HESKA CORP (Form: 10-K, Received: 03/15/2016 17:30:27)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)



x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2015



o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________________ to _______________________

Commission file number: 0-22427

HESKA CORPORATION

(Exact name of registrant as specified in its charter)



Delaware	77-0192527
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)
3760 Rocky Mountain Avenue Loveland, Colorado	80538
(Address of principal executive offices)	(Zip Code)
Registrant's telephone number, including area code: (970) 493-7272
Securities registered pursuant to Section 12(b) of the Act: Public Common Stock, $.01 par value (Title of Class) Securities registered pursuant to Section 12(g) of the Act: None	The Nasdaq Stock Market LLC (Name of Each Exchange on Which Registered)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes o No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.

Yes o No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.



Large accelerated filer o	Accelerated filer x
Non-accelerated filer o (Do not check if a small reporting company)	Smaller Reporting Company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x

The aggregate market value of voting common stock held by non-affiliates of the Registrant was approximately $172,442,053 as of June 30, 2015 based upon the closing price on the Nasdaq Capital Market reported for such date. This calculation does not reflect a determination that certain persons are affiliates of the Registrant for any other purpose.

6,620,292 shares of the Registrant's Public Common Stock, $.01 par value, were outstanding at March 14, 2016.

___________________________________

DOCUMENTS INCORPORATED BY REFERENCE

Items 10, 11, 12, 13 and 14 of Part III incorporate by reference information from the Registrant's definitive proxy statement to be filed with the Securities and Exchange Commission in connection with the solicitation of proxies for the Registrant's 2016 Annual Meeting of Stockholders.

TABLE OF CONTENTS



			Page
PART I			1
	Item 1.	Business	1
	Item 1A.	Risk Factors	12
	Item 1B.	Unresolved Staff Comments	27
	Item 2.	Properties	27
	Item 3.	Legal Proceedings	27
	Item 4.	Mine Safety Disclosures	27
PART II			28
	Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchase of Equity Securities	28
	Item 6.	Selected Financial Data	30
	Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
	Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	43
	Item 8.	Financial Statements and Supplementary Data	45
	Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	76
	Item 9A.	Controls and Procedures	76
	Item 9B.	Other Information	77
PART III			77
	Item 10.	Directors, Executive Officers and Corporate Governance	77
	Item 11.	Executive Compensation	78
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	78
	Item 13.	Certain Relationships and Related Transactions, and Director Independence	79
	Item 14.	Principal Accountant Fees and Services	79
PART IV			79
	Item 15.	Exhibits and Financial Statement Schedules	79
	Signatures		85

HESKA, ALLERCEPT, HEMATRUE, SOLO STEP, THYROMED, VET/OX and VITALPATH are registered trademarks of Heska Corporation. TRI-HEART is a registered trademark of Intervet Inc., d/b/a Merck Animal Health, formerly known as Schering-Plough Animal Health Corporation ("Merck Animal Health"), which is a unit of Merck & Co., Inc., in the United States and is a registered trademark of Heska Corporation in other countries. DRI-CHEM is a registered trademark of FUJIFILM Corporation. This annual report on Form 10-K also refers to trademarks and trade names of other organizations.

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Statement Regarding Forward Looking Statements

This Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). For this purpose, any statements contained herein that are not statements of current or historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, words such as "anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates," variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Therefore, actual results could differ materially from those expressed or forecasted in any such forward-looking statements as a result of certain factors, including those set forth in "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Business" and elsewhere in this Form 10-K. Readers are cautioned not to place undue reliance on these forward-looking statements.

Although we believe that expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based, except as otherwise required by applicable securities laws. These forward-looking statements apply only as of the date of this Form 10-K or for statements incorporated by reference from our 2016 definitive proxy statement on Schedule 14A, as of the date of the Schedule 14A.

Internet Site

Our Internet address is www.heska.com. Because we believe it provides useful information in a cost-effective manner to interested investors, via a link on our website our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are publicly available free of charge and we believe are available as soon as reasonably practical after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (the "SEC"). Information contained on our website is not a part of this annual report on Form 10-K.

PART I


Item 1.	Business.

Unless we state otherwise or the context otherwise requires, the terms "Heska," "we," "our," "us" and "the Company" refer to Heska Corporation and its consolidated subsidiaries.

We sell advanced veterinary diagnostic and other specialty veterinary products. Our offerings include blood testing instruments and supplies, digital imaging products, software and services, and single use products and services such as in-clinic heartworm diagnostic tests, heartworm preventive products, allergy immunotherapy products and allergy testing. Our core focus is on the canine and feline markets.

Our principal executive offices are located at 3760 Rocky Mountain Avenue, Loveland, Colorado 80538, our telephone number is (970) 493-7272 and our internet address is www.heska.com. We originally incorporated in California in 1988, and we subsequently incorporated in Delaware in 1997.

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Background

We were founded as Paravax, Inc. in 1988 and conducted research on vaccines to prevent infections by parasites. We changed our name to Heska Corporation in 1995, completed our initial public offering in 1997 and continued to be a research and development-focused company, devoting substantial resources to the research and development of innovative products for the companion animal health market. We subsequently took steps to lower our expense base, largely in internal research and development, and continued to concentrate our efforts on operating improvements, such as enhancing the effectiveness of our sales and marketing efforts and pursuing cost efficiencies, as well as seeking new product opportunities with third parties. We acquired a 54.6% interest in Cuattro Veterinary USA, LLC in February 2013 (the "Acquisition"), which marked our entry into the veterinary imaging market. In June 2013, we sold certain non-core assets useful for the production of both bovine and feline vaccines to Elanco Animal Health ("Elanco"), a division of Eli Lilly and Company.

Products and Services

Our business is composed of two reportable segments, Core Companion Animal Health and Other Vaccines, Pharmaceuticals and Products. The Core Companion Animal Health segment ("CCA") includes, primarily for canine and feline use, blood testing instruments and supplies, digital imaging products, software and services, and single use products and services such as heartworm diagnostic tests, heartworm preventive products, allergy immunotherapy products and allergy testing. These products are sold directly to veterinarians by us as well as through distribution relationships. The Other Vaccines, Pharmaceuticals and Products segment ("OVP") includes private label vaccine and pharmaceutical production, primarily for cattle but also for other animals including small mammals. All OVP products are sold by third parties under third party labels.

Core Companion Animal Health Segment

We presently sell a variety of companion animal health products and services, among the most significant of which are the following:

Veterinary Blood Testing and Other Non-Imaging Instruments

We offer a line of veterinary blood testing and other instruments, some of which are described below. We also market and sell consumable supplies for these instruments. Our line of veterinary instruments includes the following:

•

Blood Chemistry. The Element DC _™ Veterinary Chemistry Analyzer (the "Element DC") is an easy-to-use, robust system that uses dry slide technology for blood chemistry and electrolyte analysis and has the ability to run 22 tests at a time with a single blood sample. Test slides are available as both pre-packaged panels as well as individual slides. The DRI-CHEM 7000 Veterinary Chemistry Analyzer (the "DRI-CHEM 7000") is a complementary chemistry offering, co-branded with FUJIFILM Corporation ("FUJIFILM"), with higher throughput, multiple patient staging and a "STAT" feature which provides emergency sample flexibility in critical cases. The Element DC and DRI-CHEM 7000 utilize the same test slides. We are supplied with the Element DC, the DRI-CHEM 7000 and affiliated test slides and supplies under a contractual agreement with FUJIFILM.


•	Hematology. The Element HT _™ 5 Hematology Analyzer (the "HT5") is a true 5-part hematology analyzer which uses laser, impedance and colorimetric technologies to measure key parameters such as white blood cell count, red blood cell count, platelet count and hemoglobin levels in

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animals. The HT5 can generate results in less than a minute with 15 µL of sample. We began to ship HT5 units in January 2015. We are supplied with the HT5 and affiliated reagents and supplies under a contractual agreement with Shenzen Mindray Bio-Medical Electronics Co., Ltd. ("Mindray"). The HEMATRUE Veterinary Hematology Analyzer (the "HEMATRUE") is an easy-to-use and reliable 3-part hematology blood analyzer that we continue to offer to our customers. We are supplied HEMATRUE instruments and affiliated reagents and supplies for the HEMATRUE under a contractual agreement with Boule Medical AB ("Boule").

•

Blood Gases and Electrolytes. The Element POC™ Blood Gas & Electrolyte Analyzer ("EPOC") is a handheld, wireless analyzer which delivers rapid blood gas, electrolyte, metabolite, and basic blood chemistry testing. EPOC features test cards with room temperature storage which can offer results with less than 100 µL of sample as well as WiFi and Bluetooth connectivity. We began to ship EPOC units to customers in October 2013. EPOC and affiliated consumables and supplies are supplied to us under a contractual agreement with Alere North America, LLC, a unit of Alere Inc.

•

Immunodiagnostics . The Element i Immunodiagnostic Analyzer ("Element i") utilizes fluorescence immunoassay technology to ensure sensitivity for accurate in-clinic detection of Total T4, TSH and Cortisol. The Element i is a benchtop technology with a test time of 10 minutes or less per analyte. Along with confidence in results, this measurement principle allows for simplified reagents and testing protocols. Element i units, which we began shipping in December 2015, are supplied to us under a contractual agreement with FUJIFILM.


•	IV Pumps. The VET/IV 2.2 infusion pump is a compact, affordable IV pump that allows veterinarians to easily provide regulated infusion of fluids for their patients.

Veterinary Imaging Instruments and Services

On February 24, 2013, we acquired a 54.6% interest in Cuattro Veterinary USA, LLC, which was subsequently renamed Heska Imaging US, LLC ("Heska Imaging") and operates only in the United States. This transaction marked our entry into the veterinary imaging market. Heska Imaging's offerings in this area include:

Digital Radiography Solutions. Our digital radiography solutions are marketed and sold under the "Cuattro" brand name. We sell hardware including digital radiography detectors, acquisition workstation equipment, positioning aides such as tunnels and tables, viewing computers and other accessories along with embedded software and support, data hosting and other services. CloudDR ^TM solutions combine flat panel digital radiography acquisition with web-based image storage. Cloudbank ^TM is an automatic, secure, web-based image storage solution designed to interface with the software we sell. ViewCloud ^TM is a PACS (Picture Archival and Communications System) for Cloudbank for web or local viewing, reporting, planning and email sharing of studies on internet devices, including personal computers, tablet devices and smartphones. SupportCloud ^TM is a support package including call center voice and remote diagnostics, recovery and other services, such as the provision of warranty-related loaner units, to support CloudDR, Cloudbank and ViewCloud.

We also sell mobile digital radiography products, primarily for equine use. The Uno 6 ^TM is a full powered, seamlessly integrated, portable digital radiography generator with an embedded touchscreen digital radiography acquisition computer based upon a patented design of Cuattro, LLC. The Slate 6 ^TM is a mobile digital radiography acquisition console with a direct sunlight readable display, including multi-touch software. Slate 6 and Uno 6 have the ability to link to Digital Imaging and Communication in Medicine (DICOM) servers of all types as well as Cloudbank.

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Cuattro, LLC provides us with the hardware, software and support, data hosting and other services for our digital radiography solutions under exclusive contractual arrangements in the United States.

Ultrasound Systems. Our ultrasound products, including affiliated probes and peripherals, are provided to us under an exclusive agreement with Esaote USA ("Esaote"). We sell several different ultrasound products with varying features and corresponding price points, all under Esaote's trade names or logos. These offerings include the MyLab family of high performance systems and probes, for use in abdominal, cardiac and small parts applications in companion animal and equine patients as well as other species. The ultrasound products we sell generally seamlessly integrate with our Cloudbank and ViewCloud offerings for image storing and viewing.

Point-of-Care Heartworm Diagnostic Tests

Heartworm infections of dogs and cats are caused by the parasite Dirofilaria immitis . This parasitic worm is transmitted in larval form to dogs and cats through the bite of an infected mosquito. Larvae develop into adult worms that live in the pulmonary arteries and heart of the host, where they can cause serious cardiovascular, pulmonary, liver and kidney disease. Our canine and feline heartworm diagnostic tests use monoclonal antibodies or a recombinant heartworm antigen, respectively, to detect heartworm antigens or antibodies circulating in the blood of an infected animal.

We currently market and sell heartworm diagnostic tests for both dogs and cats. SOLO STEP CH for dogs and SOLO STEP FH for cats are available in point-of-care, single use formats that can be used by veterinarians on site. We also offer SOLO STEP CH Batch Test Strips, a rapid and simple point-of-care antigen detection test for dogs that allows veterinarians in larger practices to run multiple samples at the same time. We obtain SOLO STEP CH, SOLO STEP FH and SOLO STEP Batch Test Strips under a contractual agreement with Quidel Corporation ("Quidel").

Heartworm Preventive Products

We have an agreement with Merck Animal Health, a unit of Merck & Co., Inc., granting Merck Animal Health the exclusive distribution and marketing rights for our canine heartworm prevention product, TRI-HEART Plus Chewable Tablets, ultimately sold to or through veterinarians in the United States and Canada. TRI-HEART Plus Chewable Tablets (ivermectin/pyrantel) are indicated for use as a monthly preventive treatment of canine heartworm infection and for treatment and control of ascarid and hookworm infections. We manufacture TRI-HEART Plus Chewable Tablets at our Des Moines, Iowa production facility.

Allergy Products and Services

Allergy is common in companion animals, and it has been estimated to affect approximately 10% to 15% of dogs. Clinical symptoms of allergy are variable, but are often manifested as persistent and serious skin disease in dogs and cats. Clinical management of allergic disease is problematic, as there are a large number of allergens that may give rise to these conditions. Although skin testing is often regarded as the most accurate diagnostic procedure, such tests can be painful, subjective and inconvenient. The effectiveness of the immunotherapy that is prescribed to treat allergic disease is inherently limited by inaccuracies in the diagnostic process.

We believe that our ALLERCEPT Definitive Allergen Panels provide the most accurate determination of which we are aware of the specific allergens to which an animal, such as a dog, cat or horse, is reacting. The panels use a highly specific recombinant version of the natural IgE receptor to test the serum of potentially allergic animals for IgE directed against a panel of known allergens. A typical test panel consists primarily of various pollen, grass, mold, insect and mite allergens. The test results serve as the basis for

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prescription ALLERCEPT Therapy Shots and ALLERCEPT Therapy Drops. We operate veterinary laboratories in Loveland, Colorado and Fribourg, Switzerland which both offer blood testing using our ALLERCEPT Definitive Allergen Panels.

We sell kits to conduct blood testing using our ALLERCEPT Definitive Allergen Panels to third-party veterinary diagnostic laboratories outside of the United States. We also sell products to screen for the presence of allergen-specific IgE to these customers - we sell kits to conduct preliminary blood testing using products based on our ALLERCEPT Definitive Allergen Panels as well as a similar test requiring less technical sophistication, our E-SCREEN Test. Animals testing positive for allergen-specific IgE using these screening tests are candidates for further evaluation using our ALLERCEPT Definitive Allergen Panels.

Veterinarians who use our ALLERCEPT Definitive Allergen Panels often purchase our ALLERCEPT Therapy Shots or ALLERCEPT Therapy Drops for those animals with positive test results. These prescription immunotherapy treatment sets are formulated specifically for each allergic animal and contain only the allergens to which the animal has significant levels of IgE antibodies. The prescription formulations are administered in a series of subcutaneous injections (Shots) or by daily sublingual (under the tongue) administration (Drops), with doses increasing over several months, to ameliorate the allergic condition of the animal. Immunotherapy is generally continued for an extended time. We offer canine, feline and equine subcutaneous and sublingual immunotherapy treatment products. We believe our ALLERCEPT Therapy Drops offer a convenient alternative to subcutaneous injection, thereby increasing the likelihood of pet owner compliance.

Other Core Companion Animal Health Single Use Products. We also sell other products in our Core Companion Animal Health segment.

Other Vaccines, Pharmaceuticals and Products Segment

We developed a line of bovine vaccines that are licensed by the United States Department of Agriculture ("USDA"). Historically, the largest distributor of these vaccines was Agri Laboratories, Ltd. ("AgriLabs"), who sold these vaccines primarily under the Titanium® and MasterGuard® brands. In November 2013, AgriLabs assigned the long-term agreement with us related to these vaccines to, and the agreement was assumed by, Eli Lilly and Company ("Eli Lilly") acting through Elanco. In January 2015, we signed a long-term Master Supply Agreement related to these vaccines with Eli Lilly acting through Elanco, thereby terminating the AgriLabs agreement previously assumed by Eli Lilly in November 2013.

We manufacture biological and pharmaceutical products for a number of other animal health companies. We manufacture products for animals other than cattle including horses and small mammals. Our offerings range from providing complete turnkey services which include research, licensing, production, labeling and packaging of products to providing any one of these services as needed by our customers as well as validation support and distribution services.

Marketing, Sales and Customer Support

We estimate that there are approximately 53,000 veterinarians in the United States whose practices are devoted principally to small animal medicine and these veterinarians practice in approximately 24,000 clinics in the United States. Veterinarians may obtain our products directly from us or indirectly through others. All our Core Companion Animal Health products ultimately are sold primarily to or through veterinarians. In many cases, veterinarians will markup their costs to the end user. The acceptance of our products by veterinarians is critical to our success.

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We currently market our Core Companion Animal Health products in the United States to veterinarians through an outside field organization, a telephone sales force, independent third-party distributors, as well as through trade shows and print advertising and through other distribution relationships, such as Merck Animal Health in the case of our heartworm preventive. As of December 31, 2015, our outside field organization consisted of 36 individuals in various parts of the United States and our inside sales force consisted of 26 individuals.

We have a staff dedicated to customer and product support in our Core Companion Animal Health segment including veterinarians, technical support specialists and service technicians. Individuals from our product development group may also be used as a resource in responding to certain product inquiries.

Internationally, we market our Core Companion Animal Health products to veterinarians primarily through third-party veterinary diagnostic laboratories and independent third-party distributors.

All OVP products are marketed and sold by third parties under third-party labels.

We grant third parties rights to our intellectual property as well as our products, with our compensation often taking the form of royalties and/or milestone payments.

Manufacturing

The majority of our revenue is from proprietary products manufactured by third parties. Third parties manufacture our veterinary instruments, including affiliated consumables and supplies, as well as other products including key components of our heartworm point-of-care diagnostic tests. Our chemistry and immunodiagnostic instruments and affiliated supplies are manufactured under contracts with FUJIFILM. Our hematology instruments and affiliated supplies are manufactured under contracts with Mindray and Boule. Our blood gas and electrolyte analyzers and affiliated supplies are supplied under a contract with Alere North America, LLC. Our digital radiography products are supplied under a contract with Cuattro, LLC, which typically buys its hardware products and components from third parties. Our ultrasound products are supplied under a contract with Esaote USA. Key components of our heartworm point-of-care diagnostic tests are manufactured under a contract with Quidel. We manufacture and supply Quidel with certain critical raw materials and perform the final packaging operations for these products.

Our facility in Des Moines, Iowa is a USDA, Food and Drug Administration ("FDA"), and Drug Enforcement Agency ("DEA") licensed biological and pharmaceutical manufacturing facility. This facility currently has the capacity to manufacture more than 50 million doses of vaccine each year. We expect that we will, for the foreseeable future, manufacture most or all of our pharmaceutical and biological products at this facility, as well as most or all of our recombinant proteins and other proprietary reagents for our diagnostic tests. We currently manufacture our canine heartworm prevention product, our allergy treatment products and all our OVP segment products at this facility. Our OVP segment's customers purchase products in both finished and bulk format, and we perform all phases of manufacturing, including growth of the active bacterial and viral agents, sterile filling, lyophilization and packaging at this facility. We manufacture our various allergy products at our Des Moines facility, our Loveland facility and our Fribourg facility. We believe the raw materials for products we manufacture are available from more than one source.

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Product Development

We are committed to providing innovative products to address health needs of companion animals. We may obtain such products from external sources, external collaboration or internal research and development.

We are committed to identifying external product opportunities and creating business and technical collaborations that lead to high value veterinary products. We believe that our active participation in scientific networks and our reputation for investing in research enhances our ability to acquire external product opportunities. We have collaborated, and intend to continue to do so, with a number of companies and universities. Examples of such collaborations include:


•	Quidel for the development of SOLO STEP CH Cassettes, SOLO STEP CH Batch Test Strips and SOLO STEP FH Cassettes;


•	Mindray for the development of veterinary applications for the ELEMENT HT5 Veterinary Hematology Analyzer and associated reagents; and


•	FUJIFILM for the development of veterinary applications for the Element DC Veterinary Chemistry Analyzer and associated slides and supplies.

Internal research and development is managed on a case-by-case basis. We employ individuals with expertise in various applicable areas and will form multidisciplinary product-associated teams as appropriate. We incurred expenses of $ 1.5 million , $ 1.4 million and $1.7 million in the years ended December 31, 2013, 2014 and 2015, respectively, in support of our research and development activities.

Intellectual Property

We believe that patents, trademarks, copyrights and other proprietary rights represent opportunities to grow our business and maintain or enhance our competitive position. We also rely upon trade secrets, know-how, continuing technological innovations and licensing opportunities to develop and maintain our competitive position. The proprietary technologies of our OVP segment are primarily protected through trade secret protection of, for example, our manufacturing processes in this area.

We actively seek patent protection both in the United States and abroad. Our issued patent portfolios primarily relate to heartworm control, flea control, allergy, infectious disease vaccines, diagnostic and detection tests, immunomodulators, instrumentation, nutrition, pain control and vaccine delivery technologies. As of December 31, 2015, we owned, co-owned or had rights to 139 issued U.S. patents expiring at various dates from January 2016 to May 2028 and had no pending U.S. patent applications. Our corresponding foreign patent portfolio as of December 31, 2015 included 116 issued patents in various foreign countries expiring at various dates from March 2016 to August 2024 and had no pending applications.

We also have obtained exclusive and non-exclusive licenses for numerous other patents held by academic institutions and for profit companies.

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Seasonality

In 2013, 2014 and 2015, our fourth quarter results were significantly stronger than those for any other quarter. We expect this trend to continue in the future as it is a historical trend within our digital imaging business.

Government Regulation

Although the majority of our revenue is from the sale of unregulated items, many of our products or products that we may develop are, or may be, subject to extensive regulation by governmental authorities in the United States, including the USDA and the FDA, and by similar agencies in other countries. These regulations govern, among other things, the development, testing, manufacturing, labeling, storage, pre-market approval, advertising, promotion, sale and distribution of our products. Satisfaction of these requirements can take several years to achieve and the time needed to satisfy them may vary substantially, based on the type, complexity and novelty of the product. Any product that we develop must receive all relevant regulatory approval or clearances, if required, before it may be marketed in a particular country. The following summarizes the major U.S. government agencies that regulate animal health products:

•

USDA . Vaccines and certain single use, point-of-care diagnostics are considered veterinary biologics and are therefore regulated by the Center for Veterinary Biologics, or CVB, of the USDA. Industry data indicates that it takes approximately four years and in excess of $1.0 million to license a conventional vaccine for animals from basic research through licensing. In contrast to vaccines, single use, point-of-care diagnostics can typically be licensed by the USDA in about two years, at considerably less cost. However, vaccines or diagnostics that use innovative materials, such as those resulting from recombinant DNA technology, usually require additional time to license. The USDA licensing process involves the submission of several data packages. These packages include information on how the product will be manufactured, information on the efficacy and safety of the product in laboratory and target animal studies and information on performance of the product in field conditions.

•

FDA . Pharmaceutical products, which typically include synthetic compounds, are approved and monitored by the Center for Veterinary Medicine of the FDA. Under the Federal Food, Drug and Cosmetic Act, the same statutory standard for FDA approval applies to both human and animal drugs: demonstrated safety, efficacy and compliance with FDA manufacturing standards. However, unlike human drugs, neither preclinical studies nor a sequential phase system of studies are required. Rather, for animal drugs, studies for safety and efficacy may be conducted immediately in the species for which the drug is intended. Thus, there is no required phased evaluation of drug performance, and the Center for Veterinary Medicine will review data at appropriate times in the drug development process. The process can be costly and time consuming, requiring up to $100 million and seven to ten years to sell an animal drug in the market. In addition, the time and cost for developing companion animal drugs may be significantly less than for drugs for livestock animals, which generally have enhanced standards designed to ensure safety in the food chain.


•	EPA . Products that are applied topically to animals or to premises to control external parasites are regulated by the Environmental Protection Agency, or EPA.

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After we have received regulatory licensing or approval for our products, numerous regulatory requirements typically apply. Among the conditions for certain regulatory approvals is the requirement that our manufacturing facilities or those of our third-party manufacturers conform to current Good Manufacturing Practices or other manufacturing regulations, which include requirements relating to quality control and quality assurance as well as maintenance of records and documentation. The USDA, FDA and foreign regulatory authorities strictly enforce manufacturing regulatory requirements through periodic inspections and/or reports.

A number of our animal health products are not regulated. For example, certain products such as our ALLERCEPT panels are not regulated by either the USDA or FDA. Similarly, none of our veterinary instruments requires regulatory approval to be marketed and sold in the United States.

We have pursued regulatory approval outside the United States based on market demographics of foreign countries. For marketing outside the United States, we are subject to foreign regulatory requirements governing regulatory licensing and approval for many of our products. Licensing and approval by comparable regulatory authorities of foreign countries must be obtained before we can market products in those countries. Product licensing approval processes and requirements vary from country to country and the time required for such approvals may differ substantially from that required in the United States. We cannot be certain that approval of any of our products in one country will result in approvals in any other country.

To date, we or our distributors have sought regulatory approval for certain of our products in Canada, which is governed by the Canadian Center for Veterinary Biologics, or CCVB; in Japan, which is governed by the Japanese Ministry of Agriculture, Forestry and Fisheries, or MAFF; in Australia, which is governed by the Australian Department of Agriculture, Fisheries and Forestry, or ADAFF; in South Africa, which is governed by the Republic of South Africa Department of Agriculture, or RSADA; and in certain other countries requiring such approval.

Core Companion Animal Health products previously discussed which have received regulatory approval in the United States and/or elsewhere are summarized below:



Products	Country	Regulated	Agency	Status
ALLERCEPT Allergy Treatment Sets	United States Canada	Yes Yes	USDA CCVB	Licensed Licensed
SOLO STEP CH	United States EU Canada Japan Australia	Yes No-in most countries Yes Yes Yes	USDA CCVB MAFF ADAFF	Licensed Licensed Licensed Licensed
SOLO STEP CH Batch Test Strips	United States Canada	Yes Yes	USDA CCVB	Licensed Licensed
SOLO STEP FH	United States Canada Australia	Yes Yes Yes	USDA CCVB ADAFF	Licensed Licensed Licensed
TRI-HEART Plus Heartworm Preventive	United States Japan South Korea	Yes Yes Yes	FDA MAFF NVRQS	Licensed Licensed Licensed

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Competition

Our market is intensely competitive. Our competitors include independent animal health companies and major pharmaceutical companies that have animal health divisions. We also compete with independent, third-party distributors, including distributors who sell products under their own private labels. In the point-of-care diagnostic testing market, our major competitors include IDEXX Laboratories, Inc. ("IDEXX"), Abaxis, Inc. ("Abaxis") and Zoetis Inc. ("Zoetis"). The products manufactured by our OVP segment for sale by third parties compete with similar products offered by a number of other companies, some of which have substantially greater financial, technical, research and other resources than us and may have more established marketing, sales, distribution and service organizations than our OVP segment's customers. Companies with a significant presence in the animal health market such as Bayer AG, CEVA Santé Animale, Eli Lilly, Merck, Sanofi, Vétoquinol S.A., Virbac S.A. and Zoetis may be marketing or developing products that compete with our products or would compete with them if successfully developed. These and other competitors and potential competitors may have substantially greater financial, technical, research and other resources and larger, more established marketing, sales, distribution and service organizations than we do. Our competitors may offer broader product lines and have greater name recognition than we do.

Environmental Regulation

In connection with our product development activities and manufacturing of our biological, pharmaceutical and diagnostic and detection products, we are subject to federal, state and local laws, rules, regulations and policies governing the use, generation, manufacture, storage, handling and disposal of certain materials, biological specimens and wastes. Although we believe that we have complied with these laws, regulations and policies in all material respects and have not been required to take any significant action to correct any noncompliance, we may be required to incur significant costs to comply with environmental and health and safety regulations in the future. Although we believe that our safety procedures for handling and disposing of such materials comply with the standards prescribed by state and federal regulations, the risk of accidental contamination or injury from these materials cannot be eliminated. In the event of such an accident, we could be held liable for any damages that result and any such liability could exceed our resources.

Employees

As of December 31, 2015, we and our subsidiaries employed 310 people, of whom 135 were focused in production and technical and logistical services, including instrumentation service, 115 in sales, marketing and customer support, 55 in general and administrative services, such as finance, and 5 in product development. We believe that our ability to attract and retain skilled personnel is critical to our success. None of our employees are covered by a collective bargaining agreement, and we believe our employee relations are good.

Where You Can Find Additional Information

You may review a copy of this annual report on Form 10-K, including exhibits and any schedule filed therewith, and obtain copies of such materials at prescribed rates, at the Securities and Exchange Commission's Public Reference Room in Room 1580, 100 F Street, NE, Washington, D.C. 20549-0102. You may obtain information on the operation of the Public Reference Room by calling the Securities and Exchange Commission at 1-800-SEC-0330. The Securities and Exchange Commission maintains a website (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding registrants, such as Heska Corporation, that file electronically with the Securities and Exchange Commission.

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Executive Officers of the Registrant

Our executive officers and their ages as of March 14, 2016 are as follows:



Name	Age	Position
Kevin S. Wilson	44	Chief Executive Officer and President
Jason A. Napolitano	47	Chief Operating Officer, Chief Financial Officer, Executive Vice President and Secretary
Michael J. McGinley, Ph.D.	55	President, Biologicals & Pharmaceuticals
Nancy Wisnewski, Ph.D.	53	Executive Vice President, Product Development and Customer Support
Steven M. Eyl	50	Executive Vice President, Commercial Operations
Steven M. Asakowicz	50	Executive Vice President, Companion Animal Health Sales
Rodney A. Lippincott	42	Executive Vice President, Companion Animal Health Sales
John McMahon	50	Vice President, Financial Operations & Controller

Kevin S. Wilson was appointed President and Chief Executive Officer effective March 31, 2014. He previously served as our President and Chief Operating Officer from February 2013. Mr. Wilson became a member of our Board of Directors in May 2014. Mr. Wilson is a founder, member and officer of Cuattro, LLC. Since 2008, he has been involved in developing technologies for radiographic imaging with Cuattro, LLC and as a founder of Cuattro Software, LLC, Cuattro Medical, LLC and Cuattro Veterinary, LLC. Mr. Wilson served on the board of various private, non-profit, and educational organizations from 2005 to 2011. He was a founder of Sound Technologies, Inc., a diagnostic imaging company, in 1996. After Sound Technologies, Inc. was sold to VCA Antech, Inc. in 2004, Mr. Wilson served as Chief Strategy Officer for VCA Antech, Inc. until 2006. Mr. Wilson attended Saddleback College.

Jason A. Napolitano was appointed Chief Operating Officer in October 2015 and has also served as Chief Financial Officer and Executive Vice President since May 2002. He was appointed our Secretary in February 2009, having previously served as our Secretary from May 2002 to December 2006. Prior to joining us formally, he was a financial consultant. From 1990 to 2001, Mr. Napolitano held various positions at Credit Suisse First Boston, an investment bank, including Vice President in health care investment banking and Director in mergers and acquisitions. He holds a B.S. degree from Yale University.

Michael J. McGinley, Ph.D. was appointed President, Biologicals & Pharmaceuticals in February 2013. He previously served as President and Chief Operating Officer from January 2009 to February 2013, Vice President, Global Operations from April through December 2008, Vice President, Operations and Technical Affairs and General Manager, Heska Des Moines from January 2002 to April 2008 and in other positions beginning in June 1997. Prior to joining the Company, Dr. McGinley held positions with Bayer Animal Health and Fort Dodge Laboratories. He holds Ph.D. and M.S. degrees in Immunobiology from Iowa State University and successfully completed the Advanced Management Program at the Harvard Business School in 2008.

Nancy Wisnewski, Ph.D. was appointed Executive Vice President, Product Development and Customer Support in April 2011. She served as Vice President, Product Development and Technical Customer Service from December 2006 to April 2011. From January 2006 to November 2006, Dr. Wisnewski was Vice President, Research and Development. Dr. Wisnewski held various positions in Heska's Research and Development organization between 1993 and 2005. She holds a Ph.D. in Parasitology/Biochemistry from the University of Notre Dame and a B.S. in Biology from Lafayette College.

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Steven M. Eyl has served as our Executive Vice President, Commercial Operations since May 2013. Mr. Eyl was a principal of Eyl Business Services, a consulting firm, from January 2012 to May 2013. He was President of Sound Technologies, Inc. ("Sound") from 2000 to 2011, including after Sound's acquisition by VCA Antech, Inc. in 2004. Mr. Eyl has an extensive background in medical technology sales. He is a graduate of Indiana University.

Steven M. Asakowicz was appointed Executive Vice President, Companion Animal Health Sales in February 2013. From July 2011 to February 2013, he was employed by Cuattro, LLC as Vice President, Sales – US Veterinary and sold exclusively on behalf of Cuattro Veterinary USA, LLC. Mr. Asakowicz previously worked as Sales Director for Sound Technologies, Inc. ("Sound") from November 2002 to June 2011, including after Sound was acquired by VCA Antech, Inc. in 2004. Prior to entering the animal health market, Mr. Asakowicz spent 3.5 years employed by Smith Micro Software, Inc. as a Sales Manager and spent 7.5 years employed by AirTouch Cellular and PacTel Cellular (currently Verizon Wireless) as a Corporate Account Executive. Mr. Asakowicz holds a B.A. degree from San Diego State University.

Rodney A. Lippincott was appointed Executive Vice President, Companion Animal Health Sales in February 2013. From July 2011 to February 2013, he was employed by Cuattro, LLC as Vice President, Sales – US Veterinary and sold exclusively on behalf of Cuattro Veterinary USA, LLC. Mr. Lippincott held various positions including Sales Director for Sound Technologies, Inc., a unit of VCA Antech, Inc., from September 2007 to June 2011. Prior to entering the animal health market, Mr. Lippincott spent 13.5 years employed by Smith Micro Software, Inc. and held positions including US and International Sales Manager and Director of Marketing. Mr. Lippincott attended Saddleback College and completed the Executive Education Marketing Management Program at Stanford University, Graduate School of Business.

John McMahon, CPA , was appointed Vice President, Financial Operations & Controller in October 2015 and designated the Company's principal accounting officer in November 2015. From March 2014 to May 2015 he was employed by Pinnacle Ag Holdings, LLC as Vice President, Corporate Controller. Mr. McMahon previously worked as Vice President, Corporate Controller for Advanced Energy Industries from 2008 to 2014 and for Danka Office Imaging from June 2005 to June 2008 as Senior Vice President, Corporate Controller. Mr. McMahon holds an MBA in Finance from California State University, East Bay and a BS in Communications from Kutztown University.


Item 1A.	Risk Factors

Our future operating results may vary substantially from period to period due to a number of factors, many of which are beyond our control. The following discussion highlights some of these factors and the possible impact of these factors on future results of operations. The risks and uncertainties described below are not the only ones we face. Additional risks or uncertainties not presently known to us or that we deem to be currently immaterial also may impair our business operations. If any of the following factors actually occur, our business, financial condition or results of operations could be harmed. In that case, the price of our Public Common Stock could decline and investors in our Public Common Stock could experience losses on their investment.

Our February 2013 acquisition of a 54.6% majority interest in Cuattro Veterinary USA, LLC, which has been renamed Heska Imaging US, LLC, could be detrimental to the interests of our shareholders due to related puts, calls or other provisions, or for other reasons including related to conflicts of interest.

Under the Amended and Restated Operating Agreement of Heska Imaging (the "Operating Agreement"), should Heska Imaging meet certain performance criteria, the Imaging Minority has been granted a put option to sell us some or all of the Imaging Minority's position in Heska Imaging following the

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audit of our financial statements for 2016 and 2017. Based on Heska Imaging's current ownership position, this put option could require us to deliver up to $17.0 million following calendar year 2016 or calendar year 2017 - as well as 25% of Heska Imaging's cash (any applicable payment in aggregate to be defined as the "Put Payment") to acquire the outstanding minority interest in Heska Imaging. While we have the right to deliver up to 55% of the consideration in our Public Common Stock under certain circumstances, such stock is to be valued based on 90% of market value (the "Delivery Stock Value") and is limited to approximately 650 thousand shares in any case. If the Delivery Stock Value per share is less than the market value per share of our Public Common Stock at the time of the Acquisition, we do not have the right to deliver any Public Common Stock as consideration. Cash required under any Put Payment could put a significant strain on our financial position or require us to raise additional capital. There is no guarantee that additional capital will be available in such a circumstance on reasonable terms, if at all. We may be unable to obtain debt financing, the public markets may be unreceptive to equity financing and we may not be able to obtain financing from other alternative sources, such as private equity. Any debt financing, if available, may include restrictive covenants and high interest rates and any equity financing would likely be dilutive to stockholders in this scenario. If additional funds are required and are not available, it would likely have a material adverse effect on our business, financial condition and our ability to continue as a going concern.

Under the Operating Agreement, should Heska Imaging meet certain performance criteria, and the Imaging Minority fail to exercise an applicable put to sell us all of the Imaging Minority's position in Heska Imaging following the audit of our financial statements for 2016 and 2017, we would have a call option to purchase all, but not less than all, of the Imaging Minority's position in Heska Imaging. Based on Heska Imaging's current ownership position, exercising this call option could require us to deliver up to $19.6 million following calendar year 2016 or calendar year 2017 - as well as 25% of Heska Imaging's cash (any applicable payment in aggregate to be defined as the "Call Payment") to acquire the outstanding minority interest in Heska Imaging. While we have the right to deliver up to 55% of the consideration in our Public Common Stock under certain circumstances, such stock is to be valued based on 90% of market value (the "Delivery Stock Value") and is limited to approximately 650 thousand shares in any case. If the Delivery Stock Value per share is less than the market value per share of our Public Common Stock at the time of the Acquisition, we do not have the right to deliver any Public Common Stock as consideration. If we believe it is desirable to exercise any one of these calls, cash required under the Call Payment could put a significant strain on our financial position or require us to raise additional capital. There is no guarantee that additional capital will be available in such a circumstance on reasonable terms, if at all. If we believe it is desirable to exercise any such call, determine we are unable to economically finance the Call Payment and do not exercise the call as a result, we could be subject to a more expensive Put Payment less than a year in the future. In this circumstance, unless there is a significant change in our financial position or market conditions, such a Put Payment could have a material adverse effect on our business, financial condition and our ability to continue as a going concern.

Under and as defined in and subject to the terms of the Operating Agreement, should we undergo a change in control, the Imaging Minority will be entitled to sell their Heska Imaging units to us for cash of up to $13.6 million based on Heska Imaging's prior year Operating Income (the "Change in Control Payment"). The Change in Control Payment may decrease the interest of third parties in acquiring the Company or a majority of the Company's shares, which could otherwise have occurred at a premium to the Company's then current market price for the benefit of some or all of our shareholders. This could make some investors less likely to buy and hold our stock.

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Under the terms of the Operating Agreement, Heska Imaging is to be managed by a three-person board of managers, two of which are to be appointed by Heska Corporation and one of which is to be appointed by Kevin S. Wilson, a founder of Heska Imaging who has also been Heska Corporation's Chief Executive Officer and President since March 31, 2014. The current board of managers consists of Mr. Wilson, Jason A. Napolitano, Heska Corporation's Chief Operating Officer, Chief Financial Officer, Executive Vice President and Secretary and Nancy Wisnewski, Ph.D., Heska Corporation's Executive Vice President, Product Development and Customer Support. Until the earlier of (1) our acquiring 100% of the units of Heska Imaging pursuant to the puts and/or calls discussed above or (2) the sixth anniversary of the Acquisition, Heska Imaging may only take the following actions, among others, by unanimous consent of the board of managers: (i) issue securities, (ii) incur, guarantee, prepay, refinance, renew, modify or extend debt, (iii) enter into material contracts, (iv) hire or terminate an officer or amend the terms of their employment, (v) make a distribution other than a tax or liquidation distribution, (vi) enter into a material acquisition or disposition arrangement or a merger, (vii) lease or acquire an interest in real property, (viii) convert or reorganize Heska Imaging, or (ix) amend its certificate of formation or the Heska Imaging Agreement. This unanimous consent provision may hinder our ability to optimize the value of our investment in Heska Imaging in certain circumstances.

While the terms of both the Amended and Restated Master License Agreement and the Supply Agreement between Heska Imaging and Cuattro, LLC were negotiated at arm's length as part of the Acquisition, Mr. Wilson has an interest in these agreements and any time and resources devoted to monitoring and overseeing this relationship may prevent us from deploying such time and resources on other matters.

Mr. Wilson's employment agreement with us acknowledges that Mr. Wilson has business interests in Cuattro, LLC, Cuattro Software, LLC, Cuattro Medical, LLC and Cuattro Veterinary, LLC which may require a portion of his time, resources and attention in his working hours. If Mr. Wilson's time is occupied by these or other business interests, he may not contribute as much as he otherwise would have to enhancing our business, to the detriment of our shareholder value. Mr. Wilson is the spouse of Shawna M. Wilson ("Mrs. Wilson"). Mr. Wilson, Mrs. Wilson and trusts for their children and family own a majority interest in Cuattro Medical, LLC. In addition, including shares held by Mrs. Wilson and by trusts for the benefit of Mr. and Mrs. Wilson's children and family, Mr. Wilson also owns a 100% interest in Cuattro, LLC, the largest supplier to Heska Imaging. Cuattro, LLC owns a 100% interest in Cuattro Software, LLC and a majority interest in Cuattro Veterinary, LLC. On November 11, 2015, we announced an agreement under which we are to purchase 100% ownership of Cuattro Veterinary, LLC.

In 2015, Cuattro, LLC charged Heska Imaging $9.0 million, primarily related to digital imaging products, for which there is an underlying supply contract with minimum purchase obligations, software and service as well as other operating expenses provided for under a license agreement and a supply agreement, respectively; Heska Corporation charged Heska Imaging $4.9 million, primarily related to sales and other administrative expenses; Heska Corporation net charged Cuattro, LLC $0.2 million primarily related to facility usage and other services.

At December 31, 2015, Heska Imaging had a $1.5 million note receivable, including accrued interest, from Cuattro Veterinary, LLC, which is currently due on June 15, 2016, but which we do not currently anticipate collecting in 2016 due to our pending acquisition of Cuattro Veterinary, LLC; Heska Corporation had accounts receivable from Heska Imaging of $6.3 million, including accrued interest; Heska Corporation had net accounts receivable from Cuattro, LLC of $40 thousand; Heska Imaging had net prepaid receivables from Cuattro, LLC of $0.3 million. All monies owed accrue interest at the same interest rate Heska Corporation pays under its credit and security agreement with Wells Fargo once past due with the exception of the note receivable, which accrues at this rate to its maturity date.

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Mrs. Wilson, Clint Roth, DVM, Mr. Asakowicz, Mr. Lippincott, Mr. Wilson and Cuattro, LLC own approximately 29.75%, 8.39%, 4.09%, 3.07%, 0.05% and 0.05% of Heska Imaging, respectively, each are a member of Heska Imaging, and each have an interest in the puts and calls discussed above. If Mr. Wilson, Mr. Asakowicz or Mr. Lippincott is distracted by these holdings or interests, they may not contribute as much as they otherwise would have to enhancing our business, to the detriment of our shareholder value. While the Operating Agreement was negotiated at arm's length as part of the Acquisition, and requires that none of the members shall cause Heska Imaging to operate its business in any manner other than the ordinary course of business, any time and resources devoted to monitoring and overseeing this relationship may prevent us from deploying such time and resources on other matters.

In addition, like any acquisition, if Heska Imaging significantly underperforms our financial expectations, it may serve to diminish rather than enhance shareholder value. Heska Imaging generated operating income of $0.8 million in 2015 and an operating loss of approximately $2.1 million in 2014.

We may face costly legal disputes, including related to our intellectual property or technology or that of our suppliers or collaborators.

We may face legal disputes related to our business. For example, on March 12, 2015, a complaint was filed against us by Shaun Fauley in the United States District Court Northern District of Illinois alleging our transmittal of unauthorized faxes in violation of the federal Telephone Consumer Protection Act of 1991, as amended by the Junk Fax Prevention Act of 2005, as a class action seeking stated damages of the greater of actual monetary loss or five hundred dollars per violation. Even if meritless, these disputes may require significant expenditures on our part and could entail a significant distraction to members of our management team or other key employees. Insurance coverage may not cover any costs required to litigate a legal dispute or an unfavorable ruling or settlement. A legal dispute leading to an unfavorable ruling or settlement, whether or not insurance coverage may be available for any portion thereof, could have significant material adverse consequences on our business. We may have to use legal means and incur affiliated costs to secure the benefits to which we are entitled, such as to collect payment for goods shipped to third parties, which would reduce our income as compared to what it otherwise would have been.

We may become subject to patent infringement claims and litigation in the United States or other countries or interference proceedings conducted in the United States Patent and Trademark Office, or USPTO, to determine the priority of inventions. The defense and prosecution of intellectual property suits, USPTO interference proceedings and related legal and administrative proceedings are likely to be costly, time-consuming and distracting. As is typical in our industry, from time to time we and our collaborators and suppliers have received, and may in the future receive, notices from third parties claiming infringement and invitations to take licenses under third-party patents. Any legal action against us or our collaborators or suppliers may require us or our collaborators or suppliers to obtain one or more licenses in order to market or manufacture effected products or services. However, we or our collaborators or suppliers may not be able to obtain licenses for technology patented by others on commercially reasonable terms, or at all, may not be able to develop alternative approaches if unable to obtain licenses or current and future licenses may not be adequate, any of which could substantially harm our business.

We may also need to pursue litigation to enforce any patents issued to us or our collaborative partners, to protect trade secrets or know-how owned by us or our collaborative partners, or to determine the enforceability, scope and validity of the proprietary rights of others. Any litigation or interference proceedings will likely result in substantial expense to us and significant diversion of the efforts of our technical and management personnel. Any adverse determination in litigation or interference proceedings could subject us to significant liabilities to third parties. Further, as a result of litigation or other proceedings, we may be required to seek licenses from third parties which may not be available on commercially reasonable terms, if at all.

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If the third parties who have substantial marketing rights for certain of our historical products, existing products or future products under development are not successful in marketing those products, then our sales and financial position may suffer.

We are party to an agreement with Merck Animal Health, which grants Merck Animal Health exclusive distribution and marketing rights for our canine heartworm preventive product, TRI-HEART Plus Chewable Tablets, ultimately sold to or through veterinarians in the United States and Canada. Historically, a significant portion of our OVP segment's revenue has been generated from the sale of certain bovine vaccines, which have been sold primarily under the Titanium® and MasterGuard® brands. We have a supply agreement with Eli Lilly and its Affiliates operating through Elanco for the production of these vaccines. Either of these marketing partners may not devote sufficient resources to marketing our products and our sales and financial position could suffer significantly as a result. Revenue from Merck entities, including Merck Animal Health, represented 11% of our revenue in 2015. Revenue from Eli Lilly entities, including Elanco, represented 12% of our 2015 revenue. If Merck Animal Health personnel fail to market, sell and support our heartworm preventive sufficiently or if Elanco personnel fail to market, sell and support the bovine vaccines we produce and sell to Elanco sufficiently, our sales could decline significantly. Furthermore, there may be nothing to prevent these partners from pursuing alternative technologies, products or supply arrangements, including as part of mergers, acquisitions or divestitures. For example, we believe a unit of Merck has obtained FDA approval for a canine heartworm preventive product with additional claims compared with our TRI-HEART Plus Chewable Tablets, which we believe is not currently being marketed actively. Should Merck decide to emphasize sales and marketing efforts of this product rather than our TRI‑HEART Plus Chewable Tablets or cancel our agreement regarding canine heartworm preventive distribution and marketing, our sales could decline significantly. In another example, if Elanco were to emphasize sales and marketing efforts for bovine vaccines other than those we produce or cancel our supply agreement and produce the vaccines we supply to them by themselves, our sales could decline significantly. Third-party marketing assistance may not be available in the future on reasonable terms, if at all. If the third parties with marketing rights for our products were to merge or go out of business, the sale and promotion of our products could be diminished.

We operate in a highly competitive industry, which could render our products obsolete or substantially limit the volume of products that we sell. This would limit our ability to compete and maintain sustained profitability.

The market in which we compete is intensely competitive. Our competitors include independent animal health companies and major pharmaceutical companies that have animal health divisions. We also compete with independent, third-party distributors, including distributors who sell products under their own private labels. In the point-of-care diagnostic testing market, our major competitors include IDEXX, Abaxis, and Zoetis. The products manufactured by our OVP segment for sale by third parties compete with similar products offered by a number of other companies, some of which have substantially greater financial, technical, research and other resources than us and may have more established marketing, sales, distribution and service organizations than those of our OVP segment's customers. Competitors may have facilities with similar capabilities to our OVP segment, which they may operate and sell at a lower unit price to customers than our OVP segment does, which could cause us to lose customers. Companies with a significant presence in the companion animal health market, such as Bayer AG, CEVA Santé Animale, Eli Lilly, Merck, Sanofi, Vétoquinol S.A., Virbac S.A. and Zoetis may be marketing or developing products that compete with our products or would compete with them if developed. These and other competitors and potential competitors may have substantially greater financial, technical, research and other resources and larger, more established marketing, sales and service organizations than we do. Our competitors may offer broader product lines and have greater name recognition than we do. For example, if Zoetis devotes its significant commercial and financial resources to growing its market share in our OVP or allergy segments, our sales could suffer

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significantly. Our competitors may also develop or market technologies or products that are more effective or commercially attractive than our current or future products or that would render our technologies and products obsolete. Further, additional competition could come from new entrants to the animal health care market. Moreover, we may not have the financial resources, technical expertise or marketing, sales or support capabilities to compete successfully. One of our competitors, Abaxis, recently announced agreements with units of VCA Inc. ("VCA") for the long-term supply of blood chemistry testing products to VCA-owned veterinary clinics and for the co-marketing of Abaxis' blood chemistry testing products with VCA's veterinary diagnostic laboratory offering, which may serve to intensify competition and lower our margins as well as limit our prospects to sell blood chemistry testing products to VCA-owned veterinary clinics.

If we fail to compete successfully, our ability to achieve sustained profitability will be limited and sustained profitability, or profitability at all, may not be possible .

The loss of significant customers who, for example, are historically large purchasers or who are considered leaders in their field could damage our business and financial results.

Revenue from Eli Lilly entities, including Elanco, represented 12% and 11% of our consolidated revenue for the years ended December 31, 2015 and 2014, respectively. Revenue from Merck entities, including Merck Animal Health, represented approximately 11%, 12% and 13% of our consolidated revenue for the years ended December 31, 2015, 2014 and 2013, respectively. No other single customer accounted for more than 10% of our consolidated revenue for the years ended December 31, 2015, 2014 or 2013. Eli Lilly entities accounted for approximately 20% of our consolidated accounts receivable at December 31, 2015. Merck entities accounted for approximately 13% and 11% of our consolidated accounts receivable at December 31, 2015 and 2014, respectively. No other single customer accounted for more than 10% of our consolidated accounts receivable at December 31, 2015 or 2014.

The loss of significant customers who, for example, are historically large purchasers or who are considered leaders in their field could damage our business, including via reputational damage, and financial results.

We rely substantially on third-party suppliers. The loss of products or delays in product availability from one or more third-party suppliers could substantially harm our business.

To be successful, we must contract for the supply of, or manufacture ourselves, current and future products of appropriate quantity, quality and cost. Such products must be available on a timely basis and be in compliance with any regulatory requirements. Similarly, we must provide ourselves, or contract for the supply of certain services. Such services must be provided in a timely and appropriate manner. Failure to do any of the above could substantially harm our business.

We rely on third-party suppliers to manufacture those products we do not manufacture ourselves and to provide services we do not provide ourselves. Proprietary products provided by these suppliers represent a majority of our revenue. We currently rely on these suppliers for our blood testing instruments and consumable supplies for these instruments, for our imaging products and related software and services, for key components of our point-of-care diagnostic tests as well as for the manufacture of other products.

The loss of access to products from one or more suppliers could have a significant, negative impact on our business. We often purchase products from our suppliers under agreements that are of limited duration or potentially can be terminated on an annual basis. In the case of our blood testing instruments and our digital radiography solutions, post-termination, we are typically entitled to non-exclusive access to consumable supplies, or ongoing non-exclusive access to products and services to meet the needs of an existing customer base, respectively, for a defined period upon expiration of exclusive rights, which could

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subject us to competitive pressures in the period of non-exclusive access. Although we believe we will be able to maintain a supply of our major product and service offerings in the near future, there can be no assurance that our suppliers will meet their obligations under any agreements we may have in place with them or that we will be able to compel them to do so. Risks of relying on suppliers include:

•

Inability to meet minimum obligations. Current agreements, or agreements we may negotiate in the future, may commit us to certain minimum purchase or other spending obligations. It is possible we will not be able to create the market demand to meet such obligations, which could create a drain on our financial resources and liquidity. Some such agreements may require minimum purchases and/or sales to maintain product rights and we may be significantly harmed if we are unable to meet such requirements and lose product rights.

•

Loss of exclusivity. In the case of our blood testing instruments, if we are entitled to non-exclusive access to consumable supplies for a defined period upon expiration of exclusive rights, we may face increased competition from a third party with similar non-exclusive access or our former supplier, which could cause us to lose customers and/or significantly decrease our margins and could significantly affect our financial results. In addition, current agreements, or agreements we may negotiate in the future, with suppliers may require us to meet minimum annual sales levels to maintain our position as the exclusive distributor of these products. We may not meet these minimum sales levels and maintain exclusivity over the distribution and sale of these products. If we are not the exclusive distributor of these products, competition may increase significantly, reducing our revenues and/or decreasing our margins.


•	Changes in economics. An underlying change in the economics with a supplier, such as a large price increase or new requirement of large minimum purchase amounts, could have a significant, adverse effect on our business, particularly if we are unable to identify and implement an alternative source of supply in a timely manner.

•

The loss of product rights upon expiration or termination of an existing agreement. Unless we are able to find an alternate supply of a similar product, we would not be able to continue to offer our customers the same breadth of products and our sales and operating results would likely suffer. In the case of an instrument supplier, we could also potentially suffer the loss of sales of consumable supplies, which would be significant in cases where we have built a significant installed base, further harming our sales prospects and opportunities. Even if we were able to find an alternate supply for a product to which we lost rights, we would likely face increased competition from the product whose rights we lost being marketed by a third party or the former supplier and it may take us additional time and expense to gain the necessary approvals and launch an alternative product.

•

High switching costs. In our blood testing instrument products we could face significant competition and lose all or some of the consumable revenues from the installed base of those instruments if we were to switch to a competitive instrument. If we need to change to other commercial manufacturing contractors for certain of our regulated products, additional regulatory licenses or approvals generally must be obtained for these contractors prior to our use. This would require new testing and compliance inspections prior to sale, thus resulting in potential delays. Any new manufacturer would have to be educated in, or develop, substantially equivalent processes necessary for the production of our products. We likely would have to train our sales force, distribution network employees and customer support organization on the new product and spend significant funds marketing the new product to our customer base.

