Harvard Bioscience Inc: Form 10-Q for the period ended Jun 30, 2025

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains statements that are not statements of historical fact and are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). The forward-looking statements are principally, but not exclusively, contained in “Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Forward-looking statements include, but are not limited to, statements about management’s confidence or expectations, and our plans, objectives, expectations, and intentions that are not historical facts. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “seek,” “expects,” “plans,” “aim,” “anticipates,” “believes,” “estimates,” “is likely,” “projects,” “forecasts,” “predicts,” “intends,” “think,” “potential,” “objectives,” “optimistic,” “strategy,” “goals,” “sees,” “new,” “guidance,” “future,” “continue,” “drive,” “growth,” “long-term,” “projects,” “develop,” “possible,” “emerging,” “opportunity,” “pursue” and similar expressions intended to identify forward-looking statements. These statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties. Given these uncertainties, you should not place undue reliance on these forward-looking statements. We discuss many of these risks in detail in our Annual Report on Form 10-K for the year ended December 31, 2024 and our other filings with the SEC. 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.”

Overview

Harvard Bioscience, Inc., a Delaware corporation, is a leading developer, manufacturer and seller of technologies, products and services that enable fundamental advances in life science applications, including research, drug and therapy discovery, bioproduction and preclinical testing for pharmaceutical and therapy development. Our 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, we sell through a combination of direct and distribution channels to customers around the world.

Trends and Developments

Our business is affected by global and regional economic trends and uncertainties. Our revenue has been and may continue to be affected by our customers forgoing or delaying purchases of our products and services as a result of ongoing uncertainty with respect to the level and timing of funding from the U.S. National Institutes of Health (the “NIH”) or similar government sources. Our business has also been affected by the imposition of increased tariffs on shipments of products between the United States and other countries, and in particular between the United States and China. Our revenue has been and may continue to be affected by greater restrictions and economic disincentives on international trade, including these tariffs. Products and services that we obtain from overseas sources have been and may continue to be affected by these tariffs, resulting in increased costs to our business.

If these trends are prolonged or are more severe than anticipated, our business, results of operations, and cash flow may be materially impacted.

As of June 30, 2025, the Company was not in compliance with certain refinancing milestones (the “Refinancing Milestones”) and quarterly financial covenants contained in the Company's term loan and senior revolving credit facility, dated as of December 22, 2020 (collectively, as amended, the “Credit Agreement”). On August 8, 2025, the Company entered into an amendment to the Credit Agreement (the “August 2025 Amendment”), pursuant to which the lenders party to the Credit Agreement (the “Lenders”) and the administrative agent agreed to waive the events of default due to the Company’s failure to achieve the Refinancing Milestones and its failure to comply with the consolidated net leverage ratio covenant and the consolidated fixed charge coverage ratio covenant as of the June 30, 2025 test date. See “Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources” of this report for additional information.

Selected Results of Operations

Three months ended June 30, 2025, compared to three months ended June 30, 2024

(dollars in thousands)

Revenues

Revenues decreased $2.6 million, or 11.5%, to $20.5 million for the three months ended June 30, 2025, compared to $23.1 million for the three months ended June 30, 2024. The decrease in revenues was primarily due to the continued softening of worldwide demand primarily from academic research institutions and CROs and impact of reciprocal tariffs.

Gross profit

Gross profit decreased $1.7 million, or 12.7%, to $11.5 million for the three months ended June 30, 2025, compared with $13.2 million for the three months ended June 30, 2024, primarily due to the decrease in revenues as well as the associated lower absorption of fixed manufacturing costs. Gross margin was 56.4% for the three months ended June 30, 2025, compared to 57.2% for the three months ending June 30, 2024. The decrease in gross margin was primarily the result of under-absorption of fixed manufacturing overhead costs due to the decrease in revenues, increases in purchase price variance as well as a higher mix of lower margin products.

Sales and marketing expenses

Sales and marketing expenses decreased $0.9 million, or 15.9%, to $4.5 million for the three months ended June 30, 2025, compared with $5.4 million for the three months ended June 30, 2024. This decrease was primarily due to reduced compensation, travel and entertainment, consulting and trade show expenses.

