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 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," "expects," "plans," "anticipates," "believes," "estimates," "projects," "predicts," "intends," "potential" and similar expressions intended to identify forward-looking statements. These statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Factors that may cause the Company's actual results to differ materially from those in the forward-looking statements include the Company's failure to successfully integrate acquired businesses or technologies, complete planned consolidations of business functions, expand its product offerings, introduce new products or commercialize new technologies, including our new micro liter spectrophotometer and electrophoresis products, unanticipated costs relating to acquisitions, unanticipated costs arising in connection with the Company's planned consolidation of business functions, decreased demand for the Company's products due to changes in its customers' needs, financial position, general economic outlook, or other circumstances, overall economic trends, the timing of our customers' capital equipment purchases and the seasonal nature of purchasing in Europe, , economic, political and other risks associated with international revenues and operations, additional costs of complying with recent changes in regulatory rules applicable to public companies, our ability to manage our growth, our ability to retain key personnel, competition from our competitors, technological changes resulting in our products becoming obsolete, future changes to the operations or the activities of our Asys Hitech subsidiary that have been consolidated, our ability to meet the financial covenants contained in our credit facility, our ability to protect our intellectual property and operate without infringing on others' intellectual property, potential costs of any lawsuits to protect or enforce our intellectual property, economic and political conditions generally and those affecting pharmaceutical and biotechnology industries, completion of the purchase price allocation for Panlab s.l., impact of any impairment of our goodwill or intangible assets, and our acquisition of Genomic Solutions failing to qualify as a tax-free reorganization for federal tax purposes, the amount of earn-out consideration that the Company receives in connection with the recent dispositions of the Company's Capital Equipment Business segment and factors that may impact the receipt of this consideration, such as the revenues of the businesses disposed of, plus factors described under the heading "Item 1A. Risk Factors" in the Company's Annual Report on Form 10-K, for the fiscal year ended December 31, 2007, as amended. Our results may also be affected by factors of which we are not currently aware. 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.

General

From 1997 to 2007, the revenues from our continuing operations grew from $11.5 million to $83.4 million, an annual compounded growth rate of approximately 22.0%. Since the second half of 2005, when we made the decision to divest the Capital Equipment Business segment, we refocused our resources on our core apparatus and instrumentation business, which has been the cornerstone to our success over the last decade.

In March 2008, we outlined five major initiatives that we expected to have a positive impact on our performance in 2008. These initiatives included:

• the launch of a new major Harvard Apparatus catalog during February 2008;

• the launch of Panlab products into US markets;

• the signing of a new contract with GE Healthcare and the full launch of our new microliter spectrophotometer;

• the launch of new 2-D electrophoresis products through our Hoefer subsidiary; and

• the consolidation of business functions to reduce operating expenses.

Even with the progress we have made with these initiatives, the unprecedented strengthening of the U.S. dollar against the British Pound Sterling and the Euro during the three months ended September 30, 2008 had a negative impact on our revenues and earnings in the three months ended September 30, 2008. Since foreign revenue is approximately 56% of our Company revenue, foreign currency exchange rates will have an even greater negative impact in the future if exchange rates continue at current levels or if the U.S. dollar continues to strengthen.

We have made progress on most of these five initiatives:

• We launched our new major catalog in February 2008 with a second mailing tranche in April 2008. We have also just launched, in October 2008, a Panlab products only catalog and anticipate launching one more catalog before the end of the year. The addition of Panlab products to the Harvard Apparatus business unit portfolio of products has been well received and we have a healthy backlog of Panlab products particularly in the US. Panlab has historically had a delivery turn around time of 90-120 days from receipt of order, which we are working to reduce to 30 days. This is anticipated to take at least 12-18 months. The importance of a shorter delivery turn around time is magnified due to the increase in demand for Panlab's manufactured products given their current manufacturing capacity constraints and their increased backlog. We are making investments to lease additional facility space as well as increase headcount.

