534 )
(713 )
(739 )
(1,986 )
(2,621 )
(605 )
(2,016 )
534
(617 )
1,151
(865 )
(0.06 )
0.03
(0.02 )
(0.06 )
0.03
(0.02 )
Weighted average common shares:
Basic ....................................................................................................................................
Diluted .................................................................................................................................
36,453
36,453
34,753
34,753
See accompanying notes to consolidated financial statements.
F-4
HARVARD BIOSCIENCE, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (INCOME)
(In thousands)
Year Ended December 31,
2018
2017
Net loss .................................................................................................................................... $
Other comprehensive (loss) income:
Foreign currency translation adjustments ................................................................................
Derivatives qualifying as hedges, net of tax:
Loss on derivative instruments designated and qualifying as cash flow hedges .............
Amounts reclassified from accumulated other comprehensive (loss) income to net
(loss) income ................................................................................................................
Derivatives qualifying as hedges, net of tax ........................................................................
Defined benefit pension plans, net of tax:
Amortization of net losses included in net periodic pension costs, net of tax expense of
$56 and $62 in 2018 and 2017, respectively.................................................................
Net (loss) gain, net of tax benefit of $10 and $246 in 2018 and 2017, respectively ........
Defined benefit pension plans, net of tax ............................................................................
Other comprehensive (loss) income ........................................................................................
Comprehensive (loss) income ................................................................................................. $
(2,922 ) $
(865 )
(2,875 )
4,445
(343 )
136
(207 )
275
(49 )
226
(2,856 )
(5,778 ) $
(24 )
61
37
300
1,200
1,500
5,982
5,117
See accompanying notes to consolidated financial statements.
F-5
HARVARD BIOSCIENCE, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)
Number
of
Shares
Issued
Common
Stock
Additional
Paid-in
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Income (Loss)
Treasury
Stock
Total
Stockholders’
Equity
Balance at December 31, 2016 .... 42,187
418 215,134
(116,030 )
(16,658 ) (10,668 )
72,196
Share based payment change
in accounting principle .........
Stock option exercises .............
Stock purchase plan, net ..........
Vesting of restricted stock
-
143
76
-
2
-
72
188
140
(72 )
-
-
-
-
-
-
-
-
units ......................................
Shares withheld for taxes ........
Stock compensation expense ...
Net income ..............................
Other comprehensive loss .......
489
(131 )
-
-
-
Balance at December 31, 2017 .... 42,764
Stock option exercises ............. 1,696
89
Stock purchase plan .................
Vesting of restricted stock
units ......................................
Shares withheld for taxes ........
Stock compensation expense ...
Net loss ....................................
Other comprehensive loss .......
915
(340 )
-
-
-
Balance at December 31, 2018 .... 45,124 $
-
(1 )
-
-
-
-
(242)
3,500
-
-
419 218,792
5,149
17
159
1
-
-
-
(865 )
-
(116,967 )
-
-
-
-
-
-
5,982
-
-
-
-
-
(10,676 ) (10,668 )
-
-
-
-
-
(1 )
-
-
-
-
-
-
(767)
-
3,044
(2,922 )
-
-
-
436 $ 226,377 $ (119,889 ) $
-
-
-
-
(2,856 )
-
-
-
-
-
(13,532 ) $ (10,668 ) $
-
190
140
-
(243 )
3,500
(865 )
5,982
80,900
5,166
160
-
(768 )
3,044
(2,922 )
(2,856 )
82,724
See accompanying notes to consolidated financial statements.
F-6
HARVARD BIOSCIENCE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Cash flows from operating activities:
Net loss ................................................................................................................................ $
(2,922 ) $
(865 )
Adjustments to reconcile net loss to net cash provided by operating activities:
Year Ended December 31,
2018
2017
Stock compensation expense ...........................................................................................
Depreciation ....................................................................................................................
Gain on sale of Denville ..................................................................................................
Gain on disposal of fixed assets, net ................................................................................
Loss on sale of AHN .......................................................................................................
Amortization of catalog costs ..........................................................................................
Provision for (recovery of) allowance for doubtful accounts ..........................................
Amortization of intangible assets ....................................................................................
Amortization of deferred financing costs ........................................................................
Deferred income taxes .....................................................................................................
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable ..................................................................
Decrease (increase) in inventories ...............................................................................
Increase in other receivables and other assets .............................................................
Increase (decrease) in trade accounts payable .............................................................
Increase in accrued income taxes ................................................................................
Decrease in accrued expenses......................................................................................
Increase in deferred revenue ........................................................................................
Decrease in other liabilities .........................................................................................
Net cash provided by operating activities ................................................................
Cash flows used in investing activities:
Additions to property, plant and equipment ........................................................................
Additions to catalog costs ....................................................................................................
Proceeds from sales of property, plant and equipment ........................................................
Acquisition, net of cash acquired ........................................................................................
Disposition, net of cash sold ................................................................................................
Net cash used in investing activities ................................................................................
Cash flow provided by (used in) financing activities:
Proceeds from issuance of debt ...........................................................................................
Repayments of debt .............................................................................................................
Payments of debt issuance costs ..........................................................................................
Net proceeds from issuance of common stock ....................................................................
Net cash provided by (used in) financing activities .........................................................
Effect of exchange rate changes on cash .................................................................................
Increase in cash and cash equivalents .....................................................................................
Cash and cash equivalents at the beginning of period, including cash included in assets held
3,044
2,423
(1,251 )
(3 )
-
28
25
5,431
645
(2,861 )
(2,792 )
2,554
(124 )
1,593
612
(3,149 )
2,492
(2,861 )
2,884
(986 )
(20 )
4
(68,548 )
15,754
(53,796 )
70,700
(20,198 )
(2,006 )
4,557
53,053
299
2,440
3,500
1,317
-
(12 )
93
42
(109 )
2,442
44
(1,584 )
196
(548 )
(102 )
(918 )
212
(736 )
95
(2,010 )
1,057
(890 )
(39 )
12
-
-
(917 )
2,750
(4,702 )
-
160
(1,792 )
1,789
137
for sale .................................................................................................................................
5,733
5,596
Cash and cash equivalents at the end of period, including cash included in assets held for
sale ....................................................................................................................................... $
8,173 $
5,733
Supplemental disclosures of cash flow information:
Cash paid for interest ........................................................................................................... $
Cash refunded for income taxes .......................................................................................... $
4,987 $
98 $
686
13
See accompanying notes to consolidated financial statements.
F-7
HARVARD BIOSCIENCE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization
Harvard Bioscience, Inc., a Delaware corporation, is a global developer, manufacturer, marketer and provider of a
broad range of scientific instruments, systems, software and services used to advance life science for basic research, drug
discovery, physiologic monitoring, clinical and environmental testing. The Company’s products and services are sold to
thousands of researchers in over 100 countries through its global sales organization, websites, catalogs, and through
distributors including Thermo Fisher Scientific Inc., VWR and other specialized distributors. The Company has sales and
manufacturing operations in the United States, the United Kingdom, Germany, Sweden, Spain, France, Italy, Canada and
China.
2. Summary of Significant Accounting Policies
(a)
Principles of Consolidation
The consolidated financial statements include the accounts of Harvard Bioscience, Inc. and its wholly-owned
subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
(b)
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States
requires the use of management estimates. Such estimates include the determination and establishment of certain accruals
and provisions, including those for inventory excess and obsolescence, income tax and reserves for bad debts. In addition,
certain estimates are required in order to determine the value of assets and liabilities associated with acquisitions, as well as
the Company’s defined benefit pension obligations. Estimates are also required to evaluate the value and recoverability of
existing long-lived and intangible assets, including goodwill. On an ongoing basis, the Company reviews its estimates based
upon currently available information. Actual results could differ materially from those estimates.
(c)
Cash and Cash Equivalents
For purposes of the consolidated balance sheets and statements of cash flows, the Company considers all highly liquid
instruments with original maturities of three months or less to be cash equivalents. Cash and cash equivalents include cash
on hand and amounts due from banks. The Company maintains a portion of its cash in bank deposits, which at times, may
exceed federally insured limits. The Company has not experienced any losses in such accounts. The Company does not
believe it is exposed to any significant risk with respect to these accounts.
(d)
Allowance for Doubtful Accounts
The allowance for doubtful accounts reflects the Company’s best estimate of probable losses inherent in the accounts
receivable balance. The Company determines the allowance based on considering factors such as historical experience, credit
quality, known troubled accounts, historical experience, factors that may affect a customer’s ability to pay and other currently
available evidence.
(e)
Inventories
The Company values its inventories at the lower of the actual cost to purchase (first-in, first-out method) and/or
manufacture the inventories or the net realizable value of the inventories. The Company regularly reviews inventory quantities
on hand and records a provision to write down excess and obsolete inventories to its estimated net realizable value if less than
cost, based primarily on historical inventory usage and estimated forecast of product demand.
F-8
(f)
Property, Plant and Equipment
Property, plant and equipment are stated at cost and depreciated using the straight-line method over the estimated useful
lives of the assets as follows:
Buildings ..............................................................................................
Machinery and equipment ................................................................... 3 – 10 years
Computer equipment and software ...................................................... 3 – 7 years
Furniture and fixtures .......................................................................... 5 – 10 years
Automobiles......................................................................................... 3 – 6 years
40 years
Property and equipment held under capital leases and leasehold improvements are amortized using the straight line
method over the shorter of the lease term or estimated useful life of the asset.
(g)
Catalog Costs
Significant costs of product catalog design, development and production are capitalized and amortized over the
expected useful life of the catalog (usually one to three years).
(h)
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected
to be applied to taxable income in the years in which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the
enactment date.
The Company recognizes the effect of income tax positions only if those positions are more likely than not of being
sustained. Recognized income tax positions are measured at the largest amount that is more than 50% likely of being realized.
Changes in recognition are reflected in the period in which the judgement occurs.
(i)
Foreign Currency Translation
The functional currency of the Company’s foreign subsidiaries is generally their local currency. All assets and liabilities
of its foreign subsidiaries are translated at exchange rates in effect at period-end. Income and expenses are translated at rates
which approximate those in effect on the transaction dates. The resulting translation adjustment is recorded as a separate
component of stockholders’ equity in accumulated other comprehensive (loss) income (“AOCI”) in the consolidated balance
sheets. Gains and losses resulting from foreign currency transactions are included in net (loss) income.
(j)
Earnings per Share
Basic earnings per share is computed by dividing net income by the weighted average number of shares of common
stock outstanding during the periods presented. The computation of diluted earnings per share is similar to the computation
of basic earnings per share, except that the denominator is increased for the assumed exercise of dilutive options and other
potentially dilutive securities using the treasury stock method unless the effect is antidilutive. Since the Company is reporting
discontinued operations, it used income from continuing operations as the control number in determining whether those
potential dilutive securities are dilutive or antidilutive.
(k)
Comprehensive (Loss) Income
The Company follows the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards
Codification (“ASC”) 220, “Comprehensive Income”. FASB ASC 220 requires companies to report all changes in equity
during a period, resulting from net (loss) income and transactions from non-owner sources, in a financial statement in the
period in which they are recognized. The Company has chosen to disclose comprehensive (loss) income, which encompasses
net (loss) income, foreign currency translation adjustments, gains and losses on derivatives, the underfunded status of its
pension plans, and pension minimum additional liability adjustments, net of tax, in the consolidated statements of
comprehensive (loss) income.
F-9
(l)
Revenue Recognition
Nature of contracts and customers
The Company’s contracts are primarily of short duration and are mostly based on the receipt and fulfilment of purchase
orders. The purchase orders are binding and include pricing and all other relevant terms and conditions.
The Company’s customers are primarily research scientists at pharmaceutical and biotechnology companies,
universities, hospitals, government laboratories, including the United States National Institute of Health (NIH) and contract
research organizations. The Company also has global and regional distribution partners, and original equipment manufacturer
(OEM) customers who incorporate its products into their products under their own brands.
Performance obligations
The Company’s performance obligations under its revenue contracts consist of its instruments, equipment, accessories,
services, maintenance and extended warranties. Equipment also includes software that functions together with the tangible
equipment to deliver its essential functionality. Contracts with customers may contain multiple promises such as delivery of
hardware, software, professional services or post-contract support services. These promises are accounted for as separate
performance obligations if they are distinct. For contracts with customers that contain multiple performance obligations, the
transaction price is allocated to the separate performance obligations based on estimated relative standalone selling price,
which does not materially differ from the stated price in the contract. In general, the Company’s list prices are indicative of
standalone selling price.
Instruments, equipment and accessories consist of a range of products that are used in life sciences research. Revenues
from the sales of these items are recognized when transfer of control of these products to the customer occurs. Transfer of
control occurs when the Company has a right to payment, and the customer has legal title to the asset and the customer or
their selected carrier has possession, which is typically upon shipment. Sales on these items are therefore generally recognized
at a point in time.
The Company’s equipment revenue also includes the sale of wireless implantable monitors that are used for life science
research purposes. The Company sells these wireless implantable monitors to pharmaceutical companies, contract research
organizations and academic laboratories. In addition to sales generated from new and existing customers, these implantable
devices are also sold under a program called the “exchange program”. Under this program, customers may return an
implantable monitor to the Company after use, and if the returned monitor can be reprocessed and resold, they may, in
exchange, purchase a replacement implantable monitor of the same model at a lower price than a new monitor. The
implantable monitors that are returned by customers are reprocessed and made available for future sale. The initial sale of
implantable monitors and subsequent sale of replacement implantable monitors are independent transactions. The Company
has no obligation in connection with the initial sale to sell replacement implantable monitors at any future date under any
fixed terms and may refuse returned implantable monitors that cannot be recovered or are obsolete. The Company has
concluded that the offer to its customers that they may purchase a discounted product in the future is not a material right
based on the applicable guidance within ASC 606.
Service revenues consist of installation, training, data analysis, and surgeries performed on research animals.
Maintenance revenue consists of post-contract support provided in relation to software that is embedded within the equipment
that is sold to the customer. The Company provides standard warranties that promise the customer that the product will work
as promised. These standard warranties are not a separate performance obligation. Extended warranties relate to warranties
that are separately priced, and purchased in addition to a standard warranty, and are therefore a separate performance
obligation. The Company has made the judgment that the customer benefits as the Company performs over the period of the
contract, and therefore revenues from service, maintenance and warranty contracts are recognized over time. The Company
uses the input method to recognize revenue over time, based on time elapsed, which is generally on a straight-line basis over
the service period. The period over which maintenance and warranty contracts is recognized is typically one year. The period
over which service revenues is recognized is generally less than one month.
For sales for which transfer of control occurs upon shipment, the Company accounts for shipping and handling costs
as fulfilment costs. As such, the Company records the amounts billed to the customer for shipping costs as revenue and the
costs within cost of revenues upon shipment. For sales, for which control transfers to customers after shipment, the Company
has elected to account for shipping and handling as activities to fulfill the promise to transfer the goods to the customer. The
Company therefore accrues for the costs of shipping undelivered items in the period of shipment.
F-10
Revenues expected to be recognized related to any and all remaining performance obligations are generally expected
to be recognized in one year or less, as the majority of the Company's contracts have a term of less than one year.
Variable Consideration
The nature of the Company's contracts gives rise to certain types of variable consideration, including in limited cases
volume and payment discounts. The Company analyzes sales that could include variable consideration, and estimates the
expected or most likely amount of revenue after returns, trade-ins, discounts, rebates, credits, and incentives. Product returns
are estimated and accrued for, based on historical information. In making these estimates, the Company considers whether
the amount of variable consideration is constrained and is included in revenue only to the extent that it is probable that a
significant reversal of the revenue recognized will not occur when the uncertainty associated with the variable consideration
is subsequently resolved. Variable consideration, and its impact on the Company’s revenue recognition, was not material in
any of the periods presented.
The Company’s payment terms are generally from zero to sixty days from the time of invoicing, which generally occurs
at the time of shipment or prior to services being performed. Payment terms vary by the type of its customers and the products
or services offered.
Sales taxes, value added taxes, and certain excise taxes collected from customers and remitted to governmental
authorities are accounted for on a net basis, and are therefore excluded from revenues.
Deferred revenue
The Company records deferred revenue when cash is collected from customers prior to satisfaction of the Company’s
performance obligation to the customer. Deferred revenue consists of amounts deferred related to service contracts and
revenue deferred as a result of payments received in advance from customers. Deferred revenue is generally expected to be
recognized within one year.
The amounts included in deferred revenue from advanced payments relate to amounts that are prepaid for wireless
implantable monitors under the exchange program. The Company has made the judgment that these payments do not represent
a significant financing component as the customer can exercise their discretion as to when they can obtain the products that
they have made a prepayment for.
Advanced payments received from customers are recorded as a liability, and revenue is recognized when the
Company’s performance obligations are completed. Performance obligations are completed when the product is shipped or
delivered to the customer, or at the end of the exchange program if goods are not acquired prior to the termination of the
contract period.
Disaggregation of revenue
Refer to Note 19 for revenue disaggregated by type and by geographic region as well as further information about the
deferred revenue balances.
