HARVARD BIOSCIENCE INC

HARVARD BIOSCIENCE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Harvard Bioscience, Inc., a Delaware corporation (the “Company”), is a leading developer, manufacturer and seller of technologies, products and services that enable fundamental advances in life science applications, including research, pharmaceutical and therapy discovery, bioproduction and preclinical testing for pharmaceutical and therapy development. The Company’s products and services are sold globally to customers ranging from renowned academic institutions and government laboratories to the world’s leading pharmaceutical, biotechnology and contract research organizations (“CROs”). With operations in the United States, Europe and China, the Company sells through a combination of direct and distribution channels to customers around the world.

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.

The consolidated financial statements for the fiscal year ended December 31, 2024, have been prepared assuming that the Company will continue as a going concern. A going-concern basis assumes that the Company will continue its operations for the foreseeable future and contemplates the realization of assets and the settlement of liabilities in the normal course of business. As noted below, there is substantial doubt about the Company’s ability to continue as a going concern.

As of December 31, 2024, there was indebtedness of $37.4 million outstanding under the Company's term loan and senior revolving credit facility (collectively, the “Credit Agreement”). The Company was not in compliance with the consolidated net leverage ratio covenant contained in the Credit Agreement as of the December 31, 2024 test date. On March 10, 2025, the Company entered into an amendment to the Credit Agreement (the “March 2025 Amendment”) pursuant to which the lenders and administrative agent agreed to waive such non-compliance, subject to the terms contained in the March 2025 Amendment. The March 2025 Amendment provides, among other things, that the Company's failure to achieve certain refinancing milestones, including receipt of a term sheet or commitment letter from one or more potential lenders, by the dates provided in the March 2025 Amendment or the Company's failure to consummate a refinancing of the Credit Agreement by June 30, 2025, would, in either case, constitute an event of default under the Credit Agreement. In such event, in addition to other actions the lenders may require, the amounts outstanding under the Credit Agreement may become immediately due and payable.

The Company is exploring alternative sources of capital that would allow it to refinance the outstanding indebtedness by June 30, 2025, in order to avoid default under the Credit Agreement, but its ability to access such other sources of capital is uncertain. There is no assurance that such capital will be available, be obtainable on commercially acceptable terms, or provide the Company with sufficient funds to meet its objectives. Based on its anticipated cash flows from operations, unless the Company is able to access other sources of capital or extend the date for repayment under the Credit Agreement, the Company will be unable to pay its debt obligations and fund its operations for at least twelve months from the date of issuance of the consolidated financial statements contained in this Annual Report on Form 10-K. As a result, there is substantial doubt about the Company's ability to continue as a going concern.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles 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 income taxes, credit losses on receivables. and defined benefit pension obligations. Estimates are also required to assess the value for inventories reported at lower of cost or net realizable value, stock-based compensation expense, and the recoverability of long-lived and intangible assets, including goodwill. On an ongoing basis, the Company assesses its previous estimates based upon currently available information. Actual results could differ materially from those estimates.

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 and contract research organizations. The Company also has global and regional distribution partners, and original equipment manufacturer 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, consumables, services, software licenses and enhancements, maintenance and extended warranties. Equipment also includes software that functions together with the tangible equipment to deliver its essential functionality. Contracts with customers may contain multiple promises such as delivery of hardware, software, professional services or post-contract support services. These promises are accounted for as separate performance obligations if they are distinct. For contracts with customers that contain multiple performance obligations, the transaction price is allocated to the separate performance obligations based on relative standalone selling price, which does not materially differ from the stated price in the contract. In general, the Company’s list prices are indicative of standalone selling price, and the majority of the Company's contracts have a term of less than one year.

Instruments, equipment and accessories consist of a 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 the right to payment and the customer has legal title to the asset and the customer or their selected carrier has possession, which is typically upon shipment. Sales of these items are therefore generally recognized at a point in time.

The Company’s consumables revenue 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 as the discounted price represents the standalone selling price of the reprocessed implantable monitor.

Service revenue consists of installation, training, data analysis and surgeries performed on research animals. Service revenue is recognized when the service is performed. Maintenance revenue consists of post-contract support provided in relation to software that is embedded within the equipment that is sold to the customer. The Company provides standard warranties that promise the customer that the product will work as promised and are not a separate performance obligation. Extended warranties relate to warranties that are separately priced and purchased in addition to a standard warranty and are therefore a separate performance obligation. The Company has made the judgment that the customer benefits as the Company performs over the period of the contract, and therefore revenues from maintenance and warranty contracts are recognized over time. The Company uses the input method to recognize revenue over time, which is generally on a straight-line basis over the service period.

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.

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 tosixty days from the time of invoicing, which occurs at the time of shipment or prior to services being performed. Payment terms vary by the type of 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.

In certain subsidiaries the Company provides sales commissions to sales representatives based on annual sales volume. The Company has determined that the incentive portion of its sales commissions qualify as contract costs. The Company has elected the practical expedient in ASC 340-40-25-4 to expense sales commissions when incurred as the amortization period of the asset that would otherwise have been recognized is one year or less.

Contract Liabilities

The Company records contract liabilities when cash is collected from customers prior to satisfaction of the Company’s performance obligation to the customer. Contract liabilities consist of amounts deferred related to service contracts and revenue deferred as a result of payments received in advance from customers. Contract liabilities are generally expected to be recognized within one year.

The amounts included in contract liabilities from advanced payments relate to amounts that are prepaid for wireless implantable monitors under the exchange program. The Company has made the judgment that these payments do not represent a significant financing component as the customer can exercise their discretion as to when they can obtain the products for which they have made a prepayment.

Disaggregation of revenue

Refer to Note 3 for revenue disaggregated by type and by geographic location as well as further information about contract liabilities.

