UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
|
x
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
|
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)
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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)
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Large accelerated filer
o
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Accelerated filer
x
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Non-accelerated filer
o
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Smaller Reporting Company
¨
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Emerging Growth Company
¨
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Page
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Item 1.
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Item 1A.
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Item 1B.
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Item 2.
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Item 3.
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Item 4.
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Item 5.
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Item 6.
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Item 7.
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Item 7A.
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Item 8.
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Item 9.
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Item 9A.
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Item 9B.
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Item 10.
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Item 11.
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Item 12.
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Item 13.
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Item 14.
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Item 15.
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Item 16.
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Item 1.
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Business
|
•
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Quidel for the development of SOLO STEP CH Cassettes and SOLO STEP FH Cassettes;
|
•
|
Mindray for the development of veterinary applications for the HT5 Veterinary Hematology Analyzer and associated reagents; and
|
•
|
FUJIFILM for the development of veterinary applications for the Element DC and Element DC5x Veterinary Chemistry Analyzers and associated slides and supplies.
|
•
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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. 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.
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•
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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 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.
|
•
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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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Products
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Country
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Regulated
|
Agency
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Status
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ALLERCEPT Allergy Treatment Sets
|
U.S.
Canada
|
Yes
Yes
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USDA
CCVB
|
Licensed
Licensed
|
SOLO STEP CH
|
U.S.
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
|
U.S.
Canada
|
Yes
Yes
|
USDA
CCVB
|
Licensed
Licensed
|
SOLO STEP FH
|
U.S.
Canada
Australia
|
Yes
Yes
Yes
|
USDA
CCVB
ADAFF
|
Licensed
Licensed
Licensed
|
TRI-HEART Plus Heartworm Preventive
|
U.S.
Japan
South Korea
Hong Kong
Macau
|
Yes
Yes
Yes
Yes
Yes
|
FDA
MAFF
NVRQS
AFCD
IACM
|
Licensed
Licensed
Licensed
Licensed
Licensed
|
Name
|
Age
|
Position
|
Kevin S. Wilson
|
46
|
Chief Executive Officer and President
|
Catherine Grassman
|
43
|
Vice President, Chief Accounting Officer and Controller
|
Jason A. Napolitano
|
50
|
Chief Operating Officer and Chief Strategist
|
Nancy Wisnewski, Ph.D.
|
56
|
Executive Vice President, Diagnostic Operations and Product Development
|
Steven M. Eyl
|
53
|
Executive Vice President, Global Sales and Marketing
|
Steven M. Asakowicz
|
53
|
Executive Vice President, Companion Animal Health Sales
|
Rodney A. Lippincott
|
45
|
Executive Vice President, Companion Animal Health Sales
|
Jason D. Aroesty
|
44
|
Executive Vice President, International Diagnostics
|
Item 1A.
|
Risk Factors
|
•
|
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 Point of Care laboratory 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 Point of Care laboratory 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.
|
•
|
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. If one of our suppliers is unable to provide a raw material or finished product due to regulatory issues, it could have a material adverse financial impact on our business and could expose us to legal action if we are unable to perform on contracts to our customers involving related 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 geographic rights.
We typically do not have global geographic rights to products supplied by third parties. If we were to determine a market opportunity in a geography where we did not have distribution rights and were unable to obtain such rights from the supplier, it might hamper our ability to succeed in such geography and our sales and profits would be lower than they otherwise would have been.
|
•
|
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.
|
•
|
Changes to U.S. tariff and import/export regulations.
Changes to U.S. trade policies, treaties and tariffs could have a material adverse effect on global trade. These changes could result in increased costs of goods imported into the U.S. for the Company and our third party suppliers. Our third party suppliers may limit their trade with companies in the U.S., including us.
|
•
|
Uncertain political and economic climates, fluctuations in exchange rates that may increase the volatility of foreign-based revenue and expenses.
|
•
|
Burdens of complying with and unexpected changes in foreign laws, accounting and legal standards, regulatory requirements, taxes, tariffs and other barriers or trade restrictions.
|
•
|
Lack of experience in connection with the customs, cultures, languages and sales cycle.
|
•
|
Reduced or altered protection for intellectual property rights in foreign countries.
|
•
|
Data privacy laws which require that data storage and processing be subject to laws different than the U.S.
|
•
|
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.
|
•
|
sell, transfer, lease or dispose of our assets;
|
•
|
create, incur or assume additional indebtedness;
|
•
|
encumber or permit lines on certain of our assets;
|
•
|
make restricted payments, including paying dividends on, repurchasing or making distributions with respect to our common stock;
|
•
|
make specified investments (including loans and advances);
|
•
|
consolidate, merge, sell or otherwise dispose of substantially all of our assets; and
|
•
|
enter into certain transactions.
|
•
|
supply of products, including minimum purchase agreements, 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;
|
•
|
changes in our reputation and/or market acceptance of our current or new products; and
|
•
|
changes in the mix of products sold.
|
Item 1B.
|
Unresolved Staff Comments
|
Item 2.
|
Properties
|
Item 3.
|
Legal Proceedings
|
Item 4.
|
Mine Safety Disclosures
|
Item 5.
|
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
|
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
|
|||
March 17, 2018
|
|
14,334
|
|
|
$78.50
|
|
—
|
|
|
—
|
|
Total
|
|
14,334
|
|
|
$78.50
|
|
—
|
|
|
—
|
|
(1)
|
Shares of Public Common Stock we purchased between January 1, 2018 and December 31, 2018 were solely for the cancellation of shares of restricted stock to pay withholding taxes.
|
|
Dec-13
|
|
Dec-14
|
|
Dec-15
|
|
Dec-16
|
|
Dec-17
|
|
Dec-18
|
||||||||||||
Heska Corporation
|
$
|
100
|
|
|
$
|
208
|
|
|
$
|
444
|
|
|
$
|
821
|
|
|
$
|
920
|
|
|
$
|
987
|
|
NASDAQ Medical Supplies Index
|
$
|
100
|
|
|
$
|
120
|
|
|
$
|
133
|
|
|
$
|
151
|
|
|
$
|
199
|
|
|
$
|
213
|
|
NASDAQ Composite Total Return Index
|
$
|
100
|
|
|
$
|
115
|
|
|
$
|
123
|
|
|
$
|
134
|
|
|
$
|
173
|
|
|
$
|
168
|
|
|
2018
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
||||||||||
|
(In thousands, except per share data)
|
||||||||||||||||||
Consolidated Statements of Income Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Revenue, net
|
$
|
127,446
|
|
|
$
|
129,341
|
|
|
$
|
130,083
|
|
|
$
|
104,597
|
|
|
$
|
89,837
|
|
Net income attributable to Heska Corporation
|
$
|
5,850
|
|
|
$
|
9,953
|
|
|
$
|
10,508
|
|
|
$
|
5,239
|
|
|
$
|
2,603
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Earnings per share attributable to Heska Corporation:
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic earnings per share attributable to Heska Corporation
|
$
|
0.81
|
|
|
$
|
1.42
|
|
|
$
|
1.55
|
|
|
$
|
0.80
|
|
|
$
|
0.44
|
|
Diluted earnings per share attributable to Heska Corporation
|
$
|
0.74
|
|
|
$
|
1.30
|
|
|
$
|
1.43
|
|
|
$
|
0.74
|
|
|
$
|
0.41
|
|
Basic weighted-average common shares outstanding
|
7,220
|
|
|
7,026
|
|
|
6,783
|
|
|
6,509
|
|
|
5,951
|
|
|||||
Diluted weighted-average common shares outstanding
|
7,856
|
|
|
7,642
|
|
|
7,361
|
|
|
7,074
|
|
|
6,409
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Consolidated Balance Sheets Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Total assets
|
$
|
156,452
|
|
|
$
|
135,444
|
|
|
$
|
130,844
|
|
|
$
|
109,719
|
|
|
$
|
96,844
|
|
Long-term obligations and redeemable preferred stock
|
$
|
6,031
|
|
|
$
|
6,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash dividends declared per share:
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Item 7.
|
Management's Discussion and Analysis of Financial Condition and Results of Operations
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Revenue
|
$
|
127,446
|
|
|
$
|
129,341
|
|
|
$
|
130,083
|
|
Gross profit
|
56,638
|
|
|
58,261
|
|
|
53,892
|
|
|||
Operating expenses
|
52,844
|
|
|
40,042
|
|
|
37,359
|
|
|||
Operating income
|
3,794
|
|
|
18,219
|
|
|
16,533
|
|
|||
Interest and other (income) expense, net
|
(13
|
)
|
|
(150
|
)
|
|
29
|
|
|||
Income before income taxes and equity in losses of unconsolidated affiliates
|
3,807
|
|
|
18,369
|
|
|
16,504
|
|
|||
Income tax (benefit) expense
|
(2,115
|
)
|
|
8,913
|
|
|
4,339
|
|
|||
Net income before equity in losses of unconsolidated affiliates
|
5,922
|
|
|
9,456
|
|
|
12,165
|
|
|||
Equity in losses of unconsolidated affiliates
|
(72
|
)
|
|
—
|
|
|
—
|
|
|||
Net income, after equity in losses of unconsolidated affiliates
|
5,850
|
|
|
9,456
|
|
|
12,165
|
|
|||
Net (loss) income attributable to non-controlling interest
|
—
|
|
|
(497
|
)
|
|
1,657
|
|
|||
Net income attributable to Heska Corporation
|
$
|
5,850
|
|
|
$
|
9,953
|
|
|
$
|
10,508
|
|
|
Year Ended December 31,
|
|
Change
|
|||||||||||||||||||
|
2018
|
|
2017
|
|
2016
|
|
Dollar Change
|
% Change
|
Dollar Change
|
% Change
|
||||||||||||
Point of Care Laboratory:
|
$
|
57,375
|
|
|
$
|
54,855
|
|
|
$
|
48,817
|
|
|
$
|
2,520
|
|
5
|
%
|
$
|
6,038
|
|
12
|
%
|
Consumables
|
44,771
|
|
|
39,161
|
|
|
36,344
|
|
|
5,610
|
|
14
|
%
|
2,817
|
|
8
|
%
|
|||||
Instruments
|
10,810
|
|
|
13,773
|
|
|
10,438
|
|
|
(2,963
|
)
|
(22
|
)%
|
3,335
|
|
32
|
%
|
|||||
Other
|
1,794
|
|
|
1,921
|
|
|
2,035
|
|
|
(127
|
)
|
(7
|
)%
|
(114
|
)
|
(6
|
)%
|
|||||
Point of Care Imaging
|
22,832
|
|
|
21,907
|
|
|
29,609
|
|
|
925
|
|
4
|
%
|
(7,702
|
)
|
(26
|
)%
|
|||||
Other CCA Revenue
|
28,717
|
|
|
28,429
|
|
|
28,972
|
|
|
288
|
|
1
|
%
|
(543
|
)
|
(2
|
)%
|
|||||
Total CCA Revenue
|
$
|
108,924
|
|
|
$
|
105,191
|
|
|
$
|
107,398
|
|
|
$
|
3,733
|
|
4
|
%
|
$
|
(2,207
|
)
|
(2
|
)%
|
Percent of Total Revenue
|
85.5
|
%
|
|
81.3
|
%
|
|
82.6
|
%
|
|
|
|
|
|
|||||||||
Cost of Revenue
|
56,326
|
|
|
54,509
|
|
|
59,066
|
|
|
1,817
|
|
3
|
%
|
(4,557
|
)
|
(8
|
)%
|
|||||
Gross Profit
|
52,598
|
|
|
50,682
|
|
|
48,332
|
|
|
1,916
|
|
4
|
%
|
2,350
|
|
5
|
%
|
|||||
Operating Income
|
$
|
2,040
|
|
|
$
|
12,656
|
|
|
$
|
13,015
|
|
|
$
|
(10,616
|
)
|
(84
|
)%
|
$
|
(359
|
)
|
(3
|
)%
|
|
Year Ended December 31,
|
|
Change
|
|||||||||||||||||||
|
2018
|
|
2017
|
|
2016
|
|
Dollar Change
|
% Change
|
Dollar Change
|
% Change
|
||||||||||||
Revenue
|
$
|
18,522
|
|
|
$
|
24,150
|
|
|
$
|
22,685
|
|
|
$
|
(5,628
|
)
|
(23
|
)%
|
$
|
1,465
|
|
6
|
%
|
Percent of Total Revenue
|
14.5
|
%
|
|
18.7
|
%
|
|
17.4
|
%
|
|
|
|
|
|
|||||||||
Cost of Revenue
|
14,482
|
|
|
16,570
|
|
|
17,125
|
|
|
(2,088
|
)
|
(13
|
)%
|
(555
|
)
|
(3
|
)%
|
|||||
Gross Profit
|
4,040
|
|
|
7,580
|
|
|
5,560
|
|
|
(3,540
|
)
|
(47
|
)%
|
2,020
|
|
36
|
%
|
|||||
Operating Income
|
$
|
1,754
|
|
|
$
|
5,563
|
|
|
$
|
3,518
|
|
|
$
|
(3,809
|
)
|
(68
|
)%
|
$
|
2,045
|
|
58
|
%
|
Year Ended December 31, 2018
|
|||||||||||||||||||||||
|
Operating expenses
|
|
Operating income
|
|
Income tax (benefit) expense
|
|
Net income attributable to Heska Corporation
|
|
Basic net earnings per share
|
|
Diluted net earnings per share
|
||||||||||||
|
($ in thousands, except per share data)
|
||||||||||||||||||||||
Reported - GAAP
|
$
|
52,844
|
|
|
$
|
3,794
|
|
|
$
|
(2,115
|
)
|
|
$
|
5,850
|
|
|
$
|
0.81
|
|
|
$
|
0.74
|
|
Litigation Provision and Other One-Time Costs
|
7,407
|
|
|
7,407
|
|
|
2,094
|
|
|
5,313
|
|
|
0.74
|
|
|
0.68
|
|
||||||
Adjusted Non-GAAP
|
$
|
45,437
|
|
|
$
|
11,201
|
|
|
$
|
(21
|
)
|
|
$
|
11,163
|
|
|
$
|
1.55
|
|
|
$
|
1.42
|
|
Year Ended December 31, 2017
|
|||||||||||||||||||||||
|
Operating expenses
|
|
Operating income
|
|
Income tax (benefit) expense
|
|
Net income attributable to Heska Corporation
|
|
Basic net earnings per share
|
|
Diluted net earnings per share
|
||||||||||||
|
($ in thousands, except per share data)
|
||||||||||||||||||||||
Reported - GAAP
|
$
|
40,042
|
|
|
$
|
18,219
|
|
|
$
|
8,913
|
|
|
$
|
9,953
|
|
|
$
|
1.42
|
|
|
$
|
1.30
|
|
U.S. Tax Reform
|
—
|
|
|
—
|
|
|
(5,898
|
)
|
|
5,898
|
|
|
0.84
|
|
|
0.77
|
|
||||||
Adjusted Non-GAAP
|
$
|
40,042
|
|
|
$
|
18,219
|
|
|
$
|
3,015
|
|
|
$
|
15,851
|
|
|
$
|
2.26
|
|
|
$
|
2.07
|
|
•
|
During the year ended
December 31, 2018
, we recorded a one-time settlement charge of $6.75 million and approximately $0.3 million in related legal fees in general and administrative expenses, relating to the pending settlement of the Shaun Fauley complaint filed on March 12, 2015. See "Part II, Item 8. Financial Statements and Supplementary Data, Note 13. Commitments and Contingencies" in the accompanying notes to the Consolidated Financial Statements for further discussion of the settlement. Other one-time costs were approximately $0.4 million for the year ended
December 31, 2018
.
|
•
|
During the year ended
December 31, 2017
, our deferred income tax expense was increased by $5.9 million due to the revaluation of our deferred tax assets as a result of the Act.
