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," "expects," "plans," "anticipates," "believes," "goals," "sees," "estimates," "projects," "predicts," "intends," "think," "potential," "objectives," "optimistic," "strategy," 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 identify potential acquisition candidates, successfully integrate acquired businesses or technologies, successfully negotiate favorable pricing and other terms with acquisition candidates to enable potential acquisitions to close, complete consolidations of business functions, expand our distribution channels, expand our product offerings, introduce new products or commercialize new technologies on a timely basis, including in the field of regenerative medicine, unanticipated costs relating to acquisitions, unanticipated costs arising in connection with the Company's consolidation of business functions and any restructuring initiative, lack of demand or decreased demand for the Company's products due to changes in our customers' needs, success of our efforts with our distributors to promote sales of our microvolume spectrophotometer products and success of our strategies to increase the sales of other products, our ability to obtain regulatory approvals, including FDA approval, for our products including any products in the field of regenerative medicine, the current size or anticipated size of the regenerative medicine market, the existence and size of opportunities in the regenerative medicine market, our financial position, general economic outlook, or other circumstances, overall economic trends, the seasonal nature of purchasing in Europe, economic, political and other risks associated with international revenues and operations, the impact of the current global economic and financial uncertainty, 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 subsidiaries due to manufacturing consolidations, 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, research funding levels from endowments at our university customers, impact of any impairment of our goodwill or intangible assets, our acquisition of Genomic Solutions failing to qualify as a tax-free reorganization for federal tax purposes, our ability to utilize deferred tax assets after the release of our valuation allowances, the amount of earn-out consideration that the Company receives in connection with the disposition 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, 2011, filed with the SEC on March 15, 2012. 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

Harvard Bioscience consists of a Life Science Research Tools ("LSRT") business and a Regenerative Medicine Device ("RMD") business.

Our LSRT strategy is to have a broad range of highly specialized but relatively inexpensive products that have strong positions in niche markets in life science research. We believe that:

• having a broad product offering reduces the risk of being dependent on a single technology;

• having relatively inexpensive products reduces the volatility associated with expensive capital equipment; and

• focusing on niche markets reduces head-to-head competition with the major instrument companies.

We seek to grow this range of products through a combination of organic growth driven by internal development of new products, direct marketing, distribution channel expansion and the acquisition of closely related products. We use acquisitions to expand our product offerings because we believe we can use our well-established brands and distribution channels to accelerate the growth of these acquired products. We also believe that our expertise in operational management frequently allows us to improve profitability at acquired companies.

In addition to driving growth in our core research markets, we have been investing to create new products to address what we believe is a long term growth opportunity in the emerging field of regenerative medicine. Regenerative medicine is using stem cells to repair damaged organs and to grow organs outside the body for transplant. The U.S. Department of Health and Human Services has projected that the U.S. market for regenerative medicine may be $100 billion in the coming years. The government's estimate appears to include the value of all regenerative medicine protocols and therapies, including potential cost savings versus current methodologies. Our strategy is not to become a therapeutics company, but instead, to provide tools to researchers and clinicians in the field of regenerative medicine. These new tools currently fall into two main categories: bioreactors for growing tissue and organs outside the body; and injectors for stem cell therapy. These new tools we are creating are being built on our existing technologies-such as our market leading Harvard Apparatus precision syringe pumps and market leading Hugo-Sachs isolated organ systems.

Our strategy in our RMD business is to (i) create devices in collaboration with leading surgeons, researchers and clinicians, (ii) build these devices using our existing technologies and brands in an effort to reduce the investment needed to get the devices to market, and (iii) develop devices with significant disposable components to improve clinical safety and allow us to participate on a per-procedure basis following the sale of an instrument.