• We entered into a new distributor contract with GE Healthcare in April 2008, which led to healthy sales of our new microliter spectrophotometer in the first half of the year, however sales of our other spectrophotometers through GE Healthcare have declined significantly. We are currently working with GE Healthcare to reverse the decline in this business.

• We made significant progress consolidating certain business functions; in particular, we consolidated the marketing and administrative functions of Hoefer into the Harvard Apparatus business and consolidated the complete operations of Asys into our Biochrom business. While we have reduced expenses at both Hoefer and Asys, at Hoefer the decline in electrophoresis revenue through GE Healthcare is offsetting some of these savings. At Asys, production start up in the UK has been slower than anticipated, resulting in a delay of operational improvements.

• While we did launch the new Hoefer 2-D electrophoresis products in the second quarter of 2008, the uptake of this product has been slower than expected and we are now actively re-launching them.

Accordingly, we remain committed to our goal of high revenue and profit growth through a combination of organic growth, tuck under acquisitions and operational improvements. While we expect the initiatives discussed above will positively impact our business, the success of these initiatives is subject to a number of factors including the fluctuations in foreign exchange rates, the current economic and financial crisis and their impact on our customers, the competitiveness of our new products, the strength of our intellectual property underlying these products, the success of our marketing efforts and those of our distributors and the other factors described under the heading "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2007, as amended.

Generally, management evaluates the financial performance of its operations before the effects of stock compensation expense, before one-off restructuring expense and before the effects of purchase accounting and amortization of intangible assets related to our acquisitions. Our goal is to develop and sell products that improve life science research and as such, we monitor our operating metrics and when appropriate, effect organizational changes to leverage infrastructure and distribution channels. These changes may be effected as a result of various events, including acquisitions, the worldwide economy, general market conditions and personnel changes.

Financing

During 2003, we entered into a $20.0 million credit facility with Brown Brothers Harriman & Co. On December 1, 2006, we amended the terms of the credit facility. The amended credit facility expires on December 1, 2009. We are working with our existing banks to extend the facility in both credit amount and maturity so adequate financing at appropriate maturities will continue to be available for acquisitions. Over the past several months, the global credit markets have suffered through a liquidity contraction. We believe that the lack of liquidity in the market at large has not had a significant impact on the Company or on our current negotiations with our banks to extend our credit facility, with the exception that we expect the extension will be at prevailing interest rates. Prevailing interest rates currently exceed the rates we pay under the existing credit facility at this time, by an estimated 0.5%. We expect to secure this extended debt financing on a timely basis to avoid being constrained in pursuing our acquisition strategy. See Note 12-Revolving Credit Facility.

Historically, we have funded acquisitions with debt, capital raised by issuing equity and cash flow from operations. In order to continue the acquisition portion of our growth strategy beyond what our current cash balances and cash flow from operations can support, we will need to raise more capital, either by incurring additional debt, issuing equity or a combination.

From June 30, 2008 to September 30, 2008, the U.S. dollar strengthened by approximately 11% against the British pound and the euro. Approximately 56% of the Company's business is transacted in British pounds and euros. The U.S. dollar strengthened further since September 30, 2008. If foreign exchange rates continue at current levels or the U.S. dollar continues to strengthen then the Company's revenues, earnings and cash flows, stated in U.S. dollars, will continue to be negatively affected.

Components of Operating Income from Continuing Operations

Revenues. We generate revenues by selling apparatus, instruments, devices and consumables through our catalog, our direct sales force, our distributors and our website.