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Net cash provided by operating activities
|
$
|
13,287
|
|
|
$
|
10,409
|
|
|
$
|
5,855
|
|
Net cash used in investing activities
|
(12,174
|
)
|
|
(17,169
|
)
|
|
(3,302
|
)
|
|||
Net cash provided by financing activities
|
2,627
|
|
|
5,551
|
|
|
1,403
|
|
|||
Effect of currency translation on cash
|
(10
|
)
|
|
74
|
|
|
(52
|
)
|
|||
Increase (decrease) in cash and cash equivalents
|
3,730
|
|
|
(1,135
|
)
|
|
3,904
|
|
|||
Cash and cash equivalents, beginning of the period
|
9,659
|
|
|
10,794
|
|
|
6,890
|
|
|||
Cash and cash equivalents, end of the period
|
$
|
13,389
|
|
|
$
|
9,659
|
|
|
$
|
10,794
|
|
|
Total
|
|
Less Than 1 Year
|
|
1 - 3 Years
|
|
3 - 5 Years
|
|
After 5 Years
|
||||||||||
Purchase obligations
|
$
|
14,219
|
|
|
$
|
8,161
|
|
|
$
|
4,537
|
|
|
$
|
1,170
|
|
|
$
|
351
|
|
Operating lease obligations
|
10,108
|
|
|
2,134
|
|
|
3,852
|
|
|
4,122
|
|
|
—
|
|
|||||
Line of credit and other borrowings
|
6,051
|
|
|
20
|
|
|
6,031
|
|
|
—
|
|
|
—
|
|
|||||
Future interest obligations
|
95
|
|
|
60
|
|
|
35
|
|
|
—
|
|
|
—
|
|
|||||
Total
|
$
|
30,473
|
|
|
$
|
10,375
|
|
|
$
|
14,455
|
|
|
$
|
5,292
|
|
|
$
|
351
|
|
Item 7A.
|
Quantitative and Qualitative Disclosures about Market Risk
|
Item 8.
|
Financial Statements and Supplementary Data
|
|
Page
|
|
|
December 31,
|
||||||
|
|
2018
|
|
2017
|
||||
ASSETS
|
||||||||
Current assets:
|
|
|
|
|
|
|
||
Cash and cash equivalents
|
|
$
|
13,389
|
|
|
$
|
9,659
|
|
Accounts receivable, net of allowance for doubtful accounts of
$245 and $215, respectively |
|
16,454
|
|
|
15,367
|
|
||
Due from – related parties
|
|
—
|
|
|
1
|
|
||
Inventories, net
|
|
25,104
|
|
|
32,596
|
|
||
Lease receivable, current, net of allowance for doubtful accounts of
$40 and $0, respectively
|
|
2,989
|
|
|
2,069
|
|
||
Other current assets
|
|
4,471
|
|
|
3,096
|
|
||
Total current assets
|
|
62,407
|
|
|
62,788
|
|
||
|
|
|
|
|
||||
Property and equipment, net
|
|
15,981
|
|
|
17,331
|
|
||
Goodwill
|
|
26,679
|
|
|
26,687
|
|
||
Other intangible assets, net
|
|
9,764
|
|
|
1,958
|
|
||
Deferred tax asset, net
|
|
14,121
|
|
|
11,877
|
|
||
Lease receivable, non-current
|
|
11,908
|
|
|
9,615
|
|
||
Investments in unconsolidated affiliates
|
|
8,018
|
|
|
—
|
|
||
Other non-current assets
|
|
7,574
|
|
|
5,188
|
|
||
Total assets
|
|
$
|
156,452
|
|
|
$
|
135,444
|
|
|
|
|
|
|
||||
LIABILITIES AND STOCKHOLDERS' EQUITY
|
||||||||
Current liabilities:
|
|
|
|
|
|
|
||
Accounts payable
|
|
$
|
7,469
|
|
|
$
|
9,489
|
|
Due to – related parties
|
|
226
|
|
|
1,828
|
|
||
Accrued liabilities
|
|
10,142
|
|
|
4,074
|
|
||
Current portion of deferred revenue, and other
|
|
2,526
|
|
|
3,992
|
|
||
Total current liabilities
|
|
20,363
|
|
|
19,383
|
|
||
|
|
|
|
|
||||
Deferred revenue, net of current portion
|
|
7,082
|
|
|
8,431
|
|
||
Line of credit and other long-term borrowings
|
|
6,031
|
|
|
6,000
|
|
||
Other liabilities
|
|
567
|
|
|
1,190
|
|
||
Total liabilities
|
|
34,043
|
|
|
35,004
|
|
||
|
|
|
|
|
||||
Commitments and contingencies (Note 13)
|
|
|
|
|
|
|
||
|
|
|
|
|
||||
Stockholders' equity:
|
|
|
|
|
|
|
||
Preferred stock, $.01 par value, 2,500,000 shares authorized, none issued or
outstanding |
|
—
|
|
|
—
|
|
||
Common stock, $.01 par value, 10,250,000 and 10,000,000 shares authorized,
respectively, none issued or outstanding |
|
—
|
|
|
—
|
|
||
Public common stock, $.01 par value, 10,250,000 and 10,000,000 shares authorized, 7,675,692 and 7,302,954 shares issued and outstanding, respectively
|
|
77
|
|
|
73
|
|
||
Additional paid-in capital
|
|
257,034
|
|
|
243,598
|
|
||
Accumulated other comprehensive income
|
|
277
|
|
|
232
|
|
||
Accumulated deficit
|
|
(134,979
|
)
|
|
(143,463
|
)
|
||
Total stockholders' equity
|
|
122,409
|
|
|
100,440
|
|
||
Total liabilities and stockholders' equity
|
|
$
|
156,452
|
|
|
$
|
135,444
|
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
Revenue:
|
|
|
|
|
|
|
|
|
|
|||
Core companion animal
|
|
$
|
108,924
|
|
|
$
|
105,191
|
|
|
$
|
107,398
|
|
Other vaccines and pharmaceuticals
|
|
18,522
|
|
|
24,150
|
|
|
22,685
|
|
|||
Total revenue, net
|
|
127,446
|
|
|
129,341
|
|
|
130,083
|
|
|||
|
|
|
|
|
|
|
||||||
Cost of revenue
|
|
70,808
|
|
|
71,080
|
|
|
76,191
|
|
|||
|
|
|
|
|
|
|
||||||
Gross profit
|
|
56,638
|
|
|
58,261
|
|
|
53,892
|
|
|||
|
|
|
|
|
|
|
||||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|||
Selling and marketing
|
|
24,663
|
|
|
23,225
|
|
|
22,092
|
|
|||
Research and development
|
|
3,334
|
|
|
2,004
|
|
|
2,147
|
|
|||
General and administrative
|
|
24,847
|
|
|
14,813
|
|
|
13,120
|
|
|||
Total operating expenses
|
|
52,844
|
|
|
40,042
|
|
|
37,359
|
|
|||
Operating income
|
|
3,794
|
|
|
18,219
|
|
|
16,533
|
|
|||
Interest and other (income) expense, net
|
|
(13
|
)
|
|
(150
|
)
|
|
29
|
|
|||
Income before income taxes and equity in losses of unconsolidated affiliates
|
|
3,807
|
|
|
18,369
|
|
|
16,504
|
|
|||
Income tax (benefit) expense:
|
|
|
|
|
|
|
|
|
|
|||
Current income tax expense
|
|
140
|
|
|
49
|
|
|
407
|
|
|||
Deferred income tax (benefit) expense
|
|
(2,255
|
)
|
|
8,864
|
|
|
3,932
|
|
|||
Total income tax (benefit) expense
|
|
(2,115
|
)
|
|
8,913
|
|
|
4,339
|
|
|||
|
|
|
|
|
|
|
||||||
Net income before equity in losses of unconsolidated affiliates
|
|
5,922
|
|
|
9,456
|
|
|
12,165
|
|
|||
Equity in losses of unconsolidated affiliates
|
|
(72
|
)
|
|
—
|
|
|
—
|
|
|||
Net income, after equity in losses of unconsolidated affiliates
|
|
5,850
|
|
|
9,456
|
|
|
12,165
|
|
|||
Net (loss) income attributable to non-controlling interest
|
|
—
|
|
|
(497
|
)
|
|
1,657
|
|
|||
Net income attributable to Heska Corporation
|
|
$
|
5,850
|
|
|
$
|
9,953
|
|
|
$
|
10,508
|
|
|
|
|
|
|
|
|
||||||
Basic earnings per share attributable
to Heska Corporation
|
|
$
|
0.81
|
|
|
$
|
1.42
|
|
|
$
|
1.55
|
|
Diluted earnings per share attributable
to Heska Corporation
|
|
$
|
0.74
|
|
|
$
|
1.30
|
|
|
$
|
1.43
|
|
|
|
|
|
|
|
|
||||||
Weighted average outstanding shares used to compute basic earnings per share attributable to Heska Corporation
|
|
7,220
|
|
|
7,026
|
|
|
6,783
|
|
|||
Weighted average outstanding shares used to compute diluted earnings per share attributable to Heska Corporation
|
|
7,856
|
|
|
7,642
|
|
|
7,361
|
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
|
|
|
|
|
|
|
||||||
Net income, after equity in losses of unconsolidated affiliates
|
|
$
|
5,850
|
|
|
$
|
9,456
|
|
|
$
|
12,165
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|||
Minimum pension liability
|
|
70
|
|
|
12
|
|
|
75
|
|
|||
Sale of equity investment
|
|
—
|
|
|
—
|
|
|
(90
|
)
|
|||
Foreign currency translation
|
|
(25
|
)
|
|
123
|
|
|
(75
|
)
|
|||
Comprehensive income
|
|
5,895
|
|
|
9,591
|
|
|
12,075
|
|
|||
|
|
|
|
|
|
|
||||||
Comprehensive (loss) income attributable to non-controlling interest
|
|
—
|
|
|
(497
|
)
|
|
1,657
|
|
|||
Comprehensive income attributable to Heska Corporation
|
|
$
|
5,895
|
|
|
$
|
10,088
|
|
|
$
|
10,418
|
|
|
|
Common Stock
|
|
Additional
Paid-in
Capital
|
|
Accumulated
Other
Comprehensive
Income
|
|
Accumulated
Deficit
|
|
Total Stockholders' Equity |
|||||||||||||
|
|
Shares
|
|
Amount
|
|
||||||||||||||||||
Balances, January 1, 2016
|
|
6,625
|
|
|
$
|
66
|
|
|
$
|
227,267
|
|
|
$
|
187
|
|
|
$
|
(163,992
|
)
|
|
$
|
63,528
|
|
Net income, after equity in losses of unconsolidated affiliates
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
12,165
|
|
|
12,165
|
|
|||||
Issuance of common stock related to the acquisition of Cuattro Veterinary International, LLC
|
|
175
|
|
|
2
|
|
|
6,347
|
|
|
—
|
|
|
—
|
|
|
6,349
|
|
|||||
Issuance of common stock, net of shares withheld for employee taxes
|
|
226
|
|
|
2
|
|
|
1,616
|
|
|
—
|
|
|
—
|
|
|
1,618
|
|
|||||
Stock-based compensation
|
|
—
|
|
|
—
|
|
|
2,260
|
|
|
—
|
|
|
—
|
|
|
2,260
|
|
|||||
Accretion of non-controlling interest
|
|
—
|
|
|
—
|
|
|
1,145
|
|
|
—
|
|
|
—
|
|
|
1,145
|
|
|||||
Other comprehensive loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(90
|
)
|
|
—
|
|
|
(90
|
)
|
|||||
Balances, December 31, 2016
|
|
7,026
|
|
|
$
|
70
|
|
|
$
|
238,635
|
|
|
$
|
97
|
|
|
$
|
(151,827
|
)
|
|
$
|
86,975
|
|
Net income, after equity in losses of unconsolidated affiliates
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9,456
|
|
|
9,456
|
|
|||||
Issuance of common stock, net of shares withheld for employee taxes
|
|
277
|
|
|
3
|
|
|
1,373
|
|
|
—
|
|
|
—
|
|
|
1,376
|
|
|||||
Stock-based compensation
|
|
—
|
|
|
—
|
|
|
2,745
|
|
|
—
|
|
|
—
|
|
|
2,745
|
|
|||||
Accretion of non-controlling interest
|
|
—
|
|
|
—
|
|
|
845
|
|
|
—
|
|
|
—
|
|
|
845
|
|
|||||
Distribution for Heska Imaging minority
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,092
|
)
|
|
(1,092
|
)
|
|||||
Other comprehensive income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
135
|
|
|
—
|
|
|
135
|
|
|||||
Balances, December 31, 2017
|
|
7,303
|
|
|
$
|
73
|
|
|
$
|
243,598
|
|
|
$
|
232
|
|
|
$
|
(143,463
|
)
|
|
$
|
100,440
|
|
Adoption of accounting standards
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,634
|
|
|
2,634
|
|
|||||
Balances, January 1, 2018, as adjusted
|
|
7,303
|
|
|
73
|
|
|
243,598
|
|
|
232
|
|
|
(140,829
|
)
|
|
103,074
|
|
|||||
Net income, after equity in losses of unconsolidated affiliates
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,850
|
|
|
5,850
|
|
|||||
Issuance of common stock, net of shares withheld for employee taxes
|
|
318
|
|
|
3
|
|
|
2,759
|
|
|
—
|
|
|
—
|
|
|
2,762
|
|
|||||
Issuance of common stock related to acquisition of assets from Cuattro, LLC
|
|
55
|
|
|
1
|
|
|
5,450
|
|
|
—
|
|
|
—
|
|
|
5,451
|
|
|||||
Stock-based compensation
|
|
—
|
|
|
—
|
|
|
5,227
|
|
|
