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Note 10 - Debt

12 Months Ended

Dec. 31, 2024

10.

Debt

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

(in thousands)	December 31, 2024			December 31, 2023
Debt:
Term loan	$	24,700		$	30,723
Revolving line		12,650			6,400
Less: unamortized deferred financing costs		(394	)		(560	)
Total debt		36,956			36,563
Less: current portion of long-term debt		(37,350	)		(6,139	)
Current unamortized deferred financing costs		394			280
Long-term debt	$	-		$	30,704

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 50bps 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.