Cash and Cash Equivalents

The Company considers all highly liquid instruments with original maturities of three months or less to be cash equivalents. The Company has cash holdings in financial institutions that exceed insured limits for such financial institutions. The Company mitigates this risk by utilizing financial institutions of high credit quality.

Approximately 66% of the Company’s cash and cash equivalents at December 31, 2024, was held by the Company’s foreign subsidiaries and subject to repatriation tax considerations. These foreign funds were held primarily by subsidiaries in the United Kingdom, Germany and Spain.

Marketable Equity Securities

Equity securities traded in active markets are marked to market at each balance sheet date based on prices as quoted on the relevant stock exchange. Fair value mark-to-market adjustments are recorded as non-operating gains (losses) in the consolidated statement of operations. The Company’s investments in marketable equity securities are classified in the consolidated balance sheet based on the nature of the securities and their availability for use in current operations.

Allowance for Expected Credit Losses on Receivables

The allowance for expected credit losses on receivables is used to present accounts receivable, net, at an amount that represents the Company’s estimate of the receivables expected to be collected from customers. The allowance represents an estimate of expected credit losses over the lifetime of the receivables, even if the loss is considered remote, and reflects expected recoveries of amounts previously written off. The Company estimates the allowance on the basis of specifically identified receivables that are evaluated individually for impairment and an analysis of the remaining receivables determined by reference to past default experience. The Company considers the need to adjust historical information to reflect the extent to which current conditions and reasonable forecasts are expected to differ from the conditions that existed for the historical period considered. Losses on receivables have not historically been significant.

Management judgments are used to determine when to charge off uncollectible trade accounts receivable. The Company bases these judgments on the age of the receivable, credit quality of the customer, current economic conditions, and other factors that may affect a customer’s ability and intent to pay. Customers are generally not required to provide collateral for purchases.

Inventories

The Company values inventories at the lower of cost (determined on a first-in, first-out method) or net realizable value. The Company regularly reviews inventory quantities on hand and writes down excess and obsolete inventories to estimated net realizable value if less than cost, based primarily on historical inventory usage and estimated forecast of product demand.

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:

Leasehold improvements are amortized using the straight-line method over the shorter of the lease term or estimated useful life of the asset.

Software Development

Software development costs for software products to be sold, leased or otherwise marketed that are incurred before establishing technological feasibility are charged to operations. Software development costs incurred after establishing technological feasibility are capitalized on a product-by-product basis until the product is available for general release to customers at which time amortization begins.

Annual amortization, charged to cost of goods sold, is the amount computed using the ratio that current revenues for a product bear to the total current and anticipated future revenues for that product. In the event that future revenues are not estimable, such costs are amortized on a straight-line basis over the remaining estimated economic life of the product.

Goodwill

Goodwill acquired in a business combination and determined to have an indefinite useful life is not amortized, but instead is tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired.

For the purpose of its goodwill analysis, the Company has one reporting unit. The Company conducts its annual impairment analysis in the fourth quarter of the fiscal year and more frequently if there is an indicator of impairment. The Company assesses qualitative factors of the reporting unit to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying value. If the qualitative assessment indicates a potential impairment, a quantitative analysis is performed. The Company compares the fair value of the reporting unit with its carrying amount. The Company typically estimates fair value using market approaches but will also consider the income approach when appropriate. If the carrying amount of a reporting unit exceeds its fair value, goodwill is impaired, and the Company would recognize a loss equal to the excess.

During the year ended December 31, 2024, as a result of the Company’s underperformance of recent operating results and liquidity risk and the current macroeconomic conditions impacting the life sciences industries, the Company assessed the current and future economic outlook and identified indicators for impairment of goodwill. Based on the quantitative analysis, the Company concluded that goodwill was not impaired due to the excess of fair value over the carrying value of the reporting unit. Based on declines in the Company’s stock price subsequent to December 31, 2024, the carrying value of stockholders’ equity currently exceeds its fair value, which could lead to future impairment.

Intangible Assets

Intangible assets are comprised of existing technology, customer contracts and contractual relationships, and other definite-lived intangible assets. Identifiable intangible assets resulting from the acquisitions of entities accounted for using the purchase method of accounting are estimated by the Company based on the fair value of assets received. Identifiable definite-lived intangible assets are being amortized over the period of estimated benefit using the straight-line method and estimated useful lives ranging from four tofifteen years.

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 when events or changes in circumstances indicate that the carrying amount of an asset or asset group maynot be recoverable. Factors which could trigger an impairment review include significant negative industry or economic trends, significant loss of clients, and significant changes in the manner of the Company’s use of the assets or the strategy for its overall business.

The recoverability of assets or an asset group to be held and used is measured by a comparison of the carrying amount of an asset or asset group to estimated undiscounted future cash flows expected to be generated by the asset or the asset group. Cash flow projections are based on trends of historical performance and management’s estimate of future performance. The Company’s estimate of future cash flows requires significant judgment based on historical and anticipated results and are subject to many factors.

When the Company determines that the carrying value of the assets may not be recoverable based upon the existence of one or more of the above indicators of impairment, the Company measures the potential impairment based on a projected discounted cash flow method using a discount rate determined by management to be commensurate with the risk inherent in its current business model. An impairment loss is recognized only if the carrying amount of the asset isnot recoverable and exceeds its fair value. Different assumptions and judgments could materially affect the calculation of the fair value of the Company's assets. For the year ended December 31, 2024, the Company concluded that there were triggering events requiring the Company to assess the recoverability of its long-lived assets. Based on its recoverability assessment, the Company determined that there was no impairment. If future operating performance of the reporting units is not consistent with these assumptions, the Company could be required to record non-cash impairment charges.