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•

The involuntary or voluntary discontinuation of a product line. Unless we are able to find an alternate supply of a similar product in this or similar circumstances with any product, we would not be able to continue to offer our customers the same breadth of products and our sales would likely suffer. Even if we are able to identify an alternate supply, it may take us additional time and expense to gain the necessary approvals and launch an alternative product, especially if the product is discontinued unexpectedly.


•	Inconsistent or inadequate quality control. We may not be able to control or adequately monitor the quality of products we receive from our suppliers. Poor quality items could damage our reputation with our customers.

•

Limited capacity or ability to scale capacity. If market demand for our products increases suddenly, our current suppliers might not be able to fulfill our commercial needs, which would require us to seek new manufacturing arrangements and may result in substantial delays in meeting market demand. If we consistently generate more demand for a product than a given supplier is capable of handling, it could lead to large backorders and potentially lost sales to competitive products that are readily available. This could require us to seek or fund new sources of supply, which may be difficult to find or may require terms that are less advantageous if available at all.

•

Regulatory risk. Our manufacturing facility and those of some of our third-party suppliers are subject to ongoing periodic unannounced inspection by regulatory authorities, including the FDA, USDA and other federal, state and foreign agencies for compliance with strictly enforced Good Manufacturing Practices, regulations and similar foreign standards. We do not have control over our suppliers' compliance with these regulations and standards. Regulatory violations could potentially lead to interruptions in supply that could cause us to lose sales to readily available competitive products.


•	Developmental delays. We may experience delays in the scale-up quantities needed for product development that could delay regulatory submissions and commercialization of our products in development, causing us to miss key opportunities.


•	Limited intellectual property rights. We typically do not have intellectual property rights, or may have to share intellectual property rights, to the products supplied by third parties and any improvements to the manufacturing processes or new manufacturing processes for these products.

Potential problems with suppliers such as those discussed above could substantially decrease sales, lead to higher costs and/or damage our reputation with our customers due to factors such as poor quality goods or delays in order fulfillment, resulting in our being unable to sell our products effectively and substantially harming our business.

We have historically not consistently generated positive cash flow from operations, may need additional capital and any required capital may not be available on reasonable terms or at all.

We may be required to raise additional capital in the future. If necessary, we expect to raise these additional funds by borrowing under our revolving line of credit, the increased sale of customer leases, the sale of equity securities or the issuance of new term debt secured by the same category of assets as the term loans which we fully repaid in 2010. There is no guarantee that additional capital will be available from these sources on reasonable terms, if at all, and certain of these sources may require approval by existing lenders. Funds we expect to be available under our existing revolving line of credit may not be available and other lenders could refuse to provide us with additional debt financing. Financial institutions and other potentially interested parties may not be interested in purchasing our customer leases on economic terms, or at all. The public markets may be unreceptive to equity financings and we may not be able to obtain additional private

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equity or debt financing. Any equity financing would likely be dilutive to stockholders and additional debt financing, if available, may include restrictive covenants and increased interest rates that would limit our currently planned operations and strategies. Furthermore, even if additional capital is available, it may not be of the magnitude required to meet our needs under these or other scenarios. If additional funds are required and are not available, it would likely have a material adverse effect on our business, financial condition and our ability to continue as a going concern.

We may be unable to market and sell our products successfully.

We may not develop and maintain marketing and/or sales capabilities successfully, and we may not be able to make arrangements with third parties to perform these activities on satisfactory terms. If our marketing and sales strategy is unsuccessful, our ability to sell our products will be negatively impacted and our revenues will decrease. This could result in the loss of distribution rights for products or failure to gain access to new products and could cause damage to our reputation and adversely affect our business and future prospects.

The market for companion animal healthcare products is highly fragmented. Because our CCA proprietary products are generally available only to veterinarians or by prescription and our medical instruments require technical training to operate, we ultimately sell all our CCA products primarily to or through veterinarians. The acceptance of our products by veterinarians is critical to our success. Changes in our ability to obtain or maintain such acceptance or changes in veterinary medical practice could significantly decrease our anticipated sales. As the vast majority of cash flow to veterinarians ultimately is funded by pet owners without private insurance or government support, our business may be more susceptible to severe economic downturns than other health care businesses which rely less on individual consumers.

We recently have entered into agreements with independent third party distributors, including Butler Animal Health Supply, LLC d/b/a Henry Schein Animal Health ("Henry Schein"), which we expect to market and sell our products to a greater degree than in the recent past. Our agreement with Henry Schein prohibits us from selling our chemistry blood testing products and our hematology blood testing products to an independent third party distributor other than Henry Schein. Independent third-party distributors may be effective in increasing sales of our products to veterinarians, although we would expect a corresponding lower gross margin as such distributors typically buy products from us at a discount to end user prices. It is possible new or existing independent third-party distributors could cannibalize our direct sales efforts and lower our total gross margin. For us to be effective when working with an independent third-party distributor, the distributor must agree to market and/or sell our products and we must provide proper economic incentives to the distributor as well as contend effectively for the time, energy and focus of the employees of such distributor given other products the distributor may be carrying, potentially including those of our competitors. If we fail to be effective with new or existing independent third-party distributors, our financial performance may suffer.

We depend on key personnel for our future success. If we lose our key personnel or are unable to attract and retain additional personnel, we may be unable to achieve our goals.

Our future success is substantially dependent on the efforts of our senior management and other key personnel, including our Chief Executive Officer and President, Kevin Wilson. The loss of the services of members of our senior management or other key personnel may significantly delay or prevent the achievement of our business objectives. Although we have employment agreements with many of these individuals, all are at-will employees, which means that either the employee or Heska may terminate employment at any time without prior notice. If we lose the services of, or fail to recruit, key personnel, the growth of our business could be substantially impaired. We do not maintain key person life insurance for any of our senior management or key personnel.

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Obtaining and maintaining regulatory approvals in order to market our products may be costly and delay the marketing and sales of our products. Failure to meet all regulatory requirements could cause significant losses from affected inventory and the loss of market share.

Many of the products we develop, market or manufacture may subject us to extensive regulation by one or more of the USDA, the FDA, the EPA and foreign and other regulatory authorities. These regulations govern, among other things, the development, testing, manufacturing, labeling, storage, pre-market approval, advertising, promotion and sale of some of our products. Satisfaction of these requirements can take several years and time needed to satisfy them may vary substantially, based on the type, complexity and novelty of the product. The decision by a regulatory authority to regulate a currently non-regulated product or product area could significantly impact our revenue and have a corresponding adverse impact on our financial performance and position while we attempt to comply with the new regulation, if such compliance is possible at all.

The effect of government regulation may be to delay or to prevent marketing of our products for a considerable period of time and to impose costly procedures upon our activities. We may not be able to estimate the time to obtain required regulatory approvals accurately and such approvals may require significantly more time than we anticipate. We have experienced in the past, and may experience in the future, difficulties that could delay or prevent us from obtaining the regulatory approval or license necessary to introduce or market our products. Such delays in approval may cause us to forego a significant portion of a new product's sales in its first year due to seasonality and advanced booking periods associated with certain products. Regulatory approval of our products may also impose limitations on the indicated or intended uses for which our products may be marketed.

Difficulties in making established products to all regulatory specifications may lead to significant losses related to affected inventory as well as market share. Among the conditions for certain regulatory approvals is the requirement that our facilities and/or the facilities of our third-party manufacturers conform to current Good Manufacturing Practices and other requirements. If any regulatory authority determines that our manufacturing facilities or those of our third-party manufacturers do not conform to appropriate manufacturing requirements, we or the manufacturers of our products may be subject to sanctions, including, but not limited to, warning letters, manufacturing suspensions, product recalls or seizures, injunctions, refusal to permit products to be imported into or exported out of the United States, refusals of regulatory authorities to grant approval or to allow us to enter into government supply contracts, withdrawals of previously approved marketing applications, civil fines and criminal prosecutions. Furthermore, third parties may perceive procedures required to obtain regulatory approval objectionable and may attempt to disrupt or otherwise damage our business as a result. In addition, certain of our agreements may require us to pay penalties if we are unable to supply products, including for failure to maintain regulatory approvals.

Any of these events, alone or in unison, could damage our business.

Interpretation of existing legislation, regulations and rules, including financial accounting standards, or implementation of future legislation, regulations and rules could cause our costs to increase or could harm us in other ways.

We prepare our financial statements in conformance with United States generally accepted accounting principles, or GAAP. These accounting principles are established by and are subject to interpretation by the SEC, the Financial Accounting Standards Board ("FASB") and others who interpret and create accounting policies. A change in those policies can have a significant effect on our reported results and may affect our reporting of transactions completed before a change is made effective. Such changes may adversely affect

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our reported financial results, the way we conduct our business or have a negative impact on us if we fail to track such changes.

If our regulators and/or auditors adopt or interpret more stringent standards than we anticipate, we could experience unanticipated changes in our reported financial statements, including but not limited to restatements, which could adversely affect our business due to litigation and investor confidence in our financial statements. In addition, changes in the underlying circumstances to which we apply given accounting standards and principles may affect our results of operations and have a negative impact on us. For example, we review goodwill recognized on our consolidated balance sheets at least annually and if we were to conclude there was an impairment of goodwill, we would reduce the corresponding goodwill to its estimated fair value and recognize a corresponding expense in our statement of operations. This impairment and corresponding expense could be as large as the total amount of goodwill recognized on our consolidated balance sheets, which was $20.9 million at December 31, 2015. There can be no assurance that future goodwill impairments will not occur if projected financial results are not met, or otherwise.

The Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley") has increased our required administrative actions and expenses as a public company since its enactment. The general and administrative costs of complying with Sarbanes-Oxley will depend on how it is interpreted over time. Of particular concern are the level of standards for internal control evaluation and reporting adopted under Section 404 of Sarbanes-Oxley. If our regulators and/or auditors adopt or interpret more stringent standards than we anticipate, we and/or our auditors may be unable to conclude that our internal controls over financial reporting are designed and operating effectively, which could adversely affect investor confidence in our financial statements and cause our stock price to decline. Even if we and our auditors are able to conclude that our internal control over financial reporting is designed and operating effectively in such a circumstance, our general and administrative costs are likely to increase. We were required to have our independent registered public accountant conduct an audit of our internal control over financial reporting because as of June 30, 2015 our stock market value was above a certain level prescribed by regulation. This has increased, and is expected to increase, our general and administrative costs from what they otherwise would have been.

Similarly, we are required to comply with the SEC's mandate to provide interactive data using the eXtensible Business Reporting Language as an exhibit to certain SEC filings. Compliance with this mandate has required a significant time investment, which has and may in the future preclude some of our employees from spending time on more productive matters. In addition, actions by other entities, such as enhanced rules to maintain our listing on the Nasdaq Capital Market, could also increase our general and administrative costs or have other adverse effects on us, as could further legislative, regulatory or rule-making action or more stringent interpretations of existing legislation, regulations and rules.

We often depend on third parties for products we intend to introduce in the future. If our current relationships and collaborations are not successful, we may not be able to introduce the products we intend to introduce in the future.

We are often dependent on third parties and collaborative partners to successfully and timely perform research and development activities to successfully develop new products. For example, we jointly developed point-of-care diagnostic products with Quidel Corporation. In other cases, we have discussed Heska marketing in the veterinary market an instrument being developed by a third party for use in the human health care market. In the future, one or more of these third parties or collaborative partners may not complete research and development activities in a timely fashion, or at all. Even if these third parties are successful in their research and development activities, we may not be able to come to an economic agreement with them. If these third parties or collaborative partners fail to complete research and development activities, fail to complete them in a timely fashion, or if we are unable to negotiate economic agreements with such third parties or collaborative partners, our ability to introduce new products will be impacted negatively and our

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revenues may decline. For example, we have experienced significant delays compared to our expectations in our development of products in collaboration with Rapid Diagnostek, Inc.

Our future revenues depend on successful product development, commercialization and/or market acceptance, any of which can be slower than we expect or may not occur.

The product development and regulatory approval process for many of our potential products is extensive and may take substantially longer than we anticipate. Research projects may fail. New products that we may be developing for the veterinary marketplace may not perform consistently within our expectations. Because we have limited resources to devote to product development and commercialization, any delay in the development of one product or reallocation of resources to product development efforts that prove unsuccessful may delay or jeopardize the development of other product candidates. If we fail to successfully develop new products and bring them to market in a timely manner, our ability to generate additional revenue will decrease.

Even if we are successful in the development of a product or obtain rights to a product from a third-party supplier, we may experience delays or shortfalls in commercialization and/or market acceptance of the product. For example, veterinarians may be slow to adopt a product, a product may not achieve the anticipated technical performance in field use or there may be delays in producing large volumes of a product. The former is particularly likely where there is no comparable product available or historical precedent for such a product. The ultimate adoption of a new product by veterinarians, the rate of such adoption and the extent veterinarians choose to integrate such a product into their practice are all important factors in the economic success of one of our new products and are factors that we do not control to a large extent. If our products do not achieve a significant level of market acceptance, demand for our products will not develop as expected and our revenues will be lower than we anticipate. For example, our VitalPath Blood Gas and Electrolyte Analyzer, supplied under an agreement, the ("Roche Agreement"), with R oche Diagnostics Corporation ("Roche"), generated significantly less revenue than we anticipated following its launch in May 2010 as placements of this product with customers did not occur as we expected.

Our stock price has historically experienced high volatility, and could do so in the future, including experiencing a material price decline resulting from a large sale in a short period of time. In addition, our Public Common Stock has certain transfer restrictions which could reduce trading liquidity from what it otherwise would have been and have other undesired effects.

Should a relatively large shareholder decide to sell a large number of shares in a short period of time, it could lead to an excess supply of our shares available for sale and correspondingly result in a significant decline in our stock price.

The securities markets have experienced significant price and volume fluctuations and the market prices of securities of many microcap and small cap companies have in the past been, and can in the future be expected to be, especially volatile. During the twelve months ended December 31, 2015, sales of our Public Common Stock have ranged from a low of $15.58 to a high of $ 40.29 . Fluctuations in the trading price or liquidity of our Public Common Stock may adversely affect our ability to raise capital through future equity financings. Factors that may have a significant impact on the market price and marketability of our Public Common Stock include:

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•	stock sales by large stockholders or by insiders;


•	changes in the outlook for our business;


•	our quarterly operating results, including as compared to expected revenue or earnings and in comparison to historical results;


•	termination, cancellation or expiration of our third-party supplier relationships;


•	announcements of technological innovations or new products by our competitors or by us;


•	litigation;


•	regulatory developments, including delays in product introductions;


•	developments or disputes concerning patents or proprietary rights;


•	availability of our revolving line of credit and compliance with debt covenants;


•	releases of reports by securities analysts;


•	economic and other external factors; and


•	general market conditions.

In the past, following periods of volatility in the market price of a company's securities, securities class action litigation has often been instituted. If a securities class action suit is filed against us, it is likely we would incur substantial legal fees and our management's attention and resources would be diverted from operating our business in order to respond to the litigation.

On May 4, 2010, our shareholders approved an amendment (the "Amendment") to our Restated Certificate of Incorporation. The Amendment places restrictions on the transfer of our stock that could adversely affect our ability to use our domestic Federal Net Operating Loss carryforward ("NOL"). In particular, the Amendment prevents the transfer of shares without the approval of our Board of Directors if, as a consequence, an individual, entity or groups of individuals or entities would become a 5-percent holder under Section 382 of the Internal Revenue Code of 1986, as amended, and the related Treasury regulations, and also prevents any existing 5-percent holder from increasing his or her ownership position in the Company without the approval of our Board of Directors. Any transfer of shares in violation of the Amendment (a "Transfer Violation") shall be void ab initio under the our Restated Certificate of Incorporation, as amended (our "Certificate of Incorporation") and our Board of Directors has procedures under our Certificate of Incorporation to remedy a Transfer Violation including requiring the shares causing such Transfer Violation to be sold and any profit resulting from such sale to be transferred to a charitable entity chosen by the Company's Board of Directors in specified circumstances. The Amendment could have an adverse impact on the value and trading liquidity of our stock if certain buyers who would otherwise have bid on or purchased our stock, including buyers who may not be comfortable owning stock with transfer restrictions, do not bid on or purchase our stock as a result of the Amendment. In addition, because some corporate takeovers occur through the acquirer's purchase, in the public market or otherwise, of sufficient shares to give it control of a company, any provision that restricts the transfer of shares can have the effect of preventing a takeover. The Amendment could discourage or otherwise prevent accumulations of substantial blocks of shares in which our stockholders might receive a substantial premium above market value and might tend to insulate management and the Board of Directors against the possibility of removal to a greater degree than had the Amendment not passed.

Our Public Common Stock is listed on the Nasdaq Capital Market and we may not be able to maintain that listing, which may make it more difficult for you to sell your shares. In addition, we have less than 300 holders of record, which would allow us to terminate voluntarily the registration of our common stock with the SEC and after which we would no longer be eligible to maintain the listing of our Public Common Stock on the Nasdaq Capital Market.

Our Public Common Stock is listed on the Nasdaq Capital Market. The Nasdaq has several quantitative and qualitative requirements companies must comply with to maintain this listing, including a $1.00 minimum bid price. We completed a 1-for-10 reverse stock split effective December 30, 2010 in order

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to resolve an ongoing minimum bid price deficiency. While we believe we are currently in compliance with all Nasdaq requirements, there can be no assurance we will continue to meet Nasdaq listing requirements including the minimum bid price, that Nasdaq will interpret these requirements in the same manner we do if we believe we meet the requirements, or that Nasdaq will not change such requirements or add new requirements to include requirements we do not meet in the future. If we are delisted from the Nasdaq Capital Market, our Public Common Stock may be considered a penny stock under the regulations of the SEC and would therefore be subject to rules that impose additional sales practice requirements on broker-dealers who sell our securities. The additional burdens imposed upon broker-dealers may discourage broker-dealers from effecting transactions in our Public Common Stock, which could severely limit market liquidity of the Public Common Stock and any stockholder's ability to sell our securities in the secondary market. This lack of liquidity would also likely make it more difficult for us to raise capital in the future.

We have less than 300 holders of record as of our latest information, a fact which would make us eligible to terminate voluntarily the registration of our common stock with the SEC and therefore suspend our reporting obligations with the SEC under the Exchange Act and become a non-reporting company. If we were to cease reporting with the SEC, we would no longer be eligible to maintain the listing of our common stock on the Nasdaq Capital Market, which we would expect to materially adversely affect the liquidity and market price for our common stock.

We may not be able to continue to achieve sustained profitability or increase profitability on a quarterly or annual basis.

Prior to 2005, we incurred net losses on an annual basis since our inception in 1988 and, as of December 31, 2015, we had an accumulated deficit of $164.0 million . Relatively small differences in our performance metrics may cause us to generate an operating or net loss in future periods. Our ability to continue to be profitable in future periods will depend, in part, on our ability to increase sales in our CCA segment, including maintaining and growing our installed base of instruments and related consumables, to maintain or increase gross margins and to limit the increase in our operating expenses to a reasonable level as well as avoid or effectively manage any unanticipated issues. We may not be able to generate, sustain or increase profitability on a quarterly or annual basis. If we cannot achieve or sustain profitability for an extended period, we may not be able to fund our expected cash needs, including the repayment of debt as it comes due, or continue our operations.

Many of our expenses are fixed and if factors beyond our control cause our revenue to fluctuate, this fluctuation could cause greater than expected losses, cash flow and liquidity shortfalls.

We believe that our future operating results will fluctuate on a quarterly basis due to a variety of factors which are generally beyond our control, including:


•	supply of products from third-party suppliers or termination, cancellation or expiration of such relationships;


•	competition and pricing pressures from competitive products;


•	the introduction of new products or services by our competitors or by us;


•	large customers failing to purchase at historical levels;


•	fundamental shifts in market demand;


•	manufacturing delays;


•	shipment problems;


•	information technology problems, which may prevent us from conducting our business effectively, or at all, and may also raise our costs;


•	regulatory and other delays in product development;


•	product recalls or other issues which may raise our costs;

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•	changes in our reputation and/or market acceptance of our current or new products; and


•	changes in the mix of products sold.

We have high operating expenses, including those related to personnel. Many of these expenses are fixed in the short term and may increase over time. If any of the factors listed above cause our revenues to decline, our operating results could be substantially harmed.

If we are unable to maintain various financial and other covenants required by our credit facility agreement we will be unable to borrow any funds under the agreement and fund our operations.

Under our credit and security agreement with Wells Fargo, we are required to comply with various covenants, both financial and non-financial, in order to borrow under the agreement. The availability of borrowings under this agreement is expected to be important to continue to fund our operations. Beginning January 1, 2015 a key financial covenant is based on a fixed charge coverage ratio, as defined in the credit and security agreement with Wells Fargo. Although we believe we will be able to maintain compliance with all these covenants and any covenants we may negotiate in the future, there can be no assurance thereof. We have not always been able to maintain compliance with all covenants under our credit and security agreement with Wells Fargo. Although Wells Fargo has granted us a waiver of non-compliance in each case, there can be no assurance we will be able to obtain similar waivers or other modifications if needed in the future on economic terms, if at all. Failure to comply with any of the covenants, representations or warranties, or failure to modify them to allow future compliance, could result in our being in default and could cause all outstanding borrowings under our credit and security agreement to become immediately due and payable, or impact our ability to borrow under the agreement. In addition, Wells Fargo has discretion in setting the advance rates which we may borrow against eligible assets. We may need to rely on available borrowings under the credit and security agreement to fund our operations in the future. If we are unable to borrow funds under this agreement, we will need to raise additional capital from other sources to continue our operations, which capital may not be available on acceptable terms, or at all.

We may face product returns and product liability litigation in excess of, or not covered by, our insurance coverage or indemnities and/or warranties from our suppliers. If we become subject to product liability claims resulting from defects in our products, we may fail to achieve market acceptance of our products and our sales could substantially decline.

The testing, manufacturing and marketing of our current products as well as those currently under development entail an inherent risk of product liability claims and associated adverse publicity. Following the introduction of a product, adverse side effects may be discovered. Adverse publicity regarding such effects could affect sales of our other products for an indeterminate time period. To date, we have not experienced any material product liability claims, but any claim arising in the future could substantially harm our business. Potential product liability claims may exceed the amount of our insurance coverage or may be excluded from coverage under the terms of the policy. We may not be able to continue to obtain adequate insurance at a reasonable cost, if at all. In the event that we are held liable for a claim against which we are not indemnified or for damages exceeding the $10 million limit of our insurance coverage or which results in significant adverse publicity against us, we may lose revenue, be required to make substantial payments which could exceed our financial capacity and/or lose or fail to achieve market acceptance.

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We may be held liable for the release of hazardous materials, which could result in extensive remediation costs or otherwise harm our business.

Certain of our products and development programs produced at our Des Moines, Iowa facility involve the controlled use of hazardous and bio hazardous materials, including chemicals and infectious disease agents. Although we believe that our safety procedures for handling and disposing of such materials comply with the standards prescribed by applicable local, state and federal regulations, we cannot eliminate the risk of accidental contamination or injury from these materials. In the event of such an accident, we could be held liable for any fines, penalties, remediation costs or other damages that result. Our liability for the release of hazardous materials could exceed our resources, which could lead to a shutdown of our operations, significant remediation costs and potential legal liability. In addition, we may incur substantial costs to comply with environmental regulations if we choose to expand our manufacturing capacity.


Item 1B.	Unresolved Staff Comments.

Not applicable.


Item 2	Properties.

Our principal administrative and research and development activities are located in Loveland, Colorado. We currently lease approximately 60,000 square feet at a facility in Loveland, Colorado under an agreement which expires in 2023. Our principal production facility located in Des Moines, Iowa, consists of 168,000 square feet of buildings on 34 acres of land, which we own. We also own a 175-acre farm used principally for testing products, located in Carlisle, Iowa. Our European facility in Fribourg, Switzerland has approximately 6,000 square feet leased under an agreement which expires in 2017.


Item 3	Legal Proceedings.

From time to time, we may be involved in litigation related to claims arising out of our operations. On March 12, 2015, a complaint was filed against us by Shaun Fauley in the United States District Court Northern District of Illinois alleging our transmittal of unauthorized faxes in violation of the federal Telephone Consumer Protection Act of 1991, as amended by the Junk Fax Prevention Act of 2005, as a class action seeking stated damages of the greater of the actual monetary loss or five hundred dollars per violation. We intend to defend the Company vigorously in this matter. At December 31, 2015, we were not a party to any other legal proceedings that are expected, individually or in the aggregate, to have a material adverse effect on our business, financial condition or operating results.


Item 4	Mine Safety Disclosures.

Not applicable.

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PART II


Item 5	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Our Public Common Stock is quoted on the Nasdaq Capital Market under the symbol "HSKA." The following table sets forth the high and low sales prices for our Public Common Stock as reported by the Nasdaq Capital Market for the periods indicated below:



	High		Low
2014
First Quarter	$	11.43	$	8.19
Second Quarter	$	12.74	$	10.27
Third Quarter	$	14.58	$	10.60
Fourth Quarter	$	18.63	$	11.89
2015
First Quarter	$	26.68	$	15.58
Second Quarter	$	32.98	$	23.22
Third Quarter	$	35.72	$	26.73
Fourth Quarter	$	40.29	$	27.59
2016
First Quarter (through March 14, 2016)	$	39.47	$	28.61

As of February 29, 2016, there were approximately 259 holders of record of our Public Common Stock, including approximately 111 participant accounts of Cede & Co.'s position held with our registrar, and approximately 3,900 beneficial stockholders. We do not anticipate any dividend payments in the foreseeable future.

The following table sets forth information about our purchases of our outstanding Public Common Stock during the quarter ended December 31, 2015:



Period	Total Number of Shares Purchased (1)	Average Price Paid per Share (1)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
October 1 - October 31, 2015	14,373	$	30.55	—	—
November 1 - November 30, 2015	—	—		—	—
December 1 - December 31, 2015	—	—		—	—
Total	14,373	$	30.55	—	—

(1) Shares of Public Common Stock we purchased between October 1, 2015 and December 31, 2015 were solely for the cancellation of shares of restricted stock to pay withholding taxes.

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STOCK PRICE PERFORMANCE GRAPH

The following graph provides a comparison over the five-year period ended December 31, 2015 of the cumulative total shareholder return from a $100 investment in the Company's common stock with the NASDAQ Medical Supplies Index and the NASDAQ Composite Total Return:



	12/10		12/11		12/12		12/13		12/14		12/15
Heska Corporation	$	100	$	147	$	163	$	176	$	366	$	780
NASDAQ Medical Supplies Index	$	100	$	96	$	118	$	145	$	174	$	193
NASDAQ Composite Total Return Index	$	100	$	99	$	116	$	163	$	187	$	200

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Item 6	Selected Financial Data.

The selected consolidated statement of operations and consolidated balance sheets data have been derived from our consolidated financial statements. The information set forth below is not necessarily indicative of the results of future operations and should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements and related Notes included as Items 7 and 8, respectively, in this Form 10-K.



	2011		2012		2013			2014		2015
	(In thousands, except per share data)
Consolidated Statements of Operations Data:
Revenue	$	70,065	$	72,805	$	78,339		$	89,837	$	104,597
Operating income (loss)	3,249		2,158		(1,430		)	2,911		8,557
Income (loss) before income taxes	3,366		2,023		(1,393		)	2,950		8,427
Net income (loss) attributable to Heska Corporation	2,145		1,203		(1,196		)	2,603		5,239

Earnings (loss) per share attributable to Heska Corporation:
Basic earnings (loss) per share attributable to Heska Corporation	$	0.41	$	0.23	$	(0.21	)	$	0.44	$	0.80
Diluted earnings (loss) per share attributable to Heska Corporation	$	0.40	$	0.22	$	(0.21	)	$	0.41	$	0.74
Basic weighted-average common shares outstanding	5,237		5,326		5,755			5,951		6,509
Diluted weighted-average common shares outstanding	5,338		5,489		5,755			6,409		7,074

Consolidated Balance Sheets Data:
Total assets	$	61,894	$	66,826	$	93,553		$	96,844	$	109,719

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Item 7	Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with "Selected Consolidated Financial Data" and the Consolidated Financial Statements and related Notes included in Items 6 and 8 of this Form 10-K. This discussion contains forward-looking statements that involve risks and uncertainties. Such statements, which include statements concerning future revenue sources and concentration, gross profit margins, selling and marketing expenses, research and development expenses, general and administrative expenses, capital resources, additional financings or borrowings and additional losses, are subject to risks and uncertainties, including, but not limited to, those discussed below and elsewhere in this Form 10-K, particularly in Item 1A "Risk Factors," that could cause actual results to differ materially from those projected. The forward-looking statements set forth in this Form 10-K are as of the close of business on March 14, 2016, and we undertake no duty and do not intend to update this information, except as required by applicable securities laws.

Overview

Our business is comprised of two reportable segments, Core Companion Animal Health ("CCA"), which represented 81% of our 2015 revenue and Other Vaccines, Pharmaceuticals and Products ("OVP"), which represented 19% of 2015 revenue.

The CCA segment includes, primarily for canine and feline use, blood testing instruments and supplies, digital imaging products, software and services, and single use products and services such as heartworm diagnostic tests, heartworm preventive products, allergy immunotherapy products and allergy testing.

Blood testing and other non-imaging instruments and supplies represented approximately 37% of our 2015 revenue. Many products in this area involve placing an instrument in the field and generating future revenue from consumables, including items such as supplies and service, as that instrument is used. Approximately 30% of our 2015 revenue resulted from the sale of such consumables to an installed base of instruments and approximately 7% of our 2015 revenue was from hardware revenue. A loss of, or disruption in, the supply of consumables we are selling to an installed base of instruments could substantially harm our business. All of our blood testing and other non-imaging instruments and supplies are supplied by third parties, who typically own the product rights and supply the product to us under marketing and/or distribution agreements. In many cases, we have collaborated with a third party to adapt a human instrument for veterinary use. Major products in this area include our chemistry instruments, our hematology instruments, our blood gas instruments, our immunodiagnostic instruments and their affiliated operating consumables. Revenue from products in these three areas, including revenues from consumables, represented approximately 33% of our 2015 revenue.

Imaging hardware, software and services represented approximately 19% of 2015 revenue. Digital radiography is the largest product offering in this area, which also includes ultrasound instruments. Digital radiography solutions typically consist of a combination of hardware and software placed with a customer, often combined with an ongoing service and support contract. Our experience has been that most of the revenue is generated at the time of sale in this area, in contrast to the blood testing category discussed above

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where ongoing consumable revenue is often a larger component of economic value as a given blood testing instrument is used.

Other CCA revenue, including single use diagnostic and other tests, pharmaceuticals and biologicals as well as research and development, licensing and royalty revenue, represented approximately 25% of our 2015 revenue. Since items in this area are often single use by their nature, our typical aim is to build customer satisfaction and loyalty for each product, generate repeat annual sales from existing customers and expand our customer base in the future. Products in this area are both supplied by third parties and provided by us. Major products and services in this area include our heartworm diagnostic tests, our heartworm preventives, our allergy test kits, our allergy immunotherapy and our allergy testing. Combined revenue from heartworm-related products and allergy-related products represented 24% of our 2015 revenue.

We consider the CCA segment to be our core business and devote most of our management time and other resources to improving the prospects for this segment. Maintaining a continuing, reliable and economic supply of products we currently obtain from third parties is critical to our success in this area. Virtually all of our sales and marketing expenses occur in the CCA segment. The majority of our research and development spending is dedicated to this segment as well.

All of our CCA products are ultimately sold primarily to or through veterinarians. In many cases, veterinarians will mark up their costs to the end user. The acceptance of our products by veterinarians is critical to our success. CCA products are sold directly to end users by us as well as through distribution relationships, such as our corporate agreement with Merck Animal Health, the sale of kits to conduct blood testing to third-party veterinary diagnostic laboratories and independent third-party distributors. Revenue from direct sales and distribution relationships represented approximately 66% and 34%, respectively, of CCA 2015 revenue.

The OVP segment includes our 168,000 square foot USDA- and FDA-licensed production facility in Des Moines, Iowa. We view this facility as an asset which could allow us to control our cost of goods on any pharmaceuticals and vaccines that we may commercialize in the future. We have increased integration of this facility with our operations elsewhere. For example, virtually all our U.S. inventory, excluding our imaging products, is now stored at this facility and related fulfillment logistics are managed there. CCA segment products manufactured at this facility are transferred at cost and are not recorded as revenue for our OVP segment. We view OVP reported revenue as revenue primarily to cover the overhead costs of the facility and to generate incremental cash flow to fund our CCA segment.

Our OVP segment includes private label vaccine and pharmaceutical production, primarily for cattle but also for other animals such as small mammals. All OVP products are sold by third parties under third-party labels.

Historically, a significant portion of our OVP segment's revenue has been generated from the sale of certain bovine vaccines, which have been sold primarily under the Titanium® and MasterGuard® brands. We have an agreement with Eli Lilly and its affiliates operating through Elanco for the production of these vaccines. Our OVP segment also produces vaccines and pharmaceuticals for other third parties.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations is based upon the consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the

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disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenue and expense during the periods. These estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. We have identified those critical accounting policies used in reporting our financial position and results of operations based upon a consideration of those accounting policies that involve the most complex or subjective decisions or assessment. We consider the following to be our critical accounting policies.

Revenue Recognition

We generate our revenue through the sale of products, as well as through licensing of technology product rights, royalties and sponsored research and development. Our policy is to recognize revenue when the applicable revenue recognition criteria have been met, which generally include the following:


•	Persuasive evidence of an arrangement exists;


•	Delivery has occurred or services rendered;


•	Price is fixed or determinable; and


•	Collectability is reasonably assured.

Revenue from the sale of products is recognized after both the goods are shipped to the customer and acceptance has been received, if required, with an appropriate provision for estimated returns and allowances. We do not permit general returns of products sold. Certain of our products have expiration dates. Our policy is to exchange certain outdated, expired product with the same product. We record an accrual for the estimated cost of replacing the expired product expected to be returned in the future, based on our historical experience, adjusted for any known factors that reasonably could be expected to change historical patterns, such as regulatory actions which allow us to extend the shelf lives of our products. Revenue from both direct sales to veterinarians and sales to independent third-party distributors are generally recognized when goods are shipped. Our products are shipped complete and ready to use by the customer. The terms of the customer arrangements generally pass title and risk of ownership to the customer at the time of shipment. Certain customer arrangements provide for acceptance provisions. Revenue for these arrangements is not recognized until the acceptance has been received or the acceptance period has lapsed. We reduce our revenue by the estimated cost of any rebates, allowances or similar programs, which are used as promotional programs.

Recording revenue from the sale of products involves the use of estimates and management judgment. We must make a determination at the time of sale whether the customer has the ability to make payments in accordance with arrangements. While we do utilize past payment history, and, to the extent available for new customers, public credit information in making our assessment, the determination of whether collectability is reasonably assured is ultimately a judgment decision that must be made by management. We must also make estimates regarding our future obligation relating to returns, rebates, allowances and similar other programs.

License revenue under arrangements to sell or license product rights or technology rights is recognized as obligations under the agreement are satisfied, which generally occurs over a period of time. Generally, licensing revenue is deferred and recognized over the estimated life of the related agreements, products, patents or technology. Nonrefundable licensing fees, marketing rights and milestone payments received under contractual arrangements are deferred and recognized over the remaining contractual term using the straight-line method.

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We evaluate all of our licensing arrangements by estimating the useful life of either the product or the technology, the length of the agreement or the legal patent life and defer the revenue for recognition over the appropriate period.

We may enter into arrangements that include multiple elements. Such arrangements may include agreements allowing for the usage of an instrument and a given level of consumables for one monthly payment. In these situations we must determine whether the various elements meet the criteria to be accounted for as separate elements. If the elements cannot be separated, revenue is recognized once revenue recognition criteria for the entire arrangement have been met or over the period that the Company's obligations to the customer are fulfilled, as appropriate. If the elements are determined to be separable, the revenue is allocated to the separate elements based on relative fair value and recognized separately for each element when the applicable revenue recognition criteria have been met. In accounting for these multiple element arrangements, we must make determinations about whether elements can be accounted for separately and make estimates regarding their relative fair values.

Allowance for Doubtful Accounts

We maintain an allowance for doubtful accounts receivable based on client-specific allowances, as well as a general allowance. Specific allowances are maintained for clients which are determined to have a high degree of collectability risk based on such factors, among others, as: (i) the aging of the accounts receivable balance; (ii) the client's past payment history; (iii) a deterioration in the client's financial condition, evidenced by weak financial condition and/or continued poor operating results, reduced credit ratings, and/or a bankruptcy filing. In addition to the specific allowance, the Company maintains a general allowance for credit risk in its accounts receivable which is not covered by a specific allowance. The general allowance is established based on such factors, among others, as: (i) the total balance of the outstanding accounts receivable, including considerations of the aging categories of those accounts receivable; (ii) past history of uncollectable accounts receivable write-offs; and (iii) the overall creditworthiness of the client base. A considerable amount of judgment is required in assessing the realizability of accounts receivable. Should any of the factors considered in determining the adequacy of the overall allowance change, an adjustment to the provision for doubtful accounts receivable may be necessary.

Inventories

Inventories are stated at the lower of cost or market value, cost being determined on the first-in, first-out method. Inventories are written down if the estimated net realizable value of an inventory item is less than its recorded value. We review the carrying cost of our inventories by product each quarter to determine the adequacy of our reserves for excess/obsolete inventory. In accounting for inventories we must make estimates regarding the estimated net realizable value of our inventory. This estimate is based, in part, on our forecasts of future sales and shelf life of products.

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Deferred Tax Assets – Valuation Allowance

Our deferred tax assets, such as a domestic Net Operating Loss ("NOL"), are reduced by an offsetting valuation allowance based on an assessment of available evidence if we are unable to conclude that it is more likely than not that some or all of the related deferred tax assets will be realized. If we are able to conclude it is more likely than not that we will realize a future benefit from a deferred tax asset, we will reduce the related valuation allowance by an amount equal to the estimated quantity of income taxes we would pay in cash if we were not to utilize the deferred tax asset in the future. The first time this occurs in a given jurisdiction, it will result in a net deferred tax asset on our consolidated balance sheets and an income tax benefit of equal magnitude in our statement of operations in the period we make the determination. In future periods, we will then recognize as income tax expense the estimated quantity of income taxes we would have paid in cash had we not utilized the related deferred tax asset. The corresponding journal entry will be a reduction of our deferred tax asset. If there is a change regarding our tax position in the future, we will make a corresponding adjustment to the related valuation allowance.

Results of Operations

Our analysis presented below is organized to provide the information we believe will facilitate an understanding of our historical performance and relevant trends going forward. Our results of operations include the results of Heska Imaging for the period of February 24, 2013 through December 31, 2013 and for the full years ended December 31, 2014 and 2015. This discussion should be read in conjunction with our consolidated financial statements, including the notes thereto, in Item 8 of this annual report on Form 10K.

The following table sets forth, for the periods indicated, certain data derived from our consolidated statements of operations (in thousands):



	Years Ended December 31,
	2013			2014			2015
Revenue	$	78,339		$	89,837		$	104,597
Gross Profit	30,632			35,715			44,213
Operating expenses	32,062			32,804			35,656
Operating income (loss)	(1,430		)	2,911			8,557
Interest and other (income) expense, net	(37		)	(39		)	130
Income (loss) before income taxes	(1,393		)	2,950			8,427
Provision (benefit) for income taxes	(454		)	1,351			2,908
Net income (loss)	(939		)	1,599			5,519
Net income (loss) attributable to non-controlling interest	257			(1,004		)	280
Net income (loss) attributable to Heska Corporation	$	(1,196	)	$	2,603		$	5,239

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The following table sets forth, for the periods indicated, the percentage of sales represented by certain items reflected in our consolidated statements of operations:



	Years Ended December 31,
	2013		2014		2015
Revenue	100.0	%	100.0	%	100.0	%
Gross Profit	39.1	%	39.8	%	42.3	%
Operating expenses	40.9	%	36.5	%	34.1	%
Operating income (loss)	(1.8	)%	3.3	%	8.2	%
Interest and other (income) expense, net	—	%	—	%	0.1	%
Income (loss) before income taxes	(1.8	)%	3.3	%	8.1	%
Provision (benefit) for income taxes	(0.6	)%	1.5	%	2.8	%
Net income (loss)	(1.2	)%	1.8	%	5.3	%
Net income (loss) attributable to non-controlling interest	0.3	%	(1.1	)%	0.3	%
Net income (loss) attributable to Heska Corporation	(1.5	)%	2.9	%	5.0	%

Revenue

Total revenue increased 16% to $104.6 million in 2015 compared to $89.8 million in 2014 . Total revenue increased 15% to $89.8 million in 2014 compared to $78.3 million in 2013 .

CCA segment revenue increased 16% to $84.2 million in 2015 compared to $72.4 million in 2014 . Greater revenue from our imaging products, our instrument consumables, our chemistry instruments, our hematology instruments and our allergy drops, somewhat offset by lower sales of our heartworm diagnostic tests, were key factors in the improvement. CCA segment revenue increased 9% to $72.4 million in 2014 compared to $66.4 million in 2013 . Increased sales of our instrument consumables, somewhat offset by lower sales of our heartworm diagnostic tests were a key factor in the improvement.

OVP segment revenue increased 16% to $20.3 million in 2015 compared to $17.5 million in 2014 . Increased revenue from a new product for one of our customers was a key factor in the increase. OVP segment revenue increased 46% to $17.5 million in 2014 compared to $11.9 million in 2013 . The largest factor in the increase was greater revenue from the contract Elanco assumed from AgriLabs in 2013.

Gross Profit

Gross profit increased 24% to $44.2 million in 2015 compared to $35.7 million in 2014 . Gross Margin, i.e. gross profit divided by total revenue, increased to 42.3% in 2015 compared to 39.8% in 2014 . Higher Gross Margin in our OVP segment due to product mix as well as higher Gross Margin recognized on our imaging products in 2015 as compared to 2014 were factors in the improvement.

Gross profit increased 17% to $35.7 million in 2014 compared to $30.6 million in 2013 . Gross Margin increased to 39.8% in 2014 compared to 39.1% in 2013 . Reserves recognized in 2013 were a factor in the change, as follows. In June 2013, we recognized a reserve, the ("Roche Reserve"), related to the Roche Agreement with Roche related to our blood gas analyzers under which we would be relieved of any minimum purchase obligations other than the Roche Agreement and Roche would be obligated to supply us with consumables and spare parts for a shortened period of time. The Roche Reserve was $1.1 million, as follows: $600 thousand recognized in cost of revenue related to required purchase of new instruments under the Roche Agreement, $168 thousand recognized in cost of revenue related to instruments already in inventory and accelerated depreciation on service units, $13 thousand recognized in sales and marketing expenses related to

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accelerated depreciation on demonstration units, $99 thousand recognized in research and development expenses related to the purchase of research and development equipment required under the Roche Agreement we would not have otherwise purchased and $243 thousand recognized in general and administrative expenses related to other anticipated costs related to the Roche Agreement. In addition, in June 2013 we recognized a $453 thousand reserve (the "SpotChem Reserve") related to consumable and accessory inventory which we did not expect to sell. The Roche Reserve and the SpotChem Reserve did not recur in 2014, which, along with product mix, were factors in the improved year-over-year Gross Margin. These factors were somewhat offset by a higher relative revenue contribution from our OVP segment, which tends to operate at lower Gross Margin than our consolidated Gross Margin, and lower Gross Margin recognized on our imaging products in 2014 as compared to 2013.

Operating Expenses

Selling and marketing expenses increased 11% to $21.3 million in 2015 compared to $19.2 million in 2014 . Increased commissions and distributor incentives were key factors in the change. Selling and marketing expenses decreased 1% to $19.2 million in 2014 compared to $19.4 million in 2013 . Lower promotional and advertising expenses was a key factor in the change.

Research and development expenses increased 17% to $1.7 million in 2015 , compared to $1.4 million in 2014 . Increased development project spending was a factor in the change. Research and development expenses decreased 6% to $1.4 million in 2014 , as compared to $1.5 million in 2013 . Factors in the change include a reserve for equipment used in a project that was discontinued in 2013 and expenses related to the Roche Reserve. Both of these reserves occurred in 2013 .

General and administrative expenses increased 3% to $12.7 million , compared to $12.2 million in 2014 . A key factor in the change was a $0.9 million charge we incurred for certain accelerated restricted stock vesting and payments related to the October 1, 2015 termination of our Executive Chair's previously negotiated employment agreement. General and administrative expenses increased 10% to $12.2 million compared to $11.1 million in 2013 . Increased non-cash compensation expense related to new employment agreements for our Chief Executive Officer and our Executive Chair which were signed in March 2014 were key factors in the change.

Interest and Other Expense (Income), Net

Interest and other expense (income), net, was an expense of $130 thousand in 2015 , as compared to income of $39 thousand in 2014 and $37 thousand in 2013 . This line item can be broken into two components: net interest income or expense and net foreign currency gains and losses. Net interest was an expense of $28 thousand in 2015 , as compared to an expense of $16 thousand in 2014 and income of $53 thousand in 2013 . We recognized lower interest income in 2015 as compared to 2014 and higher interest expense unrelated to our credit facility in 2014 as compared to 2013. Net foreign currency loss was $103 thousand in 2015 , as compared to a net foreign currency gain of $55 thousand in 2014 and net foreign currency losses of $16 thousand in 2013 .

Income Tax Expense (Benefit)

In 2015 , we had total income tax expense of $2.9 million , including $1.3 million in domestic deferred income tax expense, a non-cash item primarily related to our domestic NOL position, and $1.6 million in current income tax expense. In 2014 , we had total income tax expense of $1.4 million , including $1.3 million in domestic deferred income tax expense, a non-cash item primarily related to our domestic NOL position, and $47 thousand in current income tax expense. In 2013 , we had total income tax benefit of $0.5 million , including $0.6 million in domestic deferred income tax benefit, and $0.2 million in current income tax

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expense. Greater income before income taxes was a key factor in our higher income tax expense in 2015 as compared to 2014. We had a deferred income tax benefit in 2013 as we had a loss before income taxes in 2013 . We generated domestic taxable income in 2013 due to the impact of upfront payments received in 2013 , which caused us to recognize domestic current tax expense despite a loss before income taxes and a deferred tax benefit.

Net Income (Loss)

Our 2015 net income was $5.5 million, compared to net income of $1.6 million in 2014 and a net loss of $0.9 million in 2013. Increased revenue and Gross Margin, somewhat offset by higher operating expenses, were factors in the improvement from 2014 to 2015 and from 2013 to 2014.

Net Income (Loss) attributable to Heska Corporation

Net income attributable to Heska Corporation was $5.2 million in 2015 , as compared to a net income attributable to Heska Corporation of $2.6 million in 2014 and net loss attributable to Heska Corporation of $1.2 million in 2013 . The difference between this line item and "Net Income (Loss)" is the net income or loss attributable to our minority interest in Heska Imaging, which was net income of $0.3 million in 2015 , net loss of $1.0 million in 2014 and net income of $0.3 million in 2013 .

Impact of Inflation

In recent years, inflation has not had a significant impact on our operations.

Liquidity, Capital Resources and Financial Condition

We believe that adequate liquidity and cash generation is important to the execution of our strategic initiatives. Our ability to fund our operations, acquisitions, capital expenditures, and product development efforts may depend on our ability to generate cash from operating activities which is subject to future operating performance, as well as general economic, financial, competitive, legislative, regulatory, and other conditions, some of which may be beyond our control. Our primary sources of liquidity are our available cash, cash generated from current operations and availability under our credit facilities noted below.

We have incurred net cumulative negative cash flow from operations since our inception in 1988. For the year ended December 31, 2015 , we had net income of $5.5 million and net cash provided by operations of $2.1 million . At December 31, 2015 , we had $6.9 million of cash and cash equivalents, working capital of $22.5 million and $0.1 million outstanding borrowings under our revolving line of credit, discussed below.

At December 31, 2015 , we had a $ 15.0 million asset-based revolving line of credit with Wells Fargo which has a maturity date of December 31, 2017 as part of our credit and security agreement with Wells Fargo. At December 31, 2015 , we had $0.1 million of borrowings outstanding on this line of credit. Our ability to borrow under this line of credit varies based upon available cash, eligible accounts receivable and eligible inventory. On December 31, 2015 , any interest on borrowings due was to be charged at a stated rate of three month LIBOR plus 2.25% and payable monthly. We are required to comply with various financial and non-financial covenants, and we have made various representations and warranties under our agreement with Wells Fargo. A key financial covenant is based on a fixed charge coverage ratio, as defined in our agreement with Wells Fargo. Failure to comply with any of the covenants, representations or warranties could result in our being in default on the loan and could cause all outstanding amounts payable to Wells Fargo to become immediately due and payable or impact our ability to borrow under the agreement. We were in compliance with all financial covenants as of December 31, 2015 and our available borrowing capacity based

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upon eligible accounts receivable and eligible inventory under our revolving line of credit was approximately $ 11.2 million .

A summary of our cash provided by and used in operating, investing and financing activities is as follows (in thousands):



	Years Ended December 31,
	2013			2014			2015
Net cash provided by (used in) operating activities	$	(1,412	)	$	5,554		$	2,125
Net cash provided by (used in) investing activities	71			(2,331		)	(3,773		)
Net cash provided by (used in) financing activities	1,559			(3,271		)	2,726
Effect of currency translation on cash	14			(113		)	(43		)
Increase (decrease) in cash and cash equivalents	232			(161		)	1,035
Cash and cash equivalents, beginning of the period	5,784			6,016			5,855
Cash and cash equivalents, end of the period	$	6,016		$	5,855		$	6,890

Net cash provided by operating activities was $2.1 million in 2015 as compared to net cash provided by operating activities of $5.6 million in 2014 , an unfavorable decrease of approximately $3.4 million . Key factors in the change were a $3.7 million increase in cash used for accounts receivable, a $2.3 million increase in cash used for deferred revenue and other long term liabilities, which included a $3.0 million milestone payment received in 2014 but not 2015, a $2.2 million increase in cash used in other non-current assets, which included the impact of increased capital lease activity under new marketing programs, and a $1.6 million increase in cash used for inventory in 2015, some of which related to inventory transferred to property, plant and equipment as rental units. These factors were somewhat offset by a $3.9 million increase in net income and a $2.2 million increase in cash provided by accounts payable. Net cash provided from operating activities was $5.6 million in 2014 as compared to cash used by operating activities of $1.4 million in 2013, a change of approximately $7.0 million. Key factors in the change were a $4.5 million improvement in cash provided by net income and deferred tax expense, a $4.1 million improvement in cash provided by accounts payable, accrued liabilities and other current liability accounts primarily related to payment timing, a $1.2 million increase in non-cash stock-based compensation which was primarily related to restricted stock grants to our Chief Executive Officer and our Executive Chair in 2014 and $1.2 million in increased depreciation and amortization for which a factor was increased depreciation and amortization recognized from Heska Imaging rental assets. Greater cash provided from these key factors in 2014 as compared to 2013 were somewhat offset by $3.9 million in greater cash used in inventory in 2014, some of which related to inventory transferred to property, plant and equipment as rental units.

Net cash used in investing activities was $3.8 million in 2015 as compared to net cash used in investing activities of $2.3 million in 2014 , an unfavorable increase of approximately $1.4 million . Increased investment in our Des Moines production facility including to fulfill certain customer needs, somewhat offset by lower purchases of demonstration and loaner imaging products in 2015 as compared to 2014, was a factor in the change. Net cash flows from investing activities used cash of $2.3 million in 2014 as compared to cash provided of $0.1 million in 2013, an unfavorable decrease of approximately $2.4 million. The major factor in the change was $5.0 million in proceeds from the disposition of property, including non-core vaccine-related intellectual property, in June 2013, which was somewhat offset by the incremental $3.0 million investment in Heska Imaging in February 2013. Purchases of property and equipment increased $407 thousand in 2014 as compared to 2013. Purchases related to loaner and demonstration imaging products, somewhat offset by lower spending related to our OVP segment and capitalized software costs, was a factor in the change.

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Net cash flows from financing activities provided cash of $2.7 million in 2015 and used cash of $3.3 million in 2014, which represented a $6.0 million increase in cash provided. Net cash flows from financing activities used cash of $3.3 million in 2014 and provided cash of $1.6 million in 2013, which represented a $4.8 million increase in cash used. The largest factor in the change in all periods related to our revolving line of credit, where we borrowed $0.1 million in 2015 as compared to repaying $4.8 million in 2014 and borrowing $2.2 million in 2013.

Effect of currency translation on cash

Net effect of foreign currency translations on cash changed $ 70 thousand to a $ 43 thousand negative impact in 2015 as compared to a $ 113 thousand negative impact in 2014 . The effect of currency translation on cash changed $127 thousand to a $113 thousand negative impact in 2014 from a $ 14 thousand positive impact in 2013 . These effects are related to changes in exchange rates between the US Dollar and the Swiss Franc, which is the functional currency of our Swiss subsidiary.

At December 31, 2015, Heska Corporation had accounts receivable from Heska Imaging of $6.3 million, including accrued interest, which eliminates upon consolidation of our financial statements. These monies accrue at the same interest rate as Heska Corporation pays under its asset-based revolving line of credit with Wells Fargo once past due.

At December 31, 2015, we, including the balance sheets of our consolidated subsidiaries, had net prepaid receivables from Cuattro, LLC of $0.3 million. All monies owed accrue interest at the same interest rate Heska Corporation pays under its credit and security agreement with Wells Fargo once past due. These items are listed on our consolidated balance sheets as "Due from - related parties" as Kevin S. Wilson, our Chief Executive Officer and President, Mrs. Wilson and trusts for their children and family hold a 100% interest in Cuattro, LLC.

At December 31, 2015 , we had a $1.5 million note receivable, including accrued interest, from Cuattro Veterinary, LLC. The note accrues interest at the same interest rate as the Company pays under its asset-based revolving line of credit with Wells Fargo and is currently due on June 15, 2016. We do not currently anticipate collecting this note in 2016 due to our pending acquisition of Cuattro Veterinary, LLC. Cuattro Veterinary, LLC sells the same digital radiography solutions outside the United States that Heska Imaging sells in the United States. The note is listed on our consolidated balance sheets as "Note receivable – related party" as Kevin S. Wilson, Mrs. Wilson and trusts for their children and family hold a majority interest in Cuattro Veterinary, LLC. This note was held by Heska Imaging at the time of our acquisition of a majority interest in Heska Imaging on February 24, 2013.

At December 31, 2015 , we had other borrowings outstanding totaling $228 thousand , all of which were obligations of a Heska Imaging loan from De Lage Landen Financial Services, Inc. ("DLL"). The note bears an interest rate of 6% and is due in equal monthly payments, including principal and interest, of $13 thousand through June 2017. The note may be prepaid prior to maturity, but is subject to a surcharge in such a circumstance. The principal associated with this note of approximately $159 thousand is listed as "other short term borrowings" on our consolidated balance sheets as it is due within a year.