General and administrative expenses

General and administrative expenses decreased $1.4 million, or 25.0%, to $4.3 million for the three months ended June 30, 2025, compared with $5.7 million for the three months ended June 30, 2024. The decrease was primarily due to reduced compensation costs.

Research and development expenses

Research and development expenses decreased $0.4 million, or 16.6%, to $2.2 million for the three months ended June 30, 2025, compared with $2.6 million for the three months ended June 30, 2024. This decrease was primarily due to reduced compensation costs.

Amortization of intangible assets

Amortization of intangible assets included in operating expenses was $1.2 million for the three months ended June 30, 2025, compared with $1.3 million for the three months ended June 30, 2024.

Other operating expenses

Other operating expenses for the three months ended June 30, 2025 were $0.2 million, compared with $0.2 million for the three months ended June 30, 2024. During the three months ended June 30, 2025, other operating expenses included a fee of $0.2 million in connection with the receipt of employee retention credits. During the three months ended June 30, 2024 other operating expenses included $0.4 million of restructuring costs in connection with headcount reductions in Europe and North America, which was partially offset by a credit of $0.1 million related to closure of an unclaimed property audit.

Interest expense

Interest expense was $0.8 million for the three months ended June 30, 2025, compared with $0.7 million for the three months ended June 30, 2024.

Loss on equity securities

During the three months ended June 30, 2024, we sold all of our remaining Harvard Apparatus Regenerative Technology Inc. (“HRGN”) stock and recorded a loss on equity securities of $0.3 million. We did not hold any shares of HRGN stock during the three months ended June 30, 2025.

Income tax expense (benefit)

The income tax expense (benefit) was $0.0 million and ($0.4) million for the three months ended June 30, 2025 and 2024, respectively. The effective tax rates for the three months ended June 30, 2025 and 2024 were 1.2% and 10.8%, respectively. The lower effective tax rate during the three months ended June 30, 2025, compared to the three months ended June 30, 2024, was primarily due to the change in the mix of income by jurisdiction. The Company’s effective tax rate for the three months ended June 30, 2025, was different than the U.S. statutory rate primarily due to a Global Intangible Low-Tax Income (“GILTI”) inclusion to taxable income, and changes in valuation allowances associated with the Company’s assessment of the likelihood of the recoverability of deferred tax assets.

Six months ended June 30, 2025, compared to six months ended June 30, 2024

(dollars in thousands)

Revenues

Revenues decreased $5.4 million, or 11.3%, to $42.2 million for the six months ended June 30, 2025, compared to $47.6 million for the six months ended June 30, 2024. The decrease in revenues was primarily due to the continued softening of worldwide demand primarily from academic research institutions and CROs and impact of reciprocal tariffs.

Gross profit

Gross profit decreased $4.3 million, or 15.3%, to $23.7 million for the six months ended June 30, 2025 compared with $28.0 million for the six months ended June 30, 2024, primarily due to the decrease in revenues as well as the associated lower absorption of fixed manufacturing costs. Gross margin decreased to 56.2% for the six months ended June 30, 2025, compared with 58.8% for the six months ended June 30, 2024. The decrease in gross margin was primarily the result of under-absorption of fixed manufacturing overhead costs due to the decrease in revenues, increases in purchase price variance as well as a higher mix of lower margin products.

Sales and marketing expenses

Sales and marketing expenses decreased $1.8 million, or 15.8%, to $9.5 million for the six months ended June 30, 2025, compared with $11.3 million for the six months ended June 30, 2024. This decrease was primarily due to reduced compensation, travel and entertainment, consulting and trade show expenses.

General and administrative expenses

General and administrative expenses decreased $2.2 million, or 18.9%, to $9.4 million for the six months ended June 30, 2025, compared with $11.6 million for the six months ended June 30, 2024. The decrease was primarily due to reduced compensation costs.

Research and development expenses

Research and development expenses decreased $1.0 million, or 18.2%, to $4.5 million for the six months ended June 30, 2025, compared with $5.5 million for the six months ended June 30, 2024. This decrease was primarily due to reduced compensation costs.

Amortization of intangible assets

Amortization of intangible assets included in operating expenses decreased $0.4 million, or 12.8%, to $2.3 million for the six months ended June 30, 2025, compared with $2.7 million for the six months ended June 30, 2024.