Commitments and Contingencies

Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties, and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated. If a loss is reasonably possible and the loss or range of loss can be reasonably estimated, the Company discloses the possible loss. If a loss is probable and the loss or range of loss cannot be reasonably estimated, the Company discloses or states that such an estimate cannot be made. Refer to Note 16 Commitments and Contingencies for additional information. The Company accrues and expenses legal costs associated with contingencies when incurred.

Derivatives

The Company uses interest-rate-related derivative instruments to manage its exposure related to changes in interest rates on its variable-rate debt instruments. The Company only enters into derivative contracts that it intends to designate as a hedge of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability (cash flow hedge) and does not use derivative financial instruments for trading or speculative purposes. The Company recognizes all derivative instruments as either assets or liabilities in the balance sheet at their respective fair values.

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. For derivative instruments that are designated and qualify as part of a cash flow hedging relationship, the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income (loss) (“OCI”) and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings.

By using derivative financial instruments to hedge exposure 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 major financial institutions based upon their credit profile. Market risk has an 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 monitors interest rate risk attributable to both its outstanding and forecasted debt obligations by the use of cash flow sensitivity analysis, which estimates the expected impact of changes in interest rates on the Company’s future cash flows.

Leases

The Company leases office space, manufacturing facilities, automobiles and equipment. The Company concludes on whether an arrangement is a lease at inception. This determination as to whether an arrangement contains a lease is based on an assessment as to whether a contract conveys the right for the Company to control the use of the identified property, plant or equipment for a period of time in exchange for consideration. Leases with an initial term of 12 months or less are not recorded on the balance sheet. The Company recognizes these lease expenses on a straight-line basis over the lease term.

The Company has assessed its contracts and concluded that its leases consist of operating leases. Operating leases are included in operating lease right-of-use (“ROU”) assets, current portion of operating lease liabilities, and operating lease liabilities in the Company’s consolidated balance sheets.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the leases’ commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company determines an incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The incremental borrowing rate represents a significant judgment that is based on an analysis of the Company’s credit rating, country risk, treasury and corporate bond yields, as well as comparison to the Company’s borrowing rate on its most recent loan. The Company uses the implicit rate when readily determinable. The terms in our leases may include options to extend or terminate the lease. We recognize ROU assets and liabilities when it is reasonably certain that we will exercise those options. Judgement is required in our assessment as to whether renewal or termination options are reasonably certain to be exercised and factors such as contractual terms compared to current market rates and the importance of the facility and location to our operations, among others, are considered. The Company has lease agreements with lease and non-lease components, which are generally accounted for separately.

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 from stockholders. As of December 31, 2024, and 2023, the Company hadno preferred stock issued or outstanding.

Stock-based Compensation

The Company recognizes 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 or performance condition. The Company issues awards under the 2021 Incentive Plan (the “2021 Incentive Plan”) and the Fourth Amended and Restated 2000 Stock Option and Incentive Plan (the “2000 Incentive Plan,” together with the 2021 Incentive Plan, together referred to as the “Incentive Plans”), as well as issues shares for employee stock purchases related to its Employee Stock Purchase Plan (as amended, the “ESPP”). The Company issues new shares from its registered but unissued stock pool to satisfy stock option exercises and vesting of the restricted stock units. Stock-based compensation expense is recorded on a straight-line basis over the applicable service period, which ranges fromone tofour years. The Company has elected as an accounting policy to account for forfeitures for service-based awards as they occur, with no adjustment for estimated forfeitures.

The fair value of restricted stock units is based on the market price of the Company’s stock on the date of grant. The Company values restricted stock units with a market condition using a Monte-Carlo valuation simulation. The determination of fair value of stock-based payment awards on the date of grant using a Monte-Carlo valuation simulation is affected by the Company’s stock price as well as assumptions regarding certain variables including, but are not limited to, the Company’s expected stock price volatility over the term of the awards, interest rate assumptions, and discounts to adjust for any holding period post-vest restrictions.

Performance-based RSU awards are contingent on the achievement of certain performance metrics. Compensation cost associated with performance-based RSUs are recognized based on the estimated number of shares that the Company ultimately expects will be earned. If the estimated number of shares to be earned is revised in the future, then stock-based compensation expense will be adjusted accordingly.

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to be applied to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company uses the flow-through method to account for investment tax credits. Under this method, the investment tax credits are recognized as a reduction of income tax expense.

The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is more than 50% likely of being realized. Changes in recognition are reflected in the period in which the judgement occurs. The Company’s policy is to account for Global Intangible Low-Taxed income (“GILTI”) as a period cost.

Comprehensive Income (Loss)

Comprehensive income (loss) represents the change in equity resulting from items other than shareholder investments and distributions. The Company’s foreign currency translation adjustments, interest rate swap - cash flow hedge and minimum pension liability adjustments are included in accumulated other comprehensive income (“AOCI”). The components of other comprehensive income are reclassified as net income, net of tax, when the underlying component impacts earnings. Comprehensive income (loss) and the components of AOCI are presented in the accompanying consolidated statements of comprehensive loss and consolidated statements of equity.

Fair Value of Financial Instruments

Financial reporting standards define a fair value hierarchy that consists of three levels:

The carrying values of the Company’s cash and cash equivalents, trade accounts receivable, trade accounts payable and short-term debt approximate their fair values because of the short maturities of those instruments. The fair value of the Company’s debt approximates its carrying value and is based on the amount of future cash flow associated with the debt discounted using current borrowing rates for similar debt instruments of comparable maturity (Level 2).

Foreign Currency

The functional currency of the Company’s foreign subsidiaries is generally their local currency. All assets and liabilities of 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 AOCI in the consolidated balance sheets. Gains and losses resulting from foreign currency transactions are included in other income (expense), net, in the Company’s consolidated statements of operations.