—
|
|
|
—
|
|
|
5,227
|
|
|||||
Other comprehensive income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
45
|
|
|
—
|
|
|
45
|
|
|||||
Balances, December 31, 2018
|
|
7,676
|
|
|
$
|
77
|
|
|
$
|
257,034
|
|
|
$
|
277
|
|
|
$
|
(134,979
|
)
|
|
$
|
122,409
|
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
||||||
Net income, after equity in losses from unconsolidated affiliates
|
|
$
|
5,850
|
|
|
$
|
9,456
|
|
|
$
|
12,165
|
|
Adjustments to reconcile net income to cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|||
Depreciation and amortization
|
|
4,595
|
|
|
4,754
|
|
|
4,645
|
|
|||
Deferred income tax (benefit) expense
|
|
(2,255
|
)
|
|
8,864
|
|
|
3,932
|
|
|||
Stock-based compensation
|
|
5,227
|
|
|
2,745
|
|
|
2,260
|
|
|||
Other losses (gains)
|
|
80
|
|
|
(46
|
)
|
|
(3
|
)
|
|||
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|||
Accounts receivable
|
|
(1,076
|
)
|
|
5,243
|
|
|
(4,700
|
)
|
|||
Inventories
|
|
6,046
|
|
|
(13,834
|
)
|
|
(4,731
|
)
|
|||
Due from related parties
|
|
1
|
|
|
99
|
|
|
(59
|
)
|
|||
Lease receivable, current
|
|
(920
|
)
|
|
(1,244
|
)
|
|
(736
|
)
|
|||
Other current assets
|
|
(505
|
)
|
|
(474
|
)
|
|
883
|
|
|||
Accounts payable
|
|
(2,020
|
)
|
|
3,143
|
|
|
(688
|
)
|
|||
Due to related parties
|
|
(1,477
|
)
|
|
250
|
|
|
1,356
|
|
|||
Accrued liabilities and other
|
|
6,146
|
|
|
(1,380
|
)
|
|
(351
|
)
|
|||
Lease receivable, non-current
|
|
(2,294
|
)
|
|
(4,782
|
)
|
|
(3,867
|
)
|
|||
Other non-current assets
|
|
(871
|
)
|
|
(984
|
)
|
|
(1,951
|
)
|
|||
Deferred revenue and other
|
|
(3,240
|
)
|
|
(1,401
|
)
|
|
(2,300
|
)
|
|||
Net cash provided by operating activities
|
|
13,287
|
|
|
10,409
|
|
|
5,855
|
|
|||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
||||||
Proceeds from sale of equity investment
|
|
—
|
|
|
—
|
|
|
115
|
|
|||
Acquisition of intangible asset
|
|
(2,750
|
)
|
|
—
|
|
|
—
|
|
|||
Investments in unconsolidated affiliates
|
|
(8,091
|
)
|
|
—
|
|
|
—
|
|
|||
Purchase of minority interest
|
|
—
|
|
|
(13,757
|
)
|
|
—
|
|
|||
Purchases of property and equipment
|
|
(1,358
|
)
|
|
(3,469
|
)
|
|
(3,417
|
)
|
|||
Proceeds from disposition of property and equipment
|
|
25
|
|
|
57
|
|
|
—
|
|
|||
Net cash used in investing activities
|
|
(12,174
|
)
|
|
(17,169
|
)
|
|
(3,302
|
)
|
|||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
||||||
Proceeds from issuance of common stock
|
|
4,034
|
|
|
2,452
|
|
|
2,382
|
|
|||
Repurchase of common stock
|
|
(1,271
|
)
|
|
(1,076
|
)
|
|
(762
|
)
|
|||
Distributions to non-controlling interest members
|
|
(126
|
)
|
|
(965
|
)
|
|
—
|
|
|||
Proceeds from line of credit borrowings
|
|
3,000
|
|
|
40,307
|
|
|
34,792
|
|
|||
Repayments of line of credit borrowings
|
|
(3,000
|
)
|
|
(34,979
|
)
|
|
(34,262
|
)
|
|||
Repayments of other debt
|
|
(10
|
)
|
|
(68
|
)
|
|
(747
|
)
|
|||
Payment of debt issuance costs
|
|
—
|
|
|
(120
|
)
|
|
—
|
|
|||
Net cash provided by financing activities
|
|
2,627
|
|
|
5,551
|
|
|
1,403
|
|
|||
NET EFFECT OF EXCHANGE RATE CHANGES ON CASH
|
|
(10
|
)
|
|
74
|
|
|
(52
|
)
|
|||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
|
3,730
|
|
|
(1,135
|
)
|
|
3,904
|
|
|||
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
|
|
9,659
|
|
|
10,794
|
|
|
6,890
|
|
|||
CASH AND CASH EQUIVALENTS, END OF YEAR
|
|
$
|
13,389
|
|
|
$
|
9,659
|
|
|
$
|
10,794
|
|
NON-CASH TRANSACTIONS:
|
|
|
|
|
|
|
||||||
Transfers of equipment between inventory and property and equipment, net
|
|
$
|
1,449
|
|
|
$
|
1,637
|
|
|
$
|
1,250
|
|
Common stock issued as partial consideration of Cuattro acquisition transactions (See Note 3)
|
|
$
|
5,450
|
|
|
$
|
—
|
|
|
$
|
6,349
|
|
|
Years Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Balances at beginning of period
|
$
|
215
|
|
|
$
|
237
|
|
|
$
|
189
|
|
Additions - charged to expense
|
104
|
|
|
168
|
|
|
163
|
|
|||
Deductions - write offs, net of recoveries
|
(74
|
)
|
|
(190
|
)
|
|
(115
|
)
|
|||
Balances at end of period
|
$
|
245
|
|
|
$
|
215
|
|
|
$
|
237
|
|
|
|
December 31,
|
||||||
|
|
2018
|
|
2017
|
||||
Raw materials
|
|
$
|
15,000
|
|
|
$
|
18,465
|
|
Work in process
|
|
3,592
|
|
|
4,296
|
|
||
Finished goods
|
|
8,085
|
|
|
11,465
|
|
||
Allowance for excess or obsolete inventory
|
|
(1,573
|
)
|
|
(1,630
|
)
|
||
|
|
$
|
25,104
|
|
|
$
|
32,596
|
|
Asset Classification
|
Estimated
Useful Life
|
Building
|
10 to 20 years
|
Machinery and equipment
|
2 to 7 years
|
Office furniture and equipment
|
3 to 7 years
|
Computer hardware and software
|
3 to 5 years
|
Leasehold and building improvements
|
5 to 15 years
|
•
|
Point of Care laboratory products including instruments, consumables and services;
|
•
|
Point of Care imaging products including instruments, software and services;
|
•
|
Single use pharmaceuticals, vaccines and diagnostic tests primarily related to companion animals; and
|
•
|
Other vaccines and pharmaceuticals.
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Point of Care laboratory revenue:
|
$
|
57,375
|
|
|
$
|
54,855
|
|
|
$
|
48,817
|
|
Consumables
|
44,771
|
|
|
39,161
|
|
|
36,344
|
|
|||
Sales-type leases
|
5,888
|
|
|
7,382
|
|
|
4,754
|
|
|||
Outright instrument sales
|
4,922
|
|
|
6,391
|
|
|
5,684
|
|
|||
Other
|
1,794
|
|
|
1,921
|
|
|
2,035
|
|
|||
|
|
|
|
|
|
||||||
Point of Care imaging revenue:
|
22,832
|
|
|
21,907
|
|
|
29,609
|
|
|||
Outright instrument sales
|
19,746
|
|
|
19,187
|
|
|
26,936
|
|
|||
Service revenue
|
854
|
|
|
713
|
|
|
1,206
|
|
|||
Operating type leases
|
2,232
|
|
|
2,007
|
|
|
1,467
|
|
|||
|
|
|
|
|
|
||||||
Other CCA revenue:
|
28,717
|
|
|
28,429
|
|
|
28,972
|
|
|||
Other pharmaceuticals, vaccines and diagnostic tests
|
28,265
|
|
|
28,008
|
|
|
28,596
|
|
|||
Research and development, license and royalty revenue
|
452
|
|
|
421
|
|
|
376
|
|
|||
|
|
|
|
|
|
||||||
Total CCA revenue
|
$
|
108,924
|
|
|
$
|
105,191
|
|
|
$
|
107,398
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Contract manufacturing
|
$
|
17,508
|
|
|
$
|
23,490
|
|
|
$
|
21,477
|
|
License, research and development
|
1,014
|
|
|
660
|
|
|
1,208
|
|
|||
Total OVP revenue
|
$
|
18,522
|
|
|
$
|
24,150
|
|
|
$
|
22,685
|
|
Year Ending December 31,
|
Revenue
|
|
|
2019
|
$
|
23,194
|
|
2020
|
19,556
|
|
|
2021
|
15,474
|
|
|
2022
|
12,281
|
|
|
2023
|
8,744
|
|
|
Thereafter
|
4,873
|
|
|
|
$
|
84,122
|
|
|
Useful Life
|
|
Amortization Method
|
|
Fair Value
|
Acquired Technology
|
10.00
|
|
Straight-line
|
|
$8,200
|
Common stock issued - 175,000 shares
|
$
|
6,347
|
|
Debt assumed
|
1,535
|
|
|
Total fair value of consideration transferred
|
$
|
7,882
|
|
Accounts receivable
|
$
|
222
|
|
Inventories
|
39
|
|
|
Due from Cuattro, LLC
|
963
|
|
|
Property and equipment
|
80
|
|
|
Other tangible assets
|
164
|
|
|
Deferred tax asset
|
56
|
|
|
Intangible assets
|
2,521
|
|
|
Goodwill
|
5,783
|
|
|
Accounts payable
|
(112
|
)
|
|
Deferred tax liability
|
(905
|
)
|
|
Other assumed liabilities
|
(929
|
)
|
|
Total fair value of consideration transferred
|
$
|
7,882
|
|
|
Useful Life
|
|
Amortization Method
|
|
Fair Value
|
Customer relationships
|
6.67
|
|
Straight-line
|
|
$2,521
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
Domestic
|
|
$
|
3,602
|
|
|
$
|
18,188
|
|
|
$
|
16,375
|
|
Foreign
|
|
205
|
|
|
181
|
|
|
129
|
|
|||
|
|
$
|
3,807
|
|
|
$
|
18,369
|
|
|
$
|
16,504
|
|
|
|
December 31,
|
||||||
|
|
2018
|
|
2017
|
||||
Inventory
|
|
$
|
1,249
|
|
|
$
|
1,321
|
|
Accrued compensation
|
|
110
|
|
|
103
|
|
||
Stock options
|
|
1,281
|
|
|
914
|
|
||
Research and development
|
|
476
|
|
|
442
|
|
||
Legal Settlement
|
|
1,678
|
|
|
—
|
|
||
Deferred revenue
|
|
3,305
|
|
|
2,002
|
|
||
Property and equipment
|
|
3,065
|
|
|
2,531
|
|
||
Net operating loss carryforwards – domestic
|
|
17,088
|
|
|
22,627
|
|
||
Foreign tax credit carryforward
|
|
38
|
|
|
54
|
|
||
Capital leases
|
|
(3,936
|
)
|
|
(3,757
|
)
|
||
Unremitted earnings for controlled foreign corporations
|
|
—
|
|
|
(50
|
)
|
||
Other
|
|
—
|
|
|
194
|
|
||
|
|
24,354
|
|
|
26,381
|
|
||
Valuation allowance
|
|
(10,233
|
)
|
|
(14,504
|
)
|
||
Total net deferred tax assets
|
|
$
|
14,121
|
|
|
$
|
11,877
|
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
Current income tax expense:
|
|
|
|
|
|
|
|
|
|
|||
Federal
|
|
$
|
(115
|
)
|
|
$
|
—
|
|
|
$
|
197
|
|
State
|
|
192
|
|
|
6
|
|
|
179
|
|
|||
Foreign
|
|
63
|
|
|
43
|
|
|
31
|
|
|||
Total current expense
|
|
$
|
140
|
|
|
$
|
49
|
|
|
$
|
407
|
|
Deferred income tax (benefit) expense:
|
|
|
|
|
|
|
|
|
|
|||
Federal
|
|
$
|
(1,877
|
)
|
|
$
|
9,736
|
|
|
$
|
3,545
|
|
State
|
|
(378
|
)
|
|
(872
|
)
|
|
387
|
|
|||
Foreign
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Total deferred (benefit) expense
|
|
(2,255
|
)
|
|
8,864
|
|
|
3,932
|
|
|||
Total income tax (benefit) expense
|
|
$
|
(2,115
|
)
|
|
$
|
8,913
|
|
|
$
|
4,339
|
|
|
Year Ended December 31,
|
|||||||
|
2018
|
|
2017
|
|
2016
|
|||
Statutory federal tax rate
|
21
|
%
|
|
34
|
%
|
|
34
|
%
|
State income taxes, net of federal benefit
|
(8
|
)%
|
|
(5
|
)%
|
|
2
|
%
|
Non-controlling interest in Heska Imaging US, LLC
|
—
|
%
|
|
1
|
%
|
|
(3
|
)%
|
Non-temporary stock option benefit
|
(50
|
)%
|
|
(30
|
)%
|
|
(7
|
)%
|
Meals and entertainment permanent difference
|
1
|
%
|
|
—
|
%
|
|
—
|
%
|
GILTI permanent difference
|
1
|
%
|
|
—
|
%
|
|
—
|
%
|
Other permanent differences
|
1
|
%
|
|
1
|
%
|
|
(1
|
)%
|
Change in tax rate
|
—
|
%
|
|
32
|
%
|
|
—
|
%
|
Change in valuation allowance
|
—
|
%
|
|
16
|
%
|
|
—
|
%
|
Other deferred differences
|
(21
|
)%
|
|
—
|
%
|
|
—
|
%
|
Other
|
(1
|
)%
|
|
—
|
%
|
|
1
|
%
|
Effective income tax rate
|
(56
|
)%
|
|
49
|
%
|
|
26
|
%
|
Year Ending December 31,
|
|
||
2019
|
$
|
2,989
|
|
2020
|
3,163
|
|
|
2021
|
3,089
|