Goodwill impairment

Goodwill impairment expenses increase by $48.0 million for the six months ended June 30, 2025. We identified a triggering event, including the sustained decrease in our stock price, our recent operating results, liquidity risk and the current macroeconomic conditions impacting the life sciences industry, requiring an interim impairment test. We recorded a non-cash goodwill impairment charge of $48.0 million in connection with the interim impairment test.

Other operating expenses

Other operating expenses decreased by $0.7 million, or 61.8% to $0.5 million for the six months ended June 30, 2025, compared to $1.2 million for the six months ended June 30, 2024. Expenses included a fee of $0.4 million in connection with the receipt of employee retention credits and restructuring costs of $0.1 million in connection with headcount reductions in Europe and North America.

Interest expense

Interest expense increased $0.1 million, or 6.2%, to $1.6 million for the six months ended June 30, 2025, compared with $1.5 million for the six months ended June 30, 2024. The increase was primarily due to higher average borrowings during the period compared to prior year.

Loss on equity securities

During the six months ended June 30, 2024, we sold all of our remaining Harvard Apparatus Regenerative Technology Inc. (“HRGN”) stock and recorded a loss on equity securities of $1.6 million. During the six months ended June 30, 2024, we sold all of our remaining HRGN shares for $1.9 million and recorded a loss of $1.6 million. We did not hold any shares of HRGN stock during the six months ended June 30, 2025.

Income tax benefit

The income tax benefit was $0.4 million and $0.1 million for the six months ended June 30, 2025 and 2024, respectively. The effective tax rates for the six months ended June 30, 2025 and 2024 were 08.% and 1.8%, respectively. The lower effective tax rate during the six months ended June 30, 2025, compared to the six months ended June 30, 2024, was primarily due to the tax effect of goodwill impairment and the release of reserves related to uncertain tax positions.

Liquidity and Capital Resources

Our primary sources of liquidity are cash and cash equivalents, internally generated cash flow from operations and our shelf registration statement that provides for the issuance of common stock, preferred stock, warrants and units up to an amount equal to $100 million. Our expected cash outlays relate primarily to cash payments due under our Credit Agreement described below as well as salaries, inventory, and capital expenditures. We held cash and cash equivalents of $7.4 million and $4.1 million as of June 30, 2025 and December 31, 2024, respectively. Borrowings outstanding were $34.9 million and $37.0 million as of June 30, 2025 and December 31, 2024, respectively.

The Coronavirus Aid, Relief, and Economic Security Act of 2020 (the “CARES Act”) provided an employee retention tax credit (“ERTC”) that was a refundable tax credit against certain employer taxes. The Company has received ERTC refunds of $5.4 million as of June 30, 2025 with $1.1 million received during the three months ended June 30, 2025. The Company’s compliance with the program’s qualifications may be subject to audit until May 2028, which is when the statute of limitation expires.

We maintain the Credit Agreement, which provides for a term loan of $40.0 million and a $25.0 million revolving credit facility with an original maturity of December 22, 2025. On March 10, 2025, we entered into an amendment to the Credit Agreement (the “March 2025 Amendment”). The March 2025 Amendment provided, among other things, that the Lenders’ commitment under our revolving credit facility would be capped at the amount outstanding thereunder as of the date thereof and thus we are unable to make additional borrowings under our revolving credit facility. The March 2025 Amendment also established certain Refinancing Milestones in connection with the refinancing of the Credit Agreement (the “Refinancing”), including receipt of a term sheet or commitment letter from one or more potential lenders, by the dates provided in the March 2025 Amendment, and the Company's consummation of the Refinancing by June 30, 2025. Pursuant to the March 2025 Amendment, the Lenders also agreed not to assert any breaches of the financial covenants included in the Credit Agreement for the first quarter of fiscal year 2025 provided that we continued to comply with our payment obligations, achieved the Refinancing Milestones, maintained minimum liquidity (defined as the sum of (a) unrestricted cash and cash equivalents and (b) the amount by which the aggregate amount committed under the Company’s revolving credit facility exceeds the total amount drawn under the credit facility) of $3.5 million and provided the administrative agent with certain financial reports. In addition, pursuant to the terms of the March 2025 Amendment the applicable interest rate margin was increased such that interest rate was equal to a rate per annum based on the Secured Overnight Financing Rate (“SOFR”) plus 400 bps and amortization payments were revised so that a proportionate payment must be made on a monthly rather than a quarterly basis.