At December 31, 2015 , our consolidated balance sheets included $15.7 million in non-controlling interest. This represents the value of the aggregate position in Heska Imaging of the Imaging Minority. At the time of the Acquisition, we estimated a weighted average valuation for this position and began accreting to this value over a three year period from the date of the Acquisition using a weighted average cost of capital of 18.65%. The cost of capital assumption was provided to us by a third party with expertise in estimating such items. We evaluate the value of this position every reporting period and in 2014 decided to adjust our accretion to a weighted average accretion based on various potential outcomes and our estimate of the

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likelihood of such outcomes, which had the effect of lowering the accretion from what it otherwise would have been. The accretion is to be recorded as a credit where this line item has increased compared to the prior reporting period, with the corresponding debit to directly reduce additional paid-in-capital as we have an accumulated deficit. If the value of non-controlling interest were to decrease compared to the prior reporting period, we anticipate non-controlling interest would be adjusted with a debit to non-controlling interest and a corresponding credit to additional paid-in-capital.

Our financial plan for 2016 indicates that our available cash and cash equivalents, together with cash from operations and borrowings expected to be available under our revolving line of credit, will be sufficient to fund our operations through 2016 and into 2017. However, our actual results may differ from this plan, and we may be required to consider alternative strategies. We may be required to raise additional capital in the future. If necessary, we expect to raise these additional funds through the increased sale of customer leases, the sale of equity securities or the issuance of new term debt secured by the same assets as the term loans which were fully repaid in 2010. There is no guarantee that additional capital will be available from these sources on acceptable terms, if at all, and certain of these sources may require approval by existing lenders. See "Risk Factors" in Item 1A of this Form 10-K for a discussion of some of the factors that affect our capital raising alternatives.

Under the Operating Agreement, should Heska Imaging meet certain performance criteria, the Imaging Minority has been granted put options to sell us some or all of the Imaging Minority's remaining 45.4% position in Heska Imaging following the audit of our 2016 and 2017 financial statements. In 2015, Heska Imaging generated $19.6 million in revenue, $7.5 million in gross profit and operating income of $0.8 million. In 2014, Heska Imaging generated $13.6 million in revenue, $3.6 million in gross profit and an operating loss of $2.1 million. If Heska Imaging generates at least $20 million in revenue in either 2016 or 2017 and the Imaging Minority exercises its put right in full, we would be required to purchase the Imaging Minority's position for consideration valued at 9 times Heska Imaging's operating income, subject to a maximum valuation of $13.6 million - as well as 25% of Heska Imaging's cash. If Heska Imaging generates at least $30 million in revenue and $3.0 million in operating income in either 2016 or 2017 and the Imaging Minority exercises its put right in full, we would be required to purchase the Imaging Minority's position for consideration valued at $17.0 million - as well as 25% of Heska Imaging's cash. Furthermore, should Heska Imaging meet certain performance criteria, and the Imaging Minority fail to exercise an applicable put to sell us all of the Imaging Minority's position in Heska Imaging following the audit of our 2016 or 2017 financial statements, we would have a call option to purchase all, but not less than all, of the Imaging Minority's position in Heska Imaging. If Heska Imaging generates at least $30 million in revenue and $3.0 million in operating income in either 2016 or 2017 and the Imaging Minority does not exercise its put rights at all, we would have the option to purchase the Imaging Minority's position for consideration valued at $19.6 million - as well as 25% of Heska Imaging's cash. We believe it is likely that we will deliver up to 55% of the consideration for these puts and calls in shares of our Public Common Stock. While we intend to meet any related cash payment obligations with funds provided by our ongoing operations and assets, likely supplemented by debt financing and potentially with equity financing, there can be no assurance our results will unfold according to our expectations. These potential cash payment obligations are an important consideration for us in our cash management decisions.

We believe it is likely that Heska Imaging will meet the required performance criteria for its 2016 lowest strike put, but not its 2016 highest strike put, following the audit of our 2016 financial statements and that we will be able to deliver 55% of the consideration required by the put in our Public Common Stock. In this case, the Imaging Minority would be granted a put following our 2016 audit which could require us to deliver up to $13.6 million as well as 25% of Heska Imaging's cash, to purchase the 45.4% of Heska Imaging we do not own. In such a case, while we have the right to deliver up to 55% of the consideration in our Public Common Stock under certain conditions, such stock is to be valued based on 90% of market value (the "Delivery Stock Value") and is limited to approximately 650 thousand shares in any case. If the Delivery

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Stock Value per share is less than the market value per share of our Public Common Stock at the time of the Acquisition, we do not have the right to deliver any Public Common Stock as consideration. Assuming we deliver the full 55% of the consideration in our Public Common Stock, we could still have an obligation to pay as much as approximately $6.1 million in cash as well as 25% of Heska Imaging's cash to the Imaging Minority in this circumstance.

We would consider acquisitions if we felt they were consistent with our strategic direction. We paid $1.6 million in dividends in 2012, and while we may consider paying dividends again in the long term, we do not anticipate the payment of any further dividends for the foreseeable future. We conducted an odd lot tender offer in 2012 which could have led to the repurchase of approximately $400 thousand of our stock if all eligible holders had chosen to participate, and while we may consider stock repurchase alternatives in an opportunistic manner or in the long term, we do not anticipate any stock repurchase programs in the foreseeable future.

Off Balance Sheet Arrangements

We have no off balance sheet arrangements or variable interest entities.

Contractual Obligations

The following table sets forth our future payments due under contractual obligations as of December 31, 2015 (in thousands):



	Total		Less Than 1 Year		1 - 3 Years		4 - 5 Years		After 5 Years
Operating leases	$	13,157	$	1,956	$	3,533	$	3,087	$	4,581
Purchase of non-controlling interest	6,423		—		6,423		—		—
Unconditional purchase obligations	406		203		203		—		—
Long-term debt	228		159		69		—		—
Line of credit	143		143		—		—		—
Interest payments on debt	86		85		1		—		—
Total	$	20,443	$	2,546	$	10,229	$	3,087	$	4,581

In addition to those agreements considered above where our contractual obligation is fixed, we are party to commercial agreements which may require us to make milestone payments under certain circumstances. Any milestone obligations which we believe are likely to be triggered but are not yet paid are included in "Unconditional Purchase Obligations" in the table above. We do not believe other potential milestone obligations, some of which we consider to be of remote likelihood of ever being triggered, will have a material impact on our liquidity, capital resources or financial condition in the foreseeable future.

The line item entitled "Purchase of non-controlling interest" indicates our obligations to purchase the non-controlling interest in Heska Imaging under a series of performance-based puts. We believe it is likely that Heska Imaging will meet the required performance criteria for its 2016 lowest strike put, but not its 2016 highest strike put, following the audit of our 2016 financial statements and that we will be able to deliver 55% of the consideration required by the put in our Public Common Stock. The table above assumes this is the case, assumes that Heska Imaging's performance merits the maximum payout under this put, estimates Heska Imaging year end 2016 cash based on year end 2015 and assumes the Imaging Minority exercises this option in full. In such a circumstance, we would pay $6.2 million in cash in 2017 following our 2016 audit. As discussed above, if our stock declines such that Delivery Stock Value is less than the market value of our stock at the time of Acquisition, we would not be able to deliver our Public Common Stock as consideration

- 42 -

upon the exercise of any put by the Imaging Minority and we would have to deliver the full consideration to acquire the minority interest in cash. Furthermore, we are limited to a maximum of approximately 650 thousand shares as consideration upon the exercise of any put by the Imaging Minority, which in certain circumstances could require us to deliver more than 45% of the consideration required by a put in cash. The maximum Put Payment is $17.0 million plus 25% of Heska Imaging's cash.

Net Operating Loss Carryforwards

As of December 31, 2015 , we had a net domestic operating loss carryforward, or NOL, of approximately $104.8 million, a domestic alternative minimum tax credit carryforward of approximately $0.4 million and a domestic research and development tax credit carryforward of approximately $0.4 million for federal income tax purposes. Our federal NOL is expected to expire as follows if unused: $98.8 million in 2018 through 2022, $5.5 million in 2024 and 2025 and $0.5 million in 2027 and later. The NOL and tax credit carryforwards are subject to alternative minimum tax limitations and to examination by the tax authorities. In addition, we had a "change of ownership" as defined under the provisions of Section 382 of the Internal Revenue Code of 1986, as amended (an "Ownership Change"). We believe the latest Ownership Change occurred at the time of our initial public offering in July 1997.

Recent Accounting Pronouncements

From time to time, the Financial Accounting Standards Board ("FASB") or other standards setting bodies issue new accounting pronouncements. Updates to the FASB Accounting Standards Codification ("ASC") are communicated through issuance of an Accounting Standards Update ("ASU"). Unless otherwise discussed, we believe that the impact of recently issued guidance, whether adopted or to be adopted in the future, is not expected to have a material impact on our Consolidated Financial Statements upon adoption.

To understand the impact of recently issued guidance, whether adopted or to be adopted, please review the information provided in Note 1- Operations and Summary of Significant Accounting Policies to our Consolidated Financial Statements included in Item 8 of this Form 10-K.


Item 7A.	Quantitative and Qualitative Disclosures about Market Risk.

Market risk represents the risk of loss that may impact the financial position, results of operations or cash flows due to adverse changes in financial and commodity market prices and rates. We are exposed to market risk in the areas of changes in United States and foreign interest rates and changes in foreign currency exchange rates as measured against the United States dollar. These exposures are directly related to our normal operating and funding activities.

Interest Rate Risk

At December 31, 2015 , there was approximately $0.1 million outstanding on our line of credit with Wells Fargo. We also had approximately $6.9 million of cash and cash equivalents at December 31, 2015 , the majority of which was invested in liquid interest bearing accounts. We had no interest rate hedge transactions in place on December 31, 2015 . We completed an interest rate risk sensitivity analysis based on the above and an assumed one-percentage point decrease in interest rates would have an approximate $69 thousand negative impact on our pre-tax earnings based on our outstanding balances as of December 31, 2015 .

- 43 -

Foreign Currency Risk

Our investment in foreign assets consists primarily of our investment in our Swiss subsidiary. Foreign currency risk may impact our results of operations. In cases where we purchase inventory in one currency and sell corresponding products in another, our gross margin percentage is typically at risk based on foreign currency exchange rates. In addition, in cases where we may be generating operating income in foreign currencies, the magnitude of such operating income when translated into U.S. dollars will be at risk based on foreign currency exchange rates. Our agreements with suppliers and customers vary significantly in regard to the existence and extent of currency adjustment and other currency risk sharing provisions. We had no foreign currency hedge transactions in place on December 31, 2015 .

We have a wholly-owned subsidiary in Switzerland which uses the Swiss Franc as its functional currency. We purchase inventory in foreign currencies, primarily Euros, and sell corresponding products in U.S. dollars. We also sell products in foreign currencies, primarily Euros and Japanese Yen, where our inventory costs are largely in U.S. dollars. Based on our 2015 results of operations, currency holdings and currency-related prepaid accounts, accounts receivable and accounts payable (all of which, including currency holdings, we will refer to as "Currency Accounts") as of December 31, 2015 and the functional currency of the accounting entity where such Currency Accounts are held, the expected impact on our consolidated statements of operations, if foreign currency exchange rates were to strengthen/weaken by 25% against the dollar, would be a resulting gain/loss in operating income of approximately $230 thousand and a currency loss/gain of $28 thousand , if all other currencies were to strengthen/weaken by 25% against the Swiss Franc, would be a resulting loss/gain in operating income of approximately $101 thousand and a currency gain/loss of $397 thousand , and if all other currencies were to strengthen/weaken by 25% against the Euro, would be a resulting loss/gain in operating income of approximately $266 thousand and a currency loss/gain of $417 thousand .

- 44 -


Item 8.	Financial Statements and Supplementary Data.

HESKA CORPORATION

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



	Page
Report of Independent Registered Public Accounting Firm	46
Consolidated Balance Sheets as of December 31, 2014 and 2015	47
Consolidated Statements of Operations for the years ended December 31, 2013, 2014, and 2015	48
Consolidated Statements of Comprehensive Income (Loss)	49
Consolidated Statements of Stockholders' Equity for the years ended December 31, 2013, 2014, and 2015	50
Consolidated Statements of Cash Flows for the years ended December 31, 2013, 2014 and 2015	51
Notes to Consolidated Financial Statements	52

- 45 -

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders

Heska Corporation

Loveland, Colorado

We have audited the accompanying consolidated balance sheets of Heska Corporation and subsidiaries as of December 31, 2014 and 2015, and the related consolidated statements of operations, comprehensive income, stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 2015. We also have audited Heska Corporation's internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control-Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Heska Corporation's management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on these consolidated financial statements and an opinion on the company's internal control over financial reporting based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Heska Corporation and subsidiaries as of December 31, 2014 and 2015, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2015, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, Heska Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control-Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).



/s//EKS&H LLLP
March 15, 2016
Boulder, Colorado

- 46 -

HESKA CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)



	December 31,
	2014			2015
ASSETS
Current assets:
Cash and cash equivalents	$	5,855		$	6,890
Accounts receivable, net of allowance for doubtful accounts of $216 and $189, respectively	11,919			16,136
Due from – related parties	892			308
Inventories, net	12,658			16,101
Other current assets	1,587			1,827
Total current assets	32,911			41,262
Property and equipment, net	13,410			17,020
Note receivable – related party	1,466			1,516
Goodwill and other intangibles	21,205			20,966
Deferred tax asset	27,210			25,883
Other long-term assets	642			3,072
Total assets	$	96,844		$	109,719

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	4,897		$	7,624
Due to – related party	252			—
Accrued liabilities	5,130			5,416
Current portion of deferred revenue	4,584			5,461
Line of credit	48			143
Other short-term borrowings, including current portion of long-term note payable	141			159
Total current liabilities	15,052			18,803
Long-term note payable, net of current portion	227			69
Deferred revenue, net of current portion, and other	12,754			11,572
Total liabilities	28,033			30,444
Commitments and contingencies (Note 10)
Non-Controlling Interest	15,679			15,747
Stockholders' equity:
Preferred stock, $.01 par value, 2,500,000 shares authorized, none issued or outstanding	—			—
Common stock, $.01 par value, 7,500,000 shares authorized, none issued or outstanding	—			—
Public common stock, $.01 par value, 7,500,000 shares authorized, 6,342,205 and 6,625,287 shares issued and outstanding, respectively	63			66
Additional paid-in capital	222,297			227,267
Accumulated other comprehensive income	283			187
Accumulated deficit	(169,511		)	(163,992		)
Total stockholders' equity	53,132			63,528
Total liability and stockholders' equity	$	96,844		$	109,719

See accompanying notes to consolidated financial statements.

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HESKA CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)



	Year Ended December 31,
	2013			2014			2015
Revenue:
Core companion animal health	$	66,404		$	72,354		$	84,249
Other vaccines, pharmaceuticals and products	11,935			17,483			20,348
Total revenue, net	78,339			89,837			104,597

Cost of revenue	47,707			54,122			60,384

Gross profit	30,632			35,715			44,213

Operating expenses:
Selling and marketing	19,428			19,159			21,339
Research and development	1,500			1,414			1,658
General and administrative	11,134			12,231			12,659
Total operating expenses	32,062			32,804			35,656
Operating income (loss)	(1,430		)	2,911			8,557
Interest and other expense (income), net	(37		)	(39		)	130
Income (loss) before income taxes	(1,393		)	2,950			8,427
Income tax expense (benefit):
Current income tax expense	183			47			1,581
Deferred income tax expense (benefit)	(637		)	1,304			1,327
Total income tax expense (benefit)	(454		)	1,351			2,908

Net income (loss)	(939		)	1,599			5,519
Net income (loss) attributable to non-controlling interest	257			(1,004		)	280
Net income (loss) attributable to Heska Corporation	$	(1,196	)	$	2,603		$	5,239

Basic earnings (loss) per share attributable to Heska Corporation	$	(0.21	)	$	0.44		$	0.80
Diluted earnings (loss) per share attributable to Heska Corporation	$	(0.21	)	$	0.41		$	0.74

Weighted average outstanding shares used to compute basic earnings (loss) per share attributable to Heska Corporation	5,755			5,951			6,509
Weighted average outstanding shares used to compute diluted earnings (loss) per share attributable to Heska Corporation	5,755			6,409			7,074

See accompanying notes to consolidated financial statements.

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HESKA CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)



	Year Ended December 31,
	2013			2014			2015

Net income (loss)	$	(939	)	$	1,599		$	5,519
Other comprehensive income (expense):
Minimum pension liability	182			—			(129		)
Unrealized gain on available for sale investments	30			3			44
Foreign currency translation	72			(300		)	(11		)
Comprehensive income (loss)	(655		)	1,302			5,423

Comprehensive income (loss) attributable to non-controlling interest	257			(1,004		)	280
Comprehensive income (loss) attributable to Heska Corporation	$	(912	)	$	2,306		$	5,143

See accompanying notes to consolidated financial statements.

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HESKA CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(in thousands)



	Common Stock			Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total Stockholders' Equity
	Shares	Amount		Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total Stockholders' Equity
Balances January 1, 2013	5,372	$	54	$	218,544		$	296		$	(170,032	)	$	48,862
Net loss	—	—		—			—			(939		)	(939		)
Issuance of common stock related to options, ESPP and other	55	—		323			—			—			323
Recognition of stock based compensation	—	—		408			—			—			408
Excess tax benefit from stock-based compensation	—	—		15			—			—			15
Stock issued for Heska Imaging	419	4		3,571			—			—			3,575
Stock issued for Heska Imaging Mark to Market	—	—		(3,405		)	—			—			(3,405		)
Accretion of non-controlling interest	—	—		(1,868		)	—			—			(1,868		)
Accrued distribution for Heska Imaging minority	—	—		—			—			(139		)	(139		)
Minimum pension liability adjustments	—	—		—			182			—			182
Unrealized gain on available for sale investments	—	—		—			30			—			30
Foreign currency translation adjustments	—	—		—			72			—			72
Balances, December 31, 2013	5,846	$	58	$	217,588		$	580		$	(171,110	)	$	47,116
Net income	—	—		—			—			1,599			1,599
Issuance of common stock related to options, ESPP and other	496	5		1,443			—			—			1,448
Recognition of stock based compensation	—	—		1,653			—			—			1,653
Excess tax benefit from stock-based compensation	—	—		228			—			—			228
Stock issued for Heska Imaging	—	—		3,405			—			—			3,405
Stock issued for Heska Imaging Mark to Market	—	—		(2,020		)	—			—			(2,020		)
Unrealized gain on available for sale investments	—	—		—			3			—			3
Foreign currency translation adjustments	—	—		—			(300		)	—			(300		)
Balances, December 31, 2014	6,342	$	63	$	222,297		$	283		$	(169,511	)	$	53,132
Net income	—	—		—			—			5,519			5,519
Issuance of common stock related to options, ESPP and other	283	3		1,255			—			—			1,258
Recognition of stock based compensation	—	—		2,269			—			—			2,269
Excess tax benefit from stock-based compensation	—	—		1,514			—			—			1,514
Accretion of non-controlling interest	—	—		(68		)	—			—			(68		)
Minimum pension liability adjustments	—	—		—			(129		)	—			(129		)
Unrealized gain on available for sale investments	—	—		—			44			—			44
Foreign currency translation adjustments	—	—		—			(11		)	—			(11		)
Balances, December 31, 2015	6,625	$	66	$	227,267		$	187		$	(163,992	)	$	63,528

See accompanying notes to consolidated financial statements.

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HESKA CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)



	Year Ended December 31,
	2013			2014			2015
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net income (loss)	$	(939	)	$	1,599		$	5,519
Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities:
Depreciation and amortization	2,497			3,712			4,187
Deferred tax (benefit) expense	(637		)	1,304			1,327
Stock based compensation	408			1,653			2,269
Unrealized (gain) loss on foreign currency translation	20			(81		)	36
Changes in operating assets and liabilities:
Accounts receivable	(159		)	(510		)	(4,216		)
Inventories	(1,687		)	(5,592		)	(7,240		)
Other current assets	(642		)	(73		)	(238		)
Accounts payable	(2,276		)	900			3,059
Accrued liabilities and other	(130		)	814			43
Other non-current assets	(179		)	(263		)	(2,430		)
Deferred revenue and other	2,312			2,091			(191		)
Net cash provided by (used in) operating activities	(1,412		)	5,554			2,125
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Investment in subsidiary	(3,019		)	—			—
Purchases of property and equipment	(1,930		)	(2,337		)	(3,773		)
Proceeds from disposition of property and equipment	5,020			6			—
Net cash provided by (used in) investing activities	71			(2,331		)	(3,773		)
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Proceeds from issuance of common stock, net of distributions	323			1,430			1,258
Proceeds from (repayments of) line of credit borrowings, net	2,246			(4,751		)	95
Proceeds from other debt	(1,025		)	(178		)	(141		)
Excess tax benefit from stock-based compensation	15			228			1,514
Net cash provided by (used in) financing activities	1,559			(3,271		)	2,726
EFFECT OF EXCHANGE RATE CHANGES ON CASH	14			(113		)	(43		)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	232			(161		)	1,035
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	5,784			6,016			5,855
CASH AND CASH EQUIVALENTS, END OF YEAR	$	6,016		$	5,855		$	6,890

See accompanying notes to consolidated financial statements.

- 51 -

HESKA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Heska Corporation and its wholly-owned and majority-owned subsidiaries ("Heska", the "Company", "we" or "our") develops, manufactures, markets, sells and supports veterinary products. Heska's core focus is on the canine and feline companion animal health markets.

Basis of Presentation

Our consolidated financial statements include our accounts and the accounts of our wholly-owned subsidiaries and majority-owned subsidiaries since their respective dates of acquisitions. All intercompany accounts and transactions have been eliminated in consolidation. Where our ownership of a subsidiary is less than 100%, the non-controlling interest is reported on our consolidated balance sheets. The non-controlling interest in our consolidated net income is reported as "Net income (loss) attributable to non-controlling interest" on our consolidated statements of operations. Our consolidated financial statements are stated in United States dollars and have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP").

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates are required when establishing the allowance for doubtful accounts and the provision for excess/obsolete inventory, in determining the period over which our obligations are fulfilled under agreements to license product rights and/or technology rights, evaluating long-lived and intangible assets for impairment, determining the allocation of purchase price under purchase accounting, estimating the expense associated with the granting of stock options and in determining the need for, and the amount of, a valuation allowance on deferred tax assets.

Concentration of Credit Risk

Financial instruments that potentially subject us to a concentration of credit risk consist of cash and cash equivalents and accounts receivable. We maintain the majority of our cash and cash equivalents with financial institutions that management believes are creditworthy in the form of demand deposits. We have no significant off-balance-sheet concentrations of credit risk such as foreign exchange contracts, options contracts or other foreign currency hedging arrangements. Our accounts receivable balances are due largely from domestic veterinary clinics and individual veterinarians.

One customer represented approximately 12% of our 2015 revenue and 11% of our 2014 revenue and another customer represented approximately 11% of our 2015 revenue, 12% of our 2014 revenue and 13% of our 2013 revenue.

One customer represented approximately 20% of our accounts receivable at December 31, 2015 and another customer represented 13% of accounts receivable at December 31, 2015 and 11% of our accounts receivable at December 31, 2014 . No other customers represented 10% or more of revenue for 2013 , 2014 or 2015 nor 10% or more of accounts receivable at December 31, 2014 or December 31, 2015 . We have established an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends, and other information.

- 52 -

HESKA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are recorded at net realizable value. From time to time, our customers are unable to meet their payment obligations. We continuously monitor our customers' credit worthiness and use our judgment in establishing a provision for estimated credit losses based upon our historical experience and any specific customer collection issues that we have identified. While such credit losses have historically been within our expectations and the provisions established, there is no assurance that we will continue to experience the same credit loss rates that we have in the past. A significant change in the liquidity or financial position of our customers could have a material adverse impact on the collectability of accounts receivable and our future operating results.

Changes in allowance for doubtful accounts are summarized as follows (in thousands):



	Years Ended December 31,
	2013		2014		2015
Balances at beginning of period	$	155	$	209	$	216
Additions - charged to expense	98		143		83
Deductions - write offs, net of recoveries	(44)		(136)		(110)
Balances at end of period	$	209	$	216	$	189

Cash and Cash Equivalents

Cash and cash equivalents are stated at cost, which approximates market value, and include short-term, highly liquid investments with original maturities of less than three months. We valued our Euro and Japanese Yen cash accounts at the spot market foreign exchange rate as of each balance sheet date, with changes due to foreign exchange fluctuations recorded in current earnings. We held 652,110 and 1,779,910 Euros at December 31, 2014 and 2015 , respectively. We held 1,252,221 and 1,252,221 Yen at December 31, 2014 and 2015 , respectively. We held 166,832 and 127,507 Swiss Francs at December 31, 2014 and 2015 , respectively. We held 22,761 and 26,477 Canadian Dollars at December 31, 2014 and 2015 , respectively. The majority of our cash and cash equivalents are held at U.S.-based or Swiss-based financial institutions in accounts not insured by governmental entities.

Fair Value of Financial Instruments

Our financial instruments consist of cash and cash equivalents, short-term trade receivables and payables and the Company's revolving line of credit. The carrying values of cash and cash equivalents and short-term trade receivables and payables approximate fair value. The fair value of our line of credit balance is estimated based on current rates available for similar debt with similar maturities and collateral, and at December 31, 2014 and 2015 , approximates the carrying value due primarily to the floating rate of interest on such debt instruments.

Inventories

Inventories are stated at the lower of cost or market value using the first-in, first-out method. Inventory we manufacture includes the cost of material, labor and overhead. If the cost of inventories exceeds estimated fair value, provisions are made to reduce the carrying value to estimated fair value.

- 53 -

HESKA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Inventories, net consist of the following (in thousands):



	December 31,
	2014			2015
Raw materials	$	6,298		$	8,531
Work in process	2,966			2,839
Finished goods	4,949			6,122
Allowance for excess or obsolete inventory	(1,555		)	(1,391		)
	$	12,658		$	16,101

Property and Equipment

Property and equipment is stated at cost, net of accumulated depreciation. The costs of additions and improvements are capitalized, while maintenance and repairs are charged to expense as incurred. When an item is sold or retired, the cost and related accumulated depreciation is relieved, and the resulting gain or loss, if any, is recognized in the consolidated statements of income. We provide for depreciation primarily using the straight-line method by charges to income in amounts that allocate the cost of property and equipment over their estimated useful lives as follows:



Asset Classification	Estimated Useful Life
Building	10 to 20 years
Machinery and equipment	3 to 15 years
Leasehold and building improvements	7 to 15 years

We capitalize certain costs incurred in connection with developing or obtaining software designated for internal use based on three distinct stages of development. Qualifying costs incurred during the application development stage, which consist primarily of internal payroll and direct fringe benefits and external director project costs, including labor and travel, are capitalized and amortized on a straight-line basis over the estimated useful life of the asset. Costs incurred during the preliminary project and post and post-implementation and operation phases are expensed as incurred. These costs are general and administrative in nature and related primarily to the determination of performance requirements, data conversion and training.

Goodwill, Intangible and Other Long-Lived Assets

We assess goodwill for impairment annually, at the reporting unit level, in the fourth quarter and whenever events or circumstances indicate impairment may exist. In evaluating goodwill for impairment, we have the option to first assess the qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. The more-likely-than-not threshold is defined as having a likelihood of more than 50 percent. If, after assessing the totality of events or circumstances, we determine that is more likely than not that the fair value of a reporting is less than its carrying amount, we would then perform step one of the two-step impairment test; otherwise, no further impairment test would be required. In contrast, we can opt to bypass the qualitative assessment for any reporting unit in any period and proceed directly to step one of the two-step impairment test. Doing so does not preclude us from performing the qualitative assessment in any subsequent period.

In the fourth quarter of 2015 , we performed a qualitative assessment of the goodwill residing within the assets of our CCA segment and determined that no indications of impairment existed.

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HESKA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Intangible assets are valued based on estimates of future cash flows and amortized over their estimated useful lives. We continually evaluate whether events and circumstances have occurred that indicate the remaining estimated useful life of intangible assets as well as other long-lived assets may warrant revision, or that the remaining balance of these assets may not be recoverable. When deemed necessary, we complete this evaluation by comparing the carrying amount of the assets with the estimated undiscounted future cash flows associated with them. If such evaluations indicate that the future undiscounted cash flows of amortizable long-lived assets are not sufficient to recover the carrying value of such assets, the assets are adjusted to their estimated fair values.

The estimation of useful lives and expected cash flows requires us to make significant judgments regarding future periods that are subject to some factors outside of our control. Changes in these estimates can result in significant revisions to our carrying value of these assets and may result in material charges to our results of operations.

Revenue Recognition


•	Persuasive evidence of an arrangement exists;


•	Delivery has occurred or services rendered;


•	Price is fixed or determinable; and


•	Collectability is reasonably assured.

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HESKA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Recording revenue from license arrangements involves the use of estimates. The primary estimate made by management is determining the useful life of the related agreement, product, patent or technology. We evaluate all of our licensing arrangements by estimating the useful life of either the product or the technology, the length of the agreement or the legal patent life and defer the revenue for recognition over the appropriate period.

In addition to our direct sales force, we utilize distributors to sell our products. Distributors purchase goods from us, take title to those goods and resell them to their customers in the distributors' territory.

Upfront payments we receive under arrangements for product, patent or technology rights in which we retain an interest in the underlying product, patent or technology are initially deferred, and revenue is subsequently recognized over the estimated life of the agreement, product, patent or technology. Similarly, upfront payments we receive under agreements where we are obligated to maintain a product or technology sold to a third party and/or transfer know-how or technology to a third party are initially deferred and revenue is subsequently recognized over the estimated life of the agreement. Milestone payments related to an improvement in a product in which we retain an interest in the product are initially deferred and recognized over the estimated life of the agreement or product. We received upfront and milestone payments totaling $7.0 million and $3.0 million in 2013 and 2014 , respectively. We did not receive any such payments in 2015 . Revenue from royalties is recognized once we are informed of sales on which we are entitled to royalties.

Stock-Based Compensation

Accounting for stock-based compensation requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors based on estimated fair values. We estimate the fair value of all stock options and awards on the date of grant using the Black-Scholes-Merton pricing model, which is affected by our stock price, as well as assumptions regarding a number of complex and subjective variables. These variables include our expected stock price volatility over the estimated term of the awards, the estimated term of the awards, which is dependent in part on employee option exercise behaviors, risk free interest rates and expected dividends. Our expected volatility assumption is based on the historical closing prices of our stock over a period equivalent to the expected life of the options.

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HESKA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Advertising Costs

We expense advertising costs as incurred and are included in sales and marketing expenses. Advertising expenses were $0.4 million , $ 0.1 million and $0.1 million for the years ended December 31, 2013 , 2014 and 2015 , respectively.

Income Taxes

The Company records a current provision for income taxes based on estimated amounts payable or refundable on tax returns filed or to be filed each year. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates, in each tax jurisdiction, expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date. The overall change in deferred tax assets and liabilities for the period measures the deferred tax expense or benefit for the period. Deferred tax assets are reduced by a valuation allowance based on a judgmental assessment of available evidence if the Company is unable to conclude that it is more likely than not that some or all of the deferred tax assets will be realized.

Foreign Currency Translation

The functional currency of our Swiss subsidiary is the Swiss Franc. Assets and liabilities of our Swiss subsidiary are translated using the exchange rate in effect at the balance sheet date. Revenue and expense accounts and cash flows are translated using an average of exchange rates in effect during the period. Cumulative translation gains and losses are shown in the consolidated balance sheets as a separate component of stockholders' equity. Exchange gains and losses arising from transactions denominated in foreign currencies (i.e., transaction gains and losses) are recognized as a component of other income (expense) in current operations, as are exchange gains and losses on intercompany transactions expected to be settled in the near term.

Taxes Collected from Customers

In the course of doing business we collect various taxes from customers including, but not limited to, sales taxes. It is our policy to record revenue net of taxes collected from customers in our consolidated statements of operations.

Shipping and Handling Costs

Amounts billed to customers for shipping and handling are recorded in sales. Shipping and handling costs incurred by us for the delivery of products to customers are included in cost of sales.

Recent Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02 "Leases," which supersedes ASC 840 "Leases" and creates a new topic, ASC 842 "Leases." This update requires lessees to recognize a lease liability and a lease asset for all leases, including operating leases, with a term greater than 12 months on its balance sheet. The update also expands the required quantitative and qualitative disclosures surrounding leases. This update is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years, with earlier application permitted. This update will be applied using a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period

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HESKA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

presented in the financial statements. We are currently evaluating the effect of this update on our consolidated financial statements.

In November 2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes. The amendments in this update simplify the presentation of deferred income taxes and require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. This update applies to all entities that present a classified statement of financial position. These amendments may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. If the guidance is applied prospectively, disclosure is made in the first interim and first annual period of change, the nature of and reason for the change in accounting principle and a statement that prior periods were not retrospectively adjusted. If the guidance is applied retrospectively, disclosure is made in the first interim and first annual period of change, the nature of and reason for the change in accounting principle and quantitative information about the effects of the accounting change on prior periods. The amendments are effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Earlier application is permitted for all entities as of the beginning of an interim or annual reporting period. We have decided to early-adopt ASU 2015-17, which resulted in a retrospective adjustment of amounts disclosed in our consolidated balance sheet for the year ended December 31, 2014.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). Upon the effective date, the ASU replaces almost all existing revenue recognition guidance, including industry specific guidance, in generally accepted accounting principles. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date. The amendments in this update deferred the effective date for implementation of ASU 2014-09 by one year and are now effective for annual reporting periods beginning after December 15, 2017. Early application is permitted only as of annual reporting periods beginning after December 15, 2016 including interim reporting periods within that period. We are currently assessing the impact that the adoption of this standard will have on our consolidated financial statements and related disclosures upon implementation.

2. ACQUISITION AND RELATED PARTY ITEMS

On February 24, 2013, the Company acquired a 54.6% interest in Cuattro Veterinary USA, LLC ("Cuattro Vet USA") for approximately $7.6 million in cash and stock, including more than $4 million in cash (the "Acquisition"). Included in the cash consideration was $1 million the Company paid to Cuattro Vet USA in 2012 which was reported as part of "net cash used in operating activities" on the Company's 2012 consolidated statements of cash flows. Immediately following and as a result of the transaction, former Cuattro Vet USA unit holders owned approximately 7.2% of the Company's Public Common Stock. The remaining minority position (45.4)% in Cuattro Vet USA is subject to purchase by Heska under performance-based puts and calls following calendar year 2015, 2016 and 2017. Should Heska undergo a change in control, as defined, prior to the end of 2017, Cuattro Vet USA minority unit holders will be entitled to sell their Cuattro Vet USA units to Heska.

The Company recorded assets acquired, liabilities assumed and non-controlling interests at their estimated fair values. The intangible assets and non-controlling interest were valued based on a report from an independent third party.

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HESKA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The following summarizes the aggregate consideration paid by the Company and the allocation of the purchase price (in thousands):



Consideration
Cash	$	4,073
Stock	3,571
Total	$	7,644

Inventories	$	1,466
Notes from Cuattro Veterinary, LLC, due March 15, 2016	1,360
Other tangible assets	1,278
Intangible assets	688
Goodwill	19,994
Notes payable and other borrowings	(1,527		)
Accounts payable	(1,424		)
Other assumed liabilities	(2,399		)
Total net assets acquired	$	19,436
Non-controlling interest	(11,792		)
Total	$	7,644

Intangible assets acquired, amortization method and estimated useful lives as of February 24, 2013 was as follows (in thousands, except useful life):



	Useful Life	Amortization Method	Fair Value
Trade name	2.75	Straight-line	$	688

The Company believes goodwill is a function of several factors. Cuattro Vet USA had assembled a workforce highly knowledgeable in the veterinary imaging area. These individuals had acquired the training necessary to identify opportunities for the Cuattro Vet USA to sell products, including training related to which components from existing systems could be utilized within the Cuattro Vet USA's solution to minimize the out-of-pocket cost to the customer. Cuattro Vet USA had demonstrated an ability to combine disparate assets including but not limited to digital radiography detectors, positioning aides such as tunnels and tables, viewing computers and other accessories along with embedded software and support, data hosting and other services to provide customers with a simple, efficient and convenient experience in utilizing advanced data imaging technology far in excess of what a typical customer could have created individually with similar but separately purchased assets and services. The Company anticipated bundling and cross promotion programs, including potentially in one customer contract, could enhance the revenue of both the Company and Cuattro Vet USA following the Acquisition. The ability of Cuattro Vet USA to generate estimated future cash flows due to these factors supports the goodwill calculated at the closing of the Acquisition and the current carrying value of the goodwill on the Company's consolidated balance sheets. The Company estimates it had approximately $6.9 million in tax deductible goodwill from the Acquisition at the closing of the Acquisition.

Cuattro Vet USA was subsequently renamed Heska Imaging US, LLC ("Heska Imaging") and markets, sells and supports digital radiography and ultrasound products along with embedded software and support, data hosting and other services.

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HESKA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Shawna M. Wilson, Clint Roth, DVM, Steven M. Asakowicz, Rodney A. Lippincott, Kevin S. Wilson and Cuattro, LLC own approximately 29.75% , 8.39% , 4.09% , 3.07% , 0.05% and 0.05% of Heska Imaging, respectively. Kevin S. Wilson is the Chief Executive Officer and President of the Company and the spouse of Shawna M. Wilson. Steven M. Asakowicz serves as Executive Vice President, Companion Animal Health Sales for the Company. Rodney A. Lippincott serves as Executive Vice President, Companion Animal Health Sales for the Company. Mr. Wilson, Mrs. Wilson and trusts for their children and family own a 100% interest in Cuattro, LLC. Cuattro, LLC owns a 100% interest in Cuattro Software, LLC. Mr. Wilson, Mrs. Wilson and trusts for their children and family own a majority interest in Cuattro Veterinary, LLC and Cuattro Medical, LLC.

In 2013, following the Acquisition closing, Cuattro, LLC charged Heska Imaging $6.8 million , primarily related to digital imaging products, for which there is an underlying supply contract with minimum purchase obligations, software and services as well as other operating expenses; Heska Corporation charged Heska Imaging $2.2 million , primarily related to sales expenses; Heska Corporation net charged Cuattro, LLC $140 thousand , primarily related to facility usage and other services. In 2014, Cuattro, LLC charged Heska Imaging $10.5 million , primarily related to digital imaging products, for which there is an underlying supply contract with minimum purchase obligations, software and services as well as other operating expenses; Heska Corporation charged Heska Imaging $3.9 million , primarily related to sales expenses; Heska Corporation net charged Cuattro, LLC $0.2 million , primarily related to facility usage and other services. In 2015 , Cuattro, LLC charged Heska Imaging $9.0 million , primarily related to digital imaging products, for which there is an underlying supply contract with minimum purchase obligations, software and services as well as other operating expenses; Heska Corporation charged Heska Imaging $4.9 million , primarily related to sales expenses; Heska Corporation charged Cuattro, LLC $0.2 million , primarily related to facility usage and other services.

At December 31, 2015 , Heska Imaging had a $1.5 million note receivable, including accrued interest, from Cuattro Veterinary, LLC, which was due on March 15, 2016 and which is listed as "Note receivable - related party" on the Company's consolidated balance sheets. We currently do not anticipate collecting this note in 2016 due to our pending acquisition of Cuattro Veterinary, LLC. Heska Corporation had net accounts receivable from Cuattro, LLC of $40 thousand which is included in "Due from - related parties" on the Company's consolidated balance sheets; Heska Imaging had net prepaid receivables from Cuattro, LLC of $0.3 million which is included in "Due to - related party" on the Company's consolidated balance sheets; Heska Corporation had accounts receivable from Heska Imaging of $6.3 million , including accrued interest, which eliminated in consolidation of the Company's financial statements; all monies owed accrue interest at the same interest rate Heska Corporation pays under its credit and security agreement with Wells Fargo Bank, National Association ("Wells Fargo") once past due with the exception of the note receivable, which accrues at this rate to its maturity date.

The aggregate position in Heska Imaging of the unit holders who hold the 45.4% of Heska Imaging that Heska Corporation does not own (the "Put Value") is being accreted to its estimated redemption value in accordance with Heska Imaging's Operating Agreement. Since the Operating Agreement contains certain put rights that are out of the control of the Company, authoritative guidance requires the non-controlling interest, which includes the estimated value of such put rights, to be displayed outside of the equity section of the consolidated balance sheets. The adjustment to increase or decrease the Put Value to its expected redemption value and to estimate any distributions required under Heska Imaging's Operating Agreement to the unit holders who hold the 45.4% of Heska Imaging that Heska Corporation does not own (the "Imaging Minority") each reporting period is recorded to stockholders' equity in accordance with United States Generally Accepted Accounting Principles.

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HESKA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The following is a reconciliation of the non-controlling interest balance (in thousands):



Beginning December 31, 2014	$	15,679
Accretion of Put Value	68
Balance December 31, 2015	$	15,747

In addition, Heska Imaging made a distribution of approximately $2 thousand during the twelve months ended December 31, 2014, approximately $1 thousand of which was to the Imaging Minority and which has been recorded on the "Proceeds from issuance of common stock, net of distributions" line item of the Company's consolidated statements of cash flows.

The following unaudited pro forma financial information presents the combined results of the Company and Heska Imaging for the full year ended December 31, 2013 as if the acquisition had closed on January 1, 2013 (in thousands, except per share data):



	Year Ended December 31,
	2013
Revenue, net	$	79,239
Net loss attributable to Heska Corporation	(1,948		)
Basic loss per share attributable to Heska Corporation	(0.34		)
Diluted loss per share attributable to Heska Corporation	(0.34		)

3. INCOME TAXES

As of December 31, 2015 , the Company had a domestic net operating loss carryforward ("NOL"), of approximately $104.8 million , a domestic alternative minimum tax credit of approximately $0.4 million and a domestic research and development tax credit carryforward of approximately $0.4 million for federal tax purposes. The Company's federal NOL is expected to expire as follows if unused: $98.8 million in 2018 through 2022 , $5.5 million in 2024 and 2025 and $0.5 million in 2027 and later. The NOL and tax credit carryforwards are subject to alternative minimum tax limitations and to examination by the tax authorities. In addition, the Company had a "change of ownership" as defined under the provisions of Section 382 of the Internal Revenue Code of 1986, as amended (an "Ownership Change").

The Company does not believe this Ownership Change will place a significant restriction on its ability to utilize its NOL in the future. The Company has established a valuation allowance against those NOL's for which it is estimated to be more likely than not that they will expire unutilized.

The Company is subject to income taxes in the U.S. federal jurisdiction, and various foreign, state and local jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. Cash paid for income taxes for the twelve months ended December 31, 2013, 2014 and 2015 was $84 thousand , $272 thousand and $55 thousand , respectively.

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HESKA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The components of income (loss) before income taxes were as follows (in thousands):



	Year Ended December 31,
	2013			2014		2015

Domestic	$	(1,508	)	$	2,837	$	8,325
Foreign	115			113		102
	$	(1,393	)	$	2,950	$	8,427

Temporary differences that give rise to the components of net deferred tax assets are as follows (in thousands):



	December 31,
	2014			2015
Inventory	$	643		$	954
Accrued compensation	124			267
Stock Options	57			344
Research and development	472			440
Alternative minimum tax credit	308			367
Deferred revenue	4,396			3,638
Property and equipment	1,777			1,967
Net operating loss carryforwards – domestic	40,277			37,845
Capital Lease	—			(384		)
Other	(131		)	(8		)
	47,923			45,430
Valuation allowance	(20,713		)	(19,547		)
Total net deferred tax assets	$	27,210		$	25,883

The components of the income tax expense (benefit) are as follows (in thousands):



	Year Ended December 31,
	2013			2014		2015
Current income tax expense:
Federal	$	95		11		$	1,492
State	62			7		65
Foreign	26			29		24
Total current expense	183			47		1,581
Deferred income tax expense (benefit):
Federal	(583		)	1,181		1,043
State	(54		)	123		284
Foreign	—			—		—
Total deferred expense (benefit)	(637		)	1,304		1,327
Total income tax expense (benefit)	$	(454	)	$	1,351	$	2,908

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HESKA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The Company's income tax expense (benefit) relating to income (loss) for the periods presented differs from the amounts that would result from applying the federal statutory rate to that income (loss) as follows:



	Year Ended December 31,
	2013		2014		2015
Statutory federal tax rate	34	%	34	%	34	%
State income taxes, net of federal benefit	3	%	5	%	3	%
Non-controlling interest in Heska Imaging US, LLC	6	%	12	%	(1	)%
Other permanent differences	(10	)%	(3	)%	(1	)%
Change in tax rate	—	%	2	%	(1	)%
Foreign rate difference	(1	)%	—	%	—	%
Change in valuation allowance	(13	)%	78	%	(14	)%
Other	13	%	(82	)%	15	%
Effective income tax rate	32	%	46	%	35	%

ASC 740 provides detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in the financial statements. Tax positions must meet a "more-likely-than-not" recognition threshold before a benefit is recognized in the financial statements. As of December 31, 2015 , the Company has not recorded a liability for uncertain tax positions. The Company would recognize interest and penalties related to uncertain tax positions in income tax expense (benefit). No interest and penalties related to uncertain tax positions were accrued at December 31, 2015 .

4. EARNINGS PER SHARE

Basic earnings per share ("EPS") is computed by dividing net income attributable to Heska Corporation by the weighted-average number of common shares outstanding during the period. The computation of diluted EPS is similar to the computation of basic EPS except that the numerator is increased to exclude charges that would not have been incurred, and the denominator is increased to include the number of additional common shares that would have been outstanding (using the if-converted and treasury stock methods), if securities containing potentially dilutive common shares (stock options and restricted stock units but excluding options to purchase fractional shares resulting from the Company's December 2010 1-for-10 reverse stock split) had been converted to common shares, and if such assumed conversion is dilutive.

The following is a reconciliation of the weighted-average shares outstanding used in the calculation of basic and diluted earnings per share for the years ended December 31, 2013 , 2014 , and 2015 (in thousands, except per share data):



	Years ended December 31,
	2013			2014		2015
Net income (loss) attributable to Heska Corporation	$	(1,196	)	$	2,603	$	5,239

Basic weighted-average common shares outstanding	5,755			5,951		6,509
Assumed exercise of dilutive stock options and restricted stock units	—			458		565
Diluted weighted-average common shares outstanding	5,755			6,409		7,074

Basic earnings (loss) per share	$	(0.21	)	$	0.44	$	0.80
Diluted earnings (loss) per share	$	(0.21	)	$	0.41	$	0.74

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HESKA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The following stock options and restricted units were excluded from the computation of diluted earnings per share because they would have been anti-dilutive (in thousands):



	Years ended December 31,
	2013	2014	2015
Stock options	1,103	367	144

5. GOODWILL AND OTHER INTANGIBLES

The Company's recorded goodwill relates to the February 2013 acquisition of a majority interest in Cuattro Veterinary USA, LLC, which was subsequently renamed Heska Imaging US, LLC and the 1997 acquisition of Heska AG, the Company's Swiss subsidiary.

The following summarizes the changes in goodwill during the years ended December 31, 2014 and 2015 (in thousands):



	Year Ended December 31,
	2014			2015
Carrying amount, beginning of period	$	21,009		$	20,903
Adjustments due to foreign currency fluctuations	(106		)	7
Carrying amount, end of period	$	20,903		$	20,910

Other intangibles consisted of the following as of December 31, 2014 and 2015 (in thousands):



	Year Ended December 31,
	2014			2015
Gross carrying amount	$	788		$	788
Accumulated amortization	(486		)	(732		)
Net carrying amount	$	302		$	56

Amortization expense relating to other intangibles is as follows (in thousands):



	Years Ended December 31,
	2013		2014		2015
Amortization expense	$	226	$	260	$	246

Estimated amortization expense related to intangibles for each of the five years from 2016 through 2020 and thereafter is as follows (in thousands):



Year Ending December 31,
2016	$	10
2017	10
2018	10
2019	10
2020	10
Thereafter	6
	$	56

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HESKA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

6. PROPERTY AND EQUIPMENT

Detail of property and equipment is as follows (in thousands):



	December 31,
	2014			2015
Land	$	377		$	377
Building	2,868			2,868
Machinery and equipment	30,655			35,284
Leasehold and building improvements	5,871			6,673
Construction in progress	185			1,496
	39,956			46,698
Less accumulated depreciation and amortization	(26,546		)	(29,678		)
Total property and equipment, net	$	13,410		$	17,020

The Company has utilized marketing programs whereby its instruments in inventory may be placed in a customer's location on a rental basis. The cost of these instruments is transferred to machinery and equipment or other long-term assets and depreciated, typically over a five to seven year period depending on the circumstance under which the instrument is placed with the customer. During 2013 , 2014 and 2015 , total costs transferred from inventory were approximately $4.0 million , $4.6 million and $4.1 million respectively.

The Company has sold certain customer rental contracts and underlying assets to a third party under the agreement that once the customer has met the customer obligations under the contract, ownership of the assets underlying the contract would be returned to the Company. The Company enters a debit to cash and a corresponding credit to deferred revenue at the time of these sales. These sales provided $1.8 million and $0.1 million of cash which was reported in the "deferred revenue and other" line item of the Company's consolidated statements of cash flows in 2014 and 2015 , respectively, all related to the Company's 54.6% -owned subsidiary, Heska Imaging US, LLC. As the Company anticipates it will regain ownership of the assets underlying these sales, it reports these assets as part of property and equipment and depreciates these assets per its depreciation policies. The Company had $3.0 million and $2.2 million of net property and equipment related to these transactions as of December 31, 2014 and December 31, 2015 , respectively, all related to the Company's 54.6% -owned subsidiary, Heska Imaging US, LLC.

Depreciation and amortization expense for property and equipment was $2.3 million , $3.4 million and $4.0 million for the years ended December 31, 2013 , 2014 and 2015 , respectively.

The Company capitalizes third-party software costs, where appropriate, and reports such costs, net of accumulated amortization, on the "property and equipment, net" line of its consolidated balance sheets. We had $0.6 million and $0.4 million of such capitalized costs, net of accumulated amortization, on the "property and equipment, net" line of our consolidated balance sheets as of December 31, 2014 and December 31, 2015 , respectively. Capitalized software costs in a given year are reported on the "purchases of property and equipment" line item of the Company's consolidated statements of cash flows. We had $809 thousand , $31 thousand and $51 thousand of capitalized software costs reported on the "purchases of property and equipment" line item of our consolidated statements of cash flows for the years ended December 31, 2013 , 2014 and 2015 , respectively.

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HESKA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

7. ACCRUED LIABILITIES

Accrued liabilities consisted of the following as of December 31, 2014 and 2015 (in thousands):



	2014		2015
Accrued payroll and employee benefits	$	1,322	$	1,626
Accrued property taxes	593		594
Other	3,215		3,196
Total accrued liabilities	$	5,130	$	5,416

Other accrued liabilities consists of items that are individually less than 5% of total current liabilities.

8. CAPITAL STOCK

Stock Option Plans

We have two stock option plans which authorize granting of stock options and stock purchase rights to our employees, officers, directors and consultants to purchase shares of common stock. In 1997, the board of directors adopted the 1997 Stock Incentive Plan (the "1997 Plan") and terminated two prior option plans. All shares that remained available for grant under the terminated plans were incorporated into the 1997 Plan, including shares subsequently canceled under prior plans. In May 2012 , the stockholders approved an amendment to the 1997 Plan allowing for an increase of 250,000 shares and an annual increase through 2016 based on the number of non-employee directors serving as of our Annual Meeting of Stockholders, subject to a maximum of 45,000 shares per year. In May 2003 , the stockholders approved a new plan, the 2003 Equity Incentive Plan, which allows for the granting of options for up to 239,050 shares of the Company's common stock. The number of shares reserved for issuance under both plans as of December 31, 2015 was 41,440 .

The stock options granted by the board of directors may be either incentive stock options ("ISOs") or non-qualified stock options ("NQs"). The exercise price for options under all of the plans may be no less than 100% of the fair value of the underlying common stock for ISOs or 85% of fair value for NQs. Options granted will expire no later than the tenth anniversary subsequent to the date of grant or three months following termination of employment, except in cases of death or disability, in which case the options will remain exercisable for up to twelve months. Under the terms of the 1997 Plan, in the event we are sold or merged, outstanding options will either be assumed by the surviving corporation or vest immediately.

There are four key inputs to the Black-Scholes model which we use to estimate the fair value for options which it issues: expected term, expected volatility, risk-free interest rate and expected dividends, all of which require us to make estimates. Our estimates for these inputs may not be indicative of actual future performance and changes to any of these inputs can have a material impact on the resulting estimated fair value calculated for the option. Our expected term input was estimated based on our historical experience for time from option grant to option exercise for all employees in 2013 , 2014 and 2015 ; We treated all employees in one grouping in all three years. Our expected volatility input was estimated based on our historical stock price volatility in 2013 , 2014 and 2015 . Our risk-free interest rate input was determined based on the U.S. Treasury yield curve at the time of option issuance in 2013 , 2014 and 2015 . Our expected dividends input were zero in all periods as we did not anticipate paying dividends in the foreseeable future.

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HESKA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Weighted average assumptions used in 2013 , 2014 and 2015 for each of these four key inputs are listed in the following table:



	2013	2014	2015
Risk-free interest rate	0.75%	1.21%	1.41%
Expected lives	3.4 years	3.4 years	3.4 years
Expected volatility	46%	43%	41%
Expected dividend yield	0%	0%	0%

A summary of our stock option plans, excluding options to purchase fractional shares resulting from our December 2010 1-for- 10 reverse stock split, is as follows



	Year Ended December 31,
	2013				2014				2015
	Options		Weighted Average Exercise Price		Options		Weighted Average Exercise Price		Options		Weighted Average Exercise Price
Outstanding at beginning of period	1,245,161		$	11.054	1,321,232		$	10.386	1,074,251		$	10.110
Granted at Market	275,654		$	7.532	134,800		$	16.398	146,446		$	36.904
Canceled	(166,286	)	$	11.437	(218,926	)	$	17.786	(28,440	)	$	10.080
Exercised	(33,297	)	$	6.488	(162,855	)	$	7.234	(251,647	)	$	10.559
Outstanding at end of period	1,321,232		$	10.386	1,074,251		$	10.110	940,610		$	14.163
Exercisable at end of period	939,458		$	11.556	729,175		$	9.800	621,559		$	10.269

The total estimated fair value of stock options granted during the years ended December 31, 2013, 2014 and 2015 were computed to be approximately $0.7 million , $0.7 million and $1.6 million , respectively. The amounts are amortized ratably over the vesting periods of the options. The weighted average estimated fair value of options granted during the years ended December 31, 2013 , 2014 and 2015 was computed to be approximately $2.54 , $5.28 and $11.35 , respectively. The total intrinsic value of options exercised during the years ended December 31, 2013 , 2014 and 2015 was $42 thousand , $0.7 million and $4.7 million , respectively. The cash proceeds from options exercised during the years ended December 31, 2013 , 2014 and 2015 was $0.2 million , $1.2 million and $1.8 million .

The following table summarizes information about stock options outstanding and exercisable at December 31, 2015 , excluding outstanding options to purchase an aggregate of 6.0 fractional shares resulting from our December 2010 1-for- 10 reverse stock split with a weighted average remaining contractual life of 0.85 years, a weighted average exercise price of $16.77 and exercise prices ranging from $11.00 to $22.50 . We intend to issue whole shares only from option exercises. The following table includes 109,500 shares underlying options issued in December 2015 with a strike price of $39.76 and expiration date of December 28, 2025 which will only vest and become exercisable if our stockholders approve an increase in the total number of authorized shares of our Public Common Stock to at least 8.5 million shares on or before December 31, 2022.