|
|
2022
|
2,715
|
|
|
2023
|
1,854
|
|
|
Thereafter
|
1,087
|
|
|
|
$
|
14,897
|
|
|
Years ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Net income attributable to Heska Corporation
|
$
|
5,850
|
|
|
$
|
9,953
|
|
|
$
|
10,508
|
|
|
|
|
|
|
|
||||||
Basic weighted-average common shares outstanding
|
7,220
|
|
|
7,026
|
|
|
6,783
|
|
|||
Assumed exercise of dilutive stock options and restricted stock awards
|
636
|
|
|
616
|
|
578
|
|
||||
Diluted weighted-average common shares outstanding
|
7,856
|
|
|
7,642
|
|
|
7,361
|
|
|||
|
|
|
|
|
|
||||||
Basic earnings per share
|
$
|
0.81
|
|
|
$
|
1.42
|
|
|
$
|
1.55
|
|
Diluted earnings per share
|
$
|
0.74
|
|
|
$
|
1.30
|
|
|
$
|
1.43
|
|
|
Years ended December 31,
|
|||||||
|
2018
|
|
2017
|
|
2016
|
|||
Stock options
|
111
|
|
|
123
|
|
|
234
|
|
|
December 31, 2018
|
||
Equity method investment
|
$
|
5,000
|
|
Non-marketable equity security investment
|
3,018
|
|
|
|
$
|
8,018
|
|
Carrying amount, December 31, 2016
|
$
|
26,647
|
|
Foreign currency adjustments
|
40
|
|
|
Carrying amount, December 31, 2017
|
$
|
26,687
|
|
Foreign currency adjustments
|
(8
|
)
|
|
Carrying amount, December 31, 2018
|
$
|
26,679
|
|
|
2018
|
|
2017
|
||||||||||||||||||||
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
||||||||||||
Acquired technology
|
$
|
8,200
|
|
|
$
|
—
|
|
|
$
|
8,200
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Customer relationships and other
|
3,303
|
|
|
(1,739
|
)
|
|
1,564
|
|
|
3,309
|
|
|
(1,351
|
)
|
|
1,958
|
|
||||||
Total intangible assets
|
$
|
11,503
|
|
|
$
|
(1,739
|
)
|
|
$
|
9,764
|
|
|
$
|
3,309
|
|
|
$
|
(1,351
|
)
|
|
$
|
1,958
|
|
|
Years Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Amortization expense
|
$
|
388
|
|
|
$
|
388
|
|
|
$
|
230
|
|
|
December 31,
|
||||||
|
2018
|
|
2017
|
||||
Land
|
$
|
377
|
|
|
$
|
377
|
|
Building
|
2,978
|
|
|
2,868
|
|
||
Machinery and equipment
|
33,087
|
|
|
32,188
|
|
||
Office furniture and equipment
|
1,687
|
|
|
1,665
|
|
||
Computer hardware and software
|
4,704
|
|
|
4,579
|
|
||
Leasehold and building improvements
|
9,953
|
|
|
8,156
|
|
||
Construction in progress
|
1,274
|
|
|
3,531
|
|
||
|
54,060
|
|
|
53,364
|
|
||
Less accumulated depreciation
|
(38,079
|
)
|
|
(36,033
|
)
|
||
Total property and equipment, net
|
$
|
15,981
|
|
|
$
|
17,331
|
|
|
2018
|
|
2017
|
||||
Accrued payroll and employee benefits
|
$
|
759
|
|
|
$
|
1,209
|
|
Accrued property taxes
|
632
|
|
|
661
|
|
||
Accrued settlement (see Note 13)
|
6,750
|
|
|
—
|
|
||
Other
|
2,001
|
|
|
2,204
|
|
||
Total accrued liabilities
|
$
|
10,142
|
|
|
$
|
4,074
|
|
|
2018
|
|
2017
|
|
2016
|
Risk-free interest rate
|
2.66%
|
|
1.76%
|
|
1.76%
|
Expected lives
|
4.9 years
|
|
4.8 years
|
|
4.5 years
|
Expected volatility
|
40%
|
|
41%
|
|
41%
|
Expected dividend yield
|
0%
|
|
0%
|
|
0%
|
|
Year Ended December 31,
|
|||||
|
2018
|
|||||
|
Options
|
|
Weighted Average Exercise Price
|
|||
Outstanding at beginning of period
|
630,847
|
|
|
$
|
29.312
|
|
Granted at Market
|
153,700
|
|
|
$
|
75.244
|
|
Forfeited
|
(18,978
|
)
|
|
$
|
53.010
|
|
Expired
|
(896
|
)
|
|
$
|
65.414
|
|
Exercised
|
(144,120
|
)
|
|
$
|
25.740
|
|
Outstanding at end of period
|
620,553
|
|
|
$
|
40.741
|
|
Exercisable at end of period
|
386,176
|
|
|
$
|
21.214
|
|
|
|
Options Outstanding
|
|
Options Exercisable
|
||||||||||||||
Exercise Prices
|
|
Number of
Options Outstanding at December 31, 2018 |
|
Weighted
Average Remaining Contractual Life in Years |
|
Weighted
Average Outstanding Price |
|
Number of
Options Exercisable at December 31, 2018 |
|
Weighted
Average Remaining Contractual Life in Years |
|
Weighted
Average Exercise Price |
||||||
$4.50 - $7.36
|
|
167,737
|
|
|
3.61
|
|
$
|
6.565
|
|
|
167,737
|
|
|
3.61
|
|
$
|
6.565
|
|
$7.37 - $32.21
|
|
128,465
|
|
|
5.26
|
|
$
|
15.777
|
|
|
127,261
|
|
|
5.25
|
|
$
|
15.631
|
|
$32.22 - $62.50
|
|
75,972
|
|
|
7.03
|
|
$
|
39.745
|
|
|
54,133
|
|
|
7.04
|
|
$
|
39.647
|
|
$62.51 - $69.77
|
|
130,000
|
|
|
9.18
|
|
$
|
69.770
|
|
|
—
|
|
|
0.00
|
|
$
|
—
|
|
$69.78 - $108.25
|
|
118,379
|
|
|
8.40
|
|
$
|
85.020
|
|
|
37,045
|
|
|
8.12
|
|
$
|
79.793
|
|
$4.50 - $108.25
|
|
620,553
|
|
|
6.45
|
|
$
|
40.741
|
|
|
386,176
|
|
|
5.06
|
|
$
|
21.214
|
|
|
2018
|
2017
|
|
2016
|
Risk-free interest rate
|
1.67%
|
0.74%
|
|
0.54%
|
Expected lives
|
1.2 years
|
1.2 years
|
|
1.2 years
|
Expected volatility
|
42%
|
45%
|
|
42%
|
Expected dividend yield
|
0%
|
0%
|
|
0%
|
|
|
RSAs
|
|
Weighted-Average Grant Date Fair Value Per Award
|
|||
Non-vested as of December 31, 2017
|
|
124,943
|
|
|
$
|
57.67
|
|
Granted
|
|
190,730
|
|
|
$
|
71.77
|
|
Vested
|
|
(56,243
|
)
|
|
$
|
28.97
|
|
Forfeited
|
|
—
|
|
|
—
|
|
|
Non-vested as of December 31, 2018
|
|
259,430
|
|
|
$
|
74.26
|
|
|
Minimum pension liability
|
|
Foreign currency translation
|
|
Total accumulated other comprehensive income
|
||||||
Balances at December 31, 2016
|
$
|
(501
|
)
|
|
$
|
598
|
|
|
$
|
97
|
|
Other comprehensive income
|
12
|
|
|
123
|
|
|
135
|
|
|||
Balances at December 31, 2017
|
(489
|
)
|
|
721
|
|
|
232
|
|
|||
Other comprehensive income (loss)
|
70
|
|
|
(25
|
)
|
|
45
|
|
|||
Balances at December 31, 2018
|
$
|
(419
|
)
|
|
$
|
696
|
|
|
$
|
277
|
|
Year Ending December 31,
|
|
||
2019
|
$
|
2,134
|
|
2020
|
1,993
|
|
|
2021
|
1,859
|
|
|
2022
|
1,765
|
|
|
2023
|
2,357
|
|
|
Thereafter
|
—
|
|
|
|
$
|
10,108
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Interest income
|
$
|
(261
|
)
|
|
$
|
(167
|
)
|
|
$
|
(124
|
)
|
Interest expense
|
310
|
|
|
245
|
|
|
160
|
|
|||
Other expense (income), net
|
(62
|
)
|
|
(228
|
)
|
|
(7
|
)
|
|||
|
$
|
(13
|
)
|
|
$
|
(150
|
)
|
|
$
|
29
|
|
Year Ended December 31, 2018
|
|
Core
Companion Animal |
|
Other Vaccines and
Pharmaceuticals |
|
Total |
||||||
Total revenue
|
|
$
|
108,924
|
|
|
$
|
18,522
|
|
|
$
|
127,446
|
|
Operating income
|
|
2,040
|
|
|
1,754
|
|
|
3,794
|
|
|||
Income before income taxes
|
|
2,053
|
|
|
1,754
|
|
|
3,807
|
|
|||
Investments in unconsolidated affiliates
|
|
8,018
|
|
|
—
|
|
|
8,018
|
|
|||
Total assets
|
|
133,586
|
|
|
22,866
|
|
|
156,452
|
|
|||
Net assets
|
|
96,129
|
|
|
26,280
|
|
|
122,409
|
|
|||
Capital expenditures
|
|
180
|
|
|
1,178
|
|
|
1,358
|
|
|||
Depreciation and amortization
|
|
3,369
|
|
|
1,226
|
|
|
4,595
|
|
Year Ended December 31, 2017
|
|
Core
Companion Animal |
|
Other Vaccines and
Pharmaceuticals |
|
Total |
||||||
Total revenue
|
|
$
|
105,191
|
|
|
$
|
24,150
|
|
|
$
|
129,341
|
|
Operating income
|
|
12,656
|
|
|
5,563
|
|
|
18,219
|
|
|||
Income before income taxes
|
|
12,828
|
|
|
5,541
|
|
|
18,369
|
|
|||
Investments in unconsolidated affiliates
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Total assets
|
|
111,625
|
|
|
23,819
|
|
|
135,444
|
|
|||
Net assets
|
|
75,984
|
|
|
24,456
|
|
|
100,440
|
|
|||
Capital expenditures
|
|
209
|
|
|
3,260
|
|
|
3,469
|
|
|||
Depreciation and amortization
|
|
3,736
|
|
|
1,018
|
|
|
4,754
|
|
Year Ended December 31, 2016
|
|
Core
Companion Animal |
|
Other Vaccines and
Pharmaceuticals |
|
Total |
||||||
Total revenue
|
|
$
|
107,398
|
|
|
$
|
22,685
|
|
|
$
|
130,083
|
|
Operating income
|
|
13,015
|
|
|
3,518
|
|
|
16,533
|
|
|||
Income before income taxes
|
|
12,938
|
|
|
3,566
|
|
|
16,504
|
|
|||
Investments in unconsolidated affiliates
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Total assets
|
|
110,995
|
|
|
19,849
|
|
|
130,844
|
|
|||
Net assets
|
|
68,072
|
|
|
18,903
|
|
|
86,975
|
|
|||
Capital expenditures
|
|
1,135
|
|
|
2,282
|
|
|
3,417
|
|
|||
Depreciation and amortization
|
|
3,800
|
|
|
845
|
|
|
4,645
|
|
|
For the Years Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
U.S.
|
$
|
115,543
|
|
|
$
|
116,823
|
|
|
$
|
120,082
|
|
Canada
|
2,992
|
|
|
2,924
|
|
|
2,378
|
|
|||
Europe
|
5,995
|
|
|
4,780
|
|
|
4,781
|
|
|||
Other International
|
2,916
|
|
|
4,814
|
|
|
2,842
|
|
|||
Total
|
$
|
127,446
|
|
|
$
|
129,341
|
|
|
$
|
130,083
|
|
|
Q1
|
|
Q2
|
|
Q3
|
|
Q4
|
|
Total
|
||||||||||
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total revenue
|
$
|
32,765
|
|
|
$
|
29,662
|
|
|
$
|
30,955
|
|
|
$
|
34,064
|
|
|
$
|
127,446
|
|
Gross profit
|
13,307
|
|
|
13,065
|
|
|
14,794
|
|
|
15,472
|
|
|
56,638
|
|
|||||
Operating income (loss)
|
1,871
|
|
|
2,204
|
|
|
(3,595
|
)
|
|
3,314
|
|
|
3,794
|
|
|||||
Net income (loss) before equity in losses of unconsolidated affiliates
|
2,155
|
|
|
1,897
|
|
|
(1,670
|
)
|
|
3,540
|
|
|
5,922
|
|
|||||
Net income (loss), after equity in losses of unconsolidated affiliates
|
2,155
|
|
|
1,897
|
|
|
(1,670
|
)
|
|
3,468
|
|
|
5,850
|
|
|||||
Net income (loss) attributable to Heska Corporation
|
2,155
|
|
|
1,897
|
|
|
(1,670
|
)
|
|
3,468
|
|
|
5,850
|
|
|||||
Basic earnings (loss) per share attributable to Heska Corporation
|
0.30
|
|
|
0.26
|
|
|
(0.23
|
)
|
|
0.47
|
|
|
0.81
|
|
|||||
Diluted earnings (loss) per share attributable to Heska Corporation
|
0.28
|
|
|
0.24
|
|
|
(0.23
|
)
|
|
0.44
|
|
|
0.74
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total revenue
|
$
|
29,559
|
|
|
$
|
33,405
|
|
|
$
|
30,336
|
|
|
$
|
36,041
|
|
|
$
|
129,341
|
|
Gross profit
|
13,209
|
|
|
14,929
|
|
|
13,553
|
|
|
16,570
|
|
|
58,261
|
|
|||||
Operating income
|
2,788
|
|
|
4,560
|
|
|
3,778
|
|
|
7,093
|
|
|
18,219
|
|
|||||
Net income (loss)
|
4,303
|
|
|
3,139
|
|
|
3,083
|
|
|
(1,069
|
)
|
|
9,456
|
|
|||||
Net income (loss) attributable to Heska Corporation
|
4,606
|
|
|
3,333
|
|
|
3,083
|
|
|
(1,069
|
)
|
|
9,953
|
|
|||||
Basic earnings (loss) per share attributable to Heska Corporation
|
0.67
|
|
|
0.47
|
|
|
0.43
|
|
|
(0.15
|
)
|
|
1.42
|
|
|||||
Diluted earnings (loss) per share attributable to Heska Corporation
|
0.60
|
|
|
0.44
|
|
|
0.40
|
|
|
(0.15
|
)
|
|
1.30
|
|
Item 9.