Our first regenerative medicine tool, the "InBreath" hollow organ bioreactor, was used to perform the world's first human transplant of a regenerated bronchus. Dr. Paolo Macchiarini of the Karolinska University Hospital and Karolinska Institutet, in collaboration with his colleagues, reported this success in The Lancet, a leading general medicine journal, in November 2008. We have licensed the "InBreath" hollow organ bioreactor from Dr. Macchiarini's team, and worked to make it a commercial device. We believe that it is the world's first commercially available bioreactor that has been used to perform a human transplant of a regenerated organ. We believe it marks an important milestone in the development of the regenerative medicine field as the tools evolve from concepts to commercial quality products.

During the first half of 2010, one of our collaborators, Dr. Harald Ott at Massachusetts General Hospital ("MGH") succeeded in regenerating a lung and subsequently transplanting it into a rat. In collaboration with Dr. Ott and MGH, we designed and developed a novel bioreactor, LB-2 Solid organ bioreactor, that was used to grow the lung. The work was published online in Nature Medicine in July 2010. The bioreactor used by Dr. Ott was a modified version of one of our market leading Hugo-Sachs isolated organ systems.

In June 2011, the "InBreath" bioreactor was used for the world's first successful transplantation of a synthetic tissue engineered windpipe. For the first time in history, a patient was given a new trachea made from a synthetic scaffold seeded with his own stem cells in a bioreactor. The cells were grown on the scaffold inside the bioreactor for two days before transplantation into the patient. Because the cells used to regenerate the trachea were the patient's own, there has been no rejection of the transplant, and the patient is not taking immunosuppressive drugs. The patient had been suffering from late stage tracheal cancer, which before this surgery would have been inoperable, and is now alive and well seventeen months after the surgery. The operation was performed at the Karolinska University Hospital in Huddinge, Stockholm, by Dr. Macchiarini and colleagues. Dr. Macchiarini led an international team of medical professionals and other individuals who designed and built the nanocomposite tracheal scaffold, and we produced a specifically designed bioreactor used to seed the scaffold with the patient's own stem cells. The success of this transplant surgery was noted in The Lancet on November 24, 2011.

In November 2011, a second patient was given a new trachea made from a synthetic scaffold seeded with his own stem cells in a bioreactor. The patient had been suffering from late stage tracheal cancer. The patient was discharged from the hospital in January 2012. On March 5, 2012, this patient died. The official cause of death recorded on the death certificate was pneumonia secondary to tracheal cancer. We know of no evidence that either the scaffold or the bioreactor played any part in the patient's death.

In June 2012, the "InBreath" bioreactors were used for the world's first and second successful laryngotracheal implants, using synthetic laryngotracheal scaffolds seeded with cells taken from the patients' bone marrow. The surgeries took place at Krasnodar Regional Hospital in Krasnodar, Russia on June 19th and June 21st. Each bioreactor was loaded with a synthetic scaffold in the shape of the patient's original organ. The scaffolds were then seeded with the patient's own stem cells. Over the course of about two days, the bioreactor promoted proper cell seeding and development. Because the patients' own stem cells were used, their bodies have accepted the transplants without the use of immunosuppressive drugs. The recipients of the implants are doing well four months after the surgery. These surgeries are a part of a clinical trial to be funded under a $4.8 million grant provided by the Russian government to the Krasnodar Regional Hospital.

In addition to the Russian clinical trial, a European clinical trial in tracheal cancer patients is expected to start in 2014. The European clinical trial is expected to enroll approximately 25 patients. This project is a consortium of European companies, hospitals and universities led by Dr. Macchiarini.

In addition to the bioreactors described above, we have also made progress on our clinical version of one of our market leading Harvard Apparatus research syringe pumps. The research version of this pump is called the "PHD Ultra Nanomite" stem cell therapy injection system. Based on our progress to date, we expect to begin marketing a version of the clinical pump for research applications this year. We anticipate that this pump will be used to inject cells into damaged tissue in cell therapy. We expect to submit this pump to the regulatory agencies in 2013 for approval.

We are also actively evaluating strategic alternatives to fund the RMD business going forward.