(m)
Valuation of Identifiable Intangible Assets Acquired in Business Combinations
The determination of the fair value of intangible assets, which represents a significant portion of the purchase price in
the Company’s acquisitions, requires the use of significant judgment with regard to (i) the fair value; and (ii) whether such
intangibles are amortizable or not amortizable and, if the former, the period and the method by which the intangibles asset
will be amortized. The Company estimates the fair value of acquisition-related intangible assets principally based on
projections of cash flows that will arise from identifiable assets of acquired businesses. The projected cash flows are
discounted to determine the present value of the assets at the dates of acquisitions. At December 31, 2018, amortizable
intangible assets include existing technology, trade names, distribution agreements, in-process research and development,
customer relationships and patents. These amortizable intangible assets are amortized on a straight-line basis over 7 to 15
years, 10 to 15 years, 4 to 5 years, 5 to 15 years, 5 to 15 years and 5 to 15 years, respectively.
F-11
(n)
Goodwill and Other Intangible Assets
Goodwill and unamortizable intangible assets acquired in a business combination and determined to have an indefinite
useful life are not amortized, but instead are tested for impairment annually or more frequently if events or changes in
circumstances indicate that the asset might be impaired, in accordance with the provisions of FASB ASC 350, “Intangibles—
Goodwill and Other”.
For the purpose of its goodwill analysis, the Company has one reporting unit. The Company conducted its annual
impairment analysis in the fourth quarter of fiscal year 2018. The goodwill impairment test is a two-step process. The first
step of the impairment analysis compares the Company’s fair value to its carrying value to determine if there is any indication
of impairment. Step two of the analysis compares the implied fair value of goodwill to its carrying amount in a manner similar
to a purchase price allocation for business combination. If the carrying amount of goodwill exceeds its implied fair value, an
impairment loss is recognized equal to that excess. For indefinite-lived intangible assets if the carrying amount exceeds the
fair value of the asset, the Company would write down the indefinite-lived intangible asset to fair value.
At December 31, 2018, the fair value of the Company significantly exceeded the carrying value. The Company
concluded that none of its goodwill was impaired.
The Company evaluates indefinite-lived intangible assets for impairment annually and when events occur or
circumstances change that may reduce the fair value of the asset below its carrying amount. Events or circumstances that
might require an interim evaluation include unexpected adverse business conditions, economic factors, unanticipated
technological changes or competitive activities, loss of key personnel and acts by governments and courts. At December 31,
2018, the Company concluded that none of its indefinite-lived intangible assets were impaired.
(o)
Impairment of Long-Lived Assets
The Company assesses recoverability of its long-lived assets that are held for use, such as property, plant and equipment
and amortizable intangible assets in accordance with FASB ASC 360, “Property, Plant and Equipment” when events or
changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Recoverability
of assets or an asset group to be held and used is measured by a comparison of the carrying amount of an asset or asset group
to estimated undiscounted future cash flows expected to be generated by the asset or the asset group. Cash flow projections
are based on trends of historical performance and management’s estimate of future performance. If the carrying amount of
the asset or asset group exceeds the estimated future cash flows, an impairment charge is recognized by the amount by which
the carrying amount of the asset or asset group exceeds its estimated fair value. At December 31, 2018, the Company
concluded that none of its long-lived assets were impaired.
(p)
Derivatives
The Company uses interest-rate-related derivative instruments to manage its exposure related to changes in interest
rates on its variable-rate debt instruments. The Company does not enter into derivative instruments for any purpose other than
cash flow hedging. The Company does not speculate using derivative instruments. The Company recognizes all derivative
instruments as either assets or liabilities in the balance sheet at their respective fair values. For derivatives designated in
hedging relationships, changes in the fair value are either offset through earnings against the change in fair value of the
hedged item attributable to the risk being hedged or recognized in AOCI, to the extent the derivative is effective at offsetting
the changes in cash flows being hedged until the hedged item affects earnings.
The Company only enters into derivative contracts that it intends to designate as a hedge of a forecasted transaction or
the variability of cash flows to be received or paid related to a recognized asset or liability (cash flow hedge). For all hedging
relationships, the Company formally documents the hedging relationship and its risk-management objective and strategy for
undertaking the hedge, the hedging instrument, the hedged transaction, the nature of the risk being hedged, how the hedging
instrument’s effectiveness in offsetting the hedged risk will be assessed prospectively and retrospectively, and a description
of the method used to measure ineffectiveness. The Company also formally assesses, both at the inception of the hedging
relationship and on an ongoing basis, whether the derivatives that are used in hedging relationships are highly effective in
offsetting changes in cash flows of hedged transactions. For derivative instruments that are designated and qualify as part of
a cash flow hedging relationship, the effective portion of the gain or loss on the derivative is reported as a component of other
comprehensive income and reclassified into earnings in the same period or periods during which the hedged transaction
affects earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded
from the assessment of effectiveness are recognized in current earnings.
F-12
The Company discontinues hedge accounting prospectively when it determines that the derivative is no longer effective
in offsetting cash flows attributable to the hedged risk, the derivative expires or is sold, terminated, or exercised, the cash
flow hedge is de-designated because a forecasted transaction is not probable of occurring, or management determines to
remove the designation of the cash flow hedge.
In all situations in which hedge accounting is discontinued and the derivative remains outstanding, the Company
continues to carry the derivative at its fair value on the balance sheet and recognizes any subsequent changes in its fair value
in earnings. When it is probable that a forecasted transaction will not occur, the Company discontinues hedge accounting and
recognizes immediately in earnings gains and losses that were accumulated in other comprehensive income related to the
hedging relationship.
(q)
Fair Value of Financial Instruments
The carrying values of the Company’s cash and cash equivalents, trade accounts receivable and trade accounts payable
and short-term debt approximate their fair values because of the short maturities of those instruments. The fair value of the
Company’s long-term debt approximates its carrying value and is based on the amount of future cash flows associated with
the debt discounted using current borrowing rates for similar debt instruments of comparable maturity.
Financial reporting standards define a fair value hierarchy that consists of three levels:
(cid:131)
(cid:131)
(cid:131)
Level 1 includes instruments for which quoted prices in active markets for identical assets or liabilities
accessible to the Company at the measurement date.
Level 2 includes instruments for which the valuations are based on quoted prices for similar assets or liabilities,
quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by
observable data for substantially the full term of the assets or liabilities.
Level 3 includes valuations based on inputs that are unobservable and significant to the overall fair value
measurement.
(r)
Stock-based Compensation
The Company accounts for stock-based payment awards in accordance with the provisions of FASB ASC 718,
“Compensation—Stock Compensation”, which requires it to recognize compensation expense for all stock-based payment
awards made to employees and directors including stock options, restricted stock units, and restricted stock units with a
market condition related to our Third Amended and Restated 2000 Stock Option and Incentive Plan (as amended, the “Third
A&R Plan”) as well as employee stock purchases (“employee stock purchases”) related to its Employee Stock Purchase Plan
(as amended, the “ESPP”). The Company issues new shares upon stock option exercises, upon vesting of restricted stock
units and restricted stock units with a market condition, and under the Company’s ESPP.
Stock-based compensation expense recognized is based on the value of the portion of stock-based payment awards that
is ultimately expected to vest and has been reduced for estimated forfeitures. The Company values stock-based payment
awards, except restricted stock units at grant date using the Black-Scholes option-pricing model (“Black-Scholes model”).
The Company values restricted stock units with a market condition using a Monte-Carlo valuation simulation. The
determination of fair value of stock-based payment awards on the date of grant using an option-pricing model or Monte-Carlo
valuation simulation is affected by its stock price as well as assumptions regarding certain variables. These variables include,
but are not limited to its expected stock price volatility over the term of the awards and actual and projected stock option
exercise behaviors.
The fair value of restricted stock units are based on the market price of the Company’s stock on the date of grant and
are recorded as compensation expense ratably over the applicable service period, which ranges from one to four years.
Unvested restricted stock units are forfeited in the event of termination of employment with the Company.
Stock-based compensation expense recognized under FASB ASC 718 for the years ended December 31, 2018 and 2017
consisted of stock-based compensation expense related to stock options, the employee stock purchase plan, and the restricted
stock units and was recorded as a component of cost of product revenues, sales and marketing expenses, general and
administrative expenses, research and development expenses and discontinued operations. Refer to Note 14 for further details.
F-13
(s)
Recently Issued Accounting Pronouncements
In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU)
2016-02, Leases, which is intended to improve financial reporting about leasing transactions. The update requires a lessee to
record on the balance sheet the assets and liabilities for the rights and obligations created by lease terms of more than
12 months. The update is effective for fiscal years beginning after December 15, 2018. A modified retrospective transition
approach is required for leases existing at, or entered into after, the beginning of the earliest comparative period presented in
the financial statements, with certain practical expedients available. The Company expects to utilize a practical expedient in
its method of adoption of the standard. Under this expedient, which is a “current-period adjustment method,” the Company
would apply ASC 842 as of January 2019 and record a cumulative-effect adjustment to retained earnings as of that date.
The Company has made substantial progress in its assessment over the impact of the standard and determined that the
only material leases that it holds are building leases. Upon adoption of the standard, the Company preliminarily expects to
record a right of use asset in the range of approximately $9 to $11 million and a lease liability in the range of approximately
$10 to $12 million on its consolidated balance sheet. The finalization of the Company’s assessment may result in changes to
the Company’s estimates that may impact its preliminary estimate of the cumulative effect. The Company’s future
commitments under lease obligations are summarized in Note 13.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement
of Credit Losses on Financial Instruments, which amends the impairment model by requiring entities to use a forward-looking
approach based on expected losses rather than incurred losses to estimate credit losses on certain types of financial
instruments, including trade receivables. This may result in the earlier recognition of allowances for losses. The ASU is
effective for public entities for fiscal years beginning after December 15, 2019, with early adoption permitted. In November
2018, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments—Credit Losses,
which provided additional implementation guidance on the previously issued ASU. Management has not yet completed its
assessment of the impact of the new standard on the Company’s Consolidated Financial Statements. Currently, the Company
believes that the most notable impact of this ASU will relate to its processes around the assessment of the adequacy of its
allowance for doubtful accounts on trade accounts receivable and the recognition of credit losses.
In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815) which amends the hedge
accounting recognition and presentation requirements in ASC 815, Derivatives and Hedging. The Board’s objectives in
issuing the ASU are to (1) improve the transparency and understandability of information conveyed to financial statement
users about an entity’s risk management activities by better aligning the entity’s financial reporting for hedging relationships
with those risk management activities and (2) reduce the complexity of and simplify the application of hedge accounting by
preparers. The ASU is effective for annual reporting periods, including interim periods within those annual reporting periods,
beginning after December 15, 2018. Early adoption is permitted, including adoption in any interim period. The Company is
evaluating the requirements of this guidance and has not yet determined the impact of the adoption on its consolidated
financial position, results of operations and cash flows.
In August 2018, the FASB issued ASU No. 2018-14, Disclosure Framework—Changes to the Disclosure Requirements
for Defined Benefit Plans, which amends ASC 715 to add, remove and clarify disclosure requirements related to defined
benefit pension and other postretirement plans. The ASU is effective for public entities for fiscal years beginning after
December 15, 2020, with early adoption permitted. Management has not yet completed its assessment of the impact of the
new standard on the Company’s Consolidated Financial Statements.
Recently Adopted Accounting Pronouncements
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, a new accounting standard that
provides for a comprehensive model to use in the accounting for revenue arising from contracts with customers that will
replace most existing revenue recognition guidance within generally accepted accounting principles in the United States.
Under this standard, revenue will be recognized to depict the transfer of promised goods or services to customers in an amount
that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services.
The Company adopted this standard as of January 1, 2018 using the modified retrospective approach, and applied the
guidance to contracts that were not completed at the date of adoption. The Company’s significant revenue streams currently
consist primarily of product revenue transactions, service, maintenance and extended warranty transactions on certain product
sales. The timing of recognizing revenues for these revenue streams did not materially change. Additionally, the adoption of
ASU 2014-09 did not have a material impact on the Company’s financial position, results of operations, equity or cash flows
as of the adoption date or for the year ended December 31, 2018. The Company’s updated revenue recognition policy is
described in Note 2 and disaggregated revenue disclosures required under ASC 2014-09 are presented in Note 19.
F-14
In May 2017, the FASB issued ASU 2017-09, Stock compensation (Topic 718): Scope of modification
accounting which amends the scope of modification accounting for share-based payment arrangements. The ASU provides
guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be
required to apply modification accounting under ASC 718. Specifically, an entity would not apply modification accounting
if the fair value, vesting conditions, and classification of the awards are the same immediately before and after the
modification. The ASU is effective for annual reporting periods, including interim periods within those annual reporting
periods, beginning after December 15, 2017. The Company adopted this guidance on January 1, 2018, and the new standard
did not have a material impact on its consolidated financial position, results of operations and cash flows
(t) Reclassifications
As disclosed in Note 6, on January 22, 2018, the Company sold substantially all the assets of its operating subsidiary,
Denville Scientific, Inc. (Denville). The sale of Denville represented a strategic shift that had a major effect on the Company’s
operations and financial results. As such and pursuant to Accounting Standards Codification (ASC) 205-20 – Presentation of
Financial Statements - Discontinued Operations, the operating results of Denville for the years ended December 31, 2018
and 2017 have been presented in discontinued operations in the consolidated statements of operations. Additionally, the assets
and liabilities of Denville as of December 31, 2017 have been recast in the consolidated balance sheet and presented as held
for sale. These reclassifications and adjustments had no effect on total amounts within the consolidated balance sheet,
consolidated statements of operations and comprehensive income (loss), consolidated statements of cash flows for any of the
periods presented.
3. Concentrations
No customer accounted for more than 10% of the revenues for the years ended December 31, 2018, and 2017. At
December 31, 2018 and 2017, no customer accounted for more than 10% of net accounts receivable.
4. Accumulated Other Comprehensive Loss
Changes in each component of accumulated other comprehensive loss, net of tax are as follows:
(in thousands)
Foreign
currency
translation
adjustments
Derivatives
qualifying as
hedges
Defined
benefit
pension plans
Total
Balance at December 31, 2016 ........................................... $
(14,200 ) $
- $
(2,458 ) $
(16,658 )
Other comprehensive income (loss) before
reclassifications.................................................................
4,445
(24 )
1,200
5,621
Amounts reclassified from AOCI .........................................
-
61
300
361
Net other comprehensive income .........................................
4,445
37
1,500
5,982
Balance at December 31, 2017 .......................................... $
(9,755 ) $
37 $
(958 ) $
(10,676 )
Other comprehensive income before reclassifications .........
(2,875 )
(343 )
(49 )
(3,267 )
Amounts reclassified from AOCI .........................................
-
136
275
411
Net other comprehensive (loss) income ...............................
(2,875 )
(207 )
226
(2,856 )
Balance at December 31, 2018 ........................................... $
(12,630 ) $
(170 ) $
(732 ) $
(13,532 )
F-15
The amounts reclassified out of accumulated other comprehensive (loss) income are as follows:
(in thousands)
Amounts Reclassified From AOCI
Derivatives qualifying as hedges
Realized loss on derivatives qualifying as
Affected line item in the
Statements of Operations
Year Ended December 31,
2018
2017
hedges ......................................................
Income tax ..................................................
Interest expense, net
Income tax (benefit) expense
$
Defined benefit pension plans
Amortization of net losses included in net
periodic pension costs .............................. General and administrative expenses
Income tax ..................................................
Income tax (benefit) expense
136 $
-
136
331
(56 )
275
Total reclassifications ...................................................................................................... $
411 $
61
-
61
362
(62 )
300
361
5. Acquisition
On January 31, 2018, the Company acquired all of the issued and outstanding shares of Data Sciences International,
Inc. (DSI), a Delaware corporation, for approximately $71.1 million. The Company funded the acquisition from its existing
cash balances, excess proceeds from the Denville Transaction discussed in Note 6, and proceeds from the Financing
Agreement discussed in Note 15.
DSI, a St. Paul, Minnesota-based life science research company, is a recognized leader in physiologic monitoring
focused on delivering preclinical products, systems, services and solutions to its customers. Its customers include
pharmaceutical and biotechnology companies, as well as contract research organizations, academic labs and government
researchers. This acquisition diversifies the Company’s customer base into the biopharmaceutical and contract research
organization markets.
The aggregate purchase price for this acquisition was allocated to tangible and intangible net assets acquired as follows:
Tangible assets .................................................................................................................................................. $
Liabilities assumed ............................................................................................................................................
Net assets ...........................................................................................................................................................
(in thousands)
34,010
(11,949 )
22,061
Goodwill and intangible assets:
Goodwill ............................................................................................................................................................
Amortizable intangible assets:
Trade name ........................................................................................................................................................
Developed technology .......................................................................................................................................
Customer relationships ......................................................................................................................................
In-process research and development ................................................................................................................
Total amortizable intangible assets ...................................................................................................................
Deferred tax liabilities, net ................................................................................................................................
Total goodwill and intangible assets, net of tax ................................................................................................
Acquisition purchase price ................................................................................................................................ $
21,865
3,524
25,570
9,837
1,387
40,318
(13,120 )
49,063
71,124
F-16
Tangible assets and liabilities assumed, as referenced above, consist of the following:
Cash acquired .................................................................................................................................................... $
Accounts receivable, net ....................................................................................................................................
Inventories .........................................................................................................................................................
Other current assets ...........................................................................................................................................
Property, plant and equipment, net ....................................................................................................................
Deferred income tax assets, net .........................................................................................................................
Tangible assets .................................................................................................................................................. $
Accounts payable and accrued liabilities ........................................................................................................... $
Deferred revenue including customer advances ................................................................................................
Other long term liabilities ..................................................................................................................................
Liabilities assumed ............................................................................................................................................ $
2,576
5,069
11,512
810
3,574
10,469
34,010
6,001
2,976
2,972
11,949
The allocation of the purchase price for DSI was based on estimates of the fair value of the net assets acquired and was
subject to adjustment upon finalization of the valuation of the acquired intangible assets and the related deferred taxes.