As of June 30, 2025, we were not in compliance with the Refinancing Milestones and quarterly financial covenants contained in the March 2025 Amendment. On August 8, 2025, we entered into the August 2025 Amendment Agreement, pursuant to which the Lenders and administrative agent agreed, subject to the terms contained in the August 2025 Amendment, to waive the events of default due to the Company’s failure to achieve certain Refinancing Milestones and its failure to comply with the consolidated net leverage ratio covenant and the consolidated fixed charge coverage ratio covenant as of the June 30, 2025 test date. Pursuant to the terms of the August 2025 Amendment, the Lenders also agreed not to test the financial covenants for the fiscal quarter ended September 30, 2025, provided that the Company continues to comply with its payment obligations, maintain minimum liquidity (defined as the sum of (a) unrestricted cash and (b) the amount by which the aggregate amount committed under the Company’s revolving credit facility exceeds the total amount drawn under the credit facility) of $3.0 million and provides the administrative agent with certain financial reports. The August 2025 Amendment also added as a mandatory prepayment event the receipt of cash proceeds upon a Refinancing or upon the sale of the equity interests or all or substantially all of the assets of the Company. In addition, pursuant to the terms of the August 2025 Amendment, the applicable interest rate margin was increased such that the interest rate is equal to a rate per annum based on the SOFR plus 700 bps. In connection with the August 2025 Amendment, the Company has also agreed to accomplish steps towards the Refinancing or repayment of the Credit Agreement by no later than December 5, 2025. The failure to accomplish such steps shall 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 continues to explore alternative sources of capital that would allow it to refinance the outstanding indebtedness 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 unaudited consolidated financial statements contained in this Quarterly Report on Form 10-Q. As a result, there is substantial doubt about the Company's ability to continue as a going concern.

CONDENSED CONSOLIDATED CASH FLOW STATEMENTS

(in thousands)

Net cash provided by operations was $5.7 million and $0.6 million for the six months ended June 30, 2025 and 2024, respectively. Cash flow from operations for the six months ended June 30, 2025 was positively impacted by reduction in inventories of $3.4 million and $2.2 million cash inflows from ERTC refunds received compared with the six months ended June 30, 2024.

Net cash used in investing activities was $0.9 million for the six months ended June 30, 2025 compared to cash provided by investing activities of $0.2 million for the six months ended June 30, 2024. Cash used in investing for the six months ended June 30, 2025 consisted of $0.9 million of capital expenditures for manufacturing and capitalized software development. Cash provided by investing activities for the six months ended June 30, 2024 primarily consisted of $1.9 million in proceeds from the sale of marketable equity securities, offset by $1.7 million of capital expenditures in manufacturing and information technology infrastructure and software development.

Net cash used in financing activities was $2.5 million and $0.9 million for the six months ended June 30, 2025 and 2024, respectively. During the six months ended June 30, 2025, we made $2.0 million in debt repayments on our term loan and paid $0.4 million in debt issuance costs as part of the March 2025 Amendment. During the six months ended June 30, 2024, debt outstanding under our credit facility decreased by $1.0 million, consisting of net borrowings under our revolver of $3.0 million, and payments of $4.0 million against the term loan. We also received proceeds of $0.2 million from the exercise of stock options and employee stock purchases and paid $0.1 million for taxes related to net share settlement of equity awards.

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, primarily the euro and British pound.

During the three months ended June 30, 2025, changes in foreign currency exchange rates resulted in a favorable effect on revenues of $0.4 million and an unfavorable effect on expenses of $0.4 million. During the six months ended June 30, 2025, changes in foreign currency exchange rates resulted in a favorable effect on revenues of $0.2 million and an unfavorable effect on expenses of $0.3 million.

The gain (loss) associated with the translation of our foreign equity into U.S. dollars included as a component of other comprehensive loss was $2.6 million and ($0.1) million for the three months ended June 30, 2025 and 2024, respectively and $3.9 millions and ($0.9) million for the six months ended June 30, 2025 and 2024, respectively.