|
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
|
Item 9A.
|
Controls and Procedures
|
Item 9B.
|
Other Information
|
Item 10.
|
Directors, Executive Officers and Corporate Governance
|
Item 11.
|
Executive Compensation
|
Item 12.
|
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|
Plan Category
|
(a) Number of Securities to be Issued Upon Exercise of Outstanding Options and Rights
|
|
(b) Weighted-Average Exercise Price of Outstanding Options and Rights
|
|
(c) Number of Securities
Remaining Available for Future Issuance Under Equity Compensation Plans |
Equity Compensation Plans Approved
by Stockholders
|
620,553
|
|
$40.74
|
|
273,998
|
Equity Compensation Plans Not Approved
by Stockholders |
None |
|
None |
|
None |
Total
|
620,553
|
|
$40.74
|
|
273,998
|
Item 13.
|
Certain Relationships and Related Transactions and Director Independence
|
Item 14.
|
Principal Accountant Fees and Services
|
Item 15.
|
Exhibits and Financial Statement Schedules
|
|
Exhibit Number
|
|
Notes
|
|
Description of Document
|
|
3(i)
|
|
(8)
|
|
|
|
3(ii)
|
|
(8)
|
|
|
|
3(iii)
|
|
(8)
|
|
|
|
3(iv)
|
|
(19)
|
|
|
|
3(v)
|
|
(20)
|
|
|
|
3(vi)
|
|
(25)
|
|
|
|
3(vii)
|
|
(26)
|
|
|
|
10.1*
|
|
|
|
|
|
10.2*
|
|
|
|
|
|
10.3*
|
|
|
|
|
|
10.4*
|
|
|
|
|
|
10.5*
|
|
|
|
|
|
10.6*
|
|
|
|
|
|
10.7*
|
|
|
|
|
|
10.8*
|
|
(6)
|
|
|
|
10.9*
|
|
(19)
|
|
|
|
10.10*
|
|
(19)
|
|
|
10.11*
|
|
(19)
|
|
|
|
10.12*
|
|
(19)
|
|
|
|
10.13*
|
|
(19)
|
|
|
|
10.14*
|
|
(14)
|
|
|
|
10.15*
|
|
(13)
|
|
|
|
10.16*
|
|
(21)
|
|
|
|
10.17*
|
|
(5)
|
|
|
|
10.18*
|
|
(24)
|
|
|
|
10.19*
|
|
(11)
|
|
|
|
10.20*
|
|
(13)
|
|
|
|
10.21*
|
|
(23)
|
|
|
|
10.22*
|
|
(24)
|
|
|
|
10.23*
|
|
(26)
|
|
|
|
10.24*
|
|
(1)
|
|
|
|
10.25*
|
|
(5)
|
|
|
|
10.26*
|
|
(24)
|
|
|
|
10.27*
|
|
(4)
|
|
|
|
10.28*
|
|
(5)
|
|
|
|
10.29*
|
|
(11)
|
|
|
|
10.30*
|
|
(24)
|
|
|
|
10.31*
|
|
(8)
|
|
|
|
10.32*
|
|
(13)
|
|
|
|
10.33*
|
|
(24)
|
|
|
|
10.34*
|
|
(8)
|
|
|
|
10.35*
|
|
(13)
|
|
|
|
10.36*
|
|
(24)
|
|
|
10.37*
|
|
(26)
|
|
|
|
10.38*
|
|
(27)
|
|
|
|
10.39*
|
|
(24)
|
|
|
|
10.40*
|
|
(24)
|
|
|
|
10.41*
|
|
(23)
|
|
|
|
10.42*
|
|
(23)
|
|
|
|
10.43
|
|
(2)
|
|
|
|
10.44
|
|
(3)
|
|
|
|
10.45
|
|
(3)
|
|
|
|
10.46
|
|
(7)
|
|
|
|
10.47+
|
|
(4)
|
|
|
|
10.48+
|
|
(6)
|
|
|
|
10.49+
|
|
(8)
|
|
|
|
10.50+
|
|
(10)
|
|
|
|
10.51+
|
|
(11)
|
|
|
|
10.52+
|
|
(17)
|
|
|
|
10.53+
|
|
(23)
|
|
|
|
10.54+
|
|
(12)
|
|
|
|
10.55
|
|
(14)
|
|
|
|
10.56
|
|
(28)
|
|
|
|
10.57+
|
|
(9)
|
|
|
|
10.58+
|
|
(15)
|
|
|
10.59+
|
|
(15)
|
|
|
|
10.60+
|
|
(23)
|
|
|
|
10.61+
|
|
(23)
|
|
|
|
10.62+
|
|
(23)
|
|
|
|
10.63
|
|
(22)
|
|
|
|
10.64
|
|
(22)
|
|
|
|
10.65
|
|
(26)
|
|
|
|
10.66
|
|
|
|
|
|
10.67
|
|
(8)
|
|
|
|
10.68
|
|
(18)
|
|
|
|
10.69
|
|
(8)
|
|
|
|
10.70
|
|
(16)
|
|
|
|
10.71
|
|
(18)
|
|
|
|
10.72
|
|
|
|
|
|
21.1
|
|
|
|
|
|
23.1
|
|
|
|
|
|
23.2
|
|
|
|
|
|
24.1
|
|
|
|
|
|
31.1
|
|
|
|
|
|
31.2
|
|
|
|
|
|
32.1**
|
|
|
|
|
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-K for the year ended December 31, 2002.
|
(2)
|
Filed with the Registrant's Form 10-K for the year ended December 31, 2004.
|
(3)
|
Filed with the Registrant's Form 10-Q for the quarter ended June 30, 2005.
|
(4)
|
Filed with the Registrant's Form 10-K for the year ended December 31, 2006.
|
(5)
|
Filed with the Registrant's Form 10-K for the year ended December 31, 2007.
|
(6)
|
Filed with the Registrant's Form 10-K for the year ended December 31, 2008.
|
(7)
|
Filed with the Registrant's Form 10-K for the year ended December 31, 2011.
|
(8)
|
Filed with the Registrant's Form 10-K for the year ended December 31, 2012.
|
(9)
|
Filed with the Registrant's Form 8-K/A on August 29, 2013.
|
(10)
|
Filed with the Registrant's Form 10-Q for the quarter ended September 30, 2013.
|
(11)
|
Filed with the Registrant's Form 10-K for the year ended December 31, 2013.
|
(12)
|
Filed with the Registrant's Form 10-Q for the quarter ended June 30, 2014.
|
(13)
|
Filed with the Registrant's Form 10-K for the year ended December 31, 2014.
|
(14)
|
Filed with the Registrant's Form 10-Q for the quarter ended March 31, 2015.
|
(15)
|
Filed with the Registrant's Form 10-Q for the quarter ended June 30, 2015.
|
(16)
|
Filed with the Registrant's Form 10-Q for the quarter ended September 30, 2015.
|
(17)
|
Filed with the Registrant's Form 10-Q for the quarter ended March 31, 2016.
|
(18)
|
Filed with the Registrant's Form 10-Q for the quarter ended June 30, 2016.
|
(19)
|
Filed with the Registrant's Form 10-K for the year ended December 31, 2016.
|
(20)
|
Filed with the Registrant's Form 10-Q for the quarter ended March 31, 2017.
|
(21)
|
Filed with the Registrant's Form 10-Q for the quarter ended June 30, 2017.
|
(22)
|
Filed with the Registrant's Form 8-K on August 2, 2017.
|
(23)
|
Filed with the Registrant's Form 10-K for the year ended December 31, 2017.
|
(24)
|
Filed with the Registrant's Form 10-Q for the quarter ended March 31, 2018.
|
(25)
|
Filed with the Registrant's Form 8-K on May 9, 2018.
|
(26)
|
Filed with the Registrant's Form 10-Q for the quarter ended June 30, 2018.
|
(27)
|
Filed with the Registrant's Form 10-Q for the quarter ended September 30, 2018.
|
(28)
|
Filed with the Registrant's Form 8-K on November 30, 2018.
|
Item 16.
|
Form 10-K Summary
|
|
HESKA CORPORATION
|
|
|
|
By:
/s/ KEVIN S. WILSON
Kevin S. Wilson
Chief Executive Officer and President
|
Signature
|
Title
|
Date
|
/s/ KEVIN S. WILSON
Kevin S. Wilson
|
Chief Executive Officer, President and Director (Principal Executive Officer)
|
March 7, 2019
|
/s/ CATHERINE GRASSMAN
Catherine Grassman
|
Vice President, Chief Accounting Officer and Controller (Principal Financial and Accounting Officer)
|
March 7, 2019
|
/s/ SCOTT HUMPHREY
Scott Humphrey
|
Chair
|
March 7, 2019
|
/s/ G. IRWIN GORDON
G. Irwin Gordon
|
Director
|
March 7, 2019
|
/s/ SHARON J. LARSON
Sharon J. Larson
|
Director
|
March 7, 2019
|
/s/ DAVID E. SVEEN
David E. Sveen, Ph.D.
|
Director
|
March 7, 2019
|
/s/ BONNIE J. TROWBRIDGE
Bonnie J. Trowbridge
|
Director
|
March 7, 2019
|
/s/ CAROL A. WRENN
Carol A. Wrenn
|
Director
|
March 7, 2019
|
2.1
|
COMMITTEE COMPOSITION
. The Plan shall be administered by the Committee. The Committee shall consist exclusively of two or more directors of the Company, who shall be appointed by the Board. In addition, the composition of the Committee shall satisfy:
|
(a)
|
Such requirements as the Securities and Exchange Commission may establish for administrators acting under plans intended to qualify for exemption under Rule 16b-3 (or its successor) under the Exchange Act; and
|
(b)
|
Such requirements as the Internal Revenue Service may establish for outside directors acting under plans intended to qualify for exemption under section 162(m)(4)(C) of the Code.
|
2.2
|
COMMITTEE RESPONSIBILITIES
. The Committee shall (a) select the Employees, Outside Directors and Consultants who are to receive Awards under the Plan, (b) determine the type, number, vesting requirements and other features and conditions of such Awards, (c) interpret the Plan and (d) make all other decisions relating to the operation of the Plan. The Committee may adopt such rules or guidelines as it deems appropriate to implement the Plan. The Committee may amend or modify any outstanding Awards in any manner to the extent the Committee would have had the authority under the Plan initially to make such Awards as so amended or modified. The Committee’s determinations under the Plan shall be final and binding on all persons.
|
2.3
|
INDEMNIFICATION
.
No member of the Board or the Committee, or any officer or employee of the Company or any Subsidiary thereof acting on behalf of the Board or the Committee, shall be personally liable for any action, omission, determination, or interpretation taken or made in good faith with respect to the Plan, and all members of the Board or the Committee and each and any officer or employee of the Company and of any Subsidiary thereof acting on their behalf shall, to the maximum extent permitted by applicable law and the Company’s by-laws and governing documents, be fully indemnified and protected by the Company in respect of any such action, omission, determination or interpretation.
|
2.4
|
BENEFICIARY DESIGNATIONS
. If permitted by the Committee, a Participant under the Plan may name a beneficiary or beneficiaries to whom any vested but unpaid Award shall be paid in the event of the Participant’s death. Each such designation shall revoke all prior designations by the Participant and shall be effective only if given in a form and manner acceptable to the Committee. In the absence of any such designation, any vested benefits remaining unpaid at the Participant’s death shall be paid to the beneficiary designated by the Participant in the Company’s qualified 401(k) savings plan, or if none, to the Participant’s surviving spouse, or if none, to the Participant’s estate.
|
3.1
|
BASIC LIMITATION
. Common Shares issued pursuant to the Plan may be authorized but unissued shares or treasury shares, or shares reacquired by the Company in any manner. The number of Common Shares stated in this Section 3.1 as available for the grant of Awards is subject to adjustment in accordance with Article 9. As of March 7, 2018, the aggregate number of Common Shares cumulatively authorized by the Company’s stockholders for issuance as Options and Restricted Shares under the Plan was 2,635,130. Of that total, as of March 7, 2018, Previously Issued Awards have been issued covering 2,578,093 Common Shares, leaving 57,037 Common Shares for the issuance of Options and Restricted Shares. With the March 7, 2018 amendment and restatement of the Plan, the Company’s Board and stockholders have approved an increase of 250,000 in the aggregate number of Common Shares available for Awards under the Plan, to a new total of 2,885,130. Notwithstanding the foregoing, the additional 250,000 Common Shares the Company’s Board and stockholders approved for awards under the Plan as of March 7, 2018 will not be available for issuance with respect to any Award granted prior to November 2, 2017.
|
3.2
|
ADDITIONAL SHARES
. Any Common Shares subject to an Award that is canceled, forfeited or expires prior to exercise or realization, either in full or in part, shall again become available for issuance under the Plan as ISOs or any type of Award. Notwithstanding anything to the contrary contained herein: Common Shares subject to an Award under the Plan shall not again be made available for issuance or delivery under the Plan if such Common Shares are (a) tendered in payment of an Option, or (b) delivered or withheld by the Company to satisfy any tax withholding obligation.
|
3.3
|
MINIMUM VESTING REQUIREMENTS
.