For products primarily priced under $10,000, every one to three years, we typically distribute a new, comprehensive catalog initially in a series of bulk mailings, first to our existing customers, followed by mailings to targeted markets of potential customers. Over the life of the catalog, distribution will also be made periodically to potential and existing customers through direct mail and trade shows and in response to e-mail and telephone inquiries. From time to time, we also intend to distribute catalog supplements that promote selected areas of our catalog or new products to targeted subsets of our customer base. Future distributions of our comprehensive catalog and our catalog supplements will be determined primarily by the incidence of new product introductions, which cannot be predicted. Our end user customers are research scientists at pharmaceutical and biotechnology companies, universities and government laboratories. Revenue from catalog sales in any period is influenced by the amount of time elapsed since the last mailing of the catalog, the number of catalogs mailed and the number of new items included in the catalog. We launched our latest comprehensive catalog in February 2008, with approximately 900 pages and approximately 60,000 copies printed. Revenues from direct sales to end users, derived through our catalog and the electronic version of our catalog on our website, represented approximately 30% and 31%, respectively, of our revenues for the nine months ended September 30, 2008 and for the year ended December 31, 2007.

Products sold under brand names of distributors including GE Healthcare, are typically priced in the range of $5,000-$15,000. They are mainly scientific instruments like spectrophotometers and plate readers that analyze light to detect and quantify a very wide range of molecular and cellular processes or apparatus like gel electrophoresis units. We also use distributors for both our catalog products and our higher priced products, for sales in locations where we do not have subsidiaries or where we have distributors in place for acquired businesses. For the nine months ended September 30, 2008 and for the year ended December 31, 2007, approximately 53% and 59%, respectively, of our revenues were derived from sales to distributors.

For the nine months ended September 30, 2008 and for the year ended December 31, 2007, approximately 85% and 87%, respectively, of our revenues were derived from products we manufacture. The remaining 15% and 13%, respectively, of our revenues for the nine months ended September 30, 2008 and for the year ended December 31, 2007, were derived from complementary products we distribute in order to provide the researcher with a single source for all equipment needed to conduct a particular experiment. For the nine months ended September 30, 2008 and for the year ended December 31, 2007, approximately 61% and 58%, respectively, of our revenues were derived from sales made by our non-U.S. operations. A large portion of our international sales during this period consisted of sales to GE Healthcare, the distributor for our spectrophotometers. GE Healthcare distributes these products to customers around the world, including many customers in the United States, from its distribution center in Upsalla, Sweden. As a result, we believe our international sales would have been a lower percentage of our revenues if we had shipped our products directly to our end-users. Changes in the relative proportion of our revenue sources between catalog sales, direct sales, and distribution sales are primarily the result of a different sales proportion of acquired companies.

Cost of product revenues. Cost of product revenues includes material, labor and manufacturing overhead costs, obsolescence charges, packaging costs, warranty costs, shipping costs, royalties and inventory related to restructuring costs. Our cost of product revenues may vary over time based on the mix of products sold. We sell products that we manufacture and products that we purchase from third parties. The products that we purchase from third parties have higher cost of product revenues because the profit is effectively shared with the original manufacturer. We anticipate that our manufactured products will continue to have a lower cost of product revenues as a percentage of revenues as compared with the cost of non-manufactured products for the foreseeable future. Additionally, our cost of product revenues as a percent of product revenues will vary based on mix of direct to end user sales and distributor sales, mix by product line and mix by geography.

Sales and marketing expenses. Sales and marketing expense consists primarily of salaries and related expenses for personnel in sales, marketing and customer support functions. We also incur costs for travel, trade shows, demonstration equipment, public relations and marketing materials, consisting primarily of the printing and distribution of our approximately 900 page catalog, supplements and various other specialty catalogs, and the maintenance of our websites. We may from time to time expand our marketing efforts by employing additional technical marketing specialists in an effort to increase sales of selected categories of products in our catalog. We may also from time to time expand our direct sales organizations in an effort to increase and/or support sales of our higher priced capital equipment instruments or to concentrate on key accounts or promote certain product lines.

General and administrative expenses. General and administrative expense consists primarily of salaries and other related costs for personnel in executive, finance, accounting, information technology and human relations functions. Other costs include professional fees for legal and accounting services, non-inventory related restructuring charges, facility costs, investor relations, insurance and provision for doubtful accounts.