Currency exchange rate fluctuations included as a component of net loss resulted in currency losses of $0.4 million and $0.1 million for three months ended June 30, 2025 and 2024, respectively, and $0.6 million and $0.1 million for both the six months ended June 30, 2025 and 2024, respectively.

Critical Accounting Policies

There have been no material changes to the critical accounting policies underlying the accompanying unaudited consolidated financial statements and as set forth in Part II, Item 7 included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

Recent Accounting Pronouncements

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

Evaluation of Disclosure Controls and Procedures

Under the supervision of our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30, 2025.

Disclosure controls and procedures are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure. As described below, we previously identified material weaknesses in our internal control over financial reporting. Solely as a result of these material weaknesses, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of June 30, 2025.

Previously Reported Material Weaknesses

As reported in Part II, Item 9A. “Controls and Procedures” of our Annual Reports on Form 10-K for the year ended December 31, 2024, we identified material weaknesses in our internal control over financial reporting related to controls over (i) our order to cash cycle and (ii) our physical count of inventories. Specifically, we did not design and maintain effective manual controls over the processing and review of a substantial portion of our revenue transactions. Additionally, we did not design and maintain an effective cycle count program to verify quantities of inventories held at Company locations that account for a substantial portion of inventories. The timeliness, level of precision, and appropriate segregation of duties in our review processes over revenue transactions and our physical counts of inventories were not sufficient to prevent, detect, and correct potential misstatements in a timely manner.

While management, with oversight from the Audit Committee of our Board of Directors, has commenced implementing changes to our internal control over financial reporting in order to remediate the control deficiencies that resulted in the material weaknesses as previously disclosed in our Form 10-K for the fiscal year ended December 31, 2024, additional time is required to complete the material weakness remediation work. We expect to continue our efforts throughout fiscal year 2025. We believe that the implementation of the remediation plans disclosed under “Part II - Item 9A - Controls and Procedures” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, will allow us to address the deficient controls within our internal control environment, which will facilitate the remediation of the material weaknesses. The material weaknesses will not be considered remediated until management completes the design and implementation of the measures disclosed under “Part II - Item 9A - Controls and Procedures” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 and the controls operate for a sufficient period of time such that the effectiveness of those changes is demonstrated with an appropriate amount of consistency and management has concluded, through testing, that these controls are effective. We also may conclude that additional measures may be required to remediate the material weaknesses or determine to modify the remediation plans.

Changes in Internal Control over Financial Reporting

Other than changes related to remediation of the material weaknesses, there were no changes in our internal control over financial reporting during the second quarter of fiscal 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating our controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud within the Company have been detected.

You should carefully consider the risk factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, which could materially affect our business, financial position, or future results of operations. The risks described in our Annual Report on Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business, financial position, or future results of operations. The risk factors set forth below updates, and should be read together with, the risk factors described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

We have substantial debt, and our lenders have waived our non-compliance with certain of the covenants in our Credit Agreement. If we fail to comply with the terms and conditions of the waiver, or if we fail to comply with covenants in our Credit Agreement in the future, the Lenders may require the amounts outstanding thereunder to become immediately due and payable.

As of June 30, 2025, there was indebtedness of $34.9 million outstanding under the Credit Agreement. As of June 30, 2025, we were not in compliance with the Refinancing Milestones and quarterly financial covenants contained in the March 2025 Amendment. Pursuant to the August 2025 Amendment, the Lenders and administrative agent agreed, subject to the terms contained in the August 2025 Amendment, to waive the Company’s events of default under the Credit Agreement. Pursuant to the terms of the August 2025 Amendment, the Lenders also agreed not to test the financial covenants for the fiscal quarter ended September 30, 2025, provided that the Company continues to comply with its payment obligations, maintain minimum liquidity (defined as the sum of (a) unrestricted cash and (b) the amount by which the aggregate amount committed under the Company’s revolving credit facility exceeds the total amount drawn under the credit facility) of $3.0 million and provides the administrative agent with certain financial reports. In connection with the August 2025 Amendment, the Company has also agreed to accomplish steps towards the Refinancing or repayment of the Credit Agreement by no later than December 5, 2025. The failure to accomplish such steps shall constitute an event of default under the Credit Agreement.