Earnings per Share

Basic earnings (loss) 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 (loss) per share is similar to the computation of basic earnings per share, except that the denominator is increased for the assumed exercise of dilutive options and other potentially dilutive securities using the treasury stock method unless the effect is antidilutive. The following table sets forth the computation of basic and diluted loss per share:

Business Segment Information

The Company operates inone segment which involves the design, development, production and distribution of products and services that enable fundamental advances in life science applications, including research, pharmaceutical and therapy discovery, bioproduction and preclinical testing for pharmaceutical and therapy development. The Company has a single, company-wide management team that administers all properties as a whole rather than discrete operating segments. The chief operating decision maker (“CODM”), who is the Company's chief executive officer, measures financial performance as a single enterprise and allocates resources across the Company to maximize profitability, and not on geography, legal entity, or end market basis. The Company operates in a number of countries throughout the world in a variety of product lines. Information regarding product lines and geographic financial information is provided in Note 3, “Revenues” and Note 6, "Balance Sheet Information."

Other Operating Expenses

The components of other operating expenses for the year ended December 31, 2024 and 2023, were as follows:

Recently Issued Accounting Pronouncements Adopted

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07,* Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures*, which improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses on an annual and interim basis. Entities with a single reportable segment must provide all the disclosures required by this ASU and all existing segment disclosures in Topic 280. ASU 2023-07 was effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The adoption of this standard impacted footnote disclosures and did not have a material impact on the Company's consolidated financial statements.

Recently Issued Accounting Pronouncements Yet to be Adopted

In December 2023, the FASB issued ASU No. 2023-09,Income Taxes (Topic 740): Improvements to Income Tax, which enhances disclosures related to the effective tax rate reconciliation, income taxes paid, as well as other disclosures. The new standard impacts footnote disclosures and is effective for the Company’s annual financial statements for the year ended December 31, 2025. The Company is currently evaluating the impact that adopting ASU No. 2023-09 will have on the footnote disclosures in its consolidated financial statements.

In November 2024, the FASB issued ASU No. 2024-03,Income Statement (Subtopic 220-40): Reporting Comprehensive Income—Expense Disaggregation Disclosures, which requires enhanced disclosure of income statement expense categories to improve transparency and provide financial statement users with more detailed information about the nature, amount and timing of expenses impacting financial performance. This new guidance is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact that adopting ASU No. 2024-03 will have on the footnote disclosures in its consolidated financial statements.

Correction of Unaudited Interim Financial Statements

In August 2024, the Company initiated the process of terminating one of its defined benefit plans by purchasing from plan assets a non-participating bulk annuity from an insurance company (a “buy-in” arrangement”). This bulk annuity will be used to purchase individual annuity contracts for each participant (a “buy-out” arrangement), which is expected to occur in 2025. During the three months ended September 30, 2024, the Company recorded anon-cash loss on pension settlement of $1.2 million, including the immediate recognition of the portion of the AOCI balances related to this plan.

During the three months ended December 31, 2024, the Company determined that the buy-in transaction does not result in settlement accounting as the Company has not been relieved of primary responsibility for the benefit obligation. As a result, the Company identified an immaterial error associated with recording a loss on pension settlement in other income (expense), net, in its interim financial statements for the three and nine months ended September 30, 2024. This immaterial error overstated the loss before income taxes by $1.2 million and the net loss by $0.9 million for the three and nine months ended September 30, 2024, and overstated the loss per share loss by $0.02 and $0.03 for the three and nine months ended September 30, 2024, respectively. This error had no impact on the operating loss or cash flows from operations for the three and nine months ended September 30, 2024. The correction of this immaterial error is included in these unaudited consolidated financial statements.*** ***

Prior Period Financial Statement Reclassifications

Certain immaterial reclassifications have been made to the prior year financial statements to conform to the current presentation.

The following table represents a disaggregation of revenue from contracts with customers for the years ended December 31, 2024, and 2023:

Revenues by type were as follows:

Revenues by timing of recognition were as follows:

Revenues by geographic destination were as follows:

Contract Liabilities

The following table provides a summary of contract liabilities as of the periods indicated:

Changes in the Company’s contract liabilities are primarily due to the timing of receipt of payments under service, maintenance and warranty contracts and lower revenue volumes. During the years ended December 31, 2024, and 2023, the Company recognized revenue of $3.4 million and $2.1 million from contract liabilities existing at December 31, 2023 and 2022, respectively.

Provision for Expected Credit Losses on Receivables

Activity in the provision for expected losses on receivables was as follows:

Concentrations

No customer accounted for more than 10% of revenue for the years ended December 31, 2024, and 2023, or for more than 10% of net accounts receivable at December 31, 2024 and 2023.

Warranties

Warranty activity was as follows:

Changes in the components of accumulated other comprehensive loss, net of tax, for the years ended December 31, 2024 and 2023, respectively, were as follows:

The change in the carrying amount of goodwill was as follows:

Intangible assets, net at December 31, 2024 and 2023 consisted of the following:

*Weighted average remaining life in years as of December 31, 2024

The Company capitalized $0.6 million and $0.5 million of software development costs during the year ended December 31, 2024, and 2023, respectively.

Intangible asset amortization expense was $5.4 million and $5.5 million for the years ended December 31, 2024 and 2023, respectively.

Estimated amortization expense of existing amortizable intangible assets for each of the five succeeding years and thereafter is as follows:

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

Depreciation expense was $1.7 million and $1.5 million for the years ended December 31, 2024 and 2023, respectively.

Long-lived Assets by Geographic Area:

Long-lived assets by geographic area, which include operating lease right-of-use assets, property, plant and equipment, and amortizable intangible assets, were as follows:

On an ongoing basis, the Company reviews the global economy, the healthcare industry, and the markets in which it competes to identify operational efficiencies and align its cost base and infrastructure with customer needs and its strategic plans. In order to realize these goals, the Company undertakes activities from time to time to optimize its business.