Research and development expenses. Research and development expense consists primarily of salaries and related expenses for personnel and capital resources used to develop and enhance our products and to support collaboration agreements. Other research and development expense includes fees for consultants and outside service providers, and material costs for prototype and test units. We expense research and development costs as incurred. We believe that investment in product development is a competitive necessity and plan to continue to make these investments in order to realize the potential of new technologies that we develop, license or acquire.

Stock compensation expenses. On January 1, 2006, we adopted Statement of Financial Accounting Standards (SFAS) No. 123 (revised 2004), Share-Based Payment, which requires the Company to recognize compensation expense for all share-based payment awards made to employees and directors including employee stock options and employee stock purchases related to the Employee Stock Purchase Plan ("employee stock purchases"). We adopted SFAS No. 123(R) using the modified prospective transition method, which requires the application of the accounting standard as of January 1, 2006, the first day of our fiscal year 2006. Stock-based compensation expense recognized under SFAS No. 123(R) was $0.4 million and $4,000 for the three months ended September 30, 2008 in our continuing operations and discontinued operations, respectively, and $1.4 million and $9,000 for the nine months ended September 30, 2008 in our continuing operations and discontinued operations, respectively. Stock-based compensation expense recognized under SFAS No. 123(R) was $0.7 million and $19,000 for the three months ended September 30, 2007 in our continuing operations and discontinued operations, respectively, and $1.7 million and $49,000 for the nine months ended September 30, 2007 in our continuing operations and discontinued operations, respectively. This stock-based compensation expense was related to employee stock options and the employee stock purchase plan and was recorded as a component of cost of product revenues, sales and marketing expenses, general and administrative expenses, research and development expenses and discontinued operations.

Selected Results of Operations

Three months ended September 30, 2008 compared to three months ended
September 30, 2007:



                                            Three Months Ended September 30,           Dollar          %
                                              2008                   2007              Change        Change
                                                         (dollars in thousands, unaudited)
Revenues                                 $        19,989        $        19,353       $    636          3.3 %
Cost of product revenues                          10,555                 10,077            478          4.7 %
Gross margin percentage                             47.2 %                 47.9 %
Sales and marketing expenses                       2,568                  2,458            110          4.5 %
General and administrative expenses                3,451                  3,501            (50 )       -1.4 %
Research and development expenses                  1,009                    873            136         15.6 %

Revenues.

Revenues increased $0.6 million, or 3.3%, to $20.0 million for the three months ended September 30, 2008 compared to $19.4 million for the same period in 2007. The increase in revenue was primarily due to $1.6 million of sales at Panlab, our Harvard Apparatus subsidiary acquired in the fourth quarter of 2007. Organic growth at our other Harvard Apparatus businesses was flat year-to-year. Revenues at Biochrom were down $0.4 million year-to-year for the quarter, due primarily to a $0.7 million decrease in business with Biochrom's largest customer, partially offset by growth across the remainder of our customer base. The effect of a strengthened U.S. dollar decreased the Company's third quarter revenues by $0.7 million compared with last year.

From June 30, 2008 to September 30, 2008, the U.S. dollar strengthened by approximately 11% against the British pound and the euro. Approximately 56% of the Company's business is transacted in British pounds and euros. The U.S. dollar strengthened further since September 30, 2008. If foreign exchange rates continue at current levels or the U.S. dollar continues to strengthen then the Company's revenues, earnings and cash flows, stated in U.S. dollars, will continue to be negatively affected.

Cost of product revenues.

Cost of product revenues increased $0.5 million, or 4.7%, to $10.6 million for the three months ended September 30, 2008 compared with $10.1 million for the three months ended September 30, 2007. The increase in cost of product revenues is primarily due to $1.0 million of product costs at our recently acquired Panlab subsidiary, partially offset by a $0.4 million a decrease attributable to changes in foreign exchange rates. Gross profit as a percentage of revenues decreased to 47.2% for the three months ended September 30, 2008 compared with 47.9% for the same period in 2007. The decrease in gross profit as a percentage of revenues was primarily due to the addition of our Panlab subsidiary, which sells products at lower gross margins than our historical consolidated gross margins, as a result of Panlab's higher mix of distributed products compared to manufactured products. The impact of Panlab on gross margin percentage was approximately 0.8%.