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HESKA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)



	Options Outstanding				Options Exercisable
Exercise Prices	Number of Options Outstanding at December 31, 2015	Weighted Average Remaining Contractual Life in Years	Weighted Average Exercise Price		Number of Options Exercisable at December 31, 2015	Weighted Average Exercise Price
$ 4.40 - $ 6.90	225,302	4.90	$	5.600	222,671	$	5.593
$ 6.91 - $ 8.26	188,524	7.87	$	7.384	96,689	$	7.383
$ 8.27 - $11.65	168,496	6.76	$	9.079	136,800	$	9.178
$11.66 - $18.30	205,826	5.42	$	17.483	132,229	$	17.206
$18.31 - $39.76	152,462	9.51	$	36.336	33,170	$	26.916
$ 4.40 - $39.76	940,610	6.69	$	14.163	621,559	$	10.269

As of December 31, 2015 , there was $2.2 million of total unrecognized compensation expense related to outstanding stock options. That cost is expected to be recognized over a weighted-average period of 1.9 years with all cost to be recognized by the end of December 2018, assuming all options vest according to the vesting schedules in place at December 31, 2015 . As of December 31, 2015 , the aggregate intrinsic value of outstanding options was $23.2 million and the aggregate intrinsic value of exercisable options was $17.7 million .

Employee Stock Purchase Plan (the "ESPP")

Under the 1997 Employee Stock Purchase Plan, we are authorized to issue up to 450,000 shares of common stock to our employees, of which 389,563 had been issued as of December 31, 2015 . On May 5, 2015, our shareholders approved the amendment and restatement of the ESPP, including a 75,000 share increase to 450,000 total shares authorized under the ESPP as well as changes discussed below as compared to the ESPP prior to the amendment and restatement. Employees who are expected to work at least 20 hours per week and five months per year are eligible to participate and can choose to have up to 10% of their compensation withheld to purchase our stock under the ESPP when they choose to withhold a whole percentage of their compensation.

During the period from January 1, 2013 to June 30, 2013 , our ESPP had a five -year offering period and six -month accumulation periods ending on each June 30 and December 31. The purchase price of stock on June 30 and December 31 was 85% of the fair market value at purchase.

Beginning on July 1, 2013, our ESPP had a 27 -month offering period and three -month accumulation periods ending on each March 31, June 30, September 30 and December 31. The purchase price of stock on March 31, June 30, September 30 and December 31 was the lesser of (1) 85% of the fair market value at the time of purchase and (2) the greater of (i) 95% of the fair market value at the beginning of the applicable offering period or (ii) 65% of the fair market value at the time of purchase. In addition, participating employees may purchase shares under the ESPP at the beginning of an applicable offering period for a purchase price of stock equal to 95% of the fair market value at such time or at 5 pm on a day other than March 31, June 30, September 30 and December 31 during the applicable offering period for a purchase price of stock equal to 95% of the fair market value at purchase.

Beginning April 1, 2015, employees may elect to withhold a positive fixed amount from each compensation payment in addition to the previous approach of withholding a whole percentage of such compensation payment, with all withholding for a given employee subject to a maximum monthly amount of $2,500 following the amendment and restatement as opposed to a $25,000 maximum annual amount prior to

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HESKA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

the amendment and restatement. For offering periods beginning on or after April 1, 2015, the purchase price of stock on March 31, June 30, September 30 and December 31 is to be the lesser of (1) 85% of the fair market value at the time of purchase and (2) the greater of (i) 85% of the fair market value at the beginning of the applicable offering period, (ii) the fair market value at the beginning of the applicable offering period less 1 cent and (iii) 65% of the fair market value at the time of purchase. In addition, participating employees may elect to purchase shares under the ESPP at the beginning of an applicable offering period for a purchase price of stock equal to the greater of (1) 85% of the fair market value at the beginning of the applicable offering period and (2) the fair market value at the beginning of the applicable offering period less 1 cent or at 5 pm on a day other than March 31, June 30, September 30 and December 31 during the applicable offering period for a purchase price of stock equal to the greater of (1) 85% of the fair market value at the time of purchase and (2) the fair market value at the time of purchase less 1 cent.

For the years ended December 31, 2013 , 2014 and 2015 , we issued 27,714 , 29,847 , and 16,673 shares under the ESPP, respectively.

Since July 1, 2013 , we estimated the fair values of stock purchase rights granted under the ESPP using the Black-Scholes pricing model and the following weighted average assumptions:



	2013	2014	2015
Risk-free interest rate	0.21%	0.23%	0.27%
Expected lives	1.3 years	1.3 years	1.2 years
Expected volatility	34%	34%	36%
Expected dividend yield	0%	0%	0%

For the years ended December 31, 2013 , 2014 and 2015 , the weighted-average fair value of the purchase rights granted was $1.28 , $2.61 and $6.25 per share, respectively.

Restricted Stock Issuance

On March 26, 2014, we issued 63,572 shares to Robert B. Grieve, Ph.D., who was our Executive Chair, pursuant to an employment agreement between Dr. Grieve and the Company effective as of March 26, 2014 (the "Grieve Employment Agreement"). The shares were issued in five tranches and are subject to time-based vesting and other provisions outlined in the Grieve Employment Agreement. All shares were to vest in full as of April 30, 2017. Effective on October 1, 2015, the Grieve Employment Agreement was terminated and, in connection therewith, the Company entered into a Separation and Release Agreement dated as of October 1, 2015 (the "Release Agreement") with Dr. Grieve. Pursuant to the Release Agreement, the Company agreed to treat the termination of the Grieve Employment Agreement as a termination without cause, entitling Dr. Grieve to the immediate vesting of 55,715 shares, 14,373 of which were withheld for tax purposes. As a result of the termination of the Grieve Employment Agreement, and as acknowledged in the Release Agreement, effective October 1, 2015, Dr. Grieve began serving as a consultant to the Company pursuant to the Consulting Agreement (Founder Emeritus) dated as of March 26, 2014 (the "Consulting Agreement"). The remaining 7,857 shares issued to Dr. Grieve on March 26, 2014 are scheduled to vest on April 30, 2016 if the Consulting Agreement remains in effect through April 30, 2016.

On March 26, 2014, we issued 110,000 shares to Mr. Wilson pursuant to an employment agreement between Mr. Wilson and the Company effective as of March 26, 2014 (the "Wilson Employment Agreement"). The shares were issued in four equal tranches and are subject to time-based vesting and other provisions outlined in the Wilson Employment Agreement. The first tranche vested on September 26, 2014, and each of the three remaining tranches is to vest on the succeeding March 26 until all shares are vested in full as of March 26, 2017. On May 6, 2014, we issued an additional 130,000 shares to Mr. Wilson following a

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HESKA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

vote of approval on the issuance by our stockholders. The shares were issued in ten equal tranches, five of which were subject to vesting based on the achievement of certain stock price targets as defined and further described in the Wilson Employment Agreement and five of which were subject to vesting based on certain "Adjusted EBITDA" targets as defined and further described in the Wilson Employment Agreement. All shares subject to vesting based on "Adjusted EBITDA" vested based on our 2014 performance. Of the five tranches based on the achievement of certain stock price targets, one vested in 2014 and the remaining four vested in 2015.

On March 17, 2015, the Company issued unvested shares to certain Executive Officers related to performance-based restricted stock grants (the "Performance Grants") and performance-based restricted stock grants related to the Company's 2015 Management Incentive Plan (the "MIP Grants"). The Performance Grants are to cliff vest three years following issuance, subject to the Company's achieving $7 million in Operating Cash Flow, as defined in the underlying restricted stock grant agreement, in at least one of 2015, 2016 or 2017, and other vesting provisions in the underlying restricted stock grant agreement. The MIP Grants are to vest on the date MIP Payouts are to be made under the 2015 Management Incentive Plan and are subject to the Company's achievement of certain financial goals and other vesting provisions in the underlying restricted stock grant agreement. The Company issued 52,956 shares under Performance Grants and 24,649 shares under MIP Grants on March 17, 2015.

Restrictions on the transfer of Company stock

The Company's Restated Certificate of Incorporation, as amended (the "Certificate of Incorporation"), places restrictions (the "Transfer Restrictions") on the transfer of the Company's stock that could adversely affect the Company's ability to utilize its domestic Federal Net Operating Loss Position. In particular, the Transfer Restrictions prevent the transfer of shares without the approval of the Company's Board of Directors if, as a consequence of such transfer, an individual, entity or groups of individuals or entities would become a 5-percent holder under Section 382 of the Internal Revenue Code of 1986, as amended, and the related Treasury regulations, and also prevents any existing 5 -percent holder from increasing his or her ownership position in the Company without the approval of the Company's Board of Directors. Any transfer of shares in violation of the Transfer Restrictions (a "Transfer Violation") shall be void ab initio under the Certificate of Incorporation, and the Company's Board of Directors has procedures under the Certificate of Incorporation to remedy a Transfer Violation including requiring the shares causing such Transfer Violation to be sold and any profit resulting from such sale to be transferred to a charitable entity chosen by the Company's Board of Directors in specified circumstances.

9. ACCUMULATED OTHER COMPREHENSIVE INCOME

Accumulated other comprehensive income consisted of the following (in thousands):



	Minimum pension liability			Foreign currency translation			Unrealized gains (losses) on available for sale investments		Total accumulated other comprehensive income
Balances at December 31, 2014	$	(447	)	$	684		$	46	$	283
Current period other comprehensive income (loss)	(129		)	(11		)	44		(96		)
Balances at December 31, 2015	$	(576	)	$	673		$	90	$	187

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HESKA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

10. COMMITMENTS AND CONTINGENCIES

The Company holds certain rights to market and manufacture all products developed or created under certain research, development and licensing agreements with various entities. In connection with such agreements, the Company has agreed to pay the entities royalties on net product sales. In each of the years ended December 31, 2013 , 2014 and 2015 , royalties of $0.4 million became payable under these agreements.

The Company has contracts with suppliers for unconditional annual minimum inventory purchases and milestone obligations to third parties the Company believes are likely to be triggered currently totaling approximately $0.4 million for fiscal 2016 .

The Company has entered into operating leases for its office and research facilities and certain equipment with future minimum payments as of December 31, 2015 as follows (in thousands):



Year Ending December 31,
	2016	$	1,956
	2017	1,893
	2018	1,640
	2019	1,546
	2020	1,541
	Thereafter	4,581
		$	13,157

The Company had rent expense of $1.8 million , $1.9 million and $2.0 million in 2013, 2014 and 2015 respectively.

From time to time, the Company may be involved in litigation relating to claims arising out of its operations. On March 12, 2015, a complaint was filed against us by Shaun Fauley in the United States District Court Northern District of Illinois alleging our transmittal of unauthorized faxes in violation of the federal Telephone Consumer Protection Act of 1991, as amended by the Junk Fax Prevention Act of 2005, as a class action seeking stated damages of the greater of actual monetary loss or five hundred dollars per violation. We intend to defend ourselves vigorously in this matter. At December 31, 2015 , the Company was not a party to any other legal proceedings that were expected, individually or in the aggregate, to have a material adverse effect on our business, financial condition or operating results.

The Company's current terms and conditions of sale include a limited warranty that its products and services will conform to published specifications at the time of shipment and a more extensive warranty related to certain of its products. The Company also sells a renewal warranty for certain of its products. The typical remedy for breach of warranty is to correct or replace any defective product, and if not possible or practical, the Company will accept the return of the defective product and refund the amount paid. Historically, the Company has incurred minimal warranty costs. The Company's warranty reserve on December 31, 2015 was $0.4 million .

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HESKA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

11. INTEREST AND OTHER EXPENSE (INCOME)

Interest and other expense (income) consisted of the following (in thousands):



	Year Ended December 31,
	2013			2014			2015
Interest income	$	(127	)	$	(190	)	$	(172	)
Interest expense	74			206			200
Other, net	16			(55		)	102
	$	(37	)	$	(39	)	$	130

Cash paid for interest for the twelve months ended December 31, 2013, 2014 and 2015 was $78 thousand , $92 thousand $90 thousand , respectively.

12. CREDIT FACILITY AND LONG-TERM DEBT

At December 31, 2015 , we had a $15.0 million asset-based revolving line of credit with Wells Fargo which has a maturity date of December 31, 2017 as part of our credit and security agreement with Wells Fargo. At December 31, 2015 , we had $143 thousand of borrowings outstanding on this line of credit. Our ability to borrow under this line of credit varies based upon available cash, eligible accounts receivable and eligible inventory. On December 31, 2015 , any interest on borrowings due was to be charged at a stated rate of three month LIBOR plus 2.25% and payable monthly. There is an annual minimum interest charge of $75 thousand under the agreement. We are required to comply with various financial and non-financial covenants, and we have made various representations and warranties under our agreement with Wells Fargo. A key financial covenant is based on a fixed charge coverage ratio, as defined in our agreement with Wells Fargo. We were in compliance with all financial covenants as of December 31, 2015 and our available borrowing capacity based upon eligible accounts receivable and eligible inventory under our revolving line of credit was approximately $11.2 million .

Long-term debt consists of the following (in thousands):



	December 31,
	2014		2015
Term loan with a financial entity due in monthly installments beginning July 2012 with the balance paid in full in June 2017 and a stated interest rate of 6.0%.	$	368	$	228
Less current portion of long-term debt	141		159
Long-term debt, net of current portion	$	227	$	69

Maturities of long-term debt as of December 31, 2015 were as follows (in thousands):



Year Ending December 31,
2016	$	159
2017	69
2018	—
	$	228

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HESKA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

13. SEGMENT REPORTING

The Company is comprised of two reportable segments, Core Companion Animal Health ("CCA") and Other Vaccines, Pharmaceuticals and Products ("OVP"). The Core Companion Animal Health segment includes diagnostic instruments and supplies, as well as single use diagnostic and other tests, pharmaceuticals and vaccines, primarily for canine and feline use. The CCA segment also includes digital radiography and ultrasound products along with embedded software and support, data hosting and other services from Heska Imaging after February 24, 2013. These products are sold directly by the Company as well as through independent third-party distributors and through other distribution relationships. CCA segment products manufactured at the Des Moines, Iowa production facility included in the OVP segment's assets are transferred at cost and are not recorded as revenue for the OVP segment. The Other Vaccines, Pharmaceuticals and Products segment includes private label vaccine and pharmaceutical production, primarily for cattle, but also for other animals including small mammals. All OVP products are sold by third parties under third-party labels.

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HESKA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Summarized financial information concerning the Company's reportable segments is shown in the following table (in thousands):



Year Ended December 31, 2013	Core Companion Animal Health			Other Vaccines, Pharmaceuticals and Products		Total
Total revenue	$	66,404		$	11,935	$	78,339
Operating Income (loss)	(2,295		)	865		(1,430		)
Income (loss) before income taxes	(2,229		)	836		(1,393		)
Total assets	81,041			12,512		93,553
Net assets	36,933			10,183		47,116
Capital expenditures	512			1,418		1,930
Depreciation and amortization	1,691			806		2,497



Year Ended December 31, 2014	Core Companion Animal Health		Other Vaccines, Pharmaceuticals and Products		Total
Total revenue	$	72,354	$	17,483	$	89,837
Operating Income	1,198		1,713		2,911
Income before income taxes	1,290		1,660		2,950
Total assets	85,361		11,483		96,844
Net assets	41,286		11,846		53,132
Capital expenditures	1,864		473		2,337
Depreciation and amortization	2,954		758		3,712



Year Ended December 31, 2015	Core Companion Animal Health		Other Vaccines, Pharmaceuticals and Products		Total
Total revenue	$	84,249	$	20,348	$	104,597
Operating Income	4,911		3,646		8,557
Income before income taxes	4,836		3,591		8,427
Total assets	92,567		17,152		109,719
Net assets	48,175		15,353		63,528
Capital expenditures	1,177		2,596		3,773
Depreciation and amortization	3,478		709		4,187

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HESKA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Revenue is attributed to individual countries based on customer location. Total revenue by principal geographic area was as follows (in thousands):



	For the Years Ended December 31,
	2013		2014		2015
United States	$	71,713	$	83,584	$	97,164
Europe	2,738		2,264		2,086
Other International	3,888		3,989		5,347
Total	$	78,339	$	89,837	$	104,597

Total assets by principal geographic areas were as follows (in thousands):



	For the Years Ended December 31,
	2013		2014		2015
United States	$	90,572	$	93,977	$	106,780
Europe	2,981		2,867		2,939
Other International	—		—		—
Total	$	93,553	$	96,844	$	109,719

14. QUARTERLY FINANCIAL INFORMATION (unaudited)

The following summarizes selected quarterly financial information for each of the two years in the periods ended December 31, 2014 and 2015 (amounts in thousands, except per share data).



	Q1			Q2		Q3		Q4		Total
2014
Total revenue	$	20,793		$	22,916	$	21,805	$	24,323	$	89,837
Gross profit	8,279			9,077		8,317		10,042		35,715
Operating income (loss)	(101		)	917		341		1,754		2,911
Net income (loss)	(273		)	778		15		1,079		1,599
Net income attributable to Heska Corporation	192			1,069		513		829		2,603
Basic earnings per share attributable to Heska Corporation	0.03			0.18		0.09		0.14		0.44
Diluted earnings per share attributable to Heska Corporation	0.03			0.17		0.08		0.13		0.41

2015
Total revenue	$	22,894		$	23,910	$	28,034	$	29,759	$	104,597
Gross profit	10,084			10,297		11,597		12,235		44,213
Operating income	1,021			1,829		2,142		3,565		8,557
Net income	583			1,178		1,383		2,375		5,519
Net income attributable to Heska Corporation	598			1,197		1,415		2,029		5,239
Basic earnings per share attributable to Heska Corporation	0.10			0.19		0.22		0.29		0.80
Diluted earnings per share attributable to Heska Corporation	0.09			0.17		0.20		0.28		0.74

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HESKA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

15. SUBSEQUENT EVENTS

On November 11, 2015, the Company entered into a Unit Purchase Agreement (the "International Agreement") with Cuattro Veterinary, LLC ("Cuattro International"), Kevin S. Wilson and all of the Cuattro International members (the "Members"). Cuattro International sells the same digital radiography solutions outside the United States that Heska Imaging sells in the United States. Under the terms of the International Agreement, the Company agreed to deliver $6.0 million in stock, subject to a minimum of 175,000 shares and a maximum of 200,000 shares, in exchange for 100% ownership of Cuattro International. In addition, the Company also agreed to issue additional shares of common stock to the Members (the "Contingent Shares") in the event that any of the liabilities or obligations of Cuattro International that have been fully reserved as uncollectible (the "Reserved Assets") from affiliates of Cuattro International, Mr. Wilson and the Members are recovered by the Company or Cuattro International. Additionally, the Company will assume approximately $2.1 million in debt as part of the International Agreement. The acquisition was expected to close on or about January 1, 2016 subject to certain closing conditions, including the affirmative vote of the Company's stockholders to increase by 1,000,000 shares each the authorized shares of both classes of the Company's Common Stock Securities, as defined in the Company's Restated Certificate of Incorporation, as amended. On December 16, 2015, the Company entered into a First Amendment to Unit Purchase Agreement, dated effective as of December 1, 2015 (the "First International Amendment"), with Cuattro International, Kevin S. Wilson and all of the Members. The First International Amendment extended to February 29, 2016 from December 31, 2015 the earliest date upon which the parties may terminate the International Agreement for the failure of a closing condition under the International Agreement to be satisfied. The Amendment also capped Contingent Shares at 100,000 .

On March 14, 2016, the Company, Cuattro International, Kevin S. Wilson and the Members terminated the International Agreement and superseded the International Agreement with an agreement and plan of merger by and among the Company, the Company’s wholly-owned subsidiary, Cuattro International Merger Subsidiary Inc., a Delaware corporation ("Merger Sub"), Cuattro International and the Members (the "New Agreement") and Heska Imaging extended the due date on the $1.5 million note receivable, including accrued interest, from Cuattro Veterinary, LLC which is listed as "Note receivable - related party" on the Company's consolidated balance sheets from March 15, 2016 to June 15, 2016. All parties involved intend that the transactions contemplated by the New Agreement be treated as a transaction that qualifies as a "reorganization" within the meaning of Section 368(a)(2)(E) of the Internal Revenue Code of 1986, as amended (the "Code"), and the New Agreement is intended to be, and is adopted as, a plan of reorganization for purposes of Sections 354 and 361 of the Code and within the meaning of Treasury regulation section 1.368‑2(g). The New Agreement eliminated the use of Contingent Shares in the event any of the Reserved Assets are recovered by the Company or Cuattro International; in such a circumstance, the Members would be paid in cash under the New Agreement. The earliest date upon which the parties may terminate the New Agreement for failure of a closing condition under the New Agreement to be satisfied is May 31, 2016.


Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.


Item 9A.	Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and our chief financial officer, evaluated the effectiveness of our disclosure controls and procedures, as defined by Rule 13a-15 of the Exchange Act, as of December 31, 2015. Based on this evaluation, our chief executive officer and chief

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financial officer have concluded that our disclosure controls and procedures were effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time period specified in the SEC's rules and forms and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding disclosure.

Management's Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, the Company conducted an evaluation of the effectiveness of its internal control over financial reporting based on criteria outlined in the 1992 COSO Internal Control over Financial Reporting Guidance for Smaller Public Companies, a supplemental implementation guide issued in 2007, which modified criteria established in the framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, the Company's management has concluded that the Company's internal control over financial reporting was effective as of December 31, 2015.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Accordingly, even an effective system of internal control will provide only reasonable assurance that the objectives of the internal control system are met.

EKS&H LLP, an independent registered public accounting firm, has audited our Consolidated Financial Statements included in this Form 10-K, and as part of the audit, has issued a report, included herein, on the effectiveness of our internal control over financial reporting as of December 31, 2015.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the fourth quarter of 2015 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.


Item 9B.	Other Information.

None.

PART III

Certain information required by Part III is incorporated by reference to our definitive Proxy Statement filed with the Securities and Exchange Commission in connection with the solicitation of proxies for our 2016 Annual Meeting of Stockholders.


Item 10.	Directors, Executive Officers and Corporate Governance.

Executive Officers

The information required by this item with respect to executive officers is incorporated by reference to Item 1 of this report and can be found under the caption "Executive Officers of the Registrant."

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Directors

The information required by this section with respect to our directors will be incorporated by reference to the information in the sections entitled "Election of Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance" in the Proxy Statement.

Code of Ethics

Our Board of Directors has adopted a code of ethics for our senior executive and financial officers (including our principal executive officer, principal financial officer and principal accounting officer). The code of ethics is available on our website at www.heska.com. We intend to disclose any amendments to or waivers from the code of ethics at that location.

Audit Committee

The information required by this section with respect to our Audit Committee will be incorporated by reference to the information in the section entitled "Board Structure and Committees" in the Proxy Statement.

Section 16(a) Beneficial Ownership Reporting Compliance

The information required by this item is incorporated by reference to the information in the section entitled "Section 16(a) Beneficial Ownership Reporting Compliance" in the Proxy Statement.


Item 11.	Executive Compensation.

The information required by this section will be incorporated by reference to the information in the sections entitled "Director Compensation," "Executive Compensation," "Compensation Committee Report" and "Compensation Committee Interlocks and Insider Participation" in the Proxy Statement.


Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The other information required by this section will be incorporated by reference to the information in the section entitled "Ownership of Securities - Common Stock Ownership of Certain Beneficial Owners and Management" in the Proxy Statement.

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Equity Compensation Plan Information

The following table sets forth information about our common stock that may be issued upon exercise of options and rights under all of our equity compensation plans as of December 31, 2015, including the 1997 Stock Incentive Plan, the 2003 Stock Incentive Plan and the 1997 Employee Stock Purchase Plan. Our stockholders have approved all of these plans.



Plan Category	(a) Number of Securities to be Issued Upon Exercise of Outstanding Options and Rights (1)	(b) Weighted-Average Exercise Price of Outstanding Options and Rights (1)	(c) Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (excluding securities reflected in column (a))
Equity Compensation Plans Approved by Stockholders	940,610	$14.16	101,877
Equity Compensation Plans Not Approved by Stockholders	None	None	None
Total	940,610	$14.16	101,877


(1)	Excluding outstanding options to purchase an aggregate of 6.0 fractional shares resulting from our December 2010 reverse stock split.


Item 13.	Certain Relationships and Related Transactions and Director Independence.

The information required by this section will be incorporated by reference to the information in the sections entitled "Board Structure and Committees" and "Significant Relationships and Transactions with Directors, Officers or Principal Stockholders" in the Proxy Statement.


Item 14.	Principal Accountant Fees and Services.

The information required by this section will be incorporated by reference to the information in the section entitled "Auditor Fees and Services" in the Proxy Statement.

The information required by Part III to the extent not set forth herein, will be incorporated herein by reference to our definitive Proxy Statement for the 2016 Annual Meeting of Stockholders.

PART IV


Item 15.	Exhibits and Financial Statement Schedules.

(a) The following documents are filed as a part of this Form 10-K.

(1) Financial Statements:

Reference is made to the Index to Consolidated Financial Statements under Item 8 in Part II of this Form 10-K.

(2) Financial Statement Schedules:

NOTE : All schedules have been omitted because they are either not required or the information is included in the financial statements and notes thereto.

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(3) Exhibits:

The exhibits listed below are required by Item 601 of Regulation S-K. Each management contract or compensatory plan or arrangement required to be filed as an exhibit to this Form 10-K has been identified.



Exhibit Number	Notes	Description of Document
3(i)	(16)	Restated Certificate of Incorporation of the Registrant.
3(ii)	(16)	Certificate of Amendment to Restated Certificate of Incorporation of Registrant.
3(iii)	(16)	Certificate of Amendment to the Restated Certificate of Incorporation, as amended, of Registrant.
3(iv)	(26)	Amended and Restated Bylaws of the Registrant, as amended.
3(v)	(16)	Amended and Restated Operating Agreement of Heska Imaging US, LLC.
10.1*	(25)	1997 Stock Incentive Plan of Registrant, as amended and restated.
10.2*	(25)	1997 Stock Incentive Plan Employees and Consultants Option Agreement.
10.3*	(25)	1997 Stock Incentive Plan Outside Directors Option Agreement.
10.4*		1997 Stock Incentive Plan Employees and Consultants Option Agreement (Stockholder Approval).
10.5*		1997 Stock Incentive Plan Restricted Stock Grant Agreement.
10.6*		1997 Stock Incentive Plan Restricted Stock Grant Agreement (Management Incentive Plan Award).
10.7*	(11)	2003 Equity Incentive Plan, as amended and restated.
10.8*	(25)	2003 Equity Incentive Plan Employees and Consultants Option Agreement.
10.9*	(25)	2003 Equity Incentive Plan Outside Directors Option Agreement.
10.10*		2003 Equity Incentive Plan Restricted Stock Grant Agreement.
10.11*		2003 Equity Incentive Plan Restricted Stock Grant Agreement (Management Incentive Plan Award).
10.12*	(26)	1997 Employee Stock Purchase Plan of Registrant, as amended and restated.
10.13*	(25)	Amended and restated Management Incentive Plan Master Document.
10.14*		2016 Management Incentive Plan.
10.15*		Director Compensation Policy 2016.
10.16*	(9)	Form of Indemnification Agreement entered into between Registrant and its directors and certain officers.
10.17*	(21)	Employment Agreement between Registrant and Kevin S. Wilson, effective as of March 26, 2014.
10.18*	(21)	Restricted Stock Grant Agreement between Registrant and Kevin S. Wilson, effective as of March 26, 2014.
10.19*	(25)	Restricted Stock Grant Agreement between Heska Corporation and Kevin S. Wilson, effective as of May 6, 2014.
10.20*	(21)	Employment Agreement (Executive Chair) with Robert B. Grieve, effective as of March 26, 2014.
10.21*	(21)	Restricted Stock Grant Agreements between Registrant and Robert B. Grieve, effective as of March 26, 2014.
10.22*	(21)	Consulting Agreement (Founder Emeritus) with Robert B. Grieve, dated March 26, 2014.
10.23*	(28)	Separation and Release Agreement with Robert B. Grieve, dated October 1, 2015.

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10.24*	(4)	Employment Agreement between Registrant and Jason A. Napolitano, effective as of May 6, 2002.
10.25*	(9)	Amendment to Employment Agreement between Registrant and Jason A. Napolitano, effective as of January 1, 2008.
10.26*	(8)	Employment Agreement between Diamond Animal Health, Inc. and Michael J. McGinley, effective as of May 1, 2000.
10.27*	(9)	Amendment to Employment Agreement between Diamond Animal Health, Inc. and Michael J. McGinley, effective as of January 1, 2008.
10.28*	(13)	Assignment and Second Amendment to Employment Agreement between Registrant and Michael J. McGinley, effective as of August 4, 2011.
10.29*	(8)	Employment Agreement between Registrant and Nancy Wisnewski, effective as of April 15, 2002.
10.30*	(9)	Amendment to Employment Agreement between Registrant and Nancy Wisnewski, effective as of January 1, 2008.
10.31*	(21)	Employment Agreement between Registrant and Steven M. Eyl, effective as of May 15, 2013.
10.32*	(16)	Employment Agreement between Registrant and Steven M. Asakowicz, effective as of February 22, 2013.
10.33*	(25)	Amendment to Employment Agreement between Registrant and Steven M. Asakowicz, effective as of March 1, 2015.
10.34*	(16)	Employment Agreement between Registrant and Rodney A. Lippincott, effective as of February 22, 2013.
10.35*	(25)	Amendment to Employment Agreement between Registrant and Rodney A. Lippincott, effective as of March 1, 2015.
10.36*		Employment Agreement between Registrant and John McMahon, effective as of October 14, 2015.
10.37	(6)	Net Lease Agreement between Registrant and CCMRED 40, LLC, effective as of May 24, 2004.
10.38	(7)	First Amendment to Net Lease Agreement and Development Agreement between Registrant and CCMRED 40, LLC, dated February 11, 2005.
10.39	(7)	Second Amendment to Net Lease Agreement between Registrant and CCMRED 40, LLC, dated July 14, 2005.
10.40	(15)	Third Amendment to Net Lease Agreement between Registrant and Millbrae Square Company, effective as of January 1, 2010.
10.41+	(8)	Third Amended and Restated Credit and Security Agreement between Registrant, Diamond Animal Health, Inc. and Wells Fargo Business Credit, Inc., dated December 30, 2005.
10.42+	(9)	First Amendment to Third Amended and Restated Credit and Security Agreement between Registrant, Diamond Animal Health, Inc. and Wells Fargo Bank, National Association, dated December 5, 2006.
10.43+	(9)	Second Amendment to Third Amended and Restated Credit and Security Agreement between Registrant, Diamond Animal Health, Inc. and Wells Fargo Bank, National Association, dated July 20, 2007.
10.44	(9)	Third Amendment to Third Amended and Restated Credit and Security Agreement between Registrant, Diamond Animal Health, Inc. and Wells Fargo Bank, National Association, dated December 21, 2007.
10.45+	(10)	Fourth and Fifth Amendments to Third Amended and Restated Credit and Security Agreement between Registrant, Diamond Animal Health, Inc. and Wells Fargo Bank, National Association, dated October 16, 2008.

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10.46+	(11)	Sixth Amendment to Third Amended and Restated Credit and Security Agreement between Registrant, Diamond Animal Health, Inc. and Wells Fargo Bank, National Association, dated December 30, 2008.
10.47+	(14)	Seventh Amendment to Third Amended and Restated Credit and Security Agreement between Registrant, Diamond Animal Health, Inc. and Wells Fargo Bank, National Association, dated November 30, 2009.
10.48+	(14)	Eighth Amendment to Third Amended and Restated Credit and Security Agreement between Registrant, Diamond Animal Health, Inc. and Wells Fargo Bank, National Association, dated December 15, 2010.
10.49+	(15)	Ninth Amendment to Third Amended and Restated Credit and Security Agreement between Registrant, Diamond Animal Health, Inc. and Wells Fargo Bank, National Association, dated December 21, 2011.
10.50+	(15)	Tenth Amendment to Third Amended and Restated Credit and Security Agreement between Registrant, Diamond Animal Health, Inc. and Wells Fargo Bank, National Association, dated February 9, 2012.
10.51+	(16)	Eleventh Amendment to Third Amended and Restated Credit and Security Agreement between Registrant, Diamond Animal Health, Inc. and Wells Fargo Bank, National Association, dated November 5, 2012.
10.52+	(20)	Twelfth Amendment to Third Amended and Restated Credit and Security Agreement between Registrant, Diamond Animal Health, Inc., Heska Imaging US, LLC and Wells Fargo Bank, National Association, dated August 13, 2013.
10.53+	(24)	Letter Amendment to Third Amended and Restated Credit and Security Agreement between Registrant, Diamond Animal Health, Inc., Heska Imaging US, LLC and Wells Fargo Bank, National Association, dated September 17, 2014.
10.54+		Thirteenth Amendment to Third Amended and Restated Credit and Security Agreement between Registrant, Diamond Animal Health, Inc., Heska Imaging US, LLC and Wells Fargo Bank, National Association, dated December 21, 2015.
10.55+	(1)	Product Supply Agreement between Registrant and Quidel Corporation, effective as of July 3, 1997.
10.56+	(2)	First Amendment to Product Supply Agreement between Registrant and Quidel Corporation, effective as of March 15, 1999.
10.57	(11)	Letter Amendment to Product Supply Agreement between Registrant and Quidel Corporation dated July 7, 2004.
10.58+	(8)	Supply and Distribution Agreement between Registrant and Boule Medical AB, effective as of June 17, 2003; Letter Amendment to Supply and Distribution Agreement between Registrant and Boule Medical AB, dated June 1, 2004; and Letter Amendment to Supply and Distribution Agreement between Registrant and Boule Medical AB, dated December 31, 2004.
10.59+	(10)	Letter Amendment to Supply and Distribution Agreement between Registrant and Boule Medical AB, dated July 12, 2005; Letter Amendment to Supply and Distribution Agreement between Registrant and Boule Medical AB, dated March 20, 2007; Letter Amendment to Supply and Distribution Agreement between Registrant and Boule Medical AB, dated January 23, 2008; and Sixth Amendment to Supply and Distribution Agreement between Registrant and Boule Medical AB, effective as of October 1, 2008.
10.60+	(13)	Seventh Amendment to Supply and Distribution Agreement between Registrant and Boule Medical AB, effective as of June 1, 2011.
10.61+	(18)	Eighth Amendment to Supply and Distribution Agreement between Registrant and Boule Medical AB, effective as of January 1, 2013.

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10.62+	(23)	Ninth Amendment to Supply and Distribution Agreement between Registrant and Boule Medical AB, effective as of January 1, 2014; and Tenth Amendment to Supply and Distribution Agreement between Registrant and Boule Medical AB, effective as of July 11, 2014.
10.63+	(8)	Supply and License Agreement between Registrant and Schering-Plough Animal Health Corporation, effective as of August 1, 2003.
10.64+	(11)	Amendment No. 1 to Supply and License Agreement between Registrant and Schering-Plough Animal Health Corporation, effective as of August 31, 2005.
10.65+	(16)	Amendment No. 2 to Supply and License Agreement between Registrant and Intervet Inc., d/b/a Merck Animal Health, effective as of December 7, 2011.
10.66+	(20)	Amendment No. 3 to Supply and License Agreement between Registrant and Intervet Inc., d/b/a Merck Animal Health, effective as of July 30, 2013.
10.67+	(21)	Amendment No. 4 to Supply and License Agreement between Registrant and Intervet Inc., d/b/a Merck Animal Health, effective as of December 9, 2013.
10.68+		Amendment No. 5 to Supply and License Agreement between Registrant and Intervet Inc., d.b.a. Merck Animal Health, effective as of October 30, 2015.
10.69+	(23)	Clinical Chemistry Analyzer Agreement between Registrant and FUJIFILM Corporation, effective as of January 30, 2007; and First Amendment to Clinical Chemistry Analyzer Agreement, effective as of April 1, 2014.
10.70	(26)	Second Amendment to Clinical Chemistry Analyzer Agreement, effective as of April 1, 2015.
10.71+	(16)	Amended and Restated Master License Agreement between Heska Imaging US, LLC and Cuattro, LLC, effective as of February 22, 2013.
10.72+	(16)	Supply Agreement between Cuattro, LLC and Heska Imaging US, LLC effective as of February 24, 2013.
10.73	(28)	First Amendment to Supply Agreement between Heska Imaging US, LLC and Cuattro, LLC, effective as of August 10, 2015.
10.74+	(19)	Asset Purchase and License Agreement between Diamond Animal Health, Inc., and Elanco Animal Health, a division of Eli Lilly and Company effective as of June 17, 2013.
10.75+	(27)	Master Supply Agreement between Diamond Animal Health, Inc. and Eli Lilly and Company and its Affiliates, operating through its Elanco Animal Health division, effective as of October 1, 2014.
10.76+	(27)	Supplemental Agreement between Diamond Animal Health, Inc. and Eli Lilly and Company and its Affiliates, operating through its Elanco Animal Health division, effective as of October 1, 2014.
10.77+		Agreement and Plan of Merger among Heska Corporation, Cuattro Veterinary, LLC, Kevin S. Wilson, Cuattro LLC, Lane Naffziger, Clint Roth, DVM and Doug G. Wilson, III, dated as of March 14, 2016.
10.78	(29)	Letter Agreement between Heska Imaging US, LLC and Cuattro Veterinary, LLC, dated as of March 14, 2016.
21.1		Subsidiaries of the Company.
23.1		Consent of EKS&H LLLP, Independent Registered Public Accounting Firm.
24.1		Power of Attorney (See Signature Page of this Form 10-K).
31.1		Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.
31.2		Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.

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	32.1**				Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	101.INS				XBRL Instance Document.
	101.SCH				XBRL Taxonomy Extension Schema Document.
	101.CAL				XBRL Taxonomy Extension Calculation Linkbase Document.
	101.DEF				XBRL Taxonomy Extension Definition Linkbase Document.
	101.PRE				XBRL Taxonomy Extension Presentation Linkbase Document.
	101.LAB				XBRL Taxonomy Extension Label Linkbase Document.



Notes
*	Indicates management contract or compensatory plan or arrangement.
+	Portions of the exhibit have been omitted pursuant to a request for confidential treatment.
**	Furnished herewith but not filed.
(1)	Filed with the Registrant's Form 10-Q for the quarter ended September 30, 1997.
(2)	Filed with the Registrant's Form 10-K for the year ended December 31, 2001.
(3)	Filed with the Registrant's Form 10-Q for the quarter ended September 30, 2002.
(4)	Filed with the Registrant's Form 10-K for the year ended December 31, 2002.
(5)	Filed with the Registrant's Form 10-Q for the quarter ended September 30, 2004.
(6)	Filed with the Registrant's Form 10-K for the year ended December 31, 2004.
(7)	Filed with the Registrant's Form 10-Q for the quarter ended June 30, 2005.
(8)	Filed with the Registrant's Form 10-K for the year ended December 31, 2006.
(9)	Filed with the Registrant's Form 10-K for the year ended December 31, 2007.
(10)	Filed with the Registrant's Form 10-Q for the quarter ended September 30, 2008.
(11)	Filed with the Registrant's Form 10-K for the year ended December 31, 2008.
(12)	Filed with the Registrant's Form 10-K for the year ended December 31, 2010.
(13)	Filed with the Registrant's Form 10-Q for the quarter ended June 30, 2011.
(14)	Filed with the Registrant's Form 10-Q for the quarter ended September 30, 2011.
(15)	Filed with the Registrant's Form 10-K for the year ended December 31, 2011.
(16)	Filed with the Registrant's Form 10-K for the year ended December 31, 2012.
(17)	Filed with the Registrant's Form 10-Q for the quarter ended March 31, 2013.
(18)	Filed with the Registrant's Form 10-Q for the quarter ended June 30, 2013.
(19)	Filed with the Registrant's Form 8-K/A on August 29, 2013.
(20)	Filed with the Registrant's Form 10-Q for the quarter ended September 30, 2013.
(21)	Filed with the Registrant's Form 10-K for the year ended December 31, 2013.
(22)	Filed with the Registrant's Form 10-Q for the quarter ended March 31, 2014.
(23)	Filed with the Registrants' Form 10-Q for the quarter ended June 30, 2014.
(24)	Filed with the Registrants' Form 10-Q for the quarter ended September 30, 2014.
(25)	Filed with the Registrants' Form 10-K for the year ended December 31, 2014.
(26)	Filed with the Registrants' Form 10-Q for the quarter ended March 31, 2015.
(27)	Filed with the Registrants' Form 10-Q for the quarter ended June 30, 2015.
(28)	Filed with the Registrants' Form 10-Q for the quarter ended September 30, 2015.
(29)	Filed with the Registrants' Form 8-K on March 15, 2016.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on March 15, 2016.



	HESKA CORPORATION

	By: /s/ KEVIN S. WILSON Kevin S. Wilson Chief Executive Officer and President

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Jason A. Napolitano and Nancy Wisnewski, Ph.D., and each of them, his or her true and lawful attorneys-in-fact, each with full power of substitution, for him or her in any and all capacities, to sign any amendments to this report on Form 10-K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact or their substitute or substitutes may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:



Signature	Title	Date
/s/ KEVIN S. WILSON Kevin S. Wilson	Chief Executive Officer, President and Director (Principal Executive Officer)	March 15, 2016
/s/ JASON A. NAPOLITANO Jason A. Napolitano	Chief Operating Officer, Chief Financial Officer, Executive Vice President and Secretary (Principal Financial Officer)	March 15, 2016
/s/ JOHN MCMAHON John McMahon	Vice President, Financial Operations & Controller (Principal Accounting Officer)	March 15, 2016
/s/ SHARON L. RILEY Sharon L. Riley	Chair	March 15, 2016
/s/ G. IRWIN GORDON G. Irwin Gordon	Director	March 15, 2016
/s/ BONNIE J. TROWBRIDGE Bonnie J. Trowbridge	Director	March 15, 2016
/s/ DAVID E. SVEEN David E. Sveen, Ph.D.	Director	March 15, 2016
/s/ CAROL A. WRENN Carol A. Wrenn	Director	March 15, 2016

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Exhibit Index



Exhibit Number	Notes	Description of Document
3(i)	(16)	Restated Certificate of Incorporation of the Registrant.
3(ii)	(16)	Certificate of Amendment to Restated Certificate of Incorporation of Registrant.
3(iii)	(16)	Certificate of Amendment to the Restated Certificate of Incorporation, as amended, of Registrant.
3(iv)	(26)	Amended and Restated Bylaws of the Registrant, as amended.
3(v)	(16)	Amended and Restated Operating Agreement of Heska Imaging US, LLC.
10.1*	(25)	1997 Stock Incentive Plan of Registrant, as amended and restated.
10.2*	(25)	1997 Stock Incentive Plan Employees and Consultants Option Agreement.
10.3*	(25)	1997 Stock Incentive Plan Outside Directors Option Agreement.
10.4*		1997 Stock Incentive Plan Employees and Consultants Option Agreement (Stockholder Approval).
10.5*		1997 Stock Incentive Plan Restricted Stock Grant Agreement.
10.6*		1997 Stock Incentive Plan Restricted Stock Grant Agreement (Management Incentive Plan Award).
10.7*	(11)	2003 Equity Incentive Plan, as amended and restated.
10.8*	(25)	2003 Equity Incentive Plan Employees and Consultants Option Agreement.
10.9*	(25)	2003 Equity Incentive Plan Outside Directors Option Agreement.
10.10*		2003 Equity Incentive Plan Restricted Stock Grant Agreement.
10.11*		2003 Equity Incentive Plan Restricted Stock Grant Agreement (Management Incentive Plan Award).
10.12*	(26)	1997 Employee Stock Purchase Plan of Registrant, as amended and restated.
10.13*	(25)	Amended and restated Management Incentive Plan Master Document.
10.14*		2016 Management Incentive Plan.
10.15*		Director Compensation Policy 2016.
10.16*	(9)	Form of Indemnification Agreement entered into between Registrant and its directors and certain officers.
10.17*	(21)	Employment Agreement between Registrant and Kevin S. Wilson, effective as of March 26, 2014.
10.18*	(21)	Restricted Stock Grant Agreement between Registrant and Kevin S. Wilson, effective as of March 26, 2014.
10.19*	(25)	Restricted Stock Grant Agreement between Heska Corporation and Kevin S. Wilson, effective as of May 6, 2014.
10.20*	(21)	Employment Agreement (Executive Chair) with Robert B. Grieve, effective as of March 26, 2014.
10.21*	(21)	Restricted Stock Grant Agreements between Registrant and Robert B. Grieve, effective as of March 26, 2014.
10.22*	(21)	Consulting Agreement (Founder Emeritus) with Robert B. Grieve, dated March 26, 2014.
10.23*	(28)	Separation and Release Agreement with Robert B. Grieve, dated October 1, 2015.
10.24*	(4)	Employment Agreement between Registrant and Jason A. Napolitano, effective as of May 6, 2002.

- 86 -



10.25*	(9)	Amendment to Employment Agreement between Registrant and Jason A. Napolitano, effective as of January 1, 2008.
10.26*	(8)	Employment Agreement between Diamond Animal Health, Inc. and Michael J. McGinley, effective as of May 1, 2000.
10.27*	(9)	Amendment to Employment Agreement between Diamond Animal Health, Inc. and Michael J. McGinley, effective as of January 1, 2008.
10.28*	(13)	Assignment and Second Amendment to Employment Agreement between Registrant and Michael J. McGinley, effective as of August 4, 2011.
10.28*	(8)	Employment Agreement between Registrant and Nancy Wisnewski, effective as of April 15, 2002.
10.30*	(9)	Amendment to Employment Agreement between Registrant and Nancy Wisnewski, effective as of January 1, 2008.
10.31*	(21)	Employment Agreement between Registrant and Steven M. Eyl, effective as of May 15, 2013.
10.32*	(16)	Employment Agreement between Registrant and Steven M. Asakowicz, effective as of February 22, 2013.
10.33*	(25)	Amendment to Employment Agreement between Registrant and Steven M. Asakowicz, effective as of March 1, 2015.
10.34*	(16)	Employment Agreement between Registrant and Rodney A. Lippincott, effective as of February 22, 2013.
10.35*	(25)	Amendment to Employment Agreement between Registrant and Rodney A. Lippincott, effective as of March 1, 2015.
10.36*		Employment Agreement between Registrant and John McMahon, effective as of October 14, 2015.
10.37	(6)	Net Lease Agreement between Registrant and CCMRED 40, LLC, effective as of May 24, 2004.
10.38	(7)	First Amendment to Net Lease Agreement and Development Agreement between Registrant and CCMRED 40, LLC, dated February 11, 2005.
10.39	(7)	Second Amendment to Net Lease Agreement between Registrant and CCMRED 40, LLC, dated July 14, 2005.
10.40	(15)	Third Amendment to Net Lease Agreement between Registrant and Millbrae Square Company, effective as of January 1, 2010.
10.41+	(8)	Third Amended and Restated Credit and Security Agreement between Registrant, Diamond Animal Health, Inc. and Wells Fargo Business Credit, Inc., dated December 30, 2005.
10.42+	(9)	First Amendment to Third Amended and Restated Credit and Security Agreement between Registrant, Diamond Animal Health, Inc. and Wells Fargo Bank, National Association, dated December 5, 2006.
10.43+	(9)	Second Amendment to Third Amended and Restated Credit and Security Agreement between Registrant, Diamond Animal Health, Inc. and Wells Fargo Bank, National Association, dated July 20, 2007.
10.44	(9)	Third Amendment to Third Amended and Restated Credit and Security Agreement between Registrant, Diamond Animal Health, Inc. and Wells Fargo Bank, National Association, dated December 21, 2007.
10.45+	(10)	Fourth and Fifth Amendments to Third Amended and Restated Credit and Security Agreement between Registrant, Diamond Animal Health, Inc. and Wells Fargo Bank, National Association, dated October 16, 2008.
10.46+	(11)	Sixth Amendment to Third Amended and Restated Credit and Security Agreement between Registrant, Diamond Animal Health, Inc. and Wells Fargo Bank, National Association, dated December 30, 2008.

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10.47+	(14)	Seventh Amendment to Third Amended and Restated Credit and Security Agreement between Registrant, Diamond Animal Health, Inc. and Wells Fargo Bank, National Association, dated November 30, 2009.
10.48+	(14)	Eighth Amendment to Third Amended and Restated Credit and Security Agreement between Registrant, Diamond Animal Health, Inc. and Wells Fargo Bank, National Association, dated December 15, 2010.
10.49+	(15)	Ninth Amendment to Third Amended and Restated Credit and Security Agreement between Registrant, Diamond Animal Health, Inc. and Wells Fargo Bank, National Association, dated December 21, 2011.
10.50+	(15)	Tenth Amendment to Third Amended and Restated Credit and Security Agreement between Registrant, Diamond Animal Health, Inc. and Wells Fargo Bank, National Association, dated February 9, 2012.
10.51+	(16)	Eleventh Amendment to Third Amended and Restated Credit and Security Agreement between Registrant, Diamond Animal Health, Inc. and Wells Fargo Bank, National Association, dated November 5, 2012.
10.52+	(20)	Twelfth Amendment to Third Amended and Restated Credit and Security Agreement between Registrant, Diamond Animal Health, Inc., Heska Imaging US, LLC and Wells Fargo Bank, National Association, dated August 13, 2013.
10.53+	(24)	Letter Amendment to Third Amended and Restated Credit and Security Agreement between Registrant, Diamond Animal Health, Inc., Heska Imaging US, LLC and Wells Fargo Bank, National Association, dated September 17, 2014.
10.54+		Thirteenth Amendment to Third Amended and Restated Credit and Security Agreement between Registrant, Diamond Animal Health, Inc., Heska Imaging US, LLC and Wells Fargo Bank, National Association, dated December 21, 2015.
10.55+	(1)	Product Supply Agreement between Registrant and Quidel Corporation, effective as of July 3, 1997.
10.56+	(2)	First Amendment to Product Supply Agreement between Registrant and Quidel Corporation, effective as of March 15, 1999.
10.57	(11)	Letter Amendment to Product Supply Agreement between Registrant and Quidel Corporation dated July 7, 2004.
10.58+	(8)	Supply and Distribution Agreement between Registrant and Boule Medical AB, effective as of June 17, 2003; Letter Amendment to Supply and Distribution Agreement between Registrant and Boule Medical AB, dated June 1, 2004; and Letter Amendment to Supply and Distribution Agreement between Registrant and Boule Medical AB, dated December 31, 2004.
10.59+	(10)	Letter Amendment to Supply and Distribution Agreement between Registrant and Boule Medical AB, dated July 12, 2005; Letter Amendment to Supply and Distribution Agreement between Registrant and Boule Medical AB, dated March 20, 2007; Letter Amendment to Supply and Distribution Agreement between Registrant and Boule Medical AB, dated January 23, 2008; and Sixth Amendment to Supply and Distribution Agreement between Registrant and Boule Medical AB, effective as of October 1, 2008.
10.60+	(13)	Seventh Amendment to Supply and Distribution Agreement between Registrant and Boule Medical AB, effective as of June 1, 2011.
10.61+	(18)	Eighth Amendment to Supply and Distribution Agreement between Registrant and Boule Medical AB, effective as of January 1, 2013.
10.62+	(23)	Ninth Amendment to Supply and Distribution Agreement between Registrant and Boule Medical AB, effective as of January 1, 2014; and Tenth Amendment to Supply and Distribution Agreement between Registrant and Boule Medical AB, effective as of July 11, 2014.
10.63+	(8)	Supply and License Agreement between Registrant and Schering-Plough Animal Health Corporation, effective as of August 1, 2003.

- 88 -



10.64+	(11)	Amendment No. 1 to Supply and License Agreement between Registrant and Schering-Plough Animal Health Corporation, effective as of August 31, 2005.
10.65+	(16)	Amendment No. 2 to Supply and License Agreement between Registrant and Intervet Inc., d/b/a Merck Animal Health, effective as of December 7, 2011.
10.66+	(20)	Amendment No. 3 to Supply and License Agreement between Registrant and Intervet Inc., d/b/a Merck Animal Health, effective as of July 30, 2013.
10.67+	(21)	Amendment No. 4 to Supply and License Agreement between Registrant and Intervet Inc., d/b/a Merck Animal Health, effective as of December 9, 2013.
10.68+		Amendment No. 5 to Supply and License Agreement between Registrant and Intervet Inc., d.b.a. Merck Animal Health, effective as of October 30, 2015.
10.69+	(23)	Clinical Chemistry Analyzer Agreement between Registrant and FUJIFILM Corporation, effective as of January 30, 2007; and First Amendment to Clinical Chemistry Analyzer Agreement, effective as of April 1, 2014.
10.70	(26)	Second Amendment to Clinical Chemistry Analyzer Agreement, effective as of April 1, 2015.
10.71+	(16)	Amended and Restated Master License Agreement between Heska Imaging US, LLC and Cuattro, LLC, effective as of February 22, 2013.
10.72+	(16)	Supply Agreement between Cuattro, LLC and Heska Imaging US, LLC effective as of February 24, 2013.
10.73	(28)	First Amendment to Supply Agreement between Heska Imaging US, LLC and Cuattro, LLC, effective as of August 10, 2015.
10.74+	(19)	Asset Purchase and License Agreement between Diamond Animal Health, Inc., and Elanco Animal Health, a division of Eli Lilly and Company effective as of June 17, 2013.
10.75+	(27)	Master Supply Agreement between Diamond Animal Health, Inc. and Eli Lilly and Company and its Affiliates, operating through its Elanco Animal Health division, effective as of October 1, 2014.
10.76+	(27)	Supplemental Agreement between Diamond Animal Health, Inc. and Eli Lilly and Company and its Affiliates, operating through its Elanco Animal Health division, effective as of October 1, 2014.
10.77+		Agreement and Plan of Merger among Heska Corporation, Cuattro Veterinary, LLC, Kevin S. Wilson, Cuattro LLC, Lane Naffziger, Clint Roth, DVM and Doug G. Wilson, III, dated as of March 14, 2016.
10.78	(29)	Letter Agreement between Heska Imaging US, LLC and Cuattro Veterinary, LLC, dated as of March 15, 2016.
21.1		Subsidiaries of the Company.
23.1		Consent of EKS&H LLLP, Independent Registered Public Accounting Firm.
24.1		Power of Attorney (See Signature Page of this Form 10-K).
31.1		Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.
31.2		Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.
32.1**		Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		XBRL Instance Document.
101.SCH		XBRL Taxonomy Extension Schema Document.
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document.

- 89 -



	101.DEF				XBRL Taxonomy Extension Definition Linkbase Document.
	101.PRE				XBRL Taxonomy Extension Presentation Linkbase Document.
	101.LAB				XBRL Taxonomy Extension Label Linkbase Document.