During the year ended December 31, 2024 and 2023, the Company completed restructurings and incurred expenses of $0.8 million and $0.4 million, respectively. These costs primarily consisted of severance incurred in connection with headcount reductions in Europe and North America and purchase order cancellation costs.

The changes in the accrued liabilities for restructuring and other charges for the years ended December 31, 2024 and 2023 were as follows:

The severance and other costs detailed above have been included as a component ofother operating expenses, and all inventory-related charges are included in cost of revenues.

Employee Retirement Savings Plans

The Company sponsors various qualified employee retirement savings plans and makes contributions to match a certain portion of employee contributions. The Company contributed $1.1 million to these plans for each of the years ended December 31, 2024 and 2023.

Employee Pension Plans

The Company’s subsidiary in the United Kingdom, Biochrom Ltd., maintains defined benefit pension plans for 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 Company recognizes the funded status of the pension plans as an asset or liability in the consolidated balance sheets. The funded status equals the difference between the fair value of the plan’s assets and their benefit obligations and has historically been measured each year as of December 31st. The Company records net period benefit expense (credit) as a component of other expense in the Consolidated Statement of Operations.

The components of the Company’s net period benefit expense for the years ending December 31, 2024 and 2023, were as follows:

The following provides a reconciliation of the changes in the plans’ fair value of assets and benefit obligations for the years ended December 31, 2024 and 2023, and a summary of the funded status as of December 31, 2024 and 2023:

Changes in the actuarial (gain) loss disclosed above are primarily the result of changes in the discount rate and inflation assumptions due to underlying market conditions.

The amounts recognized in the consolidated balance sheets consist of:

The weighted average assumptions used in determining the net pension cost for these plans follows:

The discount rate assumptions used for pension accounting reflect the prevailing rates available on high-quality, fixed-income debt instruments with terms that match the average expected duration of the Company’s defined benefit pension plan obligations.

The Company’s mix of pension plan investments among asset classes also affects the long-term expected rate of return on plan assets. As of December 31, 2024, 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 cost over the average remaining expected future working lifetime, which is approximately 12 years for active plan participants.

The asset allocations and fair value of the Company’s pension benefits as of December 31, 2024 and 2023, were as follows:

Level 1 assets consist of cash and cash equivalents held in the pension plans. The Level 2 assets primarily consist of investments in private investment funds that are valued using the net asset values provided by the trust or fund, including an insurance contract. Although these funds are not traded in an active market with quoted prices, the investments underlying the net asset value are based on quoted prices.

The Company expects to contribute approximately $0.3 million to its pension plan during 2025. The benefits expected to be paid from the pension plans are $0.8 million in 2025, $0.7 million in 2026, $0.7 million in 2027, $0.8 million in 2028, and $0.9 million in 2029. The expected benefits to be paid in the five years from 2030 to 2034 are $4.4 million. The expected benefits are based on the same assumptions used to measure the Company’s benefit obligation at December 31, 2024.

The Company has non-cancelable operating leases for office space, manufacturing facilities, warehouse space, automobiles and equipment expiring at various dates through 2030.

The components of lease expense for the years ended December 31, 2024 and 2023, were as follows:

Supplemental balance sheet information related to the Company’s operating leases is as follows:

Supplemental cash flow information related to the Company’s operating leases is as follows:

Future minimum lease payments for operating leases, with initial terms in excess of one year at December 31, 2024, are as follows:

As of December 31, 2024 and 2023, the Company’s debt was as follows:

The Company maintains a Credit Agreement (as amended, the “Credit Agreement”) with Citizens Bank, N.A., Wells Fargo Bank, National Association, and First Citizens Bank & Trust Company (together, the “Lenders”). The Credit Agreement provides for a term loan of $40.0 million and a $25.0 million revolving credit facility (including a $10.0 million sub-facility for the issuance of letters of credit and a $10.0 million swingline loan sub facility) (collectively, the “Credit Facility”). The Company’s obligations under the Credit Agreement are secured by substantially all of the assets of Harvard Bioscience, Inc., including all or a portion of the equity interests in certain of the Company’s domestic and foreign subsidiaries. The Company’s obligations under the Credit Agreement are guaranteed by certain of the Company’s direct, domestic wholly owned subsidiaries; none of the Company’s direct or indirect foreign subsidiaries has guaranteed the Credit Facility. Issuance costs of $1.6 million are amortized over the contractual term to maturity date on a straight-line basis, which approximates the effective interest method. Total revolver borrowing capacity is limited by the consolidated net leverage ratio as defined under the amended Credit Agreement. As of the date of this report, the Company is unable to make additional borrowings under its revolving credit facility due to net leverage ratio requirements set forth in the August 6, 2024 amendment to the Credit Agreement (the “August 2024 Amendment”) and the terms of the March 10, 2025 amendment to the Credit Agreement (the “March 2025 Amendment”), as described below.

Borrowings under the Credit Facility will, at the option of the Company, bear interest at either (i) a rate per annum based on the Secured Overnight Financing Rate (“SOFR”) for an interest period of one, two, three or six months, plus an applicable interest rate margin determined as provided in the Credit Agreement (a “SOFR Loan”), subject to a floor of 0.50%, or (ii) an alternative base rate plus an applicable interest rate margin, each as determined as provided in the Credit Agreement (an “ABR Loan”). The alternative base rate is based on the Citizens Bank prime rate or the federal funds effective rate of the Federal Reserve Bank of New York and is subject to a floor of 1.0%. Pursuant to the August 2024 Amendment, the applicable interest rate margin varies from 2.0% per annum to 3.75% per annum for SOFR Loans, and from 1.5% per annum to 3.5% per annum for ABR Loans, in each case depending on the Company’s consolidated net leverage ratio and is determined in accordance with a pricing grid set forth in the Credit Agreement, as amended. There are no prepayment penalties in the event the Company elects to prepay and terminate the Credit Facility prior to its scheduled maturity date, subject to SOFR Loan breakage and redeployment costs in certain circumstances.