While we expect the initiatives discussed above to positively impact our business, the success of these initiatives is subject to a number of factors, including fluctuations in foreign exchange rates, the current economic and financial condition and their impact on our customers and our ability to obtain credit on terms favorable to us, 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, 2011, which was filed with the SEC on March 15, 2012.

Financing

On August 7, 2009, we entered into an amended and restated $20.0 million revolving credit loan agreement with Bank of America, as agent, and Bank of America and Brown Brothers Harriman & Co. as lenders. On September 30, 2011, we entered into the First Amendment with Bank of America as agent, and Bank of America and Brown Brothers Harriman & Co. as lenders. The First Amendment extended the maturity date of our credit facility to August 7, 2013 and reduced our interest rate to LIBOR plus 3.0%. On October 4, 2012, we entered into the Second Amendment with Bank of America as agent, and Bank of America and Brown Brothers Harriman & Co as lenders. The Second Amendment extends the maturity date of our credit facility to August 7, 2014 with no changes to other terms. At September 30, 2012, the interest rate for the facility was 3.22%. The amended and restated facility includes covenants relating to income, debt coverage and cash flow, as well as minimum working capital requirements. The credit facility also contains limitations on our ability to incur additional indebtedness and requires lender approval for acquisitions funded with cash, promissory notes and/or other consideration in excess of $6.0 million and for acquisitions funded solely with equity in excess of $10.0 million.

At September 30, 2012, we had borrowings of $15.3 million outstanding under our credit facility with Bank of America and Brown Brothers Harriman & Co.

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 thereof.

Components of Operating Income

Revenues. We generate revenues by selling apparatus, instruments, devices and consumables through our catalogs, our distributors, our direct sales force and our website. For products primarily priced under $10,000, we typically distribute a new, comprehensive catalog every one to three years, 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 distribute catalog supplements that promote selected areas of our catalog or new products to targeted subsets of our customer base. Future editions of our comprehensive catalog and our catalog supplements will be timed at least in part with the incidence of new product introductions. 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 March 2010, with approximately 850 pages, 11,000 products and approximately 65,000 copies printed. Revenues from direct sales to end users represented approximately 57% and 58%, respectively, of our revenues for the nine months ended September 30, 2012 and for the year ended December 31, 2011.

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, 2012 and for the year ended December 31, 2011, approximately 43% and 42%, respectively, of our revenues were derived from sales to distributors.

For the nine months ended September 30, 2012, approximately 65% of our revenues were derived from products we manufacture; approximately 24% were derived from distributed products sold under our brand names and approximately 11% 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 year ended December 31, 2011, approximately 62% of our revenues were derived from products we manufacture; approximately 25% were derived from distributed products sold under our brand names and approximately 13% 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, 2012 and for the year ended December 31, 2011, approximately 41% and 40%, respectively of our revenues were derived from sales made by our non-U.S. operations. A large portion of our international sales during these periods consisted of sales to GE Healthcare, the distributor for our spectrophotometers and plate readers. GE Healthcare distributes these products to customers around the world, including to 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 and royalties. 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 a higher cost of product revenues as a percent of revenue 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 catalogs, supplements and the maintenance of our websites. We may from time to time expand our marketing efforts by employing additional technical marketing specialists in an effort to increase sales of selected categories of products in our catalog. We may also from time to time expand our direct sales organizations in an effort to concentrate on key accounts or promote certain product lines.

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

Research and development expenses. Research and development expense consists primarily of salaries and related expenses for personnel and spending to develop and enhance our products. Other research and development expense includes fees for consultants and outside service providers, and material costs for prototype and test units. We expense research and development costs as incurred. We believe that investment in product development is a competitive necessity and plan to continue to make these investments in order to realize the potential of new technologies that we develop, license or acquire for existing markets. Additionally, we are working to develop new products aimed at long term opportunities in the emerging field of regenerative medicine.

Stock-based compensation expenses. Stock-based compensation expense recognized under FASB ASC 718, "Compensation - Stock Compensation," was related to employee stock options, RSUs 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 and research and development expenses.