Sales and marketing expense.

Sales and marketing expenses increased $0.1 million, or 4.5%, to $2.6 million for the three months ended September 30, 2008 compared to $2.5 million for the three months ended September 30, 2007. This increase was primarily due to expenses from our recently acquired Panlab subsidiary of $0.2 million, offset by a decrease from the effects of a strengthened U.S. dollar of $0.1 million.

General and administrative expense.

General and administrative expenses decreased $0.05 million, or 1.4%, to $3.45 million for the three months ended September 30, 2008 compared with $3.5 million for the three months ended September 30, 2007. General and administrative expense increases of $0.2 million due to our acquisition of Panlab were offset by decreases of $0.1 million from foreign exchange rates and $0.2 million from our consolidation of certain activities of our Hoefer and Asys subsidiaries.

Research and development expense.

Research and development expenses were $1.0 million, an increase of $0.1 million, or 15.6%, for the three months ended September 30, 2008 compared to $0.9 million for the three months ended September 30, 2007. The increase in research and development expenses was due to our acquisition of Panlab and increased development efforts at Harvard Apparatus, offset by a reduction from the effects of changes in exchange rates.

Amortization of intangible assets.

Amortization of intangibles was $0.5 million and $0.4 million for the three months ended September 30, 2008 and 2007, respectively.

Other income (expense), net.

Other income (expense), net, was $39,000 expense for the three months ended September 30, 2008 and $0.1 million income for the three months ended September 30, 2007. Net interest income was $21,000 and $18,000 for the three months ended September 30, 2008 and 2007, respectively. Other income (expense), net, also included foreign exchange gains of $19,000 and $69,000 for the three months ended September 30, 2008 and 2007, respectively. These foreign exchange losses and gains were primarily the result of currency fluctuations on intercompany transactions between our subsidiaries.

Income taxes.

Income tax expense from continuing operations was approximately $0.4 million and $0.6 million for the three months ended September 30, 2008 and 2007, respectively. The effective income tax rate for continuing operations was 21.2% for the three months ended September 30, 2008, compared with 27.2% for the same period of 2007. The difference between our effective tax rate and the US statutory tax rate is principally attributable to foreign tax rate differential and changes in our valuation allowance.

Restructuring

During the quarter ended March 31, 2008, the management of Harvard Bioscience committed to an ongoing initiative to consolidate business functions to reduce operating expenses. Our recent actions have been related to the separation of our electrophoresis product lines from our spectrophotometer and plate reader product lines. As part of these initiatives we have made changes in management, completed the consolidation of the Hoefer electrophoresis administrative and marketing operations from San Francisco, California to the headquarters of the Harvard Apparatus subsidiary in Holliston, Massachusetts and consolidated the activities of our Asys Hitech subsidiary in Austria to the Company's Biochrom subsidiary's facility located in Cambridge UK. The combined costs of these activities recorded in the nine months ended September 30, 2008, are $1.8 million. We intend to continue our restructuring program as part of our overall strategy.

During the three months ended September 30, 2008, we recorded additional restructuring charges of approximately $60,000 comprised of $12,000 in severance payments, $16,000 in facility closure costs and $32,000 in various other costs.

Discontinued Operations

During the quarter ended September 30, 2005, the Company announced plans to divest its Capital Equipment Business segment. The decision to divest this business segment was based on the fact that market conditions for the Capital Equipment Business had been such that this business did not meet the Company's expectations and the decision to focus Company resources on the Apparatus and Instrumentation Business segment. As a result, we began reporting the Capital Equipment Business segment as a discontinued operation in the third quarter of 2005.

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