Subject to the following sentence, Awards granted under the Plan shall be subject to a minimum vesting period of one year. Notwithstanding the foregoing, (a) the Committee may permit acceleration of vesting of an Award in the event of a Participant’s death, Disability, or Retirement, or the occurrence of a Change in Control, and (ii) the Committee may grant Awards covering five percent (5%) or fewer of the total number of Common Shares authorized under the Plan without respect to the above-described minimum vesting requirements. Notwithstanding the foregoing, with respect to Awards made to Outside Directors, the vesting of such Awards will be deemed to satisfy the one-year minimum vesting requirement to the extent that the Awards vest based on the approximately one-year period beginning on each regular annual meeting of the Company’s stockholders and ending on the date of the next regular annual meeting of the Company’s stockholders.
|
4.1
|
NONSTATUTORY STOCK OPTIONS AND RESTRICTED SHARES
. Only Employees, Outside Directors and Consultants shall be eligible for the grant of NQOs and Restricted Shares.
|
4.2
|
INCENTIVE STOCK OPTIONS
. Only Employees who are common-law employees of the Company, a Parent or a Subsidiary shall be eligible for the grant of ISOs.
|
5.1
|
STOCK OPTION AGREEMENT
. Each grant of an Option under the Plan shall be evidenced by a Stock Option Agreement between the Participant and the Company. Such Option shall be subject to all applicable terms of the Plan and may be subject to any other terms that are not inconsistent with the Plan. The Stock Option Agreement shall specify whether the Option is an ISO or an NQO. The provisions of the various Stock Option Agreements entered into under the Plan need not be identical. Options may be granted in consideration of a cash payment or in consideration of a reduction in the Participant’s other compensation.
|
5.2
|
NUMBER OF SHARES
. Each Stock Option Agreement shall specify the number of Common Shares subject to the Option and shall provide for the adjustment of such number in accordance with Article 9. Options granted to any Participant in a single fiscal year of the Company shall not cover more than 50,000 Common Shares, except that Options granted to a new Employee in the fiscal year of the Company in which his or her service as an Employee first commences shall not cover more than 100,000 Common Shares. The limitations set forth in the preceding sentence shall be subject to adjustment in accordance with Article 9.
|
5.3
|
EXERCISE PRICE
. Each Stock Option Agreement shall specify the Exercise Price; provided that the Exercise Price under an Option shall in no event be less than 100% of the Fair Market Value of a Common Share on the date of grant.
|
5.4
|
INCENTIVE STOCK OPTIONS
. The grant of ISOs shall be subject to all of the requirements of Code Section 422, including the following limitations:
|
(a)
|
The Exercise Price of an ISO shall not be less than one-hundred percent (100%) of the Fair Market Value of a Common Share on the date of grant; provided, however, if on the date of grant, the Employee (together with persons whose stock ownership is attributed to the Employee pursuant to Code Section 424(d)) owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any of its Subsidiaries (a “10% Stockholder”), the Exercise Price shall not be less than one-hundred and ten percent (110%) of the Fair Market Value of a Common Share on the date of grant.
|
(b)
|
ISOs may be granted only to persons who are, as of the date of grant, Employees of the Company or a Subsidiary, and may not be granted to Consultants or Outside Directors.
|
(c)
|
To the extent that the aggregate Fair Market Value of the Common Shares with respect to which ISOs are exercisable for the first time by any individual during any calendar year (under all plans of the Company) exceeds $100,000, such Options will be treated as NQOs to the extent required by Code Section 422. For purposes of this Section 5.4(c), ISOs shall be taken into account in the order in which they were granted. The Fair Market Value of the Common Shares shall be determined as of the time the Option with respect to such Common Shares is granted.
|
(d)
|
In the event of a Participant’s change of status from Employee to Consultant or Outside Director, an ISO held by the Participant shall cease to be treated as an ISO and shall be treated for tax purposes as an NQO three (3) months and one (1) day following such change of status.
|
5.5
|
EXERCISABILITY
. Each Stock Option Agreement shall specify the date when all or any installment of the Option is to become exercisable. A Stock Option Agreement may provide for accelerated exercisability in the event of the Participant’s death, Disability or Retirement or other events and may provide for expiration prior to the end of its term in the event of the termination of the Participant’s service. NQOs may also be awarded in combination with Restricted Shares, and such an Award may provide that the NQOs will not be exercisable unless the related Restricted Shares are forfeited.
|
5.6
|
OPTION TERM
. Unless otherwise specified in a Stock Option Agreement, but in any event, no later than ten (10) years from the date of grant thereof, each Option shall terminate no later than the first to occur of the following events:
|
(a)
|
Date in Stock Option Agreement
. The date for termination of the Option set forth in the written Stock Option Agreement;
|
(b)
|
Termination of Service
. The ninetieth (90
th
) day following the date on which the Participant’s service terminates (other than for a reason described in subsections (c) or (d) below);
|
(c)
|
Disability
. In the event that a Participant’s service terminates due to the Participant’s Disability, the
Participant may exercise his or her Option at any time within twelve (12) months following the date of such termination, but only to the extent that the Participant was entitled to exercise it at the date of such termination (but in no event later than the expiration of the term of the Option as set forth in the Stock Option Agreement). If, at the date of termination, the Participant is not entitled to exercise his or her entire Option, the Common Shares covered by the unexercisable portion of the Option shall revert to the Plan. If, after termination, the Participant does not exercise his or her Option within the time specified herein, the Option shall terminate, and the Common Shares covered by such Option shall revert to the Plan;
|
(d)
|
Death
. In the event of the death of a Participant, the Participant’s Option may be exercised at any time within twelve (12) months following the date of death (but in no event later than the expiration of the term of such Option as set forth in the Stock Option Agreement), by the Participant’s estate or by a person who acquired the right to exercise the Option by bequest or inheritance, but only to the extent that the Participant was entitled to exercise the Option at the date of death. If, at the time of death, the Participant was not entitled to exercise his or her entire Option, the Common Shares covered by the unexercisable portion of the Option shall immediately revert to the Plan. If, after death, the Participant’s estate or a person who acquired the right to exercise the Option by bequest or inheritance does not exercise the Option within the time specified herein, the Option shall terminate, and the Common Shares covered by such Option shall revert to the Plan; or
|
(e)
|
Ten Years from Grant
. An Option shall expire no more than ten (10) years after the date of grant; provided, however, that if an ISO is granted to a 10% Stockholder, such ISO may not be exercised after the expiration of five (5) years from the date of grant.
|
5.7
|
EFFECT OF CHANGE IN CONTROL
. The Committee may determine, at the time of granting an Option or thereafter, that such Option shall become exercisable as to all or part of the Common Shares subject to such Option in the event that a Change in Control occurs with respect to the Company.
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5.8
|
MODIFICATION OR ASSUMPTION OF OPTIONS
. The Committee may modify, extend or assume outstanding Options or may accept the cancellation of outstanding Options (whether granted by the Company or by another issuer) in return for the grant of new Options for the same or a different number of Common Shares and at the same or a different exercise price; provided, that an extension of the term of an ISO shall be subject to limitations applicable to ISOs and provided further that any such extension may not exceed the maximum term of the Option. The foregoing notwithstanding, no modification of an Option shall, without the consent of the Participant, alter or impair his or her rights or obligations under such Option (except that the Committee has the authority to amend any outstanding Option without the Participant’s consent if the Committee deems it necessary or advisable to comply with Code Section 409A). In addition, to the extent the Committee’s modification of the purchase price or the exercise price of any outstanding Award effects a repricing, shareholder approval shall be required before the repricing is effective.
|
6.1
|
GENERAL RULE
. The entire Exercise Price of Common Shares issued upon exercise of Options shall be payable in cash or cash equivalents at the time when such Common Shares are purchased, except as follows:
|
(a)
|
In the case of an ISO granted under the Plan, payment shall be made only pursuant to the express provisions of the applicable Stock Option Agreement. The Stock Option Agreement may specify that payment may be made in any form(s) described in this Article 6.
|
(b)
|
In the case of an NQO, the Committee may at any time accept payment in any form(s) described in this Article 6.
|
6.2
|
SURRENDER OF STOCK
. To the extent that this Section 6.2 is applicable, all or any part of the Exercise Price may be paid by surrendering Common Shares that are already owned by the Participant. Such Common Shares shall be valued at their Fair Market Value on the date when the new Common Shares are purchased under the Plan. The Participant shall not surrender Common Shares in payment of the Exercise Price if such action could cause the Company to recognize additional compensation expense with respect to the Option for financial reporting purposes under GAAP accounting at the time of such proposed surrender.
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6.3
|
EXERCISE/SALE
. To the extent that this Section 6.3 is applicable, all or any part of the Exercise Price may be paid by delivering (on a form prescribed by the Company) an irrevocable direction to a securities broker approved by the Company to sell all or part of the Common Shares being purchased under the Plan and to deliver all or part of the sales proceeds to the Company.
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6.4
|
OTHER FORMS OF PAYMENT
. To the extent that this Section 6.4 is applicable, all or any part of the Exercise Price may be paid in any other form that is consistent with applicable laws, regulations and rules, including, without limitation, pursuant to a net exercise.
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8.1
|
TIME, AMOUNT AND FORM OF AWARDS
. Awards under the Plan may be granted in the form of Restricted Shares. Restricted Shares may also be awarded in combination with NQOs, and such an Award may provide that the Restricted Shares will be forfeited in the event that the related NQOs are exercised. The maximum aggregate number of Common Shares that may be granted in the form of Restricted Shares in any one calendar year to any one Participant is 45,000, except a new Employee may receive a grant of up to 75,000 Restricted Shares in the fiscal year of the Company in which his or her service with the Company begins.
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8.2
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PAYMENT FOR AWARDS
. To the extent that an Award is granted in the form of newly issued Restricted Shares, the Award recipient, as a condition to the grant of such Award, shall be required to pay the Company in cash, cash equivalents or any other form of legal consideration acceptable to the Company, including but not limited to future services, an amount equal to the par value of such Restricted Shares. To the extent that an Award is granted in the form of Restricted Shares from the Company’s treasury, no cash consideration shall be required of the Award recipients.
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8.3
|
VESTING CONDITIONS
. Each Award of Restricted Shares shall be subject to vesting. Vesting shall occur, in full or in installments, upon satisfaction of the conditions specified in the Stock Award Agreement. A Stock Award Agreement may provide for accelerated vesting in the event of the Participant’s death, Disability or Retirement or other events. Notwithstanding any other provision of the Plan to the contrary, the Committee may determine, at the time of granting Restricted Shares or thereafter, that all or part of such Restricted Shares shall become vested in the event that a Change in Control occurs with respect to the Company.
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8.4
|
VOTING AND DIVIDEND RIGHTS
. Unless otherwise provided in the Stock Award Agreement, the holder of Restricted Shares awarded under the Plan shall have the same voting, dividend and other rights as the Company’s other stockholders; provided, that any dividends declared shall be accumulated and paid at the time (and to the extent) that the Restricted Shares vest, but in no event later than two-and-a-half months following the end of the calendar year in which the vesting occurs. Without limitation, a Stock Award Agreement may require that the holders of Restricted Shares invest any cash dividends received in additional Restricted Shares (in which case such additional Restricted Shares shall be subject to the same conditions and restrictions as the Award with respect to which the dividends were paid).
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8.5
|
SECTION 162(m) PERFORMANCE RESTRICTIONS
.
|
(a)
|
In General
. For purposes of qualifying grants of Restricted Shares as “performance-based compensation” under Code Section 162(m), the Committee, in its discretion, may make Restricted Shares subject to vesting based on the achievement of performance goals, in which case the Committee will specify in writing, by resolution or otherwise, the Participants eligible to receive such an Award (which may be expressed in terms of a class of individuals) and the performance goals applicable to such Awards within 90 days after the commencement of the period to which the performance goals relate, or such earlier time as required to comply with Section 162(m) of the Code. No such Award shall be payable unless the Committee certifies in writing, by resolution or otherwise, that the performance goals applicable to the Award were satisfied. In no case may the Committee increase the value of an Award granted under this Section 8.5 above the maximum value determined under the performance formula by the attainment of the applicable performance goals, but the Committee retains the discretion to reduce the value below such maximum.
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(b)
|
Performance Goals
. Unless and until the Committee proposes for stockholder vote and the stockholders approve a change in the general performance measures applicable to Awards, the performance goals upon which the payment or vesting of an Award that is intended to qualify as performance based compensation are limited to the following Performance Measures:
|
(1)
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operating income or operating profit (including but not limited to operating income and any affiliated growth measure);
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(2)
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net earnings or net income (before or after taxes, including but not limited to deferred taxes, and any affiliated growth measure);
|
(3)
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basic or diluted earnings per share (before or after taxes, including but not limited to deferred taxes, and any affiliated growth measure);
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(4)
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revenues (including but not limited to revenue, gross revenue, net revenue, and any affiliated growth measure);
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(5)
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gross profit or gross profit growth;
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(6)
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return on assets, capital, invested capital, equity or sales;
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(7)
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cash flow (including, but not limited to, operating cash flow, free cash flow, and cash flow return on capital);
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(8)
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earnings before or after taxes, interest, depreciation and/or amortization (including but not limited to changes in this measure);
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(9)
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improvements or changes in capital structure (including but not limited to debt balances or debt issuance);
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(10)
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budget management;
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(11)
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productivity targets;
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(12)
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economic value added or other value added measurements;
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(13)
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share price (including, but not limited to, growth measures and total shareholder return);
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(14)
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expense targets;
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(15)
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margins (including but not limited to gross or operating margins);
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(16)
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efficiency measurements (including but not limited to availability measurements, call wait times, call, meeting, shipping or other volume measurements, turnaround times and error rates);
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(17)
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working capital targets (including but not limited to items reported on the Company’s balance sheet and time-based or similar measures such as days inventory, days receivable and days payable);
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(18)
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equity or market value measures;
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(19)
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enterprise or adjusted market value measures;
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(20)
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safety record;
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(21)
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completion of business acquisition, divestment or expansion;
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(22)
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book value or changes in book value (including but not limited to tangible book value and net asset measures);
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(23)
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assets or changes in assets;
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(24)
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cash position or changes in cash position;
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(25)
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employee retention or recruiting measures;
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(26)
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milestones related to filings with government entities or related approvals (including but not limited to filings with the Securities and Exchange Commission which may require stockholder approval);
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(27)
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changes in location or the opening or closing of facilities;
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(28)
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contract or other development of relationship with identified suppliers, distributors or other business partners; and
|
(29)
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new product development (including but not limited to third-party collaborations or contracts, and with milestones that may include but are not limited to contract execution, proof of concept, regulatory approval, product launch and targets such as unit volume and revenue following product launch).
|
9.1
|
ADJUSTMENTS
. In the event of a subdivision of the outstanding Common Shares, a declaration of a dividend payable in Common Shares, a declaration of a dividend payable in a form other than Common Shares in an amount that has a material effect on the price of Common Shares, a combination or consolidation of the outstanding Common Shares (by reclassification or otherwise) into a lesser number of Common Shares, a recapitalization, a spin-off or a similar occurrence, the Committee shall make such adjustments as it, in its sole discretion, deems appropriate in one or more of (a) the number of Options and Restricted Shares available for future Awards under Article 3, (b) the limitations set forth in Section 5.2 and Section 8.1, (c) the number of Common Shares covered by each outstanding Option or (d) the Exercise Price under each outstanding Option. Except as provided in this Article 9, a Participant shall have no rights by reason of any issue by the Company of stock of any class or securities convertible into stock of any class, any subdivision or consolidation of shares of stock of any class, the payment of any stock dividend or any other increase or decrease in the number of shares of stock of any class.