Measurements of these items inherently require significant estimates and assumptions. During the year ended December 31,
2018, the Company made adjustments to the preliminary allocation of the purchase price that was presented in the March 31,
2018 Form 10-Q. The adjustments consisted of an increase of $4.5 million to deferred tax liabilities; an increase of $3.1
million to goodwill; a decrease of $1.6 million to other long term liabilities; an increase of $1.5 million to property, plant and
equipment, net; an increase of $0.6 million in accounts payable and accrued liabilities; and an increase of $0.6 million to the
purchase price related to a net working capital adjustment. As of December 31, 2018, the Company has finalized the purchase
price allocation for DSI.
The weighted-average amortization periods for definite-lived intangible assets acquired are 9.4 years for tradenames,
8.2 years for developed technology, 12.4 years for customer relationships and 7.4 years for in-process research and
development assets. The weighted average amortization period for all definite-lived intangible assets acquired is 9.3 years.
Goodwill recorded as a result of the acquisition of DSI is not deductible for tax purposes.
The results of operations for DSI have been included in the Company’s consolidated financial statements from the date
of acquisition. The revenues of DSI included in the Company’s consolidated statement of operations from the date of
acquisition were approximately $42.6 million for the eleven-month period ended December 31, 2018. The net income of DSI
included in the Company’s consolidated statement of operations for the same period was approximately $1.8 million. Included
in DSI’s net income was a $3.8 million charge recognized in cost of revenues related to purchase accounting inventory fair
value step up amortization. The total inventory fair value step up was recognized into cost of revenues over one inventory
turn, or approximately five and a half months. Also included in net income of DSI is $4.0 million of intangible asset
amortization expense and $0.6 million of additional depreciation related to a step up of fair value of property, plant and
equipment, net.
The following consolidated pro forma information is based on the assumption that the acquisition of DSI occurred on
January 1, 2017. Accordingly, the historical results have been adjusted to reflect amortization expense, interest expense and
other purchase accounting adjustments that would have been recognized on such a pro forma basis. The pro forma information
is presented for comparative purposes only and is not necessarily indicative of the financial position or results of operations
which would have been reported had the Company completed the acquisition during these periods or which might be reported
in the future.
Pro Forma ................................................................................................................................
Revenues ............................................................................................................................. $
Income (loss) from continuing operations ...........................................................................
124,319 $
3,614
121,104
(8,454 )
Direct acquisition costs recorded in other expense, net in the Company’s consolidated statements of operations were
$3.4 million and $0 for the year ended December 31, 2018 and 2017, respectively.
Year Ended December 31,
2018
(in thousands)
2017
F-17
6. Discontinued Operations
On January 22, 2018, the Company sold substantially all the assets of its wholly owned subsidiary, Denville, for
approximately $20.0 million, which includes a $3.0 million earn-out provision (the Denville Transaction). Upon the closing
of the transaction, the Company received $15.7 million. The $3.0 million earn-out provision represents consideration that is
contingent on Denville achieving certain performance metrics over a period of two years.
The following table is a reconciliation of the carrying amounts of major assets and liabilities of Denville classified as
held for sale in the Company’s consolidated balance sheet as of December 31, 2017.
December 31,
2017
(in thousands)
Carrying amounts of major classes of assets
Cash ............................................................................................................................................................... $
Accounts receivable, net ................................................................................................................................
Inventories .....................................................................................................................................................
Other receivables and other assets .................................................................................................................
Current assets held for sale ............................................................................................................................
Property, plant and equipment .......................................................................................................................
Amortizable intangible assets ........................................................................................................................
Allocation of goodwill ...................................................................................................................................
Long term assets held for sale .......................................................................................................................
Total assets of the disposal group classified as held for sale in the consolidated balance sheet ........................ $
Carrying amounts of major classes of liabilities
Accounts payable and accrued expenses ....................................................................................................... $
Other current liabilities ..................................................................................................................................
Current liabilities held for sale ......................................................................................................................
Deferred income tax liabilities ......................................................................................................................
Long term liabilities held for sale ..................................................................................................................
Total liabilities of the disposal group classified as held for sale in the consolidated balance sheet .................. $
541
2,854
4,505
504
8,404
397
5,930
3,633
9,960
18,364
1,736
121
1,857
1,311
1,311
3,168
The following table is a reconciliation of the major line items of income from discontinued operations presented within
the Company’s consolidated statements of operations for the years ended December 31, 2018 and 2017.
Year Ended
December 31,
2018
2017
(in thousands)
Revenues ............................................................................................................................. $
Cost of revenues ..................................................................................................................
Operating and other expenses ..............................................................................................
Gain on disposal of discontinued operations .......................................................................
Income from discontinued operations before income taxes .................................................... $
Income tax benefit ...............................................................................................................
Income from discontinued operations .....................................................................................
893 $
(534 )
(674 )
1,251
936 $
(441 )
1,377
24,475
(16,048 )
(7,893 )
-
534
(617 )
1,151
Included within the adjustments to reconcile net loss to net cash provided by operating activities in the Company’s
consolidated statements of cash flows for the year ended December 31, 2018 and 2017, was amortization of intangible assets
for Denville of $47 thousand and $0.9 million, respectively. Depreciation and capital expenditures for Denville were
immaterial for both periods presented.
F-18
7. Goodwill and Other Intangible Assets
Intangible assets consist of the following:
December 31, 2018
December 31, 2017
(in thousands)
Weighted
Average
Life
(a)
Amortizable intangible assets:
Existing technology ...................................... $ 41,268 $
Trade names .................................................
7,828
Distribution agreements/customer
Gross
Accumulated
Amortization Gross
Accumulated
Amortization
(16,215) $ 16,173 $
4,443
(2,861)
(13,179 )
(2,280 )
7.1
7.7
Years
Years
relationships ..............................................
In-process research and development ...........
Patents ..........................................................
Total amortizable intangible assets ..............
22,657
1,387
211
73,351 $
(9,509)
(30)
(204)
(28,819)
13,197
-
223
34,036 $
(8,373 ) 10.6
7.3
-
(174 )
0.2
(24,006 )
Years
Years
Years
Indefinite-lived intangible assets:
Goodwill .......................................................
Other indefinite-lived intangible assets ........
Total goodwill and other indefinite-lived
57,304
1,232
intangible assets ........................................
58,536
36,336
1,244
37,580
Total intangible assets, gross ........................ $ 131,887
$ 71,616
(a) Weighted average life as of
December 31, 2018.
The balances presented in the tables above and below exclude intangible assets and allocated goodwill of Denville as
of December 31, 2017. Both the intangible assets and the allocated goodwill balances are reported as long term assets held
for sale as of December 31, 2017. Refer to Note 6 for further details.
The change in the carrying amount of goodwill for the year ended December 31, 2018 is as follows:
Balance at December 31, 2016 .......................................................................................................................... $
Effect of change in currency translation ........................................................................................................
Reclassification of goodwill as held for sale .................................................................................................
Balance at December 31, 2017 .......................................................................................................................... $
Goodwill arising from business combination ................................................................................................
Effect of change in currency translation ........................................................................................................
Balance at December 31, 2018 .......................................................................................................................... $
(in thousands)
38,032
1,937
(3,633 )
36,336
21,865
(897 )
57,304
Amortization of intangible assets
Intangible asset amortization expense from continuing operations was $5.4 million and $1.6 million for the years ended
December 31, 2018 and 2017, respectively. Amortization expense of existing amortizable intangible assets is currently
estimated to be $5.7 million for the year ending December 31, 2019, $5.6 million for the year ending December 31, 2020,
$5.6 million for the year ending December 31, 2021, $5.6 million for the year ending December 31, 2022, and $5.4 million
for the year ending December 31, 2023.
F-19
8. Inventories
Inventories consist of the following:
December 31,
2018
December 31,
2017
Finished goods......................................................................................................................... $
Work in process .......................................................................................................................
Raw materials ..........................................................................................................................
Total .................................................................................................................................... $
(in thousands)
6,936 $
3,667
14,484
25,087 $
5,779
1,042
10,027
16,848
9. Property, Plant and Equipment
As of December 31, 2018 and December 31, 2017, property, plant and equipment consist of the following:
December 31,
2018
December 31,
2017
Land, buildings and leasehold improvements ......................................................................... $
Machinery and equipment .......................................................................................................
Computer equipment and software ..........................................................................................
Furniture and fixtures ..............................................................................................................
Automobiles ............................................................................................................................
Less: accumulated depreciation ...............................................................................................
Property, plant and equipment, net .......................................................................................... $
(in thousands)
2,468 $
9,678
9,685
1,390
115
23,336
(17,438 )
5,898 $
2,197
7,022
8,819
1,139
120
19,297
(15,554 )
3,743
10. Related Party Transactions
As part of the acquisitions of Multi Channel Systems MCS GmbH (MCS) and Triangle BioSystems, Inc. (TBSI) in
2014, the Company signed lease agreements with the former owners of the acquired companies. The principals of such former
owners of MCS and TBSI were employees of the Company as of December 31, 2018 and 2017. Pursuant to a lease agreement,
the Company made rent payments of approximately $0.3 million and $0.2 million to the former owners of MCS during the
years ended December 31, 2018 and 2017, respectively. The Company made rent payments of approximately $44 thousand
and $42 thousand to the former owner of TBSI during the years ended December 31, 2018 and 2017, respectively.
11. Warranties
Warranties are estimated and accrued at the time revenues are recorded. A rollforward of the Company’s product
warranty accrual is as follows:
Beginning
Balance
(Payments)\
Credits
Additions
Ending
Balance
(in thousands)
Year ended December 31, 2017 ........................................... $
193
(7 )
60 $
Year ended December 31, 2018 ........................................... $
246
(37 )
182 $
246
391
F-20
12. Employee Benefit Plans
The Company sponsors profit sharing retirement plans for its U.S. employees, which includes employee savings plans
established under Section 401(k) of the U.S. Internal Revenue Code (the “401(k) Plans”). The 401(k) Plans cover
substantially all full-time employees who meet certain eligibility requirements. Contributions to the 401(k) Plans are at the
discretion of management. For the years ended December 31, 2018 and 2017, the Company contributed approximately $0.5
million and $0.6 million, respectively, to the 401(k) Plans.
The Company’s subsidiary in the United Kingdom, Biochrom Limited maintains contributory, defined benefit or
defined contribution pension plans for substantially all of its employees. In 2014, these defined benefit pension plans were
closed to new employees, as well as closed to the future accrual of benefits for existing employees. The provisions of FASB
ASC 715-20 require that the funded status of the Company’s pension plans be recognized in its balance sheet. FASB ASC
715-20 does not change the measurement or income statement recognition of these plans, although it does require that plan
assets and benefit obligations be measured as of the balance sheet date. The Company has historically measured the plan
assets and benefit obligations as of the balance sheet date.
The components of the Company’s defined benefit pension expense were as follows:
Year Ended December 31,
2018
2017
(in thousands)
Components of net periodic benefit cost:
Interest cost .............................................................................................................................
Expected return on plan assets ................................................................................................
Net amortization loss ...............................................................................................................
Recognition of net gain/loss due to settlements ......................................................................
Net periodic benefit cost .......................................................................................................... $
502
(779 )
222
110
55 $
524
(663 )
362
-
223
The measurement date is December 31 for these plans. The funded status of the Company’s defined benefit pension
plans and the amount recognized in the consolidated balance sheets at December 31, 2018 and 2017 is as follows:
December 31,
2018
2017
(in thousands)
Change in benefit obligation:
Balance at beginning of year ............................................................................................... $
Service cost .........................................................................................................................
Interest cost .........................................................................................................................
Actuarial (gain) loss ............................................................................................................
Settlements due to transfers paid .........................................................................................
Benefits paid ........................................................................................................................
Currency translation adjustment ..........................................................................................
Balance at end of year ......................................................................................................... $
21,126 $
24
502
(1,056 )
(267 )
(521 )
(1,107 )
18,701 $
19,214
-
524
26
-
(514 )
1,876
21,126
Change in fair value of plan assets:
Balance at beginning of year ............................................................................................... $
Actual return on plan assets .................................................................................................
Employer contributions .......................................................................................................
Settlement due to transfers paid ..........................................................................................
Benefits paid ........................................................................................................................
Currency translation adjustment ..........................................................................................
Balance at end of year ......................................................................................................... $
19,972 $
(1,058 )
741
(263 )
(521 )
(1,052 )
17,819 $
16,252
1,871
689
-
(514 )
1,674
19,972
December 31,
2018
2017
(in thousands)
F-21
December 31,
2018
2017
(in thousands)
Change in benefit obligation:
Funded status ........................................................................................................................... $
Unrecognized net loss .............................................................................................................
Net amount recognized ............................................................................................................ $
(882 ) $
N/A
(882 ) $
(1,154 )
N/A
(1,154 )
The accumulated benefit obligation for all defined benefit pension plans was $18.7 million and $21.1 million at
December 31, 2018 and 2017, respectively.
The amounts recognized in the consolidated balance sheets consist of:
December 31,
2018
2017
(in thousands)
Deferred income tax assets ...................................................................................................... $
Other long term liabilities ........................................................................................................
Net amount recognized ............................................................................................................ $
150 $
(882 )
(732 ) $
196
(1,154 )
(958 )
The amounts recognized in accumulated other comprehensive loss, net of tax consist of:
Underfunded status of pension plans ....................................................................................... $
Net amount recognized ............................................................................................................ $
December 31,
2018
2017
(in thousands)
(732 ) $
(732 ) $
(958 )
(958 )
The weighted average assumptions used in determining the net pension cost for these plans follows:
Year Ended December 31,
2018
2017
Discount rate ...........................................................................................................................
Expected return on assets ........................................................................................................
2.65 %
4.68 %
2.43 %
3.86 %
The discount rate assumptions used for pension accounting reflect the prevailing rates available on high-quality, fixed-
income debt instruments with terms that match the average expected duration of the Company’s defined benefit pension plan
obligations. The Company uses the iBoxx AA 15yr+ index, which matches the average duration of its pension plan liability
of approximately 15 years. With the current base of assets in the pension plans, a one percent increase/decrease in the discount
rate assumption would decrease/increase annual pension expense by approximately $9,000.
The Company’s mix of pension plan investments among asset classes also affects the long-term expected rate of return
on plan assets. As of December 31, 2018, the Company’s actual asset mix approximated its target mix. Differences between
actual and expected returns are recognized in the calculation of net periodic pension (income)/cost over the average remaining
expected future working lifetime, which is approximately 15 years, of active plan participants. With the current base of assets,
a one percent increase/decrease in the asset return assumption would decrease/increase annual pension expense by
approximately $178,000.
F-22
The fair value and asset allocations of the Company’s pension benefits as of December 31, 2018 and 2017 measurement
dates were as follows:
Asset category:
2018
December 31,
(in thousands)
2017
Equity securities ............................................................... $
Debt securities ..................................................................
Liability driven investment funds .....................................
Cash and cash equivalents ................................................
Other .................................................................................
Total ................................................................................. $
9,134
3,274
4,341
618
452
17,819
51 % $
18 %
24 %
4 %
3 %
100 % $
10,774
3,204
4,685
856
453
19,972
54 %
16 %
23 %
4 %
3 %
100 %
Financial reporting standards define a fair value hierarchy that consists of three levels. The fair values of the plan assets
by fair value hierarchy level as of December 31, 2018 and 2017 is as follows:
December 31,
2018
2017
(in thousands)
Quoted Prices in Active Markets for Identical Assets (Level 1) ............................................. $
Significant Other Observable Inputs (Level 2) ........................................................................
Significant Other Unobservable Inputs (Level 3) ....................................................................
Total .................................................................................................................................... $
618 $
17,201
-
17,819 $
856
19,116
-
19,972
Level 1 assets consist of cash and cash equivalents held in the pension plans at December 31, 2018. The Level 2 assets
primarily consist of investments in private investment funds that are valued using the net asset values provided by the trust
or fund, including an insurance contract. Although these funds are not traded in an active market with quoted prices, the
investments underlying the net asset value are based on quoted prices.
The Company expects to contribute at least $0.7 million to its pension plans during 2019. These contributions are
expected to increase in 2019 and beyond by an immaterial amount in order to accelerate the deficit recovery period.
The benefits expected to be paid from the pension plans are $0.6 million in 2019, $0.5 million in 2020, $0.5 million in
2021, $0.6 million in 2022 and $0.7 million in 2023. The expected benefits to be paid in the five years from 2024—2028 are
$4.0 million. The expected benefits are based on the same assumptions used to measure the Company’s benefit obligation at
December 31, 2018.
13. Leases
The Company has noncancelable operating leases for office and warehouse space expiring at various dates through
2023 and thereafter. Rent payments for continuing operations were approximately $3.2 million and $1.8 million for the year
ended December 31, 2018 and 2017, respectively.
Future minimum lease payments for operating leases, with initial or remaining terms in excess of one year at December
31, 2018, are as follows:
2019 ................................................................................................................................................................... $
2020 ...................................................................................................................................................................
2021 ...................................................................................................................................................................
2022 ...................................................................................................................................................................
2023 ...................................................................................................................................................................
Thereafter ..........................................................................................................................................................