Notes
*	Indicates management contract or compensatory plan or arrangement.
+	Portions of the exhibit have been omitted pursuant to a request for confidential treatment.
**	Furnished herewith but not filed.
(1)	Filed with the Registrant's Form 10-Q for the quarter ended September 30, 1997.
(2)	Filed with the Registrant's Form 10-K for the year ended December 31, 2001.
(3)	Filed with the Registrant's Form 10-Q for the quarter ended September 30, 2002.
(4)	Filed with the Registrant's Form 10-K for the year ended December 31, 2002.
(5)	Filed with the Registrant's Form 10-Q for the quarter ended September 30, 2004.
(6)	Filed with the Registrant's Form 10-K for the year ended December 31, 2004.
(7)	Filed with the Registrant's Form 10-Q for the quarter ended June 30, 2005.
(8)	Filed with the Registrant's Form 10-K for the year ended December 31, 2006.
(9)	Filed with the Registrant's Form 10-K for the year ended December 31, 2007.
(10)	Filed with the Registrant's Form 10-Q for the quarter ended September 30, 2008.
(11)	Filed with the Registrant's Form 10-K for the year ended December 31, 2008.
(12)	Filed with the Registrant's Form 10-K for the year ended December 31, 2010.
(13)	Filed with the Registrant's Form 10-Q for the quarter ended June 30, 2011.
(14)	Filed with the Registrant's Form 10-Q for the quarter ended September 30, 2011.
(15)	Filed with the Registrant's Form 10-K for the year ended December 31, 2011.
(16)	Filed with the Registrant's Form 10-K for the year ended December 31, 2012.
(17)	Filed with the Registrant's Form 10-Q for the quarter ended March 31, 2013.
(18)	Filed with the Registrant's Form 10-Q for the quarter ended June 30, 2013.
(19)	Filed with the Registrant's Form 8-K/A on August 29, 2013.
(20)	Filed with the Registrant's Form 10-Q for the quarter ended September 30, 2013.
(21)	Filed with the Registrant's Form 10-K for the year ended December 31, 2013.
(22)	Filed with the Registrant's Form 10-Q for the quarter ended March 31, 2014.
(23)	Filed with the Registrants' Form 10-Q for the quarter ended June 30, 2014.
(24)	Filed with the Registrants' Form 10-Q for the quarter ended September 30, 2014.
(25)	Filed with the Registrants' Form 10-K for the year ended December 31, 2014.
(26)	Filed with the Registrants' Form 10-Q for the quarter ended March 31, 2015.
(27)	Filed with the Registrants' Form 10-Q for the quarter ended June 30, 2015.
(28)	Filed with the Registrants' Form 10-Q for the quarter ended September 30, 2015.
(29)	Filed with the Registrants' Form 8-K on March 15, 2016.

- 90 -

Exhibit 10.4

HESKA CORPORATION 1997 STOCK INCENTIVE PLAN

STOCK OPTION AGREEMENT

(EMPLOYEES AND CONSULTANTS)


Tax Treatment	This option is intended to be an incentive stock option under section 422 of the Internal Revenue Code or a nonstatutory option, as provided in the Notice of Stock Option Grant.

Vesting/ This option will be cancelled and of no further force or effect in the event that

Exercisability

Heska Corporation’s stockholders fail to approve, at an annual or special meeting called for the purpose, an increase in the total number of authorized shares of the Company’s Public Common Stock to at least 8,500,000 shares on or before December 31, 2022. Notwithstanding anything to the contrary in this or any other section of this Stock Option Agreement or in the Notice of Stock Option Grant, the option is not vested and shall not be exercisable unless and until such stockholder approval is effective.

This option vests and becomes exercisable in installments, as shown in the Notice of Stock Option Grant. In addition, this option shall vest and become exercisable in full if one of the following events occurs:


•	Your service as an Employee, Consultant or Outside Director of the Company or a Subsidiary terminates because of death, or


•	The Company is a party to a merger or other reorganization while you are an Employee or Consultant of the Company or a Subsidiary, this option is not continued by the Company and is not assumed by the surviving corporation or its parent, and the surviving corporation or its parent does not substitute its own option for this option, or

•

The Company is subject to a “Change in Control” while you are an Employee or Consultant of the Company or a Subsidiary and, within 12 months after the Change in Control, the surviving entity terminates your service without your consent and without Cause, as defined below. If the surviving entity demotes you to a lower position, materially reduces your authority or responsibilities, materially reduces your total compensation or announces its intention to relocate your principal place of work by more than 20 miles, then that action will be treated as a termination of your service.

•

“Cause” shall mean (i) your failure to perform your assigned duties or responsibilities as an Employee or Consultant of the Company or a Subsidiary (other than a failure resulting from total and permanent disability, as discussed below) after notice thereof from the Company describing your failure to perform such duties or responsibilities; (ii) your material breach of any confidentiality agreement or invention assignment agreement between you and the Company or a Subsidiary; (iii) your engaging in any act of dishonesty, fraud, misrepresentation, moral turpitude or misappropriation of material property that was or is materially injurious to the Company or its affiliates; (iv) your violation of any federal or state law or regulation applicable to the Company’s business; or (v) your being convicted of, or entering a plea of nolo contendere to, any crime.

No additional shares become vested after your service as an Employee, Consultant or Outside Director of the Company or a Subsidiary has terminated for any reason other than those outlined herein.


Term	This option expires in any event at the close of business at Company headquarters on the day before the 10th anniversary of the Date of Grant, as shown in the Notice of Stock Option Grant. (It will expire earlier if your service terminates, as described below.)


Regular Termination	If your service as an Employee, Consultant or Outside Director of the Company or a Subsidiary terminates for any reason except death or total and permanent disability, then this option will expire at the close of business at Company headquarters on the date three months after your termination date. The Company determines when your service terminates for this purpose.


Death	If your service as an Employee, Consultant or Outside Director of the Company or a Subsidiary terminates because of your death, then this option will expire at the close of business at Company headquarters on the date 12 months after the date of death.


Disability	If your service as an Employee, Consultant or Outside Director of the Company or a Subsidiary terminates because of your total and permanent disability, then this option will expire at the close of business at Company headquarters on the date 12 months after your termination date.

For all purposes under this Agreement, “total and permanent disability” means that you are unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted, or can be expected to last, for a continuous period of not less than one year.


Leaves of Absence	Vesting of this option shall be suspended during any unpaid leave of absence unless continued vesting is required by the terms of the leave or by applicable law.

For purposes of this option, your service does not terminate when you go on a military leave, a sick leave or another bona fide leave of absence, if the Company approved your leave in writing and if continued crediting of service is required by the terms of the leave or by applicable law.

For purposes of incentive stock options, no such leave may exceed 90 days, unless reemployment upon expiration of such leave is guaranteed by the terms of the leave or by applicable law. If reemployment upon expiration of a leave of absence approved by the Company is not so guaranteed, then three months following the 91st day of such leave, an incentive stock option shall cease to be treated as an incentive stock option and shall be treated for tax purposes as a nonstatutory option.

Unless you immediately return to active work when the approved leave ends, your service will terminate.


Restrictions on	The Company will not permit you to exercise this option if the issuance of shares at that


Exercise	time would violate any law or regulation.


Notice of	When you wish to exercise this option, you must notify the Company by filing the proper


Exercise	“Notice of Exercise” form at the address given on the form. Your notice must specify how many shares you wish to purchase. The exercise will be effective when the Company receives the Notice of Exercise with the option exercise payment described herein.

If someone else wants to exercise this option after your death, that person must prove to the Company’s satisfaction that he or she is entitled to do so.


Form of	When you submit your notice of exercise, you must include payment of the option exercise


Payment	price for the shares you are purchasing. Payment may be made in one (or a combination of two or more) of the following forms:


•	Your personal check, a cashier’s check or a money order.

•

Certificates for shares of Company stock that you own, along with any forms needed to affect a transfer of those shares to the Company. The value of the shares, determined as of the effective date of the option exercise, will be applied to the option exercise price. However, you may not surrender shares of Company stock in payment of the exercise price if your action would cause the Company to recognize compensation expense (or additional compensation expense) with respect to this option for financial reporting purposes.

•

Irrevocable directions to a securities broker approved by the Company to sell all or part of your option shares and to deliver to the Company proceeds from the sale in an amount sufficient to pay the option exercise price and any withholding taxes. (The balance of the sale proceeds, if any, will be delivered to you.) The directions must be given by signing a special “Notice of Exercise” form provided by the Company.


Withholding	You will not be allowed to exercise this option unless you make arrangements acceptable


Taxes and Stock	to the Company to pay any withholding taxes that may be due as a result of the option


Withholding	exercise. These arrangements may include (with the Company's approval) withholding

shares of Company stock that otherwise would be issued to you when you exercise this option. The value of these shares, determined as of the effective date of the option exercise, will be applied to the withholding taxes.


Restrictions on	By signing this Agreement, you agree not to sell any option shares at a time when


Resale	applicable laws, Company policies or an agreement between the Company and its underwriters prohibit a sale. This restriction will apply as long as you are an Employee, Consultant or Outside Director of the Company or a Subsidiary.


Transfer of	Prior to your death, only you may exercise this option. You cannot transfer or assign


Option	this option. For instance, you may not sell this option or use it as security for a loan. You may, however, dispose of this option in your will, by the laws of descent and distribution or through a beneficiary designation.

Regardless of any marital property settlement agreement, the Company is not obligated to honor a notice of exercise from your former spouse, nor is the Company obligated to recognize your former spouse’s interest in your option in any other way.


Retention Rights	Neither your option nor this Agreement gives you the right to be employed or otherwise retained by the Company or a Subsidiary in any capacity. The Company or a Subsidiary reserves the right to terminate your service at any time, with or without cause.


Stockholder	You, or your estate or heirs, have no rights as a stockholder of the Company until you


Rights	have exercised this option by giving the required notice to the Company and paying the exercise price.


Applicable Law	This Agreement will be interpreted and enforced under the laws of the State of Colorado (without giving effect to its conflict of laws provisions).


The Plan and	The 1997 Stock Incentive Plan is incorporated in this Agreement by reference. Unless


Other	otherwise defined herein, all capitalized terms herein have the same defined meanings


Agreements	as in the 1997 Stock Incentive Plan.

This Agreement and the Plan constitute the entire understanding between you and the Company regarding this option. Any prior agreements, commitments or negotiations concerning this option are superseded. This Agreement may be amended only by another written agreement, signed by both parties.

BY SIGNING THE NOTICE OF STOCK OPTION GRANT OF THIS AGREEMENT, YOU AGREE TO ALL OF THE TERMS AND CONDITIONS DESCRIBED ABOVE AND IN THE 1997 STOCK INCENTIVE PLAN.

Exhibit 10.5

HESKA CORPORATION

1997 STOCK INCENTIVE PLAN

RESTRICTED STOCK GRANT AGREEMENT

THIS AGREEMENT is made as of the _________ day of ____________, 20__ (the “ Grant Date ”) by and between Heska Corporation (the “ Company ”), and (the “ Executive ”).

In consideration of the mutual covenants and representations herein set forth, the Company and Executive agree as follows:

SECTION 1. GRANT OF STOCK .

1.1 Precedence of Plan . This Agreement is subject to and shall be construed in accordance with the terms and conditions of the Heska Corporation 1997 Stock Incentive Plan (the “ Plan ”), as now or hereinafter in effect. Any capitalized terms that are used in this Agreement without being defined and that are defined in the Plan shall have the meaning specified in the Plan.

1.2 Grant of Stock . The Company hereby grants to Executive an aggregate of shares of Restricted Stock (the “ Shares ”), subject to vesting as provided in Section 2.

SECTION 2. UNVESTED SHARES SUBJECT TO FORFEITURE.

2.1 Shares Subject to Forfeiture. The Shares are subject to time-based and performance-based vesting requirements.

a. The Shares will vest on the third anniversary of the Grant Date, but only if the Company has earned Operating Cash Flow of $___________ in either calendar year 20__, 20__ or 20__. For this purpose, “Operating Cash Flow” means operating income plus depreciation plus amortization, calculated in the sole discretion of the Company.

b. In the event of a Change of Control prior to the third anniversary of the Grant Date, the Shares will vest. For this purpose, “Change of Control” means (i) a sale of all or substantially all of the Company’s assets, (ii) any merger, consolidation, or other business combination transaction of the Company with or into another corporation, entity, or person, other than a transaction in which the holders of at least a majority of the shares of voting capital stock of the Company outstanding immediately prior to such transaction continue to hold (either by such shares remaining outstanding or by their being converted into shares of voting capital stock of the surviving entity) a majority of the total voting power represented by the shares of voting capital stock of the Company (or the surviving entity) outstanding immediately after such transaction, (iii) the direct or indirect acquisition (including by way of a tender or exchange offer) by any person, or persons acting as a group, of beneficial ownership or a right to acquire beneficial ownership of shares representing a majority of the voting power of the then outstanding shares of capital stock of the Company, (iv) a contested election of Directors, as a result of which or in connection with which the persons who were Directors before such election

-1-

Exhibit 10.5

or their nominees cease to constitute a majority of the Board, or (v) a dissolution or liquidation of the Company.

c. In the event that Executive’s employment with the Company is terminated prior to vesting, Executive will forfeit all right to the Shares.

2.2 Restriction on Transfer. Until the Shares are vested, the Shares may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated.

SECTION 3. STOCKHOLDER RIGHTS

3.1 Stock Register and Certificates . The Shares will be recorded in the stock register of the Company in the name of Executive. If applicable, a stock certificate or certificates representing the Shares will be registered in the name of Executive, but such certificates shall remain in the custody of the Company. Executive shall deposit with the Company a Stock Assignment Separate from Certificate in the form attached below as Attachment 1, endorsed in blank, so as to permit retransfer to the Company of all or a portion of the Shares that are forfeited or otherwise do not become vested in accordance with the Plan and this Agreement.

3.2 Exercise of Stockholder Rights . Executive shall have the right to vote the Shares (to the extent of the voting rights of said Shares, if any), to receive and retain all regular cash dividends and such other distributions, as the Board of Directors of the Company may, in its discretion, designate, pay or distribute on such Shares, and to exercise all other rights, powers and privileges of a holder of Common Stock with respect to such Shares, except as set forth in this Agreement and the Plan.

3.3 Legends . Certificates, if any, representing the Shares will contain the following or other legends in the Company’s discretion:

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS UPON AND OBLIGATIONS WITH RESPECT TO TRANSFER AND RIGHTS OF REPURCHASE AS SET FORTH IN AN AGREEMENT BETWEEN THE COMPANY AND THE ORIGINAL REGISTERED HOLDER, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY.

SECTION 4. RESPONSIBILITY FOR TAXES .

4.1 Section 83(b) Election . Executive may complete and file with the Internal Revenue Service an election pursuant to Section 83(b) of the Internal Revenue Code to be taxed currently on the fair market value of the Shares without regard to the vesting restrictions set forth in this Agreement. Executive shall be responsible for all taxes associated with the acceptance of the transfer of the Shares, including any tax liability associated with the representation of fair market value if the election is made pursuant to Code Section 83(b).

4.2 Withholding . In accordance with Section 12 of the Plan, Executive agrees to make arrangements satisfactory to the Company for the satisfaction of any withholding tax obligations that arise in connection with the Plan under applicable federal, state, local or foreign

-2-

Exhibit 10.5

law. The Company in its discretion may permit Executive to satisfy all or part of his withholding or income tax obligations by having the Company withhold all or a portion of the Shares that otherwise would be issued to him on vesting.

SECTION 5. MISCELLANEOUS.

5.1 Not an Employment Contract . This Agreement is not an employment contract and nothing in this Agreement shall be deemed to create in any way whatsoever any obligation on the part of Executive to remain in the service of the Company in any capacity, or of the Company to continue Executive’s service in any capacity.

5.2 Effect on Employee Benefits . Executive agrees that the Award will constitute special incentive compensation that will not be taken into account as “salary” or “compensation” or “bonus” in determining the amount of any payment under any pension, retirement, profit sharing or other remuneration plan of the Company unless so provided in such plan.

5.3 Further Assurances . The parties agree to execute such further instruments and to take such further action as may reasonably be necessary to carry out the intent of this Agreement.

5.4 Entire Agreement . This Agreement, including any exhibits, is the entire agreement of the parties with respect to the subject matter hereof and supersedes all prior oral and written understandings of the parties.

5.5 Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware as applied to contracts between Delaware residents to be wholly performed within the State of Colorado.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

HESKA CORPORATION

EXECUTIVE a Delaware corporation

By:

Title:

Address

-3-

ASSIGNMENT SEPARATE FROM CERTIFICATE

FOR VALUE RECEIVED, I, _____________________, hereby sell, assign and transfer unto ( ) shares of the Common Stock of Heska Corporation, standing in my name on the books of said corporation represented by Certificate No. herewith and do hereby irrevocably constitute and appoint

to transfer said stock on the books of the within-named corporation with full power of substitution in the premises.

Dated: , 20 .

Signature:

This Assignment Separate from Certificate was executed in conjunction with the terms of a Restricted Stock Grant Agreement between the above assignor and Heska Corporation, dated __________ __, 20__.


Instruction :	Please do not fill in any blanks other than the signature line.

Exhibit 10.6

HESKA CORPORATION
1997 STOCK INCENTIVE PLAN

RESTRICTED STOCK GRANT AGREEMENT

(Management Incentive Plan Award)

THIS AGREEMENT is made as of the _________ day of ____________, 20__ (the “ Grant Date ”) by and between Heska Corporation (the “ Company ”), and (the “ Executive ”), in connection with the Executive’s election to receive a portion of Executive’s award under the ____ Management Incentive Plan in the form of Restricted Stock.

In consideration of the mutual covenants and representations herein set forth, the Company and Executive agree as follows:

SECTIONGRANT OF STOCK .

1.2 Grant of Stock . The Company hereby grants to Executive an aggregate of shares of Restricted Stock (the “ Shares ”), subject to vesting as provided in SECTION 2.

SECTION 2. UNVESTED SHARES SUBJECT TO FORFEITURE.

2.1 Shares Subject to Forfeiture. The Shares are subject to vesting requirements as established in connection with the Management Incentive Plan, including the terms and conditions for awards made under the ____ Management Incentive Plan (the “MIP”). As described in more detail in the MIP, up to 100% of the Shares will vest at the time payments are made under the MIP as determined by dividing ___% of the Executive’s MIP Payout (as defined in the MIP) by $_____, and rounding to the nearest whole share. Executive will forfeit all Shares that do not vest at that time. In the event that Executive’s employment with the Company is terminated prior to vesting, Executive will forfeit all right to the Shares.

2.2 Restriction on Transfer. Until the Shares are vested, the Shares may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated.

SECTION 3. STOCKHOLDER RIGHTS

blank, so as to permit retransfer to the Company of all or a portion of the Shares that are forfeited or otherwise do not become vested in accordance with the Plan and this Agreement.

3.3 Legends . Certificates, if any, representing the Shares will contain the following or other legends in the Company’s discretion:

SECTION 4. RESPONSIBILITY FOR TAXES .

4.1 SECTION 83(b) Election . Executive may complete and file with the Internal Revenue Service an election pursuant to SECTION 83(b) of the Internal Revenue Code to be taxed currently on the fair market value of the Shares without regard to the vesting restrictions set forth in this Agreement. Executive shall be responsible for all taxes associated with the acceptance of the transfer of the Shares, including any tax liability associated with the representation of fair market value if the election is made pursuant to Code SECTION 83(b).

4.2 Withholding . In accordance with SECTION 12 of the Plan, Executive agrees to make arrangements satisfactory to the Company for the satisfaction of any withholding tax obligations that arise in connection with the Plan under applicable federal, state, local or foreign law. The Company in its discretion may permit Executive to satisfy all or part of his withholding or income tax obligations by having the Company withhold all or a portion of the Shares that otherwise would be issued to him on vesting.

SECTION 5. MISCELLANEOUS.

5.3 Further Assurances . The parties agree to execute such further instruments and to take such further action as may reasonably be necessary to carry out the intent of this Agreement.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

HESKA CORPORATION

EXECUTIVE a Delaware corporation

By:

Title:

Address

ASSIGNMENT SEPARATE FROM CERTIFICATE

to transfer said stock on the books of the within-named corporation with full power of substitution in the premises.

Dated: , 20 .

Signature:

This Assignment Separate from Certificate was executed in conjunction with the terms of a Restricted Stock Grant Agreement between the above assignor and Heska Corporation, dated __________ __, 20__.


Instruction :	Please do not fill in any blanks other than the signature line.

Exhibit 10.10

HESKA CORPORATION
2003 EQUITY INCENTIVE PLAN

RESTRICTED STOCK GRANT AGREEMENT

THIS AGREEMENT is made as of the _________ day of ____________, 20__ (the “ Grant Date ”) by and between Heska Corporation (the “Company”), and ________________ (the “Executive”).

In consideration of the mutual covenants and representations herein set forth, the Company and Executive agree as follows:

SECTION 1. GRANT OF STOCK .

1.1 Precedence of Plan . This Agreement is subject to and shall be construed in accordance with the terms and conditions of the Heska Corporation 2003 Equity Incentive Plan (the “Plan”), as now or hereinafter in effect. Any capitalized terms that are used in this Agreement without being defined and that are defined in the Plan shall have the meaning specified in the Plan.

1.2 Grant of Stock . The Company hereby grants to Executive an aggregate of ___________ shares of Restricted Stock (the “Shares”), subject to vesting as provided in Section 2.

SECTION 2. UNVESTED SHARES SUBJECT TO FORFEITURE.

2.1 Shares Subject to Forfeiture. The Shares are subject to time-based and performance-based vesting requirements.

b. In the event of a Change of Control prior to the third anniversary of the Grant Date, the Shares will vest. For this purpose, "Change of Control" means (i) a sale of all or substantially all of the Company's assets, (ii) any merger, consolidation, or other business combination transaction of the Company with or into another corporation, entity, or person, other than a transaction in which the holders of at least a majority of the shares of voting capital stock of the Company outstanding immediately prior to such transaction continue to hold (either by such shares remaining outstanding or by their being converted into shares of voting capital stock of the surviving entity) a majority of the total voting power represented by the shares of voting capital stock of the Company (or the surviving entity) outstanding immediately after such transaction, (iii) the direct or indirect acquisition (including by way of a tender or exchange offer) by any person, or persons acting as a group, of beneficial ownership or a right to acquire beneficial ownership of shares representing a majority of the voting power of the then outstanding shares of capital stock of the Company, (iv) a contested election of Directors, as a result of which or in connection with which the persons who were Directors before such election

their nominees cease to constitute a majority of the Board, or (v) a dissolution or liquidation of the Company.

c. In the event that Executive's employment with the Company is terminated prior to vesting under either paragraph (a) or (b), Executive will forfeit all right to the Shares.

2.2 Restriction on Transfer. Until the Shares are vested, the Shares may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated.

SECTION 3. STOCKHOLDER RIGHTS

3.3 Legends . Certificates, if any, representing the Shares will contain the following or other legends in the Company’s discretion:

SECTION 4. RESPONSIBILITY FOR TAXES .

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otherwise to satisfy such obligation as permitted under the Plan. The Company has the right to deduct from any salary or other payments to be made to Executive any federal, state or local taxes required by law to be so withheld.

SECTION 5. MISCELLANEOUS.

5.3 Further Assurances . The parties agree to execute such further instruments and to take such further action as may reasonably be necessary to carry out the intent of this Agreement.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

HESKA CORPORATION

EXECUTIVE a Delaware corporation

By:

Title:

Address

- 3 -

ASSIGNMENT SEPARATE FROM CERTIFICATE

to transfer said stock on the books of the within-named corporation with full power of substitution in the premises.

Dated: , 20 .

Signature:

This Assignment Separate from Certificate was executed in conjunction with the terms of a Restricted Stock Grant Agreement between the above assignor and Heska Corporation, dated __________ __, 20__.


Instruction :	Please do not fill in any blanks other than the signature line.

Exhibit 10.11

HESKA CORPORATION
2003 EQUITY INCENTIVE PLAN

RESTRICTED STOCK GRANT AGREEMENT

(Management Incentive Plan Award)

THIS AGREEMENT is made as of the _________ day of ____________, 20__ (the “ Grant Date ”) by and between Heska Corporation (the “Company”), and ________________ (the “Executive”), in connection with the Executive’s election to receive a portion of Executive’s award under the ____ Management Incentive Plan in the form of Restricted Stock.

In consideration of the mutual covenants and representations herein set forth, the Company and Executive agree as follows:

SECTION 1. GRANT OF STOCK .

1.2 Grant of Stock . The Company hereby grants to Executive an aggregate of ___________ shares of Restricted Stock (the “Shares”), subject to vesting as provided in Section 2.

SECTION 2. UNVESTED SHARES SUBJECT TO FORFEITURE.

2.1 Shares Subject to Forfeiture. The Shares are subject to vesting requirements as established in connection with the Management Incentive Plan, including the terms and conditions for awards made under the _____ Management Incentive Plan (the “MIP”). As described in more detail in the MIP, up to 100% of the Shares will vest at the time payments are made under the MIP as determined by dividing ___% of the Executive’s MIP Payout (as defined in the MIP) by $_____, and rounding to the nearest whole Share. Executive will forfeit all Shares that do not vest at that time. In the event that Executive’s employment with the Company is terminated prior to vesting, Executive will forfeit all right to the Shares.

2.2 Restriction on Transfer. Until the Shares are vested, the Shares may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated.

SECTION 3. STOCKHOLDER RIGHTS

Exhibit 10.11

blank, so as to permit retransfer to the Company of all or a portion of the Shares that are forfeited or otherwise do not become vested in accordance with the Plan and this Agreement.

3.3 Legends . Certificates, if any, representing the Shares will contain the following or other legends in the Company’s discretion:

SECTION 4. RESPONSIBILITY FOR TAXES .

4.2 Withholding . In accordance with Section 11 of the Plan, Executive agrees to remit to the Company an amount sufficient to satisfy federal, state and local taxes (including the Executive’s FICA obligation) required to be withheld with respect to the vesting of the Shares, or otherwise to satisfy such obligation as permitted under the Plan. The Company has the right to deduct from any salary or other payments to be made to Executive any federal, state or local taxes required by law to be so withheld.

SECTION 5. MISCELLANEOUS.

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Exhibit 10.11

5.3 Further Assurances . The parties agree to execute such further instruments and to take such further action as may reasonably be necessary to carry out the intent of this Agreement.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

HESKA CORPORATION

EXECUTIVE a Delaware corporation

By:

Title:

Address

- 3 -

ASSIGNMENT SEPARATE FROM CERTIFICATE

to transfer said stock on the books of the within-named corporation with full power of substitution in the premises.

Dated: , 20 .

Signature:

This Assignment Separate from Certificate was executed in conjunction with the terms of a Restricted Stock Grant Agreement between the above assignor and Heska Corporation, dated __________ __, 20__.


Instruction :	Please do not fill in any blanks other than the signature line.

Exhibit 10.12

Heska Corporation

2016 Management Incentive Plan

1. The Category Percentages for the 2016 MIP are as follows:



Title	Category Percentage
Executive Vice President-level	40.0% of base salary
Other Officers	35.0% of base salary
Directors	25.0% of base salary

2. The Plan Allocation for the 2016 MIP is as follows:

50% on achievement of the company-wide financial objective and 50% on individual performance

3. The Key Parameters for the 2016 MIP are as follows:

1) Pre-MIP Target Income (Pre-MIP Operating Income excluding acquisitions plus acquisition and development expenses specified at the Compensation Committees February 10, 2016 meeting) and 2) Revenue

4. The Payout Structure for the 2016 MIP is as follows:



Pre-MIP Target Income (% MIP Goal)	Revenue (% MIP Goal)	MIP Payout (% MIP Goal)	Post-MIP Target Income
$9,800K (85%)	$106,000K (92%)	$0 (0%)	$9,800K
$10,100K (88%)	$107,000K (93%)	$260K (20%)	$9,840K
$10,400K (90%)	$108,000K (94%)	$520K (40%)	$9,880K
$10,700K (93%)	$110,000K (96%)	$780K (60%)	$9,920K
$11,100K (97%)	$112,000K (97%)	$1,040K (80%)	$10,060K
$11,500K (100%)	$115,000K (100%)	$1,300K (100%)	$10,200K
$12,600K (110%)	$121,000K (105%)	$1,625K (125%)	$10,975K
$13,800K (120%)	$127,000K (110%)	$1,950K (150%)	$11,850K

There shall be no MIP Payout if Pre-MIP Target Income is less than $9,800K or Revenue is less than $106,000K. If necessary, MIP Payouts shall be determined by interpolating between MIP Payout result rows, subject to a minimum Post-MIP Target Income interpolation.

5. MIP Payout Features:

Eligibility - To earn an MIP Payout, an MIP participant must remain an active employee of Heska Corporation or one of its affiliates through the time of payment of MIP Payouts (planned to be on February 28, 2017).

Medium of Payment - MIP Payouts are to be made in cash, although by March 4, 2016 Executive Vice President-level participants may elect to receive up to 50% of his or her MIP Payout in stock, subject to a maximum of 2,500 shares, a maximum grant of such participant’s Incentive Target and vesting based upon MIP Payout achieved.

Maximum payout: The maximum payout to any participant shall be 200% such participant’s Incentive Target, which is calculated by multiplying such participant’s base salary by the Category Percentage applicable to such participant.

Exhibit 10.15

HESKA CORPORATION

DIRECTOR COMPENSATION POLICY

Non-employee directors of Heska Corporation, a Delaware corporation (the "Company") shall receive the following compensation for their service as a member of the Board of Directors (the "Board") of the Company:

Cash Compensation

Annual Retainer for General Board Service

Effective January 1, 2013, each non-employee director shall be entitled to an annual cash retainer in the amount of $40,000 (the "Annual Retainer"). The Company shall pay the Annual Retainer on a quarterly basis in advance on the first day of the calendar quarter, subject to the non-employee director's continued service to the Company as a non-employee director on such date.

Annual Retainer for Specific Role Service

Commencing January 1, 2016, any non-employee director who serves in a specified role shall be entitled to an annual cash retainer in an amount specified in the table below (the "Service Retainer"). The Company shall pay each Service Retainer on a quarterly basis in advance on the first day of the calendar quarter, subject to the applicable non-employee director's continued service to the Company in the corresponding role on such date.



Role	Service Retainer
Chair of the Board	$12,000
Lead Director	$10,000
Audit Chair	$20,000
Compensation Chair	$12,000
Corporate Governance Chair	$7,500
Audit Member	$10,000
Compensation Member	$6,000
Corporate Governance Member	$3,000

Note: Non-employee directors are not to be paid a Chair and Member fee for service on the same committee.

Equity Compensation

Annual Award

Commencing with the 2013 Annual Meeting of Stockholders, each non-employee director elected to the Board and each other continuing non-employee director shall automatically receive an annual grant of an option valued at $50,000 (the "Equity Value") to purchase shares of the Company's common stock, at an exercise price equal to the fair market value of the common stock on the date of grant which shall be the date of each Company Annual Meeting of stockholders, subject to such grant covering a maximum of 5,000 shares (the "Option Cap"). This option shall vest in full on the earlier of (i) the one year anniversary of the date of grant and (ii) the date immediately preceding the date of the Annual Meeting of

the Company's stockholders for the year following the year of grant for the award, subject to the non-employee director's continued service to the Company through the vesting date. The option shall be immediately exercisable, but if "early exercised," remain subject to the Company's right of repurchase at the exercise price upon termination of service prior to the vesting date.

Initial Award

Beginning on January 1, 2013, any new non-employee directors appointed or elected to our Board between Annual Meetings shall automatically receive a grant of an option to purchase shares of the Company's common stock at an exercise price equal to the fair market value of the common stock on the date of grant valued at the Equity Value adjusted pro rata for the time until the next Annual Meeting, subject to the Option Cap adjusted pro rata for the time until the next Annual Meeting. The option shall vest at the same time as the Annual Award issued to Directors at the previous Annual Meeting. The option shall be immediately exercisable, but if "early exercised," remain subject to the Company's right of repurchase at the exercise price upon termination of service prior to the vesting date.

Provisions Applicable to All Non-Employee Director Equity Compensation Grants

All grants shall be subject to the terms and conditions of the Company's 1997 Stock Incentive Plan or 2003 Equity Incentive Plan, as applicable, and the terms of the Stock Option Agreement issued thereunder.

For purposes of this Director Compensation Policy, the "value" for Initial Grants and Annual Grants to non-employee directors shall be determined in accordance with the Company's option valuation policy in place at the time of grant for financial reporting purposes.

Any unvested shares underlying non-employee director option grants shall become fully vested in the event of: (1) the termination of the non-employee director's services because of death, total and permanent disability or retirement at or after age 65; or (2) a change in control occurs with respect to the Company while such non-employee director is a member of the Board.

Expense Reimbursement

All non-employee directors shall be entitled to reimbursement from the Company for their reasonable travel (including airfare and ground transportation), lodging and meal expenses incident to meetings of the Board or committees thereof or in connection with other Board related business. The Company shall also reimburse directors for attendance at director continuing education programs that are relevant to their service on the Board and which attendance is pre-approved by the Chair of the Corporate Governance Committee and Chairman of the Board. The Company shall make reimbursement to a non-employee director within a reasonable amount of time following submission by the non-employee director of reasonable written substantiation for the expenses.

Amended and Restated January 1, 2016

Exhibit 10-36

EMPLOYMENT AGREEMENT

This Employment Agreement (the “ Agreement ”) is made effective on October 14, 2015 (the “ Effective Date ”) between Heska Corporation, a Delaware corporation (“ Heska ”), and John McMahon (“ Executive ”). Heska and Executive collectively are referred to as the “ Parties ” and individually as a “ Party .”

RECITALS

WHEREFORE, Executive is currently the Vice President, Financial Operations and Controller of Heska.

WHEREFORE, Executive and Heska now wish to enter into this Agreement regarding the terms of Executive’s employment, which shall become effective upon execution.

NOW, THEREFORE, in consideration of the foregoing and of the mutual promises, covenants, and agreements contained herein, the legal sufficiency of which is acknowledged by the Parties, and intending to be legally bound, the Parties agree as follows:

TERMS


1.	Duties and Scope of Employment .

a. Position and Duties . As of the Effective Date, Executive will serve as Vice President, Financial Operations and Controller of Heska. Executive will render such business and professional services in the performance of Executive’s duties, consistent with Executive’s position within Heska, as will reasonably be assigned to Executive by Heska’s Board of Directors, Chief Executive Officer, President or their supervisor. Executive’s duties will be subject to review and adjustments will be made at the discretion of the Executive’s supervisor and superiors.

b. Obligations . During the Term of Agreement (as defined below), Executive will devote Executive’s full attention, skills, time and business efforts to Heska. For the duration of the Term of Agreement, Executive agrees not to actively engage in any other employment, occupation, or consulting activity, for any direct or indirect remuneration, without the prior approval of the Board or the Corporate Governance Committee of the Board (which approval will not be unreasonably withheld); provided, however, that Executive may, without the approval of the Board or the Corporate Governance Committee of the Board, serve in any capacity with any civic, educational, or charitable organization, provided such services do not interfere with Executive’s obligations to Heska.


2.	Term of Agreement .

a. The period of Executive’s employment under this Agreement is referred to herein as the “ Term of Agreement .” Subject to the provisions for earlier termination of employment in Section 6 below, this Agreement will have an initial term of thirty-six (36) months commencing on the on the Effective Date. On the 3 ^rd anniversary of the Effective Date, and on each annual

anniversary of the Effective Date thereafter, this Agreement automatically will renew for an additional twelve-month term unless Heska provides Executive with notice of non-renewal at least 120 days prior to the date of automatic renewal; provided, however, that either Heska or Executive may terminate Executive’s employment immediately at any time subject to the provisions in Section 6 below.

b. Executive may be entitled to severance benefits pursuant to Section 6 below, depending upon the circumstances of Executive’s termination of employment. Executive will not be entitled to severance benefits if Heska provides Executive with notice of non-renewal pursuant to Section 2(a) above, regardless of the reason. Upon the termination of Executive’s employment for any reason, Executive will be entitled to payment of all accrued but unpaid compensation, vacation, expense reimbursements, and other benefits due to Executive through Executive’s termination date under any Heska-provided or paid plans, policies, and arrangements. Executive agrees to resign from all positions that Executive holds with Heska, without limitation, immediately following the termination of Executive’s employment if the Board so requests.


3.	Compensation .

a. Base Salary . Heska will pay Executive an annual salary of $230,000 as compensation for Executive’s services (the “ Base Salary ”). The Base Salary will be paid periodically in accordance with Heska’s normal payroll practices and will be subject to the usual, required withholdings and deductions. Executive’s salary will be subject to review, and adjustments will be made at the sole discretion of the Compensation Committee of the Board (the “ Committee ”) and based upon Heska’s standard practices.

b. Annual Bonus . During the Term of Agreement, Executive will be eligible to participate in the Management Incentive Plan (the “ Bonus Plan ”), or such other bonus programs as established by the Committee, at a target percentage that is no less than 35% of Executive’s Base Salary then in effect (the “ Target Bonus ”). The actual bonus paid may be higher or lower than the Target Bonus for over or under-achievement of Executive’s performance goals, as determined by the Committee in its sole discretion. Bonuses, if any, will accrue and become payable in accordance with the Committee’s standard practices for paying executive incentive compensation, provided, however, that any bonus payable under this subsection will be payable within two-and-one-half (2-1/2) months after the end of the taxable year to which it relates or such longer period as may be permitted by Treasury regulations in order to avoid application of Section 409A of the Internal Revenue Code of 1986, as amended (the “ Code ”) to such bonuses. Any bonuses paid pursuant to this Section will be subject to applicable withholdings and deductions.

4. Expenses . In addition to the foregoing, Heska will reimburse Executive for Executive’s reasonable out-of-pocket travel, entertainment, and other expenses, in accordance with Heska’s expense reimbursement policies and practices in effect at the time of the reimbursement request. Executive shall submit such requests within forty-five (45) days of incurring such expenses.

5. Employee Benefits . During the Term of Agreement, Executive will be eligible to participate in the benefits offered to other senior executives of Heska, in accordance with benefit

plans, policies, and arrangements that may exist from time to time.

6. Termination and Severance .

a. Termination without Cause or for Good Reason other than In Connection with a Change of Control . If, at any time, Executive’s employment is terminated by Heska without Cause (as defined below), by Executive for Good Reason (as defined below), or due to Executive’s death or Disability (as defined below), and the termination is not In Connection with a Change of Control (as defined below), Executive will receive the following, subject to conditions and limitations set forth in Section 7:

i. A payment of an amount equal to six (6) months of Executive’s Base Salary, payable in accordance with Heska’s standard payroll practices over the shorter of the following periods (A) in equal installments over the period beginning on the date of such termination and ending on the six-month anniversary thereof, or (B) in equal installments on a monthly basis corresponding to the amount Executive would normally receive as salary each month if Executive were still employed with Heska, with a lump sum of any remaining balance of the amount specified above on March 15 of the year following the year of termination.

ii. Provided that Executive timely elects continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“ COBRA ”), Heska shall pay the COBRA premium for coverage for Executive and Executive’s eligible dependents under Heska’s Benefit Plans (as defined below) for six (6) months, or if earlier, until Executive becomes employed by another employer and eligible for coverage under such other employer’s welfare benefit plans ( e.g. , payments for medical COBRA premiums will cease when Executive becomes eligible for another employer’s medical plan.) For the balance of the period during which Executive and Executive’s eligible dependents are entitled to coverage under COBRA, Executive shall be entitled to maintain coverage for Executive and Executive’s eligible dependents at Executive’s sole expense. Executive shall notify Heska immediately upon Executive’s acceptance of employment with another employer.

b. Termination without Cause or for Good Reason In Connection with a Change of Control . If, at any time, Executive’s employment is terminated by Heska without Cause or by Executive for Good Reason, and the termination is In Connection with a Change of Control (as defined below), then, subject to the limitations set forth in this Section 7, Executive will receive:

i. A payment of an amount equal to twelve (12) months of Executive’s Base Salary, payable in equal installments in accordance with the standard payroll schedule over the shorter of the following periods (A) the period beginning on the date of such termination and ending on the one-year anniversary thereof, or (B) the period beginning on the date of such termination and ending on March 15 of the year following the year of termination.

ii. Provided that Executive timely elects continuation coverage under COBRA, Heska shall pay the COBRA premium for coverage for Executive and Executive’s eligible dependents under Heska’s Benefit Plans (as defined below) for twelve (12) months, or if earlier, until Executive becomes employed by another employer and eligible for coverage under

such other employer’s welfare benefit plans ( e.g. , payments for medical COBRA premiums will cease when Executive becomes eligible for another employer’s medical plan). For the balance of the period during which Executive and Executive’s eligible dependents are entitled to coverage under COBRA, Executive shall be entitled to maintain coverage for Executive and Executive’s eligible dependents at Executive’s sole expense. Executive shall notify Heska immediately upon Executive’s acceptance of employment with another employer.

c. Termination without Good Reason; Termination for Cause . If, at any time, Executive’s employment with Heska terminates voluntarily by Executive without Good Reason or is terminated for Cause by Heska, then (i) all further vesting of Executive’s outstanding equity awards will terminate immediately, (ii) all payments of compensation by Heska to Executive hereunder will terminate immediately (except as to amounts already earned), but Executive will be paid all accrued but unpaid vacation, expense reimbursements, and other benefits due to Executive through Executive’s termination date under any Company-provided or paid plans, policies, and arrangements, and (iii) Executive will not be entitled to any severance.

d. Excise Tax . In the event that any benefits payable to Executive pursuant to Section 6 of this Agreement (“ Termination Benefits ”) (i) constitute “parachute payments” within the meaning of Section 280G of the Code, or any comparable successor provisions, and (ii) but for this Section 6(d), would be subject to the excise tax imposed by Section 4999 of the Code, or any comparable successor provisions (the “ Excise Tax ”), then Executive’s Termination Benefits hereunder shall be either (A) provided to Executive in full, or (B) provided to Executive as to such lesser extent which would result in no portion of such benefits being subject to the Excise Tax, whichever of the foregoing amounts, when taking into account applicable federal, state, local, and foreign income and employment taxes, the Excise Tax, and any other applicable taxes, results in the receipt by Executive, on an after-tax basis, of the greatest amount of benefits, notwithstanding that all or some portion of such benefits may be taxable under the Excise Tax. Unless Heska and Executive otherwise agree in writing, any determination required under this Section 6(d) shall be made in writing in good faith by Heska’s independent accountants. In the event of a reduction of benefits hereunder, Executive shall be given the choice of which benefits to reduce. If Executive does not provide written identification to Heska of which benefits Executive chooses to reduce within ten (10) days after written notice of the accountants’ determination, and Executive has not disputed the accountants’ determination, then Heska shall select the benefits to be reduced. For purposes of making the calculations required by this Section 6(d), the accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of the Code and other applicable legal authority. Heska and Executive shall furnish to the accountants such information and documents as the accountants may reasonably request in order to make a determination under this Section 6(d). Heska shall bear all costs the accountants may reasonably incur in connection with any calculations contemplated by this Section 6(d).


7.	Conditions to Receipt of Severance; No Duty to Mitigate .

a. Separation Agreement and Release of Claims . The receipt of any severance pursuant to Section 6 will be subject to Executive signing and not revoking a confidential separation agreement and release of claims in a form reasonably acceptable to Heska. Such agreement will provide (among other things) that Executive will not disparage Heska, its

affiliates, parents, subsidiaries, directors, executive officers, employees, agents, or representatives. No severance will be paid or provided until the confidential separation agreement and release agreement becomes effective. No severance will be paid or provided if the Executive’s confidential separation agreement and release agreement is not signed and irrevocable within forty-five (45) days after the Executive’s termination date.

b. Non-Competition . In the event of a termination of Executive’s employment that would entitle Executive to the receipt of severance pursuant to Sections 6(a) or 6(b), Executive agrees not to engage in Competition (as defined below) for twelve (12) months following the termination date. The geographic scope of this Section 7(b) is the United States of America. If Executive engages in Competition within such period, all continuing payments and benefits to which Executive otherwise may be entitled pursuant to Section 6 will cease immediately.

c. Non-Solicitation . In the event of a termination of Executive’s employment that would entitle Executive to the receipt of severance pursuant to Sections 6(a) or 6(b), Executive agrees that, for twenty-four (24) months following the termination date, Executive, directly or indirectly, whether as employee, owner, sole proprietor, partner, director, member, consultant, agent, founder, co-venturer, or otherwise, (i) will not solicit, induce, or influence any person to modify his or her employment or consulting relationship with Heska (the “ No-Inducement ”), and (ii) not intentionally divert business away from Heska by soliciting business from any of Heska’s customers and users who would otherwise have placed the solicited order with Heska (the “ No Solicit ”). The geographic scope of this Section 7(c) is the United States of America. If Executive breaches the No-Inducement or No Solicit, all continuing payments and benefits to which Executive otherwise may be entitled pursuant to Section 6 will cease immediately.

d. Remedies . In the event of Executive’s breach of Sections 7(b) or 7(c), Heska shall have any and all remedies available to it in law or in equity, including without limitation the right to seek recovery of any amounts paid under Section 6 of this Agreement and injunctive relief, specific performance, or any other equitable relief to prevent a breach and to secure the enforcement of this Section. Injunctive relief may be granted immediately upon the commencement of any such action, and Heska need not post a bond to obtain temporary or permanent injunctive relief.


8.	Definitions .

a. Benefit Plans . For purposes of this Agreement, “ Benefit Plans ” means plans, policies, or arrangements that Heska sponsors (or participates in) and that immediately prior to Executive’s termination of employment provide Executive and Executive’s eligible dependents with medical, dental, or vision benefits. Benefit Plans do not include any other type of benefit (including, but not limited to, financial counseling, disability, life insurance, or retirement benefits). A requirement that Heska provide Executive and Executive’s eligible dependents with coverage under the Benefit Plans will not be satisfied unless the coverage is no less favorable than that provided to Executive and Executive’s eligible dependents immediately prior to Executive’s termination of employment.

b. Cause . For purposes of this Agreement, “ Cause ” shall mean the occurrence of one or more of the following: (i) conviction of, or an entry of a plea of nolo contendere to, any

crime (including one involving moral turpitude), whether a felony or misdemeanor, or any crime which reflects so negatively on Heska to be detrimental to Heska’s image or interests, or any act of fraud or dishonesty that has such negative reflection upon Heska; (ii) the repeated commitment of insubordination or refusal to comply with any reasonable request of the Board of Directors or other superior related to the scope or performance of Executive’s duties;
(iii) possession of any illegal drug on Heska premises or being under the influence of illegal drugs or abusing prescription drugs or alcohol while on Heska business, attending Heska-sponsored functions, or on Heska premises; (iv) the gross misconduct or gross negligence in the performance of Executive’s responsibilities which, based upon good faith and reasonable factual investigation of the Board, demonstrates Executive’s unfitness to serve; (v) material breach of Executive’s obligations under this Agreement; or (vi) material breach of any fiduciary duty of Executive to Heska, which results in material damage to Heska or its business; provided, however, that if any occurrence under subsections (ii), (iv), (v), and (vi) may be cured, Heska will provide notice to Executive describing the nature of such event and Executive will thereafter have thirty (30) days to cure such event, and if such event is cured with that 30-day period, then grounds will no longer exist for terminating Executive’s employment for Cause.

c. Change of Control . For purposes of this Agreement, “ Change of Control ” means (i) a sale of all or substantially all of Heska’s assets, (ii) any merger, consolidation, or other business combination transaction of Heska with or into another corporation, entity, or person, other than a transaction in which the holders of at least a majority of the shares of voting capital stock of Heska outstanding immediately prior to such transaction continue to hold (either by such shares remaining outstanding or by their being converted into shares of voting capital stock of the surviving entity) a majority of the total voting power represented by the shares of voting capital stock of Heska (or the surviving entity) outstanding immediately after such transaction, (iii) the direct or indirect acquisition (including by way of a tender or exchange offer) by any person, or persons acting as a group, of beneficial ownership or a right to acquire beneficial ownership of shares representing a majority of the voting power of the then outstanding shares of capital stock of Heska, (iv) a contested election of Directors, as a result of which or in connection with which the persons who were Directors before such election or their nominees cease to constitute a majority of the Board, or (v) a dissolution or liquidation of Heska.

d. Competition . For purposes of this Agreement, Executive will be deemed to have engaged in “ Competition ” if Executive, without the written consent of the Board or an authorized officer of any successor company to Heska, directly or indirectly (1) provides services or assistance in any form to any individual, entity, or company providing veterinary products for the companion animal health industry or imaging products or services for the veterinary market (a “Restricted Company”), whether such services or assistance is provided as an employee, consultant, agent, corporate officer, director, or otherwise or (2) participates in the financing, operation, management, or control of, a Restricted Company. A Restricted Company includes, without limitation, Abaxis, Inc., IDEXX Laboratories, Inc., scil animal health company GmbH (currently a wholly-owned subsidiary of Henry Schein, Inc.), Sound Technologies, Inc. (currently a wholly-owned subsidiary of VCA Antech, Inc.), and Synbiotics Corporation (currently a wholly owned subsidiary of Zoetis Inc.). Notwithstanding the foregoing, nothing contained in this Section 8(d) or in Section 7(b) above shall prohibit Executive from being employed or engaged in a corporate function or senior management position (and holding

commensurate equity interests) in a division of a Restricted Company, so long as such division is not in any way engaged in providing veterinary products for the companion animal health industry or imaging products or services for the veterinary market and Executive does not directly or indirectly provide services or assistance to any division that does provide veterinary products for the companion animal health industry or imaging products or services for the veterinary market.

e. Disability . For purposes of this Agreement, “ Disability ” shall mean that, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, the Executive either (i) is unable to engage in any gainful activity, or (ii) is receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering Heska employees.

f. Good Reason .

i. For purposes of this Agreement, “ Good Reason ” means the occurrence of any of the following without Executive’s express written consent:

A. Executive’s authority with Heska is, or Executive’s duties or responsibilities as Vice President, Financial Operations and Controller are, materially diminished relative to Executive’s authority, duties, and responsibilities as in effect immediately prior to such change;

B. a material diminution in Executive’s Base Salary as in effect immediately prior to such diminution; provided, that an across-the-board reduction in the base compensation and benefits of all other executive officers of Heska by the same percentage amount (or under the same terms and conditions) as part of a general base compensation reduction and/or benefit reduction shall not constitute such a qualifying material diminution;

C. a material change in the geographic location of Executive’s principal place of employment such that the new location results in a commute for Executive that is both (A) longer than Executive’s commute prior to the relocation and (B) greater than fifty (50) road miles each way from Executive’s home in the Front Range area of Colorado;

D. any material breach by Heska of any provision of this Agreement; and

E. any acquiring company fails to assume or be bound by the terms of this Agreement In Connection with a Change of Control;

ii. The aforementioned occurrences shall not be deemed Good Reason unless Executive gives Heska written notice of the existence of the condition which Executive believes constitutes Good Reason (which notice must be given within ninety (90) days of the initial existence of the condition) and such condition remains uncured for a period of thirty (30) days after the date of such notice. An event of Good Reason shall occur automatically at the expiration of such 30-day period if the relevant condition remains uncured at such time.

g. In Connection with a Change of Control . For purposes of this Agreement, a termination of Executive’s employment with Heska is “ In Connection with a Change of Control ” if Executive’s employment is terminated without Cause or for Good Reason during the period beginning three (3) months prior to a Change of Control and ending eighteen (18) months following a Change of Control.

9. Confidential Information . Executive acknowledges that Executive has executed Heska’s standard employee Confidential Information and Invention Agreement (the “ Confidentiality Agreement ”). During the Term of Agreement, and for twenty-four (24) months after termination of Executive’s employment, Executive agrees, if requested by Heska, to execute any updated versions of Heska’s form of employee confidential information agreement as may be required of substantially all of Heska’s executive officers.

10. Executive’s Representations and Warranties . Executive represents and warrants that Executive is not a party to any other employment, non-competition, or other agreement or restriction which could interfere with the Executive’s employment with Heska or Executive’s or Heska’s rights and obligations hereunder and that Executive’s acceptance of employment with Heska and the performance of Executive’s duties hereunder will not breach the provisions of any contract, agreement, or understanding to which the Executive is party or any duty owed by the Executive to any other person.

11. Notices . All notices, requests, demands, and other communications called for hereunder will be in writing and will be deemed given (a) on the date of delivery if delivered personally,
(b) one (1) day after being delivered through a nationally recognized overnight courier service, or (c) five (5) business days after the date of mailing if sent certified or registered mail. Notice to Heska shall be sent to its principal place of business with a copy provided by facsimile to the Chair of the Committee, and notice to Executive will be delivered personally or sent to Executive’s last known address provided to Heska.

12. Successors and Assigns . This Agreement will be binding upon and inure to the benefit of (a) the heirs, executors, and legal representatives of Executive upon Executive’s death and
(b) any successor of Heska. Any such Successor (as defined below) of Heska will be deemed substituted for Heska under the terms of this Agreement for all purposes. For purposes of this Section, “ Successor ” means any person, firm, corporation, or other business entity which at any time, whether by purchase, merger, or otherwise, directly or indirectly, acquires all or substantially all of the assets or business of Heska. None of the rights of Executive to receive any form of compensation payable pursuant to this Agreement may be assigned or transferred except by will or the laws of descent and distribution. Any other attempted assignment, transfer, conveyance, or other disposition of Executive’s right to compensation or other benefits will be null and void.

13. Integration . This Agreement, together with the Confidentiality Agreement, Heska’s stock plans, and Executive’s stock option and restricted stock agreements, represents the entire agreement and understanding between the Parties as to the subject matter herein and supersedes all prior or contemporaneous agreements whether written or oral, including the Prior Agreement. No waiver, alteration, or modification of any of the provisions of this Agreement will be binding

unless in writing that specifically references this Section and is signed by duly authorized representatives of the Parties hereto.

14. Interpretation . Article titles and section headings contained herein are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. The determination of the terms of, and the drafting of, this Agreement has been by mutual agreement after negotiation, with consideration by and participation of all Parties. Accordingly, the Parties agree that rules relating to the interpretation of contracts against the drafter of any particular clause shall not apply in the case of this Agreement.

15. Waivers . Any term or provision of this Agreement may be waived, or the time for its performance may be extended, by the Party or Parties entitled to the benefit thereof. Any such waiver shall be validly and sufficiently authorized for the purposes of this Agreement if, as to any Party, it is authorized in writing by an authorized representative of such Party. The failure of any Party hereto to enforce at any time any provision of this Agreement shall not be construed to be a waiver of such provision, nor in any way to affect the validity of this Agreement or any part hereof or the right of any Party thereafter to enforce each and every such provision. No waiver of any breach of this Agreement shall be held to constitute a waiver of any other or subsequent breach.

16. Severability . If any provision of this Agreement is held illegal, invalid, or unenforceable, such holding shall not affect any other provisions hereof. In the event any provision is held illegal, invalid, or unenforceable, such provision shall be limited so as to give effect to the intent of the Parties to the fullest extent permitted by applicable law. Any claim by Executive against Heska shall not constitute a defense to enforcement by Heska.

17. Tax Matters .

a. Except as provided in Section 6(d) above, Executive agrees that Executive is responsible for any applicable taxes of any nature (including any penalties or interest that may apply to such taxes) that are reasonably determined to apply to any payment made to Executive hereunder (or any arrangement contemplated hereunder), that Executive’s receipt of any benefit hereunder is conditioned on Executive’s satisfaction of any applicable withholding or similar obligations that apply to such benefit, and that any cash payment owed to Executive hereunder will be reduced to satisfy any such withholding or similar obligations that may apply thereto.

b. Executive acknowledges that no representative or agent of Heska has provided Executive with any tax advice of any nature, and Executive has consulted with Executive’s own legal, tax, and financial advisor(s) as to tax and related matters concerning the compensation to be received under this Agreement.