Bookings and Backlog

We monitor bookings and backlog as these are indicators of future revenue and business activity levels. Bookings were $25.8 million and $26.3 million for three months ended September 30, 2012 and 2011, respectively. Bookings increased by $2.0 million, or 2.5% to $82.3 million for the nine months ended September 30, 2012 compared with $80.3 million for the same period in 2011. The increase in bookings was primarily due to the acquisition of CMA Microdialysis AB ("CMA") in July 2011 and AHN in February 2012.

Backlog decreased by $0.8 million, or 15.2% to $4.7 million on September 30, 2012 compared with $5.5 million on September 30, 2011. The decrease was primarily due to weak sales in the month of September which saw a decrease in demand for our products primarily in the university/government research market due to the uncertainty of the level of future funding in this political/economic environment. This had an impact on our third quarter performance.

Selected Results of Operations

Three months ended September 30, 2012 compared to three months ended
September 30, 2011:



                                           Three Months Ended
                                              September 30,
                                                                      Dollar          %
                                           2012           2011        Change       Change
                                             ($ in thousands, unaudited)

   Revenues                              $  26,104      $ 26,381      $  (277 )       -1.0 %
   Cost of product revenues                 14,110        14,503         (393 )       -2.7 %
   Gross margin percentage                    45.9 %        45.0 %                     2.0 %
   Sales and marketing expenses              4,670         4,361          309          7.1 %
   General and administrative expenses       4,832         4,560          272          6.0 %
   Research and development expenses         1,861         1,554          307         19.8 %

Revenues.

Revenues were lower by $0.3 million, or 1.0%, to $26.1 million for the three months ended September 30, 2012 compared to $26.4 million for the same period in 2011. Our acquisition of AHN contributed approximately $0.4 million, or 1.6% to third quarter 2012 revenues. The effect of a stronger U.S. dollar decreased our third quarter revenues by $0.4 million, or 1.4%, compared with the same period in 2011. Adjusting for the effect of foreign currency fluctuation and acquisitions, revenues were down $0.3 million, or 1.2%, primarily at our Harvard Apparatus U.S., Canada and Spain subsidiaries and our Hoefer business, partially offset by increased revenue in our Harvard Apparatus U.K., Biochrom U.K. and Denville businesses.

Cost of product revenues.

Cost of product revenues decreased $0.4 million, or 2.7%, to $14.1 million for the three months ended September 30, 2012 compared with $14.5 million for the three months ended September 30, 2011. Gross profit as a percentage of revenues increased to 45.9% for the three months ended September 30, 2012 compared with 45.0% for the same period in 2011. The increase in gross profit as a percentage of revenues was primarily due to a more favorable sales mix in the third quarter of 2012 compared with the third quarter of 2011.

Sales and marketing expense.

Sales and marketing expenses increased $0.3 million, or 7.1%, to $4.7 million for the three months ended September 30, 2012 compared with $4.4 million for the three months ended September 30, 2011. In LSRT, sales and marketing expenses increased $0.2 million, or 4.7%, to $4.4 million, compared to $4.2 million for the three months ended September 30, 2011 primarily due to $0.1 million, or 1.6%, of expenses related to our acquisition of AHN and $0.2 million, or 4.7%, mainly due to increased selling activities at our Denville business. This was partially offset by the effect of a stronger U.S. dollar which caused a $0.1 million, or 1.6%, favorable currency effect on sales and marketing expenses for the three months ended September 30, 2012. In RMD, sales and marketing expenses increased $0.1 million compared with the third quarter of 2011 primarily due to an increase in business development efforts.

General and administrative expense.

General and administrative expenses increased $0.3 million, or 6.0% to $4.8 million for the three months ended September 30, 2012 compared with $4.6 million for the three months ended September 30, 2011. In LSRT, general and administrative expenses remained flat at approximately $4.3 million for the three months ended September 30, 2012 and 2011. In RMD, general and . . .