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9.2
|
DISSOLUTION OR LIQUIDATION
. To the extent not previously exercised, Options shall terminate immediately prior to the dissolution or liquidation of the Company.
|
9.3
|
REORGANIZATIONS
. In the event that the Company is a party to a merger or other reorganization, outstanding Options and Restricted Shares shall be subject to the agreement of merger or reorganization. Such agreement may provide, without limitation, for the continuation of outstanding Awards by the Company (if the Company is a surviving corporation), for their assumption by the surviving corporation or its parent or subsidiary, for the substitution by the surviving corporation or its parent or subsidiary of its own awards for such Awards, for accelerated vesting and accelerated expiration, or for settlement in cash or cash equivalents.
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11.1
|
RETENTION RIGHTS
. Neither the Plan nor any Award granted under the Plan shall be deemed to give any individual a right to remain an Employee, Outside Director or Consultant. The Company and its Parents, Subsidiaries and Affiliates reserve the right to terminate the service of any Employee, Outside Director or Consultant at any time, with or without cause, subject to applicable laws, the Company’s certificate of incorporation and bylaws and a written employment agreement (if any).
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11.2
|
STOCKHOLDERS’ RIGHTS
. A Participant shall have no dividend rights, voting rights or other rights as a stockholder with respect to any Common Shares covered by his or her Award prior to the time when a stock certificate for such Common Shares is issued or, in the case of an Option, the time when he or she becomes entitled to receive such Common Shares by filing a notice of exercise and paying the Exercise Price. No adjustment shall be made for cash dividends or other rights for which the record date is prior to such time, except as expressly provided in the Plan.
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11.3
|
REGULATORY REQUIREMENTS
. Any other provision of the Plan notwithstanding, the obligation of the Company to issue Common Shares under the Plan shall be subject to all applicable laws, rules and regulations and such approval by any regulatory body as may be required. The Company reserves the right to restrict, in whole or in part, the delivery of Common Shares pursuant to any Award prior to the satisfaction of all legal requirements relating to the issuance of such Common Shares, to their registration, qualification or listing or to an exemption from registration, qualification or listing.
|
12.1
|
GENERAL
. To the extent provided by the terms of an Award Agreement and subject to the discretion of the Committee, the Participant may satisfy any federal, state or local tax withholding obligation relating to the exercise or acquisition of Common Stock under an Award by any of the following means (in addition to the Company’s right to withhold from any compensation paid to the Participant by the Company) or by a combination of such means: (a) tendering a cash payment; (b) authorizing the Company to withhold Common Shares from the Common Shares otherwise issuable to the Participant as a result of the exercise or acquisition of Common Shares under the Award, provided, however, that no Common Shares are withheld with a value exceeding the amount of tax required to be withheld by law or such other greater amount up to the maximum statutory rate under applicable law, as applicable to such Participant, if such other greater amount would not result in adverse financial accounting treatment, as determined by the Committee (including in connection with the effectiveness of FASB Accounting Standards Update 2016-09); or (c) delivering to the Company previously owned and unencumbered Common Shares. The Company shall not be required to issue any Common Shares or make any cash payment under the Plan until such obligations are satisfied.
|
12.2
|
SECTION 280G
. To the extent that any of the payments and benefits provided for under the Plan or any other agreement or arrangement between the Company or its Affiliates and a Participant (collectively, the “Payments”) (i) constitute a “parachute payment” within the meaning of Code Section 280G and (ii) but for this paragraph would be subject to the excise tax imposed by Section 4999 of the Code, then the Payments shall be payable either (i) in full or (ii) as to such lesser amount which would result in no portion of such Payments being subject to excise tax under Section 4999 of the Code (determined in accordance with the reduction of payments and benefits paragraph set forth below); whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the excise tax imposed by Section 4999, results in the participant’s receipt on an after-tax basis, of the greatest amount of benefits under this Plan, notwithstanding that all or some portion of such benefits may be taxable under Section 4999 of the Code. Any determination required under this provision will be made by accountants chosen by the Company, whose determination shall be conclusive and binding upon the participant and the Company for all purposes.
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13.1
|
TERM OF THE PLAN
. The Plan was initially effective on March 14, 1997. The Board may, at any time and for any reason, amend, suspend or terminate the Plan (subject to the approval of the Company’s stockholders only to the extent required by applicable law, regulations or rules). The Committee may issue ISOs under the Plan until the tenth anniversary of the date of its most recent amendment or restatement. The Committee may issue any Award other than ISOs at any time prior to the date, if any, that the Board suspends or terminates the Plan. No Award may be granted pursuant to the Plan after such date, but Awards granted before such date may extend beyond that date.
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13.2
|
PERFORMANCE AWARDS
. Unless the Company determines to submit the Plan to the Company’s stockholders at the first stockholder meeting that occurs in the fifth year following the year in which the Plan was last approved by stockholders (or any earlier meeting designated by the Board), in accordance with the requirements of Code Section 162(m), and unless such stockholder approval is obtained, then no further Awards made under Section 8.5 will qualify as performance-based compensation for purposes of Code Section 162(m).
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15.1
|
Affiliate
means any entity other than a Subsidiary, if the Company and/or one or more Subsidiaries own not less than fifty percent (50%) of such entity.
|
15.2
|
Award
means any award of an Option or a Restricted Share under the Plan.
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15.3
|
Award Agreement
means any agreement, contract
or other instrument or document evidencing an Award. Evidence of an Award may be in written or electronic form, may be limited to notation on the books and records of the Company and, with the approval of the Committee, need not be signed by a representative of the Company or a Participant. Any Common Shares that become deliverable to a Participant pursuant to the Plan may be issued in certificate form in the name of the Participant or in book-entry form in the name of the Participant.
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15.4
|
Board
means the Company’s Board of Directors, as constituted from time to time.
|
15.5
|
Cause
shall have the meaning assigned to such term in a Participant’s written employment, severance, or similar agreement or Award Agreement with the Company, or, if no such agreement exists or the agreement does not define “Cause,” Cause means a Participant’s termination of service by the Company due to the Participant’s (a)
failure to perform his or her assigned duties or responsibilities as an Employee, Consultant or Outside Director of the Company or an Affiliate thereof (other than a failure resulting from the Participant’s Disability) after notice thereof from the Company describing his or her failure to perform such duties or responsibilities; (b) breach of any confidentiality agreement, invention assignment agreement or written restrictive covenant agreement between the Participant and the Company or an Affiliate thereof; (c) engagement 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; (d) violation of any written Company policy, including, without limitation, any policy with respect to sexual harassment in the workplace; (e) violation of any federal or state law or regulation applicable to the Company’s business; or (f) conviction of, or entrance of a plea of nolo contendere to, any crime.
In addition, a Participant’s service shall be deemed to have terminated for “Cause” if, on the date the Participant’s service terminates, facts and circumstances exist that would have justified a termination for Cause, even if such facts and circumstances are discovered after such termination.
|
15.6
|
Change in Control
shall mean:
|
(a)
|
The consummation of a merger or consolidation of the Company with or into another entity of any other corporate reorganization, if more than fifty percent (50%) of the combined voting power of the continuing or surviving entity’s securities outstanding immediately after such merger, consolidation or other reorganization is owned by persons who were not stockholders of the Company immediately prior to such merger, consolidation, or other reorganization;
|
(b)
|
The consummation of a sale, transfer or other disposition of all or substantially all of the Company’s assets;
|
(c)
|
A majority of the members of the Board are replaced during any eighteen (18) month period by directors whose appointment or election is not endorsed by a majority of the Board before the date of appointment or election; or
|
(d)
|
Solely with respect to Awards granted in 2018 or later, any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than (i) the Company, (ii) a Subsidiary thereof, (iii) any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any Subsidiary thereof, or (iv) any company owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the total voting power represented by the Company’s then outstanding voting securities.
|
15.7
|
Code
means the Internal Revenue Code of 1986, as amended.
|
15.8
|
Committee
means a committee of the Board, as described in Article 2.
|
15.9
|
Common Share
means one share of common stock, par value $0.01 per share, of the Company.
|
15.10
|
Company
means Heska Corporation, a Delaware corporation.
|
15.11
|
Consultant
means a consultant or adviser who provides bona fide services to the Company, a Parent, a Subsidiary or an Affiliate as an independent contractor. Service as a Consultant shall be considered employment for all purposes of the Plan, except as provided in Section 4.2.
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15.12
|
Disability
shall have the meaning assigned to such term in a Participant’s written employment, severance, or similar agreement or Award Agreement with the Company, or, if no such agreement exists or the agreement does not define “Disability,” Disability means a Participant’s
inability 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.
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15.13
|
Employee
means a common-law employee of the Company, a Parent, a Subsidiary or an Affiliate.
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15.14
|
Exchange Act
means the Securities Exchange Act of 1934, as amended.
|
15.15
|
Exercise Price
means the amount for which one Common Share may be purchased upon exercise of such Option, as specified in the applicable Stock Option Agreement.
|
15.16
|
Fair Market Value
means, for so long as the Common Shares are listed on any established stock exchange or a national market system, the value of a Common Share as determined by reference to the most recent reported sale price of a Common Share (or if no sales were reported, the most recent closing price) as quoted on such exchange or system at the time of determination. In the absence of an established market for the Common Shares, the Fair Market Value shall be determined in good faith by the Committee and such determination shall be conclusive and binding on all persons.
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15.17
|
ISO
means an incentive stock option described in section 422(b) of the Code.
|
15.18
|
NQO
means a stock option not described in sections 422 or 423 of the Code.
|
15.19
|
Option
means an ISO or NQO granted under the Plan and entitling the holder to purchase Common Shares.
|
15.20
|
Outside Director
shall mean a member of the Board who is not an Employee.
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15.21
|
Parent
means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company, if each of the corporations other than the Company owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. A corporation that attains the status of a Parent on a date after the adoption of the Plan shall be considered a Parent commencing as of such date.
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15.22
|
Participant
means an individual or estate who holds an Award.
|
15.23
|
Plan
means this Heska Corporation Stock Incentive Plan, as amended from time to time.
|
15.24
|
Previously Issued Awards
means Restricted Shares which were not subject to further vesting conditions, Common Shares issued pursuant to the exercise of ISOs, Common Shares issued pursuant to the exercise of NQOs, Restricted Shares subject to further vesting conditions, outstanding ISOs and outstanding NQOs.
|
15.25
|
Restricted Share
means a Common Share awarded under the Plan. An Award of Restricted Shares constitutes a transfer of ownership of Common Shares to a Participant from the Company subject to restrictions against transferability, assignment and hypothecation. Under the terms of the Award, the restrictions against transferability are removed when the Participant has met the specified vesting requirement.
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15.26
|
Retirement
shall mean a Participant’s termination of service with the Company (for any reason other than for Cause) on or after the attainment of age 55 with at least ten (10) years of service with the Company and its Affiliates (including service with another company prior to it becoming an Affiliate).
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15.27
|
Stock Award Agreement
means the Award Agreement between the Company and the recipient of a Restricted Share that contains the terms, conditions and restrictions pertaining to such Restricted Share.
|
15.28
|
Stock Option Agreement
means the Award Agreement between the Company and a Participant that contains the terms, conditions and restrictions pertaining to his or her Option.
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15.29
|
Subsidiary
means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company, if each of the corporations other than the last corporation in the unbroken chain owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. A corporation that attains the status of a Subsidiary on a date after the adoption of the Plan shall be considered a Subsidiary commencing as of such date.
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15.30
|
Subject Participant
means a Participant who is designated by the Board as an “executive officer” under the Exchange Act.
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SECTION 1.
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GRANT OF RESTRICTED STOCK
.
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SECTION 2.
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UNVESTED SHARES SUBJECT TO FORFEITURE
.
|
SECTION 3.
|
DELIVERY OF COMMON SHARES
.
|
SECTION 4.
|
STOCKHOLDER RIGHTS
.
|
SECTION 5.
|
RESPONSIBILITY FOR TAXES
.
|
SECTION 6.
|
RESTRICTIVE COVENANTS
.
|
SECTION 7.
|
MISCELLANEOUS
.
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EXECUTIVE
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HESKA CORPORATION
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a Delaware corporation
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Instruction
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SECTION 1.
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GRANT OF RESTRICTED STOCK
.
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SECTION 2.
|
UNVESTED SHARES SUBJECT TO FORFEITURE
.
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SECTION 3.
|
DELIVERY OF COMMON SHARES
.
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SECTION 4.
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STOCKHOLDER RIGHTS
.
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SECTION 5.
|
RESPONSIBILITY FOR TAXES
.
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SECTION 6.
|
RESTRICTIVE COVENANTS
.
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SECTION 7.
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MISCELLANEOUS
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EXECUTIVE
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HESKA CORPORATION
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a Delaware corporation
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Instruction
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SECTION 1.
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GRANT OF RESTRICTED STOCK
.
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SECTION 2.
|
UNVESTED SHARES SUBJECT TO FORFEITURE
.
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SECTION 3.
|
DELIVERY OF COMMON SHARES
.
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SECTION 4.
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STOCKHOLDER RIGHTS
.
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SECTION 5.
|
RESPONSIBILITY FOR TAXES
.
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SECTION 6.
|
RESTRICTIVE COVENANTS
.
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SECTION 7.
|
MISCELLANEOUS
.
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EXECUTIVE
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HESKA CORPORATION
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a Delaware corporation
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By:
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Instruction
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SECTION 1.
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GRANT OF RESTRICTED STOCK
.
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SECTION 2.
|
UNVESTED SHARES SUBJECT TO FORFEITURE
.