18. Section 409A .

a. This Agreement is intended to comply with Section 409A of the Code, as amended (“ Section 409A ”) and shall be construed accordingly. It is the intention of the parties that payments or benefits payable under this Agreement not be subject to the additional tax or

interest imposed pursuant to Section 409A. To the extent such potential payments or benefits are or could become subject to Section 409A, the parties shall cooperate to amend this Agreement with the goal of giving Executive the economic benefits described herein in a manner that does not result in such tax or interest being imposed; provided, however, that no such amendment shall materially increase the cost to, or impose any liability on Heska with respect to any benefits contemplated or provided hereunder. Executive shall, at the request of Heska, take any reasonable action (or refrain from taking any action), required to comply with any correction procedure promulgated pursuant to Section 409A.

b. If a payment that could be made under this Agreement would be subject to additional taxes and interest under Section 409A, Heska in its sole discretion may accelerate some or all of a payment otherwise payable under the Agreement to the time at which such amount is includible in the income of Executive, provided that such acceleration shall only be permitted to the extent permitted under Treasury Regulation § 1.409A-3(j)(4)(vii) and the amount of such acceleration does not exceed the amount permitted under Treasury Regulation § 1.409A-3(j)(vii).

c. No payment to be made under this Agreement shall be made at a time earlier than that provided for in this Agreement unless such payment is (i) an acceleration of payment permitted to be made under Treasury Regulation § 1.409A-3(j)(4) or (ii) a payment that would otherwise not be subject to additional taxes and interest under Section 409A.

d. The right to each payment described in this Agreement shall be treated as a right to a series of separate payments and a separately identifiable payment for purposes of Section 409A.

e. For purposes of Section 6 of this Agreement, “termination” (or any similar term) when used in reference to Executive’s employment shall mean “separation from service” with Heska within the meaning of Section 409A(a)(2)(A)(i) of the Code and applicable administrative guidance issued thereunder, and Executive shall be considered to have terminated employment with Heska when, and only when, Executive incurs a “separation from service” with Heska within the meaning of Section 409A(a)(2)(A)(i) of the Code and applicable administrative guidance issued thereunder.

f. If Executive qualifies as a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code and would receive any payment sooner than six (6) months after Executive’s separation from service that, absent the application of this Section 19(f), would be subject to additional tax imposed pursuant to Section 409A as a result of such status as a specified employee, then such payment shall instead be payable on the date that is the earliest of (i) six (6) months after Executive’s separation from service, (ii) Executive’s death, or (iii) such other date as will not result in such payment being subject to such additional tax.

19. Governing Law; Waiver of Jury Trial . This Agreement shall be governed by and construed in accordance with the internal laws of the State of Colorado without regard to conflict of law principles. The Parties hereto each waive their respective rights to a jury trial of any and all such claims and causes of action.

20. Counterparts . This Agreement may be executed in counterparts, and each counterpart will have the same force and effect as an original and will constitute an effective, binding agreement on the part of each of the undersigned.

[ signature page follows ]

IN WITNESS WHEREOF , Heska has caused this Employment Agreement to be duly executed by an officer thereunto duly authorized, and Executive has hereunto set Executive’s hand, all as of the day and year first above written.

HESKA CORPORATION

/s/ Jason A. Napolitano

Jason A. Napolitano

Executive Vice President, Chief Operating Officer, Chief Financial Officer and Secretary

EXECUTIVE:

/s/ John McMahon

John McMahon

Vice President, Financial Operations and Controller

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act. Omitted information, marked "[***]" in this exhibit, has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

Exhibit 10.54

THIRTEENTH AMENDMENT TO THIRD AMENDED AND RESTATED
CREDIT AND SECURITY AGREEMENT

THIS AMENDMENT (this “Amendment”), dated December 21, 2015, is entered into by and among WELLS FARGO BANK, NATIONAL ASSOCIATION (“ Lender ”), and HESKA CORPORATION, a Delaware corporation (“ Heska ”), Diamond Animal Health, Inc., an Iowa corporation (“ Diamond ”), and HESKA IMAGING US, LLC, a Delaware limited liability company (“ Heska Imaging ”) (each of Heska, Diamond and Heska Imaging may be referred to herein individually as a “ Borrower ” and collectively as the “ Borrowers ”).

Recitals

Borrowers Heska and Diamond and Lender are parties to a Third Amended and Restated Credit and Security Agreement dated as of December 30, 2005 (as amended from time to time, the “ Credit Agreement ”).

Each Borrower has requested that certain amendments be made to the Credit Agreement, which amendments Lender is willing to make pursuant to the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements herein contained, it is agreed as follows:

1. Defined Terms . Capitalized terms used in this Amendment which are defined in the Credit Agreement shall have the same meanings as defined therein, unless otherwise defined herein. In addition, Section 1.1 of the Credit Agreement is amended by adding or amending and restating, as the case may be, the following definitions:

“Maturity Date” means December 31, 2017.

2. Spread . Section 2.7 of the Credit Agreement is hereby amended to read it its entirety as follows:

“Section 2.7 Spread . The spread (the “ Spread ”) means two and one quarter of one percent (2.25%).”

3. Minimum Interest Charge . Section 2.8(d) of the Credit Agreement is hereby amended to read it its entirety as follows:

“(d) Minimum Interest Charge . Notwithstanding Sections 2.8(a), 2.8(b), 2.8(c) and 2.8(e), the Borrowers shall pay to the Lender interest of not less than $75,000 per calendar year (the “Minimum Interest Charge”), and the Borrowers shall pay any deficiency between the Minimum Interest Charge and the amount of interest otherwise calculated under Sections 2.8(a), 2.8(b) or 2.8(c), plus the amount of any unused line fee calculated under Section 2.9(a) on the date and in the manner provided in Section 2.10; provided, however, that if the period for which the Minimum Interest Charge is being

calculated is shorter than one year, such amount shall be prorated on a per diem basis for such shorter period.”

4. Reporting . Section 6.1(d) of the Credit Agreement is hereby amended to read in its entirety as follows:

“(d) sales journals, collection reports and credit memos of each Borrower (i) monthly, as long as Availability is at least $4,500,000, and (ii) weekly if Availability is at least the greater of (A) $4,500,000 or (B) thirty percent (30%) of the Maximum Line (or more frequently if Lender so requires).”

5. Investments . Section 7.4(a)(x) of the Credit Agreement is hereby amended to read in its entirety as follows:

“(x) unless a Default Period exists or would exist immediately after or as a result of any such purchase or investment, a purchase of assets of, or an investment in an equity position in, a company in a related industry, not to exceed $6,000,000 in cash (including existing cash or cash obtained by one or more Revolving Advances to complete any such purchase or investment, but excluding the value of any non-cash consideration for any such purchase or investment) in the aggregate during any fiscal year, provided that Availability (assuming for purposes of such calculation, that such purchase or investment had already been made) during the 90 days prior to and immediately following such purchase or investment is greater than $2,000,000 at all times, and provided further than (A) in the case of an investment resulting in a new Subsidiary, such Subsidiary delivers, concurrently with the closing of the investment, the items set forth in clause (b)(i) below, and (B) within forty-five (45) Banking Days (or such later date as Lender agrees in its sole discretion) prior to the consummation of such proposed investment or purchase, Borrower shall have delivered to Lender such documents and agreements, information and reports relating to the proposed equity investment or acquisition as Lender may reasonably request.”

6. Compliance Certificate . Exhibit B to the Credit Agreement is replaced in its entirety by Exhibit A to this Amendment.

7. Change in Notice Information . Pursuant to Section 9.5 of the Credit Agreement, Lender hereby gives Borrowers notice that Lender’s notice address shall be:

Wells Fargo Bank, National Association
MAC C7300-122
1740 Broadway
Denver, Colorado 80274
Telecopier: [***]
Attention: [***]

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8. No Other Changes . Except as explicitly amended by this Amendment, all of the terms and conditions of the Credit Agreement shall remain in full force and effect and shall apply to any advance or letter of credit thereunder.

9. Amendment Fee . Each Borrower agrees, jointly and severally, to pay Lender as of the date hereof a fully earned, non-refundable fee in the amount of $25,000 in consideration of Lender’s execution and delivery of this Amendment.

10. Conditions Precedent . This Amendment shall be effective when Lender shall have received an executed original hereof, together with each of the following, each in substance and form acceptable to Lender:

(a) A Third Amendment to Patent and Trademark Security Agreement, duly executed by Heska.

(b) Payment of the fee described in paragraph 9.

11. Representations and Warranties . The Borrowers hereby represent and warrant to the Lender as follows:

(a) The Borrowers have all requisite power and authority to execute this Amendment and any other agreements or instruments required hereunder, and to perform all of its obligations hereunder and thereunder, and this Amendment and such other agreements and instruments have been duly executed and delivered by the Borrowers and constitute the legal, valid and binding obligation of the Borrowers, enforceable in accordance with their terms.

(b) The execution, delivery and performance by the Borrowers of this Amendment and any other agreements or instruments required hereunder, have been duly authorized by all necessary corporate action and do not (i) require any authorization, consent or approval by any governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, (ii) violate any provision of any law, rule or regulation or of any order, writ, injunction or decree presently in effect, having applicability to the Borrowers, or the articles of incorporation or by-laws of the Borrowers, or (iii) result in a breach of or constitute a default under any indenture or loan or credit agreement or any other agreement, lease or instrument to which any Borrower is a party or by which it or its properties may be bound or affected.

(c) All of the representations and warranties contained in Article V of the Credit Agreement are correct on and as of the date hereof as though made on and as of such date, except to the extent that such representations and warranties relate solely to an earlier date.

12. No Waiver . The execution of this Amendment and the acceptance of all other agreements and instruments related hereto shall not be deemed to be a waiver of any Default or

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Event of Default under the Credit Agreement or a waiver of any breach, default or event of default under any Loan Document or other document held by the Lender, whether or not known to the Lender and whether or not existing on the date of this Amendment.

13. Release . The Borrowers hereby absolutely and unconditionally release and forever discharge the Lender, and any and all participants, parent entities, subsidiary entities, affiliated entities, insurers, indemnitors, successors and assigns thereof, together with all of the present and former directors, officers, agents, attorneys and employees of any of the foregoing, from any and all claims, demands or causes of action of any kind, nature or description, whether arising in law or equity or upon contract or tort or under any state or federal law or otherwise, which any Borrower has had, now has or has made claim to have against any such Person for or by reason of any act, omission, matter, cause or thing whatsoever arising from the beginning of time to and including the date of this Amendment, whether such claims, demands and causes of action are matured or unmatured or known or unknown.

14. Costs and Expenses . The Borrowers hereby reaffirm their agreement under the Credit Agreement to pay or reimburse the Lender on demand for all costs and expenses incurred by the Lender in connection with the Loan Documents, including without limitation all reasonable fees and disbursements of legal counsel. Without limiting the generality of the foregoing, the Borrowers specifically agree to pay all fees and disbursements of counsel to the Lender for the services performed by such counsel in connection with the preparation of this Amendment and the documents and instruments incidental hereto. The Borrowers hereby agree that the Lender may, at any time or from time to time in its sole discretion and without further authorization by the Borrowers, make a loan to the Borrowers under the Credit Agreement, or apply the proceeds of any loan, for the purpose of paying any such fees, disbursements, costs and expenses and the fee required under Paragraph 9 of this Amendment.

15. Miscellaneous . This Amendment may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original and all of which counterparts, taken together, shall constitute one and the same instrument.

[Signature Pages Follow]

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the date first written above.



HESKA CORPORATION		DIAMOND ANIMAL HEALTH, INC.
By	/s/ Jason Napolitano	By	/s/ Jason Napolitano
	Its Chief Financial Officer		Its Chief Financial Officer

HESKA IMAGING US, LLC
By	/s/ Jason Napolitano
	Its Chief Financial Officer

WELLS FARGO BANK, NATIONAL ASSOCIATION
By	[***]
	[***], Authorized Signatory

Signature Page to Thirteenth Amendment to Third Amended and Restated

Credit and Security Agreement

Exhibit A to Thirteenth Amendment

“Exhibit B to Third Amended and Restated

Credit Agreement

Compliance Certificate


To:	[***]

Wells Fargo Bank, National Association


Date:	__________________, 20__


Subject:	Heska Corporation Financial Statements

In accordance with our Third Amended and Restated Credit and Security Agreement dated as of December 30, 2005 (the “Credit Agreement”), attached are the financial statements of Heska Corporation (“Heska”) as of and for ________________, 20___ (the “Reporting Date”) and the year-to-date period then ended (the “Current Financials”). All terms used in this certificate have the meanings given in the Credit Agreement.

I certify that, to the best of my knowledge, the Current Financials have been prepared in accordance with GAAP, subject to year-end audit adjustments, and fairly present the Borrowers’ financial condition and the results of its operations as of the date thereof.

Events of Default . (Check one):


o	The undersigned does not have knowledge of the occurrence of a Default or Event of Default under the Credit Agreement.


o	The undersigned has knowledge of the occurrence of a Default or Event of Default under the Credit Agreement and attached hereto is a statement of the facts with respect to thereto.

I hereby certify to the Lender as follows:


o	The Reporting Date does not mark the end of one of the Borrowers’ fiscal quarters, hence I am completing all paragraphs below except paragraph 4.


o	The Reporting Date marks the end of one of the Borrowers’ fiscal quarters, hence I am completing all paragraphs below.

A-1

Financial Covenants . I further hereby certify as follows:

1. Minimum Individual Book Net Worth . Pursuant to Section 6.15 of the Credit Agreement, as of the Reporting Date, Heska's Book Net Worth was $_________________, Diamond's Book Net Worth was $_________________, and Heska Imaging’s Book Net Worth was $_________________, which o satisfies o does not satisfy the requirement that such amounts be no less than $1.00 on the Reporting Date.

2. Fixed Charge Coverage Ratio . Pursuant to Section 6.16 of the Credit Agreement, commencing with the month ended January 31, 2015, as of the Reporting Date, Borrowers’ Fixed Charge Coverage ratio was, on a consolidated basis, ___:1.00, which o satisfies o does not satisfy the requirement that such ratio be not less than 1.50:1.00.

Attached hereto are all relevant facts in reasonable detail to evidence the computations of the financial covenants referred to above. These computations were made in accordance with GAAP.

HESKA CORPORATION

By _____________________________________

Its ___________________________________”

A-2

Exhibit 10.68

AMENDMENT NO. 5

TO THE

SUPPLY AND LICENSE AGREEMENT

BY AND BETWEEN

HESKA CORPORATION

AND

INTERVET INC., d/b/a MERCK ANIMAL HEALTH

This AMENDMENT NO. 5, dated as of this 30th day of October, 2015 (“Amendment No. 5”), to the Supply and License Agreement, dated as of August 1, 2003 (as amended from time to time and hereinafter collectively referred to as the “Agreement”), is made by and between INTERVET INC., d/b/a MERCK ANIMAL HEALTH (“MAH”), and HESKA CORPORATION (“Heska”).

RECITALS :

WHEREAS, MAH (formerly called Schering-Plough Animal Health Corporation) and Heska entered into the Agreement to, among other things, provide for the supply by Heska to MAH of certain veterinary products; and

WHEREAS, MAH and Heska desire to amend the Agreement to, among other things, modify certain provisions of the Agreement.

NOW, THEREFORE, MAH and Heska hereby agree to amend the Agreement as follows:

1. Unless otherwise defined herein, each of the capitalized terms used in this Amendment shall have the meaning ascribed to it in the Agreement. Any references to “Schering” in the Agreement and in the amended language of the Agreement contained in this Amendment No. 5 shall be deemed to refer to MAH. MAH and Heska are each a “Party” and collectively the “Parties”.

2. Pursuant to that certain letter agreement between the Parties dated as of August 14, 2015, Heska granted MAH certain non-exclusive rights to Non-Veterinarian Channels (as defined below) [***] the following changes to the Agreement are hereby made:

(a) A new Section 1.17 is hereby added to the Agreement as follows:

"1.17 "Non-Veterinarian Channels" shall mean any portion of the retail channel that does not maintain a Permitted Distributor relationship with a Veterinary Institution with respect to the Product, including but not limited to retail pharmacies, big box stores, Internet based online pharmacies not meeting the definition of Permitted Distributor, pet specialty stores and in each case, their respective e-commerce outlets. Non-Veterinarian Channels specifically excludes the Over-the-counter channel."

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(b) Section 2.1(a) is hereby deleted in its entirety and replaced with the following:

"(a) During the term of this Agreement, Heska shall be the exclusive supplier of the Product to Schering solely for the exclusive distribution and sale of the Product by Schering to Veterinarians (including Permitted Distributors) and the Non-Veterinarian Channels in the Territory. [***] The rights to the Product retained by Heska under this Agreement include the Over-the-counter channel, but, subject to Section 2.7, will specifically exclude the right to distribute and sell the Product to Veterinarians, Permitted Distributors and the Non-Veterinarian Channels in the Territory."

(b) Section 2.1(b) is hereby deleted in its entirety and replaced with the following:

"(b) [***]

(c) All references to "Veterinarians" in Sections 2.1(c), 2.12 and 2.13 are hereby replaced with "Veterinarians and the Non-Veterinarian Channels."

3. The Parties further agree that notwithstanding anything to the contrary contained in the Agreement, [***] Heska agrees that it will manufacture and supply Products [***] MAH will be responsible for the upfront cost [***] development and shall reimburse Heska for any and all reasonable, actually incurred costs related thereto. In addition, any and all reasonable, actually incurred destruction costs for obsolete packaging incurred by Heska [***]

4. Exhibit A of the Agreement is hereby deleted in its entirety and replaced with Exhibit A-1 attached to this Amendment.

5. The last sentence of Section 2.7 of the Agreement is hereby deleted in its entirety and replaced with the following:

“If Schering fails to purchase enough Product in a Calendar Year to satisfy the Annual Minimum Purchase Requirement for that Calendar Year, then Schering may pay to Heska the amount of the shortfall, in which case this Agreement will continue as if Schering had met the Annual Minimum Purchase Requirement. If Schering fails to purchase enough Product in a Calendar Year to satisfy the Annual Minimum Purchase Requirement for that Calendar Year, the Parties shall meet within thirty (30) days after the end of such Calendar Year to discuss in good faith the reasons behind the shortfall and possible adjustments to the Annual Minimum Purchase Requirements, which Heska may accept or reject in its sole discretion. Following such

- 2 -

discussions, if Heska has not agreed in its sole discretion to change the Annual Minimum Purchase Requirement for the Calendar Year in question, and Schering fails to make the necessary shortfall payment within sixty (60) days following the end of such Calendar Year, Heska has the right upon written notice to Schering to convert this Agreement into a non-exclusive Agreement, in which case Schering shall be subject to no Annual Minimum Purchase Requirements going forward. The foregoing right to convert this Agreement into a non-exclusive Agreement is Heska's sole and exclusive remedy for Schering's failure to purchase enough Product in a Calendar Year to satisfy the Annual Minimum Purchase Requirement for that Calendar Year; provided, however, in the event of Heska's exercise of such right, [***] and thereafter during the term of this Agreement, Heska has the right upon sixty (60) days prior written notice to Schering to terminate this Agreement without liability therefor. [***]

6. Heska and MAH will discuss in good faith the implementation of private label, bundling, co-promotion and/or other similar sales strategies using the TriHeart Plus Product (or an equivalent private label brand) and Heska’s canine heartworm diagnostic testing product SoloStep (or an equivalent private label brand).

7. Except as expressly modified by this Amendment, all other terms and conditions of the Agreement shall remain in full force and effect.

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IN WITNESS WHEREOF, each of MAH and Heska has caused this Amendment to be executed by its respective duly authorized officer as of the date first above written.

HESKA CORPORATION

By: /s/ Michael J. McGinley

Name: Michael J. McGinley

Title: President, Biologicals & Pharmaceuticals

INTERVET INC.

By: [***]

Name: [***]

Title: [***]

Merck Animal Health Legal

Approved

21OCTOBER2015

[***]

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EXHIBIT A-1

PRICE, MINIMUM PURCHASE SIZE AND ANNUAL MINIMUM PURCHASE REQUIREMENT


1.	Pricing. The initial Product transfer price for all orders placed by MAH and delivered by Heska during a Calendar Year shall be volume-tiered as set forth below and based on MAH’s good faith forecast of projected purchases of Product for such Calendar Year provided to Heska pursuant to Section 2.2. [***]

Product Transfer Price:



	[***]	[***]	[***]	[***]
Small Tablets	[***]	[***]	[***]	[***]
	[***]	[***]	[***]	[***]
Medium Tablets	[***]	[***]	[***]	[***]
	[***]	[***]	[***]	[***]
Large Tablets	[***]	[***]	[***]	[***]

Prices and volumes are per Product packet, each packet consisting of six (6) tablets. MAH may order, and Heska will deliver, single-blister Small Tablets to be used as samples by MAH. The Product Transfer Price for such samples will be [***] Sample purchases will be included in the calculation of MAH’s Annual Minimum Purchase Requirements set forth in Section 3 of this Exhibit A-1.

Prices are for the packaging format currently in effect as of the effective date of this Amendment No. 5. Packaging format changes required by the FDA or other regulatory authorities shall be paid for by Heska. Packaging formats not required by the FDA or

- 5 -

other regulatory authorities and requested by MAH shall be the responsibility of MAH, and MAH shall reimburse Heska for its documented costs related to such changes in packaging format.


2.	Minimum Purchase Size:


a.	Small Tablets: [***]


b.	Medium Tablets: [***]


c.	Large Tablets: [***]


3.	Annual Minimum Purchase Requirement Per Calendar Year:


a.	2015: [***]


b.	2016: [***]


c.	2017: [***]


d.	2018: [***]


e.	2019+: The annual minimum purchase requirement for each year going forward [***]

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EXECUTION VERSION

Exhibit 10.77

AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER (this “ Agreement ”) is entered into as of March 14, 2016, by and among Heska Corporation, a Delaware corporation (“ Purchaser ”), its wholly-owned subsidiary Cuattro International Merger Subsidiary, Inc., a Delaware corporation (“ Merger Sub ”), Cuattro Veterinary, LLC, a Delaware limited liability company (the “ Company ”), Kevin S. Wilson (the “ Founder ”) and all members of the Company, as named on the signature page hereof (each, a “ Member ” and collectively, the “ Members ”).

WHEREAS, the Members own all of the issued and outstanding equity of the Company;

WHEREAS, the parties previously entered into that certain Unit Purchase Agreement dated as of November 10, 2015 (the “ UPA ”) pursuant to which Purchaser agreed to purchase, and the Members agreed to sell to Purchaser, all of the outstanding equity interests in the Company;

WHEREAS, the parties now desire to terminate the UPA and supersede the UPA with this Agreement, pursuant to which Merger Sub will be merged with and into the Company, with the Company surviving that merger as a wholly-owned subsidiary of Purchaser, on the terms and subject to the conditions set forth herein (the “ Merger ”);

WHEREAS, the board of managers of the Company (the “ Company Board ”) has unanimously (a) determined that this Agreement and the transactions contemplated hereby, including the Merger, are in the best interests of the Company and its members, (b) approved and declared advisable this Agreement and the transactions contemplated hereby, including the Merger, and (c) resolved to recommend adoption of this Agreement by the members of the Company in accordance with applicable Law;

WHEREAS, contemporaneously with the execution of this Agreement, the Company has obtained, in accordance with its operating agreement and the Delaware Limited Liability Company Act (the “ DLLCA ”), a written consent of its members approving this Agreement, the Merger and the transactions contemplated hereby;

WHEREAS, the respective boards of directors of Purchaser and Merger Sub have unanimously (a) determined that this Agreement and the transactions contemplated hereby, including the Merger, are in the best interests of Purchaser, Merger Sub and their respective stockholders, and (b) approved and declared advisable this Agreement and the transactions contemplated hereby, including the Merger in accordance with the Delaware General Corporation Law (the “ DGCL ”);

WHEREAS, the Company has elected to be treated as a C corporation for U.S. federal income tax purposes, and the parties intend that the transactions contemplated by this Agreement be treated as a transaction that qualifies as a “reorganization” within the meaning of Section 368(a)(2)(E) of the Internal Revenue Code of 1986, as amended (the “ Code ”), and this Agreement is intended to be, and is adopted as, a plan of reorganization for purposes of Sections 354 and 361 of the Code and within the meaning of Treasury regulation section 1.368‑2(g); and

NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth below, and for other good and valuable consideration,

the receipt and sufficiency of which are hereby acknowledged, the Purchaser, Merger Sub, the Company, the Founder and the Members agree as follows:

ARTICLE I

THE MERGER; CLOSING

1.1 The Merger . On the terms and subject to the conditions set forth in this Agreement, and in accordance with the DGCL, at the Effective Time, (a) Merger Sub will merge with and into the Company, and (b) the separate corporate existence of Merger Sub will cease and the Company will continue its existence as a limited liability company under the under the DGCL as the surviving entity in the Merger (sometimes referred to herein as the “ Surviving Company ”).

1.2 Merger Consideration . At the Closing (as defined in Section 1.3) in consideration of the Merger, the Purchaser will issue an aggregate number of shares (the “ Heska Shares ”) of Heska Corporation Common Stock, $0.01 par value (the “ Heska Common Stock ”), equal to (i) $6,000,000.00, divided by (ii) the average per share price of the Heska Common Stock for the ten (10) trading days ending on the trading day prior to the Closing Date (the “ Merger Consideration ”); provided , that the Merger Consideration shall not be less than 175,000 Heska Shares and the Merger Consideration shall not be more than 200,000 Heska Shares.

1.3 Location and Date of the Closing . The consummation of the Merger and the transactions contemplated pursuant to this Agreement (the “ Closing ”) shall take place at 10:00 am local time at the offices of the Purchaser, 3760 Rocky Mountain Avenue, Loveland, CO 80538, or remotely by the exchange of documents and signatures, no later than two (2) business days after the last of the conditions to Closing set forth in Article VII have been satisfied or waived (other than conditions which, by their nature, are to be satisfied on the Closing Date), or such other date as Purchaser and the Founder agree in writing. The date on which the Closing actually occurs is referred to herein as the “ Closing Date .” The Closing shall be deemed effective at 11:59 p.m. M.S.T. on the Closing Date.

1.4 Closing Deliveries .

(a) Deliveries by the Company and the Members . At the Closing, the Company and the Members shall deliver to the Purchaser the following (this Agreement, the documents referred to in this Section 1.3(a) to be executed by the Company, and all other agreements and instruments contemplated hereby to be executed by the Company being collectively referred as the “ Company Transaction Documents ”, and this Agreement, the documents referred to in this Section 1.3(a) to be executed by the Members, and all other agreements and instruments contemplated hereby to be executed by the Members being collectively referred to as “ Member Transaction Documents ” of such Members, as the case may be):

(i) Resignations . Resignations of the managers, officers and directors of the Company.

(ii) Lock-Up Agreement . A Lock-Up Agreement, each in the form attached hereto as Exhibit A , duly executed by each Member.

(iii) Ancillary Agreements .

(A) Assignment and Assumption Agreement (License Agreement) . An Assignment and Assumption Agreement between Heska Imaging US, LLC (“ Imaging US ”), Heska Imaging Global, LLC (“ Imaging Global ”), Cuattro, LLC (“ Cuattro ”) and Heska Imaging International, Inc. (formerly known as Cuattro Veterinary, LLC) (“ Imaging International ”), in the form attached hereto as Exhibit B (the “ Assignment and Assumption Agreement (License Agreement) ”), duly executed by Imaging US, Imaging Global, Cuattro and Imaging International.

(B) Assignment and Assumption Agreement (Supply Agreement) . An Assignment and Assumption Agreement between Imaging US, Imaging Global, Cuattro and Imaging International, in the form attached hereto as Exhibit C (the “ Assignment and Assumption Agreement (Supply Agreement) ”), duly executed by Imaging US, Imaging Global, Cuattro and Imaging International.

(iv) Merger Consideration Schedule . At least three (3) business days before the Closing, the Company shall deliver to Purchaser a schedule setting forth the portion of the Merger Consideration payable to each Member at Closing (and the percentage interest of each Member in any consideration payable pursuant to Section 1.5), in accordance with the Operating Agreement of the Company and any other agreement or understanding among the Members, duly certified in writing as correct by the Members (the “ Merger Consideration Schedule ”).

(v) Releases . Releases of the Company, each in the form attached hereto as Exhibit D , dated as of the Closing Date, duly executed by the Founder and each Member;

(vi) Consents and Approvals . Evidence that (A) all consents set forth in Sections 2.4 and 2.5 of the Disclosure Schedule and (B) all other consents, approvals, orders or authorizations of, or registrations, qualifications, designations, declarations or filings with any Person necessary or advisable in connection with the consummation by the Company or any Member of the transactions contemplated hereby have, in each of the cases described in the preceding clauses (A) and (B), been obtained or made, as applicable;

(vii) Manager’s Certificates .

(A) A certificate executed by the Manager of the Company certifying that attached thereto are (A) a true, complete and correct copy of the Certificate of Formation of the Company, as amended, as in effect at the Closing, certified by an appropriate authority of the State of Delaware, (B) true, complete and correct copies of the Company Operating Agreement as in effect immediately prior to the Closing, (C) true, complete and correct copies of resolutions of the Company’s managers and members, respectively, authorizing the execution, delivery and performance by the Company of this Agreement and all other Company Transaction Documents and the transactions contemplated hereby and thereby, which resolutions have not been modified, rescinded or revoked, and (D) specimen signatures of the officers of the Company authorized to sign the Company Transaction Documents;

(B) A certificate executed by the Manager of Cuattro certifying that attached thereto are (A) a true, complete and correct copy of the Certificate of Formation of Cuattro, as amended, as in effect at the Closing, certified by an appropriate authority of the State of Delaware, (B) true, complete and correct copies of the Operating Agreement of Cuattro, as in effect immediately

prior to the Closing, (C) true, complete and correct copies of resolutions of Cuattro’s managers and members, respectively, authorizing the execution, delivery and performance by Cuattro of this Agreement and all other Member Transaction Documents and the transactions contemplated hereby and thereby, which resolutions have not been modified, rescinded or revoked, and (D) specimen signatures of the officers of Cuattro authorized to sign the Member Transaction Documents;

(viii) Good Standing Certificates . Certificates issued by an appropriate authority of the State of Delaware and each other jurisdiction in which the Company is qualified to do business, certifying as of a date no more than five (5) days prior to the Closing Date that the Company is in good standing under the Laws (as defined below) of such jurisdiction; and

(ix) Other Documents . All other consents, certificates, documents, instruments and other items required to be delivered by the Company or the Members pursuant to the Transaction Documents (as defined below), and all such other documents, certificates and instruments as the Purchaser reasonably requests in order to give effect to the transactions contemplated hereby.

(b) Deliveries by the Purchaser . At the Closing, the Purchaser shall deliver to the Company (this Agreement, the documents referred to in this Section 1.3(b) to be executed by the Purchaser, and all other agreements and instruments contemplated hereby to be executed by the Purchaser being collectively referred as the “ Purchaser Transaction Documents ” and collectively with the Company Transaction Documents and the Member Transaction Documents, the “ Transaction Documents ”):

(i) Heska Shares . The Purchaser shall deliver a stock certificate or certificates, in denominations specified in writing by the Members, to the Members representing the Heska Shares bearing the following legends:

(1) “THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR TRANSFERRED (I) IN THE ABSENCE OF SUCH REGISTRATION OR (II) WITHOUT AN EXEMPTION THEREFROM AND, IF REQUESTED BY PURCHASER, AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO PURCHASER THAT SUCH REGISTRATION IS NOT REQUIRED.”

(2) “THE HOLDER OF SECURITIES REPRESENTED BY THIS CERTIFICATE HAS ENTERED INTO A LOCK-UP AGREEMENT PURSUANT TO WHICH SUCH HOLDER HAS AGREED THAT PRIOR TO _________________, 2016 SUCH HOLDER SHALL NOT OFFER TO SELL, CONTRACT TO SELL OR OTHERWISE SELL, DISPOSE OF OR GRANT ANY RIGHTS WITH RESPECT TO THE SECURITIES REPRESENTED BY THIS CERTIFICATE. THE FOREGOING RESTRICTION PRECLUDES SUCH HOLDER FROM ENGAGING IN ANY HEDGING OR OTHER TRANSACTIONS THAT MAY LEAD TO OR RESULT IN A SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE PRIOR TO _________________, 2016 EVEN IF SUCH SECURITIES WOULD BE SOLD BY SOMEONE OTHER THAN THE HOLDER.”

(ii) Lock-Up Agreement . The Lock-Up Agreement duly executed by the Purchaser;

(iii) Consents and Approvals . Evidence that all consents, approvals, orders or authorizations of, or registrations, qualifications, designations, declarations or filings with, any Person necessary to the consummation by the Purchaser of the transactions contemplated hereby have been obtained or made, as applicable; and

(iv) Other Documents . All other consents, certificates, documents, instruments and other items required to be delivered by the Purchaser pursuant to the Transaction Documents, and all such other documents, certificates and instruments as the Company shall reasonably request in order to give effect to the transactions contemplated hereby.

1.5 Contingent Merger Consideration . If, and only to the extent that, after the Closing, Purchaser or the Company recover any amounts from the Cuattro Affiliates with respect to the Reserved Assets (as such terms are defined in Section 2.7), Purchaser shall, on a date within thirty (30) days after such recovery (the “ Adjustment Date ”), issue and deliver to the Members, ratably in accordance with the percentage interests set forth in the Merger Consideration Schedule, as an adjustment to the Merger Consideration, an amount in cash equal to the amount recovered with respect to the Reserved Assets.

1.6 Effective Time . Subject to the provisions of this Agreement, at the Closing, the Company, Purchaser and Merger Sub shall cause a certificate of merger (the “ Certificate of Merger ”) to be executed, acknowledged and filed with the Secretary of State of the State of Delaware in accordance with the relevant provisions of the DGCL and DLLCA and shall make all other filings or recordings required under the DGCL and DLLCA. The Merger shall become effective as of such time as the Certificate of Merger has been duly filed with the Secretary of State of the State of Delaware or at such later date or time as may be agreed by the Company and Purchaser in writing and specified in the Certificate of Merger in accordance with the DGCL and DLLCA (the effective time of the Merger being hereinafter referred to as the “ Effective Time ”).

1.7 Effects of the Merger . The Merger shall have the effects set forth herein and in the applicable provisions of the DGCL and DLLCA. Without limiting the generality of the foregoing, and subject thereto, from and after the Effective Time, all property, rights, privileges, immunities, powers, franchises, licenses and authority of the Company and Merger Sub shall vest in the Surviving Company, and all debts, liabilities, obligations, restrictions and duties of each of the Company and Merger Sub shall become the debts, liabilities, obligations, restrictions and duties of the Surviving Company.

1.8 Governing Documents of Surviving Company . At the Effective Time, (a) the Certificate of Merger shall include such amendments to the certificate of formation of the Surviving Company as the Purchaser shall require and (b) the limited liability company agreement of the Surviving Company shall be amended and restated in its entirety in such form as Purchaser shall require.

1.9 Directors and Officers . The directors and officers of Merger Sub, in each case, immediately prior to the Effective Time shall, from and after the Effective Time, be the directors and officers, respectively, of the Surviving Company until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the DLLCA and the operating agreement of the Surviving Company.

1.10 Effect of the Merger on Units of the Company and Stock of Merger Sub . At the Effective Time, as a result of the Merger and without any action on the part of Purchaser, Merger Sub, the Company or any Member:

(a) Cancellation of Certain Company Units . Company Units, if any, that are owned by Purchaser, Merger Sub or the Company (as treasury stock or otherwise) or any of their respective direct or indirect wholly owned Subsidiaries shall automatically be cancelled and retired and shall cease to exist, and no consideration shall be delivered in exchange therefor.

(b) Conversion of Company Units . Each Company Unit issued and outstanding immediately prior to the Effective Time (other than Units to be cancelled and retired in accordance with Section 1.9(a), if any) shall be converted into the right to receive the portion of the Merger Consideration set forth in the Merger Consideration Schedule, in cash, without interest, at the respective times and subject to the contingencies specified herein.

(c) Conversion of Merger Sub Capital Stock . Each share of common stock, par value $0.001 per share, of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into and become one newly issued, fully paid and non-assessable Unit of the Surviving Company.

1.11 No Further Ownership Rights in Company Units . All Merger Consideration paid or payable upon the surrender of certificates for Units in accordance with the terms hereof shall be deemed to have been paid or payable in full satisfaction of all rights pertaining to the Units formerly represented by such certificate, and from and after the Effective Time, there shall be no further registration of transfers of Units on the transfer books of the Surviving Company. If, after the Effective Time, certificates for Units are presented to the Surviving Company, they shall be cancelled and exchanged for the Merger Consideration provided for, and in accordance with the procedures set forth, in this Agreement.

1.12 Withholding Rights . Each of the Purchaser, Merger Sub and the Surviving Company shall be entitled to deduct and withhold from the consideration otherwise payable to any person pursuant to this Agreement such amounts as may be required to be deducted and withheld with respect to the making of such payment under any provision of Tax Law. To the extent that amounts are so deducted and withheld by the Purchaser, Merger Sub or the Surviving Company, as the case may be, such amounts shall be treated for all purposes of this Agreement as having been paid to the person in respect of which the Purchaser, Merger Sub or the Surviving Company, as the case may be, made such deduction and withholding.

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF THE COMPANY, THE FOUNDER AND THE MEMBERS

Except as disclosed by the Company in the written Disclosure Schedule provided by the Company to the Purchaser dated the date hereof (the “ Disclosure Schedule ”), the Company, the Founder and the Members hereby jointly and generally represent and warrant to the Purchaser that the statements contained in this Article II are complete and accurate as of the execution and delivery of

this Agreement and the Closing Date. The Disclosure Schedule shall be arranged in sections corresponding to the numbered and lettered sections and subsections contained in this Article II, and the disclosures in any section or subsection of the Disclosure Schedule shall qualify the correspondingly numbered section and/or subsection in this Article II and, to the extent it is clear from a reading of the disclosure that such disclosure is applicable to such other sections and subsections, the other sections and subsections in this Article II.

2.1 Organization and Standing . The Company is a limited liability company duly organized, validly existing and in good standing under the Laws of the State of Delaware and has all requisite company power and authority to conduct its business as presently conducted and as proposed to be conducted by it and to enter into and perform this Agreement and the other Company Transaction Documents and to carry out the transactions contemplated by this Agreement and the other Company Transaction Documents. The Company is duly qualified to do business as a foreign company and is in good standing in each jurisdiction in which the failure so to qualify could reasonably be expected to have a material adverse effect on the business, prospects, assets or condition (financial or otherwise) of the Company, where the term “material”, unless otherwise specifically defined, shall include any specified item, event or matter which, in the aggregate, results in, or may have as a result, an impact which exceeds or may exceed $25,000 (a “ Company Material Adverse Effect ”). The Company has furnished to the Purchaser complete and accurate copies of its Certificate of Formation and Company Operating Agreement, each as amended to date and in effect. The Company has at all times complied with all provisions of its Certificate of Formation and the Company Operating Agreement and is not in default under, or in violation of, any such provision.

2.2 Subsidiaries . The Company does not have and has not had any subsidiaries, and does not own or control, and has not owned or controlled, directly or indirectly, any shares of capital stock of any other corporation or any interest in any partnership, limited liability company, joint venture or other non-corporate business enterprise. The Company is not a participant in any joint venture, partnership or similar arrangement.

2.3 Capitalization .

(a) Section 2.3(a) of the Disclosure Schedule includes a complete and accurate list of the holders of equity interests in the Company, showing the Units held by each such holder immediately before the Closing. All of the issued and outstanding equity interests in the Company have been duly authorized and validly issued and are fully paid. All of the issued and outstanding equity interests in the Company have been offered, issued and sold by the Company in compliance with all applicable federal and state securities Laws. The Merger Consideration Schedule delivered at Closing will set forth the true and accurate calculation of the portion of the Merger Consideration payable to each Member in accordance with the Operating Agreement of the Company and any other agreement or understanding among the Members.

(b) Except as set forth in Section 2.3 of the Disclosure Schedule, (i) no subscription, warrant, option, convertible security or other right (contingent or otherwise) to purchase or acquire any equity interest in the Company is authorized or outstanding, (ii) the Company has no obligation (contingent or otherwise) to issue any subscription, warrant, option, convertible security or other such right, or to issue or distribute to any holder of any equity interests in the Company any evidences of indebtedness or assets of the Company, (iii) the Company has no obligation (contingent or otherwise) to purchase, redeem or otherwise acquire any equity interest in the Company or to make

any distribution in respect thereof, and (iv) there are no outstanding or authorized equity appreciation, phantom equity or similar rights with respect to the Company.

(c) Except for this Agreement, the Company Operating Agreement and the Lock-Up Agreement there is no agreement, written or oral, between the Company and any holders of its securities, or among any holder of its securities, relating to the sale or transfer (including agreements relating to rights of first refusal, co‑sale rights or “drag‑along” rights), registration under the Securities Act of 1933 (the “ Securities Act ”), or voting, of equity interests in the Company.

(d) The Units are uncertificated securities and no certificates representing Units or other interests in the Company are issued or outstanding.

2.4 Authority for Agreement; No Conflict .

(a) The execution, delivery and performance by the Company of this Agreement and the other Company Transaction Documents, and the consummation by the Company of the transactions contemplated hereby and thereby, have been duly authorized by all necessary company action. This Agreement and the other Company Transaction Documents have been duly and validly executed and delivered by the Company and constitute valid and binding obligations of the Company enforceable in accordance with their respective terms.

(b) Except as set forth in Section 2.4 of the Disclosure Schedule, the execution and delivery of this Agreement and the other Company Transaction Documents, the consummation of the transactions contemplated hereby and thereby and the compliance with their respective provisions by the Company will not (i) conflict with or violate any provision of the Certificate of Formation of the Company or the Company Operating Agreement, (ii) conflict with, result in a breach of, constitute (with or without due notice or lapse of time or both) a default under, result in the imposition or acceleration of obligations or the loss of any benefits under, create in any Person the right to accelerate, terminate, modify or cancel, or require any notice, consent or waiver under, any material contract, lease, sublease, license, sublicense, permit, indenture, mortgage, instrument, Lien (as defined below) or other arrangement to which the Company is a party or by which the Company is bound or to which its assets are subject, (iii) result in the imposition of any Lien upon any assets of the Company or (iv) violate any order, writ, injunction, decree, statute, rule or regulation applicable to the Company or any of its properties or assets. For purposes of this Agreement, “ Lien ” means any mortgage, pledge, security interest, encumbrance, charge, restriction on transfer or other lien (whether arising by contract or by operation of law).

2.5 Governmental Consents . Except as set forth in Section 2.5 of the Disclosure Schedule, no consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any court, arbitrational tribunal, administrative agency or commission or other domestic or international governmental or regulatory authority or agency (each of the foregoing is hereafter referred to as a “ Governmental Entity ”) is required on the part of the Company in connection with the Merger, or the other transactions to be consummated at the Closing, as contemplated by this Agreement and the other Transaction Documents.

2.6 Litigation . There is no action, suit or proceeding, or governmental inquiry or investigation, pending, or, to the Company’s knowledge, any basis therefor or threat thereof, (a) against the Company, any of the Members, any of the former Members or, to the extent related to their employment relationship with the Company, any executive level employee of the Company, (b) which

questions the validity of this Agreement, the other Transaction Documents or the right of the Company or any of the Members to execute, deliver and perform any such documents, or (c) which could reasonably be expected to result, either individually or in the aggregate, in a Company Material Adverse Effect. Without limiting the foregoing, there is no litigation pending, or, to the Company’s knowledge, any basis therefor or threat thereof, against the Company, any of the Members, any of the former Members or any of the Company’s employees by reason of the past employment relationships of any of the Members or Former Members or the Company’s employees, the proposed activities of the Company, or negotiations by the Company with possible investors in the Company. None of the Company, the Members, former Members or, to extent related to their employment relationship with the Company, any executive level employee of the Company, is subject to any outstanding judgment, order or decree.

2.7 Financial Statements .

(a) Section 2.7(a) of the Disclosure Schedule includes a complete and accurate copy of (a) the balance sheet of the Company at December 31, 2013 and the related statements of operations and cash flows for the fiscal year then ended, (b) the balance sheet of the Company at December 31, 2014 and the related statements of operations and cash flows for the fiscal year then ended, and (c) the balance sheet of the Company (the “ Balance Sheet ”) at December 31, 2015 (the “ Balance Sheet Date ”) and the related statements of operations and cash flows for the period then ended (collectively, the “ Financial Statements ”).

(b) The Financial Statements are in accordance with the books and records of the Company, present fairly the financial condition and results of operations of the Company, at the dates and for the periods indicated, and have been prepared in accordance with generally accepted accounting principles (“ GAAP ”) consistently applied, except that the unaudited Financial Statements may not be in accordance with GAAP to the extent of the absence of footnotes normally contained therein and are subject to normal year-end audit adjustments which in the aggregate are not reasonably expected to be material.

(c) Without limiting the generality of the foregoing, the Company has fully reserved as uncollectable all liabilities and obligations to the Company, if any, from Cuattro, LLC, Cuattro Medical, LLC and Cuattro Software, LLC and any other affiliates of the Founder and the Members (collectively, the “ Cuattro Affiliates ”) (the “ Reserved Assets ”).

2.8 Absence of Undisclosed Liabilities . Section 2.8 of the Disclosure Schedule sets forth all liabilities of the Company of any nature (whether known or unknown, absolute or contingent) as of the date hereof, other than (a) liabilities which have arisen since the Balance Sheet Date in the ordinary course of business consistent with past practice and disclosed to Purchaser and (b) contractual liabilities incurred in the ordinary course of business consistent with past practice pursuant to Material Contracts and which could not reasonably be expected, either individually or in the aggregate, to have a Company Material Adverse Effect. Without limiting the generality of the foregoing, the Company has, and will have at Closing, no liability or obligation to any of the Founder, the Members or the Cuattro Affiliates, except for the obligations of the Company to Founder’s Affiliate, Heska Imaging, pursuant to that certain Promissory Note, dated as of February 22, 2013, in the original principal amount of $1,360,000.00, plus interest thereon (the “ Imaging Note ”).

2.9 Absence of Changes . Since the Balance Sheet Date, there has not been any:

(a) changes, events, circumstances, developments or effects that, individually or in the aggregate, have had, or could reasonably be expected to have, a Company Material Adverse Effect;

(b) waiver or compromise by the Company of a material right or of a material debt owed to it;

(c) satisfaction or discharge of any claim or Lien, or payment of any obligation, by the Company, except in the ordinary course of business consistent with past practice and the satisfaction, discharge or payment of which could not reasonably be expected to have a Company Material Adverse Effect;

(d) except for any changes to agreements necessitated by Heska Imaging, material change to a material contract or agreement by which the Company or any of its assets is bound or subject;

(e) material change in any compensation arrangement or agreement with any employee, officer, manager or member of the Company;

(f) resignation or termination of employment of any officer or any executive level employee of the Company;

(g) imposition of any Lien on any asset of the Company, except Liens for taxes not yet due or payable and any landlord’s, mechanic’s, carrier’s, workmen’s, repairmen’s or other similar statutory Liens arising or incurred in the ordinary course of business that do not materially detract from the value or use of the property encumbered thereby (“ Permitted Liens ”);

(h) loans or guarantees made by the Company to or for the benefit of its employees, officers, managers or members, or any members of their immediate families;

(i) declaration, setting aside or payment or other distribution in respect of any equity interest in the Company, or any direct or indirect redemption, purchase, or other acquisition of any of such equity interest by the Company;

(j) sale, assignment, transfer or disposition of any material assets of the Company;

(k) acquisition by the Company of any material assets;

(l) receipt by the Company of notice that any of its major customers has terminated, or intends to terminate, its relationship with the Company or canceled, or intends to cancel, any order submitted to the Company or that any Governmental Entity has terminated or cancelled or intends to terminate or cancel any Permit (as defined in Section 2.15(b));

(m) liability or obligation incurred under agreements or otherwise, except current liabilities entered into or incurred in the ordinary course of business consistent with past practices;

(n) any other transaction, occurrence or circumstance outside the ordinary course of business;

(o) any arrangement or commitment by the Company to do any of the things described above in this Section 2.9.

2.10 Taxes .

(a) For purposes of this Agreement: (i) “ Tax ” or “ Taxes ” means all taxes, charges, fees, levies or other similar assessments or liabilities, including income, gross receipts, ad valorem, premium, value-added, excise, real property, personal property, sales, use, transfer, withholding, employment, unemployment insurance, social security, business license, business organization, environmental, workers compensation, payroll, profits, license, lease, service, service use, severance, stamp, occupation, windfall profits, customs, duties, franchise and other taxes imposed by the United States of America or any state, local or foreign government, or any other Governmental Entity, and any interest, fines, penalties, assessments or additions to tax resulting from, attributable to or incurred in connection with any tax or any contest or dispute thereof; and (ii) “ Tax Returns ” means all reports, returns, declarations, statements or other information required to be supplied to a taxing authority in connection with Taxes and any amendment thereof.

(b) The amounts shown on the Balance Sheet as income taxes payable are sufficient in all material respects for the payment of all unpaid Taxes for all periods ending on or before the date thereof. The Company has timely filed or obtained presently effective extensions with respect to all Tax Returns that are or were required to be filed by it, such Tax Returns are complete and accurate in all material respects and all Taxes shown thereon to be due have been timely paid. All Taxes that the Company is or was required by Law to have withheld or collected have been duly withheld or collected and, to the extent required, have been timely paid to the proper Governmental Entity. The Tax Returns of the Company have not been audited by any Governmental Entity, and no controversy with respect to Taxes is pending or, to the best of the Company’s knowledge, threatened. The Company was treated as a partnership for United States federal, state and local tax purposes at all times from its date of formation through January 16, 2015, and as a “C” corporation at all times thereafter beginning January 17, 2015.

(c) To the best of the Company’s knowledge, all elections under Section 83(b) of the Internal Revenue Code of 1986 (the “ Code ”) have been timely filed by all individuals who have purchased or otherwise have been issued, equity or profits interests in the Company subject to vesting and repurchase rights.

2.11 Property and Assets; Sufficiency . The Company has good and marketable title to, or a valid leasehold or license interest in, all of its material properties and assets, including all properties and assets reflected in the Balance Sheet, except those disposed of since the date thereof in the ordinary course of business consistent with past practice, and, except as set forth in Section 2.11 of the Disclosure Schedule, none of such properties or assets is subject to any Lien other than Permitted Liens. The Company does not own and has not owned any real property. Except as set forth in Section 2.11 of the Disclosure Schedule, the assets of the Company constitute all of the assets used or useful in the operation of the business of the Company as it has been operated prior to the date hereof. Such assets are sufficient for the Purchaser to operate the business of the Company after the Closing in the ordinary course of business consistent with past practice. Each tangible asset is free from defects (patent and latent), has been maintained in accordance with normal industry practice, is in good operating condition and repair (normal wear and tear excepted), and is suitable for the purposes for which it presently is used.

2.12 Intellectual Property .

(a) Section 2.12(a)(i) of the Disclosure Schedule includes a complete and accurate list of each patent, patent application, copyright registration or application therefor, and trademark, service mark and domain name registration or application therefor of the Company. Section 2.12(a)(ii) of the Disclosure Schedule includes a complete and accurate list of each Customer Deliverable (as defined below) of the Company. Except as set forth in such Section, the Company does not use in its business any other patent, trademark, copyright, application for any of the foregoing, trade secret or other intellectual property rights. Purchaser will, upon consummation of the transactions contemplated by this Agreement, possess adequate rights, licenses and other authority to operate the business of the Company and to use its assets in the manner now used, without infringement or unlawful or improper use of any proprietary rights.

(b) The Company owns or has the right to use (pursuant to Material Contracts supplied to Purchaser) all Intellectual Property (as defined below) necessary (i) to use, manufacture, market and distribute the Customer Deliverables and (ii) to operate the Internal Systems (as defined below). The Company has taken all reasonable measures to protect the proprietary nature of each item of Company Intellectual Property (as defined below), and to maintain in confidence all trade secrets and confidential information, that it owns or uses. No other Person has any rights to any of the Company Intellectual Property owned by the Company (except pursuant to agreements or licenses specified in Section 2.12(b) of the Disclosure Schedule), and, to the best of the Company’s knowledge, no other Person is infringing, violating or misappropriating any of the Company Intellectual Property.

(c) To the Company’s knowledge none of the Customer Deliverables (as defined below), or the marketing, distribution, provision or use thereof, infringes or violates, or constitutes a misappropriation of, any Intellectual Property rights of any Person, and neither the marketing, distribution, provision or use of any Customer Deliverables currently under development by the Company will, when such Customer Deliverables are commercially released by the Company, infringe or violate, or constitute a misappropriation of, any Intellectual Property rights of any Person that exist today. To the Company’s knowledge none of the Internal Systems, or the use thereof, infringes or violates, or constitutes a misappropriation of, any Intellectual Property rights of any Person. Section 2.12(c) of the Disclosure Schedule includes a complete and accurate list of any complaint, claim or notice, or written threat thereof, received by the Company alleging any such infringement, violation or misappropriation; and the Company has provided to the Purchaser complete and accurate copies of all written documentation in the possession of the Company relating to any such complaint, claim, notice or threat. The Company has provided to the Purchaser complete and accurate copies of all written documentation in the Company’s possession relating to claims or disputes known to the Company concerning any Company Intellectual Property.

(d) Section 2.12(d) of the Disclosure Schedule identifies each license or other agreement pursuant to which the Company has licensed, distributed or otherwise granted any rights to any third party with respect to any Company Intellectual Property, and none of such licenses or other agreements obligates the Company to indemnify any Person against any infringement, violation or misappropriation of any Intellectual Property Rights with respect to any Company Intellectual Property other than the indemnification obligations set forth in the Company’s form of Master Warranty and Support Terms and Conditions previously delivered to the Purchaser with such changes as the Company may have approved, which would not individually or in the aggregate constitute a Company Material Adverse Effect.

(e) Section 2.12(e) of the Disclosure Schedule identifies each item of Company Intellectual Property that is owned by a Person other than the Company, and the license or agreement pursuant to which the Company uses it (excluding off-the-shelf software programs licensed by the Company pursuant to “shrink wrap” or “click through” licenses).

(f) The Company has not disclosed the source code for any software developed by it, or other confidential information constituting, embodied in or pertaining to such software, to any Person, except pursuant to the agreements listed in Section 2.12(f) of the Disclosure Schedule, and the Company has taken reasonable measures to prevent disclosure of such source code.

(g) All of the copyrightable materials incorporated in or bundled with the Customer Deliverables have been created by employees of the Company within the scope of their employment by the Company or by independent contractors of the Company who have executed agreements expressly assigning all right, title and interest (including all moral rights) in such copyrightable materials to the Company, or pursuant to the Amended and Restated Master License Agreement, dated as of February 22, 2013, as amended, or the Supply Agreement, dated as of February 24, 2013, as amended. No portion of such copyrightable materials was jointly developed with any third party.