The effective interest rate on the Company’s borrowings for both of the years ended December 31, 2024 and 2023, was 8.1%. The weighted average interest rate as of December 31, 2024, net of the effect of the Company’s interest rate swap agreement, was 8.4%. The carrying value of the debt approximates fair value because the interest rate under the obligation approximates market rates of interest available to the Company for similar instruments.

As of December 31, 2024, the term loan requires quarterly installment payments of $1.0 million with a balloon payment at maturity on December 22, 2025. Furthermore, within ninety days after the end of the Company’s fiscal year, the term loan may be permanently reduced pursuant to certain mandatory prepayment events including an annual “excess cash flow sweep”, as defined in the Credit Agreement, provided that, in any fiscal year, any voluntary prepayments of the term loan shall be credited against the Company’s “excess cash flow” prepayment obligations on a dollar-for-dollar basis for such fiscal year. There is no excess cash flow sweep requirement for the year ended December 31, 2024. As of December 31, 2023, the current portion of long-term debt included amounts due under the excess cash flow sweep of $2.0 million which was paid on March 29, 2024. Amounts outstanding under the revolving credit facility can be repaid at any time but are due in full at maturity.

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

In March 2024, the Company entered into an amendment to the Credit Agreement pursuant to which the Lenders and administrative agent modified the definition of Consolidated EBITDA used in the calculation of certain financial covenants to adjust for charges related to an abandoned property audit (see Note 13) and commission fees in connection with ERTC filings (see Note 5).

In August 2024, the Company entered into an amendment to the Credit Agreement that, among other things, modified the financial covenants relating to the consolidated net leverage ratio and consolidated fixed charge coverage ratio through the period ended December 31, 2024. The amendment also added a net leverage ratio requirement with respect to additional borrowing under the Company’s revolving credit facility and restrictions on certain additional indebtedness and investments. In addition, the applicable interest rate margin was increased by 50 bps during such time as the Company’s consolidated net leverage ratio is greater than 3.0. The Company paid fees of $0.2 million to the Lenders in connection with the amendment.

The Company was not in compliance with the consolidated net leverage ratio covenant contained in the Credit Agreement as of the December 31, 2024 test date. On March 10, 2025, the Company entered into the March 2025 Amendment pursuant to which the lenders and administrative agent agreed to waive such non-compliance subject to the terms contained in the March 2025 Amendment. The March 2025 Amendment provides, among other things, that the lender’s commitment under the Company’s revolving credit facility is capped at the amount outstanding thereunder as of the date thereof and thus the Company is unable to make additional borrowings under the revolving credit facility. The March 2025 Amendment also provides that the Company’s failure to achieve certain refinancing milestones, including receipt of a term sheet or commitment letter from one or more potential lenders, by the dates provided in the March 2025 Amendment or the Company’s failure to consummate a refinancing of the Credit Agreement by June 30, 2025, would, in either case, constitute an event of default under the Credit Agreement. The lenders also agreed not to assert the financial covenants for the first quarter of fiscal year 2025 provided that the Company continues to comply with its payment obligations, achieves the refinancing milestones, provides the administrative agent with certain financial reports and maintains a minimum level of liquidity as defined by the March 2025 Amendment. If the Company is not able to comply with the terms and conditions of the March 2025 Amendment, or if the Company is otherwise unable to regain and maintain compliance with the covenants under the Credit Agreement, as amended, or are unsuccessful in obtaining waivers or amendments for any covenant in the future, in addition to other actions the Company’s lenders may require, the amounts outstanding under the Credit Agreement may become immediately due and payable. The Company paid fees of $0.1 million to the Lenders in connection with the March 2025 Amendment.

If the Company is not able to comply with the terms and conditions of the March 2025 Amendment, or if the Company is otherwise unable to regain and maintain compliance with the covenants under the Credit Agreement, as amended, or are unsuccessful in obtaining waivers or amendments for any covenant in the future, in addition to other actions the lenders may require, the amounts outstanding under the Credit Agreement may become immediately due and payable.

In February 2023, the Company entered into an interest rate swap contract to improve the predictability of cash flows from interest payments related to its variable, SOFR-based debt. The swap contract had a notional amount of $21.7 million as of December 31, 2024, and matures on December 22, 2025. This swap contract effectively converts the SOFR-based variable portion of the interest payable under the Credit Agreement into fixed-rate debt at an annual rate of 4.75%. The swap contract does not impact the additional interest related to the applicable interest rate margin as discussed above in Note 10, Debt. The swap contract is considered an effective cash flow hedge, and as a result, net gains or losses are reported as a component of other comprehensive income (“OCI”) in the consolidated financial statements and are reclassified when the underlying hedged interest impacts earnings. An assessment is performed quarterly to evaluate the ongoing hedge effectiveness.

The following table presents the notional amount and fair value of the Company’s derivative instrument as of December 31, 2024 and 2023:

(a) See Note 13 for the fair value measurements related to this financial instrument.

The following table summarizes the effect of derivatives designated as cash flow hedging instruments for the years ended December 31, 2024 and 2023:

In April 2023, the Company received shares of common stock of Harvard Apparatus Regenerative Technology, Inc. (“HRGN”, formerly known as Biostage, Inc.) in connection with settlement of indemnification obligations related to litigation which was resolved during the year ended December 31, 2022. As of December 31, 2023, these shares had an estimated fair value $3.5 million and are included in the consolidated balance sheet as a component of other long-term assets. For the year ended December 31, 2023, the Company recognized a loss on equity securities of $0.6 million. During the year ended December 31, 2024, the Company sold its HRGN shares for $1.9 million and recorded a loss on equity securities of $1.6 million.