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SECTION 3.
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DELIVERY OF COMMON SHARES
.
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SECTION 4.
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STOCKHOLDER RIGHTS
.
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SECTION 5.
|
CODE SECTION 83(b) ELECTION
.
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SECTION 6.
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MISCELLANEOUS
.
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DIRECTOR
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HESKA CORPORATION
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a Delaware corporation
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:
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Please do not fill in any blanks other than the signature line.
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Award
|
This Award consists of an Option to purchase the number of Common Shares set forth on the Notice of Stock Option Grant, to which this Agreement is attached, at the Exercise Price per Common Share stated therein, which is not less than one-hundred percent (100%) of the Fair Market Value per Common Share on the Date of Grant (as defined in the Notice of Stock Option Grant).
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Tax Treatment
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This Option is intended to be an incentive stock option (“ISO”) under Code Section 422 or a nonstatutory option, as provided in the Notice of Stock Option Grant.
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Vesting/
Exercisability
|
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 or Consultant of the Company or a Subsidiary terminates due to your death or Disability;
•
While you are an Employee or Consultant of the Company or a Subsidiary, a Change in Control is consummated, 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 on no less favorable economic terms; or
•
While you are an Employee or Consultant, a Change in Control is consummated and your service is terminated without Cause or for Good Reason (as defined below), as applicable, in connection with or following such Change in Control.
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Termination of Service
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No additional portion of the Option shall become vested after your service as an Employee or Consultant of the Company or a Subsidiary has terminated for any reason other than those expressly outlined herein. For the avoidance of doubt, and notwithstanding anything herein or in the Plan to the contrary, in the event that your service terminates because your status changes from Employee or Consultant to Consultant, Employee or Outside Director of the Company or a Subsidiary, as applicable, such change in status will not be treated as a termination of service for purposes of this Agreement; provided, that in the event of such change in status, to the extent that this Option is an ISO, it will be subject to Section 5.4(d) of the Plan.
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Definition of “Good Reason”
(For Employees Only)
|
For purposes of this Agreement, and solely to the extent that you are an Employee of the Company, “Good Reason” shall have the meaning assigned to such term in your written employment, severance or other similar written agreement with the Company, or if no such agreement exists or the agreement does not define “Good Reason,” Good Reason means the occurrence of any of the following events without your written consent: (i) a demotion to a lower position, (ii) a material reduction of your duties, authority, or responsibilities of employment, (iii) a material reduction of your total compensation, or (iv) a required relocation of more than twenty (20) miles from your principal place of work; in each case, provided that you have given the Company or other surviving entity written notice within thirty (30) days of the occurrence of the event giving rise to Good Reason and the Company or other surviving entity has not cured within the thirty (30) days following its receipt of such notice.
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Term
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This Option expires at the close of business at Company headquarters on the day before the tenth (10
th
) anniversary of the Date of Grant set forth in the Notice of Stock Option Grant; provided, that it will expire sooner if your service terminates prior thereto, as described below.
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Regular Termination
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If your service as an Employee or Consultant of the Company or a Subsidiary terminates for any reason other than due to your death or Disability, this Option will expire at the close of business at Company headquarters on the date that is the earlier of the regular expiration date of the Option or ninety (90) days after your termination date. The Company determines when your service terminates for this purpose.
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Termination due to Death
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If your service as an Employee or Consultant 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 that is the earlier of the regular expiration date of the Option or twelve (12) months after the date of your death.
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Termination due to Disability
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If your service as an Employee or Consultant of the Company or a Subsidiary terminates due to your Disability, then this Option will expire at the close of business at Company headquarters on the date that is the earlier of the regular expiration date of the Option or twelve (12) months after your termination date.
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Leaves of Absence
(For Employees Only)
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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.
To the extent that this Option is an ISO, no such leave may exceed ninety (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 (3) months following the ninety-first (91
st
) day of such leave, the Option shall cease to be treated as an ISO and shall be treated for tax purposes as an NQO.
Unless you immediately return to active work when the approved leave ends, your service will terminate.
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Restrictions on Exercise
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The Company will not permit you to exercise this Option if the issuance of shares at that time would violate any law or regulation.
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Notice of Exercise
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When you wish to exercise this Option, you must notify the Company by filing the proper “Notice of Exercise” form at the address given on the form. Your notice must specify how many Common Shares you wish to purchase pursuant to the Option. The exercise of the Option will be effective when the Company receives the Notice of Exercise with payment of the Option Exercise Price 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.
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Method of Exercise and Payment
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When you submit your Notice of Exercise, you must include payment of the Option Exercise Price for the Common 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 Common Shares that you already own, along with any forms needed to effect a transfer of those Common Shares to the Company. The value of the Common Shares, determined as of the effective date of the Option exercise, will be applied to the Option Exercise Price. However, you may not surrender Common Shares 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; or
•
By net exercise or broker’s cashless exercise procedure, or any other procedures approved by the Committee from time to time.
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Withholding Taxes and Stock Withholding
(For Employees Only)
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Whenever Common Shares are to be issued pursuant to the exercise of any portion of the Option, the Company or an Affiliate thereof shall, in accordance with Section 12.1 of the Plan, have the power to withhold, or to require you to remit to the Company or such Affiliate thereof, an amount sufficient to satisfy any federal, state, and local withholding tax requirements, both domestic and foreign, relating to such transaction, and the Company or such Affiliate thereof may defer issuance of the Common Shares until such requirements are satisfied; provided, however, that such amount may not exceed the maximum statutory withholding rate. You will be entitled to satisfy the amount of any such required withholding by having the Company withhold from the Common Shares otherwise issuable upon exercise of the Option a number of Common Shares having a Fair Market Value equal to the amount of such required tax withholdings.
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Delivery of Common Shares Upon Exercise
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As soon as practicable after receipt of the Notice of Exercise and payment in full of the Exercise Price and any applicable taxes and withholdings with respect to any exercisable portion of the Option, but subject to the transfer restrictions set forth herein, the Company will deliver to you (or such other person or entity entitled to exercise this Option) a certificate, certificates or electronic book-entry notation representing the Common Shares acquired upon the exercise thereof, registered in your name (or such other person or entity);
provided that
, if the Company, in its sole discretion, determines that, under applicable securities laws, any certificates issued hereunder must bear a legend restricting the transfer of such Common Shares, such certificates shall bear the appropriate legend.
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Restrictive Covenants
(For Employees Only)
|
Solely to the extent that you are an Employee, as a condition precedent to the effectiveness of this Award, you agree to execute, concurrently with your execution of this Agreement, and to be bound by the confidentiality, intellectual property rights assignment, and restrictive covenant provisions attached hereto as
Exhibit A
(the “Restrictive Covenants”).
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Restrictions on Resale
|
By signing this Agreement, you agree not to sell any Common Shares at a time when 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 in service with the Company or a Subsidiary (whether as an Employee, Consultant or Outside Director).
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Transfer of Option
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Prior to your death, only you may exercise this Option. You cannot transfer or assign 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.
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No Retention Rights
|
Neither this 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 and for any reason or no reason, with or without Cause.
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No Stockholder Rights
|
You, or your estate or heirs, have no rights as a stockholder of the Company until you have exercised this Option by giving the required Notice of Exercise to the Company and paying the Exercise Price and any applicable taxes and withholdings.
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No Guarantee of Future Awards
|
This Agreement does not guarantee you the right to or expectation of future Awards under the Plan or any future plan adopted by the Company.
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Applicable Law
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This Agreement will be interpreted and enforced under the laws of the State of Colorado (without giving effect to its conflicts of law provisions).
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The Plan
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The Plan is hereby incorporated into this Agreement by reference. Unless otherwise defined herein, all capitalized terms used herein have the same meanings as set forth in the Plan. Except as otherwise expressly provided in the Plan, in the event of a conflict between any term of this Agreement and the terms of the Plan, the terms of the Plan shall control.
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Entire Agreement
|
The Notice of Stock Option Grant, this Agreement (including all exhibits and annexes attached hereto) and the Plan together 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 as provided in the Plan.
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Counterparts
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The Notice of Stock Option Grant may be signed in two counterparts, each of which will be an original, but both of which will constitute one and the same instrument.
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Incentive Compensation Recoupment
(For Employees Only)
|
Notwithstanding anything in the Plan or in this Agreement to the contrary, this Option shall be subject to any compensation recovery and/or recoupment policy adopted by the Company to comply with applicable law, including, without limitation, the Dodd-Frank Wall Street Reform and Consumer Protection Act, or to comport with good corporate governance practices, as such policies may be adopted and/or amended from time to time.
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Award
|
This Award consists of an Option to purchase the number of Common Shares set forth on the Notice of Stock Option Grant, to which this Agreement is attached, at the Exercise Price per Common Share stated therein, which is not less than one-hundred percent (100%) of the Fair Market Value per Common Share on the Date of Grant (as defined in the Notice of Stock Option Grant).
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Tax Treatment
|
This Option is intended to be a nonstatutory option.
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Vesting/
Exercisability
|
This Option vests and becomes exercisable as set forth 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 Outside Director of the Company or a Subsidiary terminates due to your death, Disability, or retirement at or after age 65;
•
While you are an Outside Director of the Company or a Subsidiary, a Change in Control is consummated, 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 on no less favorable economic terms; or
•
While you are an Outside Director, a Change in Control is consummated and your service is terminated without Cause in connection with or following such Change in Control.
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Termination of Service
|
No additional portion of the Option shall become vested after your service as an Outside Director of the Company or a Subsidiary has terminated for any reason other than those expressly outlined herein. For the avoidance of doubt, and notwithstanding anything herein or in the Plan to the contrary, in the event that your service as an Outside Director terminates because you become an Employee or Consultant of the Company or a Subsidiary, such conversion of status will not be treated as a termination of service for purposes of this Agreement.
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Term
|
This Option expires at the close of business at Company headquarters on the day before the tenth (10
th
) anniversary of the Date of Grant set forth in the Notice of Stock Option Grant; provided, that it will expire sooner if your service terminates prior thereto, as described below.
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Regular Termination
|
If your service as an Outside Director of the Company or a Subsidiary terminates for any reason other than due to your death or Disability, this Option will expire at the close of business at Company headquarters on the date that is the earlier of the regular expiration date of the Option or ninety (90) days after your termination date. The Company determines when your service terminates for this purpose.
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Termination due to Death
|
If your service as an 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 that is the earlier of the regular expiration date of the Option or twelve (12) months after the date of your death.
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Termination due to Disability
|
If your service as an Outside Director of the Company or a Subsidiary terminates due to your Disability, then this Option will expire at the close of business at Company headquarters on the date that is the earlier of the regular expiration date of the Option or twelve (12) months after your termination date.
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Restrictions on Exercise
|
The Company will not permit you to exercise this Option if the issuance of shares at that time would violate any law or regulation.
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Notice of Exercise
|
When you wish to exercise this Option, you must notify the Company by filing the proper “Notice of Exercise” form at the address given on the form. Your notice must specify how many Common Shares you wish to purchase pursuant to the Option. The exercise of the Option will be effective when the Company receives the Notice of Exercise with payment of the Option Exercise Price 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.
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Method of Exercise and Payment
|
When you submit your Notice of Exercise, you must include payment of the Option Exercise Price for the Common 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 Common Shares that you already own, along with any forms needed to effect a transfer of those Common Shares to the Company. The value of the Common Shares, determined as of the effective date of the Option exercise, will be applied to the Option Exercise Price. However, you may not surrender Common Shares 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; or
•
By net exercise or broker’s cashless exercise procedure, or any other procedures approved by the Committee from time to time.
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Delivery of Common Shares Upon Exercise
|
As soon as practicable after receipt of the Notice of Exercise and payment in full of the Exercise Price of any exercisable portion of the Option, but subject to the transfer restrictions set forth herein, the Company will deliver to you (or such other person or entity entitled to exercise this Option) a certificate, certificates or electronic book-entry notation representing the Common Shares acquired upon the exercise thereof, registered in your name (or such other person or entity);
provided that
, if the Company, in its sole discretion, determines that, under applicable securities laws, any certificates issued hereunder must bear a legend restricting the transfer of such Common Shares, such certificates shall bear the appropriate legend.
|
Restrictions on Resale
|
By signing this Agreement, you agree not to sell any Common Shares at a time when 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 in service with the Company or a Subsidiary (whether as an Employee, Consultant or Outside Director).
|
Transfer of Option
|
Prior to your death, only you may exercise this Option. You cannot transfer or assign 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.
|
No Retention Rights
|
Neither this 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 and for any reason or no reason, with or without Cause.
|
No Stockholder Rights
|
You, or your estate or heirs, have no rights as a stockholder of the Company until you have exercised this Option by giving the required Notice of Exercise 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 conflicts of law provisions).
|
The Plan
|
The Plan is hereby incorporated into this Agreement by reference. Unless otherwise defined herein, all capitalized terms used herein have the same meanings as set forth in the Plan. Except as otherwise expressly provided in the Plan, in the event of a conflict between any term of this Agreement and the terms of the Plan, the terms of the Plan shall control.
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Entire Agreement
|
The Notice of Stock Option Grant, this Agreement and the Plan together 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.
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Counterparts
|
The Notice of Stock Option Grant may be signed in two counterparts, each of which will be an original, but both of which will constitute one and the same instrument.
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•
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“CUATTRO”
|
•
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“CUATTRO DR”
|
•
|
“CUATTRO UNO”
|
•
|
“CUATTRO HUB”
|
•
|
“SONO POD”
|
•
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“DENTI POD”
|
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;
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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.
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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
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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.
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Dated: March 7, 2019
|
/s/ Kevin S. Wilson
|
|
KEVIN S. WILSON
|
|
Chief Executive Officer and President
|
|
(Principal Executive Officer)
|
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
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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
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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
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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.
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Dated: March 7, 2019
|
/s/ Catherine Grassman
|
|
Catherine Grassman
|
|
Vice President, Chief Accounting Officer and Controller
|
|
(Principal Financial Officer)
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Dated: March 7, 2019
|
By:
|
/s/ Kevin S. Wilson
|
|
Name:
|
KEVIN S. WILSON
|
|
Title:
|
Chief Executive Officer and President
|
Dated: March 7, 2019
|
By:
|
/s/ Catherine Grassman
|
|
Name:
|
CATHERINE GRASSMAN
|
|
Title:
|
Vice President, Chief Accounting Officer and Controller
|