(h) Section 2.12(h) of the Disclosure Schedule includes a complete and accurate list of all Open Source Materials (as defined below) that the Company has used in any way and describes the manner in which such Open Source Materials have been used by the Company, including whether and how the Open Source Materials have been modified and/or distributed by the Company. The Company has not (i) incorporated any Open Source Materials into, or combined Open Source Materials with, any Customer Deliverables, (ii) distributed Open Source Materials in connection with any Customer Deliverables, or (iii) used Open Source Materials that (with respect to either clause (i), (ii) or (iii) above) (A) create, or purport to create, obligations for the Company with respect to software developed or distributed by the Company or (B) grant, or purport to grant, to any third party any rights or immunities under intellectual property rights. Without limiting the generality of the foregoing, the Company has not used any Open Source Materials that require, as a condition of use, modification and/or distribution of such Open Source Materials, that other software incorporated into, derived from or distributed with such Open Source Materials be (1) disclosed or distributed in source code form, (2) licensed for the purpose of making derivative works, or (3) redistributable at no charge.

(i) To the Company’s knowledge, the Customer Deliverables and the Internal Systems are free from significant defects or programming errors and conform in all material respects to the written documentation and specifications therefor.

(j) For purposes of this Agreement, the following terms shall have the following meanings:

(i) “ Customer Deliverables ” shall mean (A) the products that the Company (1) currently markets, sells or licenses or (2) currently plans to market, sell or license in the future and (B) the services that the Company (1) currently provides or (2) currently plans to provide in the future.

(ii) “ Internal Systems ” shall mean the internal systems of the Company that are used in its business or operations, including, computer hardware systems, software applications and embedded systems.

(iii) “ Intellectual Property ” shall mean all: (A) patents, patent applications, patent disclosures and all related continuation, continuation-in-part, divisional, reissue, reexamination, utility model, certificate of invention and design patents, patent applications, registrations and applications for registrations; (B) trademarks, service marks, trade dress, Internet domain names, logos, trade names and corporate names and registrations and applications for registration thereof; (C) copyrights and registrations and applications for registration thereof; (D) mask works and registrations and applications for registration thereof; (E) computer software, data and documentation; (F) inventions, trade secrets and confidential business information, whether patentable or non-patentable and whether or not reduced to practice, know-how, manufacturing and product processes and techniques, research and development information, copyrightable works, financial, marketing and business data, pricing and cost information, business and marketing plans and customer and supplier lists and information; (G) other proprietary rights relating to any of the foregoing (including remedies against infringements thereof and rights of protection of interest therein under the Laws of all jurisdictions); and (H) copies and tangible embodiments thereof.

(iv) “ Company Intellectual Property ” shall mean the Intellectual Property owned by or licensed to the Company and incorporated in, underlying or used in connection with the Customer Deliverables or the Internal Systems.

(v) “ Open Source Materials ” shall mean all software or other material that is distributed as “free software”, “open source software” or under a similar licensing or distribution model, including the GNU General Public License (GPL), GNU Lesser General Public License (LGPL), Mozilla Public License (MPL), BSD Licenses, the Artistic License, the Netscape Public License, the Sun Community Source License (SCSL) the Sun Industry Standards License (SISL) and the Apache License.

2.13 Insurance . The Company maintains the insurance policies set forth in Section 2.13 of the Disclosure Schedule, all of which are in full force and effect. To the best of the Company’s knowledge, such policies provide reasonable coverage given the nature of the business engaged in the Company.

2.14 Material Contracts .

(a) Other than the obligations set forth in the Company’s form of Master Warranty and Support Terms and Conditions, previously delivered to the Purchaser, with such changes as the Company may have approved, which would not individually or in the aggregate constitute a Company Material Adverse Effect, Section 2.14(a) of the Disclosure Schedule sets forth a complete and accurate list of each agreement or commitment of any nature (whether written or oral) to which the Company is a party or by which it is bound (a) that could reasonably be expected to result in future expenditures by the Company in excess of $10,000 or which could reasonably be expected to result in future payments to the Company in excess of $10,000, (b) that is an employment or consulting agreement, employee benefit, bonus, pension, profit-sharing, equity option, equity purchase or similar plan or arrangement, (c) with any Person engaged by the Company as a distributor or sales representative or in a similar capacity, (d) with any current or former member, manager or officer of the Company, or any “affiliate” or “associate” of such Persons (as such terms are defined in the rules and regulations promulgated under the Securities Act), including any agreement or other arrangement providing for the furnishing of services by, rental of real or personal property from, or otherwise requiring payments to, any such Person, (e) restricting the Company from carrying on any business anywhere in the world, (f) relating to indebtedness of the Company for borrowed money, (g) for the disposition of a material

portion of the Company’s assets, (h) for the acquisition by the Company of the business or securities or other ownership interests of another Person, (i) with any Person regarding a joint venture, partnership, alliance or similar arrangement, (j) with any customer or supplier, or (k) that is otherwise material to the Company (all such agreements required to be disclosed pursuant to this Section 2.14(a), collectively, the “ Material Contracts ”).

(b) The Company has delivered to the Purchaser complete and accurate copies of all Material Contracts (or an accurate written summary of any oral agreement). All Material Contracts are valid, binding, and enforceable against the Company, and, to the best of the Company’s knowledge, against the other parties thereto in accordance with their terms, and in full force and effect. Neither the Company, nor, to the best of the Company’s knowledge, any other party thereto, is in material breach of any of the Material Contracts and there exists no condition or event which, after notice or lapse of time or both, would constitute any such breach by the Company or, to the best of the Company’s knowledge, any other party thereto.

2.15 Compliance: Permits .

(a) The Company has, in all material respects, complied with all laws, statutes, rules, regulations, judgments, orders and decrees (collectively, “ Laws ”) applicable to its present and proposed business. There is no term or provision of any mortgage, indenture, contract, agreement or instrument to which the Company is a party or by which it is bound or, to the Company’s knowledge, any provision of any Law applicable to or binding upon the Company, which has had, or could reasonably be expected to have, a Company Material Adverse Effect. Except as set forth in Section 2.15(a) of the Disclosure Schedule, to the best of the Company’s knowledge, none of the Members nor any other employee of the Company is in violation of any term of any contract or covenant (either with the Company or with another Person) relating to employment, patents, assignment of inventions, proprietary information disclosure, non-competition or non-solicitation.

(b) The Company holds and maintains in full force and effect all material permits, licenses, registrations, certificates, orders or approvals from any Governmental Entity (collectively, “ Permits ”) necessary for the ownership and conduct of its business in each of the jurisdictions in which it conducts or operates its businesses substantially in the manner conducted as of the date hereof, all of which are listed on Section 2.15(b) of the Disclosure Schedule.

(c) The Company has, in all material respects, complied with all of the terms and requirements of each Permit. The Company has not received any notice regarding (i) any actual or alleged material violation of, or material failure to comply with, any term or requirement of any Permit, (ii) any actual, proposed or potential revocation, withdrawal, suspension, cancellation or termination of, or modification to any Permit. To the Company’s knowledge (i) no event has occurred or circumstance exists that could reasonably be expected to (with or without the giving of notice or lapse of time or both) constitute or result in, directly or indirectly, (A) a material violation by the Company of, or a material failure on the part of the Company to comply with, any applicable Laws, or any of the terms and requirements of any Permit or (B) the revocation, withdrawal, suspension, cancellation or termination of, or any modification to any Permit and (ii) all filings required to have been made with respect to each Permit, including the filing of all applications required to have been filed for the renewal of each Permit, have been duly made on a timely basis with the appropriate Governmental Entity. The execution, delivery and performance by the Company of this Agreement and the other Company Transaction Documents and the consummation of the transactions contemplated hereby and thereby will not result in any revocation, cancellation, suspension or nonrenewal of any Permit.

(d) To the extent required under applicable Law, all of the Company’s marketing materials, agents agreements, distributor agreements and other similar agreements are on forms approved (where required) by the applicable Governmental Entities or have been filed (where required) and not objected to (or such objection has been withdrawn or resolved) by such Governmental Entities within the period provided for objection.

(e) The Company has filed all material reports, statements, documents, registrations, filings and submissions required to be filed with any Governmental Entity, and all such reports, statements, documents, registrations, filings and submissions complied in all material respects with applicable Law in effect when filed, and no material deficiencies have been asserted by, nor any material penalties imposed by, any such Governmental Entities with respect to such reports, statements, documents, registrations, filings or submissions.

2.16 Employees .

(a) Set forth on Section 2.16 of the Disclosure Schedule is a list of all Persons providing services for the Company, either as employees or independent contractors, and their respective positions, job categories and salaries, and any other material terms of the relationship. All of the employees of the Company are “at will” employees and may be terminated by the Company at any time, without liability or obligation except the payment of normal compensation accrued up to the time of termination of employment. All of the independent contractors of the Company may be terminated by the Company at any time, without liability or obligation except the payment of contractual compensation accrued up to the time of termination. The Company has not made any promises or representations to any employee or Person concerning employment with the Company or Purchaser following the Closing Date, and the Company has not informed any employee or other Person that such Person will receive any compensation as a result of the transactions contemplated by this Agreement or otherwise. The transactions contemplated by this Agreement will not result in any liability for severance pay to any employee of the Company or any other Person.

(b) All current and former employees and contractors of the Company (including the Members) have executed and delivered non-disclosure and assignment of inventions agreements and all of such agreements are in full force and effect. All current and former consultants of the Company that have performed development work or provided technical services to the Company or have otherwise had access to confidential or proprietary information of the Company have executed and delivered non-disclosure and assignment of inventions agreements, copies of which have been delivered to the Purchaser, and all of such agreements are in full force and effect.

(c) The Company is not aware that any employee of the Company has plans to terminate his or her employment relationship with the Company. The Company has complied in all material respects with all contracts for employment and all Laws relating to employment and employment practices, terms and conditions of employment and wages and hours; and no action, suit or proceeding, or governmental inquiry or investigation are pending or, to the knowledge of the Company, threatened, with respect to such Laws or any employment or other individual compensatory contract, either by private individuals or by Governmental Entities None of the employees of the Company is represented by any labor union, and there is no labor strike or other labor trouble pending with respect to the Company or, to the best of the Company’s knowledge, threatened. Section 2.16(c) of the Disclosure Schedule sets forth a list of all agreements between any Member or officer of the Company and a previous employer of such person that contains non-competition or non-solicitation covenants still in effect. The Company has delivered complete and accurate copies of such agreements

to the Purchasers. No employee of the Company, to the Company’s knowledge, is obligated under any contract or subject to any judgment, decree or administrative order that would conflict or interfere with (i) the performance of the employee’s duties as an employee, director or officer of the Company, or (ii) the Company’s business as conducted or proposed to be conducted.

(d) All persons who have performed services for the Company while classified as independent contractors have satisfied the requirements of applicable Law to be so classified, and the Company has fully and accurately reported their compensation on IRS Forms 1099 or other applicable Tax forms for independent contractors when required to do so. The Company has not incurred, and no circumstances exist under which the Company is likely to incur, any liability arising from the misclassification of employees as consultants or independent contractors, or from the misclassification of consultants or independent contractors as employees

(e) Section 2.16(e) of the Disclosure Schedule sets forth the annual salary and any bonus arrangements of each Member and each other officer of the Company.

(f) There have been no material violations of any federal, state or local statutes, laws, ordinances, rules, regulations, orders or directives with respect to the employment of individuals by, or the employment practices or work conditions of, the Company, or the terms and conditions of employment, wages (including overtime compensation) and hours. The Company is in compliance with the Immigration Reform and Control Act of 1986. The Company has not engaged in any unfair labor practice or other unlawful employment practice and there are no charges of unfair labor practices or other employee-related complaints pending or threatened against the Company before the National Labor Relations Board, the Equal Employment Opportunity Commission, the Occupational Safety and Health Review Commission, the Department of Labor or any other Governmental Authority. There is no strike, picketing, slowdown or work stoppage or organizational attempt pending, threatened against or involving the Company. No issue with respect to union representation is pending or threatened with respect to the Company.

2.17 ERISA .

(a) Except as set forth in Section 2.17 of the Disclosure Schedule, the Company does not have or otherwise contribute to or participate in any Employee Benefit Plan and has never contributed to or participated in or had any actual or potential liability with respect to any Employee Benefit Plan, other than a medical benefit plan with respect to which the Company has made all required contributions and has complied with all applicable Laws. The Company neither has nor has ever had any ERISA Affiliates.

(b) For purposes of this Agreement, “ Employee Benefit Plan ” means any benefit arrangement, obligation, custom or practice, whether or not legally enforceable, to provide benefits as compensation for services rendered, including employment or consulting agreements, severance agreements or pay policies, stay or retention bonuses or compensation, executive or incentive compensation programs or arrangements, incentive programs or arrangements, sick leave, vacation pay, plant closing benefits, patent award programs, salary continuation for disability, consulting, or other compensation arrangements, workers’ compensation, retirement, deferred compensation, bonus, equity compensation or equity-based compensation, equity purchase plans or programs, hospitalization, medical insurance, life insurance, tuition reimbursement or scholarship programs, employee discount programs, meals, travel, or vehicle allowances, any plans subject to Section 125 of the Code and any plans providing benefits or payments in the event of a change of control, change in

ownership or effective control, or sale of a substantial portion (including all or substantially all) of the assets of any business or portion thereof, together with any “benefit plans” as defined in ERISA Section 3(3) and any plans or arrangements that would be so defined if they were not (a) otherwise exempt from ERISA by that or another section, (b) maintained outside the United States or (c) individually negotiated or applicable only to one person. “ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended. “ ERISA Affiliate ” means any entity that is, or at any applicable time was, a member of (a) a controlled group of corporations (as defined in Section 414(b) of the Code), (b) a group of trades or businesses under common control (as defined in Section 414(c) of the Code), or (c) an affiliated service group (as defined under Section 414(m) of the Code or the regulations under Section 414(o) of the Code), any of which includes or included the Company.

2.18 Customers . The Company has permitted Purchaser and its representatives to examine the lists of past and current customers of the business of the Company, and Section 2.18 of the Disclosure Schedule contains an accurate list of the names, addresses and total sales for all customers with whom the Company has done business in the past twelve (12) months. Such list contains the names and addresses of all such customers and are accurate in all material respects. The Company is not aware, and has no reason to believe, that any of the customers on such list plan to materially alter the nature or level of their business with the business of the Company in the twelve (12) months following the Closing Date. The Company has not licensed, sold or granted any rights to any person to use any customer lists. The Company has no notice that the acquisition of Company by the Purchaser will materially and adversely affect the relationships of the Company or the Purchaser (as successor to the business of the Company) with such customers.

2.19 Suppliers and Distributors . The Company has provided to Purchaser a list of all suppliers with whom the Company has done business in the past twelve (12) months in connection with the business of the Company. Section 2.19 of the Disclosure Schedule sets forth a list of all distributors of products and services of such business in the past twelve (12) months. The Company (i) is in good standing with all such suppliers and distributors, (ii) has paid all accounts with such suppliers and distributors in accordance with their respective terms and conditions, (iii) is not on credit hold with any supplier, (iv) has not been terminated by any suppliers or distributors within the past twelve (12) months, and (v) except as set forth on Section 2.19 of the Disclosure Schedules, may terminate its relationship with all such suppliers and distributors without any liability or obligation. The Company has no notice that the acquisition of the Company by the Purchaser will materially and adversely affect the relationships of the Company or the Purchaser with any of such suppliers or distributors.

2.20 Books and Records . The copy of the minute books of the Company provided to the Purchaser contains complete and accurate minutes of all meetings of the Company’s managers (and any committee thereof) and members, respectively, and all actions by written consent without a meeting by the Company’s managers (and any committee thereof) and members, respectively, since the date of the Company’s formation and accurately reflects in all material respects all actions by the managers (and any committee thereof) and members, respectively, with respect to all transactions referred to in such minutes.

2.21 Absence of Claims; Business Relationships with Affiliates . Except as set forth in Section 2.21 of the Disclosure Schedule, neither Founder nor any of the Members, any Affiliate of Founder or a Member or any member of the immediate family of Founder or a Member owns any asset, property or right, tangible or intangible, used by the Company, has any claim or cause of action against the Company, or is owed any payment or other obligation by the Company. Except as set forth in

Section 2.21 of the Disclosure Schedule, other than standard employee benefits generally made available to all employees of the Company, the Company has not been a party to any contract, agreement, transaction, arrangement or course of dealing with Founder, a Member, any Affiliate of Founder or a Member or any member of the immediate family of Founder or a Member.

2.22 Disclosures . Neither this Agreement, nor any other Transaction Document nor any report, certificate or instrument furnished by or on behalf of the Company to the Purchaser or any of its representatives in connection with the transactions contemplated by this Agreement, when read together, contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary in order to make the statements contained herein or therein, in light of the circumstances under which they were made, not misleading. Each projection furnished to the Purchaser by representatives of the Company was prepared in good faith based on reasonable assumptions and represents the Company’s best estimate of future results based on information available as of the date of each such projection.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF MEMBERS

Each Member hereby severally represents and warrants to the Purchaser that the statements contained in this Article III are complete and accurate as of the execution and delivery of this Agreement and the Closing Date.

3.1 Authority . Such Member has all requisite power and authority to execute, deliver and perform this Agreement and all other Member Transaction Documents to be executed by such Member. This Agreement and the other Member Transaction Documents have been duly and validly executed and delivered by such Member and constitute valid and binding obligations of such Member enforceable in accordance with their respective terms.

3.2 Equity Interests . Except for the Units owned by such Member as set forth in Section 2.3(a) of the Disclosure Schedule, such Member owns no other capital, profits or other equity interests in the Company, or rights of any kind or nature to purchase or acquire any equity interests in the Company. Such Member is the sole record and beneficial owner of such Units and is hereby delivering the Units in connection with the Merger, free and clear of any Liens, other than restrictions on transfer imposed by applicable securities laws.

3.3 No Conflict . The consummation of the transactions contemplated hereby and the compliance with the provisions hereof will not: (a) conflict with or violate any provision of such Member’s formation documents or governing documents; (b) conflict with, result in a breach of, constitute (with or without due notice or lapse of time or both) a default under, result in the imposition or acceleration of obligations or the loss of any benefits under, create in any person or entity the right to accelerate, terminate, modify or cancel, or require any notice, consent or waiver under, any material contract, lease, sublease, license, sublicense, permit, indenture, instrument, Lien or other arrangement to which such Member or the Company is a party or by which such Member or the Company is bound or to which its assets are subject; (c) result in the imposition of any Lien upon any assets of such Member or the Company; or (d) violate any order, writ, injunction, decree, statute, rule or regulation applicable to such Member or the Company or any of its properties or assets.

3.4 Litigation . There is no action, suit or proceeding, or governmental inquiry or investigation, pending or, to the best of such Member’s knowledge, threatened against such Member, and, to the best of such Member’s knowledge, there is no basis for any such action, suit, proceeding, or governmental inquiry or investigation.

3.5 Certain Agreements . Except for this Agreement and the Lock-Up Agreement, such Member is not a party to any, and to the best of such Member’s knowledge there are no, agreements, written or oral, relating to the acquisition, disposition, registration under the Securities Act, or voting of the securities of the Company.

3.6 Company Representations and Warranties . To the best of such Member’s knowledge, the representations and warranties of the Company set forth in Article II are complete and accurate.

3.7 Prior Legal Matters . Such Member has not been (a) subject to voluntary or involuntary petition under the federal bankruptcy Laws or any state insolvency Law or the appointment of a receiver, fiscal agent or similar officer by a court for his business or property; (b) convicted in a criminal proceeding or named as a subject of a pending criminal proceeding (excluding traffic violations and other minor offenses); or (c) subject to any order, judgment, or decree (not subsequently reversed, suspended, or vacated) of any court of competent jurisdiction permanently or temporarily enjoining him from engaging, or otherwise imposing limits or conditions on his engagement in any securities, investment advisory, banking, insurance, or other type of business or acting as an officer or director of a public company.

3.8 Disclosure . To the best of such Member’s knowledge, neither this Agreement, any other Member Transaction Document or any report, certificate or instrument furnished to the Purchaser or its counsel in connection with the transactions contemplated by this Agreement or the other Transaction Documents, when read together, contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary in order to make the statements contained herein or therein, in light of the circumstances under which they were made, not misleading.

3.9 Investment . Such Member is (a) acquiring Heska Shares hereunder for its own account for investment and not with a view to, or for sale in connection with, any distribution thereof, nor with any present intention of distributing or selling the same; and, except as contemplated by this Agreement and the other Transaction Documents, such Member has no present or contemplated agreement, undertaking, arrangement, obligation, indebtedness or commitment providing for the disposition thereof, (b) a bona fide resident of the State contained in the address set forth on the signature page of the Accredited Investor Questionnaire or Purchaser Questionnaire, as applicable, delivered to the Purchaser, (c) not acquiring any Heska Shares because of or following any advertisement, article, notice or other communication published in any newspaper, magazine or internet site or similar media or broadcast over television or radio, or presented at any seminar or meeting, or any solicitation or a subscription by a person other than a representative of the Purchaser.

3.10 Accredited Investor . Such Member is:

(a) an “accredited investor” as defined in Rule 501(a) of Regulation D promulgated under the Securities Act, as indicated on the Accredited Investor Questionnaire delivered to the Purchaser prior to Closing; or

(b) not an “accredited investor” and has engaged the Founder as such Member’s “purchaser representative” as defined in Rule 501(h) of Regulation D promulgated under the Securities Act (“ Investor Representative ”) and delivered the Purchaser Questionnaire to the Purchaser prior to Closing, as completed and executed by the Investor Representative and acknowledged by such Member.

3.11 Experience . Such Member (either individually or together with such Member’s Investor Representative) has such knowledge and experience in financial and business matters that such Member (either individually or together with such Member’s Investor Representative) is capable of evaluating the risks and merits of such Member’s investment in the Heska Shares hereunder, and the ability of such Member to financially bear the risks thereof.

3.12 Restricted Securities . Such Member is aware that the Heska Shares have not been registered under the Securities Act, that the Heska Shares will be issued by the Purchaser on the basis of the statutory exemption provided by Section 4(a)(2) of the Securities Act or Regulation D promulgated thereunder, or both, relating to transactions by an issuer not involving any public offering, and that the Purchaser’s reliance thereon is based in part upon the representations made by such Member in this Agreement. Such Member acknowledges that such Member has been informed by the Purchaser, or is otherwise familiar with, the nature of the limitations imposed by the Securities Act and the rules and regulations thereunder on the transfer of securities. In particular, such Member agrees that no sale, assignment or transfer of the Heska Shares shall be valid or effective, and the Purchaser shall not be required to give any effect to such sale, assignment or transfer, unless (i) such sale, assignment or transfer is registered under the Securities Act, it being understood that the Heska Shares are not currently registered for sale and that Purchaser has no obligation or intention to register the Heska Shares; or (ii) the Heska Shares are sold, assigned or transferred in accordance with all the requirements and limitations of Rule 144 under the Securities Act; or (iii) such sale, assignment or transfer is otherwise exempt from the registration under the Securities Act.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

The Purchaser hereby represents and warrants to the Company and the Members that the statements contained in this Article IV are complete and accurate as of the execution and delivery of this Agreement and the Closing Date.

4.1 Investment . The Purchaser is acquiring the Units in connection with the Merger for its own account for investment and not with a view to, or for sale in connection with, any distribution thereof, nor with any present intention of distributing or selling the same; and, except as contemplated by this Agreement and the other Transaction Documents, the Purchaser has no present or contemplated agreement, undertaking, arrangement, obligation, indebtedness or commitment providing for the disposition thereof.

4.2 Accredited Investor . The Purchaser is an “accredited investor” as defined in Rule 501(a) under the Securities Act.

4.3 Authority . The Purchaser has all requisite corporate power and authority to execute, deliver and perform this Agreement and all other Purchaser Transaction Documents. The execution, delivery and performance by the Purchaser of this Agreement and the other Purchaser Transaction

Documents, and the consummation by the Purchaser of the transactions contemplated hereby and thereby, have been duly authorized by all necessary corporate action, of the Board of Directors of Purchaser and except for the approval of the Charter Amendment by the affirmative vote of a majority of the outstanding shares of Heska Common Stock (the “ Requisite Heska Vote ”), no other corporate proceedings by Purchaser are required to approve this Agreement or consummate the transactions contemplated hereby. This Agreement and the other Purchaser Transaction Documents have been duly and validly executed and delivered by the Purchaser and constitute valid and binding obligations of the Purchaser enforceable in accordance with their respective terms. The Purchaser has not been organized, reorganized or recapitalized specifically for the purpose of investing in the Company.

4.4 Experience . The Purchaser has sufficient knowledge and experience in finance and business that it is capable of evaluating the risks and merits of its investment in the Company and the Purchaser is able financially to bear the risks thereof.

4.5 Disclosure of information . The Purchaser has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the investment in the Company and the business, properties, prospects and financial condition of the Company.

ARTICLE V

COVENANTS

5.1 Conduct of Business Prior to the Closing . From the date hereof until the Closing, except as otherwise provided in this Agreement or consented to in writing by Purchaser, the Company shall, and the Founder and the Members shall cause the Company to, (i) cooperate with Purchaser to permit Purchaser and Purchaser’s personnel to take and fulfill customer orders and manage customer relationships in order to facilitate a transition of the Company’s operations at the Closing, (ii) cause Cuattro to continue to perform and provide goods and services on the same terms and conditions as in the ordinary course of business prior hereto, (iii) conduct the business of the Company in the ordinary course of business consistent with past practice; and (iv) use reasonable best efforts to maintain and preserve intact the current organization, business and franchises of the Company and to preserve the rights, franchises, goodwill and relationships of its employees, customers, lenders, suppliers, distributors, regulators and others having business relationships with the Company. Without limiting the foregoing, from the date hereof until the Closing Date, the Company, the Founder and the Members shall:

(a) cause the Company to preserve and maintain all of its Permits;

(b) cause the Company to pay its debts, Taxes and other obligations when due;

(c) cause the Company to maintain the properties and assets owned, operated or used by the Company in the same condition as they were on the date of this Agreement, subject to reasonable wear and tear;

(d) cause the Company to continue in full force and effect without modification all insurance policies;

(e) cause the Company to defend and protect its properties and assets from infringement or usurpation;

(f) cause the Company to perform all of its obligations under all Material Contracts relating to or affecting its properties, assets or business;

(g) cause the Company to cooperate with Purchaser to maintain its books and records in accordance with past practice;

(h) cause the Company to collect its receivables and pay its payables in the ordinary course of business in accordance with past practice without any acceleration or deferral of such actions inconsistent with past practice;

(i) cause the Company to comply in all material respects with all applicable Laws; and

(j) cause the Company not to take or permit any action that would cause any of the changes, events or conditions described in Section 2.9 to occur.

5.2 Access to Information . From the date hereof until the Closing, the Company shall, and the Founder and the Members shall cause the Company to, (a) afford Purchaser and its representatives full and free access to and the right to inspect all of the properties, assets, premises, books and records, Material Contracts and other documents and data related to the Company; (b) furnish Purchaser and its representatives with such financial, operating and other data and information related to the Company as Purchaser or any of its representatives may reasonably request; and (c) instruct the representatives of the Company to cooperate with Purchaser in its investigation of the Company. Any investigation pursuant to this Section 5.2 shall be conducted in such manner as not to interfere unreasonably with the conduct of the business of the Company. No investigation by Purchaser or other information received by Purchaser shall operate as a waiver or otherwise affect any representation, warranty or agreement given or made by the Company, the Founder or the Members in this Agreement.

5.3 No Solicitation of Other Bids .

(a) The Founder and the Members shall not, and shall not authorize or permit any of their Affiliates (including the Company) or any of its or their representatives to, directly or indirectly, (i) encourage, solicit, initiate, facilitate or continue inquiries regarding an Acquisition Proposal; (ii) enter into discussions or negotiations with, or provide any information to, any Person concerning a possible Acquisition Proposal; or (iii) enter into any agreements or other instruments (whether or not binding) regarding an Acquisition Proposal. The Founder and the Members shall immediately cease and cause to be terminated, and shall cause their Affiliates (including the Company) and all of its and their representatives to immediately cease and cause to be terminated, all existing discussions or negotiations with any Persons conducted heretofore with respect to, or that could lead to, an Acquisition Proposal. For purposes hereof, “ Acquisition Proposal ” shall mean any inquiry, proposal or offer from any Person (other than Purchaser or any of its Affiliates) concerning (i) a merger, consolidation, liquidation, recapitalization or other business combination transaction involving the Company; (ii) the issuance or acquisition of membership interests in the Company; or (iii) the sale, lease, exchange or other disposition of any significant portion of the Company’s properties or assets.

(b) In addition to the other obligations under this Section 5.3, the Founder and the Members shall, and the Founder and the Members shall cause the Company to, promptly (and in any event within three days after receipt thereof) advise Purchaser orally and in writing of any Acquisition

Proposal, any request for information with respect to any Acquisition Proposal, or any inquiry with respect to or which could reasonably be expected to result in an Acquisition Proposal, the material terms and conditions of such request, Acquisition Proposal or inquiry, and the identity of the Person making the same.

(c) The Company, the Founder and the Members agree that the rights and remedies for noncompliance with this Section 5.3 shall include having such provision specifically enforced by any court having equity jurisdiction, it being acknowledged and agreed that any such breach or threatened breach shall cause irreparable injury to Purchaser and that money damages would not provide an adequate remedy to Purchaser.

5.4 Notice of Certain Events .

(a) From the date hereof until the Closing, the Founder and the Members shall, and the Founder and the Members shall cause the Company to, promptly notify Purchaser in writing of:

(i) any fact, circumstance, event or action the existence, occurrence or taking of which (A) has had, or could reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, (B) has resulted in, or could reasonably be expected to result in, any representation or warranty made by the Company, the Founder or the Members hereunder not being true and correct or (C) has resulted in, or could reasonably be expected to result in, the failure of any of the conditions set forth in Article VII to be satisfied;

(ii) any notice or other communication from any Person alleging that the consent of such Person is or may be required in connection with the transactions contemplated by this Agreement;

(iii) any notice or other communication from any Governmental Entity in connection with the transactions contemplated by this Agreement; and

(iv) any legal Actions commenced or, to the knowledge of the Company, the Founder or the Members, threatened against, relating to or involving or otherwise affecting the Company, the Founder or the Members that, if pending on the date of this Agreement, would have been required to have been disclosed pursuant to Section 2.6 or that relates to the consummation of the transactions contemplated by this Agreement.

(b) Purchaser’s receipt of information pursuant to this Section 5.4 shall not operate as a waiver or otherwise affect any representation, warranty or agreement given or made by the Company, the Founder or the Members in this Agreement and shall not be deemed to amend or supplement the Disclosure Schedules.

5.5 Resignations . The Company shall deliver to Purchaser written resignations, effective as of the Closing Date, of the officers and managers of the Company set forth in Section 5.5 of the Disclosure Schedule.

5.6 Confidentiality . From and after the date of this Agreement, the Founder and the Members shall, and shall cause their Affiliates to, hold, and shall use their best efforts to cause their respective representatives to hold, in confidence any and all information, whether written or oral, concerning the Company, except to the extent that any such Person can show that such information (a)

is generally available to and known by the public through no fault of the Founder, the Members, any of their Affiliates or their respective representatives; or (b) is lawfully acquired by the Founder, the Members, any of their Affiliates or their respective representatives from and after the Closing from sources which are not prohibited from disclosing such information by a legal, contractual or fiduciary obligation. If the Founder, the Members or any of their Affiliates or their respective representatives are compelled to disclose any information by judicial or administrative process or by other requirements of Law, the compelled Person shall promptly notify Purchaser in writing and shall disclose only that portion of such information which the compelled Person is advised by its counsel in writing is legally required to be disclosed; provided , that the Founder and the Members shall cause the compelled Person shall use reasonable best efforts to obtain an appropriate protective order or other reasonable assurance that confidential treatment will be accorded such information.

5.7 Covenant Not to Compete .

(a) Covenant . The Members and the Founder, jointly and severally, covenant and agree that they will not, and will cause their respective officers, directors, managers, members, trustees, employees, subsidiaries and affiliates not to, directly or indirectly, for a period of three (3) years following the Closing Date, (i) engage or participate, as principal, agent, employee, employer, consultant or in any other individual or representative capacity whatever, in the conduct or management of, or own (legally or beneficially), or have the right or option to acquire, any direct or indirect interest in any business which engages, directly or indirectly, in any business competitive with the business of the Company, anywhere in the world outside the United States; (ii) call on, solicit, or take away any of the customers of the business of the Company either for themselves or for any other Person, or (iii) solicit or take away any employees of the business of the Company, either for themselves or any other Person. Notwithstanding the foregoing, the foregoing covenants shall not prohibit the ownership, or right or option to acquire, any passive investment not involving personal services, consulting or any involvement in operations, in any business; provided, that none of the Members or the Founder or any of their Affiliates has any active role in such business, such investment constitutes not more than five percent (5%) of the aggregate equity interests in such business and such equity interests are registered under the Securities Exchange Act of 1934. For purposes of this Section 5.7, the “business of the Company” means the distribution, sale, support and warranty service of digital radiography and PACS products and services in the veterinary market outside the United States.

(b) Acknowledgment . The Members and the Founder, each agree that the covenants set forth herein are appropriate and reasonable when considered in light of the nature and extent of the business of the Company acquired by Purchaser hereunder, which includes the goodwill of the business of the Company. The Members and the Founder each acknowledge that (i) Purchaser has a legitimate interest in protecting such business (ii) the covenants set forth herein are not oppressive to the Members or the Founder, do not prevent the Members or the Founder from earning a livelihood in their chosen fields, and contain reasonable limitations as to time, scope, geographical area and activity; (iii) the Members and the Founder have each received and will receive substantial consideration for agreeing to such covenants; (iv) the Members and the Founder are agreeing to such covenants in order, among other things, to induce Purchaser to enter into this Agreement; and (v) the Members and the Founder will each derive substantial benefits from the consummation of the transactions contemplated by this Agreement, including, but not limited to, the payment of consideration in accordance with this Agreement.

(c) Injunctive Relief . In the event any of the Members or the Founder violates the foregoing covenant not to compete or any other covenants set forth in this Agreement, then, in addition

to any other rights and remedies available, Purchaser shall have the right and remedy to have the applicable covenant provisions specifically enforced by any court of competent jurisdiction by way of an injunction or other legal equitable relief, it being agreed that any breach of the applicable covenant would cause irreparable injury to Purchaser and damages would be an inadequate remedy.

5.8 Introductions . The Members and the Founder shall, upon request of Purchaser, before or after the Closing, introduce Purchaser, or arrange for a personal introduction of Purchaser’s representatives, to suppliers, distributors, vendors and customers of the Company for the purpose of insuring good relationships with such parties following the Closing.

5.9 Further Assurances . Purchaser, the Members and the Founder shall each use their best efforts to take all actions necessary, proper, or deemed by them advisable, to fulfill promptly their obligations hereunder and to consummate the transactions contemplated by this Agreement. From time to time after the Closing, the Members and the Founder will at their own expense, execute and deliver, or cause to be executed and delivered, such documents to Purchaser as Purchaser may reasonably request, and from time to time after the Closing, Purchaser will, at its own expense, execute and deliver such documents to the Members as the Members may reasonably request, in order to more effectively consummate the transactions contemplated by this Agreement.

5.10 Governmental Filings, Approvals and Consents .

(a) Purchaser shall use its best efforts to promptly prepare and file with the Securities and Exchange Commission (“ SEC ”), no later than fifteen (15) business days after of the date of this Agreement, an amendment to its proxy statement relating to a meeting of the shareholders of Purchaser to approve an amendment to the Certificate of Incorporation of Purchaser (the “ Charter Amendment ”) to authorize an increase of 1,000,000 shares in the number of authorized shares of “NOL Restricted Common Stock” and an increase of 1,000,000 shares in the number of authorized shares of “Original Common Stock”, as such terms are defined in the Certificate of Incorporation of Heska, as amended, to disclose this Agreement and the Merger, and to facilitate the issuance of the Heska Shares pursuant to this Agreement (the “ Proxy Statement ”) and any amendment thereto, if any. Each of Purchaser and the Company shall cooperate in respect of the form and content of any other communication with shareholders of Purchaser. Purchaser shall mail or deliver the Proxy Statement to its shareholders.

(b) Each party hereto shall, as promptly as possible, (i) make, or cause or be made, all filings and submissions required under any Law applicable to such party or any of its Affiliates; and (ii) use reasonable best efforts to obtain, or cause to be obtained, all consents, authorizations, orders and approvals from all Governmental Entities that may be or become necessary for its execution and delivery of this Agreement and the performance of its obligations pursuant to this Agreement. Each party shall cooperate fully with the other party and its Affiliates in promptly seeking to obtain all such consents, authorizations, orders and approvals. The parties hereto shall not willfully take any action that will have the effect of delaying, impairing or impeding the receipt of any required consents, authorizations, orders and approvals.

5.11 Shareholder Approval . Purchaser shall call a meeting of its shareholders (the “ Heska Meeting ”) to be held as soon as reasonably practicable for the purpose of obtaining the Requisite Heska Vote in connection with this Agreement and shall use its reasonable efforts to cause such meeting to occur as soon as reasonably practicable. The Board of Directors of Purchaser shall use its reasonable efforts to obtain from the shareholders of Purchaser the Requisite Heska Vote, including by

communicating to its respective shareholders its recommendation (and including such recommendation in the Proxy Statement) that it approves the authorization of additional shares of Heska Common Stock as contemplated by the Charter Amendment.

5.12 Closing Conditions . From the date hereof until the Closing, each party hereto shall, and the Founder and the Members shall cause the Company to, use reasonable efforts to take such actions as are necessary to expeditiously satisfy the closing conditions set forth in Article VII hereof.

5.13 Update of Disclosure Schedules . The Company and the Members shall notify Purchaser in writing within five (5) days after the Company, the Founder or the Members acquire knowledge thereof or at Closing, whichever is earlier, of any material information contained in the Disclosure Schedule which, because of an event occurring after the date of this Agreement or otherwise, is materially incomplete or is no longer materially correct at all times after the date of this Agreement until the Closing Date. Such disclosures shall be deemed to modify the Disclosure Schedule as of the Closing Date; provided , that none of such disclosures shall be deemed to modify or waive any of Purchaser’s conditions to closing, or to modify, amend or supplement the representations and warranties of the Company, the Founder and the Members made as of the effective date first set forth above, except as approved in writing by Purchaser.

5.14 Public Announcements . The Company, the Founder, the Members, their Affiliates and their respective representatives, shall not (orally or in writing) publicly disclose, issue any press release or make any other public statement, or otherwise communicate with the media, concerning the existence of this Agreement, the transactions contemplated hereby or the subject matter hereof, without the prior written approval of Purchaser, except if and to the extent that such Person is required to make any public disclosure or filing (“ Required Disclosure ”) with respect to the subject matter of this Agreement (i) by applicable Law or (ii) pursuant to any rules or regulations of any securities exchange of which the securities of such Person are listed or traded. In each case pursuant to clauses (i) or (ii) of this Section 5.13, the Person making any Required Disclosure shall consult in advance with Purchaser regarding the substance of the Required Disclosure and provide Purchaser a reasonable opportunity (taking into account any legally mandated time constraints) to review and comment on the content of the Required Disclosure prior to its publication or filing.

ARTICLE VI

TAX MATTERS

6.1 Tax Covenants .

(a) Without the prior written consent of Purchaser, the Founder and the Members (and, prior to the Closing, the Company, its Affiliates and their respective representatives) shall not, to the extent it may affect, or relate to, the Company, make, change or rescind any Tax election, amend any Tax Return or take any position on any Tax Return, take any action, omit to take any action or enter into any other transaction that would have the effect of increasing the Tax liability or reducing any Tax asset of Purchaser or the Company in respect of any Post-Closing Tax Period. The Founder and the Members agree that Purchaser is to have no liability for any Tax resulting from any action of the Founder, the Members, the Company, their Affiliates or any of their respective representatives, and agree to indemnify and hold harmless Purchaser (and, after the Closing Date, the Company) against any such Tax or reduction of any Tax asset.

(b) All transfer, documentary, sales, use, stamp, registration, value added and other such Taxes and fees (including any penalties and interest) incurred in connection with this Agreement and the other Transaction Documents (including any real property transfer Tax and any other similar Tax) shall be borne and paid by the Founder and the Members when due. The Founder and the Members shall, each at its own expense, timely file any Tax Return or other document with respect to such Taxes or fees (and Purchaser shall cooperate with respect thereto as necessary).

6.2 Termination of Existing Tax Sharing Agreements . Any and all existing Tax sharing agreements (whether written or not) binding upon the Company shall be terminated as of the Closing Date. After such date neither the Company, the Founder, the Members, nor any of their Affiliates and their respective representatives shall have any further rights or liabilities thereunder.

6.3 Tax Indemnification . Except to the extent treated as a liability in the calculation of Closing Working Capital, the Founder and the Members shall indemnify the Company, Purchaser, and each Purchaser Indemnitee and hold them harmless from and against (a) any Loss attributable to any breach of or inaccuracy in any representation or warranty made in Section 2.10; (b) any Loss attributable to any breach or violation of, or failure to fully perform, any covenant, agreement, undertaking or obligation in this Article VI; (c) all Taxes of the Company or relating to the business of the Company for all Pre-Closing Tax Periods; (d) all Taxes of any member of an affiliated, consolidated, combined or unitary group of which the Company (or any predecessor of the Company) is or was a member on or prior to the Closing Date by reason of a liability under Treasury Regulation Section 1.1502-6 or any comparable provisions of foreign, state or local Law; and (e) any and all Taxes of any person imposed on the Company arising under the principles of transferee or successor liability or by contract, relating to an event or transaction occurring before the Closing Date. In each of the above cases, together with any out-of-pocket fees and expenses (including attorneys’ and accountants’ fees) incurred in connection therewith. The Founder and the Members shall reimburse Purchaser for any Taxes of the Company that are the responsibility of the Founder or the Members pursuant to this Section 6.3 within ten (10) business days after payment of such Taxes by Purchaser or the Company.

6.4 Straddle Period . In the case of Taxes that are payable with respect to a taxable period that begins before and ends after the Closing Date (each such period, a “ Straddle Period ”), the portion of any such Taxes that are treated as Pre-Closing Taxes for purposes of this Agreement shall be:

(a) in the case of Taxes (i) based upon, or related to, income, receipts, profits, wages, capital or net worth, (ii) imposed in connection with the sale, transfer or assignment of property, or (iii) required to be withheld, deemed equal to the amount which would be payable if the taxable year ended with the Closing Date; and

(b) in the case of other Taxes, deemed to be the amount of such Taxes for the entire period multiplied by a fraction the numerator of which is the number of days in the period ending on the Closing Date and the denominator of which is the number of days in the entire period.

6.5 Contests . Purchaser agrees to give written notice to the Founder and the Members of the receipt of any written notice by the Company, Purchaser or any of Purchaser’s Affiliates which involves the assertion of any claim, or the commencement of any Action, in respect of which an indemnity may be sought by Purchaser pursuant to this Article VI (a “ Tax Claim ”); provided , that failure to comply with this provision shall not affect Purchaser’s right to indemnification hereunder. Purchaser shall control the contest or resolution of any Tax Claim; provided, however , that Purchaser shall consult with the Founder before entering into any settlement of a claim or ceasing to defend such

claim; and, provided further , that the Members shall be entitled to participate in the defense of such claim and to employ counsel of their choice for such purpose, the fees and expenses of which separate counsel shall be borne solely by the Members.

6.6 Cooperation and Exchange of Information . The Founder and the Members, on one hand, and Purchaser, on the other hand, shall provide each other with such cooperation and information as either of them reasonably may request of the other in filing any Tax Return or in connection with any audit or other proceeding in respect of Taxes of the Company. Such cooperation and information shall include providing copies of relevant Tax Returns or portions thereof, together with accompanying schedules, related work papers and documents relating to rulings or other determinations by tax authorities. Each of the Founder and Members, on one hand, and Purchaser, on the other hand, shall retain all Tax Returns, schedules and work papers, records and other documents in its possession relating to Tax matters of the Company for any taxable period beginning before the Closing Date until the expiration of the statute of limitations of the taxable periods to which such Tax Returns and other documents relate, without regard to extensions except to the extent notified by the other party in writing of such extensions for the respective Tax periods. Prior to transferring, destroying or discarding any Tax Returns, schedules and work papers, records and other documents in its possession relating to Tax matters of the Company for any taxable period beginning before the Closing Date, the Founder, the Members, or Purchaser (as the case may be) shall provide the other party or parties with reasonable written notice and offer the other party or parties the opportunity to take custody of such materials.

6.7 Survival . Notwithstanding anything in this Agreement to the contrary, the provisions of Section 2.10 and this Article VI shall survive for the full period of all applicable statutes of limitations (giving effect to any waiver, mitigation or extension thereof) plus six (6) months.

6.8 Overlap . To the extent that any obligation or responsibility pursuant to Article IX may overlap with an obligation or responsibility pursuant to this Article VI, the provisions of this Article VI shall govern.

ARTICLE VII

CONDITIONS TO CLOSING

7.1 Conditions to Obligations of All Parties . The obligations of each party to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment, at or prior to the Closing, of each of the following conditions:

(a) The Requisite Heska Vote shall have been duly obtained.

(b) The Heska Shares shall have been authorized for listing on the NASDAQ Stock Market, subject to official notice of issuance.

(c) No Governmental Entity shall have enacted, issued, promulgated, enforced or entered any order or action which is in effect and has the effect of making the transactions contemplated by this Agreement illegal, otherwise restraining or prohibiting consummation of such transactions or causing any of the transactions contemplated hereunder to be rescinded following completion thereof.

7.2 Conditions to Obligations of Purchaser . The obligations of Purchaser to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment or Purchaser’s waiver in writing, at or prior to the Closing, of each of the following conditions:

(a) Other than the representations and warranties of the Company, the Founder and the Members contained in Sections 2.1, 2.2, 2.3, 2.7 and 2.21 and Sections 3.1, 3.2, 3.9, 3.10, 3.11 and 3.12 the representations and warranties of the Company, the Founder and the Members contained in this Agreement, the other Transaction Documents, and any certificate or other writing delivered pursuant hereto shall be true and correct in all respects (in the case of any representation or warranty qualified by materiality or Company Material Adverse Effect) or in all material respects (in the case of any representation or warranty not qualified by materiality or Company Material Adverse Effect) on and as of the date hereof and on and as of the Closing Date with the same effect as though made at and as of such date (except those representations and warranties that address matters only as of a specified date, the accuracy of which shall be determined as of that specified date in all respects). The representations and warranties of the Company, the Founder and the Members contained in Sections 2.1, 2.2, 2.3, 2.7 and 2.21 and Sections 3.1, 3.2, 3.9, 3.10, 3.11 and 3.12 shall be true and correct in all respects on and as of the date hereof and on and as of the Closing Date with the same effect as though made at and as of such date (except those representations and warranties that address matters only as of a specified date, the accuracy of which shall be determined as of that specified date in all respects).

(b) Each of the Company, the Founder and the Members shall have duly performed and complied in all material respects with all agreements, covenants and conditions required by this Agreement and each of the other Transaction Documents to be performed or complied with by it prior to or on the Closing Date;

(c) The maturity date of the Imaging Note shall have been duly extended to the third (3rd) anniversary of the Closing Date;

(d) Purchaser shall have received an Accredited Investor Questionnaire dated as of the Closing Date or Purchaser Representative Questionnaire and Investor Acknowledgment dated as of the Closing Date, as applicable, in form reasonably satisfactory to Purchaser, duly executed by each of the Members;

(e) Purchaser shall have completed its due diligence investigation of the Company, the results of which shall be satisfactory to Purchaser.

(f) No Action shall have been commenced against Purchaser, the Founder, the Members or the Company, which would prevent the Closing. No injunction or restraining order shall have been issued by any Governmental Entity, and be in effect, which restrains or prohibits any transaction contemplated hereby.

(g) Purchaser shall have received the consent of its lenders to consummate the transactions contemplated by this Agreement and the other Transaction Documents.

(h) From the date of this Agreement, there shall not have occurred any Company Material Adverse Effect, nor shall any event or events have occurred that, individually or in the aggregate, with or without the lapse of time, could reasonably be expected to result in a Company Material Adverse Effect.

(i) The other Transaction Documents shall have been executed and delivered by the parties thereto and true and complete copies thereof shall have been delivered to Purchaser.

(j) Purchaser shall have received the other Closing deliverables set forth in Section 1.3 to be received by Purchaser.

(k) Each Member shall have delivered to Purchaser a certificate pursuant to Treasury Regulations Section 1.1445-2(b) that the Member is not a foreign person within the meaning of Section 1445 of the Code.

(l) The Company, the Founder and the Members shall have delivered to Purchaser such other documents or instruments as Purchaser reasonably requests and are reasonably necessary to consummate the transactions contemplated by this Agreement.

(m) No holder of Units shall have exercised, or purported to exercise, statutory appraisal rights pursuant to the DLLCA with respect to any Units.

7.3 Conditions to Obligations of the Company and the Members . The obligations of the Company and the Members to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment or Founder’s waiver, at or prior to the Closing, of each of the following conditions:

(a) Other than the representations and warranties of Purchaser contained in Sections 4.1, 4.2 and 4.3 the representations and warranties of Purchaser contained in this Agreement, the other Transaction Documents and any certificate or other writing delivered pursuant hereto shall be true and correct in all respects (in the case of any representation or warranty qualified by materiality) or in all material respects (in the case of any representation or warranty not qualified by materiality) on and as of the date hereof and on and as of the Closing Date with the same effect as though made at and as of such date (except those representations and warranties that address matters only as of a specified date, the accuracy of which shall be determined as of that specified date in all respects). The representations and warranties of Purchaser contained in Sections 4.1, 4.2 and 4.3 shall be true and correct in all respects on and as of the date hereof and on and as of the Closing Date with the same effect as though made at and as of such date.

(b) Purchaser shall have duly performed and complied in all material respects with all agreements, covenants and conditions required by this Agreement and each of the other Transaction Documents to be performed or complied with by it prior to or on the Closing Date;

(c) No injunction or restraining order shall have been issued by any Governmental Entity, and be in effect, which restrains or prohibits any material transaction contemplated hereby.

(d) The other Transaction Documents shall have been executed and delivered by the parties thereto and true and complete copies thereof shall have been delivered to the Company.

(e) Purchaser should have delivered the other Closing deliverables set forth in Section 1.3 to be delivered by Purchaser.

(f) Purchaser shall have delivered the Merger Consideration to the Members as set forth in this Agreement.

(g) Purchaser shall have delivered to the Founder and the Members such other documents or instruments as the Founder reasonably request and are reasonably necessary to consummate the transactions contemplated by this Agreement.

ARTICLE VIII

TERMINATION

8.1 Termination . This Agreement may be terminated at any time prior to the Closing:

(a) by the mutual written consent of the Founder and Purchaser;

(b) by Purchaser by written notice to the Founder if:

(i) Purchaser is not then in material breach of any provision of this Agreement and there has been a breach, inaccuracy in or failure to perform any representation, warranty, covenant or agreement made by the Company, the Founder or the Members pursuant to this Agreement that would give rise to the failure of any of the conditions specified in Article VII and such breach, inaccuracy or failure has not been cured within ten (10) days of the Founder’s receipt of written notice of such breach from Purchaser; or

(ii) any of the conditions set forth in Section 7.1 or Section 7.2 shall not have been, or if it becomes apparent that any of such conditions will not be, fulfilled by May 31, 2016, unless such failure shall be due to the failure of Purchaser to perform or comply with any of the covenants, agreements or conditions hereof to be performed or complied with by it prior to the Closing;

(i) None of the Company, the Founder or the Members is then in material breach of any provision of this Agreement and there has been a breach, inaccuracy in or failure to perform any representation, warranty, covenant or agreement made by Purchaser pursuant to this Agreement that would give rise to the failure of any of the conditions specified in Article VII and such breach, inaccuracy or failure has not been cured by Purchaser within ten (10) days of Purchaser’s receipt of written notice of such breach from Founder; or

(ii) any of the conditions set forth in Section 7.1 or Section 7.3 shall not have been, or if it becomes apparent that any of such conditions will not be, fulfilled by May 31, 2016, unless such failure shall be due to the failure of the Company, the Founder or the Members to perform or comply with any of the covenants, agreements or conditions hereof to be performed or complied with by it prior to the Closing; or

(d) by Purchaser or the Founder in the event that (i) there shall be any Law that makes consummation of the transactions contemplated by this Agreement illegal or otherwise prohibited or (ii) any Governmental Entity shall have issued an order or taken action restraining or enjoining the transactions contemplated by this Agreement, and such order or action shall have become final and non-appealable.

8.2 Effect of Termination . In the event of the termination of this Agreement in accordance with this Article VIII, this Agreement shall forthwith become void and there shall be no liability on the part of any party hereto except:

(a) as set forth in this Article VIII and Section 5.6 and Article X hereof; and

(b) that nothing herein shall relieve any party hereto from liability for any willful breach of any provision hereof.

ARTICLE IX

INDEMNIFICATION

9.1 Joint and Several Indemnification . The Members and the Founder, jointly and severally, covenant and agree to indemnify and hold harmless the Purchaser, its Affiliates and their respective employees, officers, directors, managers, equity holders, members, partners, successors and assigns (excluding the Company and any of its employees, officers, managers, successors and assigns) (collectively, the “ Indemnified Parties ”) for, from and against all liabilities, losses, claims, damages (including direct, consequential, incidental and/or special damages), diminution in value, punitive damages, causes of action, lawsuits, administrative proceedings (including informal proceedings), investigations, audits, demands, assessments, adjustments, judgments, settlement payments, deficiencies, Taxes, penalties, fines, interest and costs and expenses (including amounts paid in settlement, court costs, costs of investigators, fees and expenses of attorneys, accountants, financial advisors and other experts, and other expenses of litigation) (collectively, “ Losses ”) incurred or paid by any Indemnified Party, notwithstanding any knowledge or investigation by any Indemnified Party or its representatives, arising out of any misrepresentation, breach or inaccuracy, at the Closing Date, of any representation or warranty of the Company set forth in this Agreement, or any third party allegation thereof. For the avoidance of doubt, any limitations as to “material”, “materially” or “Company Material Adverse Effect” set forth herein shall be given effect in determining whether any such misrepresentation, breach or inaccuracy has occurred.

9.2 Several Indemnification . Each Member covenants and agrees, severally and not jointly, to indemnify and hold harmless the Indemnified Parties for, from and against all Losses incurred or paid by any Indemnified Party, notwithstanding any knowledge or investigation by any Indemnified Party or its representatives, arising out of any misrepresentation, breach or inaccuracy of any representation or warranty of such Member set forth in this Agreement, or any third party allegation thereof. For the avoidance of doubt, any limitations as to “material”, “materially” or “Material Adverse Effect” set forth herein shall be given effect in determining whether any such misrepresentation, breach or inaccuracy has occurred.