The following tables present the fair value hierarchy for those assets or liabilities measured at fair value on a recurring basis:

The Company uses the market approach technique to value its financial assets and liabilities. The Company’s financial assets and liabilities carried at fair value include, when applicable, investments in common stock and derivative instruments used to hedge the Company’s interest rate risks. The fair value of the Company’s interest rate swap agreement was based on SOFR-yield curves at the reporting date. The fair value of the Company’s investment in common stock of Harvard Apparatus Regenerative Technologies (“HRGN” formerly known as Biostage, Inc.) was based on the closing price as quoted on the OTCQB Marketplace at the reporting date.

Stock-based compensation expense for the years ended December 31, 2024 and 2023, was allocated as follows:

As of December 31, 2024, the total compensation costs related to unvested awards not yet recognized is $4.1 million and the weighted average period over which it is expected to be recognized is approximately 1.6 years. During the years ended December 31, 2024 and 2023, the Company didnot capitalize any stock-based compensation.

Equity Incentive Plans

During 2021, the Company’s board of directors and stockholders adopted the 2021 Incentive Plan which authorized additional shares available for grants to officers, employees, non-employee directors and other key persons of the Company and its subsidiaries. As of December 31, 2024, there were approximately 2.4 million shares available for issuance under the 2021 Incentive Plan.

Restricted Stock Units with a Market Condition

The Company granted deferred awards of market condition restricted stock units (the “Market Condition RSUs”) to certain members of the Company’s management team. The vesting of the Market Condition RSUs is linked to the achievement of a relative total shareholder return (“TSR”) of the Company’s common stock measured from the earlier of (i) the measurement period as set out in the award agreement or (ii) upon a change of control (measured relative to the Nasdaq Biotechnology or Russell 2000 index and based on a 20-day trading average price) and is subject to a one-year holding period after vesting.

For Market Condition RSUs with a measurement period that concluded during the years ended December 31, 2024 and 2023, the TSR of the Company’s common stock relative to the applicable index resulted in achieving a weighted average vesting of 21% and 100% of the target, respectively. Market Condition RSUs outstanding as of December 31, 2024 remain subject to a TSR measurement which can result in vesting rates ranging from 0% to 150% of the target number.

The weighted average assumptions used in the valuation of the Market Condition RSUs granted during the year ended December 31, 2023, are as follows:

The Company used historical volatility to calculate the expected volatility matching the expected holding period. The risk-free interest rate assumption is based upon observed U.S. Treasury bill interest rates (risk-free) corresponding with the requisite service period. Additionally, the Company assumes a liquidity discount to adjust the fair value for the one-year holding period post-vest restrictions.

Restricted Stock Units with a Performance Condition

Performance-based RSU awards are contingent on the achievement of certain performance metrics. Compensation cost associated with performance-based RSUs are recognized based on the estimated number of shares that the Company ultimately expects will be earned. If the estimated number of shares to be earned is revised in the future, then stock-based compensation expense will be adjusted accordingly.

Stock-Based Payment Awards

Restricted stock unit (“RSU”) activity for the years ended December 31, 2024 and 2023, was as follows:

The aggregate fair value of RSUs that vested during the years ended December 31, 2024, and 2023 was $1.8 million and $7.5 million, respectively. Unvested shares related to market-based and performance-based vesting conditions are reflected at 100% of their target vesting amount in the table above. Actual vesting could range from zero to 150% of their target amounts.

Stock option activity for the years ended December 31, 2024 and 2023, was as follows:

There isno aggregate intrinsic value at December 31, 2024 because the Company’s closing stock price of $2.11 is below the exercise price of the outstanding options. The aggregate intrinsic value of options exercised wasnil and $0.6 million for the years ended December 31, 2024 and 2023, respectively.

Employee Stock Purchase Plan (“ESPP”)

The Company has an employee stock purchase plan under which eligible employees may purchase a limited number of shares of common stock at a discount of up to 15% of the market value of such stock at pre-determined and plan-defined dates. There were 0.1 million and 0.2 million shares issued under the ESPP during the years ended December 31, 2024 and 2023, respectively. As of December 31, 2024, there were 0.1 million shares available for issuance under the ESPP.

Income tax expense for the years ended December 31, 2024 and 2023, consisted of:

The effective tax rate for the year ended December 31, 2024 was (6.3)% as compared with (33.5)% for the same period in 2023. The difference between the Company’s effective tax rate year over year was primarily attributable to changes to tax attribute carryforwards, a decrease in the Company’s GILTI inclusion, and a difference in the Company’s excess tax benefits related to stock compensation.

Income tax expense for the years ended December 31, 2024 and 2023, differed from the amount computed by applying the U.S. federal income tax rate of 21% to pre-tax loss as a result of the following:

Income tax expense was based on the following pre-tax (loss) income:

The tax effects of temporary differences that give rise to significant components of the deferred tax assets and deferred tax liabilities at December 31, 2024 and 2023, were as follows:

Deferred income tax assets and liabilities by classification on the consolidated balance sheets were as follows:

As of December 31, 2024, the Company had federal net operating loss carryforwards of $1.3 million, state net operating loss carryforwards of $8.4 million, and foreign net operating loss carryforwards of $7.8 million The federal and foreign net operating losses can be carried forward indefinitely while the state net operating losses expire between 2025 and 2044, all of which are partially offset by valuation allowances. The Company had $7.6 million of federal research and development tax credit carryforwards which begin to expire in 2025 and are partially offset by a reserve of $0.8 million for uncertain tax positions. The Company had a total of $2.7 million of state investment tax credit carryforwards, research and development tax credit carryforwards, and enterprise zone credit carryforwards, which begin to expire in 2025 and are partially offset by a reserve of $0.3 million for uncertain tax positions. In addition, the Company had a total of $0.4 million of international R&D credits which begin to expire in 2037. The Internal Revenue Code (“IRC”) limits the amounts of net operating loss carryforwards or credits that a company may use in any one year in the event of a change in ownership under IRC Sections 382 or 383. The Company completed a study through December 31, 2023 and determined that no Section 382 ownership changes occurred.