Net minimum lease payments ........................................................................................................................... $
Leases
(in thousands)
2,250
2,247
1,987
1,966
1,990
7,559
17,999
Operating
F-23
14. Capital Stock
Common Stock
On February 5, 2008, the Company’s Board of Directors adopted a Shareholder Rights Plan and declared a dividend
distribution of one preferred stock purchase right for each outstanding share of the Company’s common stock to shareholders
of record as of the close of business on February 6, 2008. These rights were not initially exercisable and would trade with the
shares of the Company’s common stock. The rights would become exercisable under various conditions according to the
terms of the plan. The Shareholder Rights Plan expired, with no rights having become exercisable, in accordance with its
terms on the close of business on February 6, 2018.
Preferred Stock
The Company’s Board of Directors has the authority to issue up to 5.0 million shares of preferred stock and to determine
the price privileges and other terms of the shares. The Board of Directors may exercise this authority without any further
approval of stockholders. As of December 31, 2018, the Company had no preferred stock issued or outstanding.
Employee Stock Purchase Plan (as amended, the ESPP)
In 2000, the Company approved the ESPP. Under this ESPP, participating employees can authorize the Company to
withhold a portion of their base pay during consecutive six-month payment periods for the purchase of shares of the
Company’s common stock. At the conclusion of the period, participating employees can purchase shares of the Company’s
common stock at 85% of the lower of the fair market value of the Company’s common stock at the beginning or end of the
period. Shares are issued under the ESPP for the six-month periods ending June 30 and December 31. On May 18, 2017, the
stockholders of the Company approved an increase of 300,000 shares of common stock in the number of shares available for
issuance under the ESPP. Following such amendment, 1,050,000 shares of common stock are authorized for issuance, of
which 890,762 shares were issued as of December 31, 2018. There were 89,308 and 76,215 shares issued under the ESPP
during the years ended December 31, 2018 and 2017, respectively.
Stock Option and Equity Incentive Plans
Third Amended and Restated 2000 Stock Option and Incentive Plan (as amended, the Third A&R Plan)
The Third Amendment to the Third A&R Plan (the Amendment) was adopted by the Board of Directors on April 2,
2018. Such Amendment was approved by the stockholders at the Company’s 2018 Annual Meeting of Stockholders. Pursuant
to the Amendment, the aggregate number of shares authorized for issuance under the Third A&R Plan was increased by
3,400,000 shares to 20,908,929.
Restricted Stock Units with a Market Condition (the Market Condition RSUs)
On August 3, 2015, the Compensation Committee of the Board of Directors of the Company approved and granted
deferred stock awards of Market Condition RSUs (the 2015 Market Condition RSUs) to certain members of the Company’s
management team under the Third A&R Plan. The vesting of these 2015 Market Condition RSUs was cliff-based and linked
to the achievement of a relative total shareholder return of the Company’s common stock from August 3, 2015 to the earlier
of (i) August 3, 2018 or (ii) upon a change of control (measured relative to the Russell 3000 index and based on the 20-day
trading average price before each such date). As of August 3, 2018, certain of the target total shareholder returns were
achieved, and as a result, 69,667 of the 2015 Market Condition RSUs vested. The remaining 2015 Market Condition RSUs
did not vest and were canceled.
On May 24, 2018, the Compensation Committee of the Board of Directors of the Company approved and granted
deferred stock awards of Market Condition RSUs (the 2018 Market Condition RSUs) to certain members of the Company’s
management team under the Third A&R Plan. The vesting of the 2018 Market Condition RSUs is based on a graded-vesting
schedule (one third at the end of each year for three years) and linked to the achievement of a relative total shareholder return
of the Company’s common stock from May 24, 2018 to the earlier of (i) May 24, 2019 or (ii) upon a change of control
(measured relative to the NASDAQ Biotechnology index and based on the 20-day trading average price before each such
date). As of December 31, 2018, the target number of these restricted stock units that may be earned is 116,944 shares; the
maximum amount is 150% of the target number.
F-24
Stock-Based Payment Awards
The Company accounts for stock-based payment awards in accordance with the provisions of FASB ASC 718, which
requires it to recognize compensation expense for all stock-based payment awards made to employees and directors including
stock options, restricted stock units, Market Condition RSUs and employee stock purchases related to the ESPP.
The Company adopted ASU 2016-09 as of January 1, 2017. As a result of this adoption, the Company has elected as
an accounting policy to account for forfeitures for service based awards as they occur, with no adjustment for estimated
forfeitures. The Company recognized as of January 1, 2017, a cumulative effect adjustment of $0.1 million to reduce retained
earnings as required under the modified retrospective approach.
Stock option and restricted stock unit activity under the Company’s Third A&R Plan for the years ended December 31,
2017 and 2018 were as follows:
Stock Options
Restricted Stock Units
Market Condition RSU's
Stock
Options
Outstanding
Weighted
Average
Exercise
Price
Restricted
Stock Units
Outstanding
Grant Date
Fair Value
Market
Condition
RSU's
Outstanding
Grant Date
Fair Value
Balance at December 31,
2016 ............................... 4,096,818
237,700
Granted ..........................
(143,391 )
Exercised .......................
Vested (RSUs) ...............
-
(410,883 )
Cancelled / forfeited ......
Balance at December 31,
2017 ............................... 3,780,244 $
Granted ..........................
104,585
Exercised ....................... (1,696,255 )
Vested (RSUs) ...............
-
(231,842 )
Cancelled / forfeited ......
Balance at December 31,
3.94 1,072,653
3.24 1,298,371
-
2.48
(488,570 )
-
(85,527 )
3.93
3.95 1,796,927 $
639,126
4.48
-
3.50
(845,326 )
-
(356,965 )
4.96
3.15
2.49
-
3.08
3.05
2.69
4.31
-
2.88
2.84
182,150
-
-
-
(18,023 )
164,127 $
156,944
-
(69,667 )
(134,460 )
4.81
-
-
-
4.81
4.81
4.19
-
4.81
4.63
2018 ............................... 1,956,732 $
4.25 1,233,762 $
3.36
116,944 $
4.19
The Company did not capitalize any stock-based compensation.
Earnings per share
Basic earnings per share is based upon net income divided by the number of weighted average common shares
outstanding during the period. The calculation of diluted earnings per share assumes conversion of stock options, restricted
stock units and Market Condition 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:
Year Ended
December 31,
2018
2017
Basic ........................................................................................................................................ 36,453,126 34,753,325
Effect of assumed conversion of employee and director stock options, restricted stock units
and Market Condition RSUs ................................................................................................
-
Diluted ..................................................................................................................................... 36,453,126 34,753,325
-
F-25
Excluded from the shares used in calculating the diluted earnings per common share in the above table are options,
restricted stock units and Market Condition RSUs of approximately 3,307,438 and 5,741,298 shares of common stock for the
years ended December 31, 2018 and 2017, respectively, as the impact of these shares would be anti-dilutive.
The Company’s policy is to issue stock available from its registered but unissued stock pool through its transfer agent
to satisfy stock option exercises and vesting of the restricted stock units.
The following table summarizes information concerning currently outstanding and exercisable options as of
December 31, 2018 (Aggregate Intrinsic Value, in thousands):
Options Outstanding
Options Exercisable
Shares
Outstanding
at
Dec. 31,
2018
Weighted
Average
Remaining
Contractual
Life
in Years
Weighted
Average
Exercise
Price
Aggregate
Intrinsic
Value
Shares
Exercisable
at
Dec. 31,
2018
Weighted
Average
Remaining
Contractual
Life
in Years
Weighted
Average
Exercise
Price
Aggregate
Intrinsic
Value
Range of
Exercise
Price
$2.28 - 3.29
204,476
3.30 - 3.49
175,200
3.50 - 3.92
159,037
3.93 - 4.08
79,019
4.09 - 4.17
402,325
4.18 - 4.26
49,000
4.27 - 4.38
350,000
4.39 - 5.39
146,550
5.40 - 5.54
203,625
5.55 - 5.75
187,500
$2.28 - 5.75 1,956,732
4.74 $
8.83
5.95
2.42
5.41
5.75
4.88
6.65
6.18
6.77
5.79 $
2.71 $
3.33
3.68
4.04
4.12
4.21
4.31
4.95
5.51
5.58
4.25 $
96 160,851
-
58,400
- 114,452
79,019
-
- 402,325
-
49,000
- 350,000
- 121,550
- 144,375
- 125,625
96 1,605,597
3.89 $
8.83
4.41
2.42
5.41
5.75
4.88
6.09
6.18
6.43
5.26 $
2.66 $
3.33
3.64
4.04
4.12
4.21
4.31
5.05
5.51
5.56
4.26 $
84
-
-
-
-
-
-
-
-
-
84
The aggregate intrinsic value in the preceding table represents the total pre-tax intrinsic value, based on the Company’s
closing stock price of $3.18 as of December 31, 2018, which would have been received by the option holders had all option
holders exercised their options as of that date. The aggregate intrinsic value of options exercised for the years ended December
31, 2018 and 2017 was approximately $2.6 million and $0.1 million, respectively. The total number of in-the-money options
that were exercisable as of December 31, 2018 was 160,851.
For the year ended December 31, 2018, the total compensation costs related to unvested awards not yet recognized is
$3.2 million and the weighted average period over which it is expected to be recognized is 2.12 years.
Valuation and Expense Information under Stock-Based-Payment Accounting
Stock-based compensation expense related to stock options, restricted stock units, Market Condition RSU’s and the
employee stock purchase plan for the years ended December 31, 2018 and 2017 was allocated as follows:
Year Ended
December 31,
2018
2017
(in thousands)
Cost of revenues ...................................................................................................................... $
Sales and marketing ................................................................................................................
General and administrative ......................................................................................................
Research and development ......................................................................................................
Discontinued operations ..........................................................................................................
Total stock-based compensation.............................................................................................. $
64 $
431
2,232
167
150
3,044 $
61
488
2,695
139
117
3,500
F-26
The Company did not capitalize any stock-based compensation.
The weighted-average estimated fair value per share of stock options granted during 2018 and 2017 was $1.83 and
$1.32, respectively, using the Black Scholes option-pricing model with the following weighted-average assumptions:
Volatility ..................................................................................
Risk-free interest rate ...............................................................
Expected holding period (in years) ...........................................
Dividend yield ..........................................................................
Year Ended
December 31,
2018
43.28 %
2.84 %
4.83 years
- %
2017
41.63 %
2.03 %
5.41 years
- %
The weighted average fair value of the 2018 Market Condition RSUs which were granted under the Third A&R Plan
during the year ended December 31, 2018 was $4.19. There were no Market Condition RSUs granted during the year ended
December 31, 2017. The following assumptions were used to estimate the fair value, using a Monte-Carlo valuation
simulation, of the Market Condition RSUs granted during the year ended December 31, 2018:
Year Ended
December 31,
2018
Volatility ...........................................................................................................................................................
Risk-free interest rate ........................................................................................................................................
Correlation coefficient .......................................................................................................................................
Dividend yield ...................................................................................................................................................
44.02 %
2.27 %
0.07 %
- %
The Company used historical volatility to calculate the expected volatility as of December 31, 2018. Historical volatility
was determined by calculating the mean reversion of the daily adjusted closing stock price. The risk-free interest rate
assumption is based upon observed U.S. Treasury bill interest rates (risk-free) appropriate for the term of the Company’s
stock options. The expected holding period of stock options represents the period of time options are expected to be
outstanding and were based on historical experience. The vesting period ranges from one to four years and the contractual
life is ten years.
Stock-based compensation expense recognized in the consolidated statements of operations for the years ended
December 31, 2018 and 2017 is recognized on awards as they vest and following the adoption of ASU 2016-09 in January
2017, is not reduced for annualized estimated forfeitures.
15. Long Term Debt
On January 22, 2018, in connection with the closing of the Denville Transaction, the Company terminated the Third
Amended and Restated Credit Agreement (the Credit Agreement), among the Company, Brown Brothers Harriman & Co.
and each of the other lenders party thereto, and Bank of America, as administrative agent. All outstanding amounts under the
agreement were repaid in full using a portion of the proceeds of the Denville Transaction. At the time of repayment, there
was approximately $11.9 million outstanding.
On January 31, 2018, the Company entered into a financing agreement by and among the Company and certain
subsidiaries of the Company parties thereto, as borrowers (collectively, the Borrower), certain subsidiaries of the Company
parties thereto, as guarantors, various lenders from time to time party thereto (the Lenders), and Cerberus Business Finance,
LLC, as collateral agent and administrative agent for the Lenders (the Financing Agreement). On August 16, 2018, the
Company and Cerberus Business Finance, LLC entered into a First Amendment to the Financing Agreement, which such
amendment modified certain provisions related to the borrowing base and reporting, among other things.
The Financing Agreement provides for senior secured credit facilities (the Senior Secured Credit Facilities) comprised
of a $64.0 million term loan and up to a $25.0 million revolving line of credit. The proceeds of the term loan and $4.8 million
of advances under the revolving line of credit were used to fund a portion of the DSI acquisition, and to pay fees and expenses
related thereto and the closing of the Senior Secured Credit Facilities. In addition, the revolving facility is available for use
by the Company and its subsidiaries for general corporate and working capital needs, and other purposes to the extent
permitted by the Financing Agreement. The Senior Secured Credit Facilities have a maturity of five years.
F-27
Commencing on March 31, 2018, the outstanding term loans amortized in equal quarterly installments equal to $0.4
million per quarter on such date and during each of the next three quarters thereafter. Beginning the quarter ending March
31, 2019, the term loans amortize in installments of $0.6 million per quarter, continuing for the next three quarters thereafter
and $0.8 million per quarter thereafter, with a balloon payment at maturity.
The obligations under the Senior Secured Credit Facilities are unconditionally guaranteed by the Company and certain
of the Company’s existing and subsequently acquired or organized subsidiaries. The Senior Secured Credit Facilities and
related guarantees are secured on a first-priority basis (subject to certain liens permitted under the Financing Agreement) by
a lien on substantially all the tangible and intangible assets of the Company and its subsidiary guarantors, including all of the
capital stock held by such obligors (subject to a 65% limitation on pledges of capital stock of foreign subsidiaries), subject to
certain exceptions.
Interest on all loans under the Senior Secured Credit Facilities is paid monthly. Borrowings under the Financing
Agreement accrue interest at a per annum rate equal to London Interbank Offered Rate (LIBOR) rate plus 6.25%. The loans
are also subject to a 1.25% interest rate floor for LIBOR loans and a 4.25% interest rate floor for base rate loans.
The Financing Agreement contains customary representations and warranties and affirmative covenants applicable to
the Company and its subsidiaries and also contains certain restrictive covenants, including, among others, limitations on the
incurrence of additional debt, liens on property, acquisitions and investments, loans and guarantees, mergers, consolidations,
liquidations and dissolutions, asset sales, dividends and other payments in respect of the Company’s capital stock,
prepayments of certain debt, transactions with affiliates and modifications of organizational documents, material contracts,
affiliated practice agreements and certain debt agreements. The Financing Agreement also contains customary events of
default. As of December 31, 2018, the Company was in compliance with all financial covenants contained in the Financing
Agreement, was subject to covenant and working capital borrowing restrictions and had available borrowing capacity under
its Financing Agreement of $9.8 million.
As of December 31, 2018 and December 31, 2017, the Company had borrowings net of debt issuance costs of $60.8
million and $11.7 million respectively, outstanding. The carrying value of the debt approximates fair value because the
interest rate under the obligation approximates market rates of interest available to the Company for similar instruments.
As of December 31, 2018, the weighted effective interest rate, net of the impact of the Company’s interest rate swap,
on its term loan was 8.88%.
As of December 31, 2018 and December 31, 2017, the Company’s borrowings were comprised of:
December 31,
2018
December 31,
2017
(in thousands)
Long-term debt:
Term loan ............................................................................................................................ $
Total unamortized deferred financing costs ........................................................................
Total debt ................................................................................................................................
Less: current installments ....................................................................................................
Current unamortized deferred financing costs .....................................................................
Long-term debt ........................................................................................................................ $
62,400 $
(1,605 )
60,795
(2,400 )
401
58,796 $
11,899
(151 )
11,748
(2,800 )
35
8,983
The aggregate amounts of debt maturing during the next five years are as follows:
(in thousands)
2019 ................................................................................................................................................................... $
2020 ...................................................................................................................................................................
2021 ...................................................................................................................................................................
2022 ...................................................................................................................................................................
2023 ...................................................................................................................................................................
Total .................................................................................................................................................................. $
2,400
3,200
3,200
3,200
50,400
62,400
F-28
16. Derivatives
The Company uses interest-rate-related derivative instruments to manage its exposure related to changes in interest
rates on its variable-rate debt instruments. The Company does not enter into derivative instruments for any purpose other than
cash flow hedging. The Company does not speculate using derivative instruments.
By using derivative financial instruments to hedge exposures to changes in interest rates, the Company exposes itself
to credit risk and market risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract.
When the fair value of a derivative contract is positive, the counterparty owes the Company, which creates credit risk for the
Company. When the fair value of a derivative contract is negative, the Company owes the counterparty and, therefore, the
Company is not exposed to the counterparty’s credit risk in those circumstances. The Company minimizes counterparty credit
risk in derivative instruments by entering into transactions with carefully selected major financial institutions based upon
their credit profile.
Market risk is the adverse effect on the value of a derivative instrument that results from a change in interest rates. The
market risk associated with interest-rate contracts is managed by establishing and monitoring parameters that limit the types
and degree of market risk that may be undertaken.
The Company assesses interest rate risk by continually identifying and monitoring changes in interest rate exposures
that may adversely impact expected future cash flows and by evaluating hedging opportunities. The Company maintains risk
management control systems to monitor interest rate risk attributable to both the Company’s outstanding or forecasted debt
obligations as well as the Company’s offsetting hedge positions. The risk management control systems involve the use of
analytical techniques, including cash flow sensitivity analysis, to estimate the expected impact of changes in interest rates on
the Company’s future cash flows.
The Company uses variable-rate LIBOR debt to finance its operations. The debt obligations expose the Company to
variability in interest payments due to changes in interest rates. Management believes that it is prudent to limit the variability
of a portion of its interest payments. To meet this objective, management enters into LIBOR based interest rate swap
agreements to manage fluctuations in cash flows resulting from changes in the benchmark interest rate of LIBOR. These
swaps change the variable-rate cash flow exposure on the debt obligations to fixed cash flows. Under the terms of the interest
rate swaps, the Company receives LIBOR based variable interest rate payments and makes fixed interest rate payments,
thereby creating the equivalent of fixed-rate debt for the notional amount of its debt hedged.
As disclosed in Note 15, on January 31, 2018, the Company entered into a Financing Agreement comprised of a $64.0
million term loan and up to a $25.0 million revolving line of credit. Shortly after entering into this Financing Agreement, the
Company entered into an interest rate swap contract with PNC Bank with a notional amount of $36.0 million and a termination
date of January 1, 2023 in order to hedge the risk of changes in the effective benchmark interest rate (LIBOR) associated with
the Company’s Term Loan. The swap contract converted specific variable-rate debt into fixed-rate debt and fixed the LIBOR
rate associated with a portion of the term loan under the Financing Agreement at 2.72%. The interest rate swap was designated
as a cash flow hedge instrument in accordance with ASC 815 “Derivatives and Hedging”.
The notional amount of the Company’s derivative instruments as of December 31, 2018 was $34.1 million.
F-29
The following table presents the notional amount and fair value of the Company’s derivative instruments as of
December 31, 2018 and December 31, 2017.
December 31, 2018
Notional Amount Fair Value (a)
Derivatives designated as hedging
instruments under ASC 815
Interest rate swaps ................................... Other assets (long term liabilities)
Balance sheet classification
$
(in thousands)
34,090 $
(170 )
Derivatives designated as hedging
instruments under ASC 815
Interest rate swaps ................................... Other assets (long term liabilities)
Balance sheet classification
$
(in thousands)
11,900 $
37
December 31, 2017
Notional Amount Fair Value (a)
(a) See Note 17 for the fair value measurements related to these financial instruments.
All of the Company’s derivative instruments are designated as hedging instruments.
The Company has structured its interest rate swap agreements to be 100% effective and as a result, there was no impact
to earnings resulting from hedge ineffectiveness. Changes in the fair value of interest rate swaps designated as hedging
instruments that effectively offset the variability of cash flows associated with variable-rate, long-term debt obligations are
reported in accumulated other comprehensive income (AOCI). These amounts subsequently are reclassified into interest
expense as a yield adjustment of the hedged interest payments in the same period in which the related interest affects earnings.
The Company’s interest rate swap agreement was deemed to be fully effective in accordance with ASC 815, and, as such,
unrealized gains and losses related to these derivatives were recorded as AOCI.
The following table summarizes the effect of derivatives designated as cash flow hedging instruments and their
classification within comprehensive loss for the years ended December 31, 2018 and 2017:
Derivatives in Hedging Relationships
Amount of loss recognized in OCI on derivative
(effective portion)
Year Ended December 31,
2018
2017
Interest rate swaps ............................................................................ $
(343) $
(24 )
The following table summarizes the reclassifications out of accumulated other comprehensive loss for the year ended
December 31, 2018 and 2017:
Details about AOCI
Components
Amount reclassified from AOCI into income
(effective portion)
Year Ended December 31,
2018
2017
Interest rate swaps ................... $
136 $
61
Location of amount
reclassified from AOCI
into income
(effective portion)
Interest expense, net
As of December 31, 2018, $61 thousand of deferred losses on derivative instruments accumulated in AOCI are expected
to be reclassified to earnings during the next twelve months. Transactions and events expected to occur over the next twelve
months that will necessitate reclassifying these derivatives’ losses to earnings include the repricing of variable-rate debt. As
a result of terminating the Credit Agreement, as discussed in Note 15, the Company unwound its previous May 2017 interest
rate swap contract and received $0.1 million in proceeds.
F-30
17. Fair Value Measurements
Fair value measurement is defined as the price that would be received to sell an asset or paid to transfer a liability in
the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at
the measurement date. A fair value hierarchy is established, which prioritizes the inputs used in measuring fair value into
three broad levels as follows:
Level 1—Quoted prices in active markets for identical assets or liabilities.
Level 2—Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly.
Level 3—Unobservable inputs based on the Company’s own assumptions.
The following tables present the fair value hierarchy for those assets or liabilities measured at fair value on a recurring
basis:
(In thousands)
Assets (Liabilities):
Fair Value as of December 31, 2018
Level 1
Level 2
Level 3
Total
Interest rate swap agreements ........................................... $
- $
(170 ) $
- $
(170 )
(In thousands)
Assets (Liabilities):
Fair Value as of December 31, 2017
Level 1
Level 2
Level 3
Total
Interest rate swap agreements ........................................... $
- $
37 $
- $
37
The Company uses the market approach technique to value its financial liabilities. The Company’s financial assets and
liabilities carried at fair value include derivative instruments used to hedge the Company’s interest rate risks. The fair value
of the Company’s interest rate swap agreements was based on LIBOR yield curves at the reporting date.
18. Accrued Expenses
Accrued expenses consist of:
Compensation and payroll ....................................................................................................... $
Professional fees ......................................................................................................................
Warranty costs .........................................................................................................................
Local taxes, including VAT ....................................................................................................
Customer credits ......................................................................................................................
Interest .....................................................................................................................................
Rent .........................................................................................................................................
Other ........................................................................................................................................
Total ........................................................................................................................................ $
December 31,
2018
2017
(in thousands)
2,896 $
536
391
423
372
480
255
409
5,762 $
1,540
579
246
376
310
33
388
344
3,816
F-31
19. Revenues
The following table represents a disaggregation of revenue from contracts with customers. Revenue from continuing
operations originating from the following geographic areas for the years ended December 31, 2018 and 2017 consist of:
Year Ended December 31, 2018
(in thousands)
United States
United
Kingdom
Germany
Rest of the
world
Total
Instruments, equipment, software and
accessories .............................................. $
79,614 $
13,690 $
13,193 $
8,571 $
115,068
Service, maintenance and warranty
contracts ..................................................
Total revenues ............................................ $
4,438
84,052 $
832
14,522 $
366
13,559 $
70
8,641 $
5,706
120,774
Year Ended December 31, 2017
(in thousands)
United States
United
Kingdom
Germany
Rest of the
world
Total
Instruments, equipment, software and
accessories .............................................. $
40,240 $
14,224 $
10,766 $
9,392 $
74,622
Service, maintenance and warranty
contracts ..................................................
Total revenues ............................................ $
1,481
41,721 $
819
15,043 $
396
11,162 $
89
9,481 $
2,785
77,407
Deferred revenue
As of December 31, 2018, the Company had approximately $3.8 million in deferred revenue comprised of revenue
deferred from service contracts and revenue deferred from advance payments. Changes in deferred revenue from service
contracts and advance payments from customers during the period were as follows:
Year Ended December 31, 2018
(in thousands)
Service
Contracts
Customer
Advances
Balance, beginning of period .......................................................................... $
Addition due to business combination........................................................
Deferral of revenue .....................................................................................
Recognition of deferred revenue ................................................................
Effect of foreign currency translation .........................................................
Balance, end of period .................................................................................... $
505 $
848
4,305
(3,984 )
(15 )
1,659 $
- $
2,128
1,210
(1,177 )
-
2,161 $
Acquisition of DSI
Total
505
2,976
5,515
(5,161 )
(15 )
3,820
As discussed in Note 5, the Company acquired DSI, a previously privately held company on January 31, 2018. The
Company has adopted ASC 606 with respect to DSI as of January 31, 2018. The tables, revenue recognition policies applied,
and product descriptions noted above are thus inclusive of, and reflect revenues of DSI for the periods from the acquisition
date.
F-32
20. Income Tax
Income tax from continuing operations was a benefit of approximately $3.7 million and $0.6 million for the years ended
December 31, 2018 and 2017, respectively. The effective tax rate on continuing operations was 46.1% for the year ended
December 31, 2018 compared with 23.1% for the same period in 2017. The difference between the Company’s effective tax
rate year over year was primarily attributable to lower pre-tax income at certain individual subsidiaries in 2018 versus the
impact of certain provisions of U.S tax reform in 2017.
On December 22, 2017, tax reform legislation known as the Tax Cuts and Jobs Act (the Tax Act) was signed into law.
A majority of the provisions of the Tax Act are effective January 1, 2018. The Tax Act makes broad and complex changes to
the U.S. Internal Revenue Code which include, but are not limited to: (1) the reduction of the corporate income tax rate from
35% to 21%; (2) the implementation of a modified territorial tax system with a one-time transition tax on previously
unremitted earnings of foreign subsidiaries; (3) a new provision designed to tax global intangible low-taxed income (GILTI);
(4) the deduction for foreign-derived intangible income (FDII); (5) a new limitation on deductible interest expense; and (6)
limitations on the deductibility of certain executive compensation. In response to the Tax Act, the SEC issued Staff
Accounting Bulletin No. 118 (SAB 118), which provided companies with a one-year measurement period to complete the
accounting for the tax effects of the Tax Act. The end of the measurement period for purposes of SAB 118 was December
22, 2018. The Company has completed the analysis in accordance with guidance available as of the date of this filing and has
recorded the impact as explained below.
At December 31, 2017, the impact of the remeasurement of deferred tax assets and liabilities from 35% to 21% was an
expense of $3.2 million which was fully offset by a change in the valuation allowance. The 2017 U.S. tax impact of the one-
time transition tax on the mandatory deemed repatriation of foreign earnings was an expense of $3.0 million. This impact
was fully offset with net operating loss carryforwards for which a full valuation allowance had been recorded. As a result, no
tax expense was recorded. In finalizing its analysis in 2018 the Company recorded an immaterial amount of adjustments to
the original provisional amounts. With respect to GILTI, the Company has adopted a policy to account for this provision as
a period cost.
For the year ended December 31, 2018, an income tax benefit of $0.4 million was recorded for discontinued operations.
For the year ended December 31, 2017,income tax benefit for discontinued operations was $0.6 million.
Income tax expense attributable to income from continued operations for years ended December 31, 2018 and 2017
consisted of:
Year Ended December 31,
2018
2017
(in thousands)
Current income tax (benefit) expense:
Federal and state .................................................................................................................. $
Foreign ................................................................................................................................
Deferred income tax (benefit) expense):
Federal and state ..................................................................................................................
Foreign ................................................................................................................................
Total income tax benefit from continuing operations .............................................................. $
(191 ) $
279
88
(3,552 )
(212 )
(3,764 )
(3,676 ) $
253
297
550
(1,730 )
575
(1,155 )
(605 )
The total benefit from income taxes included in the statement of operations is as follows:
Continuing operations ............................................................................................................. $
Discontinued operations ..........................................................................................................
Total income tax benefit .......................................................................................................... $
(3,676 ) $
(441 )
(4,117 ) $
(605 )
(617 )
(1,222 )
Year Ended December 31,
2018
2017
(in thousands)
F-33
Income tax benefit for the years ended December 31, 2018 and 2017 differed from the amount computed by applying
the U.S. federal income tax rate of 21% and 34%, respectively, to pre-tax continuing operations income as a result of the
following:
Year Ended December 31,
Computed "expected" income tax benefit ............................................................................... $
Increase (decrease) in income taxes resulting from:
Permanent differences, net ..................................................................................................
Foreign tax rate differential .................................................................................................
State income taxes, net of federal income tax benefit .........................................................
Non-deductible stock compensation expense ......................................................................
Acquisition costs .................................................................................................................
Impact of U.S. rate change ..................................................................................................
Tax credits ...........................................................................................................................
Change in reserve for uncertain tax position .......................................................................
Impact of change to prior year tax accruals .........................................................................
Impact of adoption of ASU 2016-09 ...................................................................................
U.S tax on foreign dividends ...............................................................................................
Foreign withholding taxes ...................................................................................................
Conversion of U.S foreign tax credits from credit to deduction ..........................................
Change in valuation allowance allocated to income tax benefit ..........................................
Other ....................................................................................................................................
Total income tax benefit .......................................................................................................... $
2018
2017
(in thousands)
(1,674 ) $
(892 )
(117 )
(11 )
(121 )
(329 )
438
-
(242 )
203
100
-
-
-
-
(1,850 )
(73 )
(3,676 ) $
(118 )
23
(103 )
174
-
3,159
(14 )
(58 )
72
(486 )
3,149
38
648
(6,152 )
(45 )
(605 )
Certain prior year amounts in the above table have been reclassified for consistency with the current year presentation.
These reclassifications had no effect on the Company’s consolidated financial statements.
Income tax (benefit) expense is based on the following pre-tax income from continuing operations for the years ended
December 31, 2018 and 2017:
Domestic ................................................................................................................................. $
Foreign ....................................................................................................................................
Total ........................................................................................................................................ $
(in thousands)
(9,034 ) $
1,059
(7,975 ) $
(3,662 )
1,041
(2,621 )
Year Ended December 31,
2018
2017
F-34
The tax effects of temporary differences that give rise to significant components of the deferred tax assets and deferred
tax liabilities at December 31, 2018 and 2017 are as follows:
December 31,
2018
2017
(in thousands)
Deferred income tax assets:
Accounts receivable ............................................................................................................ $
Inventory .............................................................................................................................
Operating loss and credit carryforwards ..............................................................................
Accrued expenses ................................................................................................................
Pension liabilities ................................................................................................................
Contingent consideration .....................................................................................................
Stock compensation .............................................................................................................
Other assets .........................................................................................................................
Total gross deferred assets ......................................................................................................
Less: valuation allowance ...................................................................................................
Deferred tax assets .................................................................................................................. $
57 $
1,147
20,095
1,692
110
-
999
172
24,272
(13,899 )
10,373 $
Deferred income tax liabilities:
Indefinite-lived intangible assets ......................................................................................... $
Definite-lived intangible assets ...........................................................................................
Property, plant and equipment .............................................................................................
Other accrued liabilities .......................................................................................................
Total deferred tax liabilities ....................................................................................................
Deferred income tax liability, net ............................................................................................ $
1,975 $
10,221
204
63
12,463
(2,090 ) $
93
891
8,287
-
151
2,273
1,667
122
13,484
(11,447 )
2,037
3,166
2,383
-
270
5,819
(3,782 )
Deferred income tax assets and liabilities by classification on the consolidated balance sheets were as follows:
December 31,
2018
2017
(in thousands)
Deferred income tax assets ...................................................................................................... $
Deferred income tax liabilities ................................................................................................
Long term liabilities held for sale ............................................................................................
Deferred income tax liability, net ............................................................................................ $
211 $
(2,301 )
-
(2,090 ) $
182
(2,653 )
(1,311 )
(3,782 )
As of December 31, 2018 and 2017, the Company maintained a total valuation allowance of $13.9 million and $11.4
million, respectively, which relates to foreign, federal, and state deferred tax assets in both years. The valuation allowance is
based on estimates of taxable income in each of the jurisdictions in which we operate and the period over which our deferred
tax assets will be recoverable. The movement in the valuation allowance is primarily due to the finalization of purchase
accounting for the DSI acquisition and its impact on the valuation allowance related to certain U.S. deferred tax assets.
The Company adopted the provisions of ASU 2016-09, Improvements to Employee Share-based Payment Accounting,
on January 1, 2017. Upon adoption, the company recorded previously unrecognized excess tax benefits from the exercise of
employee stock options as an increase in its deferred tax asset for net operating losses of approximately $0.5 million. The
tax benefit of this increased deferred tax asset is fully offset by an increase in the valuation allowance. Following adoption,
excess tax benefits or tax deficit is reflected as income tax benefit or expense in the year the tax impact is generated. Prior to
the adoption of ASU 2016-09, these excess tax benefits could only be recognized when the related tax deduction reduces
income taxes payable and the benefit would be reflected as a credit to additional paid-in capital if realized.
At December 31, 2018, the Company had federal net operating loss carryforwards of $27.2 million, a portion of which
($21.9 million) expires between 2019 and 2037; the remainder have an unlimited carryforward period. The Company’s state
net operating loss carryforwards of $17.5 million expire between 2019 and 2037. The Company has foreign tax credits of
$0.2 million which begin to expire in 2020, as well as $8.6 million of research and development tax credit carryforwards
which begin to expire in 2020. Approximately $1.0 million of the research and development tax credit carryforwards are
offset by a reserve for uncertain tax positions. The Company had $0.8 million of alternative minimum tax credit carryforwards
F-35
which are not subject to expiration and become refundable under the Tax Act beginning in 2018. In addition, the Company
had a total of $3.8 million of state investment tax credit carryforwards, research and development tax credit carryforwards,
and EZ credit carryforwards, which begin to expire in 2019. The Internal Revenue Code (IRC) limits the amounts of net
operating loss carryforwards or credits that a company may use in any one year in the event of a change in ownership under
IRC Sections 382 or 383. As a result of the DSI acquisition as well as acquisitions in prior years, certain losses and
carryforwards would be subject to such limitation. The Company has provided a full or partial valuation allowance for the
portion of state NOLs and federal and state credit carryforwards the Company expects to expire before use.
As of December 31, 2018 and December 31, 2017, cash and cash equivalents held by the Company’s foreign
subsidiaries was $3.2 million and $4.8 million, respectively. As of December 31, 2017, the Company changed its indefinite
reinvestment assertion to provide that all foreign cash balances above the level required for local operating expenses would
be repatriated to the U.S. in tax years after 2017. The Company maintains this modified assertion at December 31, 2018. As
a result of the 2017 Tax Act, post-2017 dividends from qualifying Controlled Foreign Corporations are no longer taxed in
the U.S. However, any dividends to the U.S. must still be assessed for withholding tax liability as well as state income tax
liability. As a result of the Company’s assertion, the Company determined the potential state income tax liability related to
available cash balances at foreign subsidiaries to be immaterial in 2018 and 2017. In addition, an accrued withholding tax
liability of $38 thousand was recorded as of both December 31, 2018 and December 31, 2017, related to amounts determined
to be available for repatriation.
At December 31, 2018 and 2017 the amount of unrecognized tax benefits that would affect the Company’s effective
tax rate are shown in the table below:
Balance at December 31, 2016 .......................................................................................................................... $
Decreases based on tax positions of prior years ................................................................................................
Settlements ........................................................................................................................................................
Balance at December 31, 2017 ..........................................................................................................................
Release due to expiration of statute of limitations .............................................................................................
Additions based on tax positions of prior years ................................................................................................
Additions based on tax positions of acquired entities .......................................................................................
Balance at December 31, 2018 .......................................................................................................................... $
(in thousands)
406
(53 )
(30 )
323
(94 )
242
1,389
1,860
In 2017, a German income tax audit was settled for $30 thousand. In 2018, the Company recorded a reserve of $0.2
million related to upcoming audits. Additionally, reserves of $1.4 million were recorded to purchase accounting based on tax
positions of acquired entities, including $0.8 million for credits and $0.5 million related to state income tax issues.
The Company anticipates that the total unrecognized tax benefits will be reduced within the next 12 months by
approximately $0.5 million due to the expected settlement of certain positions of acquired entities. The Company classifies
interest and penalties related to unrecognized tax benefits as a component of income tax expense. At December 31, 2018 and
at December 31, 2017, the Company had accrued interest and penalties of $0.1 million and $15 thousand respectively.
During 2018 and 2017, the Company recognized a net expense of $31 thousand and $5 thousand, respectively, for interest
and penalties in its total tax provision.
The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction, and various states and
foreign jurisdictions. With few exceptions, the Company is no longer subject to income tax examinations by tax authorities
in foreign jurisdictions for years before 2014. In the U.S., the Company's net operating loss and tax credit carryforward
amounts remain subject to federal and state examination for tax years starting in 2000 as a result of tax losses incurred in
prior years. There are currently no pending federal or state tax examinations. The Company is subject to audits by various
taxing jurisdictions. At December 31, 2018, the Company received notice of income tax examinations to begin in 2019 at
foreign subsidiaries for which reserves have been recorded.
21. Commitments and Contingent Liabilities
From time to time, the Company may be involved in various claims and legal proceedings arising in the ordinary course
of business. The Company is not currently a party to any such material claims or proceedings.
F-36
22. Segment and Related Information
Operating segments are determined by products and services provided by each segment, internal organization structure,
the manner in which operations are managed, criteria used by the Chief Operating Decision Maker, or CODM, to assess the
segment performance, as well as resource allocation and the availability of discrete financial information. The Company has
one operating segment and therefore segment results and consolidated results are the same.
Refer to footnote 19 for a summary of revenue by geographic area of origin.
The following tables summarize additional selected financial information of the Company’s continuing operations by
geographic location:
Long-lived assets by geographic area consist of the following:
United States ........................................................................................................................... $
Germany ..................................................................................................................................
United Kingdom ......................................................................................................................
Rest of the world .....................................................................................................................
Long-lived assets held for sale ................................................................................................
Total long-lived assets (1) ....................................................................................................... $
December 31,
2018
2017
(in thousands)
42,222 $
5,022
585
2,601
-
50,430 $
3,800
5,793
966
3,214
6,327
20,100
(1) Total long-lived assets consists of property, plant and equipment, net and amortizable intangible assets, net.
Net assets by geographic area consist of the following:
United States ........................................................................................................................... $
Germany ..................................................................................................................................
United Kingdom ......................................................................................................................
Rest of the world .....................................................................................................................
Net assets held for sale ............................................................................................................
Total net assets ........................................................................................................................ $
23. Allowance for Doubtful Accounts
December 31,
2018
2017
(in thousands)
38,921 $
17,261
10,473
16,069
-
82,724 $
15,502
18,354
14,376
17,472
15,196
80,900
Allowance for doubtful accounts is based on the Company’s assessment of the collectability of customer accounts. A
rollforward of allowance for doubtful accounts is as follows:
Charged (credited) to
Beginning
Balance
Bad Debt
Expense
(Recoveries)
Charged to
Allowance (1)
(in thousands)
Other (2)
Ending
Balance
Year ended December 31, 2017 ................. $
Year ended December 31, 2018 ................. $
301
193
(57 )
28
(68 )
13
17 $
98 $
193
332
(1) Consists of accounts written off, net of recoveries.
(2) For 2018 this amount consists of an addition to the allowance of $103,000 due to business combination as well as the
effect of currency translation. For 2017, this amount consists solely of the effect of currency translation.
F-37
24. Quarterly Financial Information (unaudited)
Statement of Operations Data:
2018
First
Quarter
Second
Quarter
Third
Quarter
(in thousands, except per share data)
Fourth
Quarter
Fiscal
Year
Revenues ..................................................................................................... $ 26,759 $ 31,522 $ 28,635 $ 33,858 $ 120,774
Cost of revenues .......................................................................................... 13,490 16,167 12,818 15,118 57,593
Gross profit .............................................................................................. 13,269 15,355 15,817 18,740 63,181
Total operating expenses ............................................................................. 14,535 15,737 14,927 16,998 62,197
984
Operating (loss) income .............................................................................. (1,266 )
890 1,742
(8,959)
Other expense, net ....................................................................................... (3,979 ) (1,485 ) (1,798 ) (1,697 )
(7,975)
45
(Loss) income from continuing operations before income taxes ................. (5,245 ) (1,867 )
(908 )
(3,676)
(652 ) (3,260 )
Income tax expense (benefit) ......................................................................
(369 )
(4,299)
(256 ) 3,305
Net (loss) income from continuing operations ............................................ (5,850 ) (1,498 )
Income (loss) from discontinued operations, net of tax .............................. 1,786
1,377
(443 )
34
(256 ) $ 2,862 $ (2,922)
Net (loss) income ........................................................................................ $ (4,064 ) $ (1,464 ) $
(382 )
605
-
(Loss) earnings per share:
Basic (loss) earnings per common share from continuing operations ..... $
Basic earnings (loss) per common share from discontinued operations ..
Basic (loss) earnings per common share ................................................. $
(0.16 ) $ (0.04 ) $ (0.01 ) $ 0.09 $
0.05
- (0.01 )
(0.11 ) $ (0.04 ) $ (0.01 ) $ 0.08 $
-
(0.12)
0.04
(0.08)
Diluted (loss) earnings per common share from continuing operations .. $
Diluted earnings (loss) per common share from discontinued
(0.16 ) $ (0.04 ) $ (0.01 ) $ 0.09 $
(0.12)
operations .............................................................................................
Diluted (loss) earnings per common share .............................................. $
0.05
- (0.01 )
(0.11 ) $ (0.04 ) $ (0.01 ) $ 0.08 $
-
0.04
(0.08)
The fourth quarter includes certain true ups in income tax due to the reassessment of valuation allowances in association
with certain tax assets and in combination with deferred tax attributes of the newly acquired DSI.
F-38
Statement of Operations Data:
2017
First
Quarter
Third
Second
Quarter
Quarter
(in thousands, except per share data)
Fourth
Quarter
Fiscal
Year
Revenues ........................................................................ $ 18,086 $ 18,958 $ 18,717 $ 21,646 $ 77,407
38,237
Cost of revenues .............................................................
39,170
Gross profit .................................................................
39,805
Total operating expenses ................................................
(635 )
Operating (loss) income .................................................
(1,986 )
Other expense, net ..........................................................
(2,621 )
Loss from continuing operations before income taxes ...
(605 )
Income tax benefit ..........................................................
(2,016 )
Loss from continuing operations ....................................
1,151
(Loss) income from discontinued operations, net of tax
(865 )
Net (loss) income ........................................................... $
10,626
11,020
10,646
374
(849 )
(475 )
(464 )
(11 )
1,010
999 $
8,509
9,577
9,927
(350)
(400)
(750)
(7)
(743)
(323)
(1,066) $
9,217
9,500
9,890
(390 )
(274 )
(664 )
(19 )
(645 )
228
(417 ) $
9,885
9,073
9,342
(269)
(463)
(732)
(115)
(617)
236
(381) $
Loss (earnings) per share:
Basic (loss) earnings per common share from
continuing operations .............................................. $
(0.02) $
(0.02) $
(0.02 ) $
- $
(0.06 )
Basic (loss) earnings per share from discontinued
operations ................................................................
Basic (loss) earnings per common share .................... $
(0.01)
(0.03) $
0.01
(0.01) $
0.01
(0.01 ) $
0.03
0.03 $
0.03
(0.02 )
Diluted (loss) earnings per common share from
continuing operations .............................................. $
(0.02) $
(0.02) $
(0.02 ) $
- $
(0.06 )
Diluted (loss) earnings per common share from
discontinued operations ...........................................
Diluted (loss) earnings per common share ................ $
(0.01)
(0.03) $
0.01
(0.01) $
0.01
(0.01 ) $
0.03
0.03 $
0.03
(0.02 )
F-39
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by undersigned thereunto duly authorized.
SIGNATURES
Date: March 18, 2019
HARVARD BIOSCIENCE, INC.
By: /s/ JEFFREY A. DUCHEMIN
Jeffrey A. Duchemin
Chief Executive Officer
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
Signature
Title
Date
/s/ JEFFREY A. DUCHEMIN
Jeffrey A. Duchemin
Chief Executive Officer and Director
(Principal Executive Officer)
March 18, 2019
/s/ KAM UNNINAYAR
Kam Unninayar
/s/ JAMES GREEN
James Green
/s/ JOHN F. KENNEDY
John F. Kennedy
/s/ BERTRAND LOY
Bertrand Loy
/s/ KATHERINE A. EADE
Katherine A. Eade
/s/ THOMAS W. LOEWALD
Thomas W. Loewald
Chief Financial Officer
March 18, 2019
(Principal Financial Officer and
Principal Accounting Officer)
Director
Director
Director
Director
Director
March 18, 2019
March 18, 2019
March 18, 2019
March 18, 2019
March 18, 2019
The following exhibits are filed as part of this Annual Report on Form 10-K. Where such filing is made by
incorporation by reference to a previously filed document, such document is identified.
EXHIBIT INDEX
Description
Method of Filing
Separation and Distribution Agreement between
Harvard Bioscience, Inc. and Biostage, Inc. (f/k/a
Harvard Apparatus Regenerative Technology,
Inc.) dated as of October 31, 2013
Share Purchase Agreement between Biochrom
Limited, as Buyer, and Multi-Channel Systems
Holding GmbH, as Seller, dated as of October 1,
2014
Stock Purchase Agreement by and among
Harvard Bioscience, Inc., as Buyer, Triangle
BioSystems, Inc., and the sellers party thereto
dated as of October 1, 2014
Agreement for the Sale and Purchase of All
Shares in HEKA GmbH by and among Multi
Channel Systems MCS GmbH, as Purchaser, Dr.
Peter Schulze GmbH & Co. KG, as Seller, and
Dr. Peter Schulze, as Guarantor, dated as of
January 8, 2015
Agreement for the Sale and Purchase of All
Shares in HEKA Canada between Ealing
Scientific Limited, as Purchaser, and Dr. Peter
Schulze, as Seller, dated as of January 8, 2015
Previously filed as an exhibit to the Company’s Current
Report on Form 8-K (filed November 6, 2013) and
incorporated by reference thereto
Previously filed as an exhibit to the Company’s Current
Report on Form 8-K (filed October 1, 2014) and
incorporated by reference thereto
Previously filed as an exhibit to the Company’s Current
Report on Form 8-K (filed October 1, 2014) and
incorporated by reference thereto
Previously filed as an exhibit to the Company’s Current
Report on Form 8-K (filed January 9, 2015) and
incorporated by reference thereto
Previously filed as an exhibit to the Company’s Current
Report on Form 8-K (filed January 9, 2015) and
incorporated by reference thereto
Merger Agreement, dated as of January 22, 2018,
between Harvard Bioscience, Inc., Plymouth Sub,
Inc. and Data Sciences International, Inc.
Previously filed as an exhibit to the Company’s Current
Report on Form 8-K (filed January 26, 2018) and
incorporated by reference thereto
Purchase Agreement, dated as of January 22,
2018, between Harvard Bioscience, Inc., Denville
Scientific, Inc. and Thomas Scientific, LLC
Previously filed as an exhibit to the Company’s Current
Report on Form 8-K (filed January 26, 2018) and
incorporated by reference thereto
Exhibit
Number
2.1§
2.2§
2.3§
2.4§
2.5§
2.6§
2.7§
3(i)
Second Amended and Restated Certificate of
Incorporation of Harvard Bioscience, Inc.
3(ii)
Amended and Restated By-laws of Harvard
Bioscience, Inc.
Previously filed as an exhibit to the Company’s
Registration Statement on Form S-1/A (File No. 333-
45996) (filed on November 9, 2000) and incorporated
by reference thereto
Previously filed as an exhibit to the Company’s
Registration Statement on Form S-1/A (File No. 333-
45996) (filed on November 9, 2000) and incorporated
by reference thereto
3.1
Amendment No. 1 to Amended and Restated
Bylaws of Harvard Bioscience, Inc. (as adopted
October 30, 2007)
Previously filed as an exhibit to the Company’s Current
Report on Form 8-K (filed on November 1, 2007) and
incorporated by reference thereto
3.2
3.3
4.1
4.2
4.3
Certificate of Designations, Preferences and
Rights of a Series of Preferred Stock of Harvard
Bioscience, Inc. classifying and designating the
Series A Junior Participating Cumulative Preferred
Stock
Previously filed as an exhibit to the Company’s
Registration Statement on Form 8-A (filed February 8,
2008) and incorporated by reference thereto
Certificate of Elimination of Series A Junior
Participating Cumulative Preferred Stock, dated as
of February 27, 2018
Previously filed as an exhibit to the Company’s
Registration Statement on Form 8-A/A (filed March 2,
2018) and incorporated by reference thereto
Specimen certificate for shares of Common Stock,
$0.01 par value, of Harvard Bioscience, Inc.
Amended and Restated Securityholders’
Agreement dated as of March 2, 1999 by and
among Harvard Apparatus, Inc., Pioneer
Partnership II, Pioneer Capital Corp., First New
England Capital, L.P. and Citizens Capital, Inc.
and Chane Graziano and David Green
Shareholders Rights Agreement, dated as of
February 5, 2008 between Harvard Bioscience,
Inc., and Registrar and Transfer Company, as
Rights Agent
10.1 #
Harvard Apparatus, Inc. 1996 Stock Option and
Grant Plan
10.2 #
Harvard Bioscience, Inc. Third Amended and
Restated 2000 Stock Option and Incentive Plan
10.3
Harvard Bioscience, Inc. Employee Stock
Purchase Plan
10.4
Form of Director Indemnification Agreement
10.5
Lease of Unit 22 Phase I Cambridge Science Park,
Milton Road, Cambridge dated May 8, 2008
between The Master Fellows and Scholars of
Trinity College Cambridge and Biochrom
Limited.
10.6
Lease, dated February 23, 2004, by and between
William Cash Forman and Hoefer, Inc.
10.7 +
Trademark License Agreement, dated
December 19, 2002, by and between Harvard
Bioscience, Inc. and President and Fellows of
Harvard College.
Previously filed as an exhibit to the Company’s
Registration Statement on Form S-1/A (File No. 333-
45996) (filed on November 9, 2000) and incorporated by
reference thereto
Previously filed as an exhibit to the Company’s
Registration Statement on Form S-1/A (File No. 333-
45996) (filed on October 25, 2000) and incorporated by
reference thereto
Previously filed as an exhibit to the Company’s
Registration Statement on Form 8-A (filed February 8,
2008) and incorporated by reference thereto
Previously filed as an exhibit to the Company’s
Registration Statement on Form S-1/A (File No. 333-
45996) (filed on October 25, 2000) and incorporated by
reference thereto
Previously disclosed in the Company’s Proxy Statement
on Schedule 14A (filed April 15, 2011) and incorporated
by reference thereto
Previously filed as an exhibit to the Company’s
Registration Statement on Form S-1/A (File No. 333-
45996) (filed on November 9, 2000) and incorporated by
reference thereto
Previously filed as an exhibit to the Company’s
Registration Statement on Form S-1/A (File No. 333-
45996) (filed on October 25, 2000) and incorporated by
reference thereto
Previously filed as an exhibit to the Company’s Annual
Report on Form 10-K (filed March 11, 2009) and
incorporated by reference thereto
Previously filed as an exhibit to the Company’s Annual
Report on Form 10-K (filed March 15, 2004) and
incorporated by reference thereto
Previously filed as an exhibit to the Company’s
Quarterly Report on Form 10-Q (filed May 15, 2003)
and incorporated by reference thereto
10.8
Lease Agreement Between Seven October Hill,
LLC and Harvard Bioscience, Inc. dated
December 30, 2005.
Previously filed as an exhibit to the Company’s Current
Report on Form 8-K (filed January 4, 2006) and
incorporated by reference thereto
10.9 #
Form of Incentive Stock Option Agreement
(Executive Officers).
10.10 #
Form of Non-Qualified Stock Option Agreement
(Executive Officers).
10.11 #
Form of Non-Qualified Stock Option Agreement
(Non-Employee Directors).
10.12
10.13
10.14 #
Amended and Restated Revolving Credit Loan
Agreement, dated as of August 7, 2009, by and
among Harvard Bioscience, Inc. and the Lenders
from time to time party thereto, including Bank of
America, N.A. (both in its capacity as “Lender”
and in its capacity as “Agent”), and Brown
Brothers Harriman & Co.
Amendment No. 2, dated as of May 22, 2010, to
Lease Agreement, as subsequently amended,
between Seven October Hill LLC and Harvard
Bioscience, Inc.
Form of Deferred Stock Award Agreement under
the Harvard Bioscience, Inc. Second Amended
and Restated 2000 Stock Option And Incentive
Plan, as amended
Previously filed as an exhibit to the Company’s Annual
Report on Form 10-K (filed March 16, 2006) and
incorporated by reference thereto
Previously filed as an exhibit to the Company’s Annual
Report on Form 10-K (filed March 16, 2006) and
incorporated by reference thereto
Previously filed as an exhibit to the Company’s Annual
Report on Form 10-K (filed March 16, 2006) and
incorporated by reference thereto
Previously filed as an exhibit to the Company’s Current
Report on Form 8-K (filed August 13, 2009) and
incorporated by reference thereto
Previously filed as an exhibit to the Company’s Current
Report on Form 8-K (filed June 3, 2010) and
incorporated by reference thereto
Previously filed as an exhibit to the Company’s Annual
Report on Form 10-K (filed March 16, 2011) and
incorporated by reference thereto
10.15 # Director Compensation Arrangements
Filed with this report
10.16
10.17 #
10.18
10.19
10.20
Amendment No. 1 to the Harvard Bioscience, Inc.
Employee Stock Purchase Plan, effective as of
January 1, 2012
Previously filed as an exhibit to the Company’s Annual
Report on Form 10-K (filed March 14, 2014) and
incorporated by reference thereto
First Amendment to Harvard Bioscience, Inc.
Third Amended and Restated 2000 Stock Option
and Incentive Plan, effective as of March 9, 2013
Previously filed as an exhibit to the Company’s Annual
Report on Form 10-K (filed March 14, 2014) and
incorporated by reference thereto
Second Amended and Restated Revolving Credit
Agreement, dated as of March 29, 2013, by and
among Harvard Bioscience, Inc. and the Lenders
from time to time party thereto, including Bank of
America, N.A. and Brown Brothers Harriman &
Co.
Previously filed as an exhibit to the Company’s Current
Report on Form 8-K (filed April 3, 2013) and
incorporated by reference thereto
Amendment No. 2 to the Harvard Bioscience, Inc.
Employee Stock Purchase Plan, effective as of
May 23, 2013
Previously filed as an exhibit to the Company’s Annual
Report on Form 10-K (filed March 14, 2014) and
incorporated by reference thereto
First Amendment to Second Amended and
Restated Credit Agreement dated as of May 30,
2013, with an effective date as of April 30, 2013,
by and among Harvard Bioscience, Inc. Bank of
America, N.A. and Brown Brothers Harriman &
Co.
Previously filed as an exhibit to the Company’s Annual
Report on Form 10-K (filed March 14, 2014) and
incorporated by reference thereto
10.21 #
Employment Agreement, dated August 26, 2013,
between Harvard Bioscience, Inc. and Jeffrey A.
Duchemin
Previously filed as an exhibit to the Company’s Current
Report on Form 8-K (filed August 29, 2013) and
incorporated by reference thereto
10.22 # Offer letter dated September 30, 2013 between
Harvard Bioscience, Inc. and Yong Sun
Previously filed as an exhibit to the Company’s Current
Report on Form 8-K (filed February 19, 2014) and
incorporated by reference thereto
10.23 #
10.24
10.25
10.26
10.27
10.28
Employment Agreement, dated October 2, 2013,
between Harvard Bioscience, Inc. and Robert E.
Gagnon
Previously filed as an exhibit to the Company’s Current
Report on Form 8-K (filed October 16, 2013) and
incorporated by reference thereto
Second Amendment to Second Amended and
Restated Credit Agreement and Waiver dated as of
October 31, 2013, by and among Harvard
Bioscience, Inc. Bank of America, N.A. and
Brown Brothers Harriman & Co.
Intellectual Property Matters Agreement between
Harvard Bioscience, Inc. and Biostage, Inc. (f/k/a
Harvard Apparatus Regenerative Technology,
Inc.) dated as of October 31, 2013.
Product Distribution Agreement between Harvard
Bioscience, Inc. and Biostage, Inc. (f/k/a Harvard
Apparatus Regenerative Technology, Inc.) dated
as of October 31, 2013.
Tax Sharing Agreement between Harvard
Bioscience, Inc. and Biostage, Inc. (f/k/a Harvard
Apparatus Regenerative Technology, Inc.) dated
as of October 31, 2013.
Transition Services Agreement between Harvard
Bioscience, Inc. and Biostage, Inc. (f/k/a Harvard
Apparatus Regenerative Technology, Inc.) dated
as of October 31, 2013.
Previously filed as an exhibit to the Company’s Annual
Report on Form 10-K (filed March 14, 2014) and
incorporated by reference thereto
Previously filed as an exhibit to the Company’s Current
Report on Form 8-K (filed November 6, 2013) and
incorporated by reference thereto
Previously filed as an exhibit to the Company’s Current
Report on Form 8-K (filed November 6, 2013) and
incorporated by reference thereto
Previously filed as an exhibit to the Company’s Current
Report on Form 8-K (filed November 6, 2013) and
incorporated by reference thereto
Previously filed as an exhibit to the Company’s Current
Report on Form 8-K (filed November 6, 2013) and
incorporated by reference thereto
10.29 # Amendment to Employment Agreement between
Harvard Bioscience, Inc. and Jeffrey A.
Duchemin, effective July 30, 2014.
Previously filed as an exhibit to the Company’s Current
Report on Form 8-K (filed July 31, 2014) and
incorporated by reference thereto
10.30 # Amendment to Employment Agreement between
Harvard Bioscience, Inc. and Robert E. Gagnon,
effective July 30, 2014.
Previously filed as an exhibit to the Company’s Current
Report on Form 8-K (filed July 31, 2014) and
incorporated by reference thereto
10.31
Amendment No. 3, dated as of May 30, 2014, to
Lease Agreement, as subsequently amended,
between Seven October Hill LLC and Harvard
Bioscience, Inc.
Previously filed as an exhibit to the Company’s
Quarterly Report on Form 10-Q (filed August 7, 2014)
and incorporated by reference thereto
10.32 #
Second Amendment to Employment Agreement,
dated as of March 1, 2015, between Harvard
Bioscience, Inc. and Jeffrey A. Duchemin
Previously filed as an exhibit to the Company’s
Quarterly Report on Form 10-Q (filed May 7, 2015) and
incorporated by reference thereto
10.33
10.34
10.35 #
10.36
10.37
10.38
10.39 #
10.40 #
10.41 #
10.42
10.43
10.44
Third Amendment to Second Amended and
Restated Credit Agreement and Waiver dated as of
April 24, 2015, by and among Harvard
Bioscience, Inc. Bank of America, N.A. and
Brown Brothers Harriman & Co.
Fourth Amendment to Second Amended and
Restated Credit Agreement and Waiver dated as of
June, 30, 2015, by and among Harvard Bioscience,
Inc. Bank of America, N.A. and Brown Brothers
Harriman & Co.
Form of Deferred Stock Award Agreement under
the Harvard Bioscience, Inc. Third Amended and
Restated 2000 Stock Option And Incentive Plan,
as amended
Fifth Amendment to Second Amended and
Restated Credit Agreement and Waiver dated as of
November 5, 2015, by and among Harvard
Bioscience, Inc. Bank of America, N.A. and
Brown Brothers Harriman & Co.
Sixth Amendment to Second Amended and
Restated Credit Agreement dated as of March 9,
2016, by and among Harvard Bioscience, Inc.
Bank of America, N.A. and Brown Brothers
Harriman & Co.
Limited Consent and Waiver dated as of May 5,
2016 by and among Harvard Bioscience, Inc.,
Bank of America, N.A and Brown Brothers
Harriman & Co.
Previously filed as an exhibit to the Company’s
Quarterly Report on Form 10-Q (filed August 6, 2015)
and incorporated by reference thereto
Previously filed as an exhibit to the Company’s
Quarterly Report on Form 10-Q (filed August 6, 2015)
and incorporated by reference thereto
Previously filed as an exhibit to the Company’s
Quarterly Report on Form 10-Q (filed November 5,
2015) and incorporated by reference thereto
Previously filed as an exhibit to the Company’s Annual
Report on Form 10-K (filed April 29, 2016) and
incorporated by reference thereto
Previously filed as an exhibit to the Company’s
Quarterly Report on Form 10-Q (filed May 16, 2016)
and incorporated by reference thereto
Previously filed as an exhibit to the Company’s
Quarterly Report on Form 10-Q (filed August 4, 2016)
and incorporated by reference thereto
Third Amendment to Employment Agreement,
dated as of May 26, 2016, between Harvard
Bioscience, Inc. and Jeffrey A. Duchemin
Previously filed as an exhibit to the Company’s Current
Report on Form 8-K (filed May 27, 2016) and
incorporated by reference thereto
Second Amendment to Employment Agreement,
dated as of May 26, 2016, between Harvard
Bioscience, Inc. and Robert E. Gagnon
Previously filed as an exhibit to the Company’s Current
Report on Form 8-K (filed May 27, 2016) and
incorporated by reference thereto
Employment Agreement, dated as of May 26,
2016, between Harvard Bioscience, Inc. and Yong
Sun
Previously filed as an exhibit to the Company’s Current
Report on Form 8-K (filed May 27, 2016) and
incorporated by reference thereto
Limited Consent and Waiver dated as of
November 1, 2016, and effective as of October 26,
2016 by and among Harvard Bioscience, Inc.,
Bank of America, N.A and Brown Brothers
Harriman & Co.
Lease Agreement, dated as of August 15, 2008,
between AX US L.P. (as assigned to it by New
Brighton 14th Street LLC), Ryan Companies US,
Inc. and Data Sciences International, Inc. (as
assigned to it by Transoma Medical, Inc.)
First Amendment to Lease Agreement, dated as of
February 26, 2008, between AX US L.P. (as
assigned to it by New Brighton 14th Street LLC),
Ryan Companies US, Inc. and Data Sciences
International, Inc. (as assigned to it by Transoma
Medical, Inc.)
Previously filed as an exhibit to the Company’s Annual
Report on Form 10-K (filed March 17, 2017) and
incorporated by reference thereto
Previously filed as an exhibit to the Company’s Annual
Report on Form 10-K (filed March 16, 2018) and
incorporated by reference thereto
Previously filed as an exhibit to the Company’s Annual
Report on Form 10-K (filed March 16, 2018) and
incorporated by reference thereto
10.45
10.46
10.47 #
10.48
10.49
Second Amendment to Lease Agreement, dated as
of August 4, 2008, between AX US L.P. (as
assigned to it by New Brighton 14th Street LLC),
Ryan Companies US, Inc. and Data Sciences
International, Inc. (as assigned to it by Transoma
Medical, Inc.)
Financing Agreement, dated as of January 31,
2018, between Harvard Bioscience, Inc., each of
the borrowers named therein, the lenders from
time to time party thereto, and Cerberus Business
Finance, LLC
Previously filed as an exhibit to the Company’s Annual
Report on Form 10-K (filed March 16, 2018) and
incorporated by reference thereto
Previously filed as an exhibit to the Company’s Current
Report on Form 8-K (filed February 2, 2018) and
incorporated by reference thereto
Employment Agreement, dated October 18, 2018,
between Harvard Bioscience, Inc. and Kam
Unninayar.
Previously filed as an exhibit to the Company’s Current
Report on Form 8-K (filed October 22, 2018) and
incorporated by reference thereto
First Amendment to Financing Agreement, dated
as of August 16, 2018, between Harvard
Bioscience, Inc., each of the borrowers named
therein, the lenders from time to time party
thereto, and Cerberus Business Finance, LLC.
Third Amendment to Lease Agreement, entered
into as of November 1, 2018, with an effective
date as of October 25, 2018, between Data
Sciences International, Inc. and AX US L.P.
Previously filed as an exhibit to the Company’s
Quarterly Report on Form 10-Q (filed November 1,
2018) and incorporated by reference thereto
Previously filed as an exhibit to the Company’s Current
Report on Form 8-K (filed November 7, 2018) and
incorporated by reference thereto
10.50 #
Second Amendment to Harvard Bioscience, Inc.
Third Amended and Restated 2000 Stock Option
Plan, effective as of May 28, 2015.
10.51 # Amendment No. 3 to Harvard Bioscience, Inc.
Employee Stock Purchase Plan, effective as of
May 18, 2017.
Filed with this report
Filed with this report
10.52 # Third Amendment to Harvard Bioscience, Inc.
Filed with this report
16.1
21.1
23.1
31.1
31.2
32.1
32.2
Third Amended and Restated 2000 Stock Option
and Incentive Plan, effective as of May 17, 2018.
Letter from KPMG to the Securities and Exchange
Commission, dated as of May 9, 2017
Previously filed as an exhibit to the Company’s Current
Report on Form 8-K (filed May 11, 2017) and
incorporated by reference thereto
Subsidiaries of the Registrant
Consent of Grant Thornton LLP
Certification of Chief Financial Officer of Harvard
Bioscience, Inc., pursuant to Rules 13a-15(e) and
15d-15(e), as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002
Certification of Chief Executive Officer of
Harvard Bioscience, Inc., pursuant to Rules 13a-
15(e) and 15d-15(e), as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
Filed with this report
Filed with this report
Filed with this report
Filed with this report
Certification of Chief Financial Officer of Harvard
Bioscience, Inc., pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
*
Certification of Chief Executive Officer of
Harvard Bioscience, Inc., pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
*
101.INS XBRL Instance Document
Filed with this report
101.SCH XBRL Taxonomy Extension Schema Document
Filed with this report
101.CAL XBRL Taxonomy Extension Calculation Linkbase
Filed with this report
Document
101.DEF XBRL Taxonomy Extension Definition Linkbase
Filed with this report
Document
101.LAB XBRL Taxonomy Extension Label Linkbase
Filed with this report
Document
101.PRE XBRL Taxonomy Extension Presentation Linkbase
Filed with this report
Document
+
*
#
§
Certain portions of this document have been granted confidential treatment by the Securities and Exchange
Commission (the Commission).
This certification shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or
otherwise subject to the liability of that section, nor shall it be deemed to be incorporated by reference into any filing
under the Securities Act of 1933 or the Securities Exchange Act of 1934
Management contract or compensatory plan or arrangement.
The schedules and exhibits have been omitted. A copy of any omitted schedule or exhibit will be furnished to the
SEC supplementally upon request.
The Company will furnish to stockholders a copy of any exhibit without charge upon written request.
Compensation of Non-Employee Directors Upon Initial Election to the Board
Director Compensation Arrangements
Each non-employee director will be entitled to receive a non-qualified stock option having an aggregate Black-
Scholes cash value of $134,400, rounded to the nearest 100 shares, provided that in no case shall such stock option be less
than 25,000 shares (so long as 25,000 shares are required to be granted under the equity incentive plan of the
Corporation). Such option shall be for the purchase of common stock of the Corporation and shall vest annually over three
years and be granted on the fifth business day following his or her initial election to the Board.
Exhibit 10.15
Annual Compensation of Non-Employee Directors
Annual Retainers
Each non-employee director will be entitled to receive annual retainer amounts for each respective role on the Board.
In lieu of cash, such aggregate annual retainer amounts shall each be satisfied by the issuance of deferred stock awards of
restricted stock units as described herein.
The respective annual retainer value for each particular role on the Board are as follows:
Role
Non-employee director .......................................................................................................................... $
Chairman of the Board .......................................................................................................................... $
Audit Committee chair .......................................................................................................................... $
Audit Committee member ..................................................................................................................... $
Compensation Committee chair ............................................................................................................ $
Compensation Committee member ....................................................................................................... $
Governance Committee chair ................................................................................................................ $
Governance Committee member ........................................................................................................... $
35,280
35,280
18,144
9,072
12,096
6,048
5,040
5,040
Annual Retainer Value
The annual retainer awards (each a “Retainer Award”) are generally granted on the first trading day of January (the
“Grant Date”) and vest quarterly over the calendar year on each March 31, June 30, September 30 and December 31. The
number of shares of common stock subject to a Retainer Award is equal to the amount of cash that would have been received
had the retainers all been paid in cash, divided by the average daily closing market price of the common stock for the month
of November immediately preceding the Grant Date, rounded to the nearest 100 shares.
In the event that a non-employee director is named Chairman or joins any committees of the Board of Directors
during a fiscal year after the Grant Date, such director shall be granted a Retainer Award (the “Additional Retainer Award”),
in relation to such additional roles and respective retainer amounts pro-rated for the remainder of such year. Such Additional
Retainer Award shall be granted on the first trading day of the month after the individual is appointed to such roles. The
Additional Retainer Award shall vest in equal amounts spread over the remaining quarterly vesting dates of the Retainer
Awards for such calendar year subject to continued service as a non-employee director on the applicable vesting dates. The
number of shares of common stock subject to an Additional Retainer Award is equal to the amount of cash that would have
been received had the retainers all been paid in cash, divided by the average daily closing market price of the common stock
for the calendar month that is two months prior to the month the director was appointed to the additional roles, rounded to
the nearest 100 shares (i.e., the month of June if the director was appointed to the additional roles on August 15).
In the event a director’s service (including as a Board member, or their role as Chairman, Committee Chairman,
Committee member) ends during a particular quarter, the vesting date for such quarter in relation to the portion of the award
attributable to such roles that are ending, shall be the last day of the director’s term in the respective role such that the full
quarterly amount attributable to such roles shall vest on that earlier vesting date.
Annual Equity Award
Each non-employee director will also be entitled to receive an equity award having an aggregate cash value of
$80,640, rounded to the nearest 100 shares, vesting fully on the earlier to occur of (i) the date of the Corporation’s next
Annual Meeting of Stockholders after the grant date, immediately prior to the commencement of such meeting, and (ii) one
year from the date of grant and granted on the fifth business day following the Corporation’s Annual Meeting of Stockholders,
with such award to be evidenced by a grant of deferred stock awards of restricted stock units.
Expenses
In addition, non-employee directors shall be reimbursed for their expenses incurred in connection with attending
Board and Committee meetings.
EXHIBIT 10.50
SECOND AMENDMENT TO
HARVARD BIOSCIENCE, INC.
THIRD AMENDED AND RESTATED 2000 STOCK OPTION AND INCENTIVE PLAN
This Second Amendment to the Harvard Bioscience, Inc. Third Amended and Restated 2000 Stock Option and
Incentive Plan (the “Plan”) is effective as of May 28, 2015 (the “Effective Date”).
Pursuant to the authorization and approval of the Board of Directors and stockholders of Harvard Bioscience, Inc. in
accordance with Section 17 of the Plan, the Plan is hereby amended as follows, effective as of the Effective Date:
1. Section 3(a): The first sentence in Section 3(a) is hereby deleted in its entirety and replaced with the following in
its stead:
“a) Stock Issuable. Subject to adjustment as provided in Section 3(b), the maximum number of shares of
Stock reserved and available for issuance under the Plan shall be 17,508,929 shares of Stock which number reflects
the total of 3,750,000 shares originally reserved, plus the effect of an evergreen provision through December 31,
2005, plus an additional 2,000,000 shares added to the Plan in 2006, plus an additional 2,500,000 shares added to
the Plan in 2008 plus an additional 3,700,000 shares added to the Plan in 2011 plus an additional 1,941,254 shares
to account for the adjustment required by Section 3(b) pertaining to the Awards issued in connection with the spin-
off of Harvard Apparatus Regenerative Technology, Inc. by Harvard Bioscience, Inc. plus an additional 2,500,000
shares added to the Plan in 2015.”
2. The following is added to the end of the Plan:
“DATE SECOND AMENDMENT TO HARVARD BIOSCIENCE, INC. THIRD AMENDED AND
RESTATED 2000 STOCK OPTION AND INCENTIVE PLAN APPROVED BY BOARD OF DIRECTORS:
APRIL 3, 2015.
DATE SECOND AMENDMENT TO HARVARD BIOSCIENCE, INC. THIRD AMENDED AND RESTATED
2000 STOCK OPTION AND INCENTIVE PLAN APPROVED BY STOCKHOLDERS: MAY 28, 2015.”
3. Except as expressly amended hereby, the Plan shall remain in full force and effect.
IN WITNESS WHEREOF, Harvard Bioscience, Inc. has duly executed this amendment to be effective as the date first
above written.
HARVARD BIOSCIENCE, INC.
By:
/S/ Jeffrey A. Duchemin
Name: Jeffrey A. Duchemin
Title: Chief Executive Officer
AMENDMENT NO. 3 TO
HARVARD BIOSCIENCE, INC.
EMPLOYEE STOCK PURCHASE PLAN
EXHIBIT 10.51
This Amendment No. 3 to the Harvard Bioscience, Inc. Employee Stock Purchase Plan (the “Plan”) is effective as of
May 18, 2017 (the “Effective Date”).
In accordance with Section 18 of the Plan, as approved by the stockholders of Harvard Bioscience, Inc. on the Effective
Date, in order to increase the number of shares of common stock reserved for issuance under the Plan to One Million Fifty
Thousand (1,050,000), the Plan is hereby amended as follows, effective as of the Effective Date:
1. The reference to “Seven Hundred Fifty Thousand (750,000) shares” in the initial paragraph of the Plan is hereby
deleted and replaced with “One Million Fifty Thousand (1,050,000) shares”.
2. The following is added to the end of the Plan:
“DATE AMENDMENT NO. 1 TO PLAN APPROVED BY BOARD OF DIRECTORS: AUGUST 2, 2011.
DATE AMENDMENT NO. 2 TO PLAN APPROVED BY BOARD OF DIRECTORS: FEBRUARY 26, 2013.
DATE AMENDMENT NO. 2 TO PLAN APPROVED BY STOCKHOLDERS: MAY 23, 2013.
DATE AMENDMENT NO. 3 TO PLAN APPROVED BY BOARD OF DIRECTORS: MARCH 31, 2017.
DATE AMENDMENT NO. 3 TO PLAN APPROVED BY STOCKHOLDERS: MAY 18, 2017.”
3. Except as expressly amended hereby, the Plan shall remain in full force and effect.
IN WITNESS WHEREOF, the Harvard Bioscience, Inc. has duly executed this amendment to be effective as the date
first above written.
HARVARD BIOSCIENCE, INC.
By:
/s/ Robert E. Gagnon
Name: Robert E. Gagnon
Title: Chief Financial Officer
EXHIBIT 10.52
THIRD AMENDMENT TO
HARVARD BIOSCIENCE, INC.
THIRD AMENDED AND RESTATED 2000 STOCK OPTION AND INCENTIVE PLAN
This Third Amendment to the Harvard Bioscience, Inc. Third Amended and Restated 2000 Stock Option and Incentive
Plan (the “Plan”) is effective as of May 17, 2018 (the “Effective Date”).
Pursuant to the authorization and approval of the Board of Directors and stockholders of Harvard Bioscience, Inc. in
accordance with Section 17 of the Plan, the Plan is hereby amended as follows, effective as of the Effective Date:
1. Section 3(a): The first sentence in Section 3(a) is hereby deleted in its entirety and replaced with the following in
its stead:
“a) Stock Issuable. Subject to adjustment as provided in Section 3(b), the maximum number of shares of
Stock reserved and available for issuance under the Plan shall be 20,908,929 shares of Stock which number reflects
the total of 3,750,000 shares originally reserved, plus the effect of an evergreen provision through December 31,
2005, plus an additional 2,000,000 shares added to the Plan in 2006, plus an additional 2,500,000 shares added to
the Plan in 2008, plus an additional 3,700,000 shares added to the Plan in 2011, plus an additional 1,941,254 shares
to account for the adjustment required by Section 3(b) pertaining to the Awards issued in connection with the spin-
off of Harvard Apparatus Regenerative Technology, Inc. by Harvard Bioscience, Inc., plus an additional 2,500,000
shares added to the Plan in 2015, plus an additional 3,400,000 shares added to the Plan in 2018.”
2. The following is added to the end of the Plan:
“DATE THIRD AMENDMENT TO HARVARD BIOSCIENCE, INC. THIRD AMENDED AND RESTATED
2000 STOCK OPTION AND INCENTIVE PLAN APPROVED BY BOARD OF DIRECTORS: APRIL 2, 2018.
DATE THIRD AMENDMENT TO HARVARD BIOSCIENCE, INC. THIRD AMENDED AND RESTATED
2000 STOCK OPTION AND INCENTIVE PLAN APPROVED BY STOCKHOLDERS: MAY 17, 2018.”
3. Except as expressly amended hereby, the Plan shall remain in full force and effect.
IN WITNESS WHEREOF, Harvard Bioscience, Inc. has duly executed this amendment to be effective as the date first
above written.
HARVARD BIOSCIENCE, INC.
By:
/s/ Jeffrey A. Duchemin
Name: Jeffrey A. Duchemin
Title: Chief Executive Officer
Exhibit 21.1
Subsidiaries of the Registrant
AHN Acquisition GmbH (Germany)
Asys Hitech GmbH (Austria)
Biochrom Limited (United Kingdom)
Biochrom US, Inc. (United States)
BioDrop Ltd. (United Kingdom)
Cartesian Technologies, Inc. (United States)
CMA Microdialysis AB (Sweden)
Coulbourn Instruments, LLC (United States)
Data Sciences International, Inc.
Data Sciences (UK) MN, Ltd.
Data Sciences EURL
Data Sciences GmbH
DSI (Shanghai) Trading Co Ltd.
Ealing Scientific Limited (doing business as Harvard Apparatus, Canada) (Canada)
FKA GSI US, Inc. (formerly Genomic Solutions, Inc.) (United States)
FKAUBI, Inc. (formerly Union Biometrica, Inc.) (United States)
Genomic Solutions Canada, Inc. (United States)
Harvard Apparatus Limited (United Kingdom)
Harvard Apparatus, S.A.R.L. (France)
Harvard Distribution Oldco, Inc. (formerly Denville Scientific, Inc.) (United States)
HEKA Electronics Incorporated (Canada)
HEKA Electronik Dr. Schulze GmbH (Germany)
HEKA Instruments Incorporated (United States)
Hoefer, Inc. (United States)
Hugo Sachs Elektronik - Harvard Apparatus GmbH (Germany)
KD Scientific, Inc. (United States)
Multi Channel Systems MCS GmbH (Germany)
Panlab S.L. (Spain)
Scie-Plas Ltd. (United Kingdom)
Triangle BioSystems, Inc. (United States)
Walden Precision Apparatus Ltd. (United Kingdom)
Warner Instruments LLC (United States)
Consent of Independent Registered Public Accounting Firm
EXHIBIT 23.1
The Board of Directors
Harvard Bioscience, Inc.:
We have issued our reports dated March 18, 2019, with the respect to the consolidated financial statements and internal
control over financial reporting included in the Annual Report of Harvard Bioscience, Inc. on Form 10-K for the year ended
December 31, 2018. We consent to the incorporation by reference of the said reports in the Registration Statements of Harvard
Bioscience, Inc. on Form S-3 (File No. 333-224535) and Forms S-8 (File No. 333-53848, File No. 333-104544, File No. 333-
135418, File No. 333-151003, File No. 333-174476, File No. 333-189175, File No. 333-204760, File No. 333-218497 and
File No. 333-225365).
/s/ GRANT THORNTON LLP
Boston, Massachusetts
March 18, 2019
I, Kam Unninayar, certify that:
Certification
1. I have reviewed this annual report on Form 10-K of Harvard Bioscience, Inc.;
EXHIBIT 31.1
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is
being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: March 18, 2019
/s/ KAM UNNINAYAR
Kam Unninayar
Chief Financial Officer
I, Jeffrey A. Duchemin, certify that:
Certification
1. I have reviewed this annual report on Form 10-K of Harvard Bioscience, Inc.;
EXHIBIT 31.2
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is
being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonable likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: March 18, 2019
/s/ JEFFREY A. DUCHEMIN
Jeffrey A. Duchemin
Chief Executive Officer
CERTIFICATION OF PERIODIC FINANCIAL REPORT
PURSUANT TO 18 U.S.C. SECTION 1350
EXHIBIT 32.1
The undersigned officer of Harvard Bioscience, Inc. (the “Company”) hereby certifies to her knowledge that the
Company’s annual report on Form 10-K for the year ended December 31, 2018 to which this certification is being furnished
as an exhibit (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, fully complies with
the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), and that the information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company. This certification is provided solely pursuant to 18 U.S.C. Section 1350 and
Item 601(b)(32) of Regulation S-K (“Item 601(b)(32)”) promulgated under the Securities Act of 1933, as amended (the
“Securities Act”), and the Exchange Act. In accordance with clause (ii) of Item 601(b)(32), this certification (A) shall not be
deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and
(B) shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except
to the extent that the Company specifically incorporates it by reference.
Date: March 18, 2019
/s/ KAM UNNINAYAR
Name: Kam Unninayar
Title: Chief Financial Officer
CERTIFICATION OF PERIODIC FINANCIAL REPORT
PURSUANT TO 18 U.S.C. SECTION 1350
EXHIBIT 32.2
The undersigned officer of Harvard Bioscience, Inc. (the “Company”) hereby certifies to his knowledge that the
Company’s annual report on Form 10-K for the year ended December 31, 2018 to which this certification is being furnished
as an exhibit (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, fully complies with
the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), and that the information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company. This certification is provided solely pursuant to 18 U.S.C. Section 1350 and
Item 601(b)(32) of Regulation S-K (“Item 601(b)(32)”) promulgated under the Securities Act of 1933, as amended (the
“Securities Act”), and the Exchange Act. In accordance with clause (ii) of Item 601(b)(32), this certification (A) shall not be
deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and
(B) shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except
to the extent that the Company specifically incorporates it by reference.
Date: March 18, 2019
/s/ JEFFREY A. DUCHEMIN
Name: Jeffrey A. Duchemin
Title: Chief Executive Officer
Exhibit 1
Harvard Bioscience, Inc.
Reconciliation of US GAAP Net Loss to Non-GAAP
Adjusted Net Income (unaudited):
For the Year Ended December 31,
US GAAP net loss............................................................................................
Adjustments:
Amortization of intangible assets...............................................................
Denville Non-GAAP adjustments included in discontinued operations....
Deferred revenue valuation charges on acquisition...................................
Inventory valuation step-up charges on acquisition...................................
Depreciation of fi xed asset step-up on acquisition....................................
Forensic investigation and remediation costs............................................
Loss on sale of AHN...................................................................................
Severance and restructuring charges.........................................................
Acquisition, disposition and integration costs...........................................
Stock-based compensation expense.........................................................
Income taxes................................................................................................
Non-GAAP adjusted net income......................................................................
2018
$(2,922)
5,384
(920)
284
3,816
619
-
-
772
3,294
2,894
(5,861)
$7,360
2017
$(865)
1,553
1,072
-
-
-
386
95
426
694
3,382
(2,519)
$4,224
Exhibit 2
Harvard Bioscience, Inc.
Reconciliation of US GAAP Diluted Loss per Common Share
to Non-GAAP Adjusted Diluted Earnings Per Common Share (unaudited):
US GAAP diluted loss per common share
Adjustments:
Amortization of intangible assets...........................................................
Denville Non-GAAP adjustments included in discontinued operations
Deferred revenue valuation charges on acquisition...............................
Inventory valuation step-up charges on acquisition...............................
Depreciation of fi xed asset step-up on acquisition................................
Forensic investigation and remediation costs........................................
Loss on sale of AHN...............................................................................
Severance and restructuring charges.....................................................
Acquisition, disposition and integration costs.......................................
Stock-based compensation expense.....................................................
Income taxes.................................................................................................
Non-GAAP adjusted diluted earnings per common share...............................
For the Year Ended December 31,
2018
$(0.08)
2017
$(0.02)
0.15
(0.03)
0.01
0.10
0.02
-
-
0.02
0.10
0.08
(0.17)
$0.20
0.04
0.03
-
-
-
0.01
-
0.01
0.02
0.10
(0.07)
$0.12
CMOS
Microelectrode
Arrays
Based on complementary
metal-oxide semiconductor
(CMOS) technology with the
possibility to have thousands
of recording electrodes,
Multichannel Systems
microelectrode Arrays
(MEA’s) allow researchers
to perform high resolution
extracellular recordings on a
sub-cellular level.
Suitable for neuronal
preparations from brain
slices to stem cells, the high
resolution MEA platform
offers new possibilities
in drug discovery, safety
pharmacology, connectivity
studies, and functional
monitoring.
Forward-Looking Statements
This Annual Report contains forward-looking statements. In some cases, you
can identify forward-looking statements by terms such as “capitalize,” “increase,”
“guidance,” “objectives,” “emerging,” “long-term,” “growth,” “potential,”
“future,” “expects,” “plans,” “achieve,” “could,” “will,” “lead,” “opportunity,”
“estimate,” “continue,” “strategy,” “intend,” “believe,””see,” “may,” “should,”
“would,” “seek,” “aim,” “anticipates,” “projects,” “predicts,” “think,” “optimistic,”
“new,” “goal” and similar expressions. These statements include, but are not
limited to, statements or inferences about our beliefs, plans or objectives,
management’s confidence or expectations, our business strategy and ability
to execute such strategy, the outlook for the life sciences industry, and our
positioning for growth and market demand.
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, our business strategy, our ability to raise capital
or borrow funds to consummate acquisitions and the availability of attractive
acquisition candidates, our expectations regarding future costs of product
revenues, our anticipated compliance with the covenants contained in our
credit facility, the adequacy of our financial resources and our plans, objectives,
expectations and intentions that are not historical facts, plus factors described
under the heading “Part I, Item 1A. Risk Factors” in our 2018 Annual Report on
Form 10-K or in our other public filings.
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8
84 October Hill Road
Holliston, Massachusetts 01746
phone 508.893.8066
www.harvardbioscience.com