9.3 Liability for Company Breaches . Notwithstanding anything to the contrary in this Agreement: (i) the Members and the Founder shall be jointly and severally liable to the Indemnified Parties for all actual or alleged breaches by the Company of any of the Company’s representations and warranties; (ii) the Company shall not be liable to the Founder or Members for any or all actual or alleged breaches referred to in the foregoing clause (i); and (iii) except to the extent the Purchaser specifically and expressly consents in writing prior thereto, the Company shall not indemnify any Indemnified Party with respect to, or otherwise incur any liability for, breaches by the Company of any of the Company’s representations and warranties.-

9.4 Limitation on Indemnification . No indemnification within the scope of Sections 9.1 and 9.2 (other than with respect to Fundamental Reps (defined below)) shall be due hereunder unless and to the extent that such indemnification, net of the tax effect (computed in accordance with generally accepted accounting principles), shall individually or in the aggregate exceed the sum of Seventy-Five

Thousand Dollars ($75,000). The Founder and Members shall not be obligated to indemnify the Indemnified Parties for the amount of any Losses suffered or incurred by the Indemnified Parties to the extent (a) reimbursed by insurance (net of the premiums, if any, paid by Purchaser or Company attributable to a period after the Closing for the insurance policy under which the Losses are paid); (b) specifically reserved against on the Balance Sheet; or (c) to the extent that such Losses exceed the Purchase Price, where the value of the Heska Shares comprising a portion of the Purchase Price shall be the price per share displayed on the NASDAQ website (nasdaq.com) under the heading NASDAQ Official Close Price on the day the lock-up period under the Lock-Up Agreement expires.

9.5 Indemnification Procedures . All claims for indemnification under this Article IX (“ Claims ”) shall be asserted and resolved as follows.

(a) In the event that an Indemnified Party has a Claim against any party obligated to provide indemnification pursuant to Section 9.1 or Section 9.2 (the “ Indemnifying Party ”) which has been asserted against an Indemnified Party by a third party (a “ Third Party Claim ”), the following provisions shall apply:

(i) The Indemnified Party shall notify the Indemnifying Party of such Third Party Claim (the “ Claim Notice ”).

(ii) If any Indemnified Party asserts a Claim involving a Third Party Claim, the Indemnifying Party shall, within fifteen (15) days from delivery of the Claim Notice (the “ Notice Period ”), notify the Indemnified Party (A) whether such Indemnifying Party disputes the liability to the Indemnified Party hereunder with respect to such Third Party Claim and (B) if such Indemnifying Party does not dispute such liability, whether the Indemnifying Party desires, at the sole cost and expense of the Indemnifying Party, to defend against such Third Party Claim, provided that the Indemnified Party is authorized (but not obligated) prior to and during the Notice Period to take any action which the Indemnified Party shall deem necessary or appropriate to protect the Indemnified Party’s interests. If, and for so long as, (x) the Indemnifying Party notifies the Indemnified Party within the Notice Period that the Indemnifying Party does not dispute the Indemnifying Party’s obligation to indemnify hereunder and desires to defend the Indemnified Party against such Third Party Claim, (y) the amount of Losses for which the Indemnifying Party is potentially liable under this Article IX in connection with such Claim equals or exceeds one-half of (1) the amount of Losses sought in such Third Party Claim or (2) if such Third Party Claim is unliquidated, the likely amount of such Losses as determined by the Indemnified Party in its reasonable discretion, and (z) the Third Party Claim does not (1) involve criminal liability or any admission of wrongdoing, (2) seek equitable relief or any other non-monetary remedy against the Indemnified Party, or (3) involve any Governmental Entity as a party thereto, then except as hereinafter provided, such Indemnifying Party shall have the right to defend against such Third Party Claim with legal counsel reasonably acceptable to the Indemnified Party, which proceedings shall be promptly settled or diligently prosecuted by such Indemnifying Party to a final conclusion; provided that, unless the Indemnified Party otherwise agrees in writing, the Indemnifying Party may not settle any matter (in whole or in part) unless such settlement (I) includes a complete and unconditional release of the Indemnified Party and its Affiliates in respect of the Third Party Claim, (II)) involves no admission of wrongdoing by the Indemnified Party or its Affiliates and (III) excludes any injunctive or non-monetary relief applicable to the Indemnified Party or its Affiliates. If the Indemnified Party desires to participate in, but not control, any such defense or settlement the Indemnified Party may do so at its sole cost and expense.

(iii) If (A) the Indemnifying Party elects not to defend the Indemnified Party against such Third Party Claim, or fails to promptly settle or diligently defend such Third Party Claim, (B) the terms of this Agreement do not permit the Indemnifying Party to defend the Indemnified Party against such Third Party Claim, (C) the Indemnified Party advises that there are issues that raise actual or potential conflicts of interest between the Indemnifying Party and the Indemnified Party, or (D) the Indemnified Party has different or additional defenses available to it, then the Indemnified Party, without waiving any rights against the Indemnifying Party, may settle or defend against any such Third Party Claim in the Indemnified Party’s sole and absolute discretion and the Indemnified Party shall be entitled to recover from the Indemnifying Party the amount of any settlement or judgment and, on an ongoing basis, all Losses of the Indemnified Party with respect thereto.

(iv) If at any time, in the reasonable opinion of the Indemnified Party, any Third Party Claim could have a material adverse effect on the assets, liabilities, financial condition, results of operations or business prospects of the Indemnified Party or any of its Affiliates or its or their respective businesses, the Indemnified Party shall have the right to control or assume (as the case may be) the defense of such Third Party Claim and the amount of any judgment or settlement and the reasonable costs and expenses of defense shall be included as part of the indemnification obligations of the Indemnifying Party hereunder. If the Indemnified Party should elect to exercise such right, the Indemnifying Party shall have the right to participate in, but not control, the defense of such Third Party Claim or demand at the sole cost and expense of the Indemnifying Party.

(b) If an Indemnified Party asserts a Claim which does not involve a Third Party Claim, the Indemnified Party shall provide a Claim Notice to the Indemnifying Party. If the Indemnifying Party does not notify the Indemnified Party within the Notice Period that the Indemnifying Party disputes such Claim, the amount of such Claim shall be conclusively deemed a liability of the Indemnifying Party hereunder. If the Indemnifying Party makes an objection in writing, the Indemnified Party shall have thirty (30) days to respond in a written statement to the objection. If after such thirty (30) day period there remains a dispute as to any Claim, the Parties shall attempt in good faith for thirty (30) days to agree upon the rights of the respective Parties with respect to such Claim. If the Parties should so agree, a memorandum setting forth such agreement shall be prepared and signed by both Parties. If such Parties shall not agree, each Indemnified Party shall be entitled to initiate proceedings and seek remedies as may be permitted under the terms of this Agreement and applicable Law.

(c) Notwithstanding the other provisions of this Article IX, if a third party asserts (other than by means of a lawsuit) that an Indemnified Party is liable to such third party for a monetary or other obligation which may constitute or result in Losses for which such Indemnified Party may be entitled to indemnification pursuant to this Article IX, and such Indemnified Party reasonably determines that it has a valid business reason to fulfill such obligation, then (i) such Indemnified Party shall be entitled to satisfy such obligation, without prior notice to or consent from the Indemnifying Party, (ii) such Indemnified Party may subsequently make a claim for indemnification in accordance with the provisions of this Article IX, and (iii) such Indemnified Party shall be reimbursed, in accordance with the provisions of this Article IX, for any such Losses for which it is entitled to indemnification pursuant to this Article IX (subject to the right of the Indemnifying Party to dispute the Indemnified Party’s entitlement to indemnification, or the amount for which it is entitled to indemnification, under the terms of this Article IX).

(d) Right to Set Off . Any Indemnified Party shall have the right, but not the obligation, to set off, in whole or in part, against any obligation or payment it owes to an Indemnifying Party, amounts owed to any Indemnified Party pursuant to this Agreement.

9.6 No Claim Against the Company . Each Member and the Founder waives any and all rights of indemnification, contribution and other similar rights against the Company (whether arising pursuant to any the Company’s Certificate of Formation, the Company Operating Agreement or any contract, any Law or otherwise) arising out of the representations, warranties, covenants and agreements contained in this Agreement or the Disclosure Schedule and/or out of the negotiation, execution and performance of this Agreement or the Disclosure Schedule, and agrees that any claim of any Indemnified Party, whether for indemnity or otherwise, may be asserted directly against the Founder, all Members or any Member (to the extent provided herein), without any need for any claim against, or joinder of, the Company or any other Member.

9.7 Tax Adjustment . The parties hereto agree to treat any amount paid pursuant to this Article IX as an adjustment to the Purchase Price for federal Tax purposes, unless otherwise required by Law.

9.8 Survival of Representations and Warranties . With respect to any claim for any actual or alleged breach of the representations and warranties set forth in this Agreement, the survival periods set forth and agreed to in this Section 9.8 shall govern when any such claim may be brought and shall replace and supersede any statute of limitations that may otherwise apply.

(a) The representations and warranties of the Company and any Member shall survive the Closing and shall expire on the later of the applicable dates specified in clause (i) or (ii) of this Section 9.8(a):

(i) (A) except as to representations and warranties specified in clause (B) or (C) of clause (i) of this Section 9.8(a), the date that is eighteen (18) months after the date hereof; or (B) with respect to representations and warranties contained in Sections 2.1 (organization and standing), 2.3 (capitalization), 2.4(a) (authority for agreement), 2.21 (absence of claims; business relationships with affiliates), 3.1 (authority), 3.2 (equity interests) and 10.4 (brokers) (collectively, the “ Fundamental Reps ”), indefinitely; or (C) with respect to representations and warranties contained in Sections 2.10 (taxes) and 2.17 (ERISA), the date that is (x) six (6) months after the expiration of the longest federal, state, local or foreign statute of limitation (including extensions thereof) applicable to the underlying claim or (y) if there is no applicable statute of limitation, seven (7) years after the date hereof; and

(ii) the final resolution of all claims pending as of the relevant date described in clause (i) this Section 9.8(a).

(b) The representations and warranties of the Purchaser shall survive the Closing and shall expire on the later of the applicable dates specified in clause (i) or (ii) of this Section 9.8(b):

(i) (A) except as to representations and warranties specified in clause (B) of clause (i) of this Section 9.8(b), the date that is eighteen (18) months after the date hereof; or (B) with respect to representations and warranties contained in Sections 4.3 (authority) and 10.4 (brokers), indefinitely; and

(ii) the final resolution of all claims pending as of the relevant date described in clause (i) this Section 9.8(b).

(c) If a notice of a claim has been timely given in accordance with this Agreement prior to the expiration of the applicable survival period for such representation or warranty, then the applicable representation or warranty shall survive as to such claim, until such claim has been finally resolved.

ARTICLE X

MISCELLANEOUS

10.1 Successors and Assigns . This Agreement and the rights and obligations of the parties hereunder shall not be assigned by any of the parties hereto without the prior written consent of the other parties; provided, however, that Purchaser shall have the right to assign Purchaser’s rights under this Agreement to any of Purchaser’s wholly owned subsidiaries.

10.2 Third Party Beneficiaries . Nothing in this Agreement, express or implied, is intended to confer upon any Person other than the parties hereto, their respective permitted assigns and the Indemnified Parties any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.

10.3 Expenses . Except as set forth in Article VI and Article IX, each of the parties hereto shall bear its own costs and expenses (including legal and accounting fees and expenses) incurred in connection with this Agreement and the transactions contemplated hereby. Notwithstanding the foregoing, the Members, and not the Company, shall bear any costs and expenses (including legal and accounting fees and expenses) incurred by the Company in connection with this Agreement and the transactions contemplated hereby and the Company shall not bear any costs and expenses in connection with this Agreement and the transactions contemplated hereby.

10.4 Brokers . Each of the Company, the Founder, the Members and the Purchaser (a) represents and warrants to the other parties hereto that it has not retained a finder or broker in connection with the transactions contemplated by this Agreement, and (b) will indemnify and save the other parties harmless from and against any and all claims, liabilities or obligations with respect to brokerage or finders’ fees or commissions, or consulting fees in connection with the transactions contemplated by this Agreement asserted by any Person on the basis of any statement or representation alleged to have been made by such indemnifying party.

10.5 Severability . The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.

10.6 Specific Performance . In addition to any and all other remedies that may be available at law in the event of any breach of this Agreement, the Purchaser shall be entitled to specific performance of the agreements and obligations of the Company, the Founders and the Members hereunder and to such other injunctive or other equitable relief as may be granted by a court of competent jurisdiction.

10.7 Governing Law; Submission to Jurisdiction . This Agreement shall be governed by and construed in accordance with the internal laws of the State of Delaware without giving effect to

any choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of laws of any jurisdictions other than those of the State of Delaware.

10.8 Notices . All notices and other communications hereunder shall be in writing and shall be deemed duly delivered (i) four (4) business days after being sent by registered or certified mail, return receipt requested, postage prepaid, (ii) one business day after being sent for next business day delivery, fees prepaid, via a reputable nationwide overnight courier service, or (iii) on the date of confirmation of receipt (or, the first business day following such receipt if the date of such receipt is not a business day) of transmission by facsimile, in each case to the intended recipient as set forth below:

(a) if to the Purchaser, to

Heska Corporation
3760 Rocky Mountain Avenue
Loveland, CO 80538
Telecopy: (970) 619-3003
Attn: Jason Napolitano

with a copy to:

Osborn Maledon, P.A.
2929 North Central Avenue
21st Floor
Phoenix, Arizona 85012-2793
Telecopy: (602) 640-9050
Attn: William M. Hardin, Esq.

(b) if to the Company, the Founder or any Member, to

Cuattro Veterinary, LLC
PO Box 4605
Edwards, CO 81632

Physical Address for FedEx.

851 Elkhorn
Bachelor Gulch
Avon, CO 81620
Email: kwilson@cuattro.com
Attn: Kevin Wilson

with a copy to:

Stradling Yocca Carlson & Rauth
660 Newport Center Drive, Suite 1600
Newport Beach, CA 92660-6441
Facsimile: (949) 725-4000
Attn: R.C. Shepard, Esq.

Any party hereto may give any notice or other communication hereunder using any other means (including personal delivery, messenger service, telex, ordinary mail or electronic mail), but no such notice or other communication shall be deemed to have been duly given unless and until it actually is received by the party for whom it is intended. Any party hereto may change the address to which notices and other communications hereunder are to be delivered by giving the other parties to this Agreement notice in the manner herein set forth.

10.9 Complete Agreement . This Agreement (including the Disclosure Schedule) and the other Transaction Documents constitute the entire agreement and understanding of the parties hereto with respect to the subject matter hereof and supersede all prior agreements and understandings relating to such subject matter, including but not limited to the UPA, which is hereby terminated by mutual agreement and superseded hereby.

10.10 Amendment and Waiver . This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto. Any agreement on the part of a party hereto to waive any term of this Agreement shall be valid only if set forth in a written instrument signed on behalf of such party. Such waiver shall not be deemed to apply to any time for performance, inaccuracy in any representation or warranty, or noncompliance with any covenant or agreement, as the case may be, other than that which is specified in the waiver. The failure of any party hereto to assert any of its rights under this Agreement or otherwise shall not constitute a waiver of such rights.

10.11 Interpretation . When reference is made in this Agreement to an Article or a Section, such reference shall be to an Article or Section of this Agreement, unless otherwise indicated. The terms and headings contained in this Agreement are for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement. The language used in this Agreement shall be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction shall be applied against any party. Whenever the context may require, any pronouns used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns and pronouns shall include the plural, and vice versa. Unless otherwise expressly provided herein, any agreement, instrument or statute defined or referred to herein or any other Transaction Document means such agreement, instrument or statute as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes) by succession of comparable successor statutes and references to all attachments thereto and instruments incorporated therein. Any reference to any federal, state, local or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.” The phrase “to the best of the Company’s knowledge” and words of similar import mean the actual knowledge of Founder, or any Member, as well as any other knowledge which such persons would have possessed had they made reasonable inquiry of appropriate employees and agents of the Company with respect to the matter in question. The phrases “to such Member’s knowledge”, “to the best of such Member’s knowledge” and words of similar import mean the actual knowledge of such Member. “ Person ” means any natural person, corporation, general partnership, limited partnership, limited liability company, limited liability partnership, proprietorship, trust, union, association, court, tribunal, agency, government, department, commission, self-regulatory organization, arbitrator, board, bureau, instrumentality, Governmental Entity or other entity, enterprise, authority or business organization. “ Affiliate ” means, with respect to any Person, (i) any Person that, directly or indirectly through one or more entities, controls or is controlled by, or is under common control with, such Person, (ii) any director, officer, partner, member or trustee of such Person, (iii) any

other Person that is deemed to be an affiliate of such Person under interpretations of the Exchange Act, (iv) any Person who is an officer, director, partner, member or trustee of any Person described in clauses (i) through (iii) of this sentence, or (v) if such Person is a natural Person, any member of such natural person’s immediate family. As used herein, “controls”, “control” and “controlled” means the possession, direct or indirect, of the power to direct the management and policies of a Person, whether through the ownership of 50% or more of the voting interests of such Person, through contract or otherwise.

10.12 Counterparts and Signatures . This Agreement may be executed in any number of counterparts (including by facsimile or by an electronic scan delivered by electronic mail), each of which shall be deemed to be an original, and all of which together shall constitute one and the same document and shall become effective when counterparts have been signed by each of the parties hereto and delivered to the other parties, it being understood that all parties need not sign the same counterpart. This Agreement may be executed and delivered by facsimile or by an electronic scan delivered by electronic mail.

10.13 Effect of Investigation . No investigation by any party hereto made before or after the date of this Agreement or the provisions of any documents (other than the Disclosure Schedule) whether available pursuant of this Agreement or otherwise, shall affect the interpretation of the representations and warranties of the parties which are contained herein.

[Remainder of Page Intentionally Left Blank]

IN WITNESS WHEREOF, the Purchaser, the Company, the Founder and the Members have executed this Agreement as of the date first written above.

The Purchaser :

HESKA CORPORATION

By: /s/ Jason Napolitano

Name: Jason Napolitano

Title: Chief Operating Officer, Chief Financial Officer

Executive Vice President and Secretary

The Company :

CUATTRO VETERINARY, LLC

By: /s/ Kevin S. Wilson

Name: Kevin S. Wilson

Title: Manager

By:

Name: Doug G. Wilson

Title: Manager

The Founder:

/s/ Kevin S. Wilson

Kevin S. Wilson

Members :

CUATTRO, LLC

By: /s/ Lane Naffziger

Name: Lane Naffziger

Title: President

[Signature Pages to Merger Agreement]

/s/ Clint Roth

Clint Roth, DVM

/s/ Doug G. Wilson

Doug G. Wilson, III

[Signature Pages to Merger Agreement]

Merger Sub :

CUATTRO INTERNATIONAL MERGER SUBSIDIARY, INC.

By: /s/ Jason Napolitano

Name: Jason Napolitano

Title: Chief Executive Officer

[Signature Pages to Merger Agreement]

CONSENT OF SPOUSE

The undersigned, being the spouse of Doug G Wilson, III, who is a party to the Agreement and Plan of Merger dated as of March __, 2016 by and among Heska Corporation, a Delaware corporation, its wholly-owned subsidiary Cuattro International Merger Subsidiary, Inc., a Delaware corporation, Cuattro Veterinary, LLC, a Delaware limited liability company, Kevin S. Wilson and the other parties signatory thereto (the “ Agreement ”), hereby consents and agrees that any community property and/or other interest of the undersigned in the subject matter of the Agreement, including but not limited to the Units, is subject to, and bound by, such Agreement.

/s/ Carol Wilson DATED as of March 13, 2016.

Carol Wilson

[Signature Page to Merger Agreement – Consent of Spouse (Carol Wilson)]

CONSENT OF SPOUSE

The undersigned, being the spouse of Kevin S. Wilson, who is a party to the Agreement and Plan of Merger dated as of March __, 2016 by and among Heska Corporation, a Delaware corporation, its wholly-owned subsidiary Cuattro International Merger Subsidiary, Inc., a Delaware corporation, Cuattro Veterinary, LLC, a Delaware limited liability company, Kevin S. Wilson and the other parties signatory thereto (the “ Agreement ”), hereby consents and agrees that any community property and/or other interest of the undersigned in the subject matter of the Agreement, including but not limited to the Units, is subject to, and bound by, such Agreement.

/s/ Shawna Wilson DATED as of March __, 2016.

Shawna Wilson

[Signature Page to Merger Agreement – Consent of Spouse (Shawna Wilson)]

CONSENT OF SPOUSE

The undersigned, being the spouse of Lane Naffziger, who is a party to the Agreement and Plan of Merger dated as of March __, 2016 by and among Heska Corporation, a Delaware corporation, its wholly-owned subsidiary Cuattro International Merger Subsidiary, Inc., a Delaware corporation, Cuattro Veterinary, LLC, a Delaware limited liability company, Kevin S. Wilson and the other parties signatory thereto (the “ Agreement ”), hereby consents and agrees that any community property and/or other interest of the undersigned in the subject matter of the Agreement, including but not limited to the Units, is subject to, and bound by, such Agreement.

/s/ Alex Naffziger DATED as of March 14, 2016.

Alex Naffziger

[Signature Page to Merger Agreement – Consent of Spouse (Alex Naffziger)]

CONSENT OF SPOUSE

The undersigned, being the spouse of Clint Roth, DVM, who is a party to the Agreement and Plan of Merger dated as of March __, 2016 by and among Heska Corporation, a Delaware corporation, its wholly-owned subsidiary Cuattro International Merger Subsidiary, Inc., a Delaware corporation, Cuattro Veterinary, LLC, a Delaware limited liability company, Kevin S. Wilson and the other parties signatory thereto (the “ Agreement ”), hereby consents and agrees that any community property and/or other interest of the undersigned in the subject matter of the Agreement, including but not limited to the Units, is subject to, and bound by, such Agreement.

/s/ Kara Roth DATED as of March 14, 2016.

Kara Roth

[Signature Page to Merger Agreement – Consent of Spouse (Kara Roth)]

Exhibit A

Form of Lock-Up Agreement

[Attached]

A-1

______________, 2015

Heska Corporation

3760 Rocky Mountain Avenue

Loveland, Colorado 80538

Attn: Chief Executive Officer

Dear Sir or Madam:

Reference is hereby made to the Agreement and Plan of Merger (the " Merger Agreement "), dated as of the date hereof, among Heska Corporation, a Delaware corporation, (" Heska "), its wholly-owned subsidiary Cuattro International Merger Subsidiary, Inc., a Delaware corporation, Cuattro Veterinary, LLC, a Delaware limited liability company (the " Company "), Kevin S. Wilson and the existing members of the Company, including Cuattro, LLC, a Delaware limited liability company, which Merger Agreement provides for the issuance of shares of Heska's common stock, par value $0.01 per share (the " Common Stock ") as consideration for the Merger. Terms used but not defined herein shall have the meanings ascribed to them in the Merger Agreement.

To induce Heska to engage in the transactions contemplated by the Merger Agreement, the undersigned hereby agrees that, without the prior written consent of Heska, it will not, during the period commencing on the date hereof and ending 180 days after the date hereof (the " Restricted Period "), (1) offer, sell, pledge, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock, (2) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Common Stock, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise, or (3) publicly announce an intention to effect any transaction specified in clause (1) or (2). The foregoing sentence shall not apply to (a) transactions relating to shares of Common Stock or other securities acquired in open market transactions after the completion of the transactions contemplated by the Merger Agreement, provided that no filing under Section 16(a) of the Securities Exchange Act of 1934, as amended (the " Exchange Act "), shall be required or shall be voluntarily made in connection with subsequent sales of Common Stock or other securities acquired in such open market transactions, (b) transfers to Heska; or (c) exercises of options to purchase Common Stock granted by Heska and outstanding on the date hereof; provided that, in the case of any transfer pursuant to clause (b) or (c), (1) each transferee shall sign and deliver a Lock-Up Agreement substantially in the form of this agreement and (2) no filing under Section 16(a) of the Exchange Act, reporting a reduction in beneficial ownership of shares of Common Stock, shall be required or shall be voluntarily made during the Restricted Period. In addition, the

undersigned agrees that, without the prior written consent of Heska, it will not, during the Restricted Period, make any demand for or exercise any right with respect to the registration of any shares of Common Stock or any security convertible into or exercisable or exchangeable for Common Stock. The undersigned also agrees and consents to the entry of stop-transfer instructions with Heska’s transfer agent and registrar against the transfer of the undersigned’s shares of Common Stock except in compliance with the foregoing restrictions.

The undersigned understands that the Company and Heska are relying upon this agreement in proceeding toward consummation of transactions contemplated by the Merger Agreement. The undersigned hereby represents and warrants that the undersigned has full power and authority to enter into this agreement. The undersigned further understands that this agreement is irrevocable and shall be binding upon the undersigned’s heirs, legal representatives, successors and assigns.



	Very truly yours, [NAME OF THE STOCKHOLDER] _________________________ [NAME]

[ Signature Page to Lock-Up Agreement ]

Exhibit B

Assignment and Assumption Agreement (License Agreement)

[Attached]

B-1

Execution Version

ASSIGNMENT AND ASSUMPTION AGREEMENT

(License Agreement)

THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (this " Agreement ") is made and entered as of the Closing (defined below) (the " Effective Date "), by and among Heska Imaging US, LLC , a Delaware limited liability company formerly known as Cuattro Veterinary U.S.A., LLC (" Imaging US "), Heska Imaging Global, LLC , a Delaware limited liability company (" Imaging Global "), Cuattro, LLC , a Colorado limited liability company (" Cuattro ") and Heska Imaging International, LLC , a Delaware limited liability company formerly known as Cuattro Veterinary, LLC (" Imaging International ").

WHEREAS, Imaging US and Cuattro are parties to that certain Amended and Restated Master License Agreement dated as of February 22, 2013, and all amendments thereto (the " License Agreement ");

WHEREAS, Cuattro is a party to that certain Agreement and Plan of Merger among Heska Corporation (" Heska "), its wholly-owned subsidiary Cuattro International Merger Subsidiary, Inc., a Delaware corporation (" Merger Sub ") , Imaging International, Kevin S. Wilson and all members of Imaging International, including Cuattro, dated as of March 14, 2016 (the " Merger Agreement "), pursuant to which Merger Sub will merge with and into Imaging International with Imaging International surviving such merger as a wholly-owned subsidiary of Heska (the " Merger "), which following the Closing under the Merger Agreement (the " Closing ") will be called Heska Imaging International, LLC;

WHEREAS, it is a condition of the obligations of the parties to the Merger Agreement to consummate the Merger and the other transactions contemplated by the Merger Agreement that the License Agreement be assigned to Global Imaging and amended as set forth herein;

WHEREAS, to facilitate the transactions between its affiliate, Heska, and Cuattro, as contemplated by the Merger Agreement, which are of potential benefit to Imaging US, Imaging US is willing to enter into this Agreement to assign the License Agreement to Imaging Global and to amend the License Agreement on the terms and conditions of this Agreement;

WHEREAS, Section 10.8 of the License Agreement requires Cuattro's prior written consent before Imaging US may assign its rights under the License Agreement, and, to induce Heska to enter into the Merger Agreement, which Heska would not do unless Cuattro enters into this Agreement, Cuattro is willing to enter into this Agreement to consent to Imaging US's assignment of the License Agreement to Imaging Global and to amend the License Agreement on the terms and conditions of this Agreement; and

NOW, THEREFORE, for and in consideration of the Closing, the premises and the mutual covenants contained herein, and for other good and valuable consideration, the receipt, adequacy and legal sufficiency of which are hereby acknowledged, the parties do hereby agree as follows:

1. Assignment and Assumption . Effective as of the Closing, Imaging US hereby assigns, sells, transfers and sets over to Imaging Global all of Imaging US's right, title, benefit, privileges and interest in and to the License Agreement, and all of Imaging US's burdens and

obligations in connection with the License Agreement (collectively, the " Assignment "). Imaging Global hereby accepts the Assignment and assumes and agrees for the benefit of Imaging US and Cuattro to be bound by, observe, perform, pay and discharge all of Imaging US's duties, liabilities, obligations, terms, provisions and covenants solely to the extent they are to be observed, performed, paid or discharged on and after the Effective Date, in connection with the License Agreement (collectively, the " Assumption ").

2. Consent and Agreement of Cuattro . In accordance with Section 10.8 of the License Agreement, Cuattro hereby consents to the Assignment and Assumption. Cuattro further acknowledges and agrees that all of Cuattro's burdens and obligations under the License Agreement shall survive the assignment and assumption of the License Agreement in accordance with the terms and conditions thereof. The Assignment and Assumption shall not relieve Imaging US of responsibility for the performance of any accrued obligation which it has as of the Effective Date.

3. Amendments to License Agreement . In accordance with Section 10.9 of the License Agreement:

3.1 Amendment to Territory . Effective as of the Closing, the definition of "Territory" in Section 1.13 of the License Agreement is hereby amended to read as follows: ""Territory" shall be defined as the Market throughout the world."

3.2 Amendment to Per Copy Software License Payment Schedule . Effective as of the Closing, the table of prices in Section 3.3 of the License Agreement is hereby amended to read in its entirety as follows:


2013:	[***] per Software License in each Product


2014:	[***] per Software License in each Product


2015:	[***] per Software License in each Product


2016:	[***] per Software License in each Product


2017:	[***] per Software License in each Product


2018:	[***] per Software License in each Product


2019:	[***] per Software License in each Product


2020:	[***] per Software License in each Product


2021:	[***] per Software License in each Product


2022:	[***] per Software License in each Product

2023+: [***] per Software License in each Product

3.3 Amendment to Covered Affiliates . Effective as of the Closing, Exhibit A2 to the License Agreement is hereby amended to read in its entirety as follows:

"EXHIBIT A2

COVERED AFFILIATES


•	Heska Corporation


•	Diamond Animal Health, Inc.


•	Heska Imaging US, LLC


•	Heska Imaging International, LLC (formerly Cuattro Veterinary, LLC)


•	Heska AG"

4. Appointment of Sublicensees .

4.1 Appointment of Imaging US . Effective as of the Closing, in accordance with Section 2.1 of the License Agreement and as authorized herein, Imaging Global hereby appoints Imaging US as its sublicensee under the License Agreement with respect to the portion of the Territory comprising the United States (the " US Territory ") to hold and exercise all of Imaging Global's rights under the License Agreement with respect to the US Territory, and Imaging US hereby accepts such appointment and agrees, for the benefit of Cuattro, to perform all of Imaging Global's obligations under the License Agreement with respect to the US Territory.

4.2 Appointment of Imaging International . Effective as of the Closing, in accordance with Section 2.1 of the License Agreement and as authorized herein, Imaging Global hereby appoints Imaging International as its sublicensee under the License Agreement with respect to the portion of the Territory outside the United States (the " International Territory ") to hold and exercise all of Imaging Global's rights under the License Agreement with respect to the International Territory, and Imaging International hereby accepts such appointment and agrees, for the benefit of Cuattro, to perform all of Imaging Global's obligations under the License Agreement with respect to the International Territory.

4.3 Performance of Obligations . Cuattro agrees to look only to Imaging US for performance of the obligations of the License Agreement with respect to the US Territory and only to Imaging International for performance of the obligations of the License Agreement with respect to the International Territory.

5. No Other Consideration . The assignments and rights granted by Imaging US to Imaging Global in this Agreement are to facilitate, and in consideration of, the transactions contemplated by the Merger Agreement, and no other consideration shall be given by Imaging Global or received by Imaging US in connection with this Agreement or the transactions contemplated by the Merger Agreement.

6. Remaining Terms . All parties acknowledge that a true, correct and complete copy of the License Agreement, together with all amendments thereto, is attached hereto as Exhibit A . Except as specifically modified pursuant to this Agreement all terms and provisions of the License Agreement shall remain in full force and effect as set forth therein. Nothing in this Agreement shall constitute or be construed to be a termination of the License Agreement.

7. Further Actions . Each of the parties hereto covenants and agrees, at its own expense, to execute and deliver, at the request of the other parties hereto, such further instruments of transfer and assignment and to take such other action as such other parties may reasonably request to more effectively consummate the Assignment and Assumption contemplated by this Agreement.

8. Amendment and Waiver . No provision of this Agreement may be amended, modified, supplemented or waived except by an instrument in writing executed by all of the parties hereto or, in the case of an asserted waiver, executed by the party against which enforcement of the waiver is sought. The rights and remedies of the parties to this Agreement are cumulative and not alternative.

9. Assignment . Neither this Agreement nor any right created hereby is assignable by any of the parties hereto without the prior written consent of the other parties; provided , that the License Agreement, as amended hereby, shall continue to be assignable on the terms and conditions set forth in Section 10.8 thereof.

10. Governing Law . This Agreement will be governed by, and construed in accordance with, the laws of the State of Colorado without reference or regard to the conflicts of law rules thereof.

11. Counterparts . This Agreement may be executed in any number of counterparts and by facsimile, each of which will be deemed an original, and all of which together will constitute one and the same instrument.

[Signature Page Follows]

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.



"IMAGING US"	"IMAGING GLOBAL"
Heska Imaging US, LLC By: _________________________________ Name: ______________________________ Title: _______________________________	Heska Imaging Global, LLC By: __________________________________ Name: _______________________________ Title: ________________________________



"CUATTRO"	"IMAGING INTERNATIONAL"
Cuattro, LLC By: _________________________________ Name: ______________________________ Title: _______________________________	Heska Imaging International, LLC By: __________________________________ Name: _______________________________ Title: ________________________________

[Signature Page to Assignment and Assumption Agreement (License Agreement)]

6364120

Exhibit C

Assignment and Assumption Agreement (Supply Agreement)

[Attached]

C-1

6543000

Execution Version

ASSIGNMENT AND ASSUMPTION AGREEMENT

(Supply Agreement)

WHEREAS, Imaging US and Cuattro are parties to that certain Supply Agreement dated as of February 24, 2013, and all amendments thereto (the " Supply Agreement ");

WHEREAS, it is a condition of the obligations of the parties to the Merger Agreement to consummate the Merger and the other transactions contemplated by the Merger Agreement that the Supply Agreement be assigned to Global Imaging and amended as set forth herein;

WHEREAS, to facilitate the transactions between its affiliate, Heska, and Cuattro, as contemplated by the Merger Agreement, which are of potential benefit to Imaging US, Imaging US is willing to enter into this Agreement to assign the Supply Agreement to Imaging Global and to amend the Supply Agreement on the terms and conditions of this Agreement;

WHEREAS, Section 18.7 of the Supply Agreement requires Cuattro's prior written consent before Imaging US may assign its rights under the Supply Agreement, and, to induce Heska to enter into the Merger Agreement, which Heska would not do unless Cuattro enters into this Agreement, Cuattro is willing to enter into this Agreement to consent to Imaging US's assignment of the Supply Agreement to Imaging Global and to amend the Supply Agreement on the terms and conditions of this Agreement; and

12. Assignment and Assumption . Effective as of the Closing, Imaging US hereby assigns, sells, transfers and sets over to Imaging Global all of Imaging US's right, title, benefit, privileges and interest in and to the Supply Agreement, and all of Imaging US's burdens and obligations in connection with the Supply Agreement (collectively, the " Assignment "). Imaging

Global hereby accepts the Assignment and assumes and agrees for the benefit of Imaging US and Cuattro to be bound by, observe, perform, pay and discharge all of Imaging US's duties, liabilities, obligations, terms, provisions and covenants solely to the extent they are to be observed, performed, paid or discharged on and after the Effective Date, in connection with the Supply Agreement (collectively, the " Assumption ").

13. Consent and Agreement of Cuattro . In accordance with Section 18.7 of the Supply Agreement, Cuattro hereby consents to the Assignment and Assumption. Cuattro further acknowledges and agrees that all of Cuattro's burdens and obligations under the Supply Agreement shall survive the assignment and assumption of the Supply Agreement in accordance with the terms and conditions thereof. The Assignment and Assumption shall not relieve Imaging US of responsibility for the performance of any accrued obligation which it has as of the Effective Date.

14. Amendments to Supply Agreement . In accordance with Section 18.6 of the Supply Agreement:

3.1 Amendment to Territory . Effective as of the Closing, the definition of "Territory" in Exhibit B to the Supply Agreement is hereby amended to read as follows: ""Territory" shall be defined as the Market throughout the world."

3.2 Amendment to Allow Subdistributors . Effective as of the Closing, the following sentence is hereby added as the final sentence of Section 1.1 of the Supply Agreement: "Notwithstanding any provision of this Agreement to the contrary, Heska Imaging Global, LLC (" Imaging Global "), as successor in interest to Vet USA, may appoint its Affiliate, Heska Imaging US, LLC (" Imaging US "), as a subdistributor to exercise all the rights, and fulfill all of the obligations, under this Agreement in the portion of the Territory comprising the United States, and may appoint its affiliate, Heska Imaging International, LLC (" Imaging International ") as a subdistributor to exercise all of the rights, and fulfill all of the obligations, under this Agreement in the portion of the Territory outside the United States, and, upon such appointments, all references to "Vet USA" in this Agreement shall be deemed to refer to Imaging US with respect to the portion of the Territory comprising the United States and Imaging International with respect to the portion of the Territory outside the United States."

3.3 Exception to Exclusivity . Effective as of the Closing, the following sentence is hereby added as the final sentence of Section 1.2 of the Supply Agreement: "Notwithstanding any provision of this Agreement to the contrary, each of Imaging Global, Imaging US and Imaging International may purchase hardware components from third parties unless LLC notifies Imaging Global, Imaging US or Imaging International, as applicable, in writing to discontinue such purchases, whereupon the notified party, as applicable, may complete any pending orders and shall discontinue further such orders."

15. Appointment of Subdistributors .

4.1 Appointment of Imaging US . Effective as of the Closing, in accordance with Section 1.1 of the Supply Agreement and as authorized herein, Imaging Global hereby appoints Imaging US as its subdistributor under the Supply Agreement with respect to the portion

of the Territory comprising the United States (the " US Territory ") to hold and exercise all of Imaging Global's rights under the Supply Agreement with respect to the US Territory, and Imaging US hereby accepts such appointment and agrees, for the benefit of Cuattro, to perform all of Imaging Global's obligations under the Supply Agreement with respect to the US Territory.

4.2 Appointment of Imaging International . Effective as of the Closing, in accordance with Section 1.1 of the Supply Agreement and as authorized herein, Imaging Global hereby appoints Imaging International as its subdistributor under the Supply Agreement with respect to the portion of the Territory outside the United States (the " International Territory ") to hold and exercise all of Imaging Global's rights under the Supply Agreement with respect to the International Territory, and Imaging International hereby accepts such appointment and agrees, for the benefit of Cuattro, to perform all of Imaging Global's obligations under the Supply Agreement with respect to the International Territory.

4.3 Performance of Obligations . Cuattro agrees to look only to Imaging US for performance of the obligations of the Supply Agreement with respect to the US Territory and only to Imaging International for performance of the obligations of the Supply Agreement with respect to the International Territory.

16. No Other Consideration . The assignments and rights granted by Imaging US to Imaging Global in this Agreement are to facilitate, and in consideration of, the transactions contemplated by the Merger Agreement, and no other consideration shall be given by Imaging Global or received by Imaging US in connection with this Agreement or the transactions contemplated by the Merger Agreement.

17. Remaining Terms . All parties acknowledge that a true, correct and complete copy of the Supply Agreement, together with all amendments thereto, is attached hereto as Exhibit A . Except as specifically modified pursuant to this Agreement, all terms and provisions of the Supply Agreement shall remain in full force and effect as set forth therein. Nothing in this Agreement shall constitute or be construed to be a termination of the Supply Agreement.

18. Further Actions . Each of the parties hereto covenants and agrees, at its own expense, to execute and deliver, at the request of the other parties hereto, such further instruments of transfer and assignment and to take such other action as such other parties may reasonably request to more effectively consummate the Assignment and Assumption contemplated by this Agreement.

19. Amendment and Waiver . No provision of this Agreement may be amended, modified, supplemented or waived except by an instrument in writing executed by all of the parties hereto or, in the case of an asserted waiver, executed by the party against which enforcement of the waiver is sought. The rights and remedies of the parties to this Agreement are cumulative and not alternative.

20. Assignment . Neither this Agreement nor any right created hereby is assignable by any of the parties hereto without the prior written consent of the other parties; provided , that the

Supply Agreement, as amended hereby, shall continue to be assignable on the terms and conditions set forth in Section 18.7 thereof.

21. Governing Law . This Agreement will be governed by, and construed in accordance with, the laws of the State of Colorado without reference or regard to the conflicts of law rules thereof.

22. Counterparts . This Agreement may be executed in any number of counterparts and by facsimile, each of which will be deemed an original, and all of which together will constitute one and the same instrument.

[Signature Page Follows]

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.



"IMAGING US"	"IMAGING GLOBAL"
Heska Imaging US, LLC By: _________________________________ Name: ______________________________ Title: _______________________________	Heska Imaging Global, LLC By: __________________________________ Name: _______________________________ Title: ________________________________



"CUATTRO"	"IMAGING INTERNATIONAL"
Cuattro, LLC By: _________________________________ Name: ______________________________ Title: _______________________________	Heska Imaging International, LLC By: __________________________________ Name: _______________________________ Title: ________________________________

[Signature Page to Assignment and Assumption Agreement (Supply Agreement)]

Exhibit D

Form of Release

[Attached]

D-1

Execution Version

RELEASE

This Release is executed and delivered as of _____________, 2016, pursuant to that certain Agreement and Plan of Merger, dated as of March 14, 2016 (the " Agreement "), by and among Heska Corporation, a Delaware corporation (“ Purchaser ”), its wholly-owned subsidiary Cuattro International Merger Subsidiary, Inc., a Delaware corporation (“ Merger Sub ”), Cuattro Veterinary, LLC, a Delaware limited liability company (the “ Company ”), Kevin S. Wilson and the other parties signatory thereto.

WHEREAS , the undersigned (the " Releasor ") acknowledges that execution and delivery of this Release is a condition to the Purchaser's obligation to consummate the transactions contemplated pursuant to the Agreement and the other transaction documents contemplated thereby and that the Purchaser is relying on this Release in consummating such transactions.

NOW THEREFORE , in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Releasor, intending to be legally bound, hereby agrees as follows:

1. Defined Terms . Terms used without definition in this Release shall have the meanings ascribed to such terms in the Agreement.

2. Release . The Releasor, on behalf of the Releasor and each auditor, counsel, advisor, consultant, Affiliate, representative, agent, predecessor, successor or assign of the Releasor (collectively, the " Releasing Parties "), hereby, knowingly and voluntarily, forever compromises, settles, waives, releases and discharges with prejudice the Purchaser, the Company and each past, present or future director, manager, officer, employee, auditor, counsel, advisor, consultant, trustee, stockholder, member, equityholder, Affiliate, parent, subsidiary, representative, agent, predecessor, successor or assign of any of the Purchaser or the Company (collectively, the " Released Parties ") from any and all claims, rights, causes of action, protests, suits, disputes, orders, obligations, debts, demands, proceedings, contracts, agreements, promises, liabilities, controversies, costs, expenses, fees (including attorneys' fees), or damages of any kind (collectively, " Claims "), arising by any means including, without limitation, subrogation, assignment, reimbursement, operation of law or otherwise, out of any event, occurrence, act or failure to act preceding, or contemporaneous with, the Closing, whether known or unknown, suspected or unsuspected, accrued or not accrued, foreseen or unforeseen, or mature or unmature. The Claims released pursuant hereto include, but are not limited to, Claims for breach of contract, tort or personal injury of any sort, whether intentional or negligent, including, without limitation, Claims for the negligence of any or all of the Released Parties, and Claims under any state or federal statute or regulation, in equity or at common law, and any contract rights or Claims with respect to equity securities of the Company; provided , however , this Release shall not affect or impair any of the rights expressly set forth in the Transaction Documents.

The Claims released pursuant to this Release include, but are not limited to, any Claim arising out of the Releasor's employment with and/or termination from any Released Party, including, but not limited to, any and all rights or claims the Releasor may have under Title VII of the Civil Rights Act of 1964 , 42 U.S.C. § 2000e et seq. ; the Equal Pay Act , 29 U.S.C. § 206(d) et seq. ; the Rehabilitation Act of 1973 , 29 U.S.C. § 701 et seq. ; and the Americans with Disabilities Act of 1990 , 42 U.S.C. § 12101 et seq. ; all as amended, and any other federal, state, or local laws or regulations prohibiting employment discrimination (including a claim for

6357615

retaliation); and any claim for reinstatement. The Claims released pursuant to this Release also include, but are not limited to, any Claims for wrongful discharge, breach of contract (express or implied), breach of any covenant of good faith and fair dealing (express or implied), any Claims that any Released Party has dealt with the Releasor unfairly or has denied the Releasor any rights under its policies and procedures or any other Claims arising under common or civil law and relating to the Releasor's employment with and/or separation from any Released Party, and any Claims under the Employee Retirement Income Security Act of 1974 , 29 U.S.C. § 1001 et seq. ; provided , however , that nothing in this Release prevents the Releasor from filing, cooperating with or participating in any proceeding before the EEOC or a state fair employment practices agency (except that the Releasor acknowledges that he or she may not be able to recover any monetary benefits in connection with any such proceeding).

The Releasor, on behalf of the Releasor and the other Releasing Parties, specifically waives the benefit of the provisions of Section 1542 of the Civil Code of the State of California, which reads as follows: "A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor." Notwithstanding the provisions of Section 1542 and for the purpose of implementing a full and complete release, the parties hereto expressly acknowledge that this Release is intended to include all claims which the Releasor, on behalf of the Releasor and the other Releasing Parties, does not know or suspect to exist in his favor at the time of the execution of this Release, and that this Release will extinguish any such claims.

The Releasor agrees that the consideration contemplated pursuant to the Transaction Documents and the other direct and indirect benefits afforded the Releasor under the Transaction Documents provide more than adequate consideration for this Release.

3. Covenant Not to Sue . The Releasor, on behalf of the Releasor and the other Releasing Parties, hereby expressly agrees not to, at any time, sue, protest, initiate, institute or assist in instituting any proceeding, grievance, suit or investigation before any court or other governmental authority related to any Claim released pursuant to this Release or otherwise assert any Claim released pursuant to this Release against any of the Released Parties, except as provided in Section 2 above relating to filing, cooperating with or participating in any proceeding before the EEOC or a state fair employment practices agency.

4. Warranty of Adequate Representation . The Releasor hereby represents and warrants that the Releasor (i) has been adequately represented by counsel in deciding to execute and deliver this Release, (ii) understands the terms and conditions of this Release, (iii) is executing and delivering this Release of the Releasor's own free will, in good faith and after due consideration, and (iv) has not been coerced or placed under duress in any manner in order to induce the Releasor to execute and deliver this Release. The Releasor further acknowledges and agrees that this Release is valid, fair, adequate and reasonable.

5. Warranty of Non-Assignment of Claims . The Releasor hereby represents and warrants that the Releasor has not sold, assigned, pledged, transferred or otherwise disposed of, in whole or in part, any right, title, interest, lien, security interest, or claim in, to, or with respect to, any Claim the Releasor currently has, or has had in the past, against any Released Party.

6357615

6. Indemnification . The Releasor covenants and agrees, on behalf of the Releasor and the other Releasing Parties, to DEFEND, INDEMNIFY AND HOLD HARMLESS each of the Released Parties from and against all Claims arising out of (i) any Claim released pursuant to this Release or (ii) any breach by the Releasor of any representation, warranty, covenant or agreement set forth in this Release.

7. Reformation and Severability . If any provision of this Release is held to be invalid, illegal or unenforceable, that provision shall, to the extent possible, be modified in such manner as to be valid, legal and enforceable but so as to most nearly retain the intent of the Releasor as expressed herein, and if such a modification is not possible, that provision shall be severed from this Release, and in either case the validity, legality and enforceability of the remaining provisions of this Release shall not in any way be affected or impaired thereby.

8. Governing Law . This Release and the rights and obligations hereunder shall be governed by and construed, interpreted and enforced in accordance with the laws of the State of Delaware without giving effect to the choice of law provisions thereof.

[SIGNATURE PAGE TO FOLLOW]

6357615

IN WITNESS WHEREOF, the Releasor has executed and delivered this Release as of the day and year first written above.

____________________________

Name: ______________________

State of ___________)

) SS:

County of _________)

I, __________________________, do hereby certify that ________________ this day appeared before me personally and did acknowledge that he or she did execute and deliver the foregoing instrument by signing his or her name, for the purposes therein named and expressed.

In Witness Whereof, I set my hand and official seal this ____ day of ________________, 2016.

_________________________________

Notary Public

Commission Expires:

______________________________

CONSENT OF SPOUSE

The undersigned, being the spouse of __________, who is a party to the Release, hereby consents and agrees that any community property and/or other interest of the undersigned in the subject matter of the Release is subject to, and bound by, such Release.

____________________________________ DATED as of __________________, 2016.

Name: _____________________________

State of ___________)

) SS:

County of _________)

I, __________________________, do hereby certify that _______________________ this day appeared before me personally and did acknowledge that he or she did execute and deliver the foregoing instrument by signing his or her name, for the purposes therein named and expressed.

In Witness Whereof, I set my hand and official seal this ____ day of ________________, 2016.

_________________________________

Notary Public

Commission Expires:

______________________________

Execution Version

RELEASE

This Release is executed and delivered as of ____________, 2015, pursuant to that certain Agreement and Plan of Merger, dated as of March 14, 2016 (the " Agreement "), by and among Heska Corporation, a Delaware corporation (“ Purchaser ”), its wholly-owned subsidiary Cuattro International Merger Subsidiary, Inc., a Delaware corporation (“ Merger Sub ”), Cuattro Veterinary, LLC, a Delaware limited liability company (the “ Company ”), Kevin S. Wilson and the other parties signatory thereto.

1. Defined Terms . Terms used without definition in this Release shall have the meanings ascribed to such terms in the Agreement.

2. Release . The Releasor, on behalf of the Releasor and each trustee, beneficiary, employee, member, manager, auditor, counsel, advisor, consultant, Affiliate, representative, agent, predecessor, successor or assign of the Releasor (collectively, the " Releasing Parties "), hereby, knowingly and voluntarily, forever compromises, settles, waives, releases and discharges with prejudice the Purchaser, the Company and each past, present or future director, manager, officer, employee, auditor, counsel, advisor, consultant, trustee, stockholder, member, equityholder, Affiliate, parent, subsidiary, representative, agent, predecessor, successor or assign of any of the Purchaser or the Company (collectively, the " Released Parties ") from any and all claims, rights, causes of action, protests, suits, disputes, orders, obligations, debts, demands, proceedings, contracts, agreements, promises, liabilities, controversies, costs, expenses, fees (including attorneys' fees), or damages of any kind (collectively, " Claims "), arising by any means including, without limitation, subrogation, assignment, reimbursement, operation of law or otherwise, out of any event, occurrence, act or failure to act preceding, or contemporaneous with, the Closing, whether known or unknown, suspected or unsuspected, accrued or not accrued, foreseen or unforeseen, or mature or unmature. The Claims released pursuant hereto include, but are not limited to, Claims for breach of contract, tort or personal injury of any sort, whether intentional or negligent, including, without limitation, Claims for the negligence of any or all of the Released Parties, and Claims under any state or federal statute or regulation, in equity or at common law, and any contract rights or Claims with respect to equity securities of the Company; provided , however , this Release shall not affect or impair any of the rights expressly set forth in the Transaction Documents.

have materially affected his settlement with the debtor." Notwithstanding the provisions of Section 1542 and for the purpose of implementing a full and complete release, the parties hereto expressly acknowledge that this Release is intended to include all claims which the Releasor, on behalf of the Releasor and the other Releasing Parties, does not know or suspect to exist in his favor at the time of the execution of this Release, and that this Release will extinguish any such claims.

IN WITNESS WHEREOF, the Releasor has executed and delivered this Release as of the day and year first written above.

____________________________________

By:_________________________________

Name: ______________________________

Title: _______________________________

State of ___________)

) SS:

County of _________)

I, __________________________, do hereby certify that __________________ this day appeared before me personally and did acknowledge that he did execute and deliver the foregoing instrument by signing his name, for the purposes therein named and expressed.

In Witness Whereof, I set my hand and official seal this ____ day of ________________, 2016.

_________________________________

Notary Public

Commission Expires:

______________________________

Exhibit 10.78

March 14, 2016

Ladies and Gentlemen:

Reference is hereby made to that certain Promissory Note dated as of February 22, 2013 in the original principal amount of $1,360,000 (the "Note"), payable by Cuattro Veterinary, LLC ("Vet International") to Heska Imaging US, LLC (formerly named Cuattro Veterinary USA, LLC) ("Holder"). Capitalized terms not otherwise defined herein have the respective meanings ascribed to them in the Note.

In consideration of, and to further facilitate, the transactions contemplated by that certain Unit Purchase Agreement among Vet International, the founder and members of Vet International, and Holder’s affiliate, Heska Corporation, Holder hereby agrees that notwithstanding any provision of the Note to the contrary, the Due Date of the Note shall be June 15, 2016.

All other provisions of the Note shall remain in full force and effect according to their terms.

Very Truly Yours,



Heska Imaging US, LLC
By:	/s/ Jason A. Napolitano
Its:	Chief Financial Officer


Accepted:

Cuattro Veterinary, LLC
By:	/s/ Kevin S. Wilson
Its:	Member

Exhibit 21.1

SUBSIDIARIES OF COMPANY

Diamond Animal Health, Inc., an Iowa corporation

Heska Imaging US, LLC, a Delaware Limited Liability Company (54.6% owned)

Heska AG, a corporation incorporated under the laws of Switzerland

Sensor Devices, Inc., a Wisconsin Corporation (inactive)

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements Nos. 333-30951, 333-34111, 333-39448, 333-47129, 333-72155, 333-38138, 333-55112, 333-82096, 333-89738, 333-102871, 333-106679, 333-112701, 333-115995, 333-123196, 333-132916, 333-141737, 333-194120, 333-194122, 333-195734 and 333-204036 of Heska Corporation and subsidiaries (the “Company”) on Form S-8, of our report dated March 15, 2016 relating to the consolidated financial statements of the Company, appearing in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015. We also consent to the reference to us under the caption “Experts” in the Registration Statements.

EKS&H LLLP

March 15, 2016

Boulder, Colorado

Exhibit 31.1

CERTIFICATION

I, Kevin S. Wilson, certify that:


1.	I have reviewed this annual report on Form 10-K of Heska Corporation;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and


c.	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d.	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and


5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):


a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and


b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.



Dated: March 15, 2016	/s/ Kevin S. Wilson
	KEVIN S. WILSON
	Chief Executive Officer and President
	(Principal Executive Officer)

Exhibit 31.2

CERTIFICATION

I, Jason A. Napolitano, certify that:


1.	I have reviewed this annual report on Form 10-K of Heska Corporation;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and


c.	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d.	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and


5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):


a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and


b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.



Dated: March 15, 2016	/s/ Jason A. Napolitano
	JASON A. NAPOLITANO
	Chief Operating Officer, Chief Financial Officer, Executive Vice President and Secretary
	(Principal Financial Officer)

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Kevin S. Wilson, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Annual Report of Heska Corporation on Form 10-K for the year ended December 31, 2015 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-K fairly presents in all material respects the financial condition and results of operations of Heska Corporation.



Dated: March 15, 2016	By:	/s/ Kevin S. Wilson
	Name:	KEVIN S. WILSON
	Title:	Chief Executive Officer and President

I, Jason A. Napolitano, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Annual Report of Heska Corporation on Form 10-K for the year ended December 31, 2015 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-K fairly presents in all material respects the financial condition and results of operations of Heska Corporation.



Dated: March 15, 2016	By:	/s/ Jason A. Napolitano
	Name:	JASON A. NAPOLITANO
	Title:	Chief Operating Officer, Chief Financial Officer,
		Executive Vice President and Secretary

A signed original of this written statement required by Section 906 has been provided to Heska Corporation and will be retained by Heska Corporation and furnished to the Securities and Exchange Commission or its staff upon request.