If we are not able to comply with the terms and conditions of the August 2025 Amendment, or if we are otherwise unable to maintain compliance with the covenants under the Credit Agreement, as amended, in addition to other actions the Lenders may require, the amounts outstanding under the Credit Agreement may become immediately due and payable. There can be no assurance that the Lenders will not take action to collect payment of our debt or dispose of collateral securing the debt. Our cash flow and existing capital resources may be insufficient to repay our debt, in which such case prior thereto we would have to repay, refinance and or restructure the obligations under the Credit 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 acceleration of repayment, the Lenders could foreclose against their collateral or seek other remedies, which would jeopardize our ability to continue our current operations.

We have received written notice from Nasdaq that we are not in compliance with Nasdaq’s minimum bid price requirements and if we are unable to regain compliance with Nasdaq continued listing standards, which may require effecting a reverse stock split of our common stock, we could be delisted from Nasdaq, which would negatively impact our business, our ability to raise capital, and the market price and liquidity of our common stock.

The Nasdaq Stock Market LLC (“Nasdaq”) Listing Rule 5450(a)(1) requires that securities listed on The Nasdaq Global Market maintain a minimum bid price of $1.00 per share (the “Minimum Bid Price Requirement”), and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the Minimum Bid Price Requirement exists if the deficiency continues for a period of thirty (30) consecutive business days.

On April 4, 2025, the Company received written notice (the “Notification Letter”) from Nasdaq notifying the Company that, based on the closing bid price of the Company’s common stock for the thirty (30) consecutive business days from February 21, 2025 to April 3, 2025, the Company no longer meets the Minimum Bid Price Requirement. The Notification Letter had no immediate effect on the listing of the Company’s common stock on The Nasdaq Global Market. The Company has been provided an initial compliance period of 180 calendar days, or until October 1, 2025, to regain compliance with the Minimum Bid Price Requirement. During the compliance period, the Company’s shares of common stock will continue to be listed and traded on The Nasdaq Global Market

There is no assurance that we will be able to regain compliance with the Minimum Bid Price Requirement. To regain compliance, the bid price of the Company’s common stock must have a closing bid price of at least $1.00 per share for a minimum of ten (10) consecutive business days. If the Company does not regain compliance with the Minimum Bid Price Requirement by October 1, 2025, the Company may be eligible to transfer from The Nasdaq Global Market to the Nasdaq Capital Market and seek an additional 180 calendar day compliance period. To qualify for such transfer, the Company would be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market, with the exception of the Minimum Bid Price Requirement, and would need to provide written notice of its intention to cure the deficiency during the second compliance period, by effecting a reverse stock split, if necessary. However, if it appears to the staff of Nasdaq (the “Staff”) that the Company will not be able to cure the Minimum Bid Price Requirement deficiency, or if the Company is otherwise not eligible, Nasdaq would notify the Company that its securities would be subject to delisting. In the event of such a notification, the Company may appeal the Staff’s determination to delist its securities, but there can be no assurance the Staff would grant the Company’s request for continued listing.

The Company intends to actively monitor the bid price for its common stock and will consider available options, including effecting a reverse stock split, to regain compliance with the Minimum Bid Price Requirement. Our ability to take action and the effect of any of our actions, including seeking stockholder approval for and effecting a reverse stock split, on the market price of our common stock cannot be predicted with certainty, and the history of the impact of similar measures for companies in like circumstances is varied. For example, it is possible that the per share price of the common stock after a reverse stock split will not rise in proportion to the reduction in the number of shares of the common stock outstanding resulting from the reverse stock split, effectively reducing our market capitalization, and there can be no assurance that the market price per post-reverse split share will either exceed or remain in excess of the required minimum bid price for a sustained period of time. The market price of our common stock may vary based on other factors that are unrelated to the number of shares outstanding, including the Company’s future performance.

If our common stock is delisted by Nasdaq, it could adversely affect our ability to raise additional financing through public or private sales of equity securities, could significantly affect the ability of investors to trade our securities and could negatively affect the value and liquidity of our common stock. Delisting could also have other negative impacts, including the potential loss of confidence by our employees and customers, the loss of investor and analyst interest in the Company and in our common stock and fewer business development opportunities for the Company.