As of December 31, 2024 and 2023, the Company maintained a total valuation allowance of $17.8 million and $15.2 million, respectively, which related to foreign, federal, and state deferred tax assets in both years. The valuation allowance was based on estimates of taxable income in each of the jurisdictions in which the Company operates and the period over which deferred tax assets will be recoverable. The net change in the total valuation allowance for the years ended December 31, 2024 and 2023, was an increase of $2.5 million and $0.7 million, respectively. During the year ended December 31, 2024, the Company increased the valuation allowance related to the estimate of realizability of Spanish deferred tax assets and deferred tax assets related to the net operating losses and credit carryforwards generated in the current year.

As of December 31, 2024 and 2023, cash and cash equivalents held by the Company’s foreign subsidiaries were $2.7 million and $2.1 million, respectively. As of December 31, 2024, the Company has determined the potential income tax and withholding liability related to available cash balances at foreign subsidiaries to be immaterial.

A summary of activity of unrecognized tax benefits is as follows:

The Company expects the amount of unrecognized tax benefits to change within the next twelve months, including the release of reserves of approximately $0.2 million. Substantially all of the liability for uncertain tax benefits related to various federal, state and foreign income tax matters would benefit the Company's effective tax rate, if recognized. The Company classifies interest and penalties related to unrecognized tax benefits as a component of income tax expense, which has not been significant during the years ended December 31, 2024 and 2023, respectively.

With a few exceptions, the Company is no longer subject to income tax examinations by tax authorities in foreign jurisdictions for the years before 2020. 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 2005 as a result of tax credits generated in the prior years. There are currently no pending federal or state tax examinations.

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

In addition, the Company has entered into indemnification agreements with its directors and officers. It is not possible to determine the maximum potential liability amount under these indemnification agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. The Company hasnot recorded any liability for costs related to contingent indemnification obligations as of December 31, 2024.

The Company is subject to unclaimed property laws in the ordinary course of its business. State escheat laws generally require entities to report and remit abandoned and unclaimed property to the state. Failure to timely report and remit the property can result in assessments that could include interest and penalties, in addition to the payment of the escheat liability itself. The Company recorded an expense of $0.3 million during the year ended December 31, 2024, related to the completion of unclaimed property audits which have been included in other operating expenses in the consolidated statement of operations.

In February 2023, the Company completed the disposition of its Hoefer product line for cash consideration of $0.5 million. The carrying value of assets sold was $0.1 million resulting in a gain on disposition of $0.4 million which is recorded in other (expense) income, net, in the consolidated statement of operations for the year ended December 31, 2023. Revenue and gross profit of this disposed product line included in the condensed consolidated statement of operations for the year ended December 31, 2023 were not significant.

As there is no authoritative guidance under U.S. GAAP on accounting for grants to for profit business entities from government entities, the Company accounts for government assistance by analogy to International Accounting Standards Topic 20,Accounting for Government Grants and Disclosure of GovernmentAssistance (IAS 20). Under IAS 20, government grants are recognized when there is reasonable assurance that the grant will be received and that all conditions related to the grant will be met. Grants related to income are presented as part of the consolidated statements of operations either as a deduction of the related expense or reported separately in other income. The Company recognizes government assistance that supplements salaries or research activities as a reduction of the related operating expense over the period for which it is intended to compensate. Government assistance that is not directly related to expense reimbursement or relates to costs incurred in a previous fiscal period is recorded as other income.

The Coronavirus Aid, Relief, and Economic Security Act of 2020 (“CARES Act”) provided an employee retention tax credit (“ERTC”) that was a refundable tax credit against certain employer taxes. The Company elected to account for the credit as a government grant. The Company received ERTC refunds of $3.2 million during the year ended December 31, 2024. Due to the subjectivity of the credit, the Company has included the refunds received in other current liabilities in the consolidated balance sheet as of December 31, 2024, subject to a determination that the refunds are recognizable. The Company engaged a professional services firm under a commission fee arrangement to assist with determining the Company’s eligibility to claim the ERTC refunds and accumulating the necessary support that was used as a basis in the filing. During the year ended December 31, 2024, the Company paid fees of $0.5 million for these services, which are included in other operating expenses in the consolidated statement of operations. In January 2025, the Company received an additional $1.0 million of ERTC refunds.

For the years ended December 31, 2024 and 2023, the Company received $0.5 million and $0.2 million, respectively, under other government assistance programs. The majority of the assistance was a result of the Company’s German subsidiaries participating in programs established to offset the costs of qualifying research and development activities and employee training.

The Company conducts business as asingle operating segment which is based upon the Company’s organizational and management structure, as well as information used by the CODM to allocate resources and other factors. The accounting policies of the segment are the same as those described in Note 2.

The key measure of segment profitability that the CODM uses to allocate resources and assess performance is consolidated net income (loss), as reported on the consolidated statements of operations. The CODM utilizes consolidated net loss by comparing actual results against budgeted amounts on a quarterly basis. The following table presents the significant revenue and expense categories of the Company’s single operating segment:

Asset information provided to the CODM is consistent with that reported on the consolidated balance sheets with particular emphasis on the Company’s available liquidity, including its cash, accounts receivable, and inventory, reduced by current liabilities. Information relating to the Company’s products and services and geographical distribution of revenues is disclosed in Note 3.

On March 10, 2025, the Company entered into the March 2025 Amendment to the Credit Agreement as described in Note 